strengthen the Joint Staff's capability to play a significant role in the development of net assessments, and I believe we are going to owe you that sometime this year.

I do not think there is any question that what I like to think of as the military staff of the Secretary should play a significant role in the development of defense strategy. It should be a derivative of defense policy and based on objectives for our defense policy.

All of those things have to play together and be harmonized, and I think that with the role of the Joint Staff functioning directly under the Chairman now, and with a Vice Chairman to help provide guidance for that Joint Staff, I think, as I intimated in preliminary prepared remarks, the Chairman can exert more influence on the policy and the decisions that have to be developed.

Of course, one of the tough parts about all that is defining the objectives first because, as I see it, strategy is a means to get to the objectives, and the objectives are sometimes a little more vaguely defined than they need to be to develop a clearly etched strategy. But it will be a big job.

Chairman NUNN. I agree.

One question we require of all of our nominees to give us their answer on-and this comes from the leadership of the Senate-do you agree to appear before this committee or any other committee of Congress and answer all questions put to you by the Congress? General HERRES. Yes, sir; I do.

Chairman NUNN. General, I think you will do a superb job, and as soon as we can muster up a quorum, we will plan to call for a vote. I think you are well qualified for what I consider to be a very, very important position that has a tremendous amount of responsibility and authority, Your position will have almost as much to do with the success of this Reorganization Act as the Chairman himself.

I say "almost," the Chairman has got a huge responsibility, but yours is going to be a very, very large responsibility, I think all of your background and your experience indicates that you are well qualified for the task.

So we wish you luck and we hope you will stay in close touch. Our committee plans to continue to give oversight over this reorganization. We know it is a long-term process. We are not expecting miracles overnight, but we are going to pay a great deal of heed to what is transpiring and be interested in developments.

Well, let me instruct staff that we will have a meeting between the two votes. We will have a meeting. We have to discuss the other business that we announced we were going to, about the order of recognition, and we will try to get a quorum at that time between the two votes.

Senator Warner suggests that we meet in the office of the President Pro Tempore if we can arrange that. So we will vacate the area and have a quorum. If we do, General, we will try to expedite your nomination.

Senator WARNER. Mr. Chairman, as we close, I think we should all note that this position bears much of your wisdom, the imprimatur of that, and we do hope it works.

Chairman NUNN. If it works, I will accept the accolades.

[Whereupon, at 2:45 p.m, the hearing was adjourned.]

[The nomination of Gen. Robert T. Herres was reported to the Senate by the Committee on Armed Services on January 29, 1987, with the recommendation that the nomination be confirmed. The nomination was confirmed by the Senate on January 29, 1987.]

NOMINATION OF ROBERT B. COSTELLO TO BE ASSISTANT SECRETARY OF DEFENSE FOR ACQUISITION AND LOGISTICS

WEDNESDAY, FEBRUARY 25, 1987

U.S. SENATE,

COMMITTEE ON ARMED SERVICES,

Washington, DC.

The committee met, in open session, pursuant to notice, at 9:30 a.m., in room SR-222, Russell Senate Office Building, Senator Sam Nunn (chairman) presiding.

Present: Senators Nunn, Exon, Levin, Bingaman, Dixon, Shelby, Warner and Quayle.

Staff present: Arnold L. Punaro, staff director; Carl M. Smith, staff director for the minority; Jeffrey H. Smith, general counsel; Patrick A. Tucker, minority counsel; Andrew S. Effron, counsel; Jonathan L. Etherton, John J. Hamre, George K. Johnson, Jr., Kent Bankus, James R. Locher III, and David S. Lyles, professional staff members; Pamela G. Powell, staff assistant.

Also present: Jeffrey B. Subko, assistant to Senator Exon; Peter Levine, assistant to Senator Levin; Edward M. McGaffigan, Jr., assistant to Senator Bingaman; Charles C. Smith, assistant to Senator Dixon; Jim Sayer, assistant to Senator Wirth; Terrence Lynch, assistant to Senator Shelby; Jeffrey Hyche, assistant to Senator Shelby; Henry D. Sokolski, assistant to Senator Quayle; Alan Ptak, assistant to Senator Gramm; and Bill Wight, assistant to Senator Warner.

OPENING STATEMENT OF SENATOR SAM NUNN, CHAIRMAN Chairman NUNN. This morning we need to consider the nomination of Robert B. Costello to be the Assistant Secretary of Defense for Acquisition and Logistics.

Dr. Costello, we welcome you here this morning. We understand you have your family with you. We are delighted to have them. Is your wife with you?

Dr. COSTELLO. Yes. she is.

Chairman NUNN. We are delighted to have you this morning.

Dr. Costello is well qualified for the position that he has been nominated for, with an extensive background in dealing with similar procurement-type issues at General Motors. That experience will be sorely tested because the problems in defense acquisition are serious and certainly merit attention. We have heard many stories about many procurement problems, coffee pots costing $7,000,

toilet seats costing $600 and hammers costing $400. Of course these are problems, and they have to be addressed.

Frankly, in my view, these problems are minor compared to a far larger problem in acquisition, and that is the significant inefficiency of our production for major weapons systems. Over half of the combat aircraft production lines are being produced at a rate of one aircraft per month or less. The services are buying weapons at less than half of the production rates that were planned when the Department of Defense and Congress made a commitment to proceed with those systems.

Production stretchouts are systematic, as indicated by the increase of the number of major acquisition programs in this year's budget request that are stretched out compared to last year's budget projections.

Inefficient rates and stretchouts add, on the aggregate, billions and billions of dollars to costs to produce the same number of systems. I consider this overall situation to be one of the most serious problems we face. Far too much of our defense investment is being frittered away on overhead because of inefficient production rates. Last week the Comptroller General testified that the Department of Defense planning and budgeting systematically crams more programs into the budget than can be afforded, and certainly history shows this to be correct. It did not start with this administration, but we do have a more serious problem now than we have ever had before because we started with this administration with a very high level of defense expenditures. We had more programs crammed in than ever before, and now we are seeing a very significant decrease in that rate of defense expenditures.

So this problem is going to get worse. The budget before us continues funding for major new starts which were planned several years ago when budget forecasts were a good deal more optimistic. Now that we are facing a budget crunch, it is apparent to me that the Department of Defense has not objectively evaluated the new starts versus existing productions and do so within various realistic budget levels.

A further problem that must be addressed concerns the condition of our industrial base. We must ensure that our industrial båse is competitive with foreign businesses without losing sight of the need for increased cooperation with our allies in research, development and production.

You have many serious challenges, Dr. Costello, and we look foward to hearing your thoughts on these problems as you come into this job. We do not expect you to have all the answers this morning, but we do, I am sure, have a number of questions.

As I understand, Senator Quayle is going to introduce you. You come well represented, Dr. Costello, since Senator Quayle is an outstanding member of our committee. Not only that, he has been one of the most involved members in these procurement issues. So Senator Quayle, if you would like to proceed.

Senator QUAYLE. Thank you very much, Mr. Chairman. Dr. Costello, even though his most recent home is in Michigan, has spent, I think, about 12 or 14 years in the great State of Indiana. As a matter of fact, those were the formative years of his life [laughter] where he really learned a lot of good acquisition skills, logistics

skills, management skills and people skills, and I think that even though he was born in the east that he grew up and has a lot of experience in the midwest, and he will bring a lot of good common sense and be able to answer, hopefully, a lot of the questions that the Chairman rightfully raises.

He knows full well the kind of challenges that he is facing. I tried to tell him that this is not quite like the private sector in Delco Ramey or Delco Electronics in Indiana or General Motors, but he will bring a very good sense with a business background and management background, and we hope that in working with Mr. Godwin that they will be able to put some stability and to get a more flexible, responsive system than what we have. It is a huge challenge but I highly recommend Dr. Costello for this position. I think he will do an outstanding job, and I know he is extremely qualified, and he is ready to go.

Thank you very much, Mr. Chairman, and good luck.
Chairman NUNN. Thank you, Senator Quayle.

I would like, Mr. Costello, before we call on you to give whatever remarks you would like, I would like to call on Senator Bingaman. I am going to have to leave in just a few minutes, and I am going to ask Senator Bingaman to chair this full committee hearing this morning.

Senator Bingaman is the chairman of the Defense Industry and Technology Subcommittee which will have oversight over acquisition policy and over your responsibilities and duties.

So, Senator Bingaman, do you have any opening comments you would like to make?

Senator BINGAMAN. Mr. Chairman, let me just say that you summarized the importance of this position very well, and I think Senator Quayle pointed out the outstanding qualifications which Mr. Costello has.

He did come by to visit with me, as I know he has visited with many Members of this committee, and I am very impressed with the fact that a person of this quality would be nominated and would be foolish enough to accept a job of this type. [Laughter.]

I think it is credit to him, and I look forward to working with him. I do have a few questions after he gives his statement, some of which I would like to ask and most of which we will put in the record, but I do think that we need to get him confirmed as quickly as we can so that he can officially carry out his important duties. Chairman NUNN. Thank you, Senator Bingaman. I am going to ask you to preside, if you would, and I am going to listen to as much as I can and then I will depart, but you will be in charge. Senator BINGAMAN [presiding]. Unless someone else has an opening statement, why not go ahead, Mr. Costello, and say anything you would like to about your intentions in the new position, and then we will have a few questions.

[The nomination reference of Dr. Costello follows:]