[Note: Nominee responded and the information is contained in the committee's executive files.] PART F-FINANCIAL DATA All information requested under this heading must be provided for yourself, your spouse, and your dependents. 1. Describe the terms of any beneficial trust or blind trust of which you, your spouse, or your dependents may be a beneficiary. In the case of a blind trust, provide the name of the trustee(s) and a copy of the trust agreement. [Note: Nominee responded and the information is contained in the committee's executive files.] 2. Provide a description of any fiduciary responsibility or power of attorney which you hold for or on behalf of any other person. [Note: Nominee responded and the information is contained in the committee's executive files.] 3. List sources, amounts and dates of all anticipated receipts from deferred income arrangements, stock options, executory contracts and other future benefits which you expect to derive from current or previous business relationships, professional services and firm memberships, employees, clients and customers. [Note: Nominee responded and the information is contained in the committee's executive files.] 4. Have you filed a Federal income tax return for each of the past 10 years? If not, please explain. [Note: Nominee responded and the information is contained in the committee's executive files.] 5. Have your taxes always been paid on time? [Note: Nominee responded and the information is contained in the committee's executive files.] 6. Were all your taxes, Federal, State, and local, current (filed and paid) as of the date of your nomination? [Note: Nominee responded and the information is contained in the committee's executive files.] 7. Has the Internal Revenue Service ever audited your Federal tax return? If so, what resulted from the audit? [Note: Nominee responded and the information is contained in the committee's executive files.] 8. Have any tax liens, either Federal, State, or local, been filed against you or against any real property or personal property which you own either individually, jointly, or in partnership? [Note: Nominee responded and the information is contained in the committee's executive files.] (The committee may require that copies of your Federal income tax returns be provided to the committee. These documents will be made available only to Senators and the staff designated by the chairman. They will not be available for public inspection.) SIGNATURE AND DATE I hereby state that I have read and signed the foregoing Statement on Biographical and Financial Information and that the information provided therein is, to the best of my knowledge, current, accurate, and complete. ROBERT BASSETT COSTELLO. This 12th day of February, 1987. STATEMENT OF ROBERT B. COSTELLO, NOMINEE FOR ASSISTANT SECRETARY OF DEFENSE FOR ACQUISITION AND LOGISTICS Dr. COSTELLO. I am honored, Mr. Chairman, Senators and members of the committee, to be considered for a post of this type, especially at this time. Last year there was a great deal of focus and attention on acquisition matters in both Houses of Congress, and yourselves in particular; to establish some guidelines and rules with new legislation, to provide an opportunity for change. Personally, I am an individual who is dedicated to establishing change in a logical way, which engenders successful change. Dealing with an organization as large as the Department of Defense is awe inspiring, and despite of Senator Bingaman's comments, my wife has the same comment. She said why are you looking to take on a job of that type? Well, I have served my country in the past, and I believe that any citizen has to accept any opportunity to significantly serve and contribute to his country. It is a unique opportunity to have managed the largest industrial procurement activity in the world, and now I will have an opportunity to manage the largest purchasing activity in the world. Purchasing is a distinctive and diverse area, and requires a variety of talents. When Secretary Weinberger offered me this job, and we discussed it, I described this job as an element of business with limited time frames in which certain needs, requirements, and opportunities must be addressed. Rarely is there a person with the talent, experience, and interests which are synchronous with the opportunity for that job. I told the Secretary that if he were to offer me the job, I would not have a choice to make. It would be a pleasure to accept a job where I could take my talents and apply them directly to the needs of the Defense Department; especially at the time when the legislative branch has structured a new organization, a new activity, that will allow us the opportunity for change. I am here to look at those opportunities and to work with this committee, with the members of the committee individually, and also with the committee staff, to help expedite the procurement process and achieve the changes that Congress is attempting to accomplish through last years significant legislation. I would like to open it up to any questions that each individual would like to ask. Senator BINGAMAN. Let me just ask a couple of questions if I could and then defer to the others. I know there are a lot of people very interested in the issues that you have responsibility for or will have responsibility for in this position. Let me just ask a very general question. We have done a lot of legislating here, and Senator Quayle took the lead on a lot of it, working with Senator Levin and Senator Dixon and others including myself, to try to improve the acquisition system. I do not know if it helped or hurt at this stage, and I would be interested in any reaction that you have at this early stage as to whether the legislation that was enacted is being implemented, whether you have had the opportunity to evaluate the need for changes in that legislation, or whatever general comments you would have for us. Dr. COSTELLO. I think the extent of the legislation passed last year was so broad and sweeping that it is too early to evaluate its effects. The legislation is being implemented. Mr. Godwin, who is the Under Secretary for Acquisition, has taken on significant challenges to implement the legislative intent. His organization and the services, have responded to the challenge. It will be the role of our activities to see that the intent is fully implemented. We should be able to come back to you in the future and give you status reports as we see results. However, it is still too early to see those results. Senator BINGAMAN. Let me ask on the whole business of the defense industrial base. We have a recommendation from the Defense Science Board about the semiconductor industry and the need, in their view, to get the Department of Defense more active in trying to support our semiconductor industry. I am not going to ask you today for a reaction to that report but I am interested in your general thoughts about how we approach this whole issue of identifying what is needed for the industrial base and pursuing it. It seems to be an issue that sort of comes up on an erratic or sparadic basis, and perhaps it is not as systematically approached as it needs to be. That is my impression, and I would be interested in any thoughts you have. Dr. COSTELLO. In my prior experience with General Motors, when we bought something new or changed the direction in which we were going, we had to look at the industrial base. I have been deeply concerned about various aspects of the industrial base for at least 10 years. For the last 4 or 5 years, I have been involved with broader industrial base issues, as I took responsibility for all procurement in General Motors. I think that the Defense Department, in particular, has a role to play in the industrial base. I do not think at this time it is well defined. I think that the semiconductor industry is a necessary element of the industrial base, but is the machine tool industry, the steel industry, and the bearing industry? Rather than look at them one at a time, I think it is necessary to take a broad perspective and say yes, there is a role for the Defense Department. However, it needs to be defined. My understanding is that there is a major effort now to define the DOD's role. As part of that definition, one has to look at specific industries and the criticality of each industry to the industrial base. The semiconductor industry is very important. They have made a proposal. I think it has to be carefully evaluated on its own merits as well as part of the broader context for the general industrial base. Senator BINGAMAN. Thank you very much. I have some other questions. I think I will probably wind up submitting most of these for the record, but let us go on to questions by other Members. Senator Warner. Senator WARNER. Mr. Chairman, I would defer to the Senator from Indiana. Senator BINGAMAN. Senator Quayle, go right ahead. Welcome once again, Dr. Costello. Let me just ask you about the possibility of a recommendation of the Packard Commissoin that I think that you are working on, and that is to combine all the existing procurement legislation into a single status. You had mentioned this as one of your priorities, I think, of getting some streamlining in the regulatory process, and I just wondered how you visualize this possibility of getting a codification and all the procurement legislation under a single statute. Dr. COSTELLO. That is a very difficult question to answer. You can say, yes, you would like it done; but you have to live in the real world, Senator, where yo may not get all of the laws changed to perfection. There may not be perfection because the environment is changing. It was my impression, as I read the Packard Commission report and then had an opportunity as a consultant to go to the field and talk to people, that perhaps there is more flexibility in the laws than people realize. Legislators may promulgate laws with a specific intent; and the legislation may in fact allow for flexibility which is quite broad. That legislation then goes through the Federal Acquisition Regulation process and normally that band of flexibility is narrowed down a little. Then it goes to the Defense Acquisition Regulation Council, and they narrow that down a little more. Now, you started off with a pretty broad scope, but after a couple of iterations, we have lost flexibility. By the time you get down to the guy that has to follow that regulation, he has no flexibility at all. One of the things we should do is to look at the intent of the legislation, and then allow some of the people more flexibility within the intent of the legislation rather than come back and say please change the laws. DOD has put together a couple of committees with the Office of Federal Procurement Policy to look at laws, to see whether or not there are some legislative changes which might be of benefit. They are also going to look at the internal regulations to see how many of those should be changed or eliminated. There is a major emphasis in the services on steamlining. There is a lot of good effort being put forth. I have talked to most of the people involved in those activities. I think by the time they are through we may come back and say please change this, but that will be with full knowledge of your intent and how it can be fulfilled in the field today. Senator QUAYLE. So what you are saying is that perhaps a lot of this streamlining and getting more flexibility into the procurement system itself might be done internally. I think your description of it is quite accurate. We have had testimony in the past that someone will come before us and tell us here is the way that it is being carried out. We say, well, that is not what the congressional intent is. You are absolutely right that once it goes through about three or four processes that it gets narrowed down, and you have rigidity built into a law that we never really had anticipated. So I think that your focus is proper, that there are a lot of internal encumbrances that have been placed upon the system that might be able to be avoided administratively. I think the Packard Commission report, at least as I read it, goes in that direction and suggests that there are a lot of things within the Department of Defense itself that could be done to help alleviate this. I think it is a very important problem in getting good management, and I think you will find that out if you have not already. Dr. COSTELLO. We have the opportunity in the Office of the Assistant Secretary for Acquisition and Logistics to have a Senior Military Assistant, Capt. Jack Kavanaugh, who served on the Packard Commission. As a consultant, I have been able to discuss many ideas with Capt. Kavanaugh and I believe that he shares the same concerns that many of you do. He also seems to share your opinion, and one expressed by the Packard Commission, that many adjustments can be made internally. To put it very succinctly, I think that the people are operating today under the belief that if the law does not tell me I can, I cannot. I think the intent really is that if the law does not tell me I connot, I can. Now, that is a subtle but a very significant philosophical change, and I think that we want to find out how much we can do rather than how much we cannot do. There are some people that have taken some bold initiatives. The model installation program is a bold initiative which allows DOD employees in the field to operate more independently of DOD regulations. This program has been proven to enhance the accomplishments of DOD's employees. Senator QUAYLE. Well, we certainly wish you luck. One other final question, Mr. Chairman. One of your priorities that you have discussed deals with overcoming the adversarial relationship with industry. Do you want to define and perhaps expand on how you think that might be worked out, what you really mean by that? Dr. COSTELLO. That is a fundamental cultural change that I think has to occur. It has many facets today. The more you study, the more you realize that there are changes that need to be put in place. The normal relationship is one of I win, you lose. It is an adversarial relationship. You are negotiating with a contractor, and if you can beat him down in some area, why, then you succeed. He loses, you win. It turns out that we probably both lose under those circumstances because no one is smart enough to know all of the things that the other man has hidden. So if you approach his weakest points you may gain. I think as we look ahead understanding this relationship is important. As Senator Nunn mentioned, we have an industrial base that is not fully utilized and which is very costly. We are looking at some advanced composite structures. The Voyager was made of those new graphite composite structures. They are challenging. They are interesting, but normally the Defense Department would announce their requirements and the eight companies in that industry would put in place facilities to meet our needs. It turns out that in industry a single facility by itself may be able to meet 50 to 75 percent of our needs. If all eight of these facilities are put in place, we automatically have four to six times our needs. We compound the problem of utilization, and we compound the problem of our subsidization of industry at that point. Now, if we are going to work with industry, we have to take a look and ask them, as an industry group, how are you going to meet our needs, not exceed our needs; not incur the significant cost of subsidization of excess capacity? 77-336 0 - 88 - 2 |