at this time or accepting further delays in fielding the system. These resources are absolutely necessary for us to keep PAC-3 on track.

In concert with our Army executing agent, I have commissioned a comprehensive review of the entire PAC-3 program. Additionally, we have asked the Defense Contracting Management Command (DCMC) and the Defense Contract Auditing Agency (DCAA) for assistance. We are examining all aspects of cost growth, technical and program management, and the fundamental assumptions behind the schedules that the contractor has proposed. I have also requested a team of senior-level acquisition leaders – to include retired general officers - for their assessment of the program. Based upon my initial findings, I have already reviewed some initiatives aimed at reducing the unit cost of these missiles. While I am very concerned about the cost aspects of the program, I cannot ignore the need for a realistic schedule, performance and timely deployment for the warfighter. I have met with the prime contractor at the CEO level and have expressed my concern about the program and desire for corporate commitment to a realistic program baseline, a realistic schedule and real cost-reduction efforts. This should include costsharing arrangements to reduce Government liability. I am committed to coming back to the Committee and reporting on our progress before you complete action on the Defense Authorization and Appropriations Bills.

Ultimately, I want to reduce the unit costs of PAC-3 so we can procure more inventory for the warfighter with the same level of funding. This must always be our bottom line - more inventory and defensive protection within the budget allocated.

Navy Area. The Navy Area program builds upon the legacy of success found in the AEGIS program. This sea-based missile defense capability consists of modifications to the AEGIS combat systems and the SPY-1 radar to enable the ship to detect, track and engage theater ballistic missiles using a modified Standard missile. There are over 50 AEGIS destroyers and cruisers which will eventually constitute a fleet of forward deployed, multi-mission platforms - including theater missile defense. The Navy Area program is currently in the engineering and manufacturing development phase. We have successfully developed and demonstrated this system - including a successful series of flight tests. However, the program's progress has been slowed by the Navy's AEGIS Weapon System (AWS) Baseline 6 Phase III software development - not missile defense development issues. This has resulted in an eighteen month slip to ten developmental/operational assessment tests that were scheduled to occur in fiscal years 1999 to 2000. This slip has caused a six month delay to initial EMD testing and a one year delay in the FUE status for Navy Area. We are requesting $268.389 million in EMD and $55.002 million in procurement funds for Navy Area in fiscal year 2000.

In light of the emerging missile threat, we are endeavoring to provide a capability to the fleet as early as possible. Our plan includes providing a User Operational Evaluation System (UOES) that we call “Linebacker” for fleet use. "Linebacker" will be a single mission ship capable of performing TBMD or Aegis multiple missions. Two AEGIS cruisers, the USS Port Royal and the USS Lake Erie, are at sea now providing critical feedback to influence the tactical design improvements and modifications to the AEGIS combat system. They will conduct a variety of at-sea tests, develop core doctrine and tactics, and serve as a focal point for getting our

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theater missile defense capability to sea. In a contingency, the warfighting CINCs can call upon this Linebacker capability. I believe this is the most prudent approach to fielding our lower-tier naval TAMD capability as soon as possible.

Upper-tier TAMD Strategy. Dr. Gansler has provided a detailed overview of how the Department arrived at the revised upper-tier TAMD strategy. I realize there has been a lot of concern that we are directly competing these two systems. Some Members have pointed to language in the fiscal year 1999 National Defense Authorization Conference Report as direction that these two systems should be seen as "complementary” versus “in competition." While we have referred to our revised TAMD upper-tier approach as a "competitive strategy," we are not directly flying one system off against the other.

At the heart of our revised upper-tier strategy is the fact that we have found ourselves in a very tight spot. The medium-range ballistic missile threat is emerging very rapidly. More countries are acquiring ballistic missiles with ranges up to 1,000 kilometers, and more importantly, with ranges between 1,000 and 1,300 kilometers. North Korea has deployed the No Dong-1 missile. Last July, Iran conducted a partially successful flight test of its Shahab-3 missile. With a range of 1,300 kilometers, the Shahab-3 significantly alters the military equation in the Middle East by giving Iran the capability to strike targets in Israel, Saudi Arabia and most of Turkey.

The emergence of these missile capabilities is important because our upper tier systems THAAD and Navy Theater Wide - are designed to specifically take on these medium-range theater-class missiles. The dilemma we face, however, is that we continue to have problems demonstrating the THAAD interceptor. Each of our five intercept test failures were caused by a different problem with a different missile component. This leads us to believe there are problems with the quality of the interceptor's components, but not the overall interceptor design.

At the same time, Navy Theater Wide has experienced development problems of its own – even though it is not yet at the same level of testing as THAAD. In September 1997, the initial Control Test Vehicle flight test was unsuccessful due to a steering component failure. The follow-on flight test is scheduled for later this year and will use improved Standard Missile-3 components. The first Navy Theater Wide intercept attempt is currently scheduled to take place during the third quarter of fiscal year 2000.

Based on a review of program performance - test results, schedule, cost, program risk, and projected performance - we will propose in December 2000, that either THAAD or Navy Theater Wide be deployed first. The system that is not selected will continue to be developed and will be fielded as soon as practicable. Therefore, instead of a competition, I really see this more akin to a "leader-follower" approach.

The fundamental reason why we are compelled to follow this approach is that the threat is rapidly expanding and we have not made substantial progress in demonstrating these systems. I think in this area - because of the pressing threat - a little "sibling rivalry" can go a long way within our family of systems.

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Theater High Altitude Area Defense. So, with the threat rapidly expanding and our upper-tier programs experiencing development setbacks, we have devised an approach that will challenge us to field an upper-tier system as early as possible in order to meet the threat. As part of this approach, we will continue to fly THAAD. Our next flight test is in a few weeks. Following this, we plan to conduct four more flight tests this year. The cost-sharing agreement we have worked out with the prime contractor requires that the program achieve three flight test intercepts by the end of this year. The three intercepts are required for the missile and system to demonstrate sufficient design maturity to proceed into the next phase of development. The costsharing agreement provides that the contractor shall be responsible for up to $75 million of negative cost incentives should these intercepts not occur.

It is important to note that the rest of the THAAD system has performed remarkably well during all flight tests. We have successfully demonstrated the THAAD ground-based radar, the launcher, and the battle management, command, control and communications system. Overall, the THAAD system has performed well, but the critical element – the interceptor - still needs to demonstrate its technical maturity. The Department has made the right decision by continuing to fly the THAAD interceptor. We must get the missile into the critical "end game” and learn from that vital test experience. I am absolutely confident that if the THAAD team can shake out all the various “bugs in the system,” THAAD will successfully intercept its target later this spring.

I would like to note that Lockheed Martin's senior leadership has demonstrated to me that it is fully committed to the success of the THAAD program and that it has devoted the resources necessary to ensure success. I believe the cost-sharing plan that we have agreed to is a clear indication of the contractor's commitment to the success of the program. I continue to meet frequently with their leadership and remain very impressed with the quality of the people they have working on this program. They clearly have put the "A plus” team on the program. In light of this and the considerable progress I have observed over the last year, I am confident that the program will successfully engage its target during the next flight test.

If the next flight test, however, should fail to fully meet its objectives and successfully engage and intercept the target, I hope the Congress will recognize that this remains a program in the demonstration/validation phase. This is the phase when we want to learn from our mistakes and failures. This is the phase when we can still fix the system and have it properly aligned for acquisition. I confess that no one is more frustrated with our progress to date than me, but we need to be patient and to work the "bugs out of the system." THAAD is a critical element of our family of systems. We need to successfully develop, demonstrate and field a ground-based upper-tier system.

Navy Theater Wide. The Department is following the Congress' recommendation that we allocate the full funding required to make Navy Theater Wide an acquisition program. In fiscal year 2000, we will request $329.768 million for Navy Theater Wide. Over FY1999 - 2001, we will increase Navy Theater Wide funding by about $500 million, including funds added by Congress. This increased level of funding will allow the Navy Theater Wide system to conduct ground and flight tests to demonstrate its capabilities. The Navy Theater Wide AEGIS-LEAP

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Intercept Program now in progress is a series of progressively more challenging flight tests = culminating in a demonstration of the Navy's ability to hit a ballistic missile target above the 1 atmosphere. A Control Test Vehicle flight test is planned for the fourth quarter of this fiscal year to test the flight characteristics of the SM-3 missile. Following this, we plan to fly seven Flight Test Round shots - one per quarter - through the third quarter of fiscal year 2001. The last five flight tests will attempt to intercept their targets. The first intercept flight test will now take place in fiscal year 2000.

In acquisition programs, we have seen how competition has encouraged technological progress, reduced system costs and provided the Department with more than one program option to address a threat. My hope is that this competitive approach to the upper-tier strategy will also provide a positive incentive for both the THAAD and Navy Theater Wide teams to succeed.

Personally, I want both programs to successfully demonstrate their readiness to be fielded. Both THAAD and Navy Theater Wide will play vital roles in protecting our forward deployed forces, friends and allies against the existing and emerging theater-class missile threat. We need both THAAD and Navy Theater Wide in our TAMD family of systems architecture.

Medium Extended Air Defense System. As a result of resource constraints, especially in the years when we intend to field our core TAMD systems and develop and deploy NMD, the Department recognized that it could not afford to proceed with the Design and Development

1 phase of the MEADS program as originally planned. We made this decision even though there remains a valid military requirement for maneuver force protection and a compelling case for armaments cooperation with our allies.

The Department proposes using about $150 million over the next three fiscal years to demonstrate critical technologies – such as a fire control radar and mobile launcher - we need to satisfy the MEADS requirement. This restructured MEADS program allows us to explore less costly program options by leveraging developments in existing missile defense development programs, such as PAC-3. This approach will hopefully enable us to continue cooperation with our allies in this important mission area. As we solidify our approach with our allies, we intend to capitalize on the concurrent Air Directed Surface-to-Air Missile proof-of-principle activity as well.

Earlier this month, on Dr. Gansler's behalf, I met with our German and Italian partners to discuss the future of MEADS. I must report that they were concerned about the commitment of the United States to this program. However, they recognized the resource constraints we faced in missile defense and support our overall approach. They would, however, like for the Department and Congress to express our commitment to following the three year technology demonstration with an affordable restructured program to field a MEADS system. Quite frankly, they are concerned that the Congress will not support the program in fiscal year 2000. I know that both the Secretary and Deputy Secretary are looking to Dr. Gansler and me to work with the four defense committees to secure a stable future for our MEADS technology development program. I realize that especially in a tight budget environment $48.5 million is a very substantial amount of money. I hope to work with the Committee and the other three defense committees to lay out

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how we intend to proceed with this program, demonstrate that we have clear end-products for our investments, and also outline how our German and Italian partners will play in this cooperative venture.

Joint TAMD Programs.

Several research, development, test and evaluation efforts - which effectively support multiple theater air and missile defense system development program requirements – are managed and funded under the Joint TAMD program. Joint TAMD requirements and supporting tasks include development of target missiles, collection and analysis of target signature and discrimination measurements, and funding of CINC-level planning and participation in wargaming exercises that maximize the consideration of theater air and missile defense requirements and systems capabilities.

BMDO funds the development of the Extended Air Defense Testbed (EADTB), an object-based simulation and analytic tool which supports architecture analysis and system performance, and supports the theater air and missile defense community through distributed interactive simulation (DIS) connectivity. An important element of Joint TAMD is the TAMD Critical Measurements Program (TCMP), which provides tactical ballistic missile target signature and related discrimination data. Collected data from recent test flights will be used to characterize potential countermeasures and to develop and test algorithms designed to mitigate their effects. Programs that are expected to directly benefit from EADTB and TCMP include all theater air and missile defense MDAPs and the U.S. Air Force Space-based Infrared System (SBIRS). The Joint TAMD program element includes a requested $195.7 million in fiscal year 2000.

Family of Systems Engineering and Integration.

Each member of the family of systems will contribute what it sees to a common picture of what is occurring in the battlespace, and then based on that picture, the warfighter will launch the most effective and efficient missile defense response. All theater air and missile defense systems must be capable of joint or autonomous operations. For example, based on cueing from a space-based sensor and target detection and tracking by the THAAD ground-based radar, a Navy Theater Wide interceptor could be launched to counter a ballistic missile threat. This system will be demonstrated through a series of systems integration tests. We are currently planning such an integration test for fiscal year 2002. That test will fly targets that realistically simulate medium-range ballistic missiles against both the PAC-3 and Navy Area systems. Our intent is to calibrate how well our lower-tier systems can protect their defended areas against these longer-range targets. Our fiscal year 2000 budget request for FOS E&I is $141.821 million.

Theater Missile Defense Challenges. Mr. Chairman, missile defense is one of the most technically challenging projects the Department has ever undertaken. The urgency to develop and deploy a highly effective TAMD system grows directly out of our experience in the Gulf War. We recall that the largest single loss of U.S. servicemen was the result of the SCUD missile attack on our barracks in Dharan. And we see how the threat is growing in both numbers