Mr. Richard McKinney addressed the need to improve Air Force acquisition of space programs in a harsh fiscal environment.

"We have entered into an era of flatting budgets," said Mr. Mckinney.

The Air Force's base-line budget has not declined in the past decade, but when adjusted for inflation and not looking at annual wartime supplemental appropriations, it has not grown either. Today the Air Force is dealing with substantial cost growth across the force.

"Although we are a smaller Air Force than we were several years ago, seven percent smaller, in fact, our personnel costs have increased 16 percent," said Mr. McKinney

The Air Force is also struggling with increased costs of day-to-day operations.

"For instance, even as we have driven our energy use down by 16 percent, our energy costs have increased three-fold," said Mr. Mckinney. "Over all, our operating costs are up 19 percent as our own inventory has decreased by 10 percent. In too many of our acquisition programs, not only space programs, we are struggling with escalating costs."

With no prospect of real growth for the Air Force budget, efforts to reduce costs have led to a drive to make all aspects of the Air Force mission more effective and efficient.

"We must demonstrate that we have made every effort to reduce costs and trim overhead, to focus on the core missions of the Air Force," said Mr. McKinney, adding, "Rest assured, I expect space to remain a core mission of the Air Force."

The deputy under secretary stressed that within space as much as any other area, the Air Force absolutely must continue to improve acquisition processes, make them more efficient, drive down costs and convince the larger Air Force and DoD community that the cost of national security space is justified given the many other war fighting priorities.

Mr. McKinney noted that enabling the space domain is critical to military operations and has afforded strategic advantages to the United States because of its access to space and space capabilities.

"If we don't (continue to lead in the space domain), we risk leaving capability gaps that will increase our vulnerability across all operational domains," said Mr. McKinney.

As the space domain becomes more congested, contested and competitive; the Air Force is taking to steps to address the space environment by enhancing critical military space capabilities that directly support the war-fighter and benefit the nation's national security, economy, international relationships, scientific discovery and quality of life.

Major areas of Air Force investment include satellite communications; advanced missile warning systems; global positioning, navigation and timing; accurate time sensitive weather data capabilities and enhanced situational awareness.

"To this end the Air Force is determined to acquire the right capabilities, in the right time frame and at the right cost," said Mr. McKinney. "In today's constrained fiscal environment, we will put taxpayer dollars where they are most needed and we will work aggressively to maximize the return on our investments."

In order to do this, the Air Force is developing specific acquisition strategies for improved cost savings and a more effective, efficient space acquisition approach.

One specific strategy is Evolutionary Acquisition for Space Efficiency, or EASE.

Current Air Force procurement practices have led to increased costs due to production line breaks, parts obsolescence and inefficient use of labor.

"These challenges have prompted multiple calls from Congress for smarter acquisition and we have heard those multiple calls," said Mr. McKinney. "So we are working this year with Congress to combat inefficiency and disruption costs by the status quo approach to procuring satellites.

"EASE is designed to drive down costs, improve space industrial base stability, and allow for investments in technology that will lower risks for future programs."

EASE is composed of four basic tenets.

The first tenet is to block buy satellites. This allows the Air Force to buy economic order quantities of critical parts, run production lines more efficiently and reduce non-recurring engineering costs.

The second tenet is to establish stable research and development investments. Resulting savings from the first tenet can be reinvested in research and development to further improve the performance and lower the cost of follow-on systems. This reinvestment is an essential part of EASE, said Mr. McKinney.

"Together, these first two tenets of EASE will provide much needed stability and predictability for our fragile space industrial base," he added.

The third tenet is fixed price contracting. This tenet, according to the deputy under secretary, works well for satellites that have moved beyond the development phase, which is where most of the costs resides.

The fourth and last tenet is to ensure full funding over multiple years through advanced appropriations. This approach spreads acquisition cost over multiple years while still applying the principals of full funding.

"In the budget environment we are in, we simply can't afford multi-billion dollar spikes every few years," said Mr. McKinney.

It was noted that if this approach demonstrates results the Air Force is expecting, it will likely expand its to more programs and suppliers of satellites.

"We don't believe EASE is going to fix all the problems we have experienced in our acquisition processes," said Mr. McKinney, "but it is a concept based on feedback that we have been receiving for several years in our acquisition of space systems and it is based on common sense principals.

"The bottom line is we simply cannot continue with the status quo and we think this new approach is a prudent direction to go in for procuring space capabilities."

In tandem with this effort the Air Force is pursuing a robust examination of contractor costs and making aggressive efforts to achieve cost reductions.

"There is a rigorous 'should cost' review of the (Advanced Extremely High Frequency System) program. This review into what AEHF capabilities should cost will put the Air Force in a position to get a better deal for the tax payer," said Mr. McKinney.

In exchange for stability and commitment afforded to the industrial base by the EASE approach, the Air Force expects its industry partners to help the find ways to achieve savings.

"With Congress' support we are confident that the combination of the major elements of EASE, in tandem with a rigorous 'should cost' review, will help the Air Force achieve considerable savings in the acquisition of some of our most critical space assets," said the deputy under secretary.

Mr. McKinney ended his statements by emphasizing that, "all the space programs we are developing, investing in and sustaining are designed to support the National Security Space Strategy and the National Space Policy by leveraging emerging opportunities to strengthen the United States' National Security Space posture, while maintaining and enhancing the advantages gained from space capabilities."

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