During a Senate Armed Services Committee hearing prior to the congressional recess, Sen. Rick Scott (R-FL) spoke about private firms that underdeliver on DoD contracts.
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00:00So first off, thanks to each of you for your answers. Mr. Sherman, so you you run
00:06the Maritime Industrial Base Program. Since 2018 we've had, you've received
00:11funding above, or not you, but the program, you've received funding above
00:15normal funding. So how much is it and what's what's the return that we can
00:20tell our taxpayers? Yes sir, thank you for the question. Since 2018 we've received
00:26about about 6.7 billion dollars that's focused on the 1 plus 2 mission and then
00:34I believe around around 3.16 billion dollars that's focused on submarine
00:38sustainment mission. That those have been focused in a handful of areas as I
00:44mentioned as we mentioned supply chain uplift what we've seen there and that's
00:50where we started 18 to 22 was focused on supply chain uplift. The statistics we
00:54have from the projects that that took place between or were funded between 18
00:57and 22 and together with that in the rising demand signal we've actually
01:02increased the parts output from 16 percent of what what is required in order to
01:07execute 1 plus 2 to just over 40 percent. We need to we have to continue to advance
01:12that and and you know the the plan for the for the money that's in battery now
01:17that we haven't seen the results yet because it takes between 24 and 48 months
01:22depending on the on the type of project to really bring those things into battery.
01:26But 1,200 projects across workforce across supply chain and across advanced
01:32manufacturing are in battery working to to get up to get our production rates
01:37better sir. You know what I don't what I don't get is I never understand how with
01:43government private companies can can bid not do their their contract and then
01:49somehow government's responsible for somehow putting up more money to get
01:52something done. It seems like if if they bid up for something they know what
01:56employees cost it's there are it's their responsibility to go get these employees
02:00not government's responsibility so it's never made sense to me. So let's talk about
02:05contracts. So you all every one of you have dealt with companies that have not
02:11performed on their contract. Do they have any negative anything bad happened to
02:15them? Do they like do they have penalties? Do this what's what's the
02:21repercussions of not doing what they said there they don't want to committed to
02:24it you're not the one committed to it. I guess all of you have dealt with this
02:29right? Yes sir. If you could just say what if what what's the accountability part of
02:34this? Sir I will just you say in you know when we choose a contract type it is
02:39different for each type of ship that we're procuring in the circumstances and so
02:42all of them come with various tools. You obviously cost plus is a different
02:47strategy fixed price puts more accountability on the shipbuilder. We
02:51have fixed price for share lines which strongly incentivize them to have
02:54positive cost performance. Every contract has a often a typical set of
03:00incentives that go along with that that incentivize the shipbuilder to perform
03:04and schedule or other key program aspects. We hold the contractor
03:08accountable by by first of all the the the profit that's associated with those and
03:14sometimes with other measures but it differs for each contract depending on
03:18what we're executing. So I'm a record. Yes sir thanks for the question I agree with my
03:24colleague Admiral Moten. What I would also say is in addition to holding them
03:28accountable via their profit and how much money they make or lose we have had
03:33cases where vendors have not performed one of our strategic outsourcing vendors in
03:37which case we move the work from them to other vendors so we do take action when
03:41we do see something that is affecting our production. Are they responsible for
03:45any increased cost if you have to move it? Depending it goes back to what I'm a
03:50week said sir it depends on the contract structure so it's a my answer is it
03:53depends in some cases they are fixed price contracts which they are fully
03:57responsible in other cases it might be a cost contract depending on if it's a
04:00development one or not and so it depends on the amount of risk and how we
04:03share that risk. Yes sir and I would add that you know in extreme cases we can
04:08also withhold payments so we do retain will retain some of the payments if the
04:14companies are not performing to the contract so that is another tool that's in
04:17our inventory if we needed to use it. Chairman. Yes sir as Admiral Rucker said we've
04:22had 17 suppliers where we've stood up additional suppliers were in where we
04:28were single source previously with the submarine industrial base investments. To
04:34fully address your question sir I would say that the direction that we are
04:38headed with these maritime industrial base efforts with partnering across the
04:42submarine aircraft carrier community is particularly in submarines is to get to
04:47leverage competitive forces to get the best results and both in terms of
04:53schedule and cost out of our industrial base and as we build up the
04:57maritime industrial base we are positioning ourselves to better leverage those
05:01forces. Thank you. Senator Sheehy.