duction and capital improvement will require a sustained commitment to the longterm interests of Y-12 and its mission.

Management Systems

BWXT Y-12 is bringing fiscal discipline to Y-12. We have established a centralized planning function to include estimating, schedule planning, resource budgeting. strategic baseline planning, performance measurement & reporting, and systems management. A common tool-set has been established to provide the planners consistent planning software across the Y-12 site.

Using these tools, we have developed schedules and resource requirements for all work activities, including Work Breakdown Structure (WBS) elements, and the estmated costs, schedule, duration, resource loading, and the required earned value protocols for each element. The 10-year baseline is complete covering all major projects planned at Y-12, including future weapons programs, modernization programs, infrastructure reduction projects, and technology development activities.

Currently, we are focusing on several key upgrades to our process. While standard estimating procedures and formats have been established for all work done across the site, we are working to improve the accuracy of our estimates. Also, we are working to improve our production control systems, including the recent completion of a pilot project. The resulting schedules will provide the required integrated planning for preventative maintenance, operations, inventory, and facility maintenance

efforts.

These initiatives provide managers the visibility to effectively manage cost, control scope and maintain schedule commitments. We are working hard to assure that the resources placed in our care are well spent on activities of highest importance

to our mission.

Workforce

Y-12 is taking action to assure the technical base is available to carry out its mission in the future. We have defined our critical skill needs and initiated the hiring of entry level, technical talent to prepare them to be tomorrow's leaders. In order to attract the best talent, we have initiated cooperative education programs, including the establishment of internal mentors to maximize the benefit of their time at Y-12. We are now developing a program of partnerships with universities in the region and preliminary response to the concept of these partnerships has been enthusiastic. Our objective is to assure the best people are attracted to Y-12 as a vibrant workplace whose mission is important to national security.

Safety is the responsibility of all employees and important to everyone. BWXT Y12 has been working to bring the commitment to safety to be a first principle at Y-12. All supervisors and managers completed safety leadership training followed by rolling safety focus meetings with all employees. The routine employee interaction on safety issues has begun to show improvement in our safety metrics for the plant.

Mission Performance

Y-12 continues to meet the direct needs of the nuclear weapons program with timely delivery of products and execution of a wide variety of supporting activities. Shipments of fuel for the nuclear navy have been accomplished on time. Planning for the near-term needs has resulted in re-starting several needed capabilities as well as the introduction of several new technical capabilities. Y-12 has also participated with ORNL to provide centralized and integrated capabilities critical to the success of our national commitment to non-proliferation. A strong and refocused capability to perform work for the full range of government and commercial customers supportive of base Y-12 mission needs has been initiated in partnership with ORNL. This growing and diversified work mix is vital to the retention of critical capabilities and the development of those required for the future.

Summary

While Y-12 has made major steps forward in the past year, there is still a long road ahead to achieve long-term, sustainable capabilities to meet national security needs with confidence, including management leadership and execution effectiveness. Consistent, balanced funding support for operations, technology introduction and infrastructure re-capitalization will be required. Consistent, timely and visible definition of program requirements will be needed as well as commitment to stand behind initiatives and investments until they are completed and have produced the expected results. Y-12 must continue to be fully supported in all areas for it to continue to meet long-term national security needs.

John Mitchell, President and General Manager, BWXT Y-12

As President and General Manager of BWXT Y-12, John guides all Y-12 operations to ensure that the site fulfills its missions while maintaining the highest standards of safety, quality, and efficiency. Previously, John led the Nevada Test Site to achieve key program milestones while diversifying the site's missions, improving its safety performance, and maximizing productivity. John joined Bechtel after a 31-year career in the Navy, where he managed strategic nuclear weapons systems and retired as a Rear Admiral. He earned an MS in Physics and a BS in Electrical Engineering.

STATEMENT OF DAVID S. DOUGLASS

PRESIDENT, HONEYWELL FEDERAL MANUFACTURING &

TECHNOLOGIES

BEFORE THE

HOUSE ARMED SERVICES

SUBCOMMITTEE ON MILITARY PROCUREMENT
U.S. HOUSE OF REPRESENTATIVES

JUNE 12, 2002

Mr. Chairman, my name is Dave Douglass. I am president of Honeywell Federal Manufacturing & Technologies, which manages the National Nuclear Security Administration's (NNSA) facility in Kansas City, Missouri, and facilities supporting transportation safeguard activities in Albuquerque, New Mexico. Thank you for this opportunity to update you on the Kansas City Plant and share my perspective on the stockpile stewardship program and our capability to maintain the stockpile.

The Kansas City Plant today is an active, safe, secure, and reliable facility that serves as one of our country's most unique and valued national security assets. Our diversity of sophisticated, complex and leading-edge manufacturing capabilities is equaled by few facilities in the country, and the fact that these capabilities are housed under one roof in a secure environment is rivaled by no other manufacturer in the world. We are a unique, one-of-a-kind, national security asset.

The non-nuclear components we produce comprise 85 percent of the parts manufactured within the nuclear weapons complex, as well as 85 percent of the components that constitute a nuclear weapon. We bring to the nuclear weapons complex and our nation expertise in science-based manufacturing; Six Sigma continuous improvement techniques; supply chain management; e-business systems; sophisticated electronic, mechanical, and rubber and plastics manufacturing; and a consistent reputation as one of the NNSA's highest-rated contractors.

With the help and support of this Committee and Congress over the past four years, we have begun to address issues impacting our talent pipeline and critical skill needs, infrastructure deficiencies and recapitalization concerns at the Kansas City Plant. Over the last 18 months, we have used the additional funding provided by Congress to hire 300 people, keep our critical skills filled at a 99-percent level, and meet urgent infrastructure and recapitalization needs, including equipment upgrades, critical roofing repairs, and renovations to air handling systems in our production areas. In each case, we were able to use Congressional funding to focus on the highest priorities, however unglamorous they may have been. At the same time, we maintained world-class performance in product delivery, quality and safety performance. Using our Six Sigma processes, we have doubled the output and yields on critical W87 components, ensuring uninterrupted supply to the Pantex Plant. We have also established a foundation for new technologies, such as LIGA, which is a revolutionary miniaturization capability, to meet expectations of our national laboratory and NNSA customers. The Stockpile Management Restructuring Initiative (SMRI) to reduce the plant's footprint and improve operational efficiency continues to be ahead of schedule and under budget.

Despite the progress that has been made, issues remain as we prepare for the sizable workload brought by the upcoming life extension programs. We continue to seek your support in addressing on-going, long-term issues facing the Kansas City Plant and the entire nuclear weapons enterprise.

Mr. Chairman, as both a taxpayer and a contractor, I believe we should be held accountable to the highest standards of performance. This includes driving efficiency improvements throughout our organization to ensure that the greatest value for the investment has been achieved. To this end, Honeywell has implemented a number

of efficiency improvements at the NNSA's Kansas City Plant that embrace commer cial best practices and ensure ever-increasing value for NNSA investments.

My boss at Honeywell holds FM&T and me to the same standards of performance as all Honeywell commercial businesses. For us, this includes achieving 6 percent year-over-year improvement in productivity, qualifying for and maintaining ISO quality and environmental system certifications, implementing cost-saving digitization applications, achieving safety metrics that are significantly better than national or NNSA standards, and training employees in the use of continuous inprovement tools such as Six Sigma. All 2,000 of our salaried associates are Sa Sigma Green Belt certified, plus more than 150 of our employees are certified in Sa Sigma Black Belt productivity tools. Furthermore, when we were awarded the cortract to continue operating the Kansas City Plant in 2000, we committed we would achieve $25 million in efficiency improvements at the Kansas City Plant in the first two years of the contract. Last year, our first year, we achieved $20 million. By the end of this year, we fully expect to meet and far exceed the remaining $5 million commitment.

Achieving these efficiency improvements means we must set stretch goals for ourselves, such as digitizing 90 percent of our core business processes by FY2004. For example, we are one of only 30 Fortune 1000 companies that has implemented a fully integrated e-procurement solution, which includes electronic solicitation as well as cataloging capabilities that allow Kansas City Plant requisitioners to shop discounted price agreements for products and services. This new application streamlines the procurement process and capitalizes on partner relationships that optimize value for government spending. Our sense of urgency was exemplified by our 26 day implementation plan, and our sense of value is demonstrated by measuring the return on investment. To date, we have posted 160 electronic solicitations, including reverse auctions, valued at $68 million with realized savings of over $7 million. Our next phase will be to provide customer and supplier portals to streamline business operations further.

As part of our vision of the Kansas City Plant as a multi-mission, national security asset, we have grown our Work-for-Others program by 42 percent in two years. Other government agencies, including military, law enforcement and intelligence organizations, are finding increasing value in our combination of advanced technology solutions and a high-security environment. Our robust Work-for-Others program helps offset overhead costs and retain critical-skill associates by offering them new technical challenges. This value benefits both the government and the taxpayer.

A natural question is: If we have derived these millions of dollars of efficiency improvements, why do we require sustained funding support? It is well documented that the Department of Energy made a conscious decision in the 1990s to focus investment on science and defer investment in production. Our efficiency improvements during this decade gave us some flexibility to balance critical near-term needs with longer-term investment needs, thus maintaining this 60-year-old facility in relatively good condition. However, the average annual investment rate of 2.4 percent of the total value of the plant and equipment compared to an industry standard of 5 percent created a substantial backlog of infrastructure needs. It is this backlog that continues to impact present operating efficiencies adversely, risking our ability to support the stockpile over the long-term.

The Facilities and Infrastructure Recapitalization Program (FIRP) has clearly begun to aid us in reducing our backlog. The chart indicates we require $65 million a year to sustain the Kansas City Plant infrastructure. Limited funding over the last decade has pushed our backlog into the next five years. Thus, FIRP is critical to the Kansas City Plant to work down the deferred maintenance. I strongly endorse continued support of this effort.

The Kansas City Plant is at a juncture. Unlike commercial manufacturers, we are in a position to manage the NNSA's requirements to produce high-quality, low-volume components; retain skills to sustain aging or obsolete technologies; and warehouse parts needed to maintain the 25-year life expectancy of the stockpile-at an affordable cost to the government. Over the next two years our workload will begin to escalate as we prepare for full-scale production of the Stockpile Life Extension Programs in the FY2006-FY2007 time period. Based on the Kansas City Plant's targets in the Future Years Nuclear Security Program (FYNSP) and our progress to date, I am cautiously optimistic we can successfully maintain the stockpile, while managing workforce issues and the highest infrastructure priorities.

I strongly support General John Gordon in his efforts to simplify and streamline the NNSA and its processes. A more efficient NNSA, providing appropriate oversight of labs and plants, will serve to focus our energies and efforts on important, value-added tasks. To that end, accelerating and measuring implementation of the NNSA's internal restructuring plans and processes will only enhance my optimistic outlook for our future at the Kansas City Plant.

Mr. Chairman, the Kansas City Plant is busy. We support 42 product families and 120 advanced technologies, shipping more than 60,000 product packages annually. We are producing and procuring components for every weapons system in the active stockpile. We are hiring new associates and actively addressing critical skill needs. We have begun to increase infrastructure investments to recover from funding shortfalls in the 1990s. We are developing new manufacturing capabilities and suppliers required to support the upcoming Life Extension Programs. The next few years will see significant challenges as we continue to address critical skills, and upgrade our infrastructure while preparing for sizable new production requirements driven by the Life Extension Programs. Our success is directly tied to a sustained funding profile, which fully accounts for these challenges.

As the NNSA's primary non-nuclear production plant, the Kansas City Plant is a hub for the majority of nuclear weapons complex products. From radars, to reservoirs, to sensors, to telemetry units, to analytical testing, to science-based manufacturing, we are the NNSA's one facility with the broadest skills and capabilities for turning national laboratory science into manufacturing reality-we produce robust products and these products must keep pace with technological advancements. That's why it is so important that we maintain balance between science and production. Scientific advancement is vital. But to keep pace with these advancements, we must also develop advanced manufacturing technologies, train our employees, and maintain our facilities. This brings us full circle to the issue of long-term reinvestment in and value of the Kansas City Plant as a national security asset.

Mr. Chairman, thank you for the opportunity to present these views to you. Honeywell is committed to our national defense mission and to the future success of the Kansas City Plant and nuclear weapons complex. I look forward to continuing to work with you and the Members of this Committee to address these challenges.

Honeywell Federai Manufacturing & Technologies

Jave Jongrass s rescent 1 newer Feneri Manufacturing & Technologies FAC Jaser Sursas 1, AC Mauces and procures non-nuclear elecTical sectronc, sectoremmen become nastic, and metal components for Tuclear weapons inder i me retract or ne 3 Department of Energy. Honeywell Maas ipproximate associates and s me of the largest employers in Kansas Dr. Fac uso vs ipproximately 3000 associates in New Mexico and Arsansas. Tav. Enerwe Montmues o be the ghest rated produccon contractor or ne Vana Navear Security Administration. Douglass is also president of Funerved Me ncuding responsibility for Honeywell's minorby ownership n 3WX-Pantex contractor for the NSA's Pantex Plant in amario. Texas.

Congrass was previous ce president fperations at M&T responsible for engneering, manufacturing, sounes, ma suppiv namn. In that position, Douglass led Po mere is highest ever performance ating in iperations as measured by he istomer e served as i sev nemoer if he team that successfully retained he Kansas Try Plant contract. He was uso responsible for restructuring FM&T's Tusiness development organization with a new beus in growth.

Couglass las experience with rapidly mplementing improvements in safety, manfacturing, and management afcency: making smooth and orderly transitions in ruction wie minimizing mpacts in continuity of operations and improving Jerformance by removing barners to efficiency. He also has experience adapting to hanging requirements, managing facilities, assets, and quality control in support if manufacturing and retaining inca sails through people-valued orientation

Douglass rejoined ne Honeyweil staff in January 2000 after working as plant manager for the Eaton Corporation's Navy Controls Division, Milwaukee, Wis., for two years. At the Eaton Corporation. Douglass had profit and loss responsibility for an M plant in the business of design and manufacture of motor control and power conversion equipment for the US Navy. His accomplishments included:

Successfully managing a sales increase of 20% in a single year.
Implementing lean manufacturing concepts and Six Sigma,
Overseeing the plant being awarded ISO 9001 certification, and

Receiving the national Social Compact award in May 1999 and mayor of Mil-
waukee's Corporate Citizen of the Year award in 2000 for workforce and busi-
ness development in central city.

Douglass originally joined the Honeywell staff in 1981. From that time until 1998, Douglass held a number of positions including director of electronic products, manager of mechanical engineering, manager of high-energy products, senior project engineer in the mechanical engineering group, and several engineering positions in plastica products. Douglass was instrumental in the design, installation, and oper