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of efficiency improvements at the NNSA's Kansas City Plant that embrace commercial 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 improvement tools such as Six Sigma. All 2,000 of our salaried associates are Six Sigma Green Belt certified, plus more than 150 of our employees are certified in Six Sigma Black Belt productivity tools. Furthermore, when we were awarded the contract 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 stockpileat 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 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.
Biography of David S. Douglass
President Honeywell Federal Manufacturing & Technologies Dave Douglass is president of Honeywell Federal Manufacturing & Technologies (FM&T). Based in Kansas City, MO, FM&T produces and procures non-nuclear electrical, electronic, electromechanical, mechanical, plastic, and metal components for nuclear weapons under a prime contract for the U.S. Department of Energy. Honeywell FM&T has approximately 3,000 associates and is one of the largest employers in Kansas City. FM&T also employs approximately 300 associates in New Mexico and Arkansas. Today, Honeywell FM&T continues to be the highest rated production contractor for the National Nuclear Security Administration. Douglass is also president of Honeywell FM&T LLC, including responsibility for Honeywell's minority ownership in BWXT-Pantex LLC, contractor for the NNSA's Pantex Plant in Amarillo, Texas.
Douglass was previously vice president of operations at FM&T, responsible for engineering, manufacturing, facilities, and supply chain. In that position, Douglass led FM&T to achieve its highest ever performance rating in operations as measured by the customer. He served as a key member of the team that successfully retained the Kansas City Plant contract. He was also responsible for restructuring FM&T's business development organization with a new focus on growth.
Douglass has experience with rapidly implementing improvements in safety, manufacturing, and management efficiency; making smooth and orderly transitions in production while minimizing impacts on continuity of operations; and improving performance by removing barriers to efficiency. He also has experience adapting to changing requirements; managing facilities, assets, and quality control in support of manufacturing; and retaining critical skills through people-valued orientation.
Douglass rejoined the Honeywell 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 $85M plant in the business of design and manufacture of motor control and power conversion equipment for the U.S. 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 plastics products. Douglass was instrumental in the design, installation, and oper
ation of a state-of-the-art flexible manufacturing system, one of only a handful in the country that integrate machining and product acceptance.
Douglass has a bachelor of science degree in mechanical engineering from Kansas State University and an M.B.A. through the Rockhurst College's Executive Fellows Program. In 2001, he completed the Harvard Business School's General Managers Program. He is actively involved in education and technology activities in the States of Missouri and Kansas.
Contract Information Honeywell Federal Manufacturing & Technologies LLC operates the U.S. Department of Energy's National Nuclear Security Administration's Kansas City Plant under contract number DE-AC04–01 AL66850.
TESTIMONY OF ROBERT A. PEDDE
AIKEN, SOUTH CAROLINA
ARMED SERVICES COMMITTEE
JUNE 12, 2002
I appreciate the invitation to address you today. This is my first time to testify before your committee since becoming President of the Westinghouse Savannah River Company last August, although I am very familiar with defense complex issues, having worked as the Vice President of Defense Programs for WSRC for the previous six years.
On behalf of the WSRC, I am pleased to submit the following testimony regarding the Savannah River Site NNSA programs. The Westinghouse Savannah River Company leads an integrated team that operates the Savannah River Site. We have operated SRS since 1989.
Of the subcommittee's topics today, the one that is most relevant to our work is the defense complex infrastructure's ability to maintain the stockpile.
Presently, our primary NNSA missions are: 1) providing tritium-loaded reservoir components to support the Nuclear Weapons Stockpile Maintenance program, and 2) surveillance testing of stockpile evaluation reservoirs and components. We are also the designated architect/engineering support contractor for a potential future Modern Pit Manufacturing facility.
Currently, we have two major line-item projects underway to support the tritium mission: Tritium Modernization and Consolidation (TCON), and the Tritium Extraction Facility. Both of these projects are key elements of the Stockpile Stewardship program.
At SRS, we also support the Nuclear Nonproliferation program. SRS is the location for construction and operation of two new facilities to dispose of about 50 metric tons of surplus U.S. plutonium. WSRC is currently designated as the operator of the Pit Disassembly and Conversion Facility, while a consortium of Duke, Cogema and Stone and Webster will provide the design, construction and operation of a Mixed Oxide Fuel Fabrication Facility. WSRC will provide infrastructure services to the Mixed Oxide Fuel Fabrication Facility.
DOE's Environmental Management program serves as the landlord for SRS. DOE's Operations Office Manager at SRS reports to the Assistant Secretary for Environmental Management. Senior NNSA officials for both Defense Programs (DP) and Nuclear Nonproliferation (NN) report to their DOE Headquarters offices, respectively. As the Foster Panel and others have pointed out, there is certainly a strong need for integration among the program offices, and for consistency in the way the site does business. From my perspective, I know that the program offices recognize that, and are working to achieve that consistency.
While the DOE-EM program is not the focus of this hearing, I should point out that DOE-EM is currently accelerating the cleanup and closure of environmental management scope across the complex through the Accelerated Cleanup program. Although at the time of this writing, and exact funding for SRS has not been deter
mined, the program has the potential to complete the SRS EM mission in the 2020 to 2025 timeframe, which would be considerably earlier than the originally projected completion date. At some point, there are important decisions that will have to be made about the landlord and infrastructure functions at SRS, both for the total site and/or elements of the site that directly support the enduring missions of the NNSA.
The proposed FY03 Savannah River Site Defense Programs budget is $241.6 million. An additional $9.7 million is anticipated in FY03 from the Commercial Light Water Reactor Program for the Tritium Extraction Facility line item project. This funding is sufficient to execute the core Stockpile Stewardship mission, and to maintain progress on the two line item projects mentioned above.
As stockpile needs evolve, small facility projects are needed to support loading, testing and inspection activities associated with our missions. In addition, emergent facility needs for equipment will surely arise. These items, along with a material procurement necessary to support key NNSA missions, are not fully funded today. Otherwise, the site's NNSA facilities particularly with the anticipated completion of the TCON facility I mentioned earlier-are in excellent condition, primarily as a result of our ability to reinvest in the program over the years.
At the beginning of this testimony, I noted that the baseline Nuclear Nonproliferation program at SRS supports DOE's plutonium disposition efforts. As of this hearing, the FYO3 NN funding for SRS has not yet been determined. I will be happy to provide you additional information on that program for the record at a later time.
We are proud to continue our support for the national security missions that have been located at SRS. SRS and its local stakeholders have a long tradition of support in this area, and we appreciate the confidence that has been shown in us. I thank you for inviting me to meet with you today, and I am pleased to answer any questions you may have.
Testimony of Robert A. Pedde The Westinghouse Savannah River Company operates the Savannah River Site under contract number DE-AC09–96SR18500 with the U.S. Department of Energy.
The contract reads as follows.
“The estimated cost of the contract is the total of funding provided from October 1, 1996 to September 30, 2000, which totals $5,383,459,753.41 plus an estimated budgetary cost of $8,400,000,000 for the period October 1, 2000 through September 30, 2006, for a total estimated cost of $13,783,459,753.41.'