    [House Hearing, 106 Congress]
    [From the U.S. Government Publishing Office]

    VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: VIEWS OF THE DEPARTMENTS OF
                      DEFENSE, STATE, AND VETERANS AFFAIRS

    =======================================================================

                                    HEARING

                                   before the

                       SUBCOMMITTEE ON NATIONAL SECURITY,
                      VETERANS AFFAIRS, AND INTERNATIONAL
                                   RELATIONS

                                     of the

                                  COMMITTEE ON
                               GOVERNMENT REFORM

                            HOUSE OF REPRESENTATIVES

                           ONE HUNDRED SIXTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 2, 1999

                                   __________

                                Serial No. 106-5

                                   __________

           Printed for the use of the Committee on Government Reform

         Available via the World Wide Web: http://www.house.gov/reform

                                     ______

                        U.S. GOVERNMENT PRINTING OFFICE
    56-508 CC                   WASHINGTON : 1999

    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpr.gov  Phone (202) 512�091800  Fax: (202) 512�092250
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                         COMMITTEE ON GOVERNMENT REFORM

                         DAN BURTON, Indiana, Chairman
    BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
    CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
    CHRISTOPHER SHAYS, Connecticut       ROBERT E. WISE, Jr., West Virginia
    ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
    JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
    STEPHEN HORN, California             PAUL E. KANJORSKI, Pennsylvania
    JOHN L. MICA, Florida                GARY A. CONDIT, California
    THOMAS M. DAVIS, Virginia            PATSY T. MINK, Hawaii
    DAVID M. McINTOSH, Indiana           CAROLYN B. MALONEY, New York
    MARK E. SOUDER, Indiana              ELEANOR HOLMES NORTON, Washington,
    JOE SCARBOROUGH, Florida                 DC
    STEVEN C. LaTOURETTE, Ohio           CHAKA FATTAH, Pennsylvania
    MARSHALL ``MARK'' SANFORD, South     ELIJAH E. CUMMINGS, Maryland
        Carolina                         DENNIS J. KUCINICH, Ohio
    BOB BARR, Georgia                    ROD R. BLAGOJEVICH, Illinois
    DAN MILLER, Florida                  DANNY K. DAVIS, Illinois
    ASA HUTCHINSON, Arkansas             JOHN F. TIERNEY, Massachusetts
    LEE TERRY, Nebraska                  JIM TURNER, Texas
    JUDY BIGGERT, Illinois               THOMAS H. ALLEN, Maine
    GREG WALDEN, Oregon                  HAROLD E. FORD, Jr., Tennessee
    DOUG OSE, California                             ------
    PAUL RYAN, Wisconsin                 BERNARD SANDERS, Vermont
    JOHN T. DOOLITTLE, California            (Independent)
    HELEN CHENOWETH, Idaho

                          Kevin Binger, Staff Director
                     Daniel R. Moll, Deputy Staff Director
               David A. Kass, Deputy Counsel and Parliamentarian
                          Carla J. Martin, Chief Clerk
                     Phil Schiliro, Minority Staff Director
                                     ------

    Subcommittee on National Security, Veterans Affairs, and International
                                   Relations

                    CHRISTOPHER SHAYS, Connecticut, Chairman
    MARK E. SOUDER, Indiana              ROD R. BLAGOJEVICH, Illinois
    ILEANA ROS-LEHTINEN, Florida         TOM LANTOS, California
    JOHN M. McHUGH, New York             ROBERT E. WISE, Jr., West Virginia
    JOHN L. MICA, Florida                GARY A. CONDIT, California
    DAVID M. McINTOSH, Indiana           JOHN F. TIERNEY, Massachusetts
    MARSHALL ``MARK'' SANFORD, South     THOMAS H. ALLEN, Maine
        Carolina                         EDOLPHUS TOWNS, New York
    LEE TERRY, Nebraska                  BERNARD SANDERS, Vermont
    JUDY BIGGERT, Illinois                   (Independent)
    HELEN CHENOWETH, Idaho

                                   Ex Officio

    DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                Lawrence J. Halloran, Staff Director and Counsel
                      J. Vincent Chase, Chief Investigator
                  Samantha Sherman, Professional Staff Member
                            Jonathan Wharton, Clerk
                        David Rapallo, Minority Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on March 2, 1999....................................     1
    Statement of:
        Toye, Nelson, Deputy Chief Financial Officer, Department of
          Defense; Stanley Soloway, Deputy Under Secretary of Defense
          for Acquisition Reform; Edward A. Powell, Jr., Assistant
          Secretary for Financial Management, Department of Veterans
          Affairs, accompanied by Mark Catlett, Deputy Assistant
          Secretary for Budget, and Frank Sullivan, Deputy Assistant
          Secretary for Finance; and Bert Edwards, Chief Financial
          Officer, U.S. Department of State, accompanied by Patrick
          Kennedy, Assistant Secretary of State for Administration...     2
    Letters, statements, etc., submitted for the record by:
        Blagojevich, Hon. Rod R., a Representative in Congress from
          the State of Illinois, prepared statement of...............    15
        Edwards, Bert, Chief Financial Officer, U.S. Department of
          State, prepared statement of...............................    45
        Powell, Edward A., Jr., Assistant Secretary for Financial
          Management, Department of Veterans Affairs:
            Information concerning remediation.......................    77
            Prepared statement of....................................    32
        Soloway, Stanley, Deputy Under Secretary of Defense for
          Acquisition Reform:
            Information concerning operational and maintenance
              savings................................................    59
            Information concerning overrun and costs.................    55
            Prepared statement of....................................    21
        Toye, Nelson, Deputy Chief Financial Officer, Department of
          Defense, prepared statement of.............................     5

    VULNERABILITIES TO WASTE, FRAUD, AND ABUSE: VIEWS OF THE DEPARTMENTS OF
                      DEFENSE, STATE, AND VETERANS AFFAIRS

                                  ----------

                             TUESDAY, MARCH 2, 1999

                      House of Representatives,
           Subcommittee on National Security, Veterans
                  Affairs, and International Relations,
                                Committee on Government Reform,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 10 a.m., in
    room 2247, Rayburn House Office Building, Hon. Christopher
    Shays (chairman of the subcommittee) presiding.
        Present: Representatives Shays, Mica and Tierney.
        Staff present: Lawrence J. Halloran, staff director and
    counsel; J. Vincent Chase, chief investigator; Samantha
    Sherman, professional staff member; Jonathan Wharton, clerk;
    Earley Green, minority staff assistant; and David Rapallo,
    minority counsel.
        Mr. Shays. I would like to call this hearing to order.
        Last week the General Accounting Office [GAO], and the
    Inspector Generals identified high risk programs and
    significant management challenges at the Departments of
    Defense, Veterans Affairs and State. They cited longstanding
    financial management and procurement weaknesses at DOD,
    inefficient health care infrastructure and slow benefits
    processing at the VA, and the need for enhanced security and
    information systems at the Department of State.
        Today, we invite those three important departments to
    address the same subjects. We do so for two reasons. First,
    these hearings give the subcommittee an opportunity to survey
    key issues with our oversight partners, and refine our agenda
    for this Congress. Second, this broader perspective helps us
    discern common problems that might yield governmentwide
    solutions.
        While each department faces unique challenges, all three
    have at their disposal the same powerful set of tools that can,
    if energetically applied, help fix broken systems, improve
    program performance and increase accountability. The Government
    Performance and Results Act, which requires clear performance
    goals and measurable results, offers troubled agencies and high
    risk programs an incremental but inevitable path out of
    bureaucratic thickets and inefficiencies once thought
    intractable.
        As the Results Act process matures, performance measures
    will have a greater impact on administration budgets, on
    authorizations and on appropriations, and on Congress as well.
    So we ask the departments to describe their Results Act
    compliance efforts and to identify the key indicators by which
    they, and we, will measure their performance in the years
    ahead.
        We welcome all our witnesses today, and it is my
    understanding that we will have two statements from the
    Department of Defense, and given the size of the budget that
    seems reasonable, and then one testimony from the Veterans
    Affairs and one from State. But, all of our witnesses at the
    table will be invited to respond to questions, and let me just
    introduce our witnesses.
        From the Department of Defense, Nelson Toye, Deputy Chief
    Financial Officer, and then we have Stanley Soloway, Deputy
    Under Secretary of Defense for Acquisition Reform, speaking
    about acquisition.
        And then from the Department of Veterans Affairs we have
    Edward A. Powell, Jr., Assistant Secretary for Financial
    Management, accompanied by Mark Catlett, Deputy Assistant
    Secretary for Budget, and Frank Sullivan, Deputy Assistant
    Secretary for Finance.
        Department of State, we have Mr. Bert Edwards, Chief
    Financial Officer, U.S. Department of State, accompanied by
    Patrick Kennedy, Assistant Secretary of State for
    Administration.
        Our practice is that we swear everybody in beforehand, and
    if you would stand and raise your right hands, please.
        [Witnesses sworn.]
        Mr. Shays. For the record, all our witnesses responded in
    the affirmative.
        Now, is anyone missing from that list? OK. We are going to
    start with you, Mr. Toye, and we will go from there. And if you
    would bring your microphones somewhat closer.

      STATEMENTS OF NELSON TOYE, DEPUTY CHIEF FINANCIAL OFFICER,
    DEPARTMENT OF DEFENSE; STANLEY SOLOWAY, DEPUTY UNDER SECRETARY
       OF DEFENSE FOR ACQUISITION REFORM; EDWARD A. POWELL, JR.,
      ASSISTANT SECRETARY FOR FINANCIAL MANAGEMENT, DEPARTMENT OF
    VETERANS AFFAIRS, ACCOMPANIED BY MARK CATLETT, DEPUTY ASSISTANT
      SECRETARY FOR BUDGET, AND FRANK SULLIVAN, DEPUTY ASSISTANT
       SECRETARY FOR FINANCE; AND BERT EDWARDS, CHIEF FINANCIAL
       OFFICER, U.S. DEPARTMENT OF STATE, ACCOMPANIED BY PATRICK
        KENNEDY, ASSISTANT SECRETARY OF STATE FOR ADMINISTRATION

        Mr. Toye. Thank you, Mr. Chairman. With your permission, I
    ask that my formal written statement be included in the record,
    and at this time I would like to provide a summary of the
    statement.
        I want to thank you for the opportunity to be here today to
    discuss ongoing financial management reform within the
    Department of Defense. I welcome the opportunity to address
    what we have done and what we are doing to improve financial
    management within the Department.
        I want to begin by stating that financial management reform
    within the Department continues to be a high priority. The
    Department's ongoing financial management reform initiatives
    represent the most comprehensive reform of financial management
    in the Department's history. Our objective is to put into place
    policies, systems and practices that will enable us to produce
    accurate financial information in a timely manner.
        While we are proud of the significant progress that the
    Department has achieved to date, we are very well aware that
    much more remains to be accomplished. Today I want to briefly
    address the challenges we face, the progress we have made, and
    our short-term and long-term strategies for lasting reform.
        First, our challenges. The size and complexity of the
    Department alone makes financial management reform a big
    challenge. Compare us, for example, with General Motors, the
    No. 1 Fortune 500 company for 1998. GM had approximately $178
    billion in annual revenues and $228 billion in assets. In
    contrast, the annual budget for the Department of Defense is
    over $260 billion and we have over $1 trillion in assets.
        Beyond size, our complexity is equally challenging. We
    maintain over 500 bases in 150 countries and territories
    throughout the world. Additionally, the Department of Defense
    has hundreds of appropriations and accounts managed by 4
    military services, 14 defense agencies and numerous other
    subordinate organizations.
        Additionally, the standards that the Department now is
    asked to comply with are still evolving. As the Department
    strives to comply with standards that only recently have been
    established, still more changes are occurring. In fiscal year
    1998 alone, four new auditable financial statements were
    required for DOD's reporting entities. New reporting
    requirements also continue to be imposed. This is a significant
    challenge for the Department of Defense because it is akin to
    hitting a moving target. Despite these challenges, we have made
    significant progress.
        First, the Department has consolidated over 330 financial
    management field sites scattered throughout the world into 5
    centers and 18 operating locations. This was completed in July
    1998, almost 2 years ahead of the Department's original
    schedule.
        Second, to remedy the problem of numerous and incompatible
    financial management systems, we have embarked on a major
    streamlining effort. As of October 1998, we had reduced the
    number of finance and accounting systems by 66 percent.
    However, we are not simply reducing the number of finance and
    accounting systems. Our objective is to replace old, outdated,
    noncompliant systems with more modern systems that can meet
    today's standards.
        In addition to consolidating operations and reducing
    systems, the Department has over 150 other initiatives underway
    to improve and streamline financial management and to improve
    the timeliness and accuracy of its accounting data. Despite
    these accomplishments, the Department still faces significant
    obstacles in transforming its financial operations, but we are
    getting the job done one step at a time.
        The Pentagon of today is not the Pentagon that our fathers
    knew. In this new Pentagon it is no longer adequate to keep
    just a checkbook balance of the Department's funds.
    Increasingly, the Department of Defense is being judged by new
    standards, as generally accepted accounting practices prevalent
    in the private sector are being applied to the Federal
    Government.
        So how is the Department going to improve financial
    management? We are moving toward our goal with both a long-term
    and a short-term strategy.
        The Department's systems were not designed to meet current
    commercial-type standards and therefore are not capable of
    complying with recently enacted standards. To overcome this
    problem, the Department is taking a two-track approach. The
    first track is to improve or replace the Department's current
    systems with systems that will meet current standards. But the
    Department does not expect to have financial systems that can
    produce fully auditable financial statements prior to the year
    2003. Because of the desire and indeed the necessity to achieve
    progress before that date, the Department has undertaken a
    second track that is an interim effort, and includes the use of
    contractors to address many of the Department's more
    significant problems. As a result, the Department expects to
    make progress each year toward resolving its financial
    management challenges. Financial management within the
    Department is a work in progress. There have been notable
    successes, but it is impossible to reverse decades-old problems
    and inefficiencies overnight and implement necessary reforms
    without several years of initiatives.
        In summary, the Department of Defense faces significant
    financial management challenges in the near term. To be
    successful in our reform efforts, we need a dedicated effort
    from the Department's financial community and the cooperation
    of every community that feeds data to the Department's
    financial management systems. We are getting both. This is a
    Departmentwide management initiative involving participation
    across all functional areas. Success should enable us to
    generate better financial data for decisionmakers and
    ultimately get more ``bang for the buck'' out of the defense
    budget.
        Mr. Chairman, this completes my oral testimony, and I will
    be happy to answer any questions for the record.
        [The prepared statement of Mr. Toye follows:]
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        Mr. Shays. Thank you, Mr. Toye.
        Let me just mention at this time that we have Mr. Tierney
    from Massachusetts with us. And I don't know if the gentleman
    would like to make a comment, but I would like to do some
    bookkeeping while we have a Member here.
        I ask unanimous consent that all members of the
    subcommittee be permitted to place any opening statements in
    the record and that the record remain open for 3 days for that
    purpose. Without objection, so ordered.
        [The prepared statement of Hon. Rod R. Blagojevich
    follows:]
    [GRAPHIC] [TIFF OMITTED] T6508.010

    [GRAPHIC] [TIFF OMITTED] T6508.011

        Mr. Shays. And I also ask further unanimous consent that
    all witnesses, which is your request, be permitted to include
    their written statements in the record, and without objection,
    so ordered.
        Let me now ask Mr. Soloway to make his statement.
        Mr. Soloway. Thank you very much, Mr. Chairman. It is a
    pleasure to be here.
        A little over a year ago Secretary Cohen launched the
    Defense Reform Initiative [DRI], a broad-based and ambitious
    program to fundamentally change the way in which the Department
    of Defense operates, internally and externally. His call for
    major departmental reform followed the completion of a
    comprehensive review of our national military strategy and
    defense posture. Although it was founded on four initial
    pillars--elimination, re-engineering, consolidation and
    competition--the DRI is now the Department's overall framework
    for change and reform in all aspects of defense.
        For the purposes of today's hearing, allow me to briefly
    touch on our progress in each of these areas.
        Base realignment and closure or BRAC is our No. 1 priority.
    Only through BRAC can we right size the Department and reduce
    unneeded infrastructure to free up the funds we need to meet
    the challenges of the 21st century. As such, we will be seeking
    congressional approval for two more rounds of base closure.
        Second, re-engineering, which includes both internal
    business processes and acquisition reform. In truth, real
    reform began to take shape some 6 years ago in a vital and
    rewarding partnership between the Department and the Congress
    which resulted in passage of the Federal Acquisition
    Streamlining Act [FASA], and the Clinger-Cohen Act, both of
    which signaled the common vision and commitment of the Congress
    and the Department.
        At the same time, within the Department, internal change
    had already begun. Then Secretary of Defense William Perry
    created a new demand for performance specifications rather than
    design-specific military specs and standards, and then Under
    Secretary of Defense-Comptroller, now Deputy Secretary John
    Hamre, had put into motion a substantial series of internal
    management reforms.
        The DRI embraced and expanded on all of these, and helped
    create within the Department a critical partnership committed
    to change and reform that encompasses all aspects of defense.
    For example, through the DRI the Department has put in place
    its first ever Financial Management Improvement Plan. We are
    working toward continuous improvement in the business practices
    associated with the Defense Working Capital Funds. We have
    increased, as well, our focus on electronic commerce, the
    electronic mall on the internet, and of course the purchase
    card. By the year 2000 we will be obtaining over 90 percent of
    our low-value purchases with the card.
        Acquisition reform has opened the door to important new
    flexibility and decisionmaking as well as a new focus on
    performance. Many programs, including the Defense Acquisition
    Pilot Programs, are reaping major benefits for both the user
    and the taxpayer.
        For example, the program costs of the Joint Air-to-Surface
    Standoff Missile or JASSM have been reduced 44 percent, and the
    unit costs of the Joint Direct Attack Munition or JDAM have
    been reduced by approximately 60 percent from the estimated
    cost. Cycle time for the JDAM has been reduced 35 percent with
    a 30 percent reduction in program staffing.
        In addition, the Single Process Initiative, where we seek
    to replace non-value added government specifications on
    contracts with commercially proven, performance-focused
    processes, is proving to be a real success as well. Overall,
    the Defense Contract Management Command reports that the Single
    Process Initiative has now gone past the half billion dollar
    mark in savings and long-term cost avoidance, and we have only
    just begun.
        We are also developing new strategies for reducing the
    long-term operations and support costs of both our new and
    existing systems, which today represent an enormous drain on
    our budget. As Congress has directed, for instance, we have
    identified 10 weapons systems as pilot programs for reduced
    total ownership cost and are pursuing a range of management
    actions to achieve that critical goal.
        These are but a few ways in which our acquisition world has
    changed for the better. However, we have a long way to go and
    our commitment to acquisition reform remains unabated. It is
    driven by our continued commitment to implementing best
    business practices, as well as our very real need to access the
    full range of technology and technology suppliers to help meet
    the challenges of the future. The barriers to doing so remain
    significant and must be removed. As such, the Department will
    be proposing a series of legislative initiatives designed to
    help us overcome those barriers.
        The third area is consolidation, where the story is shorter
    and simpler. At the outset of the DRI, Secretary Cohen made
    clear his commitment to re-engineer and reduce headquarters
    staffs. To date, the Department is right on target to reduce
    the Office of the Secretary of Defense by 33 percent by the end
    of this fiscal year; the Joint Staff by 29 percent by fiscal
    year 2003; the defense agencies by 21 percent by fiscal year
    2001; and the DOD field and related activities by 36 percent by
    fiscal year 2001.
        Competition is also a pillar of defense reform, and on that
    important topic I would like to make just a couple of brief
    comments.
        First, the key word here is competition. Our goal is to
    exploit the many advantages of the competitive environment to
    the benefit not only of the American taxpayer but the
    warfighters, our customers in the field. Competition saves
    money and can improve quality. Hence, our goal is not
    outsourcing, it is competition.
        Second, we must recognize that with innovation and
    creativity come vastly different ways of doing business. When
    many of the rules and statutes governing competitive sourcing
    were put in place, we were contemplating very clear choices.
    Today, particularly as we seek to access the best and most
    contemporary technologies, the choices are more complex and
    sometimes lead us to solutions that are virtually impossible to
    directly compete between the public and the private sectors.
        It is the Department's hope that the Congress will continue
    to work with us in support of implementing such innovation,
    while we at the same time seek to provide appropriate
    assistance in cases where the best solutions for the taxpayer
    and the warfighter result in adverse impacts for our work
    force.
        Third, what we seek is not just lower costs but the best
    overall value. We have collectively agreed that in selecting
    commercial suppliers, low cost does not always equal the best
    value to the government, and it is time for our statutes to
    recognize that fact for public-private competition as well.
        And fourth, as I stated earlier, one of our overarching
    goals in acquisition reform is our ability to access the full
    range of technologies and suppliers that exist for any given
    requirements. So too must this be our goal in competition. Our
    competitions must be fair, clear and conducted in such a manner
    that all parties, public and private, walk away, win or lose,
    feeling like they have been given a fair shake.
        The Department has also fully embraced the principles of
    the Government Performance and Results Act, as evidenced by its
    fiscal year 2000 GPRA performance plan. In the fiscal year 2000
    plan, DOD has established two corporate level goals.
        Shape the international environment and respond to the full
    spectrum of crisis by providing an appropriately sized,
    positioned and mobile force.
        And prepare now for an uncertain future by pursuing a
    focused modernization effort that maintains U.S. qualitative
    superiority in key warfighting capabilities. Transform the
    force by exploiting the revolution in military affairs and re-
    engineering the DOD to achieve a 21st century infrastructure.
        Our two corporate goals form the basis for using GPRA as a
    management tool. The performance goals are supported and
    evaluated by quantifiable output, which is assessed by using
    performance measures or performance indicators. Performance
    measures and indicators quantify the output of the defense
    program for key measures associated with providing a ready
    force and preparing for the future. The Department's plan
    includes 41 performance measures and indicators, all of which
    have baselines and goals.
        Mr. Chairman, members of the committee, the Department of
    Defense is changing the way that we do business, and the
    Defense Reform Initiative provides the overarching framework to
    enable us to achieve these many and crucial goals.
        Yesterday, Secretary Cohen and Deputy Secretary Hamre
    reiterated their commitment to stay on course in the pursuit of
    real change in the Department. In so doing they also explained
    how the defense reform umbrella has expanded well beyond the
    initial four pillars to include quality of life initiatives,
    logistics reform and homeland security, all in an effort to tie
    together the many elements of reform and the reality that each
    is an important part of the Defense Department we envision for
    the future.
        At their press conference they also unveiled a new CD-ROM
    designed to communicate accomplishments to date and describe
    the challenges ahead. Further, the CD-ROM includes score cards
    for most major areas of reform that will enable us to track the
    progress that we are making. In this regard the Secretary and
    Deputy Secretary have firmly restated our commitment to
    performance measures and meaningful results. With your
    permission, Mr. Chairman, I would like to submit for the record
    a copy of the CD-ROM as well as a text version. Every Member of
    Congress did receive a copy of this CD-ROM yesterday prior to
    the press conference.
        In closing, it is fair to recognize that defense reform is
    not yet a way of life in the Department. We are, however,
    making real progress. As we continue to move forward, to
    encourage and adopt more and more innovation and creativity,
    mistakes will be made. And just as we have learned from those
    that we have already seen, so too will we continue to learn
    from our mistakes as we continue down this complex and
    difficult road.
        Defense reform would never have been possible without the
    support, encouragement, and partnership we have enjoyed with
    the Congress, and we are counting on that continuing
    partnership, that shared commitment to creating a Department of
    Defense that is optimally prepared to meet the challenges
    ahead.
        I thank you for your time, and we will be happy to answer
    any questions.
        [The prepared statement of Mr. Soloway follows:]
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        Mr. Shays. Thank you. Now we will hear from the Department
    of Veterans Affairs, Mr. Powell, who is accompanied by Mr.
    Catlett and Mr. Sullivan.
        Mr. Powell. Thank you, Mr. Chairman and Congressman
    Tierney. I am pleased to appear before you to testify on the
    actions we are taking at the Department of Veterans Affairs to
    address the management issues identified by the General
    Accounting Office and the VA's Inspector General. I have
    submitted my full statement to the subcommittee and request
    that statement be made a part of the hearing record.
        The VA is facing two major management challenges: improving
    the infrastructure of our health care system and resolving the
    shortcomings in our benefits claims processing. I believe this
    supports what you have already heard from our IG and the GAO.
    These challenges are not new, nor are they easily conquered.
    Indeed, we have been dealing with both issues for a long time.
    By their very nature, they may never go away completely. We
    will always be looking to identify and implement better ways to
    deliver our services and benefits.
        This morning I wish to update you on a few of the
    initiatives underway at VA which demonstrate our commitment to
    providing first class service to veterans and managing the
    resources entrusted to us.
        VA has long been regarded as a leader in the Federal debt
    management community. Over the past year, we have been moving
    closer to our goal of consolidating all major VA debt programs
    into one centralized automated collection system. We have made
    significant progress toward automating the billing and payment
    processing of first party medical receivables, and have laid
    the groundwork for consolidating the management of all debts at
    our Debt Management Center in St. Paul, MN. Debt collection is
    a high priority for the Department, and we expect to see
    continued success in this area in fiscal year 1999.
        VA has completed the year 2000 renovation of its entire
    mission critical computer software applications. This includes
    all payment related applications and applications supporting
    health care. We have placed 97 percent of these applications
    into production and have verified their ability to successfully
    process year 2000 dates. At the same time, all VA offices are
    verifying the readiness of their physical plants and workplace
    equipment, as well as other software, to ensure that they will
    continue to operate after December 31, 1999.
        We are collaborating internally and with other Federal
    entities such as Treasury and the U.S. Postal Service in
    preparing and implementing business continuity and contingency
    plans. These plans will ensure that payments to veterans,
    fiduciaries, employees and vendors are made without
    interruption on January 1, 2000 and beyond.
        It was gratifying to learn Congressman Horn awarded VA an
    ``A minus'' for our progress in preparing for the year 2000. We
    are confident we can raise that grade to an ``A'' in the next
    reporting cycle.
        My top priority as the chief financial officer is to obtain
    an unqualified opinion on VA's fiscal year 1999 financial
    statements. We are down to one qualification, and we fully
    expect to resolve that issue before the end of this fiscal
    year.
        VA has made significant progress toward developing and
    implementing a results-oriented framework for managing and
    evaluating our programs. Major advancements are highlighted in
    our fiscal year 2000 performance plan which was delivered to
    Congress on February 1. Foremost among those advancements are a
    greater emphasis on outcomes; a greater focus on highest
    priority goals and measures; increased attention to validation
    and verification of data, and the identification of total
    budget resources for each program.
        Our medical care program deserves particular note in this
    area. The results of the Government Performance Project just
    conducted by Syracuse University gave VA's Veterans Health
    Administration an ``A'' for managing for results. As a side
    note, VHA received the only ``A'' among the 15 Federal entities
    evaluated.
        During the last year the issue of data validation and
    verification has been a major focal point for the Department.
    Our fiscal year 2000 performance plan includes a very frank
    discussion of VA's problems with data quality. However, it also
    identifies the actions we are taking to resolve those problems.
    We are working closely with VA's Office of Inspector General on
    a series of detailed performance audits.
        At GAO's invitation, we met with their staff last month to
    discuss our data validation and verification efforts. GAO is
    preparing a best practices report on this topic. They have
    identified VA as one of the agencies they intend to commend in
    their report.
        Finally, we have had notable success in identifying the
    total staffing and funding associated with each of our
    programs. We expect to make additional progress in this area as
    activity-based costing methodologies are implemented throughout
    the Department.
        Mr. Chairman, the Department of Veterans Affairs is fully
    aware of the challenges we face. We are proud of the progress
    we have made, but understand we have much work yet to do. I
    assure you we are approaching our challenges thoughtfully and
    resolutely, and look forward to continued success.
        This concludes my opening statement. I would be happy to
    answer any questions you or the Members may have.
        [The prepared statement of Mr. Powell follows:]
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        Mr. Shays. Thank you very much, Mr. Powell.
        Now we will hear from Mr. Edwards, who is accompanied by
    Mr. Kennedy.
        Mr. Edwards. Thank you, Mr. Chairman.
        Last week you heard from the GAO and the various Inspectors
    General, and I was responsible for the State Department's
    provision of information to the GAO's National Security and
    Internal Affairs Division which prepared the report ``Major
    Management Challenges and Program Risks--Department of State.''
    Together, Mr. Kennedy and I have responsibility for many of the
    issues in the GAO report and the Inspector General's letter and
    testimony last week.
        I think it is significant in his transmittal accompanying
    the GAO report Comptroller General David Walker stated, ``The
    State Department has made progress in addressing the many
    challenges that GAO has identified. State is now devoting
    substantial resources to developing a strategy to enhance its
    information technology capacity and security as well as its
    financial management systems. In fact, State received an
    unqualified opinion on its most recent financial statements.''
        We would like to review today the challenges identified by
    the GAO and several additional ones in the letter to Secretary
    Madeleine Albright, that the subcommittee sent to her. I would
    like to review those in the order that the GAO report
    identified them.
        The first challenge was enhancing the management of
    security programs for our overseas personnel and property.
    Clearly the bombings in our embassies in Nairobi and Dar es
    Salaam last August have refocused attention on the safety of
    our people and our facilities. Congress worked quickly to enact
    an emergency supplemental appropriation to address State's
    immediate needs from this tragedy.
        The 1999 emergency supplemental provides a total funding of
    $1.4 billion for a total of six different program areas. In
    order to document how we are managing the emergency
    supplemental, we have established a coding structure in our
    financial management system to report obligations and
    expenditures against these six activities, and have established
    a monthly reporting internally to monitor our progress. Our
    objective is to expend these security funds both wisely and
    promptly. However, the scope of our financial needs to address
    these worldwide security requirements is daunting.
        As a result of our negotiations with OMB on the fiscal year
    2000 budget, the President has proposed $36 million in
    additional funding to begin planning on up to eight embassy
    construction projects to be commenced beginning in fiscal year
    2001. In addition, the President's budget proposes an advance
    appropriation for the construction of $3 billion for the fiscal
    years 2001 through 2005, with $300 million in 2001 and
    increasing by $150 million a year through 2005.
        Subsequent to the budget submission, the Accountability
    Review Board, which was chaired by Admiral Crowe, substantiated
    the Department's facilities and security deficiencies and
    recommended $1.4 billion per year for construction for 10 years
    to meet these needs. We are continuing our discussions with OMB
    on appropriate funding for security upgrades and facility
    relocations.
        Finally with respect to physical security, most experts
    agree that a principal factor is setback. The farther a
    facility is from potential blasts, the less damage results.
    Lack of this setback is a problem for 88 percent of our
    embassies and consulates; 229 of our 260 posts lack our 100-
    foot setback standard. We are addressing this through a
    vigorous program to expand the setback around our facilities
    through adjacent property acquisitions, street closures,
    bollards and barricades, and other devices.
        The second GAO challenge was improving our information
    management systems. Certainly no other management area at State
    has received more extensive attention than information
    management. As the GAO report indicates, within the past 6
    months a number of substantial achievements have been attained.
        First, we created a separate Information Resources
    Management Bureau under a new Chief Information Officer who has
    25 years of experience in information technology.
        Second, we have implemented a total of six major
    improvements, and those are in my statement and I won't read
    them for you to enumerate those, but these are all very major
    information technology accomplishments.
        Third, we have instituted a capital planning process. Our
    Information Technology Program Board and our Information
    Technology Review Board have met numerous times over the past
    year to rigorously review and approve over 100 projects
    totaling over $200 million in funding. Furthermore, we will
    complete final enhancements to our capital planning process to
    fully comply with OMB's Circular A-11 guidance in time for the
    next budget cycle.
        Fourth, we have created an IT tactical plan that has been
    favorably cited by GAO and OMB and other agencies which
    describes in detail how we are carrying out over 70 key
    modernization projects this year and next year.
        Fifth, we have created an IT vision paper which contains a
    number of groundbreaking goals for the years 2001 through 2005.
    This paper was featured in an article in Government Computer
    News this past month.
        Last, we have enhanced our security program in a number of
    ways. We have a Departmentwide security infrastructure working
    group. We have appointed a Department-level information systems
    security officer; we have published a critical infrastructure
    protection plan; we have installed a state-of-the-art intrusion
    protection software; and we have developed a network security
    architecture plan. All of these are in accordance with GAO
    standards and guidelines.
        With respect to the Y2K issue, the Department is confident
    our program to achieve compliance will succeed and our systems
    will be ready before the year 2000. At the Department's monthly
    Y2K Steering Committee meetings chaired by Under Secretary
    Cohen and attended by all Assistant Secretaries with mission
    critical systems, and also attended by John Koskinen, chairman
    of the President's Council on the Year 2000 Conversion, Mr.
    Koskinen noted the great strides the Department has made toward
    meeting OMB's goals.
        Briefly, State has 59 mission critical systems, and at our
    February 19, 1999, meeting we reported that we had the
    following results: 21 legacy systems are compliant; 18 systems
    completed repairs and replacements by the February 19 meeting
    and are now compliant; 16 additional systems will complete
    implementation and be compliant by March 31, 1999; two systems
    will complete implementation in April; and two systems will
    complete implementation, one in May and one in the July or
    August timeframe.
        The systems that are beyond March 31, that will be
    completed in April and May, are sister systems to nearly
    identical systems already implemented elsewhere in the
    Department, and the July/August system is the last of a
    multiple system installed at a number of locations.
        To summarize, over 90 percent of our mission critical
    systems will be compliant by March 31, the OMB deadline; 95
    percent by April 30; 98 percent by May 31; and 100 percent by
    this summer.
        Moving on to financial management systems--and in your
    opening statement, Mr. Chairman, you cited that issue--I am
    happy to say, when I was asked to join the Department last year
    as the CFO, I was pleased to learn that we had made sufficient
    progress to permit our financial management systems to produce
    auditable financial statements, and we received an unqualified
    or clean opinion from our Inspector General and the IG's CPA
    contractor. We were only 1 of 11 agencies last year which
    received such an unqualified report, and we expect a similar
    result for the fiscal year 1998 audit which is now in the wrap-
    up stage as we speak this morning.
        In addition, our Foreign Service Retirement and Disability
    Fund, which is a separate pension system covering 13,000
    retired Foreign Service employees and 11,000 active Foreign
    Service officers, has received an unqualified clean report for
    the past 5 years.
        Finally, State also operates the International Cooperative
    Administrative Support Services, the ICASS system, which
    manages and allocates over $700 million annually in overseas
    support costs for the 35 agencies which have employees in our
    embassies and consulates. ICASS is separately audited, and also
    received an unqualified or clean auditor's report in fiscal
    year 1997, and we expect the same this year.
        Our independent auditors and the Inspector General have
    identified a number of areas where we can achieve improvements,
    and we are working to resolve these issues. In addition, our
    1998 Federal Managers' Financial Integrity Act report will show
    that the Department has successfully resolved eight material
    weaknesses during the past 3 years, and we only have two
    remaining to be resolved.
        I am going to ask one of my colleagues to distribute our
    1997 accountability report to accompany this testimony. This is
    an experimental program authorized by the Government Management
    Reform Act, and provides in a single document information
    mandated under a total of seven different laws, including our
    audited financial statements and our GPRA comments. And also
    that report would be repeated for 1998. It is in process, and
    we expect that to be issued in June 1999.
        The third GAO challenge was effectively managing our visa
    process. We have an increasing number of visitors entering the
    United States each year. Our accountability report on page 10
    shows that for nonimmigrant visas we have----
        Mr. Shays. I am going to ask you to summarize your last
    three points.
        Mr. Edwards. I will be happy to do that, Mr. Chairman.
        Our visas are constant, but we have a visa waiver program
    covering 12 million visitors in addition to the 7 to 8 million
    who get visas, and this of course has impacted our economy
    favorably with a total of 20 million visitors a year.
        The fourth GAO challenge was effectively reorganizing our
    foreign affairs agency. Mr. Kennedy, who is here with me,
    prepared for the State Department that report which was filed
    by the President in late December, and can speak to your
    questions on that.
        Last, with respect to meeting GPRA standards, we have filed
    a 1999-2000 performance plan which amends the earlier 1999
    plan. We have made major efforts to improving our GPRA
    standards. We have the same issues that my colleagues spoke
    about earlier, and that is identifying appropriate baselines
    and benchmarks so we can link our expenditures to our
    performance outcomes.
        In summary, Mr. Chairman, the State Department faces
    daunting challenges, both in foreign policy and in improving
    our information technology and infrastructure. The GAO official
    who prepared the January report, who you heard from last week,
    acknowledged that State has been administering foreign affairs
    for too many years on the cheap. Particularly in the area of
    security, we must obtain the additional funding to have safe
    facilities for our employees, employees of other agencies in
    our embassies, and for visitors to our facilities. We need the
    continued assistance of Congress to obtain these resources, and
    I would be pleased to answer questions you and your colleagues
    may have at this point.
        [The prepared statement of Mr. Edwards follows:]
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        Mr. Shays. Thank you very much for accommodating our needs.
    All of your statements were very helpful. I realize that they
    are general in nature and somewhat short. I don't want Defense
    and VA and State to think that our common practice is going to
    be to bring you up in a line and you have to listen to
    everybody else's presentation. The purpose of today's hearing
    is to help us focus; to help guide this committee in the next 2
    to 4 years; where this committee is going to go in utilizing
    our very small resources and what we are going to focus in on.
        At this time I would ask Mr. Tierney if he has questions.
        Mr. Tierney. Thank you.
        Mr. Soloway, just a question generally. You talked about
    competition to a large extent and what you thought the benefits
    on that are. Perhaps it is my perspective on this thing, but it
    seems to me that the only area that we think that less
    competition is better for the consumer is in the military
    industries, where we are encouraging consolidation and merger
    so we have less people bidding on contracts. Has there been any
    rethinking on this particular direction?
        Mr. Soloway. I think if you look at the most recent history
    in terms of the Department's position on those consolidations,
    we have actually taken a stand on several, the most obvious
    being the Lockheed case not too long ago. We are now in the
    process of reviewing the most recent in the shipyard business
    with the General Dynamics/Newport News proposal which has been
    in the media over the last several weeks. So the Department is
    taking a very serious look at making certain that we can
    maintain competition, and to inject and intercede where we
    believe that competition is being threatened.
        And so from that perspective I think we are taking a very
    serious look at it, but I think it goes beyond--my comments
    about competition go beyond that. First of all, in the areas
    beyond that major tier of contracting, the prime contractor
    that we all talk about every day, the competition continues to
    be fierce. For instance, more than half of our money goes to
    buying services, much of it in the information technology
    world, and that is a very robust marketplace where there is no
    issue of a lack or limit on competition.
        Second, the competition that I was referring to more
    specifically in my testimony is our commitment to competing
    those positions within the Department that we deem to be
    commercial in nature, in other words, positions that may well
    be able to be performed by commercial contractors versus having
    it done by government employees. Those competitions almost
    always are going to involve public-private competitions, where
    we have a process through OMB Circular A-76 which provides a
    methodology for those competitions.
        The history of that has demonstrated to us that just the
    injection of competition into that process achieves roughly a
    20 percent savings at minimum, as high as in the 40 to 45
    percent range, and that is a figure which has been pretty well
    documented in most of the studies that I have seen inside the
    government and outside. We have committed to competing upwards
    of 200,000 positions over the next several years and expect
    those positions to yield savings in excess of $11 billion,
    money which we have already planned for in the out year
    budgets.
        So the competition comes in many different levels. But to
    your specific question, I think the Department has made clear,
    particularly with the recent history, that we take seriously
    this question of competition and are reviewing it on a case-by-
    case basis very seriously.
        Mr. Tierney. Is that something that you think that this
    committee ought to take a look at?
        Mr. Soloway. You are asking an agency official to tell you
    to look at something that we are doing.
        I don't think that it is necessary at this point, because I
    do think that the Department is taking a thoughtful and
    aggressive approach to it. As you acknowledge, there has been a
    tremendous degree of consolidation in our traditional supplier
    base.
        Mr. Tierney. Encouraged by the Department, I might say.
        Mr. Soloway. The initial phases definitely were. As
    indicated in the Lockheed case of this past year, it reached a
    point in some areas where the vertical integration became a
    matter of grave concern in the Department, and of course the
    Department of Justice intervened and said that we couldn't
    support those consolidations. So I think that our approach at
    this point is a very thoughtful one, and I don't know that
    there is any need to take it beyond that at this point.
        Mr. Tierney. Mr. Powell, we talked during the hearings last
    week about the prospect of taking some of your older buildings,
    your older assets, and finding a use for them, but at the same
    time moving a lot of the Veterans Administration service
    delivery to outreach clinics or something closer to the
    veterans. Does your Department have a particular plan in place,
    or where might we go with that concept of what we do with the
    older, more costly to maintain buildings and move to a more
    service-oriented regional delivery?
        Mr. Powell. To the best of my knowledge, this issue has not
    come to my office. VHA may be working on those plans because
    they are much closer to the issue. We are very concerned with
    the enhanced use opportunities that would allow us to
    effectively utilize our facilities. If we have underutilized
    buildings we can lease or sell within our facilities we should
    optimize their use. Obviously, we do have facilities which are
    not currently engaged.
        Mr. Tierney. Is it the plan looking forward, then, to
    maintain all of those buildings and go out to the community-
    based outreach clinic concept?
        Mr. Powell. I don't mean to be evasive. We have not
    discussed that particularly as a specific plan. I do know if it
    is a priority for VHA, so I will get back to you on that.
        Mr. Tierney. Mr. Edwards, there was talk also last week
    about the identification of the number of personnel for which
    we are responsible which are located overseas and the cost of
    maintaining and providing security for them. Is there any plan
    in the works of making some identification, some thought of
    addressing whether or not there are too many people, too widely
    scattered, or has that been addressed at all?
        Mr. Edwards. As part of the security supplemental, we have
    established an Overseas Presence Advisory Panel, and they will
    be commencing their activities. March 9 is the initial meeting.
    The purpose of this group of distinguished individuals, led by
    an attorney from New York and some people from within State,
    Admiral Crowe has agreed to join the panel, they will be
    looking at how we should structure our posts overseas from the
    standpoint of having larger embassies perhaps serving a group
    of surrounding countries, and specifically the new facility in
    Nairobi will be a test case of that. As you know, we are
    rebuilding an entire new post.
        So the overseas presence has been a matter of concern; and
    of course our concern is that the growth of overseas people in
    our posts are largely in agencies other than the State
    Department, so we have the security of those people equally on
    our mind because they are, in essence, guests in our
    facilities. So we are taking a look at that. That panel has
    agreed to complete its work in June of this year with a draft
    report, so we are moving forward to examine that very issue.
        Mr. Kennedy. This is something of particular interest
    because only about one-third of all of the U.S. Government
    civilian employees assigned in our embassies and consulates
    abroad are actually from the State Department, the other two-
    thirds are from other agencies. And so this is a crosscutting
    look at the U.S. Government's presence overseas, not just State
    Department.
        Mr. Tierney. Is State picking up the cost of security and
    maintenance for those individuals?
        Mr. Kennedy. We pick up a significant portion, and that is
    why we are interested in having the panel look at our presence
    overseas and how additional cost-sharing methods might be
    appropriate.
        Mr. Tierney. Thank you. Mr. Soloway, in your written
    testimony you had noted a number of acquisition programs in
    which cost and turnover time had been reduced. Can you speak to
    the cost of the F-22 program for me in that regard?
        Mr. Soloway. I don't mean to be evasive, but if you have
    specific questions about the program, I can take them for the
    record and I would be happy to get back to you. I don't have
    the details on the F-22 program with me.
        Mr. Tierney. I would like for you to get back with the
    amount of overrun and costs, and is it going beyond its
    original projected return dates.
        [The information referred to follows:]
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        Mr. Shays. Let me just say as a policy that the staff will
    make sure that the requests--you can give it to the committee
    and you can CC the Member, but we want to make sure that
    information does come in. And so if you make sure that the
    committee gets it and we will make sure you get it, but we are
    not going to ask frivolously for information and then forget to
    see that we get it. We will followup.
        Mr. Tierney. My last question, Mr. Soloway, is in regards
    to your weapons acquisition process in general. There are
    comments from the Inspector General that there were concerns
    there that there were premature commitments made to a number of
    technologies, moneys being applied before the technology was
    really ready at that point.
        Have you looked, has your Department looked at the national
    missile defense proposals to determine that in fact the latest
    request from the Department of Defense isn't doing just that
    with respect to putting money where technology is prematurely
    stated?
        Mr. Soloway. Specifically with regard to NMD, I think the
    Department is continually evaluating whether or not the money
    is being well spent, whether or not the technology is capable
    of achieving the performance requirement set forth, and that is
    an ongoing process. It is a continual discussion within the
    leadership of the Department, both military and civilian.
        In the broader sense of the term, taking it out of the
    missile defense area, the question of technology maturity and
    when we make buy decisions or no-buy decisions is something
    that we have looked at very extensively, because what we have
    found historically is that we have sometimes set a technology
    requirement way out here and then spent 40 or 50 percent of the
    money trying to get the last 10 or 15 percent of the way,
    rather than having a more flexible technology requirement,
    accessing technologies that were more immediate and being able
    to field systems more quickly and more quickly efficiently.
    That is an ongoing process in terms of reducing cycle times and
    focusing on the technology availability question. But with
    regard to missile defense, that is something that is an ongoing
    discussion in the Department and it is continually evaluated.
        Mr. Tierney. Are you saying that the Inspector General's
    concern is not well placed because the real problem is setting
    the goals too far out?
        Mr. Soloway. If we are not talking about the missile
    defense question specifically, but more broadly about how we
    make acquisition decisions, I think a criticism would be to say
    that sometimes we have established requirements that are simply
    unreachable in an appropriate or reasonable amount of time.
        And what we have going now, for instance, we have a team
    right now that is a rather unique relationship between the
    Joint Staff and the acquisition side, the civilian and military
    side, co-chaired by my boss, Dr. Gansler, who is the Under
    Secretary for Acquisition and Technology, and General Ralston,
    that is looking specifically at the impact of the requirements
    process on acquisition and how we can have a more flexible,
    iterative process, so we don't have this historic sort of over-
    the-transom, this is what we need, and the acquisition
    technology folks try to figure out how to go get it and it
    takes 15-20 years.
        We have been very open about the fact that it takes us 15-
    18 years to field a system not only drives cost, but it means
    that we often end up with systems that are not in fact
    reflective of contemporary technology, that technology passes
    us by because we have made those decisions way early. By making
    the system more iterative, more reflective of what is really
    out there in the technology world, we believe that we can
    substantially reduce cycle time and reduce costs, also field
    systems with better technologies quicker. I think that is a
    fair criticism of our history.
        Mr. Tierney. Thank you.
        Mr. Shays. All of you I think can speak to information
    systems and facilities, and I will be asking you questions
    about both. And all of you in one way or the other have
    acquisitions, but obviously DOD has more significant purchases.
        The first question I want to ask relates to facilities--
    500-plus bases, give or take, owned by the DOD. When we look at
    base closure I want to go two stages, Mr. Soloway. What number
    do we hope to get those bases down to?
        Let me just tell you that I am going to be asking the other
    Members on the same issue. I am interested to know about your
    facilities, how many facilities you actually have, and then I
    want to have you speak to whether you've done assessments as to
    whether all of those facilities are needed or not. Mr. Soloway.
        Mr. Soloway. The additional BRAC rounds that we are
    requesting, we do not have a specific number of facilities
    because that will be determined by the commission itself. I can
    tell you what our projections are in terms of savings and what
    we think that we will gain, if that is what you are looking
    for, or I can give you some history.
        Mr. Shays. Why don't you start that way. But that raises
    another question. Let's start. I'm sorry.
        Mr. Soloway. Well, the request for two additional rounds of
    BRAC which would be a fiscal year 2001 and 2005 request, we
    expect the savings to approach about $23 billion beginning
    fiscal year 2008 through 2015.
        Mr. Shays. Is that an annual expenditure savings?
        Mr. Soloway. No, that would be a cumulative savings between
    fiscal year 2008 and 2015 for approximately $23 billion, with a
    steady state of savings of about $3.6 billion a year after
    that.
        Mr. Shays. That is your goal, and then you decide to see
    how many bases you have to close to meet that goal?
        Mr. Soloway. We don't decide how many bases to close. That
    is a determination by the Base Realignment and Closure
    Commission.
        Mr. Shays. I understand that. I am not looking to strain at
    gnats and swallow camels here, but it does beg the question. If
    you know what you are going to save, how are you going to know
    what you are going to save if you don't know what you are going
    to close? Do you basically say this is your goal and then you
    tell BRAC, and then they have to decide what they have to do to
    reach that goal?
        Mr. Soloway. The savings that we have identified are based
    on two previous rounds. We are asking for two more rounds, so
    it would be a similar scale.
        Mr. Shays. How many bases did we close in the last two
    rounds?
        Mr. Soloway. We have closed, total, we have closed 97 major
    bases and we have realigned 55, and we have had 235 smaller
    bases either closed or realigned.
        Mr. Shays. How many bases did we open up?
        Mr. Soloway. I am not aware that we have opened up any, but
    I can check on that. That is the cumulative total. What we have
    looked at in establishing the savings estimate were the average
    cost savings that were contained in the President's budget for
    fiscal year 2000 based on the BRAC rounds in 1993 and 1995.
        Mr. Shays. What I wrestle with is, the cold war is over but
    the world is a more dangerous place in the sense that in the
    past we were able to have a deterrent. So obviously we had a
    nuclear threat that seemed more frightening on a scale, but now
    we have the potential of a nuclear attack by a rogue nation or
    individuals, and we have a tremendous number of hot spots
    around the world. And so in some cases, a number of our
    soldiers and sailors and Marines--the Marines always tell me I
    cannot call them soldiers----
        Mr. Soloway. You forgot the airmen.
        Mr. Shays. And the airmen. Thank you. I have not met with
    them yet for them to tell me that. So they are being spread out
    to more hot spots and so on. But we are also manning a number
    of bases, and I wonder if that is not to our detriment. So,
    obviously, I am sympathetic to the need to begin to
    consolidate. I know we have to weigh--not concentrate too much,
    of our forces like we did in Pearl Harbor and then regret it
    later on when it was such a tempting target.
        But what I am hearing from you then, and then you can
    qualify the response, I am hearing that you have a sense of
    what you are going to save and yet we do not know the number of
    facilities we would close.
        Can I infer in this that there is not a document in DOD
    where the generals and admirals and so on have gotten together
    and said, Listen, in our world, if we did it without BRAC, this
    is what we would do?
        Mr. Soloway. I can't tell you for a fact. I don't have
    operational responsibility for base closure. But what I would
    be happy to do is take that for the record and find that out
    for you.
        Mr. Shays. I am not going to ask you to do that. We will
    get that from other sources.
        Mr. Soloway. Let me, if I could comment on your other
    statement in terms of the threats we face. I think that if you
    look at the strategic documents that have come out of the
    Department, not just the Quadrennial Defense Review but the
    Joint Vision 2010, which is the Joint Chiefs' of Staff view of
    the future defense requirement and the threats we face, I think
    we are very, very aware of the increasing nature of the threat
    that we face, but it is a very different threat. And what we
    are really trying to do and what Joint Vision 2010--which came
    out of the Joint Chiefs--talks about and Secretary Cohen talks
    about, the Revolution in Military Affairs, is really right-
    size, and reorient ourselves so that we are optimally prepared
    to deal with that new type and new form of threat.
        It is not, for instance, a single, large conflict that we
    look at it. Is multiple, concurrent conflicts. As you
    mentioned, we are concerned about the threat posed by rogue
    nations and terrorist groups and so forth. We are also
    concerned about nuclear, chemical, and biological warfare. As I
    mentioned in my testimony, the whole concept of homeland
    security and how we protect the Nation from those kinds of
    threats is something that we are very focused on.
        So I don't believe that it would be appropriate to
    characterize the BRAC process, and I am not suggesting you
    have, but the interpretation could be that we are doing this
    without regard to the changing threat but just as a money-
    saving venture. This is actually partially about right-sizing
    and identifying resources we can save, but it is also about
    reorienting the Department to more efficiently meet the war-
    fighting need or the more war-fighting mission that we have,
    and that is something that we will be very focused on and very
    concerned about.
        Mr. Shays. I concur in that. And I would just say to you
    that I was trying to acknowledge the fact that it may be
    destructive for our military to have so many bases and spread
    our manpower resources so thinly and our financial resources,
    trying to keep all these bases open. But if you cannot give me
    a sense of the number of bases, you have given me a number of
    what you try to save. What would be the percent of the current
    or projected operational maintenance money that you would save
    through these two BRAC closings? You have given me the amount.
    Is it going to be a 1 percent, 2 percent overall savings?
        Mr. Soloway. I would have to go back and pull the budget
    figures again. I haven't looked at it from that perspective,
    sir, to be honest with you.
        [The information referred to follows:]

        Operations and Maintenance savings represent approximately
    52% of the total savings generated in the previous two BRAC
    rounds, based upon the FY 2000 budget data. One could make the
    case that this is an indication of future BRAC results.
    However, only a detailed BRAC analysis can determine this data.

    [GRAPHIC] [TIFF OMITTED] T6508.038

    [GRAPHIC] [TIFF OMITTED] T6508.039

        Mr. Shays. I would ask you to do that. In other words, our
    committee has to decide whether we want to dip our toe in this
    issue of base closures, because it is so controversial and
    would require us to utilize some resources. One opportunity is
    for our committee to begin to look at what the requirements are
    and try to put a number on it. In an ideal world, what we
    should be doing is closing to meet all the threats that we
    face. I just do not know if we want to get into it.
        Mr. Soloway. I would be happy to get that for you. But I
    will reiterate again, I think the key point that there is
    nothing we can do in terms of change and reform that will more
    directly affect, both from a financial and an operational
    standpoint, our ability to meet those threats than to pursue
    additional rounds of base closure.
        Mr. Shays. I know the Secretary is very determined that we
    proceed. And I think Congress is a little reluctant, but I do
    know that we need to proceed.
        As it relates to the veterans' affairs, when you say 500
    bases, is it 500 major bases? For instance, when we went out to
    Seattle a few weeks ago, it is basically a weather station that
    is under the command of the admiral in the Center, but do I
    consider that one of your bases?
        Mr. Soloway. We have closed 97 major bases.
        Mr. Shays. In your statement you had 500.
        Mr. Soloway. I don't believe so. Maybe Nelson did.
        Mr. Toye. That's 500 installations. And an installation
    could be a major installation, but not necessarily.
        Mr. Shays. Thank you. That would not necessarily be, when
    you go to Idaho for the pilots, that is not necessarily a base.
    It is owned by the government, but would you consider that a
    base, or an installation?
        Mr. Toye. The 500 number includes DOD-owned and operated
    installations. And some of those installations may have at one
    point in time been a major installation and in the current
    environment may no longer be a major installation.
        Mr. Shays. Could it also be a bombing practice range?
        Mr. Toye. It could be, yes.
        Mr. Shays. Thank you very much.
        How many facilities does the VA have?
        Mr. Powell. We have 172 hospitals and approximately 400 of
    the outpatient clinics, with 89 more opening this year. We
    don't own those facilities, Mr. Congressman, we lease those.
        Mr. Shays. You said 400 outpatient clinics?
        Mr. Powell. Right. Those are leased, however.
        Mr. Shays. I am delighted the VA has those outpatient
    clinics. But Mr. Tierney has made reference to what we heard
    from the Inspector Generals at the GAO last week, and one of
    the points was that the 172 hospitals are really providing
    service in a facility that is not designed for the needs of
    today's health care. You had representatives here. I am sure
    that is an issue you all discussed. What was your reaction to
    that?
        Mr. Powell. Actually, if I could revisit Congressman
    Tierney's question just a bit, we are seeking new legislation
    this year for the authority to dispose of excess property. Our
    capital asset disposal plan as an agenda item will allow us to
    retain most of the revenue from the disposition of these
    properties, which we could then apply for other internal uses.
    This allows us to manage these decisions much more effectively
    at the local level where decisions regarding which properties
    to use versus renovate, et cetera, is made at the local level
    and comes up through the chain that way. We feel that is an
    appropriate way to deal with that.
        We continue to make significant improvements in our capital
    investment process, which requires much better documentation
    than we have ever had before, and allows for us to conduct a
    much more critical assessment of any new proposal capital
    investment. We have a much more formal process now of
    identifying where we spend our capital dollars, particularly
    with regards to facilities.
        Mr. Shays. The legislation that you are bringing forward,
    is it going to allow for the VA to use the sale of an asset for
    operating expenditures or for another asset? I am happy to have
    anyone answer the question.
        Mr. Powell. It is generally for operating and nonrecurring
    costs. And 10 percent of the proceeds, as I understand it,
    would be set aside for homeless programs.
        Mr. Shays. I just wonder, the wisdom of taking a capital
    asset and then transferring it into an operating cost. Is that
    what you are basically saying?
        Mr. Powell. Yes, sir.
        Mr. Shays. Again, the reason why we are asking this
    question in a general way, we are not going to nail down all
    the answers. It is just to begin to see if Mr. Tierney and I
    and others want to get into this whole issue. And it is a big
    issue because I know the service groups and veterans like their
    facilities, and we like the veterans.
        But the question is: Is there a better way to provide them
    health care? And we need to be willing to ask that question.
    And one of the questions we may ask ourselves to undertake is a
    very thorough study of really how well does the VA--with the
    infrastructure it has had for decades and decades and decades
    and decades, does it meet the need of today's veterans?
        Is there any study that the VA has undertaken, or has the
    VA had any dialog that is trying to reappraise the facilities
    that we have and to see if some of them should be sold and some
    of them should be converted and so on? Is this anything that
    the VA is beginning to undertake?
        Mr. Powell. That issue has not come to the Secretarial
    level yet. One consideration is to convert from our high-
    maintenance fixed assets to leased facilities. This would
    reduce ongoing operating costs, which is really the objective.
    The combination of these locally-based decisions and the
    allocation of resources through the VERA model, encourages
    local officials to pay more attention to how their facilities
    are utilized for and how to best serve their client's needs, in
    this case the veteran.
        Mr. Shays. Do we have any statistics to say how many
    veterans are alive today from World War II versus, say, 10
    years ago or 20 years ago?
        Mr. Powell. I'm sure that we do, sir. I'll have to get that
    specific number for you. I don't have it with me.
        [Note.--The information requested was not provided at the
    time of print.]
        Mr. Shays. I am just curious to know what that peak period
    was. I realize that we had a larger group, but they were
    healthier. Now we may have a smaller group, but they are not as
    well. So I realize these are all factors. But I would like to
    see that. So that would be a request that I am making.
        As it relates to the State Department, how many facilities?
        Mr. Kennedy. Mr. Chairman, the State Department has about
    265 embassies, consulates, and missions overseas, plus another
    two dozen or so, consular agencies, which are small one-person
    facilities staffed by a locally hired American, mainly in major
    tourist centers, who are the first line of intervention if an
    American is injured or in jail, such as in tourist resort areas
    in Mexico for example.
        We also have some 30 facilities throughout the United
    States, including passport agencies in Connecticut and
    Massachusetts, diplomatic security field offices and three
    major regional centers: One in Fort Lauderdale, FL, which
    provides support throughout Central Latin America and the
    Caribbean; a major finance center and new passport production
    facility in Charleston, SC; and a major passport and immigrant
    visa processing facility in Portsmouth, NH.
        Those latter two, if I might, are products actually to our
    benefit of the Base Closing and Realignment Commission, because
    as DOD closed the former Pease Air Force Base in New Hampshire
    and the Charleston Naval Station, the State Department, looking
    for ways to economize, streamline, and create efficiencies in
    economies of scale, picked up, with Congress assistance,
    facilities in those two locations.
        Mr. Shays. Let me ask you this: The 265 of the embassies
    primarily, are they also the residences of the Ambassadors?
        Mr. Kennedy. No, sir. I said there are 265 cities in which
    the United States has diplomatic and consular representations.
    If you added in the other leased facilities, the number comes
    up, Mr. Chairman, to 12,000. When you add in the embassies,
    annexes, consular operations, warehouses, and the residences of
    U.S. Government personnel overseas, it could come to as much as
    12,000.
        Mr. Shays. Are all the residences leased?
        Mr. Kennedy. Some are owned, Mr. Chairman. Some are leased.
    We own about 2,000 properties and lease another 10,000.
        Mr. Shays. You cannot go to 10,000?
        Mr. Kennedy. 2,000 owned, 10,000 leased, for a total of
    12,000 properties.
        Mr. Shays. I am making an assumption that is 12,000
    separate locations. One of the things I was thinking of doing
    is having my staff go and see all these facilities.
        Mr. Kennedy. Mr. Chairman, seriously, we always welcome
    congressional staff visits.
        Mr. Shays. Seriously, you try to say that and try to feel
    that way, but I do not know if you always welcome us. You would
    be crazy if you did.
        Mr. Edwards. Many of those 12,000, of course, would be
    individ- ual apartments and homes in which State Department as
    well as other U.S. Government employees at the embassies are
    living. So it sounds like an enormous number but most of those
    would be individual residents' units.
        Mr. Shays. It is just so that technically we are
    responsible for the safety of the people in those facilities.
    When we went to Colombia--and this was after they lost the 700,
    their DAS building was destroyed about 8 to 10 years ago. It
    was their FBI building. They lost 700 people and 70 were
    killed. And we went down there--a delegation from Congress, to
    visit with some of the Colombians, who are truly fighting a
    drug war. I mean, for them it is not theory. But when we saw,
    for instance, the Ambassador's home--it was a lovely home and
    it was kind of in a valley, there were probably 80 structures
    above it so that any sniper could just knock off whomever they
    wanted. So I could say, that is just one little home. I mean,
    obviously it is a home, but it is a facility that many people
    use. So that is why I was thinking of that.
        Let me go back to Mr. Tierney, and then I am going to talk
    about information systems when we get back.
        Mr. Tierney. I only have one other question.
        Mr. Powell, I do not mean to beat a dead horse and I hope I
    am not on an area that you do not have any information on, but
    I am sort of fascinated by the prospect of properties, VA
    hospitals and the like, that if they are too expensive for us
    to maintain or if they are not serving the purpose of providing
    medical care in today's environment, has there been any process
    or consideration to dealing with the surrounding communities
    where they are located and some public-private partnership type
    of thing of trying to create long-term care facilities or
    assisted-living facilities, all of which there is a
    considerable need for, that would help with the financial end
    of things and serve our needs with another 1.3 million veterans
    who are going to be over the age of 85 over the next 10 years,
    and help the surrounding areas with their similar demographic
    problems?
        Mr. Powell. Yes, sir. We have a number of projects that we
    are looking at under the category of ``enhanced use.'' We are
    looking at partnerships with, for example, State veterans
    organizations where we can allow facilities that we aren't
    currently using to be converted for long-term care, or other
    programs that may be run by the State veterans groups. We have
    a number of those projects that are in the process of being
    identified. Hopefully, they will be approved for that type of
    conversion.
        Mr. Tierney. And do you go beyond that, too, to look into
    some private partnerships with people that might come in and
    renovate an entire thing and then lease back at a favorable
    rate for our veterans' use?
        Mr. Powell. Yes, there are a number of those that we look
    at from time to time. Again, most of that is driven from the
    local level and it is something that we encourage.
        Mr. Tierney. Thank you.
        Is there anything that any one of you feels compelled that
    you should share with us that we have not asked you?
        Mr. Kennedy. Mr. Tierney, if I could add something on the
    property issues. The State Department does have the authority
    to sell its properties overseas and to retain the proceeds of
    sale and to turn those proceeds toward new properties. And this
    is a stewardship we take very, very seriously.
        For example, last year we sold over $58 million worth of
    property and purchased another $58 million worth of property.
    We try to identify properties which are obsolete or not serving
    their highest value and then take those assets and sell them,
    avoiding several million dollars of lease cost every year. But
    obviously those lease costs repeat and mount every year, so the
    savings become significant.
        Another example would be in Singapore several years ago, we
    actually sold the United States Embassy, which is a very old,
    small building, but on a very, very valuable downtown lot, and
    took those proceeds and were able to build an entirely new
    embassy, Ambassador's residence, Marine guard quarters, without
    having to request a single dollar in appropriated funds,
    because we were taking an asset and converting that asset to
    its highest and best use. And this is something we do very,
    very rigorously.
        Our Office of Foreign Buildings examines properties
    overseas. We even availed ourselves of what we call the Real
    Estate Advisory Board to help with this process. And that
    membership, to make sure we draw on real estate professionals
    from the intelligence community, the General Services
    Administration, and the U.S. Postal Service, so that we can
    look at properties and decide the best way to convert a fixed
    asset to its highest and best use so we do not have to come
    back to the Congress for additional appropriations.
        Mr. Tierney. That is interesting. I am glad you shared that
    with us.
        I assume there is not the same kind of authority with the
    Veterans Administration. I assume that you do not have that
    same authority to be able to sell and buy properties without
    coming back to us for approval on that. But do you have
    advisory groups that help you deal with your real estate
    issues?
        Mr. Powell. No, sir, we don't. That is one of the issues in
    our enhanced use proposal we would like you to look at.
        Mr. Tierney [presiding]. Let me ask you a question for the
    absent Mr. Shays.
        The GAO testimony last week indicated that the Results Act
    Performance Goals and Measures should provide us and you with
    clear indicators of progress and problems. The VA testimony
    today indicates that the Department has made significant
    progress in identifying performance targets and collecting
    valid data to measure progress. VA has focused on a small
    number of goals and performance measures VA leaders identified
    as critical to the success of the Department.
        Would each of you please identify the three performance
    measures in your fiscal year 1999 plan that you see as critical
    to your Department's success?
        I will give you time to prepare if you want. But State is
    ready to go?
        Mr. Edwards. We have had some very interesting challenges
    on GPRA, because in many cases our programs are designed to
    have things not happen versus supposed to happen. But certainly
    in our accountability report we have some very solid data on
    issuance of passports, issuance of visas, which of course is a
    service to Americans and to people who are coming here to visit
    or to emigrate. So we have those data. And it is clear that
    we're delivering an increasing number of passports and visas
    with a decreasing number of personnel. And we are using some
    very high technology to minimize fraud.
        At our new plant, I guess not too far from your district,
    Mr. Tierney, in Portsmith, NH, we have a new passport system
    where your photograph is actually part of the printed material.
    It is not an embedded photograph. And there are about four
    different vendors involved in producing that passport. So the
    chance of fraudulent passports, once we get that system in
    throughout the Nation, is very, very much diminished. So we can
    measure our effectiveness there.
        We can measure land mine removal. But the problem is we
    don't know how many land mines there are. There are still land
    mines from World War I, believe it or not.
        And we are faced in Central America with the Hurricane
    Mitch aftermath of land mines floating down mud rivers, and
    people putting their hands in the mud and the mine going off,
    because these mines were in fields and roads which were
    devastated. That hurricane, as you may recall, is probably the
    most severe hurricane in the Western Hemisphere since Europeans
    have been here.
        So we have some very, very difficult tasks and we're
    struggling to be able to measure each of our 16 objectives and
    3 diplomatic readiness objectives, and we have a way to go. But
    we are committed, as a service agency, to find a way to measure
    that to show that there is payoff for the dollars that we're
    spending.
        Mr. Tierney. Thank you.
        Mr. Soloway. Congressman, as I mentioned in my testimony,
    we have two overall corporate goals, if you will. The first one
    really focuses on force structure and strategic issues. The
    second one is more directly related to what you are interested
    in, which is the reengineering and performance management
    within the Department.
        Let me just mention a few of the performance measures that
    we have established that we are tracking and that would
    obviously be included in our GPRA reporting: Our annual
    procurement spending, which is investment in new systems; the
    percentage of the DOD budget that is spent on infrastructure,
    which of course we are trying to reduce; public-private
    competitions, which is that number of positions that we are
    able to effectively compete and thereby achieve efficiencies
    whether the work is done, one, by in-house government workers
    or by contractor; and where we are going in terms of cost
    growth and cycle times with our major defense acquisition
    programs.
        If there were some key ones, those would be the ones that I
    think are really the highest on the list. As I mentioned, I
    think there are about 41 that we've established.
        Mr. Tierney. We will not ask you to go through all those,
    but thank you.
        Mr. Powell. The VA performance plan, that was submitted
    with the budget on February 1st, lists slightly over 100
    different outcomes that we are looking at, with 24 that the
    Department considers as key.
        I happen to be very interested in three that really measure
    outcomes, and deal with the quality of what we deliver.
        One is the accuracy of the processing of VBA claims. The
    other two relate to health care, which are issues that are also
    very important to Dr. Kizer. The first of these is the Chronic
    Care Index, which really consists of 14 medical aspects and
    gets to the issue of quality of patient care. The other issue
    would be the Prevention Index, which consists of nine medical
    interventions measuring how well the VA follows nationally
    recognized primary prevention and early detection. Both of
    those go to the essence of serving the needs of our community.
        Mr. Tierney. What progress are you having on the claims
    issue? I know that I can report, hopefully, that I am hearing
    less in this last year than I heard several years ago on that.
    What has the Department done to try to address the backlog in
    the claims?
        Mr. Powell. Again, this is a little out of my purview as
    CFO. We do have the balanced score card that Under Secretary
    Joe Thompson has been talking about, and there are now
    published, on a web site, monthly updates on performance. I
    know too that the Veterans Benefits Administration has a number
    of initiatives underway to try to reduce the backlog but I'm
    not familiar enough with those to give you an answer. I can get
    that answer back to you.
        Mr. Tierney. No. I can go to another source. Thank you.
        Mr. Shays [presiding]. As it relates to information
    systems, all three of you have your challenges, obviously, in
    this area even if we did not have the Y2K problem. But let me
    first ask as to it relates to the Y2K problem. I want you to
    give me what would be the worst-case scenario from each of your
    stand-points on what could happen if we did not address this
    issue properly, and then I make assumptions that you try to
    take the worst case first to deal with that.
        But, for instance, let me just go backward and start in
    reverse order and start with State. What could be the worst
    inconvenience or the worst challenge that could happen if we
    are not getting a handle on the Y2K problem for State?
        Mr. Edwards. Well, there is no question, since we are a
    very labor-intensive organization, the inability to pay our
    people both domestically and to pay not only our people, but
    Americans and SFNs overseas. So we've remediated all four, our
    three overseas and our domestic payroll system, and we've also
    remediated our retirement system.
        As I indicated in my comments, we have 13,000 retirees that
    we pay at State that aren't in an OPM-administered plan. Not
    only would it be devastating to us but you'd hear about it
    almost immediately if we failed to pay them.
        Mr. Shays. One of the problems could be, they did not get
    paid at all or they got paid an amount that was not
    commensurate; they could have received a $10,000 check when
    they deserved a $2,000 check, these kind of scenarios. They
    might be disappointed if you solved the problem.
        Mr. Edwards. Not getting any check at all, Mr. Chairman,
    would probably be the problem of processing.
        Mr. Shays. I am being serious here. Is the problem that
    they would not get any check if you did not solve it, or they
    might get an inaccurate amount?
        Mr. Edwards. If the system crashed, you would not get the
    output--which would be principally not checks but electronic
    transfers into their bank accounts. We pay almost everybody,
    even overseas, electronically.
        Mr. Shays. I am going to ask others. But what I am trying
    to understand is, do we even know? Is the issue that it would
    be inaccurate, or it is just that they would get nothing, or
    don't you know?
        Mr. Edwards. Well, in the Y2K bugs that we had, it would be
    very difficult right now to know, since we've remediated the
    systems and they are essentially compliant, what would happen.
    But normally when you have a meltdown of a system, the output
    stops, so that means you wouldn't get the electronic transfers.
        Mr. Kennedy. On the substantive side, Mr. Chairman, in
    addition to our administrative process, the State Department
    provides a number of services to the public such as passport
    services, and visa services to foreigners, which is why we put
    the remediation, the Y2K compliance issues of those systems, at
    the head of our list, and why they have been remediated.
        I'll give you one example. We maintain a data base of
    criminals and terrorists who, when they apply for a visa at a
    U.S. facility abroad, that visa is denied. But that is a large
    data base that we work on jointly with the Immigration and
    Naturalization Service and other law enforcement officials.
        So we have taken great steps to make sure that when
    somebody comes in, applies for a visa, and we run their name
    against our name check system in a highly, as I said,
    computerized and automated process, we want the right answer to
    come up, either a record or clean.
        So that is an example of something we take very seriously,
    because we do not want to admit any criminal or terrorist
    elements into the United States because our computer process
    has somehow been flawed by the Y2K bug. And that system is
    remediated, and we are in the process of installing the modern
    hardware around the world. The only reason it is not fully
    certified is not because the hardware and software hasn't been
    approved, but it's just that we are in the process of literally
    putting the new terminals at all of our 260 locations. This
    will be complete by July of this year. But the system is tested
    and in place at a number of posts.
        Mr. Shays. Right.
        You still have Wang word processors in some State
    Department facilities?
        Mr. Kennedy. That is a system that will be completely
    phased out by July of this year.
        Mr. Shays. One of the things that I have heard from people
    who work in our embassies, from the Ambassadors on down, is
    that we have not yet developed a system for them to communicate
    through e-mail quickly from State to overseas; that they cannot
    communicate quickly from one embassy to another.
        Is there a plan in place to begin to totally--and would you
    say is it just a plan or is it a possibility that it is done?
        Mr. Kennedy. We have begun already implementing that. And
    we will have one system in place that is commercially based,
    robust, Y2K compliant, completely installed around the world by
    July of this year.
        Mr. Shays. That will allow an ambassador in France to talk
    to the Ambassadors in England?
        Mr. Kennedy. Yes, sir. But there is a complication there,
    and that is a complication that most other agencies do not
    have, and that is level of security required.
        The State Department essentially maintains three separate
    systems and that is because no one, including the National
    Security Agency, has been able to certify a firewall that would
    allow us to combine national security, classified information,
    and what we call sensitive but unclassified information. An
    example of that would be the anti-terrorism data base we
    maintain, and then the internet. So we have deployed three
    enclaves to deal with these problems. And our Chief Information
    Officer and his colleagues are in constant communication with
    DOD and the National Security Agency, looking for that magic
    firewall that would allow us to merge all three systems
    together, on one terminal, on the Ambassador's desk.
        But, yes, if the Ambassador wishes an unclassified terminal
    on his desk and wants to work in that world, we will have that
    in July. The classified systems are taking a little bit longer
    because of the complexity of ensuring that we never expose
    national security information to those who should not be privy
    to it.
        Mr. Shays. Thank you.
        Defense, it seems to me if we just talk about the computers
    in the airplanes, the computers in the air traffic control,
    there are a hundred different ways that you all must have to
    focus your time and energy on. But in different areas, what
    would be the worst-case scenario if we do not succeed? I
    realize we are making progress.
        Mr. Soloway. I think, Congressman, the question of progress
    is key here, because certainly Defense is one of those agencies
    that was viewed with great concern both by ourselves and by the
    Congress and others looking at it as recently as this past
    fall, where we had a number of mission-critical systems that
    had not yet passed muster, and there was great concern as to
    whether or not we were going to be able to overcome the
    problem.
        I think what is important to note is that now, today, about
    83 percent of our systems have not only been fixed but tested.
    We will be at 90 percent in the March-April timeframe and 100
    percent by October. So we have made, I think, dramatic
    progress.
        In fact, Deputy Secretary Hamre, who is testifying right
    downstairs this morning on Y2K, made the comment yesterday that
    he himself, as I think he testified before Congress earlier
    this year, had been deeply concerned about whether or not we
    are going to be able to overcome the problems associated with
    the Y2K bug, but now has tremendous optimism that we will be
    able to get there.
        Really where our focus is now, in addition to continuing
    our attention to that last 17 percent, which is not
    unimportant, but really a lot of our attention now is focused
    on working with our NATO partners and also with Russia on the
    early warning systems and so forth, because, as has been
    reported in the media, there has not been perhaps as much
    aggressive addressing of these issues overseas as here. And so
    that is, in addition to our focus on our own problems, a much
    increased level of activity, if you will, with regard to
    overseas allies to ensure that we don't have any problems in
    that regard.
        I don't have, nor does Mr. Toye, operational responsibility
    for information systems. That is under the purview of our CIO.
    Dr. Hamre has personally directed the Y2K efforts in the
    Department. So I can't give you specifics in terms of a worst-
    case scenario. But I can tell you I think from a progress
    standpoint, we are substantially ahead of not only where we
    were, but where we thought we would even be by now, or well on
    track, and much of our attention now has been focused overseas.
        Mr. Shays. Some of the systems are basically run by DOD.
    But a system, for instance, in a fighter jet would be the
    manufacturer's challenge, not your challenge?
        Mr. Soloway. It is a common challenge. It is a joint
    challenge, sir.
        Mr. Shays. I realize that. But let me just try to
    understand who has that responsibility, rather than year 2000
    no one having it. Is it the manufacturer's responsibility?
        Mr. Soloway. That's a very good question. Specifically,
    from a legal standpoint, I don't know the answer to that. I do
    know that we have been working with our suppliers to ensure
    that systems are updated and are capable of overcoming the Y2K
    problem in those cases where they face it. And as we look at--
    certainly with mission-critical systems, our guidance systems
    and targeting systems and so forth clearly would fall into that
    category.
        I don't know from a legal standpoint who has those
    responsibilities. I know that we are certainly requiring that
    anything new that we purchase clearly would be compliant when
    we purchase it. But in terms of actual legal responsibility for
    legacy systems from a legal standpoint, I would have to
    hesitate to answer and would probably take that for the record
    and get back to you.
        [Note.--The information requested was not provided at the
    time of print.]
        Mr. Shays. Mr. Horn, his subcommittee, is doing an
    extraordinary job and, as you point out, have created each of
    the departments and we have really deferred to them. The one
    area where they have not gotten as much involved is areas where
    there is--particularly with the intelligence community, because
    of the nature of the information, but it impacts DOD. I know
    they have been focusing on DOD--and I am happy that he has done
    this and it is not on our shoulders. His Government Management,
    Information, and Technology Subcommittee is focusing on that.
        I just want to get a handle as to whether we are leaving
    anything out as it relates to DOD. As I think of all the number
    of areas that you have to focus in on, did you have a method in
    which you went through each area to know if you were able to
    comply or not? In other words, what is the structure in which
    you begin to even know if you have a handle on this?
        Mr. Soloway. The Deputy Secretary, Dr. Hamre, took personal
    charge of this at the Secretary's request, and he conducts
    monthly meetings of the Y2K Steering Committee that involves
    the very senior leadership for covering the entire Defense
    Community, going through from a community-by-community
    perspective, if you will, the systems that they have in place,
    the challenges that they face, the progress that they are
    making, and so forth. So it has been managed at the very most
    senior levels at the Department.
        You are correct, of course, we have systems that cut across
    many areas. We have 500 that support the intelligence
    community. But internally it has been managed as a very senior
    level effort to make certain that it is very clear in the field
    that this is an absolute top priority and to make certain that
    the leadership has its arms around the full scope of the
    problem.
        We have looked at our Defense Finance and Accounting
    System, the intelligence, the readiness issues, and all of
    those things as they relate to one another and each individual
    system. It has been organized at the most senior levels of the
    Department.
        Of course, our money--our senior civilian official, and our
    Chief Information Officer, Mark Langston, have had direct
    responsibility. But it has been managed and overseen
    personally, as I said, by Dr. Hamre, who is downstairs
    testifying again on the topic.
        Mr. Shays. Before I recognize Mr. Mica, let me just ask
    each of you, what is the key information system challenge that
    you have that is not related to Y2K? And Defense could probably
    give me two. But put your heads together. What is the key
    information challenge that you are faced with? Actually, let me
    ask each of you. I think it would be easier that way. The two
    key issues.
        Mr. Kennedy. Mr. Chairman, I think that of the two major
    challenges to the State Department, the first is obtaining
    qualified information technology professionals in sufficient
    numbers that can do both the domestic jobs and deploy to our
    many overseas locations to provide the national security
    services we provide.
        I believe the second challenge that we have is to stitch
    together both all our locations and all our systems across 24
    time zones around the world, including operating in countries
    that have the highest degree of information technology
    capability, just as in the United States, down to the Third and
    Fourth World, operating across all systems, across all levels
    of technological competence overseas and around the globe,
    which is our second major challenge.
        Mr. Shays. It is very difficult for government, given the
    pay level sometimes, to bring in the quality of competence that
    we need. But even in industry in the area that I represent, we
    have 1,900 information system type jobs available, unfilled,
    because we do not have the people to fill them. And that is the
    private sector competing with price. And you have limits that
    way, correct?
        Mr. Kennedy. We have limits. And we just had a big job fair
    last weekend, and we did get a rather large and qualified
    turnout because we were emphasizing the ability to serve and
    work for the U.S. Government overseas. So the salary levels
    worked against us, but we do have potential inducement of
    talking about offering people an opportunity to serve their
    country abroad.
        Mr. Shays. And you also have the ability to hire some
    people with high skills overseas, I would assume.
        Mr. Kennedy. Yes.
        Mr. Shays. But in this country, hiring Americans, from the
    moment that person comes to that job fair--what is the earliest
    that you could, even if you knew then that you wanted them?
        Mr. Edwards. We made 50 offers Saturday, and we started the
    background investigations yesterday.
        Mr. Shays. So how long would it take you to get them?
        Mr. Kennedy. We would say probably 90 days, sir, because of
    the need to conduct the rigorous national security background
    investigation pursuant to statute and Executive order.
        Mr. Shays. It is interesting, because I was thinking 90
    days from the government's standpoint was pretty good. So
    congratulations. Larry Halloran, my counsel, was saying, ``my
    God, 90 days is 3 months, and think of that person having to
    wait and all the other people are going to be tempted to
    apply!''
        Mr. Kennedy. It is a real burden. But because of the
    information that the State Department processes and handles,
    especially everything that moves through the conduit of our
    Information Technology System, we have to take those steps. It
    is a challenge and a burden that we accept, and we try to
    streamline as much as we can.
        Mr. Shays. Your first answer on the people was not a
    surprise I was not expecting. I was happy to ask the question.
        Mr. Sullivan. I believe that our critical problem is
    ensuring that all of our systems at VA are seamlessly
    integrated. We have been struggling with this for a while. We
    are coming close with the interfaces we developed. But that's
    not the answer. We need to look at the newer technology and see
    how we can better seamlessly integrate these systems.
        Mr. Shays. And you are working with three time zones.
        What is the second problem? Besides the integration, what
    would be the second challenge to information systems?
        Mr. Sullivan. I can speak from the finance side. I think
    our other biggest challenge is to get data on a more timely
    basis to our management decisionmakers out there. We haven't
    been doing a very good job of that at all, and a lot of it is
    because of our legacy system and some of it is because we need
    to reengineer some of our processes up front.
        Mr. Soloway. Congressman, I have two and then Mr. Toye has
    two more. But being a reformer, I would like to break the rule
    and add another to build on your comment.
        First and foremost I think the biggest challenge we have is
    cyber-security. As Dr. Hamre and I think others reiterated
    several times, we are very concerned about the security of our
    systems as we more and more use the internet and so forth and
    our ability to maintain truly secure fire walls and so forth.
    That has clearly got to be our No. 1 priority.
        The second one, actually I want to build on your point
    about people. Our ability to recruit and retain true technology
    skills is a very serious challenge and one that concerns us
    greatly. It is very difficult to compete with the commercial
    world. We do not always have the opportunity to offer people
    the opportunity to go and serve in embassies overseas or what
    have you. And we certainly don't have internally the structure
    to maintain that technological refreshment that is needed.
    That's a major concern.
        But it leads me to really the second big area, which is in
    our business logistics information systems. Logistics is a huge
    cost-eater in the Department of Defense and we are still living
    with variable logistic systems. And if you analyze supply chain
    management, if you look at velocity of systems and so forth, it
    is really the information technology which is the first step,
    the absolute key to improving efficiency, reducing cost,
    getting materials and supplies to the field more quickly and so
    forth.
        So we face enormous challenges in modernizing our logistics
    and information systems with truly contemporary technologies so
    we can better serve the folks in the field.
        Mr. Shays. Thank you. Mr. Toye.
        Mr. Toye. Within DOD, financial systems, or the lack of
    adequate systems, is indeed the biggest single impediment to
    improving financial management. Our systems were not designed
    to meet current standards. They were designed to track the
    Department's execution of the budget as appropriated by the
    Congress, and they do those things very well. And at one point
    in time, that may have been good enough, but it certainly is
    not good enough in today's environment.
        So our first priority is to overhaul or replace our
    financial systems. And we have a plan that we are executing, as
    was mentioned earlier, that will not be completed until the
    year 2003. But even upgrading our financial systems by itself
    is simply not good enough. A substantial portion of the
    information that ends up in our financial reports comes from
    what we call feeder systems. These are systems in non-financial
    areas that provide information to DOD.
        We need to, and we are working with those other communities
    in DOD, to get them to make the changes in their systems to
    ensure that the information that they pass to the financial
    systems also will meet today's current standards. That is a
    long-term effort. It is a significant effort, but it is the
    most effort and it needs to be accomplished to bring financial
    management to the point where it should be.
        Mr. Shays. Thank you very much.
        Mr. Mica, it is great to have you here.
        Mr. Mica. Thank you, Mr. Chairman, and thank you for the
    opportunity to ask a few questions. I think my questions are
    going to divert here to the Department of State. And I guess we
    have got the Chief Financial Officer, Mr. Edwards, here to
    answer.
        Mr. Edwards, first I want to address the question of the
    security of our diplomatic facilities and posts overseas. I
    know Rear Admiral Crowe had recommended, I guess, some $14
    billion be expended over 10 years for that purpose. It is my
    understanding also that I think this year there has been a
    recommendation of a lower amount; if we had to do that over 10
    years, it would be about $1.4 billion or something like that.
        What is the dollar amount you all are recommending?
        Mr. Edwards. Well, as I indicated in my statement, the
    President's budget recommends an advance appropriation of $3
    billion for 2001 through 2005, and that is ramping up from $300
    million in the first year to $900 million.
        Mr. Mica. $3 billion for 2001?
        Mr. Edwards. Through 2005. Fiscal year 1999, we got an
    increase over our previous construction budget of $36 million,
    and that is to do the advanced planning on the first, up to
    eight embassies or other facilities for that advance
    appropriation that would come in 2001.
        Mr. Mica. How are you picking or prioritizing the
    facilities for upgrades?
        Mr. Edwards. Well, we had a very extensive examination
    following the embassy bombings. Each of the Ambassadors
    notified Washington of their immediate needs. We sent out teams
    of diplomatic security and our building people, to a total of
    36 posts which were clearly at the high end of risk.
        So we have now come up with quite a number of posts for
    each of those 5 years that we would either relocate, rebuild,
    or otherwise reinforce weaknesses, so that in the event the
    appropriation is approved we are ready to spend the money
    appropriately.
        Mr. Mica. Has the State Department issued any kind of
    advisory as to small measures that can be taken to prevent
    death or damage, to your knowledge?
        Mr. Kennedy. Mr. Mica, my name is Pat Kennedy. I am the
    Assistant Secretary for Administration, and I supervise our
    Office of Foreign Buildings and also was the Acting Assistant
    Secretary for Diplomatic Security for some period of time. And
    the answer to your question is an emphatic ``yes.''
        We have a series of standards in place. We have notified
    our posts. We have made funds available to them for everything
    from what is called ``shatter-resistant window film,'' which
    the trade name usually used is Mylar, and telling them how to
    do it and making the money available to them.
        If I might give you one example that combines two things we
    have done, both making that available and a rigorous training
    program: There was a bomb blast about 2 weeks ago in the
    capital city of the country in which there was a local problem,
    not against the United States. There was a noise in the street.
    Some of the local nationals working in the embassy started to
    go to the windows to look out. The Americans who had been
    through the training said, ``No. No. Get away. Move inside.''
        When the bomb exploded moments later, all the windows were
    blown out, but no one was hurt, for two reasons: One, the
    Americans had pulled everyone toward the inner part of the
    building and when the windows shattered the Mylar treatment
    kept----
        Mr. Mica. That is exactly what I am talking about, some
    commonsense things.
        This subcommittee in its previous life did quite a bit of
    work on force protection, particularly after the Kobar Towers
    incident, and we found some simple things. Of course, we spent
    a third of a billion dollars on enhancing our force protection,
    and we have been out looking at what was done.
        It is interesting when you have a problem how you throw
    money at it. We bought every kind of gadget in the world. I
    remember going to Saudi Arabia with Mr. Hastert, who is now the
    Speaker, and saw every kind of equipment you could possibly
    imagine, most of it foreign produced, which is kind of
    interesting to address the foreign protection problem; but some
    simple measures that we were advised, like the Mylar on windows
    and the other advisories that folks can do. Because I am not
    going to criticize you for not spending a lot of money. I think
    that sometimes the small amount can do a lot of good.
        And we overreact on some of these, I think. I think even
    Admiral Crowe is an overreaction. With $14 billion, I do not
    know how many embassies we could harden. But that does not give
    us any protection when we have American schools, we have
    American facilities, we have American tourists, we have
    American businesses all throughout the world.
        I just got back from visiting South and Central America.
    And when you take precautions in one area, they will come after
    you in other areas, we have seen in Tanzania and Kenya. So just
    some commonsense things and not spending the entire Treasury on
    things that may look good and satisfies people's wish lists
    would be desirable.
        Mr. Chairman, if I may, I have some questions in a couple
    of other areas.
        As a financial officer, I have been involved in the
    narcotics effort; and one of the reasons we are having such a
    problem right now in the United States is the diversion of some
    of the funds, particularly State Department funds, from the
    Andean strategy. In particular, I was told about $40 million
    was taken out of the Andean strategy and diverted at one point
    several years ago to Haiti.
        How does this happen? Who is making the decisions in
    diverting some of these funds in that manner?
        Mr. Edwards. Well, it can come about several ways. First of
    all, if our base funding isn't sufficient to do everything we
    want, we have to, for example, absorb salary increases and FICA
    tax increases and so forth, we have to start reducing programs.
        Mr. Mica. This is taking money out of a program
    specifically appropriated by Congress and putting it into
    another area.
        Mr. Edwards. Well, if the Congress would appropriate it
    directly for foreign assistance in a program as you have
    described, that's where the money obviously would go.
        Last year in the accountability report, we have a citation
    of drug interdiction. We had a major year in fiscal year 1997
    of inderdicting drugs coming into the country, and I think the
    street value of those drugs was something in the billions of
    dollars if you took the tons of drugs interdicted, and priced
    it out at street values.
        Mr. Mica. That does not address my question specifically.
    And I will get my subcommittee staff to give your subcommittee
    staff the specifics. But I want to know how that $40 million,
    thereabouts, were diverted.
        Mr. Shays. So let me just say that that would be a request
    that we would have and we will followup on that.
        Mr. Edwards. We can certainly respond to that question on
    that specific issue, Mr. Chairman.
        [The information referred to follows:]

        Responsibility for Y2K system remediation depends on the
    system status. Remediation of operational systems unique to the
    Department are the responsibility of the owning Service or
    Agency. They may use the developing contractor, other
    commercial organization, or may rely on organic resources to
    effect the required changes.
        For commercial systems in use by the DoD, the owners must
    rely on the commercial vendors to effect the change.

        Mr. Mica. The Haiti money particularly bothers me, because
    some of that money was spent for institution building as far as
    their police and judicial system, and now we are told that
    Haiti has become a center for drug trafficking. So you diverted
    money out of an Andean strategy to stop drugs at their source,
    and money was used in Haiti for institution building and they
    were barely certified, I think with reservations, the other day
    by the President, because the programs that we diverted money
    for have basically failed.
        I have the same problem with the money that we were trying
    to get and resources to Colombia. Colombia has now turned into
    the major producer of cocaine in the Western Hemisphere, and
    this administration and the State Department have blocked
    equipment, helicopters, material, resources, from going into
    Colombia.
        They had, I know, some disagreements on human rights and
    our pattern of conduct of the past administration. But I am
    wondering if you can give us an update--it does not have to be
    now, but to the committee--on what you are doing now to see
    that there is a new government in place, and hopefully a new
    attitude by the administration to give resources to Colombia,
    which is now the major producer of cocaine in the entire world.
    The major. We have turned it into the major.
        It is also the major producer of heroin in the entire
    world. Since none of that equipment went down to eradicate the
    crops, they have poppy fields growing from one end of Colombia
    to the other and they are producing heroin in unbelievable
    quantities of high purity.
        So I am anxious, Mr. Chairman, and I would request the
    subcommittee, and will submit a letter and request to see what
    is being done to expedite the finances, resources.
        Mr. Shays. Would the gentleman yield? This is a good
    opportunity to acknowledge the fact that Mr. Mica's
    subcommittee has jurisdiction over the whole drug effort in
    this country, both domestically and overseas; and instead of
    our saying, well, State and DOD report to this committee
    solely, you report to us on every issue except the drug issue.
        So what I am going to do is, even with the first question,
    because I think it really is important to get right to the
    committee of jurisdiction. Mr. Mica and I, by the way, serve on
    each other's subcommittees as well, so I think this is a very
    important question. It is good that he used this opportunity
    now when you are before us. And we will send a memo to your
    committee, in fact, just making sure. And we would like this
    information sent to the committee.
        The title of the committee now is what?
        Mr. Mica. It is Criminal Justice, Drug Policy, and Human
    Resources. Only a shadow of its mere former.
        Mr. Shays. If you would send that information directly to
    that committee. You do not need to send it here. I am not going
    to ask you to do it twice.
        Mr. Mica. And through the committee, Mr. Chairman, I will
    redraft those questions very specifically and address them to
    the agencies, with your permission.
        Mr. Shays. Exactly. So you just have been given a public
    notice.
        Mr. Edwards. We will be happy to respond, both in writing
    and also have our Assistant Secretary in that area meet with
    your subcommittee.
        Mr. Mica. I have two other questions in a couple of areas.
        One, I was recently in discussions with a member of the
    Ukraine Parliament who came to us with allegations that the
    United States foreign assistance, foreign aid to Ukraine, is
    being given and going into the pockets of basically thugs that
    are in charge of the Ukraine activities.
        Is there some kind of an enhanced oversight mechanism for
    grants, assistance, aid projects in the emerging Eastern Bloc
    nations?
        I was appalled by what I heard. In fact he said that--he is
    a member of parliament. He is also a banker, and he can
    document this corruption with our money. He said it would be
    better if we terminated all of the assistance for his country
    because it is actually--it is hindering their development. Do
    we have any kind of an enhanced check or oversight IG
    inspection of these activities?
        Mr. Kennedy. Mr. Mica, we deal with this on four levels.
    There is an Agency for International Development [AID] mission
    in the Ukraine that is on the ground and immediately
    responsible for program development. It has Washington
    oversight.
        Mr. Mica. I was told that it is corrupt from bottom to top,
    and all of our assistance programs there have been subverted.
        Mr. Kennedy. Mr. Chairman, this is not specifically within
    the State Department's jurisdiction because it is an Agency for
    International Development program, but the State Department
    does have a policy coordinator for assistance to the countries
    of the former Soviet Union.
        Mr. Mica. Can your IG go in, or does he not have that
    authority?
        Mr. Kennedy. The AID IG, sir, would be the relevant
    authority.
        Mr. Shays. I am sorry to interrupt. The AID will be under
    State when, October?
        Mr. Kennedy. The Administrator of AID, effective April 1,
    will be under the foreign policy authority and direct control
    of the Secretary of State, but pursuant to the legislation it
    retains its status as an independent entity with its own IG.
        Mr. Shays. So it is just for administrative purposes, but
    the bottom line is that we oversee that subcommittee.
        Mr. Mica. I would like to start with the Ukraine and maybe
    we can work on. But I had an investigator from the
    International Relations Committee and an investigator from my
    subcommittee of the Government Reform Committee, listen to this
    detail of corruption with our funds that was absolutely
    appalling, and I think we have the responsibility to followup
    in some fashion, whoever is in charge, whenever. And maybe we
    can start right there, and we will be glad to give you
    additional details after the hearing.
        Mr. Kennedy. The Secretary is concerned about the best use
    of all overseas funds, especially for sustainable development.
    And I will take this up with the coordinator for the Newly
    Independent States and pass this on, and your offer to share
    this information to the AID people as well, sir.
        Mr. Mica. Possibly in your jurisdiction or oversight, is it
    true, and I don't know if this is accurate, did a Japanese firm
    get the new passport contract to produce the passports?
        Mr. Kennedy. An American firm won the contract. However,
    this American firm does buy some of its materials from Japanese
    sources. And that competition was an open competition and we
    brought in evaluators, I believe it was from the National
    Institute of Standards and Technology, to evaluate the process
    we are using, which is a photo digitalization process to
    literally spray the picture onto the passport book, to
    eliminate the threat caused by criminal and other terrorists
    who are trying to extract the picture from under the laminate.
    So an American contract was awarded to----
        Mr. Mica. You said some of the material?
        Mr. Kennedy. I would have to get back to you.
        Mr. Mica. I need to get back with Mr. Traficant. He has
    some interest in this Buy American provision. It is interesting
    that I was told that Americans will soon be walking around with
    Japanese content passports.
        Mr. Kennedy. The passport booklets, themselves, Mr. Mica,
    are produced by the Government Printing Office.
        Mr. Shays. May I ask the gentleman, my sense is that we
    have reciprocal agreements with our allies, that they get to
    bid on certain things that we do and we bid on certain things
    that they do. In this case it could have been a foreign
    corporation that could have won this bid or not, but didn't?
        Mr. Kennedy. I am not a contracting specialist, but I
    believe, sir, that you are correct.
        Mr. Shays. I'm sorry?
        Mr. Kennedy. General Agreements on Tariffs and Trade do
    permit cross-bidding.
        Mr. Shays. We have that same issue in Defense as well,
    where we bid on things that are used by our allies.
        Mr. Soloway. There is a globalization in industry in
    general, and if we want to access the most contemporary
    technology there is a need to access that full global
    marketplace.
        Mr. Shays. But Mr. Traficant is rightfully concerned that
    we have as much U.S. participation as possible. Do you have
    another question?
        Mr. Mica. I do, but I think I have done enough damage.
        Mr. Shays. You can go ahead.
        Mr. Mica. Are you going to keep the record open?
        Mr. Shays. Sure.
        Mr. Mica. I would prefer to do that.
        Mr. Shays. But as it relates to the drug issue, would you
    report to Mr. Mica's committee. I also serve on that committee.
        AID, we are going to be doing some looking at that; and Mr.
    Mica can join, as he sits on this committee, to pursue that. I
    am happy that he mentioned it, and we need to get a handle on
    that.
        I am going to conclude, but let me just say if there is
    anything that any of you had wished--anything in particular
    that you wished that we had asked, this would be your
    opportunity to put it on the record.
        I thank you. This was a general hearing in nature, but it
    is helpful in helping us sort out where we go. I thank you very
    much. This hearing is now closed.
        [Whereupon, at 12:10 p.m., the subcommittee was adjourned.]

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