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



           MILITARY CONSTRUCTION APPROPRIATIONS FOR 2001--Part 5

                  MILITARY CONSTRUCTION APPROPRIATIONS

                                FOR 2001

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION
                                ________

          SUBCOMMITTEE ON MILITARY CONSTRUCTION APPROPRIATIONS

                     DAVID L. HOBSON, Ohio, Chairman

 JOHN EDWARD PORTER, Illinois       JOHN W. OLVER, Massachusetts
 TODD TIAHRT, Kansas                CHET EDWARDS, Texas
 JAMES T. WALSH, New York           SAM FARR, California
 DAN MILLER, Florida                ALLEN BOYD, Florida
 ROBERT B. ADERHOLT, Alabama        NORMAN D. DICKS, Washington
 KAY GRANGER, Texas                 
 VIRGIL H. GOODE, Jr., Virginia     

 NOTE: Under Committee Rules, Mr. Young, as Chairman of the Full 
Committee, and Mr. Obey, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.

 Elizabeth C. Dawson, Brian L. Potts, and Mary C. Arnold, Subcommittee 
                                 Staff
                                ________

                                 PART 5
                                                                   Page
 Overview.........................................................    1
 Quality of Life..................................................  121
 Army.............................................................  203
 Navy.............................................................  305
 Air Force........................................................  371
 Housing Privatization--Department of Defense.....................  511
 Housing Privatization--Outside Witnesses.........................  627
 Testimony Submitted for the Record...............................  730

                              

                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
 65-951                     WASHINGTON : 2000

                       COMMITTEE ON APPROPRIATIONS

                   C. W. BILL YOUNG, Florida, Chairman

 RALPH REGULA, Ohio                      DAVID R. OBEY, Wisconsin
 JERRY LEWIS, California                 JOHN P. MURTHA, Pennsylvania
 JOHN EDWARD PORTER, Illinois            NORMAN D. DICKS, Washington
 HAROLD ROGERS, Kentucky                 MARTIN OLAV SABO, Minnesota
 JOE SKEEN, New Mexico                   JULIAN C. DIXON, California
 FRANK R. WOLF, Virginia                 STENY H. HOYER, Maryland
 TOM DeLAY, Texas                        ALAN B. MOLLOHAN, West Virginia
 JIM KOLBE, Arizona                      MARCY KAPTUR, Ohio
 RON PACKARD, California                 NANCY PELOSI, California
 SONNY CALLAHAN, Alabama                 PETER J. VISCLOSKY, Indiana
 JAMES T. WALSH, New York                NITA M. LOWEY, New York
 CHARLES H. TAYLOR, North Carolina       JOSE E. SERRANO, New York
 DAVID L. HOBSON, Ohio                   ROSA L. DeLAURO, Connecticut
 ERNEST J. ISTOOK, Jr., Oklahoma         JAMES P. MORAN, Virginia
 HENRY BONILLA, Texas                    JOHN W. OLVER, Massachusetts
 JOE KNOLLENBERG, Michigan               ED PASTOR, Arizona
 DAN MILLER, Florida                     CARRIE P. MEEK, Florida
 JAY DICKEY, Arkansas                    DAVID E. PRICE, North Carolina
 JACK KINGSTON, Georgia                  MICHAEL P. FORBES, New York
 RODNEY P. FRELINGHUYSEN, New Jersey     CHET EDWARDS, Texas
 ROGER F. WICKER, Mississippi            ROBERT E. ``BUD'' CRAMER, Jr., 
 GEORGE R. NETHERCUTT, Jr.,              Alabama
 Washington                              MAURICE D. HINCHEY, New York
 RANDY ``DUKE'' CUNNINGHAM,              LUCILLE ROYBAL-ALLARD, California
California                               SAM FARR, California
 TODD TIAHRT, Kansas                     JESSE L. JACKSON, Jr., Illinois
 ZACH WAMP, Tennessee                    CAROLYN C. KILPATRICK, Michigan
 TOM LATHAM, Iowa                        ALLEN BOYD, Florida
 ANNE M. NORTHUP, Kentucky               
 ROBERT B. ADERHOLT, Alabama             
 JO ANN EMERSON, Missouri                
 JOHN E. SUNUNU, New Hampshire           
 KAY GRANGER, Texas                      
 JOHN E. PETERSON, Pennsylvania          
 VIRGIL H. GOODE, Jr., Virginia     

                 James W. Dyer, Clerk and Staff Director

                                  (ii)

 
             MILITARY CONSTRUCTION APPROPRIATIONS FOR 2001

                              ----------                              

                                        Tuesday, February 15, 2000.

                         DEPARTMENT OF DEFENSE

                                WITNESS

WILLIAM J. LYNN III, UNDER SECRETARY OF DEFENSE (COMPTROLLER)

                       Statement of the Chairman

    Mr. Hobson. We are 4 minutes late. We are going to try to 
start these hearings on time. I appreciate all the members 
coming this morning. We are going to try to follow the rule 
that whoever is here will get to ask the questions; who arrives 
late is going to be later, no matter what their seniority may 
be.
    We are going to try to be flexible. We will go around and 
let everybody ask an initial question or so, and then we will 
come back. Mr. Olver can ask whatever he wants and take the 
amount of time he needs. But everybody else, we will try to do 
the 5-minute rule if we can.
    If there are any questions for the record, we need to have 
those, and we need two copies.
    I want to thank Mr. Lynn for coming this morning. This is 
our second shot at him. We had him earlier in the week--or I 
guess it was last week.
    Just let me say that I have some concerns with the budget 
request. The overall defense budget is up $15 billion. Funding 
on this bill is down $297 million, excluding BRAC, MilCon, and 
family housing, funding decreases $950 million from last year.
    I am particularly pleased with Secretary Cohen and his 
approach this year on housing and making it a top priority. I 
have some overall concerns about the issue, as we have 
discussed before, especially in the area of privatization, and 
we will probably have some more detailed questions on that as 
we go through this.
    One thing I would like to mention is--and I have got a 
chart here which I have given you. This is a chart that Rep. 
Hayes got to me from Fort Bragg in North Carolina. One of the 
things that we have heard is that while we have raised the 
Basic Allowance for Housing (BAH) in a number of places, there 
is an inequity in many people's minds happening with this. I am 
not sure that everybody shares that it is an inequity in the 
same way, but in talking with troops, in talking with 
commanders, the way this is being implemented appears to them 
to be negative. It is good for certain lower pay grades. There 
are some places that it is not. But at some point, I would 
like, after Mr. Olver is finished with his opening statement, I 
would like you to address that because I think Norm has the 
same problem. Norm is not here, but Norm Dicks has the same 
problem in Washington, and I do not know whether Fort Hood has 
been hit or not in Mr. Edwards' district, but certainly Fort 
Bragg in Mr. Hayes' district has been hit also.
    So, with that, we will look forward to your testimony, and, 
Mr. Olver, I will turn it over to you for any opening comments 
that you might have.
    Mr. Olver. Thank you. Thank you very much, Mr. Chairman.
    Thank you, Mr. Secretary, for being here to present the 
President's budget request for fiscal year 2001. I have 
reviewed your testimony and the budget, and I think it gets us 
off to a good start.
    We all have some issues that we want to discuss. The 
chairman has already indicated one such issue, which I will 
comment on in just a moment.
    I, too, am concerned about the progress on housing 
privatization, and the corollary to that is any possibility 
that we end up decreasing the military housing proportion of 
this budget while personnel accounts are increased to 
accommodate increased housing allowances in the other budget. 
That is of great concern, and I know the chairman is much 
concerned about those relationships as well. So we will get to 
them.
    I am also concerned about the continued need for base 
closings, the proposal for further BRAC Commissions and how 
that is to be defended and whether this is a serious proposal 
or just something that is out there for show.
    I am especially concerned about the request for 
construction funds for the missile defense system, while there 
is still no formal decision to implement the program.
    So I am looking forward to your testimony and discussing 
that with you. I do have another hearing shortly, so, in 
effect, I think that from what the chairman has said, he is 
going to be dwelling heavily on some of the very issues that I 
am concerned about, and I will defer to his work on that.
    Mr. Hobson. First of all, we have all the members here, and 
I want to recognize Robin Hayes. I am not going to let him 
speak. I let Porter speak when he came one time from the other 
side, but Robin is here and he is very interested in what is 
going on at Fort Bragg, and he brought me the stuff about the 
Fort Bragg problem that we have.
    Why don't we let you, Mr. Lynn, if you would, just briefly 
highlight your testimony. Everybody has a copy, I think, of the 
testimony, and so we can get down to an exchange here which I 
think would be helpful to both of us.

                 STATEMENT OF HON. WILLIAM J. LYNN, III

    Mr. Lynn. Okay. Thank you very much, Mr. Chairman. I 
appreciate the opportunity to come again to this subcommittee 
and present the President's budget. I would like to follow your 
suggestion and just incorporate my full statement in the 
record, and what I would like to do is just summarize a few 
comments and maybe address a couple of the things that you, Mr. 
Olver, raised in your opening comments.
    Let me start with the context. This is the second year of a 
sustained buildup that the President has proposed in the 
defense budget. It is the first increase since the end of the 
Cold War. Over 6 years, the President proposed an increase of 
$112 billion. That increase was, in fact, front-loaded. Often 
with defense increases you see them out in 2004 and 2005, the 
fifth or sixth year of the program, not really considered real 
money by the people doing the Nation's business. In this case, 
actually, the biggest increases are in the first and the second 
year. You noted the $15 billion increase this year alone.
    The President has gone further than he did last year and 
has added some to the $112 billion in order to try and protect 
the program that was encompassed in that. We have added funding 
for new contingencies, specifically in Kosovo, and we have 
added funding for the dramatically increased cost in fuel.
    The purpose of those, as I say, was to protect the 
underlying program. I think we have succeeded in doing that, 
but as you noted, the military construction request, while it 
stays on the path that we had set out last year in terms of the 
$112 billion increase--and that was an increase, a relatively 
sizable one, from prior budgets for military construction and 
family housing--we have not matched your increase of last year. 
And so it depends on which column you want to compare. If you 
compared to where we said we would be this year, if you take 
account of inflation and foreign currency, we are pretty close 
to what we said we would be at. If you compare it to what the 
committee enacted last year, as you said, we are down $200 or 
$300 million from that point and a more sizable amount if you 
just narrow it to look at military construction and family 
housing.
    As I said, we would like to, frankly, do more in the 
facilities area. The President put forward a $112 billion 
increase. What we would like to have seen from the perspective 
of the Chiefs was $148 billion. The $112 billion was the 
minimum we thought was needed to put the defense budget on the 
right track, but the full proposal, as it was made a year and a 
half ago, was $148 billion.
    A good part of the difference between $112 billion and $148 
billion is actually in the facilities area, both in terms of 
construction itself as well as real property maintenance and 
the associated costs of operating the bases. So we would aspire 
to higher budgets, but in this instance, we have not been able 
to devote more resources than we put forward in this budget 
proposal.
    Let me tick down a few of the issues that you raised and 
address a couple of things. One, you raised the President's 
housing proposal which centers on an increase in the basic 
allowance for housing. The proposal changes the system that we 
have used for housing allowances, which have always assumed, by 
legislation, that the service member and his or her family 
would have absorbed 15 percent of the cost of off-base housing. 
That is, the allowances were capped at 85 percent of housing 
costs.
    We are proposing this year to repeal that limitation and 
over the course of 5 years bring the housing allowance up to 
the full cost of housing in the service member's region. That, 
I think, will have several important benefits.
    The first and most obvious, of course, is that it puts more 
money in the pocketbooks of service families. That is 
important. Also, it is tax-free money as well, so there is a 
multiplier effect in that regard. But the importance of this 
initiative actually extends beyond just the money in the 
service member's pocket. By eliminating the absorption rate, as 
it is called, we hope to change the demand for on-base housing 
by equalizing the cost between on-base and off-base. We will 
reduce the demand for on-base housing, but we do not plan to 
reduce the budgets. The supply of on-base housing will remain 
the same. The demand will go down. So with this initiative, the 
on-base housing should become more adequate as well.
    A third important ramification of eliminating out-of-pocket 
cost and raising the housing allowance is with the initiative 
Mr. Olver mentioned, which is the privatization initiative. 
There we are trying to leverage off private sector initiatives 
to try and bring them in to build and operate our housing. 
Those kinds of deals that we are striking with the private 
sector are keyed very much to housing allowances. If the 
housing allowances go up, the rental flow that would go into 
these private sector initiatives would go up as well. And we 
think we will have a better opportunity to make these kinds of 
deals.
    These privatization initiatives are extremely important to 
deal with the biggest problem we have in housing. That is, two-
thirds of our housing stock, 200,000 of the 300,000 units, are 
labeled right now as inadequate. If we are going to turn that 
over--and our goal is to eliminate that inadequate housing 
stock by 2010--we are going to have to go beyond traditional 
funding means for family housing. Traditional funding would get 
you six to seven to eight thousand new housing units a year.
    Now, you can do the math. If you are turning it over at six 
or seven or eight thousand a year, and you are trying to 
eliminate a backlog of 200,000 inadequate units, you will never 
catch up.
    With privatization, we think we can get upwards of 20,000 a 
year by leveraging the housing allowances in private sector 
developments in order to bring on 20,000 housing units in a 
single year. That is the pace we need if we are going to 
eliminate inadequate housing in 10 years, 20,000 a year; we 
think we may even be able to go up above that.
    Now, I understand the committee has scrutinized this 
initiative, which is appropriate. These deals are set for a 
long period of time, 30, 40, 50 years.
    Mr. Hobson. Fort Carson is a 50-year lease.
    Mr. Lynn. That is what I thought, 30, 40, 50 years. Some 
are shorter. Some are as long as 50 years. So you are 
absolutely right. We have to have the financial underpinnings 
exactly right if we are going to enter into that kind of deal. 
And we appreciate the kind of scrutiny that you have brought. 
Frankly, I think it has improved these deals. But I think the 
underlying truth from my perspective in terms of overseeing the 
finances of the Department is that if we do not have this tool, 
we are not going to be able to reach our goal. So we need to 
use the tool right, but we need to use it.
    Let me stay with the basic allowance for housing, and I am 
sure you will have some questions, but let me address the other 
issue. There is a second issue that you raised, Mr. Chairman, 
with the basic allowance for housing, which is the question of 
the adjustments that have been made this year in how that 
housing allowance is distributed regionally. And what you are 
seeing this year is the completion of a move that started 
several years ago to move us away from an across-the-board 
housing allowance, something called the BAQ, that was not tied 
to housing costs in the area; it was supplemented by a variable 
housing allowance that did have some relationship to high-cost 
areas. We found that system to be essentially unfair. Some 
people got too much, some people got too little, and there was 
the sense that their housing costs were either overcovered or 
not adequately covered.
    We have moved to the BAH, which is a single housing 
allowance. We have combined this BAQ and BAH into a single 
housing allowance which is intended to be tied to the cost of 
housing in that region. We are making that shift right now. A 
number of regions in the country have seen their housing 
allowances go up as a consequence of that, but there are a few 
areas where allowances have decreased, one of which is Fort 
Bragg, and Washington State is another.
    Mr. Hobson. Wright-Patterson, too.
    Mr. Lynn. Wright-Patterson. There are several areas where 
the adjustment from this standard housing allowance to one tied 
to housing cost has caused some decreases, and that has caused 
consternation among service member families.
    Now, one thing in the conversation that we had beforehand 
that you suggested people did not know--and I think we need to 
probably do a much better job in making sure people 
understand--is that these housing allowance adjustments are 
prospective only; that is, if a service member is at Fort 
Bragg, his or her housing allowance does not change. Someone 
coming into Fort Bragg after January 1 would be subject to the 
new housing allowance. You run into the potential inequity 
problem that somebody next door is going to have a higher 
housing allowance than their neighbor, or a lower one, but in 
the middle of a tour at Fort Bragg or Washington State or 
Wright-Patterson, you will not reduce the housing allowance for 
a family that is already there.
    As I say, we understand the consternation. I think the 
principle of the system is right, that the housing allowances 
should be tied to housing costs. We need to make sure that we 
are doing that right in the sense that we need to make sure we 
have an accurate judgment. We do this by survey. We have hired 
a contractor to do the surveys, but we need to ensure that the 
surveys have accurately judged the housing costs in the area. 
And we certainly need to make sure that the service members and 
their families understand how we are doing this and how this 
grandfathering provision works for people that are already on 
base now.
    I would be happy to answer more questions on that as we go 
into it.
    Let me mention one other initiative that Mr. Olver 
mentioned. We are serious, Mr. Olver, about the base closure 
proposal. We have not been successful in the past. We 
understand it is a difficult job of persuading this body and 
the Senate to give us the authority for two additional BRACs. 
But we think it is absolutely essential.
    Going back to the first point I made about the military 
construction budget, it is going to be very, very difficult to 
ever get the military construction budget right as long as we 
are maintaining a base structure that is demonstrably larger 
than the force structure. We have cut the force structure by 
between 35 and 40 percent. Depending on how you measure it, we 
have cut the base structure by 21 to 26 percent. No matter how 
you cut it, whether you look at ramp space, pier space, 
training space, we have more base structure than we need for 
the current force structure. Carrying that extra infrastructure 
in the end means that we have too few dollars in the military 
construction arena chasing too many bases. And until we fix 
that mismatch, it is going to be very difficult to ever get the 
funding level for military construction right.
    Let me close with that and prepare to answer your 
questions.
    [The prepared statement of Hon. William J. Lynn, III 
follows:]



    Mr. Hobson. Okay. I just want to make a comment. I do not 
want you to respond to this, but I hope somebody is looking at 
the contractor to make sure. One of the complaints I have had 
is there are some people concerned that the contractor was 
correct in what they did. I do not want to be redundant and 
keep going back and then we have to look at that one and that 
one. But there ought to be some way to make sure that we are 
okay in the markets.
    John, I know you have got another hearing, so why don't you 
ask your questions.

                   BASE STRUCTURE AND FORCE STRUCTURE

    Mr. Olver. Well, thank you, Mr. Chairman.
    I just want to comment on your comments. If what you say 
about the mismatch between base structure and force structure 
is correct, the percentage of reduction as we have modernized 
and gone more technological and made smarter forces rather than 
large numbers of forces, which I happen to agree would be the 
way we ought to be doing it as we head into this 21st century, 
if that is true then there is a point at which we inevitably 
reach shell forces in structures where the structures have a 
large base cost, fixed cost related to them. We do not have 
enough forces spread all over that for that to be efficient and 
good training kinds of locations. But it all depends upon, it 
seems to me, convincing people that, in fact, there is such a 
mismatch between the base structure and the force structure, 
the physical structure and the force structure that is there.

                         HOUSING PRIVATIZATION

    I want to go back to the housing privatization. My 
understanding was that the original idea of the housing 
privatization problem, based upon your statement that two-
thirds of our housing is inadequate, was that we were not 
putting enough money in this budget to do the maintenance and 
the reconstructions and so on to update or new construction of 
housing, and so at least a part--a part--of the privatization 
process was intended to take large pieces of that out and 
thereby leave money available, the money that would be 
available so that we could apply that amount to some of the 
remaining pieces which were not being privatized and thereby be 
able to upgrade more of the remainder, both of these working in 
balance.
    Now, my understanding is that some of the services are 
reducing the housing overhead and maintenance accounts as 
privatized housing comes on and making--although there are only 
a few of those projects actually in place, making adjustments 
in pay accounts. Is there a DOD position on that, or is it up 
to each of the services?
    Mr. Lynn. Both, actually. Let me start back a step.
    I think I understand what you are referring to. You are 
saying that the housing operations money was shifted out of 
housing and into allowances.
    Mr. Olver. Yes.
    Mr. Lynn. I have actually gone back and looked at that. The 
issue here is, I think, largely with the Army. I think the Navy 
and the Air Force have essentially protected their housing 
operations budget. The Army, as you suggest, did cut their 
housing operations budget because they have 10,000 fewer units.
    Mr. Olver. But the Army has not yet finished a single 
privatization project, has it?
    Mr. Lynn. They have not finished, but we are talking about 
fiscal year 2001, and they will have. They expect to have 
reduced the housing stock by 10,000 units in FY 2000.
    Mr. Olver. During this year?
    Mr. Lynn. During this year. A portion of that is 
privatization; and some of that is demolition. They are 
demolishing some older, unusable units. So they have reduced 
their housing operations budget; however, they increased their 
housing construction budget by an even larger amount.
    Mr. Hobson. Wait a minute. Wait a minute. Last year they 
did not ask for any.
    Mr. Lynn. Right. And this year they have asked for $160 
million.
    Mr. Hobson. And what he is pointing out is that last year 
they did not ask for anything, so somehow they were going to--I 
do not know what they were going to do. Then this year they 
have now started to get into it, but they are not going to 
have, the way they are proceeding, that they are going to get 
to the numbers because we do not even have a process yet that 
anybody is comfortable with. Fort Carson has a different--
excuse me for interrupting you, John.
    Mr. Olver. That is fine.
    Mr. Hobson. Fort Carson had a different process than the 
RCI process. We do not know whether the RCI process works yet 
or the Fort Carson process is the way to go. The Army is doing 
it one way. The Air Force is doing it another way. The Navy is 
doing it another way. We have got all these consultants trying 
to protect them, but nobody has reached a pattern in their 
service yet, and I think that is part of all of our collective 
problem. And yet they are shifting this money.
    Mr. Lynn. Well, I think we are saying the same thing, Mr. 
Chairman. The Army has shifted some money from housing 
operations to housing construction. They have also added beyond 
that to housing construction. As you said, the budget, if it 
had been put forward as it was last year, would have been 
inadequate.
    But, essentially, I think the point Mr. Olver is making is 
a little bit more complex.
    Mr. Hobson. But didn't it go to personnel accounts? Isn't 
that money shifted to personnel accounts?
    Mr. Lynn. There is more money--you do not know what went 
from where to where.
    Mr. Hobson. We think it is----
    Mr. Lynn. What I am saying is the overall Army housing 
budget, construction and operations, is up $77 million from 
where the Army said it would be last year. Their operations 
budget is down, but their construction budget is up, as you 
said, $160 million.
    Mr. Olver. That is the housing allowance.
    Mr. Lynn. The housing allowance budget is also up.
    Mr. Olver. There are some personnel costs that are going 
up, or is that--I am not sure. Maybe that is part of the 
allowance, housing allowance.
    Mr. Lynn. The housing allowance budget had to go up to 
cover the costs of more people being on housing allowance 
because you are shifting these 10,000 people. What I am saying 
is that, overall, the Army family housing budget actually went 
up as well. It went down in operations and up in construction, 
and the net was a net increase of over $70 million.
    Mr. Olver. Obviously, we are going to be very concerned 
about the balance here.
    Mr. Lynn. So I think what I am saying----
    Mr. Olver. Whether the numbers fit.
    Mr. Lynn. I understand that. I guess what I am saying, is 
that there was a net increase by the Army in housing. The other 
services were essentially a wash.
    The general point you made that I will come back to is what 
is the service role and the Department-wide role. The 
Department has given guidance to the services, in general 
terms, that the savings from housing privatization should 
remain in the housing accounts.
    Mr. Olver. You have given general directives, but, there 
may be differences between the services----
    Mr. Lynn. There may be differences----
    Mr. Olver [continuing]. And that is expected.
    Mr. Lynn. Exactly, and let me complicate it further. We 
give the services a lot of general guidance, to be fair, and we 
expect them then to balance within a top line. We tell them 
here is how much money you have and here is all the general 
guidance.
    They can make a fair point that if they do absolutely 100 
percent of all the guidance that they are told, they will 
exceed their budget. So they have to balance the general 
guidance with the fiscal guidance, and they have to balance. In 
this case, as I said, I think the Army did that, and they 
shifted some money from operations. They also added money to 
construction to remedy the situation that you highlighted--that 
last year they had no money in family housing. This year they 
put in $160 million. About half of that increase was financed 
by the shift from housing operations; the other half they had 
to finance from other areas.
    Mr. Olver. Let me lay out one other question here. If we 
are increasing the basic housing allowance to 100 percent of 
cost and that was not part of the analyses for the various 
privatizations up to this point, it would seem to me that might 
have some effect upon the economics of the privatizations. Has 
anybody gone back to look at the privatization projects and 
analyze what effects the BAH would have on them?
    In particular, if we are going to go up with the basic 
housing allowance, private housing may come up and it may 
affect both the private side's portion on the military side and 
also the need for base housing.
    It seems to me there is a connection. How many developers 
are just going to go out and build privately because now it is 
covering the average cost within the area? And how is that 
going to affect both the privatized programs where we have got 
them going to move those couple of hundred thousand units over 
and the ones that are actually our own and continue to be our 
own DOD-operated housing?
    Mr. Lynn. I think I agree with you on both points. What I 
tried to say in my opening statement is we think that this 
initiative will indeed improve the economics, the underlying 
economics for the privatization deals. I think you are 
absolutely right. We need to review the deals we have already 
developed and make sure that those make sense.
    I know in some instances, Alaska in particular, we were 
having trouble----
    Mr. Hobson. Elmendorf.
    Mr. Lynn. Elmendorf. We were having trouble. Before we 
eliminated this absorption rate, the developer said it did not 
look like the economics supported them getting involved. We are 
hopeful that with the increase that this will become more 
attractive to them.
    So I think you are right. We need to review what we have 
done, and we certainly think it is going to improve, 
prospectively, developers wanting to get involved in this.
    I think the other point you made, the point I was trying to 
make, is it will make off-base housing more attractive to more 
service members, which will reduce the demand for on-base 
housing. So instead of having these long waiting lists, the 
waiting list will be shortened. If we are covering 100 percent 
of the costs off base and 100 percent on base, you are going to 
clear the market effectively towards the off-base housing.
    Mr. Olver. But there is a potential contradiction there. 
While you are suggesting that the full cost improves the 
economics of the privatization, the fact that the off-base, 
truly off-base kind of stuff, totally private stuff, is also--
the prospects there, that has a depressing effect upon the 
privatization. I do not know whether we have really thought on 
the potential success of the privatization or the need for the 
privatization, and it seems to me those are countering forces.
    Mr. Lynn. Well, I guess I would not describe them as 
countering forces. I would call them reinforcing forces. We 
have a huge problem of 200,000 units. We are trying to attack 
it every way we can. If we can reduce the demand for on-base 
housing, that is one way. If we can increase the attractiveness 
of private developers coming in and developing the on-base 
housing, that is a second way. And so I think they are 
reinforcing in that they both attack this stock of inadequate 
housing.
    Mr. Olver. Well, Mr. Chairman, I appreciate your allowing 
me to ask those questions, and I am sure we have now laid open 
some other things that I am sure you are going to get into, so 
I thank you very much.
    Mr. Hobson. Okay. This is the way we are going to go in the 
order people arrived: Mr. Farr, Mr. Miller, Mr. Tiahrt, Mr. 
Walsh, Mr. Boyd. If we can keep to the 5-minute rule, we will 
do rounds. We can get around and everybody can ask something.
    Sam.
    Mr. Farr. Thank you very much, Mr. Chairman. I appreciate 
this first hearing of the Mil Con Subcommittee and, Mr. Lynn, 
thank you for coming over.
    I like to remind people in your position that you are 
facing Members of the House of Representatives, and what we do 
is we represent the way the Federal Government, particularly 
the DOD, hits the ground all over the United States. And I do 
not think we fully understand how the military hits the ground 
until you have a military base closing, because that is when 
the people of the community get to come in and really see what 
was built, how it was built, how it is going to be reused. And 
I think that the best minds probably in the country are here in 
Washington, but I think that the work they have done in this 
country is absolutely appalling. It is so poor.
    Military housing cannot be sold in the private market 
because it does not meet any code standards and nobody wants to 
put in the money to retrofit them. And I think the fact that we 
are building housing around this country that does not meet 
local code standards is abominable. And I think that if we 
factor in the costs of what a base has to do to clean up the 
mess that the military makes, and the inability for even modern 
housing to meet code standards, and to retrofit them and go 
back and do the asbestos and lead paint cleanup, you know, on 
and on and on, you just find--why doesn't the military do more 
like the private sector, like the community does it, build it 
to community standards?
    One of the things that I am very interested in is 
privatization, but I am interested that it not be done from 
Washington down. I think that gets too damn costly here. If you 
have one-size-fits-all in a privatization, you are going to 
have the same problem that we had when one size fit all doing 
it under the military.
    So I think that this is an interesting time because if we 
are at the same time asking for another BRAC go-round so we 
know that we are going to be downsizing or not having buildings 
that are necessary for the military to occupy, as we build new 
buildings, we ought to ask the first question: When we leave 
this building, can we sell it? Would anybody want it? What are 
the costs of getting out of it, not just the costs of getting 
in?
    I think you will find that if you go back and look at the 
cost of getting out of buildings and apply this to this 
privatization formula, you are going to find a lot more 
interest in the privatization. I frankly do not understand why 
all houses cannot be built privately except in some remote area 
where nobody wants to live. But where we have the military 
land, it is nonsense for us to be building the housing on the 
taxpayer dollar when you can have that done at the private 
sector dollar. Where you can retrofit and have lease-back 
conditions, we ought to be doing that.
    So my question is--we have a new law since the committee 
last met, and that law is that when we do have a base closure, 
you can give that land to the local community at a no-cost 
economic development conveyance, and that the revenues derived 
from that conveyance for any increased value that the local 
government gets out of it has to stay in that community for job 
re-employment and rehab and things like that. And I think that 
is a great deal. But if indeed these no-cost EDCs are really 
going to cost us a hell of a lot to have to bring all these 
properties up to code standards--I mean, we can understand why 
we have not built military properties to meet the ADA, the 
Americans with Disabilities Act, but there is no reason why we 
shouldn't build properties in earthquake zones to meet 
earthquake standards or in flood zones to met flood zone 
standards. And that is what I have seen in California.
    I am a big fan of privatization if it is done right and it 
is done from the bottom up rather than the top down. But I 
think the market out there will be much more interesting than 
Washington has ever imagined. But I would like you to be able 
to give this committee some examples, because we are all 
representing different parts of the country. And I would be 
very curious of what the Department decides--what you think is 
the best cleanup that you have done, the best base cleanup, and 
what the cost of that does, and, frankly, give us what you 
think is the worst example of base cleanup and what the costs 
were incurred.
    I would also be interested in this issue of privatization 
and retrofitting of housing, where you have the best retrofit 
examples and where you have the worst. And while we are on the 
issue of privatization, I would be interested in what you think 
is the best privatization practices that have gone on in the 
military and perhaps, again, what this committee hears is the 
worst.
    What we are all going to come to you with is vignettes of 
our own knowledge. And I will tell you, what I have seen in the 
base closure at Fort Ord, California, which was the largest 
base the Army has ever closed--the chairman has been out to 
that base, saw 27,000 people that got up and left. It was a 
great opportunity except for the fact that it is a really dirty 
base, the fact that the buildings are all non-code buildings, 
the fact that you can't even get into the buildings because of 
the cleanup process and the lawsuits that have been filed.
    We had housing that looked like the middle picture there 
when the Army pulled out. Six years later, it looked like the 
picture on the left. The windows are all broken, the streets 
are all full of ruts, roots coming up through them, potholes, 
all the vegetation has died.
    Mr. Hobson. How many houses are sitting there vacant?
    Mr. Farr. Eleven hundred.
    Mr. Hobson. Eleven hundred houses sitting vacant.
    Mr. Farr. And you know what happens? And this is where the 
chairman really understands the problem. As politicians, we get 
called upon by people who drive by that housing and they call 
you with stories, mothers telling you about their daughters who 
have been abandoned by their husbands with their children, they 
are sleeping in their car. Why can't they move the kids into 
this housing? Look at it. It is nice. Really, it looks as nice 
as that middle picture. And they see that all boarded up, the 
windows broken, and they wonder why can't we get that.
    We have a situation where, when we close these bases, we 
have figured out how many officers could we downsize and kept 
some of the housing for the military. But guess what? They 
didn't figure out that 70 percent of the people were not even 
married. And when you deploy a soldier, the family gets to stay 
behind for a number of months. So the housing that we expected 
the new soldier to come into is being occupied by the family of 
the soldier that just left. And we have got to go back and get 
some more of these houses.
    There are just a lot of things we have to do, and I would 
be interested in getting your answers to the questions that I 
asked.
    Thank you, Mr. Chairman.
    Mr. Hobson. I do not know if you can do that in the time 
left. [Laughter.]
    Mr. Lynn. Well, let me make a couple of points and then get 
some things to you.
    First, on the cleanup issue that you have mentioned, Mr. 
Farr, I think that was one of the core issues that was 
decided--when the original BRACs were set up. In the end I 
think the decision by Congress was the right one, which is that 
the cleanup costs can be horrendous on an individual base, and 
the clean up is going to have to be done whether we keep the 
base or whether we return it to private use. The only thing 
that changes potentially is the schedule of that cleanup. We 
are going to have to clean up--where we polluted the 
groundwater, we have to clean it up. Where we have asbestos, we 
have to take it out.
    Mr. Farr. But there is an ounce of prevention, what we are 
talking about. As we go into these new buildings, we ought to 
make sure that nothing we are doing on these bases is going to 
incur these incredible cleanup costs.
    Mr. Lynn. There I agree with you. I think in that instance 
privatization will help us. We will build to code as a matter 
of course, a matter of law. And so I think we need to do that.
    While we can be criticized on a number of grounds for 
privatization, I do not think one of them is that we have tried 
one size fits all.
    Mr. Hobson. I will agree to that. I will stipulate to that.
    Mr. Lynn. The services have all done this quite 
differently.
    Mr. Hobson. Even within the services, they have done it----
    Mr. Lynn. Even within the services they have a whole 
variety of tools. One of the ones you mentioned, which is a 
lease-back arrangement, we do do. I will have Randall Yim 
either brief you or provide some material you can review on how 
we do privatization. The chairman has spent a lot of time with 
us, and we have let a thousand flowers bloom. That may indeed 
be one of the problems. We may indeed have to systematize it a 
bit more than we do.
    On your point that we should not do this centrally, I think 
we have discovered that as well. We originally had this 
centralized in OSD. We have now pushed it out to the services 
so as to implement it on a region-by-region basis.
    Mr. Farr. When you push it out to the services, does it 
trickle down to where it is done regionally? Or is it done just 
by Washington?
    Mr. Lynn. It is done regionally, but it varies by service. 
But the key player here is the base commander who helps.
    Mr. Farr. Would you give us those examples?
    Mr. Lynn. Sure. I am going to ask Randall Yim to do that. 
We will try and give you some kind of assessment as to where we 
are.

                      BASE REALIGNMENT AND CLOSURE

    Then, finally, on BRAC, I know we have a report in the 
Department that goes through a number of the closures and 
evaluates them in terms of successes and failures. And I will 
provide that to you as well.
    Mr. Farr. May I have a follow-up question of John's on the 
BRAC? The question asked here is: What authority do you need--
why do you need congressional authority to begin a BRAC 
process? If indeed a BRAC is essential for the military now, 
why not just begin it internally?
    Mr. Lynn. The law would prevent this at this point. The law 
passed in the early 1970s has an elaborate set of notification 
requirements.
    Mr. Farr. It is the procedure once you have made your list, 
the internal decision of what you think ought to be eliminated 
is not----
    Mr. Lynn. Is not barred, that is correct.
    Mr. Farr. When it becomes public, there is a process for 
reviewing it.
    Mr. Lynn. That is true, and that would be a possibility. We 
have not developed a list, and we have not developed one 
intentionally. The thing that held the base closure rounds 
together before was the independence of the Commission. Now, it 
got questioned at the end, but I think throughout the four 
rounds, it was the independence of the judgment of the 
Commission, and the oversight to the process that went into 
submitting the list to the Commission, that was important. And 
we have tried to protect that by proposing a base closure round 
without prejudging it with the list.
    Now, it could get to where you have to ultimately develop a 
list. Indeed, I think one of the impetuses of the original BRAC 
rounds was Secretary Cheney did develop just such a list, and 
people were so horrified by the list that they reacted to set 
up the commissions.
    We haven't gone to that step, and as I say, what we are 
trying to do is ensure that we haven't prejudged anything and 
that GAO and the other oversight organizations will be able to 
see the preparation of the list and then move it to the 
Commission and make the decision. So it is all done as 
objectively as possible.
    Mr. Hobson. Mr. Miller.
    Mr. Miller. So there is no internal list, and so when you 
come up with the military construction budget, you don't 
prioritize those that may be a low-priority base as such.
    Mr. Lynn. No--well, I mean, you obviously make priorities 
in the budget, but it is not done on the basis of a shadow 
closure list.
    Mr. Miller. Okay.
    Mr. Hobson. There is an office--excuse me. There are some 
guys in an office of BRAC somewhere.
    Mr. Lynn. There is nobody developing closure lists. I mean, 
obviously, we are implementing the four prior BRACs, and so 
there is a BRAC office, absolutely. But they are not--the ones 
who develop the list. You would actually ask the individual 
service departments to pull together a team, and they would 
evaluate all of the bases in a category and decide what was the 
needed capacity and what exceeded it based on a variety of 
criteria that were laid out in the original BRAC law. They 
would look at military utility, economic return and so on. You 
would do a systematic evaluation of the bases.
    We have not done that because of the way the process has 
worked in the past. People want to have oversight and an 
ability to basically go through and reconstruct how you made 
the list and see how it was done each step.
    This is a very controversial and contentious process, as 
the questioning makes clear, and we----
    Mr. Hobson. Having been through it twice, I----
    Mr. Lynn. I am sorry?
    Mr. Hobson. Having been through it twice with one of my 
bases, I can tell you.
    Mr. Miller. So, yes, but when you prioritize, to some 
extent you have to be into the process, and that if that is a 
low-priority base to you, you are not going to be spending 
money on a new medical facility, necessarily, or----
    Mr. Lynn. You would probably want to check with the 
individual military departments as to how they do this. But I 
think the priorities right now are more driven by what is 
needed on the base and how urgent the need is. If it is a 
front-line unit, that is going to get a higher priority.

                     DAVIS-BACON AND PRIVATIZATION

    Mr. Miller. Next question. When you privatize, how does 
Davis-Bacon fit into privatization? Does it apply?
    Mr. Lynn. Prevailing wage--I don't know. I would have to 
get that to you for the record.
    Mr. Miller. I don't know if it is privatized----
    Mr. Lynn. Your question is does Davis-Bacon on prevailing 
wage apply to a contractor who is doing a privatization project 
on a military base, and the chairman says it does.
    Mr. Hobson. I think it does.
    Mr. Lynn. I don't know.
    Mr. Miller. Have there ever been any studies of the costs 
Davis-Bacon adds--I mean, one of the problems with the 
Government when it builds facilities, it costs more than the 
private sector. That is one of the reasons for privatization. 
And Davis-Bacon is one of the contributing factors. I don't 
know if that has ever been studied.
    Mr. Lynn. I am not aware of any studies.

                           BOSNIA AND KOSOVO

    Mr. Miller. Over in Bosnia and Kosovo, are we--what kind of 
infrastructure monies are we spending there that is--when I 
visited last summer, they were talking about having plywood 
houses rather than tents this year. Is that under the military 
construction budget, plywood?
    Mr. Lynn. No.
    Mr. Miller. Okay. What kind of military construction 
investments are going into that area that you can comment on 
here?
    Mr. Lynn. Yes, the intent in both Bosnia and Kosovo is to 
walk a line between adequate quality of life for the troops 
that are spending at this point an indefinite duration there--I 
mean, 6-month tours but we don't know for how long--and 
permanent military construction. We try to avoid permanent 
military construction, but provide adequate quality of life.
    When we first walked that line in Bosnia, we didn't walk it 
very well. We put people in tents in very severe winter 
weather, and they did not have much in the way of quality of 
life. There was no gym. There were no weights, no kind of place 
to go at night.
    Mr. Hobson. Well, originally, it was supposed to be one 
year.
    Mr. Lynn. Exactly right. It was supposed to be one year.
    Mr. Hobson. I just thought I would remind you of that.
    Mr. Lynn. That is right. That was the initial rationale.
    Mr. Walsh. Christmas, wasn't it?
    Mr. Lynn. Christmas. And that was several years ago, and we 
are still there. We have tried to basically learn the lesson of 
that in Kosovo because we don't know how long the Kosovo 
operation will last. So we have gone straight to what you said, 
which is plywood structures. They are relatively easy to tear 
down. They are not permanent. But in terms of the quality of 
life, it is far better than the kind of tent cities that we 
initially put into Bosnia.
    We are also trying to put in temporary gyms to be able to 
play basketball, lift weights, and to have basic amenities. 
Again, we are trying to walk a line between permanent 
structures and adequate quality of life. And I think we have 
done that. We have done it better on the first shot out of 
Kosovo, having learned the lessons from Bosnia, including the 
lesson of not setting an artificial deadline.
    Mr. Hobson. But the money came out of O&M money.
    Mr. Lynn. Yes.
    Mr. Hobson. And then you do the supplemental, you pay it 
back. Is that right?
    Mr. Lynn. There is a transfer account we have called the 
Overseas Contingency Operation Transfer Fund, OCOTF. We like 
acronyms. The money all goes into that account, and then it is 
transferred to the O&M account.
    Mr. Miller. Is any money out of this account going into 
Kosovo or Bosnia?
    Mr. Lynn. I don't believe so.
    Mr. Miller. Thank you, Mr. Chairman.
    Mr. Hobson. Mr. Tiahrt.
    Mr. Tiahrt. Thanks for coming, Mr. Lynn, and thank you for 
the first hearing, Mr. Chairman. I believe we share some common 
frustrations with trying to get adequate resources to do the 
job we need to do to enhance the quality of life in order to 
keep people in the services. And one of the problems with 
recruiting is directly related to housing as well as other 
areas. You have to factor in numerous deployments that are 
extended and pay discrepancies which Congress took first steps 
last year toward fixing. But in this committee, we had a very 
tough job last year, and I have to say that the staff did an 
excellent job of trying to fight back from a very large 
reduction in the FY00 military construction budget.
    This year you have not helped with the budget that the 
administration is submitting. This is frustrating because it is 
a very difficult process. If I look at canvass alone, we met 
about one-fourth of our needs in this last year in the 
President's budget. We have the same situation this year. So we 
have a very difficult job to try to overcome the limited 
resources that we have available.
    It appears that the President's priorities continue to be 
starting new programs in the Washington, D.C., area through the 
appropriate bill Labor, Health, and Human Services. And that 
priority is frustrating when we have young men and women who 
are serving our country and Congress is trying to protect them, 
trying to get them to volunteer and stay in the service trying 
to keep them on board. And yet the President priorities are 
different.
    They face extended deployments, with their families at home 
and them overseas. We have got to take care of those families 
when they are home if we want to sign them up again.
    So it is a very difficult task that this committee and 
staff has had to carry out this year, and I hope that we can 
work through that as successfully as we did last year. It took 
all of Congress to pull together for us to do that.

                      BASIC ALLOWANCE FOR HOUSING

    I went down to Fort Bragg, Mr. Chairman, with Congressman 
Hayes yesterday, and there was a master sergeant who stood up 
in front of a three-star general and a two-star general and the 
community fathers, and he went to bat for the people who were 
down there that have just taken a cut in their base allowance 
for housing. And it is a big problem.
    Now last year one of the reasons we enacted a military pay 
raise is because we are trying to get people off of food stamps 
that are in our military. And yet $118 in housing allowance was 
what he was saying that some of them were cut.
    I am sure that is not a lot of money to many people in 
Washington, but for a guy who is fighting to keep his family 
off of food stamps, that is a lot of money each month. And if 
there was some way of freezing the payments on that as you go 
through the process of implementing these new requirements for 
BAH, your 5-year plan, I think it would be good for our 
military personnel, and I hope you take that into 
consideration. We need some type of freeze so that there is no 
penalty associated with it, especially in these areas like 
Washington State that Norm Dicks is going to keep reminding you 
of, and the chairman's district, and McConnell Air Force Base 
in my district.
    Another thing that I want to bring up is on page 3 in your 
report you talked about the energy programs, and you have goals 
that you are wanting to achieve, and those are admirable goals. 
But I think if you look at the time period that you are using 
as a baseline, and particularly, I will go back to Fort Bragg 
because it is a fresh example. They didn't use to have air-
conditioning at Fort Bragg during the time period that you are 
using. Through quality-of-life issues, we are trying to make 
housing a little more comfortable, new insulation, air-
conditioning. Energy consumption is going to have something to 
do with air-conditioning and quality of life that wasn't 
existent in the period that you are using.
    So that is a precautionary note. When you are forcing these 
bases to hold down energy costs, it is going to be tough for 
some of them to do that because of these issues.
    But the thing that I would like you to comment on is: We 
have four BRACs going on. Is that correct? Have we completed 
all four of them? Or before we start another one, when do they 
complete? Do you know? Are you familiar with when they are 
going to be done?
    Mr. Lynn. The last one is completed, I think, in the middle 
of 2001. July 2001.
    Mr. Tiahrt. Is the first one complete?
    Mr. Lynn. The first one should be complete.
    Mr. Tiahrt. The second one is still in process?
    Mr. Lynn. Implementation of the first, and second, third 
are completed, and the fourth, is still open.
    Mr. Tiahrt. The concept was to not make this political, but 
in the 1996 Presidential campaign in California, it became 
political. We don't want to see that happen again. We want to 
see these go to completion. But I hope that we can keep them 
from being political in the future.
    I would just like you to comment on your plan on the basic 
allowance for housing. That is a big concern.
    Mr. Lynn. Sure. But can I make a couple of comments in 
response to your comments?
    Mr. Tiahrt. Sure.
    Mr. Lynn. One, going back to your core comment about the 
importance of treating the troops and their families right, we 
absolutely agree, and what we have tried to do with this budget 
is to address what we see as the four pillars of quality of 
life, which are pay, retirement, housing, and medical.
    With your help last year, we had the largest pay increase 
in a generation; the largest pay increase since the early 
1980s. We have continued on this pattern in this budget 
proposal by increasing civilian pay based on employment 
comparability index plus half a percent. We have a way of 
measuring civilian pay increases called the employment 
comparability index. We take that index, add a half a percent 
to it, and that is the pay proposal that we put in this year.
    The law used to require that the civilian pay raise equal 
ECT minus half a percent. Now it is plus half a percent. That 
is what you did last year. That is what we propose this year. 
So on pay, we are trying to continue to keep faith with that.
    On retirement, we proposed, and you accepted or passed a 
proposal, to change the retirement system back from what was 
called the Redux which passed in 1986. Redux lowered the basic 
retirement to 40 percent of basic pay. We increased that back 
to 50 percent. You passed that, we funded it, so the second leg 
I think we have addressed.
    The third leg you asked about was the basic allowance for 
housing. As I said in my opening comments, we want to change 
the way we have done that. Up until now we have covered 85 
percent of the costs for people in the continental United 
States. We think we ought to cover 100 percent of the costs. We 
propose that we achieve this about 4 or 5 percent increments. 
We will move from the current 19 percent down to zero in terms 
of the amount of out-of-pocket expenses that service member 
families have to absorb.
    Finally, I think medical is the most difficult area to 
tackle, while not in this committee's cognizance, I can tell 
you that we have taken a number of steps to improve access to 
TriCare, but we are not done yet. We need to improve the 
TriCare process for our military. They are, I think, relatively 
happy with the level of care they get, but not so happy with 
the process they go through to get it. We need to improve that 
process. We are also going to have to address retirees.
    But the overall point is we tried to address each of those 
four legs of quality of life as we went through.
    Your point on freezing BAH. We have, I think, come halfway 
to where you are saying; in other words, a family member or a 
military family at Fort Bragg who is there now--or was there 
before January 1st, will not see their housing allowance drop. 
They are grandfathered, as it is. New people coming to Fort 
Bragg would see a lower housing allowance than the people who 
are there now.
    Mr. Hobson. The only question on that is: Is that corrected 
when they arrive? Is the number meeting the standard for the 
community? Which is what it is supposed to do.
    Mr. Lynn. That is what it is supposed to do.
    Mr. Hobson. And we need to make sure that it just the 
perception of somebody coming in who is taking a cut, maybe 
that it isn't, and somebody needs to monitor this to make 
sure--because I can tell you from talking to soldiers, this is 
a big perception. I don't know the reality, but it is a big 
perception problem with soldiers that they are getting a raw 
deal: My pay went up, my final went down. And that is a 
problem.
    Mr. Walsh.
    Mr. Walsh. Thank you, Mr. Chairman, and thank you for the 
great job that you do on the subcommittee. You take your 
responsibilities very seriously, and I know that of all the 
Members of the House, you know this issue better than anyone. 
So thanks for the job that you do.

                             FUNDING LEVELS

    Under Secretary, thank you for your testimony. I am really 
concerned about the inadequate amount of funding being provided 
to the Air National Guard and the Army Guard. I am looking at 
the--and I am talking about construction right now. As I 
understand it, the President's request for Army National Guard 
for major construction is $52 million; Air National Guard, $37 
million. That is wholly inadequate.
    Mr. Hobson. Got none in my district.
    Mr. Walsh. Well, that is part of the problem, I think, that 
there just--the priorities are not right. And the Congress ends 
up--as I understand it, we appropriated over $200 million for 
each last year. And it is sort of a game being played, I think, 
that the services come in and within the President's request 
they lay out a low-ball figure, knowing that the Congress will 
come back and put in a higher figure. But ultimately it hurts 
them because the projections on construction are not realistic.
    I just wondered if you agreed with my assessment, and could 
you tell me who determines that funding level? How do we arrive 
at that President's request of $52 million and $37 million for 
those respective Guard units?
    Mr. Lynn. The point you make is right. The biggest drop 
between the enacted level in 2000 and the level that we have 
proposed is the Guard and Reserve area. The other reductions 
are far smaller. It is a $480 million or so reduction from what 
you had last year to what we have proposed this year.
    You are also right that this is a repeated problem. It is a 
historical problem. Your request will always favor the Guard 
and Reserve far more--or your appropriation will always favor 
the Guard and Reserve more than our request does.
    Is it a game? I think to a degree it probably is. It is a 
problem that we have been having----
    Mr. Hobson. At least that is an honest answer. [Laughter.]
    Mr. Walsh. Thank you for the straightforward response.
    Mr. Lynn. And we have seen it in other areas, too. We have 
seen this Guard and Reserve issue with other committees. In 
fact, I think we are having a bit more success in other areas 
than we are in this particular one in terms of trying to get 
things on a more even footing.
    In the O&M and personnel budget, we used to have the same 
kind of thing where we would low-ball it, you would increase 
it. For the last 2 years, I think, the Army, in particular, 
deserves credit. They have been trying to work with their 
Guard, in particular, which is where the biggest part of this 
issue is.
    Mr. Hobson. They finally realized they had one.
    Mr. Lynn. They finally--well----
    Mr. Hobson. Anything is better than nothing. I mean----
    Mr. Lynn. I think first under General Reimer, now General 
Shinsecki has picked up the banner. They have developed a 
better partnership, and that partnership has resulted in 
increased operating budgets for the Guard and Reserve over what 
you enacted for the last 2 years. That, as I say, is--
``historic'', which may be too big a word for that, but it is a 
dramatic change in pattern. We have not done that.
    I don't know that we are ever going to quite get to that 
level in this committee, but we need to take a closer look at 
what the right level is and see if we can take a bit of the 
game out of this.
    Let me answer your last question, who is responsible. The 
way it works is the services propose a program, as I indicated 
in answer to an earlier question. We provide them general 
guidance and fiscal guidance, basically a funding level. They 
propose a program in reaction to that, and then the Secretary 
makes whatever changes he felt necessary to that.
    So the initiative is with the services, but the final say 
is with the Secretary.
    Mr. Walsh. It is significant in that we ask the Guards, 
Army and Air, to perform similar duties, and many the exact 
same duties. And yet I think they feel that there is a lack of 
commitment to their role. They get second fiddle at best.
    In my State, for example, our number one project, it is not 
even initially--it was last year--was not even in the 
President's request. And, you know, this does affect, along 
with pay and other things, it affects attitude all the way 
through.
    So we have to make sure that when you come to us with a 
request it reflects the real need out there, and I think we 
will try to work with you on those.
    Thank you.
    Mr. Hobson. Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman.
    First of all, Mr. Chairman, I want to echo the comments of 
the gentleman from New York, Mr. Walsh, about your knowledge of 
the issues before this committee and the way you run this 
committee, and we are all deeply appreciative of that.
    Secretary Lynn, I had a couple of questions. I guess the 
first one was going to be about housing, but since we have 
developed or investigated that in depth in this committee prior 
to----
    Mr. Hobson. We are not done yet.
    Mr. Boyd. Well, I want to move to a couple other issues.

            forward operating locations in Ecuador and Aruba

    One, I noticed in your testimony that you reference a $77 
million appropriations for construction of FOLs in Ecuador and 
Aruba. Given the recent coup and general problems and general 
unrest in Ecuador, are you rethinking that request? Or how does 
that play into what you will be doing, we will be doing there?
    Mr. Lynn. The purpose of these forward operating locations, 
the FOLs, is to replace the counterdrug operations that 
heretofore have gone out of Howard Air Force Base in Panama. As 
we pull out of Panama, we are losing those operations. We need 
to replace them in order to reduce the inflow of drugs to the 
United States.
    The money for those forward operating locations is actually 
in two places. There is $38 million proposed in the 
supplemental for this year. It is known as the Colombia 
Supplemental. That is a misnomer. It really is a counterdrug 
supplemental, and the $38 million will entirely support the FOL 
in Ecuador. Then there is another $78 million, as you 
mentioned, in the 2001 request that would complete Ecuador and 
also do the Aruba and Curacao bases.
    We did take a look at the recent events in Ecuador, and 
also asked the Joint Staff and our policy folks in the State 
Department to take a look, and they think that there is 
stability now. Therefore, we do not think it affects the 
supplemental request. It is the right question. I think it has, 
at least in the Department, been asked and answered. But we are 
happy to get more people up here and brief you on the details.
    Mr. Hobson. While you are asking that question, let me 
interject. This won't come out of your time. I do not 
understand why--part of this is emergency and then we get 
whacked. Why didn't it all go in the supplemental?
    Mr. Lynn. It was divided into two pieces. The most urgent 
piece was in Ecuador. It is going to take a relatively large 
effort to bring that base into something that we can use 
effectively. So we front-loaded that piece. And then the second 
piece was in the normal budget request.
    I will tell you, in fact, that as we were doing the budget, 
was in the normal budget request. When the Colombia 
Supplemental came along, we frankly pressed to have some of the 
most urgent piece included in the Supplemental. So originally 
our request would have been for the full $117 million in 2001. 
We actually reduced that.
    Mr. Hobson. We wish it was the other way around so we could 
take care of some of this----
    Mr. Lynn. Well, I mean, you could. It would certainly be 
possible to do it all in the Supplemental.
    Mr. Hobson. Was that an OMB decision or was that----
    Mr. Lynn. Well, the content of all of the supplemental 
ultimately is an OMB decision. We proposed that some of the 
FOLs be accommodated within that, and they approved it.
    Mr. Hobson. Did you ask for it all?
    Mr. Lynn. Yes.
    Mr. Hobson. We just need to get that, because it affects us 
dramatically on something that--you know, if you had seen this 
kid yesterday--my wife tells me I have got to stop calling 
these people kids, but this was a young man who could have been 
most of our sons in here. But here is a PFC and his wife living 
in a brand-new house, and, I mean, they were so proud of what 
they had. The young man was happy. I guarantee you, they are 
going to re-up. They like where they are living. He is going to 
do his job better. His family is happy. Why can't we do this 
other places? And we are doing it--in the stuff we are 
privatizing, we are trying to build to community standards now 
in size and other things, and we have to change the law on some 
other things, the authorizing that you have to do. But it is 
just so wonderful to see that.
    And then you go and see some of other stuff that we are 
doing, and it is just very depressing to go through that. And 
then we see we are going to--I understand we have got missions 
we have got to do, but if we don't have people, we do not do 
the missions. And we have got to take care of these people.
    I find it very difficult to fund FOLs out of what I think 
is taking away from normal housing, and when I get back to 
this, I am going to ask you some questions about numbers, 
because the numbers are off.
    I am sorry. Go ahead. But you brought up the FOL question.
    Mr. Boyd. Thank you, Mr. Chairman. I think that, of course, 
the major concern of the committee and probably most House 
Members would be the security of our personnel who would be 
manning that FOL. And your answer that you have taken a look at 
it since the coup obviously is satisfactory to me.

                      BASE REALIGNMENT AND CLOSURE

    Mr. Chairman, I wanted to move to another area, and that is 
the area of BRAC, just very briefly for a brief question. But, 
first of all, before I ask the question, I wanted to follow up 
on Mr. Farr's line of questioning, and that was about a list. I 
mean, I sat here a year ago in absolute fear that there was a 
list because of some things that I had seen happen at some 
facilities in Florida. And I was assured, I think, by you and 
others, that there was no such list. And I want to strongly 
recommend--at least know that this member doesn't want there to 
be a list. I think the only way for the process to be effective 
and get done in the proper way is for us to not have a list and 
let the BRAC Commission, if we decide to go there, do that 
work.
    It really created some heartburn for myself and for some 
other members last year about some of the things, because we 
had even seen documentation from some Air Force folks that said 
that there was a list, and, you know, this particular facility 
was on it and these are the reasons we need to do these things.
    But we will cross that bridge and hopefully----
    Mr. Lynn. There is no list.
    Mr. Boyd. Thank you, sir.
    Mr. Farr. Can I say one thing, though? The game has changed 
from when you had the lease and further conveyance, and I do 
not think DOD understands that what we ought to do is be 
engaging these communities early and looking at military bases 
and saying--we may have some interest in this. We will help you 
rather than fight you.
    Mr. Hobson. Well, we are working on it. You guys are not on 
the Defense subcommittee, but we have a situation at Brooks Air 
Force Base which, if we can work it out, if I can ever get the 
Air Force to come back to me before we get this thing done, may 
begin the beginning of this program. I am a believer that you 
can go take a base that--and Brooks has some problems, and we 
want to keep some things there for a while. But it has been on 
the BRAC list, and the community stepped forward and 
understands this.
    There may be ways to begin a process where you begin to 
lease out or give parts of the base back to the community so 
they can build up a private consortium of jobs, and then if--
and leave some of the stuff there, and then if that stuff 
becomes where it should be moved later, you can move it and you 
don't have the community uproar because they can already see 
it.
    I will give you an example--and the biggest problem is 
getting the base back to the community fast enough. And I can 
give you one. Gentile Air Force Station in Kettering, Ohio, 
which is right next to Dayton--it is in Tony Hall's district. 
Everybody went nuts when we were going to BRAC it. The mayor 
just beat the heck out of me, a nicer word of saying it. Why 
can't I get this back?
    Once we got it back to him, it is now the private sector 
and everybody is happy. But at the time it was a problem. We 
are working on that. We are working on that with the services. 
We have got to find a way. I did not like the way that--they 
had originally come up with the leasing of it as the way they 
are doing this. It can also be used--if it is not used right, 
it can be used the way of non-BRAC'ing a base. We have to be--
and that was the big controversy we had in the big committee 
about what was happening at Brooks.
    So I think you all need to get into this, too, and not just 
let the Air Force--because it is a program that could be used 
all across service-wide. So I think you all ought to look at 
it, too.
    Mr. Boyd. Mr. Chairman, I have one question about the BRAC 
process, if I might.
    Mr. Hobson. Yes, sure.
    Mr. Boyd. That is, Secretary Lynn, your statement that you 
made here orally about BRAC earlier seemed to be made with the 
premise that base structure and force structure reductions must 
be made on a percentage equal basis. My question is--two 
questions: What basis do you have for that premise, number one? 
And how does that premise square with the accomplishment of our 
mission as a Nation and as a military?
    Mr. Lynn. That is a good question, Congressman. We do not 
have a list of bases to close, as I said. So in order to 
understand the rationale, we have fallen to percentages. You 
don't want to use even examples because then you are prejudging 
the results.
    There is such a large mismatch between 21-25 percent and 
35-40 percent. You might be able to justify some discrepancy 
between force structure reductions and base reductions, but not 
one that large.
    Now, when you get down to it, it doesn't have to be exact. 
You would use that as justification for starting a BRAC 
process. You wouldn't use it for actually implementing it. Then 
you would have to go through category by category.
    Mr. Boyd. Facility by facility.
    Mr. Lynn. Facility by facility. How many training bases do 
I need? How many maneuver bases do I need? And so on. And you 
would go down and actually look at each category.
    I can take the percentages down another step, I think, 
without implicating individual bases. For examples, Navy ships 
have dropped by 45 percent and Navy pier space has gone down by 
17 percent. There is a fundamental mismatch. What bases you 
would change and so on, I don't know. You would have to have 
the Navy do a careful review.
    Mr. Boyd. Geographic----
    Mr. Lynn. Geographic, military utility, you would want to 
go through it. Another example is the number of small aircraft 
in the Air Force has come down by 53 percent, whereas the ramp 
space for those aircraft has only come down 34 percent.
    You go through it category by category and you see 
mismatches. It doesn't tell you which bases to close, but it 
tells you you do need a process for evaluating that structure 
and be able to close some.
    Mr. Boyd. Thank you very much, Mr. Chairman.
    Mr. Hobson. The interesting thing about that is the Navy 
says they need more ships, and if you take away the pier space, 
then do you get it back? So there are all kinds of processes 
that have to go on. We are going to hear from two more members. 
Actually, we have a new member of our subcommittee, Mr. Goode, 
and he is keeping up the tradition of this subcommittee of only 
having three members who have ever been on active duty--or even 
been in the military, I guess. I don't know if you were on 
active duty. You were in the Guard, I guess. I was in the 
Guard. I was activated, but you were in the active, so we have 
got three members, only three today. When I think of years ago, 
it is a different thing. I think it is one of the reasons we 
all need to get out and look at some of this stuff from time to 
time and make sure that we all know what is going on.
    I have been in the Air Force, and going down to look at the 
Army was a good thing for me the other day. I'm not sure going 
up to West Point was a good thing. But we will get into that 
later.
    So we will go Mr. Edwards, then Virgil.

                      BASIC ALLOWANCE FOR HOUSING

    Mr. Edwards. Secretary Lynn, thank you for coming. We all 
know--we appropriate funds every year, don't give you enough 
money, and the Department of Defense has to juggle balls and 
make priorities, and I understand that and I respect that. You 
have a tough job, and I appreciate the job you are doing.
    But I have just got to say, once in a while we are penny-
wise and pound-foolish. A couple of years ago when I was on the 
Armed Services Committee, in July, we passed a bill that was 
going to--small measures, an amendment to a bill that was going 
to reduce the retirement benefits of our military personnel. In 
48 hours, I landed in the Azores on a trip to Europe, and our 
delegation was bombarded with questions from uniformed 
personnel that were already demoralized because of the rumor 
getting to the Azores faster than our jet airplane could get 
there.
    I think what DOD has done on the housing allowance is close 
to that example as anything I have seen in a while. It is 
creating--I represent 20 percent of the active-duty Army 
divisions in the world at Fort Hood, as you know. I cannot 
overemphasize, I couldn't raise my voice high enough to clearly 
point out the kind of morale problem that this is creating. And 
I know this is just starting. I think we are just seeing the 
tip of the iceberg.
    It wasn't pleasant as a Member of Congress to go back and 
give a speech to the Rotary Club where there were a number of 
uniformed personnel there and to talk about the commitment 
Congress has made to military families and the quality of life, 
mention in detail the improvement in their retirement benefits, 
mention in detail the salary increase and how much that was 
going to cost the taxpayers, about how good that was, and then 
have an officer raise his hand and say, ``How about my reduced 
housing allowance?'' And I sit there dumbfounded, didn't even 
know anything about it, and felt badly enough about it that I 
came back and asked Ike Skelton, who is ranking Democrat on the 
Armed Services Committee, didn't know anything about it. John 
McHugh, who along with me co-chairs the Army Caucus and 
represents Fort Drum, didn't know anything about it 3 days ago 
or 4 days ago when I mentioned this to him.
    But, that aside, I would hope DOD would let Members of 
Congress know of major installations when a decision like this 
is made. If it is a right decision, then perhaps we can help 
sell that decision.
    But, given that, I just tell you, I guess my question is: 
Do you want us, do you need us to organize a number of Members 
of Congress to riot on this issue? I have talked to six or 
seven or eight or nine or ten, some of them directly affected, 
some of them understand the impact of spending tens of billions 
of dollars to improve morale by increased pay and retirement 
benefits, and then you undermine virtually all of the good you 
have accomplished by those expensive measures by saying to 
junior-level officers we are going to reduce your housing 
allowance. And compounding the problem, I will promise you, 
even though it was intended to grandfather and help some people 
presently at these installations, when you end up having two 
majors living next door to each other in an apartment or 
townhouse complex and one of them realizes that the other one 
who is doing the same job they are doing is getting, you know, 
reimbursed $100 a month or $200 a month less than the other 
person for housing, it is going to create animosity that will 
just add fuel to the fire.
    I guess my question is: Where are we in terms of looking at 
that? I would almost bet every dime I own that the cost of 
housing at Fort Hood, Texas, has not gone down in those 
communities, and yet their housing allowances are going down.
    How seriously are you looking at it? Some mistakes I think 
are better just--rather than analyzing them forever, just 
correct it and cut off the weed at the root and solve the 
problem before it seriously undermines morale. Because if we 
spend the next 6 or 9 months studying this thing, the impact--
even if we correct it, you are going to have--those soldiers 
are going to say to me, you know, I can't trust the Government 
anymore. You guys come back and tell us you are helping us with 
the salary and you are helping us with the retirement, and then 
you screw us with, you know, reducing--you know, taking money 
out of one pocket that you put in the other, as the chairman 
said.
    Maybe I am overestimating this. I do not think I am. I 
think it is going to be a huge morale problem. I wish we could 
correct this as quickly as we could. What are you doing about 
it? And how can we help you solve that problem? And do we need 
20 or 30 Members of Congress to organize and come meet with you 
and the Secretary and others and raise hell about it? Because 
they are willing to do it. I would rather solve it quietly 
behind the scenes.
    Mr. Lynn. I think it violates my oath of office to foment a 
riot. [Laughter.]
    It is not even hard to do.
    Mr. Edwards. And you can help me stop the riot I am going 
to have to put up with down there because people are so 
disappointed. They just think once again we have--they have 
lost trust. You know, I am up there speaking in a group saying, 
you know, gosh, Congress has made a commitment to helping you 
and your quality of life. You know, we have made a commitment 
to you. And then to have to have soldiers say, ``Well, sir, do 
you realize that you just took money out of my other pocket?''
    Mr. Hobson. One thing is that the pay raise is taxable. The 
BAH is not taxable. So, you know, perception is reality in 
this. I mean, and it is fermenting. One person talks to another 
person, whether he is really involved or not, it becomes a 
discussion. And we need to figure out a way to get that----
    Mr. Edwards. And this will become an issue, Mr. Chairman, I 
think, along the lines you just said, far better than even the 
actual dollars mentioned. It is an important dollar problem for 
a lot of people who are struggling to pay the bills every 
month. But this is like that issue I saw in the Azores. It is 
going to grow beyond itself and is going to hurt the morale of 
our military men and women at the very time we are trying to 
recommit to them and we want to help them with the quality-of-
life issues.
    Mr. Lynn. You are right. We have a problem, and we 
understand we have a problem. The theory is good. Housing 
allowances ought to match the housing costs in a particular 
area, I do not think anybody quarrels with the theory. And that 
was not the system we were on before. I do not think you want 
to go back to a system that was overcomplex, and where 
allowances didn't match costs. I understand the problems you 
are having at Fort Hood and Fort Bragg and some other 
installations. There are also people living in high-cost areas 
who saw their allowances go up to come closer to covering the 
cost. You are not hearing from them, but I think that is an 
important side of this that you need to keep in mind as you 
look. It is not in my mind the underlying system that is the 
problem.
    That said, the execution of this and the timing, in some 
ways, is worse than you said. We have the large initiative to 
eliminate absorption costs but it is being overwhelmed by the 
publicity, which is, I think, unfortunate. I think we are 
basically saying to everybody that we are going to add 15 
percent to your housing allowances over 5 years, and that it is 
tax-free. That is a huge step forward both in terms of dollars 
to the family member as well as changing the fundamental system 
we have, which was biased against people who lived off base.
    That is an important element that is being overshadowed by 
this, and, in fact, would, over time, correct it. As we raise 
the housing allowance itself, it will start covering the 
changes here that you have on your Fort Bragg chart. But it 
will take some time, probably a couple of years for that to 
occur. In the interim, we have this morale problem. We have 
been talking with the personnel and readiness folks about what 
to do with it. Certainly we are taking a look at it, and we 
certainly need to make people understand better how it works 
and why it was done.
    Mr. Edwards. I do understand the plus of that, but just 
take Fort Hood. It has 20 percent of the active-duty Army.
    Mr. Lynn. Right.
    Mr. Edwards. And no matter what you tell them about what it 
is going to do for, you know, high-income areas----
    Mr. Lynn. They don't care about the sailors in San Diego. I 
understand.
    Mr. Edwards [continuing]. In the Navy and somewhere else, 
you know, you got 20 percent of the Army, you add Fort Bragg 
and Fort Hood together, and you got a huge part of the Army. 
And it looks to me like the Army is one that ended up getting 
the short end of this stick.
    Mr. Lynn. The Army, because of where it is located, did. 
That is true.
    Mr. Edwards. And telling them what we are going to do 5 
years from now is not----
    Mr. Lynn. No.
    Mr. Edwards. How much would it cost to hold harmless 
those--and I know you have a grandfather clause for those that 
are presently in installations. But to not drop the rates at 
Fort Hood or Fort Bragg across the board, how big----
    Mr. Lynn. I might have to beg your indulgence on that and 
provide it. I did try and get that number. I thought you might 
ask that. I have heard a couple of different numbers. I have 
asked the question a couple of different times, and I am 
getting different answers. Until I am sure of an answer, I do 
not want to give you an answer. So let me provide that for the 
record.
    Mr. Hobson. One thing you might add to that is rather than 
reducing the BAH is use the initiative to increase the out-of-
pocket expenses to correct the problem. I do not know if that 
will work or not, but you could look at that and see.
    Mr. Edwards. Well, not knowing what the number is, if it is 
a huge number, then that is a huge number of dollars that are 
being taken out of the pockets of our uniformed men and women. 
If it is not a huge number, then, you know, we ought to go back 
and fix that. It is just not worth--I know the theory of this, 
but it is just--you know, when you are hurting this big of a 
percentage of the active-duty Army, just as one example, it is 
just not worth the dollars. It undermines--we would have been 
better off having a much smaller pay raise than not hurting 
this many people.
    I know you are studying the issue, but, you know, I have 
seen studies go on for 5 years around here. Can you be more 
specific? At what level--you know, is this being seriously 
discussed at your level at the Pentagon about coming up with a 
solution? If so, what would be a possible time frame?
    Mr. Lynn. I do not have a time frame. It is being discussed 
at the highest levels on essentially a daily basis. But I do 
not have any time frame for any sort of action.
    Mr. Edwards. In the ballpark, is it, you know, hundreds of 
millions? Or is it----
    Mr. Lynn. I do not think it is that high.
    Mr. Edwards [continuing]. Billions of dollars?
    Mr. Lynn. It is definitely not billions. I do not even 
think it is hundreds of millions.
    Mr. Edwards. How much did the pay raise cost on an annual 
basis, would you estimate ballpark?
    Mr. Lynn. A couple billion dollars.
    Mr. Edwards. How about the retirement benefit increase? 
Just ballpark.
    Mr. Lynn. A year? I think a billion.
    Mr. Edwards. Okay. I would just hope you would let us know 
how we can work with you, because, you know, we have spent 
billions of dollars on those two measures and just cut the 
needs out for the benefit of that, actually going backwards in 
terms of trust. At the very time we are asking people to trust 
us about going into the military or, you know, re-enlisting, 
now it is hard for us to go back with a straight face and 
explain it. I sure wish we could somehow follow up and get more 
specific----
    Mr. Hobson. Well, you are going to come back to us.
    Mr. Lynn. I will come back to you. I am hesitant to 
publicly say a number that I am not sure of.
    Mr. Hobson. Maybe we will have a private meeting on this.
    Mr. Lynn. We will get you the number.
    Mr. Edwards. Then we are going to have to create a riot.
    Mr. Lynn. Well, the worst thing I can do right now is give 
you the wrong number.
    Mr. Hobson. This is a big deal and it runs through the 
ranks, in the middle ranks and some upper ranks, of the people 
you are trying to get to re-up. And I think when a policy was 
good--I thought when I saw the BAH going up that it was going 
to be really good because it would work some of these 
privatization deals better and the numbers. And then I started 
hearing--you know, and then I went to this base, and I think 
you are hearing it and I have heard it.
    Mr. Edwards. Twenty-three thousand people, Mr. Chairman, 
they were not grandfathered; 23,233 people would end up getting 
less money as a result of this at Fort Hood.
    Now, as soon as those are replaced, in a year or two, that 
will be 23,000 people whose income, after-tax income has been 
dropped, in some cases considerably. This is from forces 
command. You have Fort Bragg.
    Mr. Lynn. I have Fort Bragg.
    Mr. Edwards. This is from forces command on all the other 
Army installations.
    Mr. Hobson. This is about 90,000--I would say that is 
probably closer to 90,000 people between those two bases.
    Mr. Edwards. Mr. Chairman, I would look forward to working 
with you, and I am serious. There are a lot of other members 
that had no idea this was happening. Some of them haven't been 
hurt directly, but they feel very strongly about this as a 
morale problem. And I would love to work with you, Mr. 
Chairman, and you, Mr. Secretary, to see if we can work 
together. And we have to help to see if we can solve this 
problem.
    Thank you.
    Mr. Farr. Couldn't we solve that the same way we solved the 
civilian sector? We have what we call locality pay.
    Mr. Hobson. Well, we have that now, and it----
    Mr. Farr. But wouldn't that also help with this?
    Mr. Lynn. We had a system, Mr. Farr, where we gave 
everybody a blanket housing allowance regardless of their 
housing costs. And then we had close to a locality pay, 
something called a variable housing allowance, for high-cost 
areas. We found that system was overcomplex, and it ended up 
paying some people too much relative to housing costs and many 
people too little. So what we are trying to do is move to a 
system where the housing allowance is tied to the housing cost 
in the area in which you live.
    As I was saying to Mr. Edwards, the theory of this is 
flawless. The problem is that in transitioning from the old 
system to the new system, some people's income is going down. 
And that is the problem. Regardless of whether they should be 
going down or not, the fact that they are seeing a reduction or 
as they come into a new base they see a reduction based on what 
people had before them is clearly causing a lot of 
consternation and morale problems and we need to address those.
    Mr. Edwards. Mr. Chairman, if I could submit this? Mr. 
Dicks' office just delivered this to me. It is a letter from 
Mr. Murtha and Mr. Dicks expressing their strong problems with 
the present policy.
    Mr. Lynn. Is this the riot he predicted?
    Mr. Edwards. It is just the beginning.
    Mr. Hobson. Well, these are two of the leaders. They will 
be joined by others. [Laughter.]
    Mr. Edwards. They are kind of like Texas Rangers, one 
person, one riot, you know, one Ranger, one riot.
    Mr. Hobson. We will accept this for the record.
    [The information follows:]



    Mr. Hobson. This is similar to the discussion we had, a 
little more in-depth in here than we did the other day in the 
other committee. But I think you have sensed the concern that 
we had before.
    Mr. Lynn. Yes.
    Mr. Hobson. You know, we need to all sit down and figure 
out a right answer for the troops.
    Welcome, Virgil. You can ask for about 5 minutes or so. 
Nobody has kind of stuck to the 5 minutes. We are glad you were 
in the Guard.
    Mr. Goode. Thank you, Mr. Chairman.
    First, I want to say it is an honor to be on your 
subcommittee, and I am really looking forward to it. As some 
have said before, you do have an enviable reputation in this 
critical subject.

                      FORWARD OPERATING LOCATIONS

    Mr. Hobson. Just as long as it continues.
    Mr. Goode. I really just have one question. I am new on the 
committee and am not too familiar with forward operating 
locations. Do you have any in Venezuela, or did you have any?
    Mr. Lynn. No.
    Mr. Goode. Say on the one you want to do in Ecuador, how 
much do you put in in the way of fixtures? Just ballpark it. 
And fixtures are things that you can't take with you after----
    Mr. Hobson. He is a lawyer.
    Mr. Lynn. Most of the money that we are talking about here 
would be for fixtures. For Ecuador $38 million in 2000 and 
another $23 million in 2001. Most of that is to build 
facilities. This is military construction. There would be an 
additional budget that is in that, with a counterdrug budget 
account to operate, but most of this is to build a squadron 
operations center, maintenance hangars, maintenance facilities, 
visiting officer quarters, those kinds of facilities. 
Basically, the facility is to operate an air base in order to 
counter the inflow of drugs.
    Mr. Goode. If you had the facility back in Panama, would 
you need the facility in Ecuador?
    Mr. Lynn. I am not sure I am qualified to answer that. I 
can answer the narrower question. This FOL is meant to replace 
the counterdrug operations that were going out of Howard. 
Whether the people we have in charge of counterdrug operations 
would want to supplement Howard with something in Ecuador, 
because they were running into a problem with people trying to 
get around Howard, I do not know the answer. I would have to 
get that for you as to whether they would want to supplement 
it.
    But the direct answer to your question is that Ecuador and 
Aruba and Curacao are meant to make up for the loss of Howard.
    Mr. Goode. What have you got--and I do not even know their 
names. I am like George Bush. I do not know the names of all 
these leaders. If you had the leader in Venezuela--the leader 
in Ecuador and he told you to get out, you would just lose it, 
wouldn't you?
    Mr. Lynn. I suppose. You always are there with their 
permission, in a sovereign country.
    Mr. Goode. Right.
    Mr. Lynn. So we would have to react to that. I think as I 
indicated to Mr. Boyd----
    Mr. Goode. But you think Ecuador is the best choice?
    Mr. Lynn. We think Ecuador is, yes. That was the military 
judgment. This was done largely by our Southern Command. 
General Wilhelm is the one that identifies the bases. He, I 
know, feels quite strongly that these are absolutely essential 
to these operations.
    Mr. Goode. That is all.
    Mr. Hobson. We are still in Cuba, and they have not kicked 
us out. So I think you can stay in some of these places.
    What I am concerned about, though, along this line is these 
may not be the only places we are looking at. There are some 
other places that I understand we may be looking at. So these 
are not the last dollars that we are going to see on this. So I 
think we need to be very clear and do not get the impression 
that this may be all of the forward operating locations. To my 
understanding, there may be one or two other places that we are 
talking with that I do not want to get into right now that may 
or may not have forward operating locations. So you do not need 
to answer that, but I just do not want anybody here to think 
that this is the end. We will think more of it in the 
supplemental and not this bill, especially with our housing 
problems that we have got.
    I want to ask two or three things, and then we will do 
another round.

                            HISTORIC HOUSES

    I sense--and I want to get this out in the public, and I 
want this on the record--we have got a huge problem with 
historic houses, and I thought I was talking about 55,000 
buildings in the Army. I understand from the Army's numbers 
there may be 70,000 buildings that must be evaluated for 
historic significance over the next number of years. I think 
over the next five it may be around 50,000. I do not know. And 
the Air Force has got 35,000.
    I mean, this is a huge potential problem and I keep 
bringing it up so that there is somebody in your shops over 
there thinking about it, because nobody has come back to me yet 
and said how we are going to handle all these. We do not have 
the money to handle all these, in my opinion, down the road. We 
cannot tear them down fast enough, some of this stuff. Some of 
this stuff should not be kept. Some of the warehouses and stuff 
I saw yesterday ought to be gone, and they are tearing them 
down about as fast as they can get them down, but they run into 
asbestos. These are mainly wood structures, and some of them 
are vintage 1950s and 1960s stuff that is a little harder to 
tear down than some of that old World War II stuff.
    But that is a real, real problem. You do not have to 
comment on it. I want to get it out on the record. I want 
people thinking about it.

                        GENERAL OFFICER QUARTERS

    The general officers' quarters over $25,000 are going 
through this committee now. And we have approved some, some 
with changes. And I think they have gotten the message that we 
are reading these. I think it took a while for people to 
understand that we will read these things, we will look at the 
numbers, and we will question the numbers. Even if it is a 
small number, we are going to question it.
    I think the Navy got the message on that. The Air Force has 
gotten the message. But I am sure some of these--I read some 
testimony the other day where some guy said, some Admiral said, 
Oh, I am just going to wait it out until this other Admiral 
retires, and then I am going to spend the money, and he did. 
And he spent O&M money. And now he is retired. By the time I 
read it, he was retired. And I am hoping that we do not have 
any more of this stuff going on. I hope you guys are policing 
it where these general officers are going out and redoing their 
kitchens and their private residences to the tune of--I do not 
mean just hundreds of thousands of dollars. I mean millions of 
dollars--out of the wrong accounts. So I hope we do not see any 
more of that.
    The other thing I do think that needs to be changed in the 
authorizing committee is this deal that you could only build a 
general officers' house of 2,200 square feet--is my 
understanding--needs to be changed because, frankly, what we 
wind up with is rehabbing some larger houses that are not worth 
keeping. I can give you an example. One is in Osan, Korea, for 
example. We ought to build that--I do not know whether he was a 
four-star or whatever. But we ought to probably build him a new 
house rather than putting 80,000 or more back into that old 
house that is what I would call a zipper house. I have not seen 
it, but it is probably pre-fab, put together. We ought to build 
him a better house and one that will last and that is done 
right rather than doing what we are doing. But everybody tells 
me, oh, you know, all this stuff.
    We just need to change some of these rules. The housing 
stuff, we need to go to what Sam is talking about when we do 
privatization. We need to build to community standards so that 
if that project--if we BRAC that base or we do not have housing 
the same way anymore, it now goes to a community standard and 
they rent it out. First of all, it makes it cheaper for them to 
finance when they finance it if it is built to that because it 
is a dual-use type thing. It is not a single-purpose building. 
Some of the stuff on Sam's base does not meet the code. And I 
think it is outrageous for the Army to have 1,100 houses 
sitting there, and until we went out there, they were not even 
being maintained at all. And that is how many--what are those 
houses worth, $150,000, $250,000 apiece?
    Mr. Farr. Probably $250,000.
    Mr. Hobson. All right. So you are talking about $250 
million worth of--$225 million, anyway, of houses sitting there 
in an area that is, you know----
    Mr. Farr. Zero occupancy.
    Mr. Hobson. Yes. We could fill those houses. They could be 
leased in the private sector, some of them, and that is not the 
only place where that is.
    But if you look at a BRAC, in my opinion, you ought to look 
at a BRAC that does some of these things that we would like to 
do down at Brooks, where we would get--it is terrible to these 
communities to go in and just shut down a base almost 
overnight. It is devastating. That is why they fight so hard. 
But if they have got private sector jobs that would gradually 
move in there, I think there would be much less of that. And I 
hope everybody would look at that. We are trying to work Brooks 
that way now. I hope you all are helping us because this right 
now is the whole Air Force thing, but it has more synergy than 
that. It could affect everybody, the Army and whoever has to go 
through this.

                     INCREMENTALLY FUNDED PROJECTS

    The last question I want to hit you with is--and a little 
of this is not totally your fault. Dr. Hamre was here last 
year, and I think he is a good guy, as I told you the other 
day. But there is a little inconsistency here that we need to 
talk about.
    In your opening remarks, you stated that the budget request 
is at the same level you projected last year. However, last 
year you asked us to incrementally fund construction projects 
and to fund the balance of the projects this year.
    Now, in the infinite wisdom of this subcommittee, we denied 
your request, and I remember the projections. For the year it 
was, I think, around $11 billion, $3 billion of which was to 
pay for the projects begun last year, the incrementally funded 
projects.
    I looked at this--and I do not know if you will agree to 
this or not--as a $3 billion reduction that we are taking a hit 
on if we had followed what was going on from you all last year. 
And I do not think you did it. This is from the Department. But 
is there an inconsistency here?
    Mr. Lynn. Well, now, I should have been clearer. We had the 
funding for the 2000 military construction budget split-funded 
between 2000 and 2001. You, as you say, did not approve that 
and fully funded it in 2000.
    When I said we funded essentially our 2001 request, I mean 
minus that funding that you already paid. You are right. That 
$3 billion that would have paid the 2001 costs of the 2000 
projects did not stay in military construction. I did not mean 
to indicate that it had.
    Mr. Hobson. Okay. I just did not want to misunderstand. We 
could use $3 billion. We could spend it real easy. And I just 
would encourage everybody to go to these bases and see some of 
the working conditions that these people have, see some of the 
housing conditions that these people are in on these bases.

                         HOUSING PRIVATIZATION

    We really need to get at this partnership of--we are going 
to have to have MilCon some places. No question about it. We 
cannot privatize everything. But we have got to figure out how 
to privatize things. I am not sure in the Army what is the 
right way to go yet, whether the RCI is the right way to go. I 
think we ought to do one in the RCI to see whether it comes up, 
and we have this other one that we did at Fort Carson in a 
different way. And we ought to see which one gets us the best 
bang for the buck. Maybe we have to disapprove one as we go 
along to make sure that we--if it is not getting the best bang 
for the buck.
    I do want to compliment the services. I think they finally 
got the right consultants, or they have got consultants that 
are defending them with the developers and looking at what I 
call the underwriting of these projects before we get too long. 
These are big dollars. And before we get out there and make--
you know, and get into this, we need to know where we are 
going, because if we make some mistakes in this, we will kill 
the privatization and people will run from it.

                          FACILITIES REDUCTION

    The other thing is--just a last comment I have, and then we 
will go back to another round here--there are a number of--I am 
concerned about the utilities privatization, and all the bases 
are running around scared to death of this. They are not quite 
sure where to go with it. And the other thing is--here it is, 
the facilities reductions. As a part of the Defense Reform 
Initiative, each military service surveyed its building 
inventory to identify the obsolete and excess buildings they 
could demolish and otherwise dispose of. The survey identified 
80 million square feet and about 8,000 specific structures, and 
at some point I would like you to tell us what progress the 
Department has made in disposing of this excess real property. 
And when does the Department expect to meet the desired end 
state?
    Mr. Lynn. I can answer that right now.
    Mr. Hobson. Okay.
    Mr. Lynn. You are right, 80 million square feet is the 
target. The target date is 2003. Thus far in 1998 and 1999 we 
have demolished and disposed of just over 30 million square 
feet. That is actually a little bit ahead of the schedule that 
we planned, and it is actually a little bit below cost.
    Unfortunately, we probably will not be able to keep to that 
pace because, as is natural, you take the low-hanging fruit 
first. And so the easiest and cheapest structures have 
probably, almost surely, been demolished.
    Mr. Hobson. No, I can show you a whole bunch of them out 
there. There are still a bunch of them.
    Mr. Lynn. That leaves about 50 million square feet to do 
over the next 3 years, and as I say, we are currently actually 
a little ahead of schedule. We expect it to get tougher, 
though.
    Mr. Hobson. Sam.
    Mr. Farr. Mr. Chairman, following up on that, you know, we 
have certainly moved in the Pentagon to off-the-shelf 
technology. It seems to me that is where we are in this 
housing, and we have got to look to more off-the-shelf 
technology.
    But just quickly a budgetary comment I would like to make. 
We have in this budget $473 million for construction projects 
overseas. I wondered whether staff might review whether how 
much of that could be in the emergency that would be relevant 
to the supplemental.
    Mr. Hobson. With the fight I had with those guys the last 
time----
    Mr. Farr. I know, and you did a good job. I think you are 
doing such a good job, we ought to consider it again this year.
    Secondly, I would like to express my concern about building 
the national missile defense system. I think that we ought to 
wait for the President's decision on that before we go ahead, 
and I just want to share that I am concerned about that, as did 
Mr. Olver.
    I would also like to express my interest in seeing the 
Pentagon move stronger on contracting out for base operations 
and savings that could be incurred. We are finding we are 
getting into the typical fight that it is people who 
essentially are in the Federal family that want the job, don't 
want to let those jobs go to the local family. But in both 
cases, it is one public sector to another public sector. And 
since these bases are in the local community which does have 
police, fire, and public works and so on, there ought to be--we 
ought to look closely at how much we can save by allowing local 
communities to do the work.
    Lastly, I will just submit to you two questions that I 
would like responded to in writing, and I know this is not the 
formal way of doing it, but perhaps these notes can get the 
same results. That is, I would like to have a list of the 
conveyance dates for the remaining projects at Fort Ord. I got 
it from the----
    Mr. Hobson. Yes, I would like to see that, too.
    Mr. Farr. What I find is that there are dates there and 
that some of the reasons for not being able to convey are 
locally generated and others are federally generated. I would 
like to see at least what your guesstimates are when those 
properties can be finally conveyed. You know, we have signed 
the economic development conveyance, the no-cost conveyance, 
and it is signed by the local re-use authority. So there is no 
reason other than the cleanup that ought to keep these 
properties from being transferred.
    Secondly, one question I get and you are all going to get, 
not only with base ops, but when you do construction on a base, 
the local contractors are very interested in how they can get 
in line to bid on it. It seems to be a very federally 
controlled, in-house process of base contractors. Frankly, 
there is a lot more work that could be done by the locals, and 
so if you could have somebody write how the local contractors 
can bid on base projects, including privatization, we might be 
able to use that for information that every Member of Congress 
would like to let out to their local building construction 
community.
    Mr. Hobson. One of the complaints on privatization is, as 
some services are looking at it, that it is skewed to the large 
national developers, I think is what he is getting to. 
Therefore, the local community is cut out, and so you do not 
get the use of local contractors and the subs that you do in a 
normal housing project. Now, some of these are pretty big and 
the bonding requirements are pretty high. But I think we would 
like to see as much--I hate to see in the housing area the same 
thing happens when we built tanks or trucks or some of these 
things where you get the traditional--I think this is what you 
are fighting against, the traditional Government contractor, he 
knows all the hoops and all the paperwork, and the local guys 
are just--well, they do not want to do it because of that.
    Mr. Farr. The outside contractors have been scandalous, and 
they have walked away from projects, they have not built them 
to standards. You know, there is a lot of local checking, 
particularly by the labor unions.
    The other thing that happens is that the response is, well, 
you can bid on it, you just have to read the Federal Register 
or the contract, which, you know, small businesses do not have 
the time nor the ability to subscribe to that volume of 
information that comes out every week. And at least there ought 
to be some way of notifying the local community, some sort of 
sidebar process.
    Mr. Hobson. The Army has had some hearings--or meetings, I 
think, in some of the local communities on theirs, but the 
feedback I get back is that a lot of the locals feel they are 
skewed to the large national developers. Whether that is true 
or not, I do not----
    Mr. Lynn. Well, let me get back to you for the record on 
that, on both the conveyance dates at Fort Ord as well as what 
kind of procedures we have to involve the local community in 
military construction.
    Let me just make a couple of comments about your earlier 
statements.

                        NATIONAL MISSILE DEFENSE

    Funding for the national missile defense is not meant to 
prejudge the decision the President will make this summer. It 
was meant to enable it. We think we have put together a 5-year 
program that is fully funded to an initial operating capability 
in 2005 should the President decide to deploy to that date. It 
does not in and of itself make the decision. I think that is 
particularly true with the military construction.

                         BASE OPERATING SUPPORT

    With regard to competing base operating support functions, 
we are trying to do that. We have already studied well over 
100,000 positions in the Department for competition. We have in 
training nearly an equal number to do over the next 2 or 3 
years. Base operating support is one of the principal 
functions, for the reasons you indicate. There is a large 
commercial market in most of these functions, and we would like 
to improve our cost structure by allowing competition in that 
area, because what we found in all these areas is that, 
regardless of who wins, whether it is the Government entity or 
a private competitor, we save 20 to 30 percent. The competition 
itself causes the Government entity to restructure in ways that 
reduces its costs and in ways really only they understand. I 
mean, it is impossible to do this top down and to say from 
Washington, here is how you can do your business better. They 
know far better how to do that. And when put into a competition 
with an aggressive private sector, they do do far better.
    It does cause problems with Government employees. I do not 
want to minimize that. There is instability and heartache and 
difficulty, and I need to be cognizant of that. But I think as 
long as the competition is fair, fairly run and fairly decided, 
this is definitely a positive thing for the Department.
    Mr. Farr. Are you including in that housing authorities? My 
county housing authority says they can operate, keep the 
military housing in better condition at a cheaper cost.
    Mr. Lynn. I would have, though that would be on a service-
by-service basis. I do not know the answer.
    Mr. Hobson. I think we had to change the law. I think the 
law is now changed, isn't it, that we can use these--there have 
been a couple of housing authorities that are trying to bid. 
Mr. Hoyer and Mr. Cardin are very interested in one. I think 
there are a couple others that have tried. There was something 
wrong with the law, but I understand now they can. I think that 
has been changed. If not, we need to look at that.
    Mr. Farr. Well, I would include that in your consideration 
of base ops along with, you know, public works and----
    Mr. Hobson. I think it was changed. He said it was changed 
last year. Now, before that, there was a problem.
    Mr. Farr. Thank you.
    Mr. Hobson. Allen.
    Mr. Boyd. No questions.
    Mr. Hobson. Chet.
    Mr. Edwards. Just very briefly, Mr. Chairman. Since this is 
the first meeting of the year, I want to thank you for all the 
tough questions you asked about privatization last year. I 
think it is going to be a better program because of that, and I 
appreciate your approach, your cautious approach, and the tough 
questions, and I hope we can move forward on some of these 
projects. We are getting closer, but I really do think that a 
lot of those issues need to be raised, and I am glad you have.
    Mr. Secretary, again, as long as you will not interpret my 
silence of further follow-up on the housing allowance as being 
lack of concern, I just would re-emphasize briefly that I just 
think that is an enormous issue that goes way beyond the 
numbers, and surely, the quicker we can solve that without 6 
months of studies and committees and evaluation and this and 
that and passing the buck back and forth, the better off we 
will be. We already have hurt our trust with our uniformed 
personnel, and I hope we could cut our losses and do it quickly 
and move on with the number of good programs you have that will 
let them know we care about their quality of life.
    Thank you for the job you are doing. It is tough one, and I 
appreciate what you are doing.
    Mr. Lynn. Thank you, Mr. Edwards.
    Mr. Hobson. Virgil.
    Mr. Goode. Just one question, Mr. Chairman. I look under 
medical projects, and you have got $1.4 million for a 
veterinary treatment facility. What is that? What kind of 
animals?
    Mr. Lynn. I am afraid I do not know. We will have to get 
back to you.
    Mr. Hobson. Anybody else?
    [No response.]
    Mr. Hobson. Well, Mr. Secretary, we have got some questions 
for you for the record. We will give them to you and you can 
answer them, and we would appreciate a timely response. Good 
luck to you with your duties, and we really want to work 
together. I hope it does not appear sometimes that we are 
adversarial. We have to be in some respects, but our mutual 
goals are the same. We want to help our military do the things 
that they are asked to do, and we want to protect their 
families and their quality of life. We think that is part of 
our job, and it is your job, and I think we share that.
    I tried to say this yesterday with the officers I was with. 
I learn by asking questions and having a dialogue, and if we do 
not have that dialogue, we all cannot get our jobs done better. 
And I very much appreciate your candor with me over the time we 
have spent together. And our next hearing--is there anything 
you would like to say before we end?
    Mr. Lynn. Well, no. Thank you very much, Mr. Chairman, for 
the opportunity, and I do look forward to working with you. I 
think this committee has always been constructive, and I am 
sure it is going to continue under your leadership.
    Mr. Hobson. If we can just get enough money. [Laughter.]
    Our next hearing is tomorrow at 9:30. The subject will be 
quality of life in the military. Our witnesses will be the 
senior enlisted from each service, and that is always a very 
interesting hearing, and we look forward to that.
    I am sure you might have somebody here listening to what 
they may say about that.
    Mr. Lynn. We usually do.
    Mr. Hobson. Thank you.
    Mr. Lynn. Thank you very much.
    Mr. Hobson. Thank you.

    [Clerk's note.--Questions for the record submitted by 
Chairman Hobson.]

                     HISTORIC PRESERVATION EFFORTS

    Question. What efforts are being undertaken by the Department to 
reduce costs and improve the maintenance of historic buildings?
    Answer. The Department of Defense (DoD) has undertaken several 
initiatives. First, the Services have implemented a centralized 
demolition plan to remove facilities from its inventory that have 
exceeded their economic life and have no enduring historic 
significance. By eliminating buildings that are simply old but not 
historic, this action will limit unwanted future expansion of the 
inventory of historic buildings that must be maintained. Secondly, the 
Services are working with the State Historic Preservation Officers and 
Advisory Council on Historic Preservation to form programmatic 
agreements (PAs) regarding the management of historic facilities. The 
PAs range in scope from specific historic facilities or classes of 
facilities (such as family housing) to those covering all historic 
facilities in a region or historic district. The standards implemented 
by the PAs are expected to improve quality and also reduce costs by 
eliminating uncertainty and improving the timeliness of performing 
maintenance and improvement projects. In addition, since it may not be 
prudent to maintain all the potentially eligible facilities in the 
DoD's inventory, the PAs will help determine which facilities should be 
maintained and which are potential candidates for the Services 
centralized demolition program. Thirdly, the Services are updating 
their Installation Cultural Resource Management Plans and integrating 
them with other installation planning documents such as master plans. 
Finally, the Services have established working groups to develop a 
management plan for the ownership, operation and maintenance of 
historic family housing. We are preparing a report entitled ``The Cost 
of Maintaining Historic Family Housing'' which will provide 
installation commanders, cultural resource managers, and other base 
personnel with information on how to reduce the costs of maintaining 
these historic structures.

                HISTORIC PRESERVATION ACTIVITY ACCOUNTS

    Question. In order to keep historic costs distinct from normal 
maintenance and repair funding, has the Department considered 
reconfiguring the military construction and family housing accounts to 
provide specific line items for the lump-sum funding of all historic 
preservation activities? If not, why not?
    Answer. The Services have considered the establishment of separate 
accounts to track costs associated with historic preservation. While 
such accounts would certainly provide visibility for costs associated 
with historic structures, careful thought needs to be given to the 
advantages and disadvantages of creating separate accounts. The 
Services are concerned that the creation of separate accounts would 
restrict their flexibility in managing maintenance and repair programs 
and preempt their ability to move money to accommodate higher 
priorities, should the need arise. It is also questionable whether 
separate historic preservation accounts would meet their intended 
purpose, since in practice, it is difficult to break out costs 
associated with maintaining historic aspects of facilities from those 
that would be incurred regardless of historic status. It is a fact that 
the size and condition of historic quarters, not historic preservation 
requirements, are the main cost drivers. In summary, the DoD is not 
confident the benefits of establishing and maintaining separate 
accounts to track historic preservation expenses would outweigh the 
additional management and overhead costs.
    Question. If separate, sole-source, historic preservation accounts 
were established, does the Department believe this would assist in 
forcing prioritization of preservation activities?
    Answer. No. In theory, the establishment of separate historic 
preservation accounts would provide visibility in the programming and 
budgeting process. However, in practice it is unclear whether historic 
preservation activities can be completely isolated from other property 
management considerations. The size and condition, not historic 
preservation requirements, are the main cost drivers for maintaining 
historic housing. Overall, the DoD is concerned that a focus on 
historic preservation in the budget process would ultimately extend 
beyond basic stewardship principles and detract from the Services 
primary responsibility to prioritize and maintain its facilities to 
meet mission requirements.

                 HISTORIC PRESERVATION--PRIVATE FUNDING

    Question. Under Title 10, does the Department have the authority to 
use private donations for the upgrade and maintenance of historic 
quarters or buildings? If not, is the Department seeking to make a 
legislative proposal to allow such expenditures?
    Answer. Section 2601 of title 10, United States Code, authorizes 
the Secretary to accept gifts for the benefit of any organization or 
institution under its jurisdiction. Although the Department has 
accepted private gifts for the benefit of historic facilities in the 
past, the Department is not confident that a sufficient quantity of 
gifts will be available on an ongoing basis to play a significant role 
in the maintenance of historic facilities. Regarding historic family 
quarters, the Section 128 of the Military Construction Appropriations 
Act, 2000 (Public Law 106-52) specifically prohibits the use of sources 
other than military family housing appropriations for the maintenance 
and repair of military family housing.
    Although the Department is not seeking any specific legislation 
regarding historic quarters, we are seeking improvements to our current 
outleasing authorities to enhance our ability to make better economic 
use of less than fully utilized assets. Those improved authorities, if 
enacted, would be available for use with historic quarters and could 
help offset some of our current costs for those facilities.

             HISTORIC PRESERVATION--COOPERATIVE AGREEMENTS

    Question. Please describe the efforts being made by the Department 
to reach cooperative agreements, if any, with the Advisory Council on 
Historic Preservation, the National Trust for Historic Preservation, 
and State Historic Preservation Offices on historic property 
management.
    Answer. The Army entered into an Interagency Agreement (IAG) with 
the Advisory Council on Historic Preservation (ACHP) in February 1996 
to assist the Army in management of its historic properties. The IAG 
facilitates protection, enhancement, and preservation of historic 
properties on Army lands; provides a cost effective means for 
addressing recurring historic property management issues; and enhances 
Army stewardship of our Nation's heritage. The ACHP continues to assist 
Army Headquarters in such diverse actions as development of Army policy 
and guidance for management of historic properties; establishment of 
guidance for Integrated Cultural Resources Management Plans; and the 
development of Army-specific ``alternate procedures'' that can 
substitute for the ACHP's Section 106 National Historic Preservation 
Act regulations.
    In August 1999, the Department of the Army entered a cooperative 
agreement with the National Trust for Historic Preservation (NTHP) to 
improve management of the Army's historic property inventory. Goals of 
the initiative include: identifying and evaluating past and ongoing 
efforts at Army installations to involve private entities in the 
redevelopment, use, and management of historic properties; developing a 
model for evaluating opportunities for redevelopment of historic 
properties on Army installations similar to that used for the NTHP's 
National Main Street program; implementing pilot projects to evaluate 
opportunities for redevelopment of historic properties at Army 
installations; and identifying potential state, local, and private 
partners.
    The Navy recently negotiated a programmatic agreement in Virginia 
that covers the naval complex in Hampton Roads. It is nearing 
completion of a programmatic agreement concerning Navy properties on 
Oahu, notably the Pearl Harbor National Historic Landmark District, and 
a nationwide programmatic agreement concerning historic family housing. 
The Navy routinely executes programmatic agreements or memoranda of 
understanding for BRAC dispositions. All programmatic agreements and 
memoranda of understanding involve consultation with one or more State 
or Tribal Historic Preservation Officers, and may involve consultation 
with the National Conference of State Historic Preservation Officers 
(SHPOs), the ACHP, and other parties, as required by 36 CFR Part 800.
    The Marine Corps has negotiated a programmatic agreement for 
historic property management at MCAGCC Twentynine Palms, CA, and MCAS 
Yuma, AZ, with the cognizant State Historic Preservation Offices and 
the ACHP. It is in the process of negotiating agreements at MCB Camp 
Pendleton, CA; MCB Camp Lejeune, NC; and MCB Quantico, VA. The Marine 
Corps intends to begin negotiations at Marine Barracks Washington, DC; 
MCAS Cherry Point, NC; MCRD San Diego, CA; and MCRD Parris Island, SC. 
It negotiated an agreement for the disposition of historic properties 
at MCAS Tustin, a BRAC base. MCAS El Toro, another BRAC base, does not 
possess historic properties.
    In 1995, the Air Force signed a proclamation entitled Preservation 
and Management of Historic Properties in the Department of the Air 
Force with the NTHP, the ACHP, the National Council of Historic 
Preservation Officers (NCSHPOs), and the Keeper of the National 
Register of Historic Places. The Proclamation recognizes the Air 
Force's need to support mission requirements while maintaining historic 
resources in a cost-effective manner. To support this Proclamation, the 
Air Force has encouraged its installations to develop, where 
appropriate, programmatic agreements with the State Historic Property 
Officer and the ACHP to streamline the Section 106 consultation 
process. The Air Force also uses programmatic agreements as effective 
tools for identifying cost effective maintenance and treatment methods 
that meet the Secretary of the Interior standards for historic 
buildings.

           HISTORIC PRESERVATION--HISTORIC PROPERTY INVENTORY

    Question. By Service, how many Department of Defense properties are 
considered historic?
    Answer. The Army's real property management system, the Integrated 
Facilities System (IFS), includes a coding category to reflect whether 
a property is ``historic,'' Use of this coded field is not mandatory 
and definitions governing the field have been subject to varying 
interpretations. As a result, Army installation real property managers 
have not used the system in a completely reliable way. The following 
figures are the best Army estimates:
    Buildings listed or eligible to be listed on the National Register:

Family Housing................................................     4,559
    GFOQ (quarters)...........................................       168
    Non-GFOQ (quarters).......................................     4,391
All other buildings...........................................     2,413

    The figure for ``All other buildings'' is significantly 
understated. Annual Environmental Quality Reports from Army 
installations respond to a query for the number of listed or eligible 
historic properties. The sum of these responses for a substantial 
number of Army installations totals 8,801. Based on this sample of 
responses, a reasonable estimate of all historic Army properties in 
12,000. Knowing the housing numbers are nearly precise at 4,559, this 
yields a figure for all other buildings between 7,400 and 7,,500. Note 
that the total count of 12,000 buildings listed or eligible to be 
listed on the National Register of Historic Places in 22 percent of all 
Army buildings over 50 years old.
    The Navy and Marine Corps currently have approximately 2763 
buildings and structures on or eligible for the National Register of 
Historic Places. Of these, approximately 946 will be transferred as 
BRAC disposals. This figure differs from input to a similar HAC 
question a couple of weeks ago in that it includes structures in 
addition to buildings. It does not include National Register-eligible 
sites (including archaeological sites), objects, ships, or shipwrecks.
    The Air Force has approximately 4177 historic buildings and 
structures.
    Question. By Service, how many Department of Defense properties are 
considered National Historic Landmarks (HNLs)?
    Answer. The Army has a total of 15 National Historic Landmarks: 
Carlisle Indian School, PA; Fort Huachuca, AZ; Fort Leavenworth, KS; 
Fort McNair, Washington DC; Fort Monroe, VA; Fort Sam Houston, TX; Fort 
Shafter, HI; Fort Sill, OK; Rock Island Arsenal, IL; Fort Wainright, 
AK; U.S. Military Academy, NY; Watervliet Arsenal, NY; White Sands 
Missile Range, NM; Fort Douglas, UT; and Yuchi Town, Fort Benning, GA.
    The Air Force has a total of 11 National Historic Landmarks, 
including Fort David Russell (F.E. Warren AFB, WY), Cape Canaveral 
Launch Site, FL, and Wheeler Field, HI.
    The Navy has 13 National Historic Landmarks, including the Pearl 
Harbor National Historic Landmark District, HI; NAS Pensacola, FL; 
Puget Sound Naval Shipyard, WA; U.S. Naval Academy, MD; and Washington 
Navy Yard, DC. Pearl Harbor has 550 buildings and structures, nearly 
three-quarters of all the Navy buildings located in National Historic 
Landmarks or National Historic Landmark districts.
    Question. By Service, in the next 20 to 30 years, how many 
Department of Defense properties will reach 50 years of age (the 
minimum age for listing a property on the National Register)?
    Answer. In the next 20 to 30 years, approximately 48,500 Department 
of the Navy buildings and structures will reach 50 years of age in 
addition to the 29,500 buildings and structures in the current 
inventory of age 50 or older. These figures do not account for 
facilities that will be removed from the Navy's inventory under the 
centralized demolition program.
    In the next 20 to 30 years, approximately 155,317 Department of the 
Army buildings and structures will reach 50 years of age in addition to 
the 53,975 buildings and structures in the current inventory of age 50 
or older. These figures do not account for facilities that will be 
removed from the Army's inventory under the centralized demolition 
program.
    The Air Force does not have that data.

                      HISTORIC PRESERVATION--COSTS

    Question. By Service, what is the total operation and maintenance 
costs for all historic properties?
    Answer. The Services have no accounting system in place to provide 
this information.
    Question. By Service, what is the average annual maintenance and 
repair cost per historic property?
    Answer. The Services have no accounting system in place to provide 
this information.
    Question. By Service, what is the average annual maintenance and 
repair cost per non-historic property?
    Answer. The Services have no accounting system in place to provide 
this information.
     Historic Preservation--Coordination With Housing Privatization
    Question. How are utilities privatization and housing privatization 
being coordinated?
    Answer. Coordination of utilities privatization and housing 
privatization is done primarily at the local installation level, since 
most of the issues are location dependent. Overall integration of the 
two programs is the responsibility of the Deputy Under Secretary of 
Defense for Installations.
    Question. What is the impact of utilities privatization on housing 
privatization?
    Answer. DoD policy directs that members living in privatized 
housing be responsible for their utilities usage. Rents are limited to 
an amount that, on average, allows members to pay both their rent and 
their utilities from their housing allowances. In off-base privatized 
housing, members would normally pay their bills directly to private 
utility providers. Similarly, in on-based privatized housing, they 
would pay a utility provider or an administrative entity, which would 
be either the developer or a private utility provider.
    One concern is that commodity price increases caused by the utility 
system conveyance could reduce housing project rents because member 
rents are reduced by the member tenant's expected utility expense. This 
could cause a reduction in the developer's income that could affect the 
financial viability of the housing project. This matter will require 
coordination between housing and utilities privatization.

               HISTORIC PRESERVATION--FEASIBILITY STUDIES

    Question. The first of two interim milestones of the utility 
privatization effort is to determine whether or not to pursue 
privatization for each system by September 30, 2000. Has the Office of 
the Secretary of Defense provided economic feasibility guidance for the 
Services' to use in their evaluation of systems? If not, why not?
    Answer. Defense Reform Initiative Directive #49 provides basic 
guidance for conducting the utilities privatization economic analysis. 
Feedback we received from the Services after they conducted several 
solicitations indicated that additional guidance was necessary. As a 
result, the Office of the Secretary of Defense, in conjunction with the 
Military Services and supported by a private consultant hired by the 
Department is developing more comprehensive cost and economic analysis 
guidance. We expect to publish this guidance by May 2000.
    Question. By Service, what is the total cost to perform the 
necessary studies to meet the first DoD utility privatization 
milestone?
    Answer. The Services have different approaches towards utilities 
privatization implementation and use studies to different degrees. 
Studies are performed for determining the economic feasibility to 
privatize, to prepare environmental baselines and to secure contracting 
assistance to evaluate solicitations. The amount of money spent 
specifically on studies to meet the first utilities privatization 
milestone, however, is not broken out from overall program study costs. 
The Military Departments estimate that it will cost $264 million to 
conduct studies in support of utilities privatization (Army, $60 
million; Navy, $99.7 million; and Air Force, $85 million).

                    NATO SECURITY INVESTMENT PROGRAM

    Question. The budget request for fiscal year 2000 was $191 million 
and the fiscal year 2001 request is $190 million. Has the request been 
adjusted to reflect the three new members?
    Answer. Yes, the budget request has been adjusted to reflect the 
three new members and their potential participation in the various 
funding requirements for the Alliance. The request also considers the 
fact that many projects still requiring funding were approved prior to 
the expansion. Therefore, the U.S. contribution is greater in those 
instances.
    Question. What is the revised U.S. share since the three new 
members, Hungary, Poland, and the Czech Republic, have been admitted to 
the Alliance?
    Answer. The revised U.S. share when the total Alliance of 19 
members participate is 22.3 percent, and increases to 25.5 percent when 
only 18 members participate (France abstaining). Not all members of the 
Alliance participate in every project and some ongoing projects were 
approved prior to the expansion. Therefore, it is estimated that the 
average annual U.S. contribution is closer to 26 percent.
    Question. How much is programmed in fiscal year 2001 for NATO 
Expansion? How does this compare to expansion costs in fiscal year 
2000?
    Answer. As provided for in the budget justification for the NATO 
Security Investment Program, $12 million is requested in fiscal year 
2001 to cover the anticipated requirements for NATO expansion. Our 
request for fiscal year 2000 was $5 million. The funding requirement 
for expansion will level out for the next few years and then diminish 
dramatically in the final period of the ten-year program.
    Question. What are the anticipated recoupments in fiscal year 2001 
for the NATO Security Investment Program?
    Answer. The estimated recoupments for NATO is $11.0 million for 
fiscal year 2001.
    Question. How much did the Department recoup in fiscal year 2000?
    Answer. The Department estimates that $11.0 million will be 
recouped in fiscal year 2000.
    Question. What NAU rate was used in formulating the fiscal year 
2001 budget request and what is the date of the next revaluation of the 
NAU?
    Answer. The NAU rate used in formulation for fiscal year 2001 was 
3.641 NAU. The next revaluation of the NAU rate will be July 1, 2000.

                       CHEMICAL DEMILITARIZATION

    Question. The Chemical Weapons Convention (CWC) Treaty disposal 
deadline is in 2007. Due to evaluation of alternative technologies and 
delays in receiving the necessary environmental permits, the 
Department's Chemical Demilitarization construction program has fallen 
behind schedule. Is compliance with the Treaty date at risk? If so, 
what are the consequences if we fail to meet the 2007 goal?
    Answer. The Program remains on schedule to comply with the CWC 
completion date of April 2007 at all sites except Pueblo, Colorado and 
Blue Grass, Kentucky. Public Law 104-208 prohibited obligation of funds 
to construct incineration facilities at Blue Grass and Pueblo until 180 
days after the Department of Defense submitted its report to Congress 
on demonstration of at least two alternative technologies to 
incineration to destroy assembled chemical weapons. This report was 
provided to Congress in October 1999. In addition, Public Law 106-52 
prohibits obligation of funds to construct any disposal facility at 
Blue Grass until the SECDEF certifies to Congress that the remaining 
alternative technologies identified by the ACWA Program will be 
demonstrated. On July 27, 1999, my office certified that the Department 
would proceed to demonstrate the remaining technologies. Demonstration 
testing of these technologies is scheduled to begin in the third 
quarter of Fiscal Year 2000. Our preliminary assessment indicates that 
the Blue Grass site is at risk in breaching the CWC. There is some 
degree of risk associated with the Pueblo site making the CWC deadline. 
The Department continues to assess options to mitigate schedule delays, 
while complying with existing laws and regulations. The Department 
remains committed to meeting the United States' obligations under the 
CWC.
    The CWC does not specify whether or what type of penalty would be 
levied should a State Party be unable to destroy chemical weapons 
within ten years of entry into force of the Convention (April 2007). In 
accordance with the Verification Annex, Part IV(A), Section C, 
paragraph 24-28, a State Party is entitled to request up a to five-year 
extension if it is unable to complete destruction operations within the 
designated 10 years. If granted, the Executive Council shall set 
conditions for the granting of the extension, including the specific 
verification measures deemed necessary as well as the specific actions 
to be taken by the State Party to overcome problems in its destruction 
program. There is no guarantee, however, that a State Party would be 
granted this extension during a review and vote by the Executive 
Council.
    Question. Once again, the Department proposes to shift funding for 
the Chemical Demilitarization Program from Defense-wide to the Army 
Account. What precautions have been taken to make sure the Army program 
is not reduced to fund chemical demilitarization?
    Answer. A complete evaluation of the Chemical Demilitarization 
program was accomplished as part of the last Quadrennial Defense 
Review. Consistent with this review, all known Chemical 
Demilitarization program requirements were fully funded at the time of 
the transfer to the Army. As a result of this transfer, the Army's 
topline was commensurately increased thereby holding all Army programs 
harmless. Since then, additional funding has been programmed in the 
outyears to cover unanticipated requirements and restore congressional 
reductions (to place funds in the year in which they will execute) 
before transferring it to the Army again this year.

                        ADVANCED APPROPRIATIONS

    Question. Advance appropriations totaling $821 million for 8 
projects are requested in the budget. What criteria were applied in 
determining which projects would receive advance appropriations?
    Answer. Advance appropriations are requested for projects which the 
Department plans to incrementally fund. Of the 8 projects requested in 
the budget, 4 have been authorized and approved for incremental funding 
by Congress in previous years. The four criteria used to determine if a 
project will be incrementally funded are: (1) the estimated cost of the 
project should be $50 million or greater; (2) the construction schedule 
should be equal to or greater than 24 months; (3) contracts shall 
conform with the Federal Acquisition Regulation to prevent over-
obligation of the government; and (4) configuration of the contract in 
separate increments will not significantly increase the cost of the 
project.
    Question. What benefit is expected from advance appropriations?
    Answer. The Department hopes to make more efficient use of 
available funding by not budgeting or funding construction that cannot 
be executed in the budget year. As noted above, full authorization for 
4 of the 8 projects has already been approved, and the Department has 
requested full authorization and advance appropriations in the FY 2001 
budget request to complete all projects. This funding approach, 
incidentally, is similar to the way many projects have been financed by 
Congress in the past.

                          UNOBLIGATED BALANCES

    Question. The budget proposes to finance $20 million of the 
Military Construction, Navy account from unobligated prior year 
appropriations of four accounts. Why was it formulated in this 
manner and why didn't the Department request a traditional 
rescission of these funds? Provide for the record the 
individual sources, which derive the $20 million.
    Answer. The Navy Military Construction request was 
formulated in this manner in order to maximize the use of 
available resources. We routinely monitor program execution. In 
this case, the review of program execution in prior years 
showed that actual contract amounts, outstanding commitments, 
current working estimates and the use of split funding had 
generated unobligated balances that were greater than the 
remaining program requirements for those years.
    The use of unobligated balances to finance a portion of the 
FY 2001 program is consistent with previous budget requests. 
Most recently, in FY 1999 our budget proposed financing $15.5 
million of the Army, Navy, and Air Force family housing 
construction programs with prior year unobligated balances. In 
FY 1998, the budget proposed using $23.8 million of unobligated 
balances to finance part of the Air Force military construction 
program.
    Using either method (unobligated balances or rescissions) 
achieves the same result--maximum use of scarce military 
construction resources.
    Since the FY 2001 review was based on actual and projected 
costs at the program level, individual sources by project for 
the $20 million were not identified. The Navy will identify the 
individual sources as it executes its FY 2001 program.

                            SOUTHCOM HOUSING

    Question. What is OSD's long-term plan to provide housing 
for all U.S. Southern Command (SOUTHCOM) Headquarters 
personnel?
    Answer. The long-term housing plan continues to focus on 
providing adequate housing for all HQ, SOUTHCOM personnel. This 
will be accomplished by a variety of strategies that may 
include: government construction of accompanied, unaccompanied, 
and key personnel housing; partnering with the private sector 
for a privatization type housing project(s); lease/purchase of 
existing housing; continued use of housing allowances for 
private rental housing; or a combination of all. A cost benefit 
analysis would dictate the best alternative(s) to pursue. 
Legislation may be required to accomplish long-term housing 
solutions.
    Question. Has the Department programmed construction 
dollars for military housing at SOUTHCOM Headquarters? If so, 
how much and what fiscal year?
    Answer. The Army has not programmed any construction for 
military housing at SOUTHCOM Headquarters.
    Question. How is housing currently provided for all 
SOUTHCOM Headquarters personnel, and how much is budgeted in 
fiscal year 2001 to provide housing for all SOUTHCOM personnel?
    Answer. $2.029 million is currently budgeted for 112 leased 
family housing apartments for junior enlisted personnel, and 8 
units for Key and Essential (K&E) personnel. An additional 
$.85M is budgeted for 66 apartments (double occupancy) for 
unaccompanied junior enlisted and one unaccompanied K&E 
officer.

                      BASE REALIGNMENT AND CLOSURE

    Question. Why does the Department need authority for two 
additional rounds of base realignment and closure?
    Answer. The Department needs this authority for a number of 
reasons. I will address the three most significant points. 
First, the Department estimates it has 23 percent excess base 
capacity, relative to 1989 force levels, as reported in the 
April 1998 Report of the Department of Defense on Base 
Realignment and Closure. Maintaining infrastructure we no 
longer need is not prudent management. We need to properly 
manage our facility resources by reducing the excess capacity 
and freeing up funds for war fighting capability and quality of 
life programs. Second, the Department needs to reshape its base 
infrastructure to match its changing mission requirements. Only 
through BRAC authority is the Department able to reshape its 
infrastructure, when reshaping involves the closure and 
realignment of some of its bases. Third, BRAC actions generate 
significant savings, a point on which both the General 
Accounting Office and the Congressional Office are in agreement 
with the Department. The Department estimates that current BRAC 
rounds could generate approximately $6 billion in annual 
recurring savings, and over $3 billion for future rounds. These 
savings or cost avoidance could be better applied toward higher 
priority Defense programs.
    Question. Is it correct that the Future Years Defense Plan 
has ``placeholders'' for future BRAC rounds in fiscal year 2004 
and beyond? If so, how much is set aside in each year, and how 
would administrative expenses be financed prior to fiscal year 
2004?
    Answer. The Future Years Defense Plan accompanying the FY 
2001 President's Budget includes $691.0 million in FY 2004 and 
$1,381.0 million in FY 2005 to implement two new Base 
Realignment and Closure rounds in FY 2003 and FY 2005. Prior to 
FY 2004, administrative expenses associated with formulating 
two new BRAC rounds would be financed by current DoD operating 
accounts.
    Question. The implementation of the last round of the four 
approved BRACs will be complete July 13, 2001. What are the 
projected annual savings after fiscal year 2001? Additionally, 
over the implementation period (FY 1990-2001), how much will 
the Department have invested in the four approved BRACs, and 
what were the total realized savings and total net savings as a 
result of the process?
    Answer. If the BRAC portion of the FY 2001 MilCon budget is 
approved as requested, the Department will have invested $22 
billion to implement the current BRAC rounds through 2001. 
Through the same period, the Department estimates BRAC should 
generate approximately $37 billion, resulting in net cumulative 
savings of approximately $15 billion.

                          FACILITY REDUCTIONS

    Question. By service, what are the future funding requirements to 
complete this initiative?
    Answer. Beginning with the fiscal year 2001 request, these are the 
future funding requirements to achieve the Defense Reform target of 
80.1 million square feet eliminated by the end of fiscal year 2003.

   DEFENSE REFORM INITIATIVE REQUIREMENT IN MILLIONS FISCAL YEAR 2001
                           THROUGH COMPLETION
------------------------------------------------------------------------
                                                          Fiscal year of
                                                            completion
------------------------------------------------------------------------
Army...................................          $299.9            2003
Navy...................................            79.6            2002
Marine Corps...........................               0            2000
Air Force..............................           146.9            2003
------------------------------------------------------------------------

    The Marine Corps will achieve their portion of the Defense Reform 
target (2.1 million square feet disposed) in FY 2000, so they have no 
future requirement related to this initiative. However, this does not 
mean the Marine Corps have no future requirement for demolition 
funding. The Marine Corps will continue to have demolition requirements 
in the future but these additional requirements are beyond the scope of 
the Defense Reform Initiative. The same will apply to other military 
services once they achieve their individual Defense Reform objectives.
    Question. To date, what are the estimated avoided operation and 
maintenance costs due to the demolition effort, and how are these 
savings being re-applied?
    Answer. DoD will avoid operations and maintenance costs of about $2 
per square foot eliminated. During fiscal year 1999, DoD avoided about 
$32 million in costs due to the fiscal year 1998 demolition effort 
(over 16 million square feet eliminated). During fiscal year 2000, DoD 
will avoid an additional $61 million in costs due the combined 1998-
1999 demolition results (over 30 million square feet eliminated). In 
total, by the end of fiscal year 2000 DoD will have avoided 
approximately $93 million in costs due to the 1998-1999 demolition 
effort, and will continue to avoid these costs in each future year. In 
accordance with DepSecDef's original direction, any savings derived 
from demolition programs remain with the military service that 
accomplished the demolition to be re-applied to their highest priority 
unfunded requirements. Our accounting system does not track where 
dollars formerly spent on obsolete facilities are now being spent.
    Question. What are the annual savings per year upon completion of 
the demolition initiative?
    Answer. DoD will avoid annual operations and maintenance costs of 
about $2 per square foot eliminated, or approximately $160 million each 
year upon completion of 80.1 million square feet by the end of fiscal 
year 2003.

                     GENERAL PROVISIONS: DELETIONS

    Question. Why does the budget propose to delete the following 
sections:
    Section 111--American preference for A&E contracts.
    Section 113--notification of exercises.
    Section 119--annual burdensharing report.
    Section 121--compliance with ``Buy American Act''.
    Section 122--American-made equipment and products.
    Section 124--Partnership for Peace Programs.
    Section 125--notification of housing privatization solicitations.
    Answer. Sections 111 (American preference for A&E contracts), 121 
(compliance with ``Buy American Act''), and 122 (American-made 
equipment and products) are unnecessary restrictions which limit the 
bidding climate. Similarly, Section 124 (Partnership for Peace 
Programs) places unnecessary limits on the Partnership for Peace 
Programs. Section 113 (notification of exercises) inhibits the 
President's ability to perform his function of Commander-in-Chief by 
requiring a 30-day notification before military exercises occur. The 
continuing requirement to provide an annual burdensharing report under 
Section 119 is burdensome and unnecessary since it duplicates 
information already provided the committee. Section 125, which requires 
a 60-day notification prior to any housing privatization solicitations 
containing a base closure guarantee, only serves to delay privatization 
initiatives an additional 30 days since 10 U.S.C. 2883 already requires 
a 30-day notification prior to any family housing privatization 
solicitations.

                      TROOP HOUSING--``1 PLUS 1''

    Question. What progress is the Department making in upgrading 
barracks for our single members to meet the new ``1 Plus 1'' standard?
    Answer. The Services are making good progress in building to the 
1+1 barracks construction standard. The Army indicates it will achieve 
the 1+1 standard by 2008, and the Air Force by 2009. The Marine Corps 
(operating under a waiver to the 1+1 standard) will achieve its two 
person per room standard by 2037.
    The Navy has constructed or renovated 10,687 spaces to the ``1 Plus 
1'' standard. The Navy is currently reviewing a new policy to allow 
junior enlisted unaccompanied shipboard Sailors to move off ship when 
the ship is in its homeport. As a first step in providing ashore living 
accommodations to shipboard Sailors, Navy was granted a waiver by the 
Deputy Assistant Secretary of the Navy for Installations and Facilities 
to construct/renovate permanent party enlisted barracks at the ``2 Plus 
0'' standard. Once it satisfies the housing requirement at the ``2 Plus 
0'' standard, the Navy will proceed to construct facilities at the 1+1 
standard until all Sailors are provided a private sleeping room. 
Additional details concerning an implementation plan are being 
developed.
    The Air Force has invested military construction (MilCon) funds to 
construct new or renovate existing critical condition permanent-party 
dormitories to provide 9,600 ``1+1'' standard dormitory rooms. In 
addition to MilCon, the Air Force has invested Congressionally 
appropriated Quality of Life Enhancement, Defense funds to renovate 
existing critical dormitories to the ``1+1'' standard to include the 
conversion of 30 central latrine dormitories.
    Question. What has the average cost per space been under the ``1 
Plus 1'' barracks standard?
    Answer. The Army's average cost per space for FY96-FY00 was $46,000 
from all funding sources. The average cost of military construction 
(MilCon) funded projects was $80,000 per space. This amount includes 
barracks, Soldier Community Buildings, administrative buildings, and 
dining facilities of the entire brigade complex. The average for O&M 
funded renovations of existing barracks was $25,000 per space.
    The Navy's average cost is $62,700 per space constructed at the 
``1+1'' construction standard. The Marine Corps' average cost is 
$48,400 per space ($80,800 per two-person room constructed at the 2+0 
standard).
    The Air Force's average cost per space for new ``1+1'' dormitories 
constructed in FY96-FY98 MilCon programs has been approximately 
$58,000.

                                BARRACKS

    Question. Submit for the record a chart that will show, by Service, 
the timetable for completion of the barracks revitalization effort at 
the time OSD approved the ``1 plus 1'' barracks standard, as compared 
with the timetable for completion of this effort as a result of 
Congressional initiatives to accelerate this effort.
    Answer. The additional appropriations for quality of life programs 
that Congress has added in the FY 97 to FY 00 budgets have contributed 
to the acceleration to the 1+1 barracks standard. These funds have also 
contributed to improvements in other quality of life facilities.

------------------------------------------------------------------------
                                            Original         Current
                                           timetable        timetable
------------------------------------------------------------------------
Army..................................            2020             2008
Navy..................................            2013         \1\ 2013
Air Force.............................            2019             2009
Marine Corps..........................            2013             2037
------------------------------------------------------------------------
\1\ Under review.

    The Navy is currently reviewing a new policy to allow junior 
enlisted unaccompanied shipboard Sailors to move off ship when the ship 
is in its homeport. As a first step in providing ashore living 
accommodations to shipboard Sailors, Navy was granted a waiver by the 
Deputy Assistant Secretary of the Navy for Installations and Facilities 
to construct/renovate permanent party enlisted barracks at the ``2 Plus 
0'' standard. Once details of this initiative are completed, the Navy 
will be able to provide more accurate projections for attaining the 1+1 
barracks standard.
    The original target date for the Marine Corps refers to the 
Service's initial plan (Dec 1995) to meet the 1+1 barracks standard. In 
1996, the Marine Corps revised its plan to build to the 1+1 barracks 
standard and requested a waiver that would allow them to build to a 
standard that provides for two enlisted members per room, sharing a 
bath (2+0 configuration). The Marine Corps estimated that it would 
complete building to the 2+0 configuration by 2070. As a result of 
additional resourcing and the Committees efforts, the date for meeting 
the 2+0 standard has been accelerated to 2037.

                         TROOP HOUSING: DEFICIT

    Question. By Service, what is the total current troop-housing 
deficit?
    Answer. The deficit is defined as the number of soldiers, sailors 
and airmen for which no housing is available. The Army has also 
included in its deficit figure the number of soldiers that currently 
occupy inadequate quarters. The Army's troop-housing deficit is 
approximately 55,500 bed spaces, which represents approximately 46,600 
soldier remaining to be adequately housed after FY01 funding. The 
Navy's troop-housing deficit is about 18,000 spaces. This deficit was 
calculated before adoption of its new policy to allow shipboard Sailors 
to move off ship when the ship is in its homeport. The Navy is 
currently assessing the effect of the new shipboard Sailor policy on 
the troop-housing deficit. The Marine Corps current enlisted room 
configured housing deficit is 27,500 spaces. The Navy and Marine Corps 
troop-housing deficits include both shortages in quantity as well as 
spaces that are inadequate or are served by central heads. The Air 
Force's troop-housing deficit is 13,000 rooms.
    Question. What progress has been made by the other services in 
developing a ``Master Plan'' similar to the Air Force's?
    Answer. The Army has completed a ``Barracks Assessment Study'' 
similar to the Air Force for all U.S. installations and a 
representative sample of installations in Korea and Europe. The Navy 
and Marine Corps are currently developing their barracks plans, along 
with required statements, for submission to OSD this Spring. The Navy 
is presently incorporating its Homeport Ashore initiative, which 
provides ashore living accommodations to shipboard Sailors while in 
homeport, into its plan.

                      TROOP HOUSING: INADEQUACIES

    Questions. Provide a breakout of how many barracks are considered 
substandard, inadequate and facilities with central latrines/showers.
    Answer. The following table indicates the number of permanent party 
bed spaces in barracks and dormitories considered substandard or 
inadequate and the number with central latrines/showers:

------------------------------------------------------------------------
                                          Substandard or      Central
                 Service                    inadequate       latrines
------------------------------------------------------------------------
Army....................................          12,900          28,300
Navy \1\................................          37,700          10,300
Air Force...............................           4,000               0
Marine Corps............................           6,300           7,900
------------------------------------------------------------------------
\1\ Includes permanent party and student spaces.


                     TROOP HOUSING: BUDGET REQUEST

    Question. How many spaces are included in the budget request for 
troop housing?
    Answer. The Department's FY 2001 budget request includes funding 
for about 11,810 barracks spaces (maximum use) with an intended use of 
10,950 spaces. The difference between maximum use and intended use is 
that the Services usually grant E-5s and above two spaces due to their 
seniority.

              TROOP HOUSING: COST TO BUY-OUT TROOP DEFICIT

    Question. By Service, what would it cost to buy-out the current 
troop-housing deficit?
    Answer. For the Army, the total remaining requirement FY 02-08, is 
$5.1 billion. Of this amount, $4.5 billion is in the MilCon funding. 
The remainder is required in Operations and Maintenance and host nation 
funds.
    The Navy estimates that it would require about $1.2 billion to buy 
out the troop housing deficit to the ``1+1'' construction standard. 
This estimate is based on the current troop-housing deficit and does 
not take into consideration the impact of the new shipboard Sailor 
policy.
    The Marine Corps estimates it would cost about $1.2 billion to 
eliminate its bachelor enlisted housing deficit and reach a person per 
room assignment standard.
    The Air Force estimates its cost to buy-out the current troop 
housing deficit is $743 million between FY 01 and FY 09.
    Question. By Service, what is the estimated cost per space to 
eliminate the current troop-housing deficit?
    Answer. The Army's anticipated average cost per space for the 
remaining program is $93,000. MCA projects will average $112,000 per 
space and O&M renovations will average $41,000 per space. These amounts 
do not include contingencies, and do include an estimate for anti-
terrorism/force protection measures. The costs are higher than historic 
costs primarily because much of the least expensive O&M and MCA 
projects were funded early in the program.
    The estimated cost per space to eliminate the Navy's troop-housing 
deficit is $62,000, at the ``1 Plus 1'' standard. For the Marine Corps, 
the cost per 2x0 configured room is $80,000.
    The Air Force's estimated cost per space to eliminate the current 
troop-housing deficit is $60,000.

                       TROOP HOUSING AVERAGE AGE

    Question. What is the average age of barracks facilities?
    Answer. The average age of barracks for each Service is:

Army..............................................................    38
Navy..............................................................    39
Air Force.........................................................    29
Marine Corps......................................................    24

    Question. Approximately, how many barracks were built over 30 years 
ago?
    Answer. More than 7,600 barracks buildings were built over 30 years 
ago. This is based on the date of acquisition from the current FY 1999 
inventory.

                        UNACCOMPANIED PERSONNEL

    Question. What percentage is the enlisted force does the Department 
estimate is single or unaccompanied?
    Answer. At the end of FY 1999, 48.5 percent of the enlisted force 
was single. Of the enlisted force, 41.9 percent was single with no 
children.
    Question. What percentage of the officers does the Department 
estimate is single or unaccompanied.
    Answer. At the end of FY 1999, 30.0 percent of the officer corps 
was single. Of the officer corps, 26.7 percent was single with no 
children.
    Question. How many men and women currently live in permanent party 
unaccompanied personnel housing? Of this amount, how many are enlisted 
personnel and how many are officers?
    Answer. According to the Department's Selected Military 
Compensation Tables for January 2000, about 416,463 single military 
personnel are living on-base in unaccompanied personnel housing. This 
figure can be further broken down to 10,995 officers and warrant 
officers and 405,468 enlisted personnel residing on-base.
    Question. What percentage of single or unaccompanied personnel does 
the Department estimate lives in private off-base housing?
    Answer. According to the Department's Selected Military 
Compensation Tables for January 2000, 180,443 (30 percent) of the 
Department's 596,906 single or unaccompanied personnel receive cash 
allowances for living off-base.

                       AVERAGE AGE OF FACILITIES

    Question. What is the average age of facilities and family housing?
    Answer. The average age for all DoD-owned facilities and family 
housing is 35.0 years based on the date of acquisition. If the date of 
acquisition is weighted by plant replacement value so that a large 
facility is given more weight than a small facility, the average is 
40.3 years. This has the effect of giving a small storage shed less 
weight in the average than a large tactical vehicle maintenance 
facility--to more accurately measure average age in the context of DoD 
recapitalization requirements.

                   FAMILY HOUSING: REPLACEMENT VALUE

    Question. What is the current housing replacement value for the 
Department of Defense?
    Answer. Based on a Department-wide average cost of $160,000 for 
construction of a new family housing unit, it would cost about $48.5 
billion to replace the 286,500 houses owned by DoD.

                        FAMILY HOUSING: DEFICIT

    Question. What is the current total family housing deficit for the 
Department of Defense, both in units and in cost of replacement, 
repair, or improvements?
    Answer. The following table represents the Department's estimate of 
family housing deficits for new construction, replacement and/or 
improvements:

                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                        New
                                                                   construction     Replacement     Improvement
----------------------------------------------------------------------------------------------------------------
Army:
    Units.......................................................           7,000          20,000          41,000
    Cost........................................................        $965,000      $3,000,000      $3,000,000
Navy:
    Units.......................................................          15,600           4,200          13,600
    Cost........................................................      $2,294,300        $693,000      $1,088,000
Air Force:
    Units.......................................................           6,000          26,700          38,500
    Cost........................................................        $417,845      $2,575,395      $3,031,112
Marine Corps:
    Units.......................................................          10,731           5,611           6,278
    Costs.......................................................      $1,622,464        $960,135        $370,717
----------------------------------------------------------------------------------------------------------------

                  Family Housing: Average Age of Units
    Question: What is the average age of on-base housing?
    Answer. The average age of family housing is as follows:

Army..............................................................    37
Navy..............................................................    35
Air Force.........................................................    36
Marine Corps......................................................    35

             FAMILY HOUSING: ANNUAL MAINTENANCE AND REPAIR

    Question: What is the annual maintenance and repair bill on average 
for each unit?
    Answer. The average annual maintenance and repair cost in the FY 
2001 President's Budget request is $4,270 per unit.

                   FAMILY HOUSING: MAINTENANCE COSTS

    Question: Provide for the record a chart, which will show a five-
year history, by service, of the annual inventory of family housing 
units, the annual maintenance amount, and the annual maintenance cost 
per unit.
    Answer. The average annual inventory, maintenance and unit costs 
for each Service of the last five years are:

----------------------------------------------------------------------------------------------------------------
                                                     FY97         FY98         FY99         FY00         FY01
----------------------------------------------------------------------------------------------------------------
Army:
    Inventory..................................      122,370      118,416      115,527      111,125      100,974
    Maintenance (000)..........................     $531,922     $475,480     $489,908     $460,594     $300,792
    Unit cost..................................       $4,347       $4,015       $4,241       $4,145       $3,940
Navy:
    Inventory..................................       69,337       62,684       61,554       58,143       55,636
    Maintenance (000)..........................     $440,255     $417,263     $351,425     $331,008     $328,135
    Unit cost..................................       $6,349       $6,657       $5,709       $5,693       $5,898
Marine Corps:
    Inventory..................................       22,351       25,569       24,125       22,983       23,022
    Maintenance (000)..........................      $75,699      $63,084      $70,815      $60,506      $65,695
    Unit cost..................................       $2,986       $2,467       $2,935       $2,633       $2,854
Air Force:
    Inventory..................................      100,299      109,609      109,856      109,013      106,122
    Maintenance (000)..........................     $406,660     $418,211     $409,786     $408,001     $428,456
    Unit cost..................................       $3,687       $3,815       $3,730       $3,743       $4,037
----------------------------------------------------------------------------------------------------------------

                           HOUSING ALLOWANCES

    Question. Submit for the record a chart that will show, by 
appropriation account, the amount expended during fiscal year 1999 and 
the amounts budgeted for fiscal years 2000 and 2001 for housing 
allowance, separately identifying accompanied and unaccompanied 
allowances.
    Answer. The following is the requested information: ($000)


----------------------------------------------------------------------------------------------------------------
                      Appropriation account                           FY 1999         FY 2000         FY 2001
----------------------------------------------------------------------------------------------------------------
Military Personnel, Army:
    Accompanied.................................................       1,441,268       1,555,819       1,625,489
    Unaccompanied...............................................         329,699         319,629         334,888
Military Personnel, Navy:
    Accompanied.................................................       1,454,791       1,615,985       1,599,635
    Unaccompanied...............................................         417,247         418,988         446,663
Military Personnel, Marine Corps:
    Accompanied.................................................         424,985         460,317         474,699
    Unaccompanied...............................................          92,561          98,559         101,913
Military Personnel, Air Force:
    Accompanied.................................................       1,237,172       1,248,372       1,321,149
    Unaccompanied...............................................         487,783         500,133         507,652
----------------------------------------------------------------------------------------------------------------

                               INFLATION

    Question. What inflation rate was used in formulating the budget 
request?
    Answer. For military construction, family housing, and base closure 
accounts, the budget request reflects an inflation rate of 1.5%.

                         NON-APPROPRIATED FUNDS

    Question. Provide for the record the estimated costs (by State, 
Service and project) of all non-appropriated funded construction over 
$500,000 in fiscal years 2000 and 2001. Also include the lump sum total 
of all projects between $200,000 and $500,000.
    Answer. Provided is the FY 2000 NAF Construction Program estimated 
costs (by State, Service and project). Attachment 1 has all projects 
over $500,000 for FY 2000 and attachment 2 has all FY 2000 projects 
between $200,000 and $500,000.
    The FY 2001 NAF Construction program will not be determined until 
August 2000.



                          PLANNING AND DESIGN

    Question. Provide for the record a detailed project listing by 
Service of all projects included in the fiscal year 2001 planning and 
design request. The listing should include project scope, estimated 
cost, and estimated design cost.
    Answer. The information is provided in the attached spreadsheets.



                       SUMMARY AND RECONCILIATION

    Question. Please submit for the record the two-page chart 
titled ``Summary and Reconciliation of Authorization, 
Authorization of Appropriations, and Appropriations Requested 
from Congress for Fiscal Year 2001''.
    Answer. The summary chart is attached.



                    FOREIGN CURRENCY EXCHANGE RATES


    Question. Provide for the record the exchange rates assumed 
in the fiscal year 2001 budget request.
    Answer.

              UNITS OF FOREIGN CURRENCY PER ONE U.S. DOLLAR
------------------------------------------------------------------------
                                                               Fy 2001
                                                  Fy 2000     President
           Country              Monetary unit    execution      budget
                                                   rates        rates
------------------------------------------------------------------------
Belgium......................  Franc..........       38.260       40.210
Denmark......................  Krone..........        7.110       7.3930
European Community...........  Euro...........       0.9486       0.9982
France.......................  Franc..........       6.2211       6.5471
Germany......................  Deutsche Mark..       1.8549       1.9521
Greece.......................  Drachma........      312.670      326.900
Italy........................  Lira...........    1,836.370    1,932.190
Japan........................  Yen............     111.6695     102.6700
Netherlands..................  Guilder........       2.0899       2.1968
Norway.......................  Krone..........       7.8880       8.0720
Portugal.....................  Escudo.........     190.6800      198.830
Singapore....................  Dollar.........       1.6640       1.6850
South Korea..................  Won............     1,199.10     1,149.80
Spain........................  Peseta.........      158.250      165.300
Turkey.......................  Lira...........    480,770.0    518,220.0
United Kingdom...............  Pound..........       0.6080       0.6250
------------------------------------------------------------------------

    Question. What is the current balance in the Foreign Currency 
Fluctuation Account?
    Answer. Only a small balance ($1,680,000) is currently held in the 
Foreign Currency Fluctuation, Construction, Account. Most funds have 
been transferred to the Components' Centrally Managed Allotments (CMAs) 
to meet FY 2000 foreign currency fluctuation requirements. The amounts 
currently held in the Components' CMAs are as follows ($ in thousands):

MILCON, Army..................................................    20,349
Family Housing Construction, Army.............................     4,218
Family Housing Operations, Army...............................   120,218
MILCON, Navy..................................................       100
Family Housing Construction, Navy.............................       100
Family Housing Operations, Navy...............................     1,430
MILCON, Air Force.............................................     4,721
Family Housing Construction, Air Force........................     1,289
Family Housing Operations, Air Force..........................    10,000
MILCON, Defense-Wide..........................................     6,464
Family Housing Operations, Defense-Wide.......................       378
                    --------------------------------------------------------------
                    ____________________________________________________

    Total.....................................................   169,367

    Question. How much additional cost has been incurred as a result of 
foreign currency fluctuation over the last three years, in both 
construction and family housing operations and maintenance?
    Answer. The following table reflects the gains and losses 
associated with foreign currency fluctuation during the last three 
years:

                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                  Family housing  Family housing
                                                      MILCON       construction     operations         Total
----------------------------------------------------------------------------------------------------------------
FY 1997.........................................            +3.6            +0.6           +38.3           +42.5
FY 1998.........................................            +8.5            +1.5           +38.4           +48.4
FY 1999.........................................            -0.3            +2.2           -20.9           -19.0
----------------------------------------------------------------------------------------------------------------

    Question. How much has been transferred into the Foreign Currency 
Fluctuation Account at the end of the last five fiscal years?
    Answer. The following amounts are transferred into the Foreign 
Currency Fluctuation Account at the end of the fiscal year:

                                                               Thousands
1995..........................................................   $79,773
1996..........................................................    79,045
1997..........................................................    63,867
1998..........................................................   141,391
1999..........................................................   169,084

                              LOST DESIGN

    Question. How much in lost design occurred in fiscal year 1999 for 
each service?
    Answer. The table below identifies the amount of lost designed in 
fiscal year 1999 by service.

                                                       Lost design costs
Army....................................................      $5,800,000
Navy....................................................       1,600,000
Air Force...............................................         212,896
Army National Guard.....................................          85,886
Army Reserve............................................         170,000
                    --------------------------------------------------------
                    ____________________________________________________
    Total...............................................       7,868,782

                          BREAKAGE AND DESIGN

    Question. How much breakage and deferred design occurred in fiscal 
year 1999 for each service?
    Answer. The table below identifies the amount of breakage and 
deferred design in fiscal year 1999 by service.

                                                   Design breakage costs
Navy....................................................        $337,000
Army National Guard.....................................         180,000
Navy Reserve............................................           4,200
                    --------------------------------------------------------
                    ____________________________________________________
    Total...............................................         521,200


                           DAVIS-BACON: COSTS

    Question. What is your estimate of the amount within the budget 
request for fiscal year 2001 that is attributable to the provisions of 
Davis-Bacon?
    Answer. The Department conservatively estimates that 5 to 8 percent 
of project costs could be reduced were the Davis-Bacon provisions to be 
waived. Amounts attributable to Davis-Bacon for Military Construction 
are $121 million at 5 percent and $193 million at 8 percent. Amounts 
for family Housing are $26 million and $42 million, respectively.

                     DOD ENVIRONMENTAL PROJECT LIST

    Question. Provide for the record a list of environmental compliance 
projects requested in the budget, sorted by service, installation, and 
by level of compliance.
    Answer. The following environmental projects are in the FY 2001 
budget:

                                        ENVIRONMENTAL COMPLIANCE PROJECTS
----------------------------------------------------------------------------------------------------------------
                                                                                                      Compliance
                 Service                           Installation                   Project               level
----------------------------------------------------------------------------------------------------------------
Navy.....................................  Puget Sound, WA, NSY.......  Oily wastewater collection.            I
Air Force................................  Vandenburg, CA.............  Upgrade water dist. system.            I
Air Force................................  Beale, CA..................  Water treatment plant......            I
Air Force................................  Moody, GA..................  Water treatment plant......            I
Air Force................................  Eielson, AK................  Hazardous material storage.            I
Air Force................................  Incirlik, TU...............  Fire training facility.....            I
Air Force................................  Cape Romanzof, AK..........  Generator fuel storage.....            I
Air NG...................................  Ft. Smith, AR..............  Fire training facility.....            I
----------------------------------------------------------------------------------------------------------------

                          ENVIRONMENTAL LEVELS

    Question. For the record, what is the definition of ``Level I'' 
``Level II'', and ``Level III'' projects?
    Answer. The term ``Level'' should be changed to ``Class''. The 
definitions for Class I through Class III projects are found in the DoD 
Environmental Compliance Instruction, DoD I 4715.6, dated April 24, 
1996. The definitions are as follows:
    Class I--Projects and activities needed that are currently out of 
compliance (have received an enforcement action from a duly authorized 
Federal, State, or local authority, have a signed compliance agreement 
or received a consent order; and/or have not met requirements based on 
applicable Federal, State, and local laws, regulations, and Executive 
Orders, DoD policies, and Final Governing Standards overseas). This 
class also includes projects and activities needed that are not 
currently out of compliance (deadlines or requirements have been 
established by applicable authorities, but deadlines have not passed or 
requirements are not in force) but shall be if projects or activities 
are not implemented within the current program year. Those activities 
include the preparation of plans (e.g.: National Environmental Policy 
Act documentation, master plans, emergency response plans, integrated 
natural and cultural resource management plans, pollution prevention 
plans; etc.), opportunity assessments and inventories. The preferred 
approach is to use pollution prevention projects or activities, if cost 
effective, to bring a facility into compliance. Overseas, this class 
includes projects and activities necessary to alleviate the human 
health threats to ongoing operations or necessary to comply with 
applicable treaties and agreements.
    Class II--Projects and activities needed that are not currently out 
of compliance (deadlines or requirements have been established by 
applicable Federal, State, and local laws, regulations, and Executive 
Orders, DoD policies and Final Governing Standards overseas, but 
deadlines have not passed or requirements are not in force) but will be 
if projects or activities are not implemented in time to meet an 
established deadline beyond the current program year. The preferred 
approach is to use pollution prevention projects or activities, if cost 
effective, as the means of maintaining or bringing a facility into 
compliance. Overseas, this class includes projects and activities 
identified using risk based prioritization practices that meet the 
long-term objective of full implementation of the Final Governing 
Standards for each foreign country where DoD maintains substantial 
installations.
    Class III--Includes projects and activities that are not explicitly 
required by law, but are needed to address overall environmental goals 
and objectives.
    There is also a Class 0 that includes activities needed to cover 
the recurring administrative, personnel and other costs associated with 
managing environmental programs that are necessary to meet applicable 
compliance requirements (Federal, State, and local laws, regulations, 
Executive Orders, DoD policies, and Final Governing Standards overseas) 
or which are in direct support of the military mission. Also, includes 
environmental management activities associated with the operation of 
facilities, installations and deployed weapon systems. Recurring costs 
consist of manpower, training, supplies, hazardous waste disposal, 
operating recycling activities, permits, fees, testing and monitoring 
and/or sampling and analysis, reporting and record keeping (e.g. Toxic 
Release Inventory reporting), maintenance of environmental equipment, 
and compliance self assessments.

                  DOD LIFE SAFETY/HEALTH PROJECT LIST

    Question. Provide for the record a list of life safety/health 
compliance projects requested in the budget, sorted by service, 
installation, and by level of compliance.
    Answer. The following life safety/health compliance projects are in 
the FY 2001 budget.

----------------------------------------------------------------------------------------------------------------
                                                                                                      Compliance
                 Service                           Installation                   Project               level
----------------------------------------------------------------------------------------------------------------
Navy.....................................  Puget Sound, WA NSY........  Chemical Metallurigal Lab..  ...........
Navy.....................................  Cherry Point, NC NADEP.....  Aircraft Stripping Fac.      ...........
                                                                         Addn.
Navy.....................................  Little Creek, VA,            Waterfront Ops Building....  ...........
                                            NAVPHIBASE.
----------------------------------------------------------------------------------------------------------------

                     UNSPECIFIED MINOR CONSTRUCTION

    Question. Provide for the record a chart, which will show the 
budget request for unspecified minor construction by component, 
compared to the enacted fiscal year 2000 level.
    Answer. The following table identifies the FY 2001 budget request 
and the FY 2000 enacted level by component for unspecified minor 
construction.

                         [Dollars in thousands]
------------------------------------------------------------------------
                                              FY 2000         FY 2001
                Component                     enacted         request
------------------------------------------------------------------------
Army....................................          14,600          15,000
Navy....................................           8,862           7,659
Air Force...............................          11,341           9,850
Defense Wide............................          18,618          17,390
Army National Guard.....................          15,629           2,295
Air National Guard......................           3,500           4,000
Army Reserve............................           2,716           1,917
Air Force Reserve.......................           4,467           4,115
Navy Reserve............................           2,806  ..............
                                         -------------------------------
    Total...............................          82,539          62,226
------------------------------------------------------------------------

                            EXECUTION RATES

    Question. What is the execution rate of each component for the past 
three years for both military construction and family housing?
    Answer. Execution rates are shown below:

                                                 EXECUTION RATES
----------------------------------------------------------------------------------------------------------------
                                                                             FY 1997      FY 1998      FY 1999
                  Service                           Appropriation           (Percent)    (Percent)    (Percent)
----------------------------------------------------------------------------------------------------------------
Army......................................  MCA..........................           82           82           91
Army......................................  MCAR.........................           86           69           79
Army......................................  MCNG.........................           61           69           70
Army......................................  AFHC.........................           83           55           62
Army......................................  AFHO.........................          100          100          100
Navy......................................  MCON.........................           93           96           92
Navy......................................  MCNR.........................           74           85           87
Navy......................................  FH Const.....................          100          100          100
Navy......................................  FH Impr......................           90           95           85
Air Force.................................  MCAF.........................           95         98.8         97.8
Air Force.................................  MCAFR........................           71          100          100
Air Force.................................  MCANG........................           89           98           92
Air Force.................................  FH Const.....................           84           65           77
Air Force.................................  FHO&M........................          100           90          100
----------------------------------------------------------------------------------------------------------------

                          BRAC FUNDING HISTORY

    Question. Provide for the record an updated version of the chart, 
which appeared in last year's hearing (part 5, page 77), together with 
whatever comments you may care to add.
    Answer. A revised chart of BRAC environmental restoration funding 
is provided below:

                                                              DATA AS OF DECEMBER 31, 1999
                                                                [in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        FY91     FY92     FY93     FY94     FY95     FY96     FY97     FY98     FY99     FY00     Total
--------------------------------------------------------------------------------------------------------------------------------------------------------
BRAC I:
    Floor...........................................    100.0    220.0    134.6      0.0     66.8      N/A      N/A      N/A      N/A      N/A     521.4
    Allocation......................................    350.6    362.7    179.3      0.0     91.2      N/A      N/A      N/A      N/A      N/A     983.8
    Obligations.....................................    347.0    357.8    167.6      0.0     90.4      N/A      N/A      N/A      N/A      N/A     962.7
    Outlays.........................................    341.9    347.2    163.4      0.0     87.6      N/A      N/A      N/A      N/A      N/A     940.1
BRAC II:
    Floor/ceiling...................................      N/A    231.7    308.9    262.3    138.7    469.5    223.8    105.2      N/A      N/A   1,740.1
    Allocation......................................      N/A    264.7    311.7    277.1    211.2    433.2    177.1     50.9      N/A      N/A   1,725.9
    Obligation......................................      N/A    263.9    309.4    275.9    210.3    430.8    176.2     50.9      N/A      N/A   1,717.5
    Outlays.........................................      N/A    256.2    298.1    267.9    188.6    400.5    147.8     39.2      N/A      N/A   1,598.2
BRAC III:
    Floor/ceiling...................................      N/A      N/A      N/A    200.0    302.7    236.7    352.0    410.8    271.8      N/A   1,774.0
    Allocation......................................      N/A      N/A      N/A    249.2    333.4    191.0    263.2    358.8    245.9      N/A   1,641.5
    Obligations.....................................      N/A      N/A      N/A    248.0    331.4    184.9    261.9    356.1    243.3      N/A   1,625.6
    Outlays.........................................      N/A      N/A      N/A    242.3    310.2    174.6    215.0    250.0    100.6      N/A   1,292.7
BRAC IV:
    Floor/ceiling...................................      N/A      N/A      N/A      N/A      N/A      N/A    226.1    416.2    491.0    346.4   1,479.7
    Allocations.....................................      N/A      N/A      N/A      N/A      N/A    205.0    212.3    418.7    469.9    340.0   1,626.0
    Obligations.....................................      N/A      N/A      N/A      N/A      N/A    201.4    208.7    400.9    442.5     73.2   1,326.7
    Outlays.........................................      N/A      N/A      N/A      N/A      N/A    183.3    184.1    264.6    167.1     11.7     810.9
Summary:
    Floor/ceiling...................................    100.0    451.7    443.5    462.3    508.2    706.2    801.9    932.2    762.8    346.4   5,515.2
    Allocation......................................    350.6    627.4    491.0    526.3    635.8    829.2    652.6    818.4    715.8    340.0   5,987.1
    Obligations.....................................    347.0    621.7    477.0    523.9    632.1    817.1    646.8    807.9    685.8     73.2   5,632.5
    Outlays.........................................    341.9    603.4    461.5    510.2    586.4    758.4    546.9    553.8    267.7     11.7   4,641.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Numbers may not add due to rounding.)

Notes: (1) The FY 1994 Military Construction Appropriations Act set the floor for BRAC III a $300.0 million. However, this floor was revised to $200.0
  million in the FY 1994 Supplemental Appropriations Act and further revised to $249.7 million through DoD congressional notification actions.
(2) The FY 1996 Military Construction Appropriations Act established ceilings on environmental amounts for BRAC II and BRAC III as indicated. The
  amounts for FYs 1991-1995 are floors and the amounts in FY 1996 and out are ceilings. No FY 1996 ceiling on environmental amounts was set for BRAC IV.
(3) On 3 September 1999, The Department notified the Congress of the need to raise the FY 1999 ceiling on environmental amounts for BRAC IV by $65.0
  million to $491.0 million.

                        CONTINGENCY CONSTRUCTION

    Question. What is the current unobligated balance of prior year's 
appropriation, which remain available for contingency construction?
    Answer. Of the funds appropriated for contingency construction in 
FY 1996-2000, $9.4 million remains available.
    Question. Provide for the record a list of amounts appropriated for 
contingency construction projects for fiscal years 1996, 1997, 1998, 
1999, and 2000 together with a list of projects for which these funds 
have been obligated.
    Answer.

                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                             General      Projects
                                                Appropriated   Rescission   reduction      funded      Balance
----------------------------------------------------------------------------------------------------------------
FY 1996.......................................        11,037        2,315  ...........    \1\ 7,750          972
FY 1997.......................................         4,500        3,000  ...........  ...........        1,500
FY 1998.......................................         4,000  ...........        1,900  ...........        2,026
FY 1999.......................................         4,890  ...........          900  ...........        3,990
FY 2000.......................................           938  ...........  ...........  ...........          938
----------------------------------------------------------------------------------------------------------------
\1\ $3,750 was provided to USCENTCOM for a Forward Headquarters facility at a Classified location. $4,000 was
  used to provide operational space for National Security Agency (NSA) personnel during the renovation of the
  current Operations Building at Menwith Hill Station, England.




    Question. Has this appropriation met the needs of the 
components over the last two years? What shortfalls, if any, 
have been encountered?
    Answer. The appropriation for unspecified minor 
construction has been adequate over the last two years since 
minor construction funds are requested based on historical 
experience. The components also have the ability to split-fund 
projects with prior year appropriations and have the authority 
to reprogram an additional 25 percent over the amount 
authorized to be appropriated for minor construction. This 
maximizes the use of these funds and minimizes the budget year 
financing requirement.

                          PLANNING AND DESIGN

    Question. Does the budget request include sufficient 
planning and design funds to execute the entire fiscal year 
2001 program?
    Answer. The Department's estimate for planning and design 
(P&D) requirements for the budget year is based on the size of 
the two succeeding fiscal year military construction programs. 
For example, the amount requested for FY 2001 will be used to 
complete design on FY 2002 projects and to initiate design on 
the FY 2003 projects. Therefore, the size of the FY 2001 
request is a function of the size of the FY 2002 and FY 2003 
construction programs. Consequently, the $314 million requested 
in FY 2001 for planning and design is sufficient to complete 
design on the FY 2002 military construction program, which will 
allow for execution in FY 2002, and bring the FY 2003 program 
to the required 35% design level.
    Question. Are any projects in the budget request at less than 35 
percent design? If so, list and justify such projects.
    Answer. The reason for requiring a project to be at the 35 percent 
design level is to have a high confidence cost estimate and to increase 
the chances of awarding the project in the year in which it was 
requested. Over the past several years Congress has been encouraging 
the Department to use parametric cost estimating in an effort to lessen 
lost design. Therefore, most of the projects in the FY 2001 President's 
budget use parametric estimating consistent with this congressional 
desire. Parametric estimating is not considered design; therefore, most 
of the projects are not considered to be 35 percent designed. However, 
all of the projects satisfy the congressional requirement of either 
having a parametric estimate or being at the 35 percent design level.

                       REAL PROPERTY MAINTENANCE

    Question. What is the total fiscal year 2001 budget request for 
real property maintenance? How much is earmarked for barrack 
renovation?
    Answer. The fiscal year 2001 RPM request is $5.6 billion, or which, 
approximately $727 million is for various barracks renovation projects.
    Question. Submit for the record a table which will show, by fiscal 
year, the total amount approved by Congress for reprogramming for 
`Military Construction, Defense-Wide' for the last five years.
    Answer. The following is a list of reprogrammings processed in each 
fiscal year.

------------------------------------------------------------------------
                                             Number of        Amounts
                                           reprogramming   approved for
                                              actions      reprogramming
------------------------------------------------------------------------
Fiscal year 1995........................               7     $21,893,000
Fiscal year 1996........................               2       2,920,000
Fiscal year 1997........................               3       1,250,000
Fiscal year 1998........................               2       2,540,000
Fiscal year 1999........................               7      22,008,000
Fiscal year 2000 \1\....................  ..............  ..............
------------------------------------------------------------------------
\1\ As of 2/25/00.

                       SUMMARY AND RECONCILIATION

    Question. Please submit for the record the two-page chart titled 
``Summary and Reconciliation of Authorization, Authorization of 
Appropriations, and Appropriations Requested from Congress for Fiscal 
Year 2001''.
    Answer. The summary chart is attached.



                            OVERALL FUNDING

    Question. In your opinion, what can be done about the lack of 
support and funding requested by the Department for facility investment 
and housing and when can we expect to see a steady path of funding?
    Answer. While we would love to have the topline allocated to this 
committee for military construction and family housing, and are very 
appreciative of the efforts this subcommittee has made on the behalf of 
the soldiers, sailors, and airmen, we don't have that luxury. Military 
construction, family housing, and RPM, by their very nature, are things 
that can be postponed because you can always provide a temporary fix 
and make due for one more year.
    That aside, we always mark our progress against the amount we had 
programmed in the FYDP. From that benchmark of $8.3 billion that was 
programmed in the FY 2001 column of the FY 2000 President's Budget 
request (excluding all of the advance appropriations carried over from 
the FY 2000 program), our FY 2001 President's Budget request of $8.0 
billion fairs pretty well. We are down $278.6 million; however, a 
sizable portion of that reduction is for inflation ($59.2 million) and 
foreign currency fluctuations ($61 million), both of which have no 
programmatic impact. The balance is associated with the deletion of 
contingencies ($158.4 million). Therefore, if you add these adjustments 
back to the amount requested in FY 2001, we actually have a more 
slightly larger program than originally programmed.

                         CONTINGENCY REDUCTION

    Question. How much savings did this initiative create, and how were 
those savings reapplied?
    Answer. By eliminating funding for contingency, the Department 
freed up $158 million in FY 2001 which was reapplied toward addressing 
readiness shortfalls and weapons modernization requirements.
    Question. Will this reduction hinder successful program execution? 
Do you expect the Services will have to defer projects as a result of 
this initiative?
    Answer. We do not anticipate any project cancellations, however, 
some project deferrals may be necessary. There is also an element of 
risk that the Services' may not be able to maintain full project scope 
(especially in family housing projects) and the quality of construction 
may be compromised.
    Question. The Committee is concerned about mission essential 
related projects, such as the beddown of the C-17 and testing of the F-
22. How can you assure us that operation schedules will be met with no 
contingency allowances?
    Answer. We are currently working award and funding strategies with 
our design/construction agents to ensure sufficient funds can be made 
available for each project so construction can proceed as necessary to 
meet need dates and avoid costly delays. However, elimination of 
contingency funding for fiscal year 2001 MILCON projects increases the 
possibility of deferring projects to provide funds to complete projects 
under construction.

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    Question. The Department proposes a Basic Allowance for Housing 
(BAH) plan that will completely eliminate out-of-pocket housing 
expenses for military members by 2005. How will this initiative impact 
the family housing accounts?
    Answer. The Department believes that eliminating service members' 
out-of-pocket expenses will decrease the demand for on-base housing. 
However, only by conducting Housing Market Analyses at all 
installations, which is a long-term effort, can we determine whether 
the demand will reduce on-base housing inventories or address existing 
deficits at installations. In recent years, the Department has focused 
its funding on improving existing housing and not building out our 
deficit. One important prong of Secretary Cohen's housing initiative is 
to maintain a consistent level of family housing funding for additional 
housing privatization and to improve housing the Department retains.

                            SHIFTS IN COSTS

    The Committee has always been concerned about the shift in costs 
from the family housing accounts to the personnel accounts to pay for 
family housing privatization. In last year's testimony for the record, 
it states that, ``Guidance from the Secretary of Defense (SECDEF) 
requires that any savings resulting from privatization be re-applied to 
housing.'' This year, the Army and Navy transferred roughly $112 
million from the family housing accounts to cover necessary increases 
in housing allowances due to privatization.
    Question. Has there been a change in SECDEF guidance on this issue?
    Answer. No. The Army and Navy decisions to realign $112 million 
from family housing accounts to military personnel accounts are 
consistent with the SECDEF guidance on reapplication of savings. 
Although we may have preferred the Air Force approach (no realignment 
of housing funds to military personnel account), the Army and Navy 
decisions to shift costs (not savings) comport with the Department's 
generally accepted principals of budgeting.
    Question. The Committee has always been concerned about the shift 
in costs from the family housing accounts to the personnel accounts to 
pay for family housing privatization. In last year's testimony for the 
record, it states that, ``Guidance from the Secretary of Defense 
(SECDEF) requires that any savings resulting from privatization be re-
applied to housing.'' This year, the Army and Navy transferred roughly 
$112 million from the family housing accounts to cover necessary 
increases in housing allowances due to privatization. Is the Department 
working to integrate the personnel and installation departments on this 
issue?
    Answer. The Department has made progress in ensuring that the 
personnel and installation organizations are coordinating issues that 
affect housing allowances, construction and privatization initiatives. 
In addition to the Department's planning, programming and budgeting 
system, we have established a Housing Policy Panel to guide issues that 
cut across the relevant offices within the Under Secretary of Defense 
for Acquisition, Technology and Logistics and the Under Secretary of 
Defense for Personnel and Readiness. Housing issues are also reviewed 
and vetted within the Quality of Life Executive Committee and 
Department of Defense Installation Policy Board. Both of these groups 
are chaired by senior Department officials with membership from the 
Office of the Secretary of Defense, Services and Defense Agencies to 
ensure we obtain the broadest possible input and dissemination of 
housing related policies.

                       FAMILY HOUSING INTEGRATION

    Question. Now that the Department has developed an integrated plan 
to improve housing, will we see an integration of the personnel and 
family housing departments to oversee the initiative?
    Answer. The Department's integration of personnel and family 
housing organizations to address important housing related issues will 
be conducted through existing boards and committees. Additionally, the 
Deputy Under Secretary of Defense for Installations has established a 
Housing Policy Panel made up of relevant representatives throughout the 
Department that specifically focus on housing issues. This group is 
responsible for identifying, discussing and recommending new solutions 
to common housing problems, sharing lessons learned, and vetting new 
ideas and techniques for managing the Department's housing program. To 
fully implement and integrate the housing privatization, military 
construction and compensation pieces of the housing program, the 
Department has also initiated a peer/audit review project. The goal is 
to bring the expertise of credible and highly esteemed firms who have 
the private sector experience that DoD would use to augment the 
development of a coordinated housing strategy. Both of these entities 
report to the Department's Installation Policy Board, chaired by the 
Deputy Under Secretary of Defense for Installations.

                        GENERAL OFFICER QUARTERS

    Question. What efforts have you taken to assure that there is no 
further abuse of operation and maintenance of general and flag officer 
quarters?
    Answer. Internal discussion between OSD and the Services has 
culminated in a policy memorandum which I recently issued. The purpose 
of my memorandum essentially was to reinforce Section 128 of the FY 
2000 Military Construction Act that makes family housing O&M funds the 
sole source for repair and maintenance of all family housing, including 
the general and flag officer quarters. A copy of the memorandum is 
attached.



                        UTILITIES PRIVATIZATION

    Question. The Department has undertaken an aggressive utility 
privatization effort. The goal is to privatize all utility systems 
unless uneconomical or exempt for security reasons by September 30, 
2003. What progress has been made by the Department in achieving this 
goals?
    Answer. Defense Reform Initiative Directive (DRID) #9 directed the 
privatization of electric, water, wastewater and natural gas systems by 
January 1, 2000, except where uneconomical or for or for unique 
security reasons. DRID #49 changed this goal to September 30, 2003, and 
established two interim milestones: (1) for all systems, determine 
whether to pursue privatization by September 30, 2000 (go/no go 
decisions); and (2) issue all requests for proposals (RFPs) by 
September 30, 2001.
    In January 2000, the Services reported that of the 2,742 utility 
systems that support our installations worldwide, they still owned, 
1,721 systems (13 systems have been privatized since DRID #49 was 
issued and 1,008 systems were either privatized prior to DRID #49 or 
were owned by other entities, such as host nations). The Services also 
reported that they were on track to meet the first DRID #49 milestone 
and had made go/no go decisions for 942 systems, with 897 systems 
moving on to the RFP stage (RFPs have been issued for 257 of these 897 
systems). A total of 46 systems have been determined to be uneconomical 
to privatize or classified as exempt due to security reasons.
    Question. Has the Department been able to document any savings or 
avoided costs, which may result from this (utilities privatization) 
effort?
    Answer. Twelve systems at eight installations have been privatized 
since DRID #49 was issued. These solicitations individually meet the 
requirements of Title 10 U.S.C. Section 2688 and represent an 
aggregated annual economic benefit of more than $10 million. However, 
since the economic analyses were based on the ``should costs'' of 
operating and maintaining the systems in accordance with industry 
standards, this does not necessarily mean the utility bills at these 
installations will go down by this amount. The economic analyses 
consider long-term capitalization costs, which include deferred major 
repair and construction projects. When system ownership is transferred 
to a utility provider, the Services in turn purchase utility services 
from the new owner, which includes the cost of operations, maintenance, 
rehabilitation, and technological or environmental upgrades. 
Ultimately, by the provider bringing the utilities up to industry 
standards, the Department of Defense will have more efficient and 
reliable systems.
    Question. What assurances can the Department provide that the 
conveyances of utility systems will not result in a substantial 
increase in long-term utility cost?
    Answer. The authority under which these systems are conveyed, Title 
10 U.S.C., Section 2688, requires that the Department certify to 
Congress that the long-term economic benefit of the conveyance exceeds 
the long-term economic cost, and the conveyance will reduce the long-
term costs for utility services provided by the utility system 
concerned. The Department does not have the authority to convey a 
utility system when the conveyance does not meet this standard.

                      BASE REALIGNMENT AND CLOSURE

    Question. How does the Department intend to budget for the 
continuing environmental restoration efforts at BRAC I through IV 
locations beyond fiscal year 2001--will there be a continuing account 
in this appropriations bill to fund these costs?
    Answer. The Department intends to budget for continuing 
environmental and caretaker costs at BRAC I through IV locations in the 
existing BRAC Account. Section 2822 of the FY 2000 National Defense 
Authorization Act (P.L. 106-65) contained a provision which amends 
section 2703 of Title 10, United States Code, to extend the existing 
BRAC Account as the sole source of funds to carry out environmental 
restoration and mitigation activities and other caretaker activities 
after the period of BRAC implementation. This extension of the current 
BRAC account negates the need to establish a successor account.
    Question. Do you have an estimate of the annual level of funding 
required for this effort for fiscal 2002 and beyond?
    Answer. For continuing BRAC environmental costs, the Future Years 
Defense Program (FYDP) accompanying the FY 2001 President's Budget 
request contains a total of approximately $1.0 billion for these costs 
for FY 2002 through FY 2005, ranging from a high of $0.4 billion in FY 
2002 to $0.2 billion in FY 2005. The FYDP also contains less $0.1 
billion per fiscal year for calendar costs.
    Question. Although the four approved BRAC's are to be completed by 
July 13, 2001, the Department will continue to incur environmental 
restoration costs in the out years. How long will the Department 
continue to incur these costs?
    Answer. The Department should continue to incur environmental 
clean-up costs for a moderate period of time beyond 2001. The Military 
Services project that, by 2001, 72 percent of the BRAC installations 
should either be cleaned or should a clean-up remedy in place. That 
rate is projected to grow to 98 percent through 2005. For the remaining 
few installations, clean-up remedies should be in place by 2015.

                          FACILITY REDUCTIONS

    Question. What progress has the Department made in 
disposing of this excess real property, and when does the 
Department expect to meet desired end-state?
    Answer. During fiscal years 1998 and 1999 (the first two 
years of the six-year Defense Reform Initiative to demolish and 
dispose obsolete and excess facilities), DoD eliminated 30.6 
million square feet. The department plans to achieve its DRI 
goal of 80.1 million square feet before the end of fiscal year 
2003.
    Question. How much has the Department expended to date to 
achieve its demolition initiative and, by service, how were 
these costs funded?
    Answer. During fiscal years 1998 and 1999 (the first two 
years of the six-year Defense Reform Initiative to demolish and 
dispose obsolete and excess facilities) DoD expended $303.3 
million on this initiative. The costs were funded within the 
operations and maintenance appropriations for each military 
service. The amounts by service are:

               [Dollars in millions to date, FY 1998-1999]

Army..............................................................$203.6
Navy..............................................................  57.0
Marine Corps......................................................  10.8
Air Force.........................................................  31.9

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    Question. In the Department's three-pronged integrated plan to 
improve housing, how much will the Department rely on traditional 
family housing construction? Will we see an increase or decrease in 
future family housing construction funding?
    Answer. The Department's housing policy is to rely first on the 
private sector for its housing needs. The Department will rely on the 
traditional family housing construction to build and maintain on-base 
housing only in those instances where the private sector cannot provide 
the types of housing the Services require to house their military 
members and families. The Secretary of Defense's recent three-prong 
initiative to improve housing does not alter this policy. In fact, it 
further enhances our reliance on the private sector by making more 
quality housing available for service members. We believe that some 
number of on-base housing will always be needed, such as for key and 
essential military members. Because two-thirds of the Department's 
housing inventory is in need of revitalization, the third prong of the 
Secretary's initiative is to maintain current family housing funding 
levels to continue improving on base housing units we will need to 
retain in the long-term.
    Question. For the record, please provide the programmed funding 
levels for family housing construction over the next five years (fiscal 
years 2001-2005).
    Answer. The following table reflects the military departments' 
future years family housing construction program: ($000)

----------------------------------------------------------------------------------------------------------------
                                                   FY 2001      FY 2002      FY 2003      FY 2004      FY 2005
----------------------------------------------------------------------------------------------------------------
Army...........................................      162,106      133,282      136,083      138,961      140,902
Navy...........................................      362,822      308.106      344,811      372,809      423,998
Air Force......................................      223,483      366,327      363,336      417,321      384,017
Defensewide....................................            0            0           50           50           50
                                                ----------------------------------------------------------------
      Total....................................      748,411      807,715      844,280      929,141      948,967
----------------------------------------------------------------------------------------------------------------

    Question. Increasing the Basic Allowance for Housing will reduce 
the demand for on-base housing, what is the Department's plan for re-
evaluating its on-base housing requirements and deficits?
    Answer. The Department's current family housing requirements 
process requires the Services to have a current Housing Market Analyses 
(HMAs) available for installations in which they are proposing to build 
or renovate housing. Since the HMAs are to include projections of 
housing availability in the future, each Service will need to include 
the projected housing allowances in its requirements analyses to ensure 
the Department does not build or maintain unneeded housing.
    Question. A decrease in the demand for on-base housing will reduce 
the need to maintain older, high cost units. What is the Department's 
plan for divesting itself of unneeded housing units, and how will those 
resources be re-applied?
    Answer. The Department believes that the increase in Basic 
Allowance for Housing will decrease the need to maintain older, high 
cost on-base housing. However, without conducting a detailed Housing 
Market Analyses at all installations, which is a long-term effort, it 
is premature to predict the extent of this decrease in demand and 
impossible to predict the amount or allocations of these resources. The 
Department will look at demolishing old housing units that are no 
longer cost effective to maintain or replace.
    Question. For the record, explain the new housing allowances 
program the Department began implementing in January 1998.
    Answer.

                   BASIC ALLOWANCE FOR HOUSING (BAH)

    A. Background.--
    1. Because of inaccuracies and inequities inherent in the old 
housing allowance system, the 1998 National Defense Authorization Act 
established the Basic Allowance for Housing (BAH) designed to establish 
a uniform out-of-pocket cost, in terms of dollars spent, for every 
member within the same pay grade for housing that is essentially the 
same as what a civilian of like income would spend on housing in that 
area.
    2. The transition was initially proposed to occur over 6 years. In 
response to the concerns of members in high-cost housing locations, 
Congress authorized the expenditure of an additional $225 million to 
complete the transition process. This allowed us to fully increase 
rates in high-cost areas, and to decrease rates in other areas where 
out-of-pocket costs were less than the 18.8 percent average.
    3. Many people have expressed concerns that the new rates 
inappropriately went down in some areas and that Service members in 
these areas are being significantly disadvantaged. This is not the 
case--the new housing allowance system is appropriate and will 
ultimately work to the advantage of every member living on or off base 
in the future. However, on February 23rd, the Secretary of Defense 
announced that housing allowances would be restored in those locations 
where the 2000 BAH rates were lower than the 1999 rates.
    4. On January 6th, the Secretary of Defense announced a plan to 
increase housing allowances enough to lower average out-of-pocket costs 
from the current 18.8 percent to 15 percent in 2001, and to eliminate 
them altogether by 2005.
    a. To do this, an additional $3.1 billion has been committed to 
housing allowances over the next five years. This will result in 
increased housing allowances everywhere in the country.
    b. Service members will see their housing allowances increase over 
the next five years. For a typical married E-4, the 2001 monthly 
increase would be $28, with a total monthly increase by 2005 of $139. 
Allowances will increase for both members with and without family 
members.
    B. Administration Position.--
    1. Rate protection and the announced restoration of housing 
allowance rates ensure that no Service member, regardless of where 
assigned in the United States will see a reduction in their pay due to 
decreased housing allowances.
    2. In 2005, the average member's housing allowance will be 
sufficient to cover the full cost of rent and utilities for the average 
cost standard housing, by pay grade, in every region of the country.

                         HOUSING PRIVATIZATION

    Question. The Department is proposing to extend the Military 
Housing Privatization Initiative (MHPI) authorities for an additional 
five years. The Department is still actively testing most of the 
authorities and has only completed one project to date. However, an 
increased reliance upon housing privatization is part of the 
Department's three-pronged integrated plan to improve housing. Why is 
the Department increasing its reliance on authorities it is still 
testing?
    Answer. The Department has completed four solicitations under the 
Military Housing Privatization Initiative. While it is true that we are 
still testing to determine the optimal uses of the authorities granted 
by the initiative, it is clear from these first four projects that 
privatization provides tremendous leveraging of our military 
construction funds. This leverage is essential in the Department's 
plans to fix its inadequate housing stock by 2010. We are requesting 
extension of the authorities, vice permanent legislation, so that we 
can further refine the authorities through experience. The eventual 
permanent legislation would then reflect a much more comprehensive body 
of experience.
    Question. As part of its new housing plan, will the Department seek 
to add projects to the current list? If so, how many?
    Answer. The Air Force identified six housing privatization sites in 
their family housing master plan as submitted in FY99, totaling 
approximately 6,900 units. The House Appropriations Committee applauded 
the Air Force approach and required similar plans from all Services. 
Those master plans are due in June 2000 and will identify future 
privatization sites needed to reach the Department's 2010 goal to 
eliminate inadequate family housing. These projections represent future 
plans and not approved projects. Prior to soliciting any projects OSD 
review and approval and required Congressional notifications will be 
accomplished.
    Question. To what extent does OSD (or the Services) rely on 
consultant support for design, development and finalization of housing 
privatization projects?
    Answer. OSD and the Services rely on consultant support to an 
extent appropriate to the nature of the action being taken. For actions 
that are inherently governmental, such as decision-making or oversight, 
the reliance is minimal. For actions that are technical or that involve 
sophisticated financial transactions, the reliance is more extensive.
    While consultants provide very little support in developing housing 
requirements or in the physical housing design, they work closely with 
the Services in designing financial concepts and in developing 
solicitations which will elicit optimal proposals. The best proposals 
are those which provide the best housing for the government's 
contribution, while minimizing the government's financial risk. 
Financial consultants always advise solicitation evaluation teams on 
the technical aspects of proposals. Consultants also play a key 
advisory role in oral discussions and negotiations with developers. 
Finally, consultant support is most extensive at award and closing of 
the deal to help ensure that last-minute document revisions do not 
adversely impact the government's interest.
    Question. By Service and fiscal year, please provide a chart of the 
total amount of expenditures for consultants under the Military Housing 
Privatization Initiative (MHPI). Please indicate account source for all 
expenditures. This chart should also include OSD's Competitive Sourcing 
and Privatization Office.
    Answer. OSD expenditures for contractor support of the MHPI made 
from the Family Housing Improvement Fund are as follows:

                                                                Millions
FY 96.............................................................  $0.9
FY 97.............................................................   6.7
FY 98.............................................................   6.7
FY 99.............................................................   3.2

    Question. Please provide name(s) of consultants used for MHPI 
projects, experience in real estate and financial deal making, years 
worked for OSD (or Service), method of selection and amounts paid by 
account source.
    Answer. In November 1997, GSA competitively awarded a multiple 
year, multiple award contract for professional services in support of 
MHPI projects. There were six prime contractor awardees for the base 
year and options were exercised for three prime contractors for option 
year one. Each of the awardees had subcontractors and key personnel 
experienced in accounting, real estate development, real estate 
financing, and real estate law. The prime contractors and the amounts 
they have been paid are as follows: Ernst & Young Kenneth Leventhal 
($15.6M); Hawkins, Delafield & Wood ($.5 million); Price Waterhouse, 
LLP ($.09 million); KPMG Peat Marwick ($.06 million); Deloitte & Touche 
($.06 million); and Arthur Andersen ($.05 million). All funds were paid 
from the Family Housing Improvement Fund.
    Question. What products and services have been provided by 
consultants for the MHPI?
    Answer. A wide range of products and services have been provided 
during both program and project development, development and 
preparation of project solicitations, pre-award evaluations, loan 
instruments and other legal documents, and independent legal analyses. 
The following list is representative of key deliverables:
          Project development including site visits, analysis and 
        proforma runs for all alternatives
          Solicitation development and preparation including developing 
        of RFQ/RFP
          Analyses of lessons learned during solicitation
          Documentation of guarantee and loan program requirements
          Development of borrower and lender application forms
          Development of loan servicing agreements
          Training on budget scoring
          Analytical and technical support to resolve OMB scoring 
        issues
          Assist in development of a model for estimating defaults/
        recoveries on loans/guarantees
          Assist in award closing and documentation
          Provide post award training and assistance

                 PRIVATIZATION OF UNACCOMPANIED HOUSING

    Question. In addition to family housing privatization, the Military 
Housing Privatization Initiative provides for the privatization of 
unaccompanied housing. However, no Service has yet launched a project 
for unaccompanied housing. It is our understanding, the Navy and Marine 
Corps are considering privatization projects for unaccompanied housing.
    What are the obstacles to the privatization of unaccompanied 
housing?
    Answer. Scoring consideration limited unaccompanied housing 
projects until 1998, when OMB interpretation of assignment of personnel 
made projects viable. Department of Navy is considering unaccompanied 
projects in Washington, DC and at Quantico, VA. Unaccompanied housing 
remains an option at other locations as well. Our focus in housing 
privatization has been primarily on family housing, but we strongly 
desire retention of unaccompanied housing authorities to allow us to 
pursue such privatization where feasible. Our analysis shows that such 
projects are financially viable in many locations.

                       FAMILY HOUSING MAINTENANCE

    Question. The budget request includes a reduction of $110 million 
from the enacted levels for family housing maintenance. Is this budget 
adequate to address the tremendous need for maintenance and repair of 
existing units?
    Answer. The FY 2001 budget reflects the balance of priorities 
across many programs and requirements. The Department allocated as much 
of its resources to housing maintenance and repair as it could afford 
while maintaining other readiness and quality of life programs.

    [Clerk's note.--End of questions for the record submitted 
by Chairman Hobson.]
                              ----------                              

    [Clerk's note.--Questions for the record submitted by 
Congressman Farr.]

                          FORT ORD, CALIFORNIA

    Question. Please provide a list of Conveyances dates for the 
remaining properties at Fort Ord, California.
    Answer. Attached at Table 1 is a listing of property at the former 
Fort Ord, their environmental category, and the expected recipient. 
Table 2 explains the categories used in Table 1. Table 3 lists the 
environmental categories and the anticipated conveyance dates that are 
based on current conditions. Category A parcels are clean and are 
expected to transfer in April 00. Category E parcels remain to be 
investigated and are suspected to have significant OE issues and may 
require significant remediation to insure health and human safety. 
These dates represent the best estimates of the various offices 
involved with Army Base Realignment and Closure (BRAC) actions at the 
former Fort Ord.



                            BIDDING PROCESS

    Question. Provide an explanation of how local contractors can bid 
on base projects, including privatization?
    Answer. The Department recognizes that robust competition is a 
critical component to successful privatization of utility distribution 
systems and family housing. Given competing demands for business 
opportunities in today's market, the Military Departments must often be 
proactive in seeking market interest. All potential base contracts over 
$25,000 are listed in the Commerce Business Daily (available either on-
line or in printed format) and local contractors can and do review the 
Daily for bidding opportunities. However, because the Commerce Business 
Daily may not be routinely referenced by certain potential bidders, 
other public media such as local and regional newspapers, industry 
journals and magazines, trade associations and the Internet will be 
used to attract the greatest amount of interest in local privatization 
projects. Local contractors can access these various media and can 
submit proposals to the contracting officer if they desire to take part 
in the solicitation. Additionally, solicitations for housing 
privatization projects commence with a widely publicized industry forum 
held in the local vicinity of the proposed project to ensure all 
interested parties can participate.

    [Clerk's note.--End of questions for the record submitted 
by Congressman Farr.]
                                      Wednesday, February 16, 2000.

                       U.S. DEPARTMENT OF DEFENSE

                               WITNESSES

ROBERT E. HALL, SERGEANT MAJOR, UNITED STATES ARMY
JAMES L. HERDT, MASTER CHIEF PETTY OFFICER, UNITED STATES NAVY
ALFORD L. McMICHAEL, SERGEANT MAJOR, UNITED STATES MARINE CORPS
FREDERICK J. FINCH, CHIEF MASTER SERGEANT, UNITED STATES AIR FORCE

                       STATEMENT OF THE CHAIRMAN

    Mr. Hobson. The hearing will come to order, fairly close to 
on time. By Government standards, I guess that is pretty good, 
at least when I was in the State Senate; we try to start on 
time when we can.
    Today's hearing is going to focus on the quality of life in 
the military. The witnesses today are the senior enlisted 
members from each service. This hearing is intended to continue 
the tradition of this subcommittee, which is to focus on the 
quality of life issues.
    We look forward to hearing your views since you should be 
most in touch with our young people in the services and their 
families. I have been out traveling around a little bit, and 
there are some issues that we are going to raise in our 
questions.
    I want to thank the members of the committee who are here 
so far and thank Mr. Hoyer for showing his interest in the 
committee by showing up. It seems like every day we hold a 
hearing, we have someone who is not on our committee, and now 
we are bipartisan, because yesterday we had a Republican, and 
today we have a Democrat. But in this committee, we are just 
looking for the truth, and I think that is the way we want this 
committee to be.
    I will yield at this point to Mr. Olver for anything that 
he might have to say.
    John.
    Mr. Olver. Thank you, Mr. Chairman.
    I also want to welcome you, who represent the backbone of 
the men and women--although you are all men--who serve on 
behalf of America in the armed forces.
    This is always a very interesting hearing because all the 
Members on both sides of the aisle are deeply concerned about 
the quality of life that the men, women, families must deal 
with as they serve us. I think your concerns are undoubtedly 
about the same as other Americans' for health care, child care, 
and good housing, and that really affects the readiness of the 
services and the retention. You are representatives of 
retention perhaps even at the extreme level, but we have lots 
of other needs in terms of retention.
    I do not want to go on and presume what you are going to 
tell us about these issues of quality of life. I would rather 
not try to put words in your mouths; let us hear from you. We 
want to do the best we can on all sides, in this subcommittee 
and throughout the Congress.
    Mr. Hobson. But I want you to be prepared for two things--
and I think Mr. Edwards is going to hit on this, too, when he 
gets his shot--there are two things I would like you to talk 
about, that you might summarize in your testimony. Those are 
the Basic Allowance for Housing (BAH) and the change in the 
(BAH) and what has happened as a result of that. And what you 
are hearing, based on the hearing we held yesterday and the one 
we had last Thursday, is very important to us, and if there is 
any fix that you know of that is happening. Also, in the area 
of health care, I have had some complaints from recruiters, a 
Navy recruiter whose credit was really messed up because he 
could not get his TRICARE health care stuff. I think there are 
some Air Force people, and I do not know about the Marine 
recruiters--they are too big; I do not really handle those guys 
too much--but there are some problems with TRICARE in that 
respect, and we need to know about that, too.
    So if you would just summarize your testimony, and then we 
will get to some questions.
    Do you want to start, Sergeant Major Hall?

               STATEMENT OF SERGEANT MAJOR ROBERT E. HALL

    Sergeant Major Hall. I would be honored to, Mr. Chairman, 
distinguished members of the subcommittee.
    As you know, sir, I have submitted a statement for the 
record, but I would appreciate a few minutes just to make some 
opening comments.
    Mr. Hobson. Certainly.
    Sergeant Major Hall. It is an honor to appear before you 
today to represent and talk to you about the health and the 
needs of our soldiers, the young men and women who are the 
United States Army. You begin to realize what a great country 
this is when a country boy from South Carolina is afforded the 
opportunity to testify in front of Congress.
    This is my 29th month as Sergeant Major of the Army, a 
relatively short period, but Saturday marks 32 years of service 
in uniform as a soldier. On a sadder note, I will retire this 
summer and will pass on to another deserving noncommissioned 
leader the opportunity to sit here next year. I may not miss 
that part, but I will miss the opportunity to serve with 
soldiers and to represent them at every level of leadership.
    My guidance from two Army Chiefs of Staff is to be a 
forceful advocate for soldiers, to be with soldiers and keep my 
eye on the future. I have done that to the best of my ability 
during testimony and also as I travel throughout the Army 
talking with soldiers at every step.
    My goal has been that I always tell their story and express 
their concerns, and I knew I could only do that if I had some 
of the same mud on my boots as the soldiers whom I lead and 
represent have on theirs.
    I will tell you, sir, that the Army is answering the 
Nation's call in a way that makes soldiers, past and present, 
swell with pride. They are peacekeepers, they are peacemakers, 
they are warriors. They are continually called upon to meet the 
Nation's commitments, sometimes in places whose names they 
cannot even spell and always only a quick breath from being in 
harm's way.
    This is my third and final opportunity to appear before 
you, but I would be remiss if I did not take a second to thank 
you for your support. There is a song that we use as one of our 
recruiting themes that goes: ``When we were needed, we were 
there.'' That is also true of you. When we needed you, you were 
there. You provided for contingency operations and addressed 
some of our most pressing near-term readiness issues; you 
financed and funded key unfinanced requirements. Your support 
and leadership significantly improved our ability to maintain a 
trained and ready force, and it created a better quality of 
life for our soldiers and their families.
    I will tell you that from my foxhole, the Army's challenge 
has not changed much from last year. Recruiting and retention 
remains a challenge. The balancing act between people, 
readiness and transformation in the budget process is delicate. 
Deployments are high and our warriors are much in demand 
throughout the world.
    We fully understand that we as an Army exist for one 
reason--to fight America's wars when called upon to do so. This 
requires a force that is trained and ready to fight and one 
that has the ability to sustain and win. The single most 
important resource for making that happen is our people; our 
soldiers whose selfless service, dedication and professionalism 
sustain us today on missions in 74 different countries. They do 
not ask for much. They face an unprecedented operational pace. 
They are top-quality people. They are diverse, highly-skilled, 
well-trained, well-led.
    Our soldiers did not ask to be in those faraway lands, but 
they are. And they are doing everything that our Army or our 
Nation could ask of them, and in return, they ask for decent 
pay, housing, medical care, and retirement benefits for the day 
when they too take off their uniforms for the last time.
    I think their hopes and expectations are reasonable. These 
young men and women protect the freedom of our Nation without a 
single thought about comfort or pleasure or profit or personal 
safety. They do so much and ask for so little.
    I am very proud of our soldiers, and I am extremely proud 
to have the opportunity and the privilege to represent them 
here today.
    Thank you, Mr. Chairman, for giving me the opportunity to 
make this statement.
    Mr. Hobson. Thank you for your service.

               PREPARED STATEMENT OF HON. ROBERT E. HALL




    Mr. Hobson. Petty Officer Herdt.

         STATEMENT OF MASTER CHIEF PETTY OFFICER JAMES L. HERDT

    Chief Petty Officer Herdt. Good morning, sir, Chairman 
Hobson, members of the committee.
    Thank you for the opportunity again to speak on behalf of 
the sailors and families of our great Navy. This is my second 
opportunity to testify before this committee. It is my distinct 
pleasure to thank you on behalf of America's sailors serving 
around the world for taking the time to listen and respond to 
their concerns.
    Sailors enthusiastically send their thanks for your 
congressional support in passing last year's pay triad. It was 
an enormous first step in the right direction, and we must now 
continue this progress. I look forward to answering your 
questions later.
    My duties had me traveling over 200 days last year, 
visiting with thousands of sailors and their families stationed 
across Europe, in the corners of Japan and Korea, in the 
Arabian Gulf, and throughout the United States. Sustained 
forward presence on station is the unique attribute that your 
Navy brings to the table for America's defense.
    Approximately 40,000 sailors are on deployment on any given 
day, lasting anywhere from 3 to 6 months. In my travels to 
ships deployed in virtually every corner of the world, I find 
that our sailors do not complain about deploying or living 
aboard their ships; neither do they complain about working 14 
to 16 hours per day, 7 days a week, while at sea. Deployments 
are what we do in our vehicles for combat--our ships.
    Sailors know this and take intense pride in fulfilling 
their duty to all Americans. However, when their duty does not 
call for them to make these expected sacrifices life at sea 
brings, they should and do expect to be provided adequate 
living conditions ashore commensurate with their peers not in 
the military.
    The great gains Congress made to financially compensate 
service members in last year's budget were very well-received. 
Yet I know we will never be able to afford to pay our service 
members enough for their sacrifices, and our sailors understand 
this. Luckily, America has sons and daughters who realize that 
the importance of freedom and democracy goes beyond financial 
value.
    Relative to the vital job they do in ensuring the freedoms 
we all enjoy, they do not expect much. Everywhere I travel, the 
number one request is for improved quality of life. It is 
essential now more than ever to show our sailors our commitment 
to ensuring they can live within the modest and reasonable 
quality of life standards they request.
    We in the Navy are reemphasizing our commitment to retain 
sailors. This commitment is essential to sustaining the 
fighting force America has come to expect from us and to 
ensuring that we are responsible stewards of the taxpayer's 
dollar.
    I am convinced that the quality of the facilities in which 
we train, work and live plays a vital role in retaining Navy 
families. The key in our retention efforts is to retain the 
Navy family. We recruit sailors but retain families. Last year 
was a monumental year for sailors' compensation, and they 
noticed and appreciate your commitment.
    While I am confident that other crucial issues are being 
addressed, I want to stress my belief that compensation alone 
will not guarantee that we recruit and retain a quality force.
    As I have stated in my written statement, I have three main 
concerns in regard to quality of life and military 
construction. The first is to define Basic Allowance for 
Housing (BAH) to cover 100 percent of a sailor's housing needs, 
as the Secretary of Defense has proposed. The second is to 
increase our commitment to continue meeting the growing needs 
for military family housing in the Navy; and finally, to 
continue support for the Navy's Public-Private Venture.
    These three initiatives would be the most welcome 
expression of commitment from the Congress and the American 
people. This ``Thank you'' would be a most appropriate 
reflection of our Nation's appreciation for the sacrifices that 
United States sailors and their families make and the hardships 
they endure every day in providing freedom and democracy around 
the world.
    In regard to the two issues that you specifically asked 
about, sir, BAH and TRICARE, I will just make a very brief 
comment before we get into the questions about it.
    I think BAH, if calculated appropriately, will serve us 
very well. I think there are some issues that need to be 
addressed in it as it is currently being implemented. I am not 
sure the standards are right, for one. But in the end, I think 
it will serve us well if we continue, if we stick with it, and 
we iron out what difficulties we have with it.
    The TRICARE piece is a little more problematic, because I 
have spoken to the same individuals that you have with regard 
to indebtedness brought about by nonpayment of TRICARE bills on 
time. That is a fundamental issue that I had hoped would be 
addressed earlier than it has been. But I will tell you that my 
vision of a fix that is fundamental to getting TRICARE right is 
a military care system where the sailor never receives a bill. 
This is something that I think should be handled between the 
contractor and the doctor. Sailors and their families do not 
care to navigate medical care systems----
    Mr. Hobson. Their credit should not be affected by the 
nonpayment by the contractor. It is outrageous.
    Master Chief Petty Officer Herdt. Absolutely.
    Mr. Hobson. We got it worked out, but he had to come to me 
before we could take care of it, and that tension should not be 
there.
    Master Chief Petty Officer Herdt. And he is not the only 
one.
    Mr. Hobson. I am sorry to get into that before the 
questions, but I had about five or six different recruiters in 
a room who came to me, and the Navy guy had a number of years 
in--they all had good years in--this is a very prideful thing. 
You pay your bills, and something that you have no control over 
happens and ruins your credit rating. How do you get that back? 
We can get it paid, but how do you get that expunged from his 
record and frankly from his family's mind and so on?
    Master Chief Petty Officer Herdt. Absolutely, sir, and the 
financial accountability is one of the things that we key on in 
leadership, and here we have a system that has brought about 
some of these problems.
    The other two issues with regard to retiree and Medicare-
eligible military retirees is also problematic, and I am 
looking forward to whatever we can bring about this year to put 
some of this right.
    So, sir, in closing, let me just say that I look forward to 
addressing your specific questions on these and other issues 
you may wish to discuss and thank the committee for its 
continued support.
    Thank you, sir.
    Mr. Hobson. Certainly.
    [The prepared statement of Master Chief Petty Officer James 
L. Herdt follows:]



    Mr. Hobson. Sergeant Major McMichael.
    Sergeant Major McMichael. Good morning, Mr. Chairman.
    Mr. Hobson. This is your first time, isn't it?
    Sergeant Major McMichael. This is my first time.
    Mr. Hobson. We are not as bad as you have heard. 
[Laughter.]

            STATEMENT OF SERGEANT MAJOR ALFORD L. MCMICHAEL

    Sergeant Major McMichael. Good morning, sir, and 
distinguished members of the Military Construction 
Subcommittee.
    It is a privilege for me to have the opportunity to come 
before you this morning, and as the chairman has stated, as my 
first time in my capacity as Sergeant Major of the Marine 
Corps. But I am also honored to have the opportunity to come 
this morning and discuss with you the military construction 
program that we have for the Marine Corps which vitally impacts 
on the quality of life of our Marines, or your Marines. In 
that, we are very thankful for all the things that our 
leadership of this great Nation, including the Secretary of 
Defense and our leaders in Congress, have done to help us build 
this bridge that we cross every day with military construction 
and quality of life to a point where we can actually get on the 
bridge and now have a feeling that we will one day cross it. A 
lot of that has been done with the support of people in the 
right places of leadership and concern.
    Although the weapons and all the plus-ups of money for the 
budget and pay are very vital, and we can see those things, one 
thing that is really a quality of life issue to the Marines--
and when I talk about Marines, I am talking about not only 
those who are in uniform but the family members as well, and 
that includes those who have gone before us who now carried the 
title of ``retiree''--when they come aboard our bases and 
stations and see that things have changed, and they see new 
construction and new barracks and new family housing, they see 
state-of-the-art fitness centers and day care centers, these 
things make a major contribution to retention as well as 
recruiting. That is why I speak of the ``Marine family,'' and I 
try to paint the picture of the Marine family as everyone who 
has worn the uniform as well as those of us who are still in 
uniform today.
    At this point, I will say to you that we are very grateful 
for those things that we have received, but there is still a 
lot to be done. I will say to you this morning that the 
foundation is strong, but without the sustainability of the 
appropriation that has been requested for FY01, we might find 
ourselves taking a step back as far as quality of life is 
concerned.
    We must sustain that request and support the request to be 
able to continue to upgrade the 97,000 single bachelor quarters 
throughout the world that the Marine Corps manages each day. 
For us to continue to make this happen, we will ask for support 
from an appropriations standpoint for the year FY01.
    I am here to say that we cannot get there without that. We 
will stay at the front of that bridge and never be able to 
cross it.
    But even with that, we must understand that once we build 
these things, we have to put the right stuff inside so that 
these young men and women who are still so willingly and 
faithfully, even with a robust economy, coming into our 
military to serve. They may dress a little differently, and 
they may think a little differently, but they are still showing 
up to answer the call of their Nation. The patriotism is there, 
and I believe they deserve to be in a comfortable dwelling when 
they are away from the battlefield and away from the foxhole.
    That is why we have to have this support, and we plead for 
this support so that we can carry on and continue to add to the 
single barracks or the bachelor housing.
    We have moved into a ``whole room'' concept which has 
allowed us to give facelifts and some of the needed repairs in 
preparation for giving them quality of life. That is a great 
asset, but we still have to go further. We cannot stop now. It 
would be like buying a new car and never putting fuel in it--
one tank of gas when you drive off the parking lot will not get 
you good use of that vehicle when it is time to trade it in for 
a new one. That is why we need to continue to add to our 
request for appropriation help in the years to come.
    Our family housing consists of 23,000 quarters that we 
manage a year in the Marine Corps--23,000--but 80 percent of 
those quarters need major repairs. I will say to you that we 
have done a great thing in trying to work in this area, but if 
we stop there, where will we be in 2005? We believe that if we 
get the support we need, we can eliminate some of this by the 
year 2010 and make quality of life central.
    It is not only a readiness issue; it is a retention issue, 
it is a recruitment issue, it is a Nation's issue. It is all of 
our concern to do this thing in a partnership manner so that we 
can take care of the young men and women that we bring from the 
streets of America, the homes of our mothers and fathers, every 
day. We deserve to be able to treat them with dignity and 
respect by giving them the things that we would want any 
serviceman, any American, to have in quality of life.
    So my thing today is not just the barracks maintenance and 
the single Marine quarters, but the families as well, because 
it will make a great impact on quality of life.
    To touch on TRICARE, it is another major issue for us to be 
very, very focused on. Without good health care, you do not 
have a healthy Marine family to be there to support them when 
they go off to battle. On any given day, we have 23,000 Marines 
forward-deployed to do the things that our Nation requires of 
us. We should be able to know that those families, whether it 
is an earache of a 3-year-old at 2 o'clock in the morning, can 
go out and get taken care of without having to worry about 
being financially strapped or credit ruined just to take care 
of that child. That keeps the military member, your Marine, 
focused on the mission that you expect of us when we go into 
harm's way.
    I look forward to answering any questions on those issues 
this morning, and I once again say that even though this is my 
first time here, I consider it a great privilege and look 
forward to answering your questions.
    Thank you.
    Mr. Hobson. Thank you, sir.
    [The prepared statement of Sergeant Major Alford L. 
McMichael follows:]



         STATEMENT OF CHIEF MASTER SERGEANT FREDERICK J. FINCH

    Chief Master Sergeant of the Air Force Finch. Good morning, 
Mr. Chairman, members of the committee. I, like my counterparts 
here, am delighted to have an opportunity to come here and 
address the concerns and issues on behalf of the 500,000 airmen 
on active duty in the Air Force Reserve and the Air National 
Guard as we go out and look for improvements for the year 2000 
and beyond.
    I first, like my counterparts, would like to thank the 
Members of Congress and the administration for the great shot 
in the arm that you have given us beginning with the year 2000 
with the pay raise and the guaranteed plus-up above ECI for the 
next few years and the repeal of the Redux retirement system. 
All of those send a very strong message to our airmen as I 
travel around that someone is very concerned and cares about 
their sacrifices and contributions, and I think that that is a 
big plus.
    As I travel around, I find that our airmen, one, do very 
important work and realize that fact; two, want to be 
reasonably taken care of, themselves and their families; and 
three, want to know that they are appreciated for what they do 
for America.
    So the messages that we send, and that you send, in terms 
of the quality of life issues send a very important message to 
the men and women about our care and feeding for their future.
    As we begin the year 2000 and beyond and as we start 
looking forward, the most serious challenges that we face in 
the Air Force today are going to be in recruiting and 
retention--finding enough people to sustain the Air Force and 
what you and the American public want for our future. Now, that 
is directly related to our ability to provide a quality of life 
for these men and women and their families.
    This is a difficult balance as we try to provide funds for 
modernization, for readiness and for quality of life, but I 
will tell you that without the people portion of this, it does 
not make any difference how good the materials are as we go 
forward.
    I realize that direct compensation is probably the biggest 
issue that people have addressed to me in the last 6 months 
since I have been Chief Master Sergeant of the Air Force. I 
have traveled to 35-plus bases in the 26 weeks that I have been 
in this job, and all the issues that you addressed, Mr. 
Chairman--the BAH issue, certainly for today--I have spent a 
lot of time talking with people about that in the last 6 
weeks--that is a big issue; TRICARE also remains a large issue. 
People are cautiously optimistic about the future, but as the 
Sergeant Major said, this is something that we must continue to 
work as we move on.
    We thank you for the many contributions you have made to 
us, and the airmen thank you for that. We need more work to be 
done, and I look forward to answering your questions to help in 
this process.
    Thank you.
    [The prepared statement of Chief Master Sergeant Frederick 
J. Finch follows:]



    Mr. Hobson. I am going to let the members ask questions. We 
have a conference on our side this morning, but I went ahead 
with the meeting anyway, but that is why this side is not here.

                            OVERALL FUNDING

    I just want to mention one thing for the information of 
everybody so they understand. One of the problems we have is 
that while the overall budget is an increase of $15 billion 
from the Department of Defense, funding for this bill by the 
administration, actually, if you take out base realignment and 
closure, the military construction and family housing accounts 
decreased $951 million. I do not know if they expect us to plus 
it up or what, but I think all of you, when you are making out 
your stuff and you are talking to people, need to fight a 
little harder to make sure that we maintain at least our levels 
as we go through these, because we just cannot afford to let 
down in these accounts, and we cannot always depend on a plus-
up.
    I might tell you that one member of this committee the 
other day was on the ground, underneath a truck, looking at the 
truck; and we have been on the bases; and members of this 
committee are getting out, going into barracks and into family 
housing to see what is going on. We have been traveling 
together, some as individuals, and we hope that people will 
understand that we are trying to make a difference for them; 
every member of this committee is trying to do that.
    We will move forward now and recognize people in the order 
in which they came in. We will try to follow the 5-minute rule 
in the first round, except for the ranking member, and see 
where we go from there.
    Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman.
    I would like to allow the other members on our side of the 
aisle to have a chance. They have other things to do. We are 
here for the duration, so I will have a chance, and I would 
like to let them go, and I will follow them, if that would be 
helpful to them.
    Mr. Hobson. Certainly.
    Chet, you are up.
    Mr. Edwards. I do not know who tried to run over our 
chairman with a truck, but Mr. Chairman, I am glad you are here 
and set up this meeting.
    Mr. Hobson. No, no. I was not under the truck. Another 
member was under the truck, checking it out.
    Mr. Edwards. I understand. I appreciate that.
    Thank you for calling this meeting, Mr. Chairman. Having 
the privilege and honor to represent Fort Hood, I find that 
military leaders and national leaders from other countries are 
more impressed by our Non-Commissioned Officers Corps than any 
other single aspect of our military. You represent the very 
finest of that today. As someone who believes in the concept of 
public service, I feel honored to be at the same table with you 
who have given your lives to the true meaning of public 
service, and I want to say thank you to each and every one of 
you.

                      BASIC ALLOWANCE FOR HOUSING

    The issue of Basic Allowance for Housing was mentioned by 
several of you as an important issue. I would like to ask what 
you are hearing from the folks back home.
    Sergeant Major Hall, I can tell you what I am hearing from 
20 percent of the active duty Army divisions that are at Fort 
Hood--they are located anywhere in the world, but 20 percent 
being in Fort Hood--is that it is creating serious morale 
problems, that as more and more soldiers learn about it, it is 
causing great upset. In my opinion, it is undermining a lot of 
the good will we intended to create with the billions of 
dollars we committed to salary increases and retirement benefit 
increases last year, and that even though the intent was to 
help high-cost cities, it is insanity to harm those who are in 
middle-cost cities who did not have their rent rates drop by 
reducing their Basic Allowance for Housing. And for $20 or $30 
million or whatever the savings is, to undermine the good will 
that we spent billions to increase just does not make sense; it 
is penny-wise and pound-foolish.
    The chairman and I and a number of us are working with the 
Pentagon and every other person we can talk to now to try to 
change this. Some of us think it needs to be changed quickly, 
that we do not need to analyze it for 6 months; it is wrong, 
and we ought to have a ``hold harmless'' for those soldiers, 
Marines, sailors, airmen who were in a mid-price city and did 
not have their rent rates drop, but their allowances dropped as 
of January 1.
    Can you tell us--and I am not asking you to criticize the 
Pentagon program that was put in place January 1--perhaps I 
could ask it in a positive way--if this Basic Allowance for 
Housing Program is important, wouldn't it do a lot of good for 
morale if we could go back and correct that, if Congress and 
the Pentagon working together could correct that quickly? 
Couldn't this potentially be a serious problem as more and more 
of our military men and women find out that their housing 
allowances have been dropped?
    Sergeant Major Hall. Sir, by the emails I receive, I think 
they all know that it has been dropped.
    Mr. Edwards. Okay.
    Sergeant Major Hall. You started off asking what are we 
hearing. The 4.8 percent pay raise was a great news story, a 
show of faith that we appreciate the service and the sacrifice 
of our people. Pay table reform, a movement in the right 
direction, needs another look to give more compensation, more 
money, to non-commissioned officers. Victory on the Redux 
retirement system is probably the best thing we could have done 
for those mid-grade noncommissioned officers.
    So everybody is feeling good about their service and their 
sacrifice and their leadership. BAH hits them--I would say that 
the BAH still has the capability of being better than the old 
Variable Housing Allowance which put the enlisted force in a 
death spiral with regard to what their allowance was with 
dollars. So this is better.
    They think that we use smoke and mirrors; that you gave a 
4.8 percent pay raise on one hand, and you took it back on BAH 
on another. I do not think that that was the intent; I know 
that was not the intent.
    Mr. Hobson. But we did not do the BAH system, although we 
may agree that things changed around correctly. We did the pay 
raise and the retirement. Somebody else down there did that. I 
do not want any misimpression that the Congress did that.
    Sergeant Major Hall. First of all, I do not think the 
soldiers care. [Laughter.]
    Mr. Hobson. But we do.
    Sergeant Major Hall. I know you do, and I do not mean to be 
flip. I have been able to keep in pretty good touch with 
soldiers. I have been in for 32 years, and I have a daughter 
who is 29, a daughter who is 22, and a son who is 14, so I know 
what young folks think today--they are a little bit strange 
sometimes, but I know what they think.
    My daughter is married to a sergeant who is at one of those 
division installations--not yours, sir; he does not need 
anymore pressure, he has enough--and when my daughter calls, 
she does not call the Sergeant Major of the Army, she calls 
``Dad.'' So I have been able to keep in touch.
    The leadership and military leaders, uniformed and 
civilian, have lost credibility because of the BAH issue. There 
was a lack of communication between higher headquarters and the 
contractor who did the surveys and who to this day keeps that 
as proprietary information. So I do not know if the data is 
right or not, because we cannot look at it. So there was a lack 
of communication between those two elements, plus local housing 
offices, which have got to play. The Fort Hood, Texas, housing 
office has got to play. If there is a neighborhood that we do 
not want soldiers in, we can exclude it. In some cases, those 
housing offices did not play, and they were excluded--not at 
your doing, but at our own doing, and some of them were Army. 
And there was a lack of communication between the leaders. But 
when you get all four of those entities in, and nobody is 
communicating with each other, that is how it happens.
    Absolutely the right thing to do is to go back in and buy 
back so that you are back at the 1999 rates. And sir, I applaud 
your efforts to do it very, very quickly. How do you account 
for that later? If you want to, you can account for it, because 
with the Secretary of Defense's initiative to now buy back the 
15 percent of out-of-pocket expenses as allowances in high-cost 
areas move up, if the data is right, maybe those locations move 
up a little bit on a different pay scale--but absolutely to buy 
back very quickly.
    Mr. Edwards. One last quick question I think will finish my 
time, but I will come back to this in the second round. Does 
the level of concern that you have just expressed to this 
subcommittee come from the four of you and upstairs at the 
Pentagon to our Chiefs as well as the Secretaries? Are you 
passing along this level of concern?
    Mr. Hobson. And have you all heard the same things about 
it?
    Chief Master Sergeant Finch. Essentially, yes. I can speak 
for the Air Force. Sixty-eight percent of the people will not 
say anything because they get a plus-up in the BAH, so it is 
pretty quiet from their perspective--not a lot of mail saying 
gee whiz, thank you, thank you. But for anybody in the areas 
where it went down--and there are over 16 areas for the Air 
Force, some in Texas, by the way----
    Mr. Hobson. Wright Patterson, I hear.
    Chief Master Sergeant Finch. Wright Patterson, San Antonio; 
a lot of information coming back to us. Part of it, though, is 
a communication issue. BAH is, certainly as I explain it to 
people, a much better program compared to what we had under the 
old quarters allowance and then Variable Housing Allowance 
(VHA) for our airmen and soldiers. So I hear this as an issue, 
but I agree with the Sergeant Major that we did not communicate 
all of this, so there are lots of questions. But we have pushed 
this back to our senior leaders and explained it to them in the 
services and in OSD, and they have responded by going out--I am 
not yet to San Antonio, but I know that the Department of 
Defense (DOD) experts and the Air Force experts just went out 
to McCord in Washington to confirm the data and talk to people. 
So it is being addressed.
    Mr. Hobson. The Navy is being real quiet because they did 
pretty well under this. The Marine Corps is not saying a lot 
because they did not do as well, so they have been quiet about 
it.
    Mr. Edwards. But it is an issue of trust, and I think the 
four of you are going to be crucial in this fight. I just want 
to let you know that you are not alone. We will work with you 
and fight with you, but we need your voices speaking out for 
the working men and women in the military.
    Thank you, Mr. Chairman.
    Mr. Hobson. Thank you.
    I think we have a few more minutes.
    Allen, I think you were here next.
    Mr. Boyd. Thank you, Mr. Chairman. I will be very brief.

                         HOUSING PRIVATIZATION

    First of all, Chief Finch, I know that you all have done a 
lot of experimentation with housing privatization in the Air 
Force, and Congress is preparing to reauthorize some of those 
projects and some of the statutes. Can you tell me if you are 
making any recommendation in terms of any standard guideline or 
template that we might follow--because I know you have done 
lots of different kinds of experimentation with it.
    Chief Master Sergeant Finch. We have about 10 privatization 
projects ongoing right now. We just completed one.
    Mr. Hobson. You have only completed one.
    Chief Master Sergeant Finch. Right. Lackland was the first 
one. There are some ongoing privatization projects. It is 
something that we need to pursue, because at the end of the 
day, right now, we have 106,000 houses in the Air Force 
inventory of which 65,000 need some revitalization, and in 
order for us to do it strictly with the military construction, 
it would take us a long time to get there. So privatization is 
a way to help down that road.
    Mr. Boyd. But you are not ready at this time----
    Chief Master Sergeant Finch. To give a template on how that 
should go--I do not believe so, sir, but I can check with our 
housing experts.
    [The information follows:]

                         MILCON QUALITY OF LIFE

    As you know we initially identified 10 pilot projects to 
test a range of authorities provided in the 1996 authorization. 
We currently have one project at Lackland awarded and three 
others in the process of contract award (Robins--July 2000, 
Dyess--July 2000, Elmendorf--August 2000). Each of these 
projects have provided valuable lessons learned that we have 
cross-fed to the field, but at the same time each project 
provides its own unique set of challenges. Each of the projects 
have a specific expense and income profile based on the 
condition of the housing units and the BAH of the military 
member to occupy the unit.
    Regarding a standard guideline/template, we are 
establishing the Air Force Center for Environmental Excellence 
as our implementation focal point for housing privatization. 
This ensures the lessons learned are incorporated in future 
privatization ventures.

                               RETENTION

    Mr. Boyd. One quick question, Sergeant Major.
    I notice that your retention rates were at an all-time high 
last year, but recruiting problems continued to exist, and you 
did not meet enlistment goals. Is that retention rate because 
of the good things that happened last year? Is that a one-shot 
deal, or is that something we can expect to continue?
    Sergeant Major Hall. Sir, I hope it is something that will 
continue forever. It is really hard to explain. We did miss our 
recruiting goals last year by about 6,300, but those who came 
in stayed at rates that we had never seen before.
    I think some of it was because of the initiatives with pay 
and retirement. I think some of it is a belief that we will 
work medical care the coming year, and that is important, that 
we work TRICARE this year with the same intensity that we 
worked pay and retirement last year.
    I think part of it is the fact that they are doing what 
they come in to do and they are making a difference, and they 
feel glad about what they are doing.
    When we go to places like Kosovo and Bosnia, those units 
which are most deployed, retention rates are the highest in 
those areas.
    I hope it is because they have not lost faith--faith in the 
Army, faith in the leadership of this country, and faith in 
themselves, that they are going to do okay.
    With regard to recruiting this year, I will tell you, sir, 
that we made our recruiting goal for the first quarter; we 
overproduced in January by about 700 soldiers, and the first 
week of February was an extremely good recruiting week. No 
promises--it feels good to sit here today and say we made it 
for 4 months, but we still have some tough months ahead of us, 
and I would not base any projections on making it by the end of 
the year, but just to know that we made it the first quarter 
and the first month of this new quarter is a pretty good goal. 
But I think we need to continue working initiatives, General 
Equivalency Diploma (GED) plus some other things; we need to 
find every way we can to offer opportunities for young men and 
women to come in and serve.
    Mr. Boyd. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Hobson. Why don't we just stop here for a moment? We 
have 7 minutes to vote, and then we will come back, because I 
want to talk some more about these issues before we conclude.
    [Recess.]
    Mr. Hobson. We can proceed.
    Mr. Walsh, do you have anything that you wanted to ask?
    Mr. Walsh. I do not have any questions at this time, Mr. 
Chairman. I just walked in. We are glad to have you here and 
appreciate your testimony.
    Mr. Hobson. Mr. Goode.
    Mr. Goode. Not right now; thank you.
    Mr. Hobson. Okay. Chet.

                      BASIC ALLOWANCE FOR HOUSING

    Mr. Edwards. Just following up on the Basic Allowance for 
Housing issue, I heard during the break that maybe July is a 
period that the Pentagon brass are thinking about solving this 
problem. I hope you will send back the message that a lot of us 
feel that that is too late. That is 6 months of distrust that 
we are fomenting, and it is 6 months of morale problems.
    My concern is that just as when we backtracked on 
retirement, even after you correct it, there is still that 
trust issue in somebody's mind when they and their spouse are 
thinking about whether or not to re-enlist. And I do not want 
that distrust.
    Sergeant Major, I think you said it well, that soldiers are 
out there thinking this was a smoke and mirrors game where, 
even though we gave them billions in new benefits and we only 
took away about $30 million, they are thinking that for every 
dollar you gave us in benefits, with smoke and mirrors, you 
took that same dollar out of the other pocket. It is absurd to 
create that kind of problem and let it go on for 6 months.
    So I hope that you will, if you honestly feel this way, 
pass back your judgment, which should be more important than 
ours, on the importance of resolving this quickly. We do not 
need 6 months to study this problem. We ought to be able to fix 
it in 6 hours.
    Thank you, Mr. Chairman, and thank you for your focus on 
this.
    Mr. Hobson. I just want to mention to each of you that I 
did speak to some senior officers yesterday, and some of them 
do not think this is a huge dollar amount, that we may be able 
to handle it and handle it pretty quickly, but I would echo the 
statement that it ought to be handled as fast as possible, 
because with the emails you are getting and the emails we are 
getting, it is just not worth the dollars having the trauma out 
there, especially when--and I think you said it, Sergeant Major 
Hall, and it was echoed--that the BAH change is an overall 
positive change in the way we are doing it versus the way we 
were doing it for the people in the military.
    I think you would all agree that it is the right step; it 
is just that the implementation is a problem at this point. Am 
I correct in that?
    Master Chief Petty Officer Herdt. Sir, if I might, I do 
believe it is the right step. It is the right direction in 
which to go. I am not sure that we have done a really good job 
of educating folks in the process used to calculate the BAH.
    Sir, in your question to Sergeant Major Hall, about folks 
lining up saying, ``Hey, I have lost money,'' they have not 
lost money. The folks coming in are not going to get the new 
rate. The folks who are there are in a save pay. That is not 
satisfactory, and I am not implying that. But I get the same 
emails, ``Hey, I am losing money.'' Well, they are not losing 
money. That does not imply that we have actually gotten it 
right.
    So if we can do a better job of being more open with how we 
are coming about deriving the BAH--there does not seem to be a 
lot of open information on how we got to what we came up with. 
I still get questions about, hey, did you know that the only 
enlisted pay grade that is expected to live in a single-family 
dwelling is an E-9?
    I am here to say that it would be my expectation that every 
chief petty officer, E-7, 8, and 9, should be living in a 
single-family dwelling.
    So I am pretty sure that we do not have the standards 
right, and that is another piece that I think needs to be 
fixed.
    Mr. Edwards. I agree that there is a terrible communication 
problem. As an example, I found out about this when speaking to 
a group of folks at Fort Hood, bragging about the pay raise and 
the retirement benefits, and a soldier raised his hand and 
said, ``Sir, how about the cut in our housing allowance?'' and 
I did not even know anything about it.
    But I do not want to leave here with us thinking that by 
just communicating better, we can solve this problem, because 
to some people, it is not a communication problem--it is a 
reduction. If two majors are living next to each other in an 
apartment complex, or two privates, and one is getting $100 
less per month in housing allowance than the other person with 
the same rank, doing the same job, that grandfathering, even 
though it is well-intended, is actually going to exacerbate the 
ill feelings about this process.
    Master Chief Petty Officer Herdt. It is an inequity, 
absolutely.
    Sergeant Major Hall. It certainly bleeds into other areas, 
if I may. I used an example 2 years ago of a private first-
class, an E3, at Fort Hood, Texas, who was married and had two 
kids, not typical of our soldier today, but it does happen. If 
you put expenses on one side of the ledger, and you put income 
on the other, at that time, he had $17 of disposable income. 
Now it is up to about $60 of disposable income. But he is 
making medical decisions for his family sometimes based on how 
many dollars he has in his pocket.
    So it bleeds into everything with the full spectrum of 
quality of life for soldiers.
    Mr. Hobson. If I could interrupt for a moment, I am going 
to have to leave, because I have to go to another committee 
hearing and ask some of these questions in that hearing in 
Defense Appropriations. It is going to end shortly, I want to 
get in there and ask some of this stuff on readiness for you 
all. It is not that I do not want to be here; it is that I have 
got to get over there and ask that stuff.
    Mr. Aderholt is going to take over.
    I want to show you the stuff they gave us on Fort Bragg. I 
do not know if you have seen a copy of that, and I am sure that 
you have them also. If you could give them to us for our 
committee, we can keep the pressure on. We are trying to raise 
it to a level where it gets done, and we do not want to do 
legislation. We think it can be fixed internally, and I have 
been given some information that it can be fixed internally, 
and Chet has raised it; it is the highest levels of this 
country. So we are hoping we can get the right attention for 
all of you.
    And just before I leave, the whole purpose of this 
committee is to try to improve the quality of life of the 
people that you represent, and you need to tell all of us from 
time to time the things that are most critical to you that we 
can do to improve the quality of life of the people serving in 
the armed services and the families at home.
    I was in a home recently of a young PFC which I talked 
about. He had a brand new house. His wife had a smile on her 
face. The child was playing games on the computer. They were 
the perfect model of what we would like to see. And you will 
not have any problem with that kid's performance in the 
service, because he has a happy home life, and he is going to 
do well. And you will not have any problem with him re-upping, 
because he is happy at his job and at his home. That is our 
goal. He is our goal--she is our goal--wherever they are.
    So, Robert--I do not know who is up next. Allen, were you 
finished?
    Mr. Boyd. Yes.
    Mr. Hobson. Okay. Then, I think it is John, then Sam.
    Mr. Aderholt [presiding]. Mr. Olver.
    Mr. Olver. Thank you, Mr. Chairman.
    I think we have asked a number of questions about the BAH, 
and we know there are problems there. There are subtleties in 
the way it has been handled that are not exactly simple, and we 
really need to understand that very carefully, the kind of 
inequity that can come out of the last discussion. All of us 
are committed to making certain that that gets corrected. I 
think it is fair to say that everyone on both sides of the 
aisle here is committed to making that sort of change, and it 
is important enough that the chairman has gone off to his other 
committee, which is the committee in which that perhaps is 
equally or more so the point. We sort of divvy up the housing 
issues, where we do the military construction housing and the 
privatization aspects, but the BAH is managed in the other 
subcommittee, and how it is funded comes from there. So you can 
take that to your constituents that we are all committed to 
that.
    I was sort of curious, just as one last question--Chief 
Master Sergeant Finch, you had said that 68 percent in this 
system were going to actually benefit, so they were being sort 
of quiet. I take it you did not mean 68 percent across the 
armed services. I take it you meant within the Air Force?
    Chief Master Sergeant Finch. My understanding is that it is 
across the services.
    Mr. Olver. It is across all services that that 68 percent 
applies.
    Chief Master Sergeant Finch. Yes, that is my understanding.
    Mr. Olver. Okay. I just wanted to clarify that for my own 
information.

                       RECRUITMENT AND RETENTION

    My colleague from Florida commented about recruitment and 
retention, and I want to follow up on that just a little bit. 
We did give pay and retirement benefits, but it was late enough 
in the year that it is hard to imagine that it could have 
really affected what was going on in retention and recruitment 
during last year. So I do not know what to make of the fact, 
Sergeant Major Hall, that retention was good, that recruitment 
had a little bit of a problem.
    Are you now--and I would like each of you to address this--
do you believe you are now seeing any impact now of what was 
done late in the session last year, on both recruitment and 
retention, each in turn? I think maybe I ought to hear from the 
other three first.
    Sergeant Major Hall. I would like to come back at the end.
    Mr. Olver. Okay, sure.
    Master Chief Petty Officer Herdt. Sir, if I might, we have 
seen an upswing, an improvement in retention in the Navy. 
Although we have seen it, we cannot be sure of this because of 
the pay triad improvement of last year. We would like to think 
so. It is early enough in the trend that we cannot say that it 
is a sustaining trend, so we are sort of withholding right now. 
We are watching it very closely to make sure that when we do 
make a judgment based on it that we have some data to put it 
against.
    But I would tell you that what we have seen is heartening 
in that we have stopped the downward trend, and it is actually 
kind of coming up in the last couple of months.
    Mr. Olver. On retention; how about recruitment?
    Master Chief Petty Officer Herdt. On recruitment, I will 
tell you that we continue to make goal in the Navy, but it is a 
month-to-month battle. Our Delayed Entry Program pool that we 
rely on is at an all-time low, and we are working very hard to 
beef those delayed entry pools up. As you know, last year, we 
plussed-up our recruiting force out there; we had let that 
dwindle. We now have 5,000 recruiters on the streets. That is 
paying dividends for us, but they are working hard.
    I do not think there has been a lot of change in what we 
have to offer. I do not want that to sound negative, but what I 
am saying is that I do not think that the potential recruit is 
saying, hey, things are better in the Navy, Army, Air Force, 
whatever, based on the pay that they got last year.
    I think they still come in for the same reasons. I think it 
is still what each service individually has to offer in 
addition to national service, military service, and the hard-
working recruiters that matter the most. But it is a month-to-
month battle for us, and I think it will continue to be that 
way for us for some time.
    Mr. Olver. And for the Marines?
    Sergeant Major McMichael. The recruiting is still going 
well for us. For 55 consecutive months, we have been able to 
meet our mission of bringing young men and women off the 
streets of America to serve in the United States Marine Corps. 
But let us never forget that recruiting cannot go single-
handedly; it has to go hand-in-hand in a marriage with 
retention. And these plus-ups that we have had for pay and BAH 
and things of that nature more directly affect those who are 
already in. That will affect those who will come, because they 
will see that life is what they expect.
    So we see it as a plus for the future to get us where we 
want to go, but by the same token, we have to also remember 
that retention will be greatly affected if the ones who are in 
are starting to exit--and I am not going to say that it is 
because of a great economy and the unemployment rate is low; I 
am never going to complain about this great Nation for doing 
what it should to help this Nation be healthy--but by the same 
token, we have to realize that when we have health care in the 
military that does not meet the standards that the Marines who 
are already serving expect, and if you have housing that does 
not meet the standards that your service members expect, then 
it is hard for me to understand how we can expect them to want 
to stay. So that is the retention piece.
    We are concerned about retention. You cannot wait until you 
lose a wheel to pull over and fix the wheel. So our focus now 
is not only to put those quality of life things that have been 
added on the table, but also to try to retain them so we can 
get more.
    Mr. Olver. A major point that you are making and a new 
point, I think, is that we should expect last year's triad to 
have affected, ultimately--even if we cannot really be sure 
that it is affecting it now--ultimately, it is going to affect 
more retention directly than recruitment. People at the 
recruitment level are not really thinking about retirement--
maybe they would be about the pay, but not so much about the 
retirement--and ultimately, if the people are in there and want 
to stay, then that feeds back to the others. That is an 
important point, and that----
    Sergeant Major McMichael. That is the marriage.
    Mr. Olver. That is very sensible.
    What are you seeing at the Air Force level?
    Chief Master Sergeant Finch. Actually, there is a 
correlation between recruiting and retention. If you do not 
retain people, you have to recruit a lot more. So we have found 
that it is probably a little early to decide whether the 
compensation gains we had in the FY00 National Defense 
Authorization Act in this last recent go-around have had a 
really significant impact on that yet, because most people in 
the Air Force make some of those decisions 6 to 12 months out 
as opposed to the event. So we are encouraged that that will 
get better.
    Our retention numbers to date, as we begin this fiscal 
year, are still below in all three categories--first term, 
second term, and career--below what we need to do and what we 
believe will sustain the force. That drives recruiting 
challenges, and like the other services' recruiting challenges, 
we did not meet our recruiting goals in the Air Force for the 
first time in 1999--although we plussed up the number just a 
little bit, we did not quite meet that--so we started the year, 
like the Navy, with a smaller pool in the Delayed Enlistment 
Program, the banked people, if you will. So we have some 
significant challenges ahead in recruiting, and we are 
addressing those on a number of fronts with extra recruiters, 
enlistment bonuses, and more advertising. So that is a big 
issue for us.
    Mr. Olver. It cannot be just triad, the program. It also 
has to do with housing and the living conditions--and I will 
have another round a little bit later--and it also involves 
working conditions.
    Chief Master Sergeant Finch. Sure, yes.
    Mr. Olver. So all of those go hand-in-hand in creating the 
atmosphere that is necessary for you to both recruit and 
retain.
    Chief Master Sergeant Finch. The core concept, sir, is 
whether the people believe that what they are contributing is 
being compensated in some way, how hard they are working 
relative to what they are getting compensated. We are asking 
them to deploy, so we have to take care of their families. It 
is all interrelated, so it is hard to say that one thing is 
going to affect retention or recruitment.
    Mr. Olver. Thank you.
    Mr. Aderholt. Mr. Farr.

                                1 PLUS 1

    Mr. Farr. Thank you, Mr. Chairman.
    I have three questions on things that I have been thinking 
about. First, to Chief Petty Officer Herdt, the Navy has the 
two-plus-two quarters for bachelor enlisted, and you are 
proposing to go to a one-plus?
    Master Chief Petty Officer Herdt. No, sir; it is just the 
opposite. We are currently building to a one-plus-one 
configuration, and that is our ultimate goal and will remain 
our goal. What we are seeking to do is to establish an interim 
goal of going to two-plus-zero, to renovate the two-plus-zero 
standards.
    The reason behind that as we renovate or build to the one-
plus-one standard, we typically lose about one-third of the 
racks, or beds, in any structure that we put up.
    Mr. Farr. So it is a space issue?
    Master Chief Petty Officer Herdt. It is a bed issue, the 
number of people that we can house issue, in the interim as we 
are building out to one-plus-one.
    Mr. Farr. What is the goal of getting to one-plus-one? When 
do you think you will get there?
    Master Chief Petty Officer Herdt. I would have to take that 
for the record, sir. I cannot remember right off the top of my 
head. I would be glad to get an answer back to you.
    Mr. Farr. Do the other services have that one-plus-one 
goal, too?
    Sergeant Major McMichael. The Marines have two-plus-zero.
    Sergeant Major Hall. The Army has a 1 + 1, with the 
exception of Korea, which we would like to get to 2 + 2. We 
think we are going to be able to get there in 2008, to a one-
plus-one standard.
    Mr. Farr. One-plus-one is a higher standard, right?
    Sergeant Major Hall. Yes, sir.
    Mr. Farr. Single room, shared bathroom?
    Sergeant Major Hall. Yes, sir.
    Chief Master Sergeant Finch. We have a one-plus-one goal 
also. It is the issue of privacy. Right now, our funding is to 
get us there by the year 2008. We have 14,000 in deficit----
    Mr. Farr. Does that go into a retention issue?
    Chief Master Sergeant Finch. In which way?
    Mr. Farr. Does that play in it in any way--that people 
prefer so much to have their own room?
    Chief Master Sergeant Finch. For us, sir, in the quality of 
life surveys, the number one issue for our first-term force is 
privacy and dormitories; the fact that we had different 
standards for housing and we made them double up and live with 
somebody else. And this addressed that----
    Mr. Farr. Perhaps you can get for our committee--you do not 
have to do it today--what the status of each of the services is 
on the goal to get one-plus-one.
    [The information follows:]

    In our continued commitment to improve the quality of life 
for our Sailors, the Navy is addressing one of its most 
pressing challenges, the 25,000 E-1 through E-4 unaccompanied 
enlisted Sailors who now live aboard ship when in homeport. 
Studies, surveys, and my own personal observation have shown 
that these young Sailors have the worst living accommodations 
in the Department of Defense. When deployed, these Sailors have 
no choice but to endure sleeping in bunk beds in cramped spaces 
with dozens of their shipmates, with little more than a small 
locker to store their personal belongings. When the ship 
returns to homeport, these Sailors must continue to live aboard 
ship. In contrast, unaccompanied E-1 through E-4s assigned to 
aviation squadrons or submarines live aboard ship when 
deployed, but merit BEQ spaces when the ship is in homeport, 
and accompanied Sailors return to their homes to live with 
their families. A 1999 Navy Quality of Life Domain Study 
concluded that shipboard life and standards of living are major 
dissatisfactions for target retention groups.
    The Secretary of the Navy and the Chief of Naval Operations 
have committed to developing a Homeport Ashore program that 
will provide these Sailors accommodations, either in a BEQ or 
in the community, when their assigned ship is in homeport. We 
have a pilot project underway at Naval Base Pearl Harbor, HI, 
where a unique combination of recent fleet reductions, a large 
initial inventory of BEQ spaces, and a desire of more senior 
enlisted to live in the community, has made BEQ spaces 
available. So far about 900 shipboard E-1 through E-4 at Pearl 
Harbor have moved ashore into BEQ spaces, with plans to house 
the rest ashore by this summer. Initial results are extremely 
positive.
    The Navy remains committed to providing housing that meets 
the 1+1 barracks construction standards. As an interim step to 
start the Homeport Ashore effort, the Navy has granted a waiver 
to use the 2+0 configuration to construct the FY-2001 Navy BQ 
projects. Because 2+0 spaces cost about one third less than 
1+1, we were able to provide spaces for 400 more single Sailors 
than we would have been able to do under the 1+1 standard. 
These 2+0 spaces will be converted in the future to equivalent 
1+1 spaces through assignment policy.
    The Marine Corps has received a permanent waiver to the DoD 
1+1 standard that allows us to build 2x0 room configured 
barracks buildings for E1-E5 Marines. This waiver was granted 
in July 1998. Our current programming goal is to reach a 2-
person assignment standard (2x0) by fiscal year 2037. We are 
evaluating this goal to determine the investment that would be 
required to accelerate this goal to less than 20 years.

                             STATUS OF 1+1

    The Army is on track to meet our 1+1 goal by 2008.
    Since ``1+1'' was approved 6 November 1995, and through the 
fiscal year 2000 MILCON program, the Air force has invested 
$593,000,000 to construct new or renovate existing permanent-
party dormitories to provide 9,600 ``1+1'' dormitory rooms. The 
Air Force's goal is to implement our vision of the standard, a 
private room for every unaccompanied E-1 through E-4, by 2009. 
We are using a dual-pronged approach consisting of both the 
``1+1'' construction standard, in concert with the Air Force 
Dormitory Master Plan, and a private assignment policy to meet 
this vision. We will not replace or convert any existing 
``2+2'' standard dormitories (two people per room) with ``1+1'' 
dormitories until they reach the end of their useful life. 
Instead we implemented a private room assignment policy, phased 
by grade, which will authorize our unaccompanied airmen private 
rooms in these dormitories by 2002.
    In addition to MILCON, we have invested $88,000,000 in 
Congressionally appropriated Quality of Life Enhancement, 
Defense funds to renovate existing critical condition 
dormitories to ``1+1'', to include the conversion of 30 central 
latrine dormitories. We will continue to use the Air Force 
Dormitory Master Plan as our roadmap to eliminate the Air Force 
wide deficit of 14,000 dormitory rooms and replace 5,500 
existing critical condition dormitory rooms by 2009.

    Chief Master Sergeant Finch. Yes, sir.
    Master Chief Petty Officer Herdt. Sir, if I might, I would 
like to expand just a brief minute on the two-plus-zero 
concept, because it is not far off of the one-plus-one and in 
some cases is actually better.
    It is a room with an enclosed head, a private head, that 
allows a little more flexibility in assignment of quarters. For 
E4 and below, you put two people in this single room--and you 
are right, they would not have the single room privacy, but 
they would have their own head. E5 and E6 would have one person 
to that room with a private head, and E7 and above, you would 
take two of those rooms with an adjoining door, and they would 
actually have a sleeping room and a sitting room, but they 
would have the two heads incorporated with that. So you can see 
that the flexibility is a little bit better for us, and we can 
get there without losing the number of bunks in the interim as 
we reach for an ultimate goal of one-plus-one.

                                TRICARE

    Mr. Farr. The other question I have is I went through a 
base closure where a military hospital closed, and at the same 
time, the TRICARE contract was up, and it wound up in an 
incredible mess. People not understanding who the providers 
would be and certainly not having access to the military 
hospitals. The more I see this, I just wonder why we do not put 
the military under the Federal Employees Health Insurance 
Program--perhaps not for the active duty, because you have to 
have immediate health care--but for the families. I do not know 
whether they benefit from TRICARE versus what we have, where 
every Federal employee gets to choose what carrier they want in 
the community they live in, and then you go out in the 
community, and you have access to community medicine, community 
hospitals, and everything--there is no separate process.
    Do you have any feelings about that? Is there any 
discussion about it?
    Master Chief Petty Officer Herdt. The only discussion I 
have heard with regard to FEHBP over the last year and a half 
was centered around the retired military population.
    Mr. Farr. Wanting to get into it.
    Master Chief Petty Officer Herdt. Yes.
    Mr. Farr. But nothing on the way the way the families have 
reacted.
    Master Chief Petty Officer Herdt. There has not been much 
talk, at least in the Navy, from my perspective and experience, 
on FEHBP.
    The family issues with TRICARE have centered around, one, 
accessibility. It has not been about quality of care so much as 
it has been about accessibility and contractor payment, dealing 
with the contractor. But I have not heard in the Navy anything 
about family desirability with regard to FEHBP.
    Mr. Farr. Okay.

            QUALITY OF LIFE: MILITARY VS. CIVILIAN COMMUNITY

    The last question I have--and I am just interested in your 
reflection--the chairman has taken this committee to bases in 
this country and other countries, and my impression--I have a 
21-year-old daughter, and I look at her peers--my impression is 
that what we have seen is that young people in America with 
families live at a far better lifestyle in the military because 
they have access to housing, they have quality child care if 
they have children--the child care I have seen in the military 
is much better than I have seen in the civilian community--they 
have access to recreational opportunities, transportation, and 
food services. When you add that up, if you were in the same 
age group out on the street in the civilian community, you 
would not be able, with your income at that level, to have that 
kind of access.
    I use this a lot when I go around and talk at high schools 
now--in fact, in many ways, I guess I am recruiting--and I 
wonder what your reflection is on that. People are always 
complaining--we complain, Members of Congress complain about 
our lifestyle--I know that that is typical. But what is your 
impression--it seems to me that being in the military between 
the ages of 18 and 30, you would have a hard time receiving as 
much quality service if you were in the private sector earning 
a salary.
    Sergeant Major Hall. We work very hard to make it that way, 
too, sir, as do you. But you can still never pay those young 
men and women enough. We have soldiers in 74 countries today, 
Bosnia and Kosovo, each a 6 month deployment, so at a moment's 
notice, the potential is there for them to pick up and go fight 
the Nation's wars. During the time that they are not deploying 
in the Nation's interest or doing the training that prepares 
them to do that, I think we have got to continue to give them 
the best possible quality of life that we can.

                               RETENTION

    Mr. Farr. But is the point, then, that retention--what is 
the issue on retention? Is it pay scale? You can leave the 
military and all of a sudden realize that your pay check in the 
private sector is not going to be able to buy you the same kind 
of child care services and all these other services you get in 
the military. Do people realize that, and is there discussion 
of it, or is it because you are deployed too much--and yet you 
told us that being deployed, some of the people who were 
happiest were the ones who were in Bosnia and Kosovo.
    Master Chief Petty Officer Herdt. If I could, sir, I would 
tell you that we are not asking the same thing of these two 
different groups of young people. We are asking a tremendous 
amount of the young people who serve in the military. In the 
Navy's case, we are asking them to pick up every 18 months and 
go away from home for 6 months. It makes no difference if they 
are married or single--we are asking them to do this.
    The retention piece, I would tell you, is significantly 
about compensation. It is about money, and for those who say it 
is not about money, I would say that is easy to say when you 
have money. These folks are E5's and E6's and are not so junior 
people. Our E7's and E8's and E9's are trying to put kids 
through college and so forth, but for principally the midgrade 
NCOs, when you have disposable income of $29 to $50 a month, 
after not extravagant bills, you do begin to ask. And we are 
asking in many cases the wives or the spouses to not have 
meaningful careers because of the movements that we require of 
them, the frequent transfers. So I think it is a lifestyle that 
is very difficult to compare to civilians. And I would agree 
that on face value, you could make that comparison, and it 
would look favorable, but in the long haul, when you start 
looking at the sacrifices required and the compensation for 
those sacrifices, I think it is not in balance.
    Chief Master Sergeant Finch. If I could add to that, sir, I 
would agree with the Master Chief in some part of this. Our 
expectations of the young people in the military are far 
different than expectations in some of the civilian sectors 
outside the military. We have people who are 21 years old 
qualified to be crew chiefs in a multi-million-dollar F15 out 
there with awesome responsibilities, and then, as we grow 
supervisors, we put them in charge of not just themselves but 
of other people. And as the MCPON was saying, we ask them to 
pick up and move and deploy--and although people like to do 
important work--I have talked to people who have gone over to 
the desert in Saudi Arabia and have enjoyed their 120-day tour, 
and now they are being given 90-day tours, and the first time 
was fun, but the second time was not as much fun; by the time 
they have been back there five times, their ``fun meter'' is 
pretty much pegged out.
    So it comes down to not just compensation; what it really 
comes down to is do we really value their worth for what we are 
asking them to contribute. And sometimes, the PCS seem to be 
losing money, and all of that gets back to them and their 
families. So it is not easy to say, well, you are making more 
than the person who stayed home, because they are contributing 
something different.
    Mr. Farr. It sounds like what we ought to look at is how 
much we move people around. One problem at the local base is 
that the base commander comes in, gets totally involved in the 
community, knows everybody, and is doing a great job and then 
has to leave; so there is no continuity. And these are 
important universities and training schools. I know that that 
is the policy of the military, but I would think that it is 
deployment--deployment is one thing--just moving because you 
have to move every so many years is something else.
    Chief Master Sergeant Finch. The majority of the moves for 
the Air Force are rotational locational moves, taking people 
over to forward locations, i.e., Korea, the Japans of the 
world, Germany, overseas. So we do rotational moves as opposed 
to just moving them for the sake of moving. So these are 
required moves. We will have the haves and have-nots--some 
people at locations who do not deploy at all, and other people 
at locations who are deploying all the time. So there has got 
to be a balance somewhere, giving the experiences and making 
sure we do not help one person at one location at the expense 
of someone else. There is a delicate balance.
    Master Chief Petty Officer Herdt. The same is true in the 
Navy.
    Sergeant Major Hall. I think it is true for all of us. None 
of us moves just for the sake of moving people. You have 53,000 
soldiers stationed in Europe and 27,000 in Korea, and when 
their time is up, they want to come back home, and somebody has 
to go and replace them. And 40,000 in Europe, with a 480,000-
soldier Army becomes the pivot point to ensure that everybody 
rotates, especially on that one-year tour over there, to get 
them back in.
    Master Chief Petty Officer Herdt. Sir, may I make one more 
point about retention being highest on deployment. Take a look 
at where we are deploying. We are deploying to what are 
classified as tax exclusion areas. Our best retention rates are 
in those areas where people make the most money. That is a 
significant change in the pay that they receive, and things 
look different when you are receiving that kind of money.
    Every battle group that comes out of the Arabian Gulf has 
sky-high retention. They reenlist there--their selective 
reenlistment bonuses are tax-free. They are coming off of 6 
months of tax-free pay. It is a significant issue.
    Mr. Farr. So there is discussion--men and women in uniform 
are aware of that is going on outside in the civilian community 
and what their type of skill level could bring them.
    Chief Master Sergeant Finch. Some are, sir. I cannot say 
that everybody in the Air Force is doing that, but there are a 
lot who are well aware. Some of our Local Access Network (LAN) 
administrators know exactly how much they would make if they 
decided to separate from the Air Force and go work for a 
different company. Some do, and others certainly do not. But I 
think people are fairly educated on what is going on.
    Sergeant Major McMichael. And that is one of the things 
that affects retention, because they know they can take their 
skills outside the gate and be employed in the civilian sector. 
So I think it is important to understand that even though we 
say that military personnel in uniform who are serving our 
Nation may have child care available and may have youth 
programs and other things available, those programs are not 
free. So if you are 21 years old, and you are outside and on 
your own, and you are doing the same thing, the cost may not 
have the same equitable price tag--but they are not free, and 
based on the pay check that you are earning, trying to deploy 
and run a household and keep your children in child care or 
send them to school--65 percent of the families in the Marine 
Corps live outside the gate, so some of those programs--for 
instance, if I have to put my child in piano class in the 
civilian sector, I have to pay the same dollar that everyone 
else pays.
    So I do not want anyone to think that because we serve our 
country in this uniform that we are getting any more than 
anyone else, because we have worked hard to put these things on 
the bases so that we can continue to have cohesion and team-
building and camaraderie amongst the service members.
    Mr. Farr. No, I was not trying to imply that. What I think 
we do not do a very good job of is indicating the quality of 
life issues that we really do support and that these are things 
to be proud of in the service. I think the quality of child 
care in the service is phenomenal. I think the DOD schools 
overseas are very good schools. I think the recreation 
facilities that we have been building are really good. These 
are the kinds of things that the private sector advertises all 
the time. We do not take advantage of pointing out that these 
services are for our men and women in uniform because we are 
proud of their service; we are proud that they are able to live 
in a kind of quality of life.
    I think the quality of life in the military, we have always 
got to keep improving--and obviously, pay is the top--but where 
we do a good job, we should also talk about that, and I do not 
think we do. I think that if we did, people would feel better 
about it.
    You know as a recruiter, you have got to emphasize the 
positive.
    Master Chief Petty Officer Herdt. Yes. One thing that is 
not seen as a positive by the men and women in uniform each 
year is the Statement of Total Military Compensation. I can 
just tell you from the Navy perspective that when they take a 
look at their base pay and their BAH, and we start throwing in 
the value of their medical care, the value of the commissary 
privilege, the exchange privilege and all of that, that builds 
in more cynicism than it does actually saying, hey, this job is 
worth this amount of money.
    First of all, not everyone benefits from all of those 
things; not everyone uses them. They are not always convenient 
to where the families live in the community, et cetera. We do 
not offer housing to everyone. The current BAH policy does tax 
people who do not live on base with the 15 percent out-of-
pocket, so there is an inequity there.
    So we need to be careful, I think, in selling that kind of 
stuff too ardently. But I do believe that one thing we do not 
do especially well in the recruiting in particular is, as an 
entire military, package ourselves very well with those 
benefits that we do have to offer. I think we sort of leave it 
up to each recruiter to do that. We do not have an employment 
package as a DOD entity, as a military service. We all have our 
various special interests or missions, but we just do not have 
the employment package out there.
    Mr. Farr. What can we do--if you were going to go to work 
for IBM, they would certainly try to keep you--they are going 
to hire you for life. They do not want to hire you for just a 
couple months or a few years. And if we are interested in 
retaining people, we ought to be able to do that kind of 
employment tactic.
    Master Chief Petty Officer Herdt. It is my thought that we 
could.
    Mr. Farr. I appreciate that.
    By the way, have you ever tried to close military golf 
course?
    Sergeant Major Hall. You know, sir, it is not just for the 
recreation. I am not a golfer, so I came into this position not 
a real fan of golf courses. It is okay to build barracks and so 
on. But when you really get into the MWR system, golf courses 
are money-makers. So a golf course pays for everything else, 
subsidizes everything else we are doing on a military 
installation. So I am still not a golfer, but I have changed my 
tune about golf courses.
    Mr. Farr. Well, we closed the Army golf courses, and the 
Navy built a big hotel with the money. So if you come to the 
Monterey Peninsula, you can enjoy a lot of golf there.
    Thank you, Mr. Chairman.
    Mr. Aderholt. Mr. Olver.
    Mr. Olver. Thank you very much, Mr. Chairman.
    We are going to need to go to vote fairly soon, so I will 
try to cover a little bit of ground quickly.
    At least two of you have commented about the amount of time 
that you spend going around to bases all over the country and 
around the world. Are you all spending more than half of your 
time visiting all of those bases as the senior noncommissioned 
officer in the service? You are all doing that. That is your 
job, to understand what is going on. Okay.
    Now, we talked a little bit about the privatization issue, 
and at least for the Air Force, you have only completed one in 
10, and it has not been completed for very long, so you really 
do not have much in the way of information back as to how it 
affects the balance of the way people think about on-base 
housing and off-base housing, private housing, and so forth. I 
think the situation is roughly the same in the others; isn't 
that correct? Okay. You do not have any completed housing 
privatization projects; they are all in process. Okay.
    So, ultimately, this committee has put a lot of effort, and 
the chairman has been very strong on this, in trying to make 
the privatization program and the base program fit together, 
and I think that over time, we ought to have a balance.
    What I would like to ask you about is the other side of the 
coin. There are other issues. My colleague from California has 
commented about the child development centers; he mentioned the 
gymnasiums and fitness centers and so forth. But there are 
other aspects of the working conditions that I think are also 
important, and every one of these items--whether it is child 
development, health care, housing, pay and benefits, 
retirement, and so forth--goes to retention and, by word of 
mouth, to recruitment down the road.

                           WORKING CONDITIONS

    We have not heard much said about the other issues of 
working conditions. Would you comment a little bit about that? 
I am talking about the things that go beyond the housing--what 
are the training facilities like, what is the equipment like, 
things of that nature. Some of those are in the purview of this 
subcommittee.
    Sergeant Major Hall. Sir, each of those areas is being 
worked, and sometimes they are being worked because we are 
leveraging the privatization issue. The dollars are tight--a 
$70 billion budget for the Army this year. It is the first time 
during this Administration that we have gone over $70 billion. 
But when you factor in inflation and everything else, that is 
really a 1.7 percent decrease in buying power, so you have to 
leverage privatization to make sure that the ranges are up to 
standard. You can make sure that the motor pools are such that 
soldiers can work on equipment. It just frees up or allows you 
to spend a lot of other money other places, everything from 
those training facilities to spare parts----
    Mr. Olver. In your experience, are the training facilities 
up to the level, or better or poorer? Would you care to give a 
general view, compared with, say, the housing that you see?
    Sergeant Major Hall. I would say generally poorer, simply 
because base ops and real property management have been 
underfunded for so many years. We have come back in in the 2001 
budget and put additional moneys in there and funded it at a 
level that is higher than in times past, but the infrastructure 
was crumbling, so it is going to take a while to get out from 
under that.
    Mr. Olver. It sounds as if the workplace may be worse than 
the housing.
    Sergeant Major Hall. I would not say it is worse.
    Mr. Olver. Not as good.
    Sergeant Major Hall. We have 114,000 sets of quarters in 
the Army, and 78 percent of them are inadequate. I will tell 
you what we do have. For the first time ever, we have a 
standard that is called an Installation Status Report, and 
every agency on every installation is now rated against that 
standard so we know exactly where to put the money. But if you 
ask me the question you ask, I would tell you it is a toss-up.
    Mr. Olver. Okay. Would you like to answer for the Marine 
Corps? We will hear from the Sergeant Majors first.
    Sergeant Major McMichael. Actually, we have had some very 
needed facelifts in family housing and so forth. But our 
training facilities are at an all-time high as we go into this 
new decade. A lot of money and work has been put into our 
training facilities, not just the ranges and things like that, 
but the schoolhouses as well, the distance learning process--
all of these things have been plus-ups to increase better 
learning and training.
    The tradeoff is that when you put money into that, it comes 
from somewhere else, as the Sergeant Major said, and it has 
allowed the quality of life on the base side to pull some 
stretched strings. So it is kind of a toss-up, but it does not 
matter who is ahead in the middle of the race; we would like to 
be able to run to the finish line.
    Mr. Olver. We need to balance it.
    Sergeant Major McMichael. We need to get to the finish line 
with a tie, a photo-finish.
    Chief Master Sergeant Finch. I agree the balance is always 
a delicate thing to do. Housing has been a focus, and I know 
that we focused on dormitories at the expense of some other 
construction money. But as my counterparts have said, it has 
got to be balanced. We look at infrastructure on the bases--and 
I know it is difficult to say they have to fix the sewer system 
at a base; no one wants to do that because we would rather 
build a dormitory--but at some point in time, that priority has 
to be laid out and we have to say yes, this is something we 
will do.
    But as the Army has done, we have got to match the plan on 
each base and say here are the facilities, and let us 
prioritize and decide which is the best to do and take a very 
objective look.
    Master Chief Petty Officer Herdt. Sir, I would just say 
that I think what we are really talking about here is quality 
of work life. It is something that we are really just starting 
to see the need to address. Certainly when you go to work in a 
rundown hangar--our shipboard quality of work life is fairly 
fixed and does not change, but everyplace else in the Navy, 
when you to go work each day in a place that is rundown, you 
feel like you are working for a second-rate outfit in some 
ways.
    Real Property Maintenance (RPM) has not kept up. We are 
building new barracks, we build new housing, and right away, 
the RPM is not there. We use it as a bill-payer for other 
things. That new housing and those new buildings do not remain 
new for very long. Having the right furnishings--instead of 
going to the Defense Reutilization Management office to get 
castaway furniture, the ability to buy new furniture to put in 
a work space makes a tremendous difference in the way people 
perceive their daily work life, and it is important.
    Mr. Olver. We are going to have to go and vote.
    Would you like to come back for another round?
    Mr. Edwards. I will submit any additional questions that I 
might have.
    Mr. Olver. Okay. Is that all right with you?
    Mr. Farr. Yes.
    Mr. Olver. Well, let me just say that I would invite you if 
you wish to give us for each of your services a further 
analysis, because this might have led to additional comment if 
we were not sort of in a move here, to talk about that balance 
from your point of view of the quality of life components and 
the working condition components, because I really do believe 
that we would all understand that they fit into the whole of 
retention and recruitment, the issues of how you serve this 
country. So I would invite you to submit that for each of your 
services, and if you would do so, that would be fine.
    Also, two of you have indicated that you have master plans 
for your bases, which helps to identify what is the highest 
priority of all these things in individual cases--three--you 
have a master plan--all of the services have master plans that 
relate all of these different issues in some way together, 
which we could probably each do if we need to in talking about 
exactly what we are doing. I think that that is a valuable 
understanding for us to have as well.
    Thank you very, very much for being here. This is always a 
great hearing.
    [The information follows:]

    I think it's impossible to separate the two in reference to their 
ties with retention. We continuously spend a lot of money on improving 
the off-duty quality of life for Sailors, and this is very necessary. 
However, we can't ignore the importance of improving the working 
environment for Sailors also. Quality of life at work needs to be a 
priority for us in leadership positions. Sailors should be proud of 
where they come to work, and know that their spaces are ergonomically 
efficient. We should continue to show our commitment to improving 
overall quality of life for Navy families by ensuring the working 
environments our Sailors work in are just as professional as the work 
we expect the Sailors to produce in them.
    We're trying to sell Sailors on staying with a top-quality 
employment team in the Navy. In order to do this, we have to act like a 
top-quality company and invest in the facilities we ask our people to 
work in. We shouldn't stop after the initial investment either. It's 
counterproductive to fund state-of-the-art facilities on one hand, and 
not include the funding to properly maintain these facilities on the 
other.
    By the nature of our business, the Navy has to invest substantial 
amounts of money in ships. All too often, the shore facilities that 
support our fleets get short-changed when the funds run out. Sailors 
ashore shouldn't be punished, or expected to work in substandard 
facilities just because they're not at sea. We need to work towards 
more equity throughout all of our services in regards to the quality of 
working environments we expect our service members to do what we ask 
them to do.
    Based on our facilities condition assessment system, the majority 
of the Marine Corps facilities are adequate to complete the mission but 
require some maintenance and repair. While quality of life projects for 
barracks improvements have received increased visibility, the Marine 
Corps continues to make improvements in workplace conditions through 
projects which renovate administrative buildings, modernize A/C and 
heating in buildings, repave parking lots and improve maintenance 
facilities contributing to improved workplace quality of life.
                         MILCON Quality of Life
    The Air Force places quality of life investments in a balanced 
funding priority with readiness and modernization. We will continue, 
with your support, to pursue quality of life priorities such as fair 
and competitive compensation and benefits; balanced TEMPO; safe, 
affordable and adequate housing, increase and support of community and 
family programs; expand education programs; and access to quality 
health care. The Secretary of Defense and Chairman have made Basic 
Allowance for Housing (BAH) and improvement of health care (TRICARE) 
two of their top priorities for fiscal year 2001. The Secretary has 
also announced intention to reduce out-of-pocket expenses to 15% in 
fiscal year 2001 and perhaps eliminate out-of-pocket expenses entirely 
within five years.
    Planned actions to improve TRICARE will focus on fully funding and 
placing more emphasis on the Defense Health Program; access to care; 
enhancing access for remote locations; improving claims processing and 
establishing a nationwide mail-order pharmacy service; and community-
based pharmacy network to serve the prescription drug needs of over-age 
65 military retired members, their spouses, and survivors of the 
military community.
    Specific improvements concerning claims process are: claims 
processing cycle time standards changed 1 September 1999 (with industry 
standards adopted) from 75% in 21 days to 95% in 30 days and 100% in 60 
days, with interest paid by the Managed Care Support Contract (MCSC) 
for claims delayed past 30 days. This new standard relates to retained 
claims. Claims that are not complete are returned to the submitter 
after a couple of attempts to get the info via phone. Additionally, 
contractor re-certification is required only for TRICARE network 
providers; non-network provider claims are not delayed for processing. 
Plus, claims processors are dedicating special units in the claims 
processing center to solve claims problems. More improvements to the 
claims processing system are being made. As it stands now, our system 
is set up as ``chase and pay.'' That means there is a lengthy process 
of deciding who should pay what. So lengthy, sometimes, the beneficiary 
gets caught in the middle. The Joint Chiefs of Staff plan to change 
this to ``pay and chase.'' The bill will be paid first, then it will be 
determined who pays what. That way, the beneficiary will never have to 
worry about being sent to a bill collector for something that was never 
their responsibility.
    Medical care is a top Air Force priority. The Air Force is working 
actively with DoD's new Defense Medical Oversight Committee, which aims 
to address current irritants and future benefits of the military 
healthcare system. Our goal is a prevention focused comprehensive 
health care system providing care to our beneficiaries wherever they 
live. DoD has developed the TRICARE benefit into a nationwide offering 
for individuals primarily located near bases. A new initiative will 
ensure that family members living outside military catchment areas will 
also be able to obtain care at TRICARE Prime prices. We don't concur 
with changing the TRICARE benefit into an FEHBP-like benefit for the 
following reasons. In the current DoD demonstration project offering 
FEHBP to our Medicare eligible beneficiaries at eight sites, enrollment 
has been very disappointing, less than 3% of the eligible individuals 
at the sites have enrolled. It is clear that all estimates of demand 
for FEHBP were wrong. The legislation that established the FEHBP 
demonstration for Medicare eligible retires required a study on the 
demonstration. One of the areas to be reviewed will be why enrollment 
was so low. Another, perhaps more important concern is lockout. There 
is a lockout in the FEHBP 65 program, enrolled individuals are not 
eligible to obtain services from MTFs, because the government would be 
paying twice for their care. The Office of Personnel Management which 
operates the program has been experiencing double digit inflation in 
premium rates over the past several years. Under FEHBP the family would 
be responsible for 25-28% of the premium costs, which could increase 
greatly each year with double-digit inflation.
    While BAH and TRICARE are key issues for fiscal year 2001, other 
areas of focus are equally important. We need to continually monitor 
and review the pay of our military members to ensure we see a reduction 
of the pay gap between military and civilian pay. A 3-year extension of 
authority to use certain Force Management policies (TERA, SSB, VSI, 
etc.) as tools to shape the officer and enlisted corps is needed. 
Additionally, authority to reimburse parking expenses incurred by 
military recruiters, senior ROTC cadre members, and MEPCOM members in 
the performance of their assigned duties is essential. We are also 
working to better manage our TEMPO. To help arrest the increasing TEMPO 
levied on our people we implemented the Expeditionary Aerospace Force 
concept, which will give our people more stability and predictability 
in their deployment schedules.
    The need for sustained investment levels, coupled with cost-based 
housing allowances and the ability to competitively source and 
privatize ailing infrastructure will go a long way to provide access to 
safe, affordable and adequate housing. The Air Force's goal is to 
implement our vision of the ``1+1'' standard, a private room for every 
unaccompanied E-1 thru E-4, by 2009. We are using a dual-pronged 
approach consisting of both the ``1+1'' construction standard, in 
concert with the Air Force Dormitory Master Plan, and a private 
assignment policy to meet this vision. We will not replace or convert 
any existing ``2+2'' standard dormitories (two people per room) with 
``1+1'' dormitories until they reach the end of their useful life. 
Instead we implemented a private room assignment policy, phased by 
grade, which will authorize our unaccompanied airmen private rooms in 
these dormitories by 2002. Since ``1+1'' was approved 6 November 1995, 
and through the fiscal year 2000 MILCON program, the Air Force has 
invested $593,000,000 to construct new or renovate existing critical 
condition permanent-party dormitories to provide 9,600 ``1+1'' 
dormitory rooms. In addition to MILCON, we have invested $88,000,000 in 
Congressionally appropriated Quality of Life Enhancement, Defense funds 
to renovate existing critical condition dormitories to ``1+1'', to 
include the conversion of 30 central latrine dormitories. We will 
continue to use the Air Force Dormitory Master Plan as our roadmap to 
eliminate the Air Force-wide deficit of 14,000 dormitory rooms and 
replace 5,500 existing critical condition dormitory rooms by 2009.
    Programs like child development, fitness centers, lodging, 
libraries, skills development, golf courses, and bowling centers all 
offer programs and services that support and enhance the sense of 
community and meet our members needs for relaxation and stress 
reduction. On-base programs are part of the non-pay benefit system 
providing savings over the cost members would pay to receive similar 
services off base. For example, National Association for the Education 
of Young Children (NAEYC) accredits only 5 to 8 percent of civilian 
childcare centers, while all Air Force Child Development Centers are 
NAEYC accredited. Accredited care generally costs twice as much as on-
base care. To a young enlisted family, these savings amount to $3,000 
per child per year.
    The Air Force continues to focus on helping active duty deployable 
members with their dual responsibilities as military members and 
parents. There is a need for 80,000 child care spaces. We were able to 
meet 62 percent of this need by end of fiscal year 1998. Facility 
projects and funding are in place to achieve 65 percent of the need by 
2002 through:
    Air Force members rated fitness centers as significant influences 
in both their readiness and their career intentions in the 1999 CSAF 
QoL Survey. Recognizing the importance of fitness, the Air Force has 
made increasing the quality of fitness facilities and programs a top 
priority. An independent needs assessment performed in 1995 indicated a 
need for 53 fitness center construction projects at a cost of 
$175,000,000. Further, the 1996 DoD Fitness Facility Survey determined 
29 Air Force fitness centers were defined as in poor condition.
    The Air Force is conducting an independent needs assessment of all 
installation fitness centers and is developing a multi-year 
construction program to upgrade all fitness facilities to the newly 
defined Air Force standards. After completion of only 32 of 88 total 
assessments, identified requirements already total over $280,000,000. 
The allocation of $183,000,000 for fiscal years 2000-2005 from the 
Secretary of Defense Quality of Life Funding Wedge for fitness center 
improvements will serve as the centerpiece of our continued effort to 
modernize fitness centers. Currently, an investment of $2,600,000 is 
needed to equip Air Force fitness centers not meeting current 
standards. Maintaining a sound fitness program, by investing in 
facilities and programs, will ensure Air Force people continue to 
choose a healthier lifestyle--a choice that is good both for them and 
Air Force readiness.
    We continue to demonstrate our commitment to our airmen and their 
families through programs such as spouse employment, personal financial 
management assistance, and relocation and transition assistance. For 
our junior airmen, we offer a Personal Financial Management Program to 
help deal successfully with today's heavily credit-based society.
    A major quality of life factor impacting recruiting and retention 
is expanded educational opportunities and access. For airmen working 
toward attaining their initial college degree, the community College of 
the Air Force allows them to combine college credits and military 
education and experience to earn Associate Degrees in Applied Science. 
Tuition Assistance pays up to 75% of tuition costs for individuals 
pursuing an undergraduate or graduate degree. The Air Force supports 
elimination of the $1,200 payment required to receive the education 
benefit and seeks to gain support and approval, in addition to 
expanding enrollment opportunities for the Montgomery GI Bill.
    The Marine Corps recognizes that sustaining our installations 
directly impacts readiness. Therefore, our approach to infrastructure 
management includes maintaining the highest possible quality of life 
for our Marines and their families. Our plan is developed from a 
coordinated perspective that includes management of current 
facilities,demolition of sub-standard buildings/structures, and 
strategic planning for our installations, while recognizing the 
limitations of our resource-constrained environment.
    The goals for improving our infrastructure are articulated in an 
Installations Campaign Plan. Our strategic approach will be developed 
in our Marine Corps Installations 2020 Plan. The two plans cover such 
areas as:
    --assessing the ability of our infrastructure to meet Marine Corps 
mission readiness requirements;
    --providing continued and uninterrupted access to all critical 
assets (land, airspace and water);
    --having required infrastructure in place for equipment and 
organizational fielding;
    --divesting of inefficient assets;
    --pursuing infrastructure reform initiatives (such as 
regionalization, reengineering and competition) to improve our business 
practices.



CONDITION OF FACILITIES IMPACT ON RETENTION AND RECRUITMENT OF SOLDIERS 
                         AND ARMY MASTER PLANS

    It is recognized that Army facilities generally are in poor 
condition and may have an adverse impact on mission accomplishment. 
Based on my observations as well as the data we have collected, 
facilities supporting soldier well being and facilities in which 
soldiers work and train are in about equally poor condition. We have 
ongoing programs to improve soldier housing and other facilities 
impacting soldier well being. We now have developed a plan to correct 
the poor condition of facilities where soldiers work and train and we 
hope to implement that plan in the next programming cycle.
    The soldier's work place is their home away from home for nine to 
ten or more hours each day. Their work surroundings and the condition 
of those surroundings have an affect on them as it would any other 
American. Soldiers, by the very nature of their jobs and experiences 
around the world, are some of the most flexible and adaptable people 
you'll find. Soldiers are extremely resourceful. They'll turn empty 
water crates into a primitive executive desk set in the middle of the 
desert if it helps get the job done. In the most dire of deployed 
situations you'll find them improving their living and working 
conditions whether it is a muddy foxhole or a bombed out stadium in 
Bosnia. But, soldiers do appreciate living conditions that are clean, 
safe and well equipped. As one NCO said the other day, ``It's hard to 
do a job that requires two hands when one hand has to hold up the 
desk.'' Whether in a hangar, an office, or a tent, the conditions of 
the work environment do impact on soldier productivity and morale.
    Improving the work conditions of soldiers directly impacts their 
attitude and perception that they are part of the finest Army in the 
world and positively impacts on retention.
    Regarding Army Master Plans, the Army has 188 bases, each of which 
has a master plan. It is Army policy that major Army commands manage 
and approve the master planning of their installations. The master 
plans are prepared and maintained at the installations.

    [Questions for the record submitted by Congressman 
Aderholt.]

         FAMILY SEPARATIONS DUE TO AFFORDABLE HOUSING SHORTAGES

                             ARMY RESPONSE

    Question. Are families choosing family separation because of 
shortages of affordable housing rather than mission requirements? I 
believe these personnel are referred to as ``geo bachelors.'' How 
widespread is this problem?
    Answer. There are many reasons a soldier may elect not to take his 
or her family to a new duty station, such as: a spouse having a good 
job at the old duty station; a soldier may own a house and not be able 
sell or rent it, lack of good schools at new duty station and a 
shortage of affordable housing at the new duty station.
    The Army does not track the reason or the number of geographic 
bachelors who do not take families to their new duty station.

    [Clerk's note.--Questions for the record submitted by 
Congressman Aderholt.]

                             NAVY RESPONSE

    Question. Are families choosing family separation because of 
shortages of affordable housing rather than mission requirements? I 
believe these personnel are referred to as ``geo-bachelors'' How 
widespread is this problem?
    Answer. I'm hesitant to determine a specific reason Sailors would 
serve a tour as a ``geo-bachelor.'' It is a difficult decision for any 
family to choose, and narrowing the reasons to one or two would be 
misleading.
    The problem, as I see it, with ``geo-bachelors'' is that we don't 
officially acknowledge them with housing policies. A majority of career 
Sailors will serve as a geo-bachelor at one time or another throughout 
a career. With this in mind, we're doing each of them an injustice by 
not providing them with logical options.
    I've said before that Sailors don't ask for too much. I assure you, 
serving a tour as a geo-bachelor is not a favorable option for anyone 
involved. Providing Sailors with a barracks room to sleep in is the 
least we can do as their family is making this significant personal 
sacrifice for their country.

                            MARINES RESPONSE

    Question. Are families choosing family separation because of 
shortages of affordable housing rather than mission requirements? I 
believe these personnel are referred to as ``geo bachelors.'' How 
widespread is this problem?
    Answer. It is unlikely that an accurate accounting can be made of 
how many service members are choosing family separations based on a 
shortage of affordable housing. There are a variety of reasons a 
military service member will choose to separate themselves from their 
family or become a ``Geo Bachelor.'' In some cases, waiting for 
available housing may be a factor but we also find that service members 
do not want to disrupt their children's lives by switching schools in 
mid-year. Additionally, many family members have spouses who work and 
their skills are not as transferable from one location to the next. 
This is a personal decision with each of these factors being weighted 
collectively as the family decides when is the best time to relocate 
with their service member.

                         MILCON QUALITY OF LIFE
                           AIR FORCE RESPONSE

    Question. Are families choosing family separation because of 
shortages of affordable housing rather than mission requirements? I 
believe these personnel are referred to as ``geo bachelors.'' How 
widespread is this problem?
    Answer. The Air Force does not track family separation numbers at 
CONUS locations. It is tracked for the overseas bases and current 
numbers show approximately 91% of eligible Air Force members to be 
serving ``accompanied'' tours at these locations. As far as reasons for 
the approximate 9% of eligibles serving overseas in an 
``unaccompanied'' status, we have no hard data regarding the member's 
specific rationale. Anecdotally, we believe it to be more social (e.g., 
marital problems, extended family health issues, children schooling 
concerns) than financial (e.g., housing costs) in nature.

    [Clerk's note.--End of questions for the record submitted 
by Congressman Aderholt.]
                                           Thursday, March 2, 2000.

                         DEPARTMENT OF THE ARMY

                               WITNESSES

MAHLON APGAR IV, ASSISTANT SECRETARY OF THE ARMY, INSTALLATIONS AND 
    ENVIRONMENT
MAJOR GENERAL ROBERT L. VAN ANTWERP, JR., ASSISTANT CHIEF OF STAFF FOR 
    INSTALLATION MANAGEMENT
MAJOR GENERAL THOMAS J. PLEWES, CHIEF, ARMY RESERVE, OFFICE, CHIEF ARMY 
    RESERVE
BRIGADIER GENERAL MICHAEL J. SQUIER, DEPUTY DIRECTOR, ARMY NATIONAL 
    GUARD

                       STATEMENT OF THE CHAIRMAN

    Mr. Hobson. The committee will come to order. This 
afternoon's hearing will focus on the Army Military 
Construction Program, including Family Housing, Base 
Realignment and Closure, and the Guard and Reserve.
    Our witnesses this afternoon are Secretary Apgar, who is 
the Secretary of the Army for Installations and Environment; 
and Major General Robert Van Antwerp, who is the Assistant 
Chief of Staff for the Army for Installation Management. It is 
a pleasure to have both of you appear before the subcommittee 
this year, sir. Gentlemen, we look forward to your testimony 
and a good hearing on the construction program for the Army, 
Army National Guard and Army Reserve.
    Mr. Olver, do you have any opening comment you would like 
to make at this time?
    Mr. Olver. Only I would like to welcome the secretary and 
general, again. You have been with us before. I will have other 
questions when your testimony is done.
    Mr. Hobson. Mr. Edwards, since you are the only one here, 
do you have anything you want to say or do you want to wait?
    Mr. Edwards. Not at this point. I would just like to thank 
you, Mr. Chairman.
    Mr. Hobson. If you would make your opening comments and 
keep them kind of brief because we do have some questions we 
would like to ask you after you get finished. So if you will 
just start, Mr. Secretary.

                   STATEMENT OF HON. MAHLON APGAR IV

    Mr. Apgar. Thank you, Mr. Chairman, distinguished members 
of the subcommittee. It is a pleasure to appear before you to 
discuss the Army's military construction request for fiscal 
year 2001. In addition to Major General Van Antwerp, I am also 
joined by Major General Plewes, the Chief of the Army Reserve, 
and Brigadier General Squier, Deputy Director of the Army 
National Guard.
    Our combined witness statement provides details of our 
military construction budget request, and with your permission, 
Mr. Chairman, I would like to submit the full statement for the 
record.
    Mr. Hobson. Sure.
    Mr. Apgar. Before we address your specific questions 
regarding the budget submission, I would like to highlight a 
few of our key initiatives in the Army's active and reserve 
components.
    Forty-seven percent of our budget, $427 million, is 
dedicated to providing facilities that help the well-being of 
our soldiers, their families and civilians. This includes our 
top MILCON priority to get soldiers out of inadequate barracks 
and to provide new or upgraded barracks to over 136,000 
soldiers. The fiscal year 2001 MCA budget request of $367 
million for barracks will provide modern housing for over 3,100 
soldiers worldwide.
    Our Strategic Mobility Program is on track for completion 
in fiscal year 2003. We realize that we will be examining our 
entire strategic mobility requirement as part of transforming 
the Army to a more strategically responsive force in line with 
the new Army vision. But based on current plans, our MCA 
program has been responsive to the current requirements of the 
Army.
    The Army's Family Housing Program contains a total of $154 
million: over $100 million for the construction of new or 
replacement housing or revitalization of current housing within 
the United States and $54 million to improve our housing 
overseas. Together with our Housing Privatization initiative 
and Secretary Cohen's initiative to eliminate Service member's 
out-of-pocket costs for off-base housing in the United States, 
this MILCON funding will help improve the living conditions for 
our married soldiers.
    The Army National Guard's fiscal year 2001 MILCON budget 
request focuses on training site modernization, readiness 
centers and Army National Guard Division Redesign Study 
projects. The Army National Guard's participation in Army 
Division Redesign, ADRS, will provide needed forces to the 
commanders-in-chief. ADRS will convert some National Guard 
combat forces to combat support and service support forces that 
are needed by the Army to implement the national military 
strategy.
    For the Army Reserves, the budget provides the essential 
military construction resources for Army Reserve Centers, their 
backbone for training, readiness and mobilization.
    Mr. Chairman, our fiscal year 2001 budget permits us to 
execute the Army's military construction programs. Our long-
term facility strategy can be accomplished only through 
balanced funding, reduction of excess capacity and improvements 
in management. We plan to work closely with you and this 
committee to streamline, consolidate and establish partnerships 
that generate resources for infrastructure improvements and 
continuance of services.
    And we look forward to working with you to help us manage 
our installations as strategic assets, not simply a collection 
of facilities and projects and to fix a fiscal model that is 
broken, that is not suited to the long-term management of our 
unique and valuable real estate assets. With the support of 
this committee and approval of our budget, we will be better 
able to support the Army and the soldiers and their families 
who serve our Nation.
    Thank you, Mr. Chairman. Major General Van Antwerp will now 
provide his remarks.

         STATEMENT OF MAJOR GENERAL ROBERT L. VAN ANTWERP, JR.

    General Van Antwerp. Mr. Chairman, members of the 
committee, I am honored to be here with you today and look 
forward to a good discussion on where we are headed with this 
2001 program.
    As you know, it is an exciting time in the Army with 
transformation. Some of the bills for transformation are yet to 
be determined, a lot of questions to be asked and answered on 
that.
    For our initial brigades that go into Fort Lewis, 
Washington, there is going to be very little facilities in the 
early years. We have about $91 million that we are already 
programming for Fort Lewis. So there is not a big change there.
    Mr. Hobson. Where is Norman? [Laughter.]
    General Van Antwerp. We will have to give him a separate 
brief here.
    But the other part that we are really doing is focusing on 
some very special programs, as was already talked about, the 
barracks renovation program. We intend to have all of our 
soldiers in 1 plus 1 barracks by 2008. We are currently, after 
this 2001 budget, we will be at 70 percent of our soldiers in 1 
plus 1 rooms or, in Korea, 2 plus 2, which is a modification.
    Currently, the budget in 2001, about 40 percent of the 
MILCON goes towards those barracks renovation projects and 
leaves about $119 million for other types of projects. After 
you take out the barracks renovation, strategic mobility, and 
then you have others. So it is a very focused program, 
primarily on barracks and strategic mobility.
    After that, I just wanted to say a few words about where we 
are on quantity and quality of facilities. We have about 
166,000 facilities in the Army. The average age of those 
facilities is about 44 years old. We, of course, have a lot of 
historic facilities, about 12,000 of that number is historic. 
If you get into just something specific like the general 
officer quarters, the average age of those general officer 
quarters, we have 326 of them, it is about 70 years old. So 
there is a lot of impact there, as far as maintenance repair 
and upkeep of those facilities.
    We have two models, two tools, that really help us to 
program. And we think in the Army, and I speak for all of the 
components here, that we have good fidelity on what our needs 
are, both for RPM and for MILCON, both quantity and quality. 
And I will tell you that the quality backlog of maintenance and 
repair or modernization is about $15 billion. So in order to 
eat that piece, it is a focused strategy to focus in on our RPM 
and to focus in on modernization, which is a combination of OMA 
and MILCON, and that is where we are headed.
    The future, after barracks and after strategic mobility, is 
tactical equipment shops, it is Army Reserve armories and 
readiness centers for the Guard, it is classrooms, it is hard 
stands, it is training barracks, and it is physical fitness 
facilities. So that is just a glimpse of where we are headed in 
the facilities business.
    Currently, with all of the components, we meet about 40 
percent of the needs, and that is a real challenge. So we have 
had to really focus that down, and we are looking forward to 
talking further with you about that, and we will receive any 
guidance you have for us.
    That ends my statement, and I look forward to your 
questions.
    [The information follows:]

 PREPARED STATEMENT OF THE HONORABLE MAHLON APGAR IV AND MAJOR GENERAL 
                         ROBERT L. VAN ANTWERP



    Mr. Hobson. I will let my members go first. Mr. Olver.
    Mr. Olver. I am going to wait.
    Mr. Hobson. Chet.
    Mr. Edwards. Thank you. This is the politest committee in 
the U.S. House, I think. [Laughter.]
    Mr. Secretary, thank you for being here, General. Thank you 
all for a lifetime of service to our Army and families.
    Obviously, this is a subcommittee that is especially 
sensitive about quality-of-life issues, and I think all of us 
think, if not all, I think we all probably think that housing 
improvements is crucial to keeping and retaining the best. And 
if there is any money left after Fort Lewis is funded--oh, I am 
sorry----
    [Laughter.]
    Mr. Dicks. There will be a few. [Laughter.]
    Mr. Edwards. I just mentioned it, and now you want a 
million-dollar----
    [Laughter.]

                         HOUSING PRIVATIZATION

    Mr. Edwards. $91 million. But I guess, Secretary Apgar, 
what I would like to ask you, just give me and the committee a 
general overview of where we are on the Housing Privatization 
Program.
    Mr. Apgar. Certainly, sir.
    As you know, Fort Carson was the first housing 
privatization project to be awarded last fall and is now well 
underway, under the traditional request for proposals 
procurement method. I met with General Soriano, the Commanding 
General, installation commander, his staff and the J.A. Jones 
team, the contractor, for a day several weeks ago for the first 
time to really understand and dissect their approach, what they 
had done already, and what is still to come and was impressed 
with progress to date. They have done some smart business 
things.
    Within 60 days of the contract award, they had mobilized a 
maintenance task force and cleared 200 units which had been 
unoccupied for months, in some cases, years, and brought them 
online. So families were able to move in just before the 
holidays in a troop redeployment that were headed to the 
Balkans, and that was a major visible symbolic, but very real 
step to show what can be done in this process.
    As that first project comes online, as you know, we changed 
last year the procurement methodology from the traditional RFP 
to the Request for Qualifications method, and the first of 
those projects, Fort Hood, is about to be awarded as soon as we 
can clear a reprogramming step, which is essential to basically 
fund the management and support for that project.
    The Fort Lewis RFQ, closed recently, is now under 
evaluation. We should be able to make that award within the 
next two months.
    Mr. Edwards. Does the reprogramming that affects Ford Hood 
affect Fort Lewis also?
    Mr. Apgar. It does. It affects all three of the pilot 
projects: Forts Hood, Lewis and Meade. And, essentially, the 
reprogramming is the enabler to fund and support those three 
pilot projects to move ahead. Assuming we can stay on track and 
recover the few weeks of lost ground in Fort Hood to open, we 
should have, by the fourth quarter of this year, three pilot 
projects under the RFQ methodology totalling about 12,000 
units, in addition to the 2,000 at Fort Carson.
    So the total privatization project program for the Army 
will exceed 14,000 units and provide, we believe, precisely the 
test that you, Mr. Chairman, exhorted us to do a year ago; a 
test not only of methodologies for procurement, which are, 
frankly, profound in their own impact, but also tests of 
geography, markets, developers and approaches. In a sense, 
these four pilots, if we include Fort Carson in that group, 
will represent, and this is purely a judgment call, but 
certainly 90-percent-plus of all of the situations that we face 
within the Continental United States, in terms of diversity, 
and geography and market conditions, we think.
    So I would certainly be happy to expand further, but in a 
nutshell, that is where we are.
    Mr. Edwards. The reprogramming needs to be completed before 
you can move ahead with Fort Lewis and Fort Hood.
    Mr. Apgar. That is correct.
    Mr. Hobson. I do not want to leave the impression that it 
has been the committees that have held up totally the 
reprogramming. There were some problems, we discussed the 
reprogramming, we encouraged it to come forward. It did not 
come forward as fast as we all, I think you thought it was 
coming. Once we got it, I do not know what the dates were when 
it came, but it did not come in the fashion as fast as I think 
you thought it was going to be because you and I talked.
    We have asked, I think, for some justifications along with 
it, which we have not received yet. So I do not want to leave 
the impression that this committee has held up that 
reprogramming because that is not our intent to do that. We 
just have certain things we have to follow. The problem is this 
has gone on longer than I anticipated it would be because you 
and I talked I think before the break----
    Mr. Edwards. Yes, in December.
    So there is still information forthcoming.
    Mr. Hobson. That is what Brian tells me.
    Mr. Edwards. My understanding was that it was being held up 
predominantly in the Senate, but if we need more information 
from the Army, then we need to get it.
    Mr. Hobson. Even if the Senate had approved it right now, 
we would not, I do not believe, be able to totally respond yet 
to it. And it is not trying to do anything, and it is not 
because of the concept.
    Mr. Edwards. I would love to get Norman, myself, and 
anybody else, to work together to encourage the Army to get 
this information in or find out, Mr. Secretary, I do not know 
if you are even aware that the information is not here. Do we 
know what information has not been provided by the Army?
    Mr. Hobson. Well, I think we need to sit down with staff, 
your staff, and get it worked out.
    Mr. Edwards. Okay. That would be great.
    Mr. Apgar. Thank you, Mr. Chairman. We would like to do 
that. This is a surprise, frankly, in terms of information 
required. We have submitted, after the original submission to 
this committee and the other three committees, through my 
colleague, Ms. McCoy, Assistant Secretary for Financial 
Management, the standard procedure for submissions, and then 
learned from the staff response that it had to go to OSD first.
    Mr. Hobson. That was my letter saying it had to go there 
first.
    Mr. Apgar. Yes. And having then crossed that hurdle, it did 
take longer than expected in OSD. It is my understanding, as of 
last Friday, that it cleared OSD and was resent to all four 
committees from OSD.
    Mr. Hobson. Well, I just do not want anybody to think that 
we held it up. It has to go through certain hoops before we can 
approve it. One of them was OSD. And as soon as we found it out 
had not, we told them. So it is not any intent to flack 
anything, it has just got to follow the steps.
    Mr. Dicks. If the gentleman will yield.
    Mr. Chairman, do you think there is any substantive problem 
here at this juncture or is this procedural at this point? I 
mean, if it is now over here----
    Mr. Hobson. Well, I do not know if it is here.
    Oh, we have had it since last Friday. I have not had a 
chance to work it. We just need to have a meeting on it. We 
will have a meeting on it.
    Mr. Edwards. Thank you.
    Mr. Hobson. Anything else?
    Mr. Edwards. No other questions. Thank you, Mr. Secretary. 
Thank you, Mr. Chairman.
    Mr. Hobson. Sam.
    Mr. Farr. Thank you, Mr. Chairman. I always seem to have 
three questions.
    Mr. Hobson. He had three this morning. So he has three this 
afternoon. Three for three.
    Mr. Farr. I do not know why, to me, it does not seem like 
rocket science. I was a county supervisor and did a lot of 
land-use development in the county. Why do we spend any public 
money on building housing, family housing or bachelor housing 
for the military? It seems to me that we own the land. We do 
not have to buy it. And we have the people. We can present 100-
percent occupancy, and that occupancy is going to be good 
occupants or we keep them out. We do not have to kick them out. 
We pay the bill. We pay them electronically. I mean, this is a 
``gift horse,'' and I would think anybody would say I would 
love to build for that constituency.

                        FORT ORD FAMILY HOUSING

    I guess the reason I am so sensitive to this is because of 
a big military base being closed, Fort Ord where the Army built 
state-of-the-art housing in the eighties. Now that the base is 
closed, you have these civilians going in there and looking at 
it and finding out we cannot convert even this modern, 
beautiful housing. It never was built to local codes. So now it 
is a closed base. You cannot even turn this--it has 
deteriorated for other reasons--but even if you could just turn 
it over, you have to go back and retrofit it. It does not meet 
fire standards, it does not meet water hook-up standards, so 
the liability by the utility companies and the liability for 
anybody who is an owner because of fire insurance and things 
like that.
    I guess my first question goes to, when we build this 
housing, whether we build it with private-sector money, which I 
think we ought to do, or we build it with Government money, are 
we going to start building this housing according to local 
building standards?
    Mr. Apgar. In fact, Mr. Farr, that is one of the principal 
features of the military housing privatization legislation 
that, to us, is most important. It enables us, for the first 
time, to build to local market standards, including not only 
the design, materials and geometry of the houses, but also 
their features and internal appliances and the rest. And that 
is a very important change. It is so important that, frankly, 
it led me, upon assuming this responsibility, to assume--
wrongly, in retrospect--that we should privatize a much more 
substantial percentage of our housing than we are.
    Mr. Farr. I would like to have the Army go back and look at 
private housing you built in Ford Ord called Sun Bay 
Apartments. The Chairman has been there. This is really quality 
housing. It was for the NCOs. And the agreement was that if the 
base ever closed, you know, that a private developer--and it 
worked out beautiful.
    Now, I understand the reason we cannot do that kind of 
anything any more is about 1991 or 1992 OMB changed the scoring 
methods, and I do not understand what that is all about. But if 
that is the problem, we ought to be dealing with it. Do you 
know anything about that?
    Mr. Apgar. Well, I know about certain aspects, but not 
others. I am not familiar with the specific project you are 
addressing.
    Mr. Farr. Well, I do not know and you do not know, but I 
would like to have the Department look into why we cannot do 
more Sun Bay developments--Sun Bay, Fort Ord--developments on 
bases all over the world?
    Mr. Hobson. Well, scoring has, if you would just let me 
interject, scoring is a very difficult problem in these deals. 
And my problem has been we have allowed scoring to do 
potentially dumb deals rather than do the right deal because of 
the way it is scored, which is just something that somebody 
figures out is a way of----
    Mr. Apgar. An accounting principle.
    Mr. Hobson. It is an accounting deal.
    Mr. Farr. Well, we ought to write the law. We can tell them 
how to score.
    Mr. Hobson. And it certainly is not, when you say 
``accounting principle,'' it is certainly not in FASBY or 
anyplace else you are going to find it--only in the Government 
will you find it. And what I object to in that is that we are, 
on the one hand, trying to use private principles to develop 
deals, which is along the lines of what you want to do, and 
then we used Government jargon or manipulation to make those 
not as good, from my perspective and from a financial 
standpoint, as they should be. So he has got a good point.
    The other thing that is going to help this stuff is the 
recent change that the Secretary of Defense did in the BAH is 
going to drive the deals better because there are places where, 
because of the BAH, these deals did not make sense. They will 
not be universal, but it will make them, I think--is that a 
fair assessment of what he is talking about?
    Mr. Apgar. Yes, Mr. Chairman, it is. And in addition, OSD 
has, I understand, recently submitted proposals that would 
extend this market-based design and development principle to 
military construction as well. And that alone would be a 
profound change; in other words, shifting from mil specs, which 
are not adapted to local conditions and standards, to market-
based standards.
    Mr. Hobson. And that would save money.

                          FORT HUNTER-LIGGETT

    Mr. Farr. The second question I have is the Army cantonment 
area at Fort Hunter-Liggett, which is now under the command of 
Army Reserve. Are you aware of any reason that the Army may be 
changing its mind, and can it? Can it withdraw from what has 
already been put out, where you have asked for proposals from 
other Federal agencies, and they have responded and said, ``We 
are interested''? Once it has been BRAC'd, you can renege on 
that?
    Mr. Apgar. I am not certain, sir, but I wonder if General 
Plewes would respond.
    General Plewes. Yes, sir. I am Chief of the Army Reserves, 
so I think I can try to answer that.
    When we started to expand the training base at Hunter-
Liggett we discovered that many of the decisions made in the 
BRAC process just did not seem to make any sense any more. We 
have now gotten more training hours in there than when my 
division was training there, for example.
    Mr. Farr. If the Reserve is not training there, then the 
National Guard is training there.
    General Plewes. Well, the Reserve and National Guard, sir. 
I have gotten the National Guard back in there again, and the 
Army Reserve has put in two schools, and they are working 
around the clock. So we are pretty busy there. I went back to 
Forces Command, quite frankly, which has the overall 
responsibility there, and I asked could we rethink some of the 
BRAC decisions. And basically the decision we got back is, no, 
we are not going to reopen BRAC.
    Then came what you have been helping us with, and that is 
going around to other agencies to determine whether or not it 
is possible for another Agency to take responsibility, and then 
we would rent back, lease back, whatever we could. We are still 
in negotiations with the National Park Service. And that is 
about as far as we are. They are taking a look at whether or 
not they want to get involved in that business. It would make 
good business sense for them if they decided that that is 
consistent with what their charter is, and we would, I believe, 
be in a position to offer them some long-term assurance that we 
will provide the basis of funding.
    Mr. Farr. Well, if for any reason that the National Park 
Service does not, and it is BRACed, I think we ought to look at 
the Forest Service because there is also civilian training 
going on there in the Wild Land Fire Management, which benefits 
all of the other Federal agencies; the Forest Service, Park 
Service, BLM, working in conjunction with the National Guard 
and the Reserves.
    This is a great opportunity for training, and we ought to 
just broaden and use that. This is a huge place that we have. 
It is the fifth largest, I think, piece of land in the Army in 
the United States.
    Mr. Hobson. How many acres is it?
    Mr. Farr. You have got the biggest. It is 168,000 acres. 
And I look at, I said, ``Look, let us look at this like a 
convention center. Anybody who wants to do training here, 
whether they be military or civilian,'' I mean for all of this 
detection of how you train people for explosives and 
biologicals, we could use this. We have got all kinds of 
capabilities. We ought to just think broadly on this one. And I 
appreciate your answer.

             PRESIDIO OF MONTEREY--ADDITIONAL HOUSING NEEDS

    I understand that the Army is entering into a lease-back 
arrangement with the City of Marina as a part of Fort Ord. The 
initial contract consists of approximately 170 units with 
another 530 units for potential lease arrangements. Is the 
housing stock sufficient to fulfill the needs of the DLI, the 
Defense Language Institute, at the Presidio in Monterey or do 
you foresee even additional housing needs? And do you 
anticipate that the Army will have to build new housing? You 
still own military land. You have housing on there, about 5,000 
soldiers and families of soldiers, and you have run out of 
housing.
    The reason is that when you send students to the DLI, (we 
have about 70-percent married now), that when the student, 
after they have their training, the student is deployed to 
their next assignment, but the family of the student has up to 
18 months to relocate. So the house that the incoming student 
would have been in or the building that they would have been in 
is occupied by the family of the outgoing. And we have this 
overlap, and we are now suffering from lack of housing. If you 
need more housing, you are going to lease back from Marina this 
housing that you got rid of. You probably got rid of too much. 
But are you considering, on that land on the Palm Annex, that 
you may have to build some more land and build more military 
housing?
    Mr. Apgar. I do not know the answer, sir, but we will be 
happy to look into it and report back to you.

                  CLEAN-UP OPERATIONS AT CLOSED BASES

    Mr. Farr. And then, lastly, a very interesting thing that 
this committee is probably involved with because of my concern 
about it, can you tell me if the Army has been the subject of 
any environmental lawsuits for clean-up operations at closed 
bases--this goes to your BRAC statement here at the end--
similar to the lawsuit that was filed to clean up Fort Ord? Is 
there any other lawsuit like that?
    General Van Antwerp. Not that I am aware of. That is the 
one unique thing. We have a considerable number of 
environmental issues to overcome. There is $231 million in this 
2001 budget to work BRAC environmental. So there are other 
issues out there, but none have come to the point that Fort Ord 
did.
    Mr. Farr. I admonished the Navy this morning when they were 
in here. The Services are going to have to get together on this 
clean-up, particularly when they are dealing with the State of 
California. Because you have one stop for all services in the 
State of California. It is called the Office of Toxic 
Substance. And they are in the process of determining what the 
clean-up standards should be for re-use, for civilian re-use, 
under California law. And it appears that their standard is 
going to be higher than the Federal standard, which means, 
essentially, that the land cannot be used for the purposes, 
with the adopted re-use plan, that DoD has already approved.
    See, this is where we are getting into a big problem, we 
have said, ``Yes, we will clean up the land to the standard 
which you have put in your master plan for re-use.'' And then 
along comes the Toxics Office and says, ``Our standard for re-
use is going to be higher than the military,'' and you are held 
accountable, responsible financially, to cleaning up to that 
standard. And you are going to be held forever.
    And what they have just agreed with an MOU with the Navy 
could be the boilerplate covenant for all military land in 
California, regardless of what Service.
    The Army is the lead, but you are the unexploded ordnance 
experts. You do that for all of the Services. It seems to me 
that there has got to be a meeting between, and California is 
probably the test place, between the Army, the Smart Team that 
Ray Clark has headed up, and the Office of Toxic Substance to 
really come--and I will push them--to come to some kind of 
standard that you could both agree on, and you ought to work 
out some covenants there, boilerplate language, that other 
Services could use.
    But do not let the Navy drive it. They have got a clean 
piece of land, and they have essentially got you hooked into, 
because I can see the same covenant coming along, and you are 
going to have a financial responsibility beyond your 
capability. And this is something this committee has got to 
deal with because if we are going to build them and abandon 
them, we are going to be responsible for cleaning them.
    General Van Antwerp. We will definitely get with them and 
look into it.
    Mr. Farr. Thank you.
    Thank you, Mr. Chairman.
    Mr. Hobson. Norman.

                   HOUSING PRIVATIZATION--FORT LEWIS

    Mr. Dicks. Assuming this reprogramming is approved, and you 
have gone through kind of the schedule, could you give a little 
more detail about just what is going to transpire at Fort 
Lewis. You are going to turn over all of the military housing 
to whoever wins the RFQ, and then they will build additional 
housing over what period of time? Or is that an agreement that 
has to be reached?
    Mr. Apgar. It does. You have to go back to the process 
itself.
    As soon as we have made the award, two events occur 
simultaneously: One, the development partner begins receiving 
the revenue flow, if you will, from the basic allowance for 
housing of all of the soldiers in family housing, and the Army 
and the developer begin a joint planning process within a 6- to 
9-month period to produce what we have called a Community 
Development and Management plan, and that has three components: 
A financing plan, source of capital, for both renovation and 
new construction and ancillary facilities, landscaping and the 
rest; a development plan over a period of time, how many units, 
which ones, where, which are renovated, which are new; and, 
thirdly, an operations plan, that is, ongoing maintenance and 
management of units once they are renovated and/or constructed.
    That is, although we are maintaining flexibility at this 
point to be negotiated, typically going to be a 40- to 50-year 
agreement, with very strong oversight on the Army's part. I 
view the installation commander as the plant. My role and our 
office's role in the task force at headquarters is there to 
help make it all happen and basically to supervise the deal 
until it is ready to be consummated.
    So in that 6- to 9-month period, that plan, the detailed 
plan, will be produced. And at the end of that plan, there will 
then be the formal development agreement, and the management of 
the whole portfolio, all family housing in Fort Lewis, will 
then ensue.
    We have set up a structure, including both the installation 
commander and his staff, local community leaders--and Mr. 
Edwards could perhaps describe to you how we have approached 
that at Fort Hood already, and we are about to do this at Fort 
Lewis. The model is to involve all of the stakeholders in 
planning, not just Army, but local community, and in doing 
that, to engage in all of the issues that are going to come up 
from not only who is building the housing, but governance and 
relationships with the local market service providers.
    On an ongoing basis, the installation commander and his 
staff will really have the day-to-day oversight of the 
development partners' work. But in the cases to date, the 
premise is that the development organization will have not only 
a full-time staff, but senior executives there full time. And 
those decisions could be really made and solved locally, not 
from the Pentagon or here. But that is the basic framework.
    Mr. Dicks. Interestingly, once this is, in essence, 
privatized, and it is no longer the Government owning this 
housing, through the Army, it will then be subjected to local 
taxes, will it not, or local issues of that nature?
    Mr. Apgar. It depends.
    Mr. Dicks. On local zoning or whatever?
    Mr. Apgar. Because we remain the landholder, and this is a 
ground lease in some form, the present rules apply; that is, we 
are our own zoning authority, and we are our own building 
certification authority, and we are also the source, in effect, 
of the revenues.
    I think where we are going to have to forge new ground. 
This is not clear yet. The linkages with the local community 
where existing services that may be available off-post that 
serve on-post residents, may be applicable, and the model 
really is Monterey for that, which is a pioneering 
relationship, joint agreement between the Army and the local 
community and we have other models to look at. But that is 
certainly a profound one, in my view, for how a long-term 
partnership with the local community would work.
    Some of those issues are precisely what we are going to 
have to work through in each case and each case will be 
different. There is no template that is uniform. In fact, it 
would be a serious mistake to think that each post, each 
location at this scale has a uniform template. There are some 
principles that are the same but the specifics are a little 
different in each case.

                 HOUSING PRIVATIZATION--TAXATION ISSUE

    Mr. Dicks. But taxation will be an issue, right?
    Mr. Apgar. Well, it will be an issue for schools as it is 
today but it won't be an issue for property taxes.
    Mr. Dicks. How would they be exempt from that?
    Mr. Apgar. Because we own the real estate. In effect, the 
developer will have the rights.
    Mr. Dicks. What about the construction? In our State we 
have a sales tax. But the sales tax is sometimes not imposed, I 
believe, when the military does it. But if a private sector 
person is doing it then they are going to have to pay that, 
right?
    Mr. Apgar. No. Because the development rights in this case 
are on land that we own and, in effect, we are granting through 
the form of a lease in whatever legal structures that we work 
out--and that can be different, too--we are granting the 
developer the rights to build, to renovate, to demolish. But I 
have not, at least, been apprised as yet of a specific, either, 
property tax or local excise tax except for sales taxes that 
could apply if there were a revenue stream and so far there is 
not.
    Clearly it is an issue to be worked through.
    Mr. Dicks. Yes, it has got to be worked through.

                             EXIT STRATEGY

    Mr. Hobson. If I could interject. Where there could be a 
problem some day in this that in most of these leases there is 
a provision that I, one, frankly, and one of the reasons we are 
building where we are building is that the military is going to 
change. This doesn't necessarily mean Fort Hood because they 
are probably going to be there ad infinitum as long as we have 
got an Army. But there are other facilities that through a BRAC 
or over a period of time as people as we have discussed at 
another hearing move out of base, traditional base housing or 
this housing, even, and would go into the economy maybe buy a 
house or something--well, that is--who knows how missions are 
going to change--this in character would change from a 
predominantly occupied facility by active duty military into 
maybe in the final analysis local community people after you 
run through, you know, how the lease is drawn and the gamut.
    So, it seems to me at some point the community is going to 
get a little upset at some point if you have got people moving 
in there, out of the community, and they are not getting some 
sort of revenue back beyond the probably the income taxes that 
they have or something of that sort that are occupying these.
    It is something we need to think about as we are putting 
these models together but one model that is going to be 
consistent throughout all of this is that, I believe, that 
should be here is that if we don't need this housing any more 
we should not continue a leasing arrangement. I think everybody 
agrees to that. The problem is when that shifts over to a 
predominantly civilian, which who knows when that is going to 
happen, what then happens to the taxation part of this? And I 
don't know anybody really, how they are considering that in 
their modelling now, but it is a good point to look at.
    Mr. Apgar. To your point, Mr. Chairman, one lesson we have 
already learned from the Fort Carson project is that I only 
discovered in the course of this briefing, I mentioned a few 
weeks ago, that there was no exit strategy. Now, that is a 
central principle of any long-term real estate deal. And we had 
already assumed that for the Forts Hood, Lewis and Meade cases. 
As you know, the Fort Carson project was set up several years 
ago. So, that is a specific example of why this issue is 
important.
    If you have an exit strategy, and let's say every five 
years there is a trigger for whatever reason, the issues of 
transfer of both ownership or in the case of a long-term lessee 
controlled the values associated with that, both in the revenue 
stream and in the underlying real estate, are carefully 
defined. And that is not rocket science. It is complex.
    Mr. Hobson. It is normal real estate.
    Mr. Apgar. Well, exactly. It is normal real estate 
practice. So, those are the sorts of issues which are 
unconventional or even unprecedented for Government--and 
remember I have only been in the Government now for about 20 
months, so, I am still new to this--that are well-practiced in 
the private sector.
    So, we may have more difficulty, ourselves, with this than 
our development partner will or even the local community. 
Nonetheless, the short answer is a number of details have to be 
worked out at that time.
    Mr. Dicks. Okay.
    Thank you, Mr. Chairman.
    Mr. Hobson. I might add that we are going to have, for 
anyone who might want to show up, we are going to have a 
hearing on how to do privatization, alone, in about a week or 
so, where we can discuss where we are, where we have been, 
where we don't like where we are. I don't like 50-year leases 
that are a 50-year term. I would rather have a shorter, 10-year 
lease, and then be able to flip in or out as you go along and 
Fort Carson, I think, is what 70----
    Mr. Apgar. It is 50----
    Mr. Hobson. Fifty with a 25--I don't know, if I was going 
to do anything I would do 25 and then 50 but there are some 
underwriting things that are all in these things. But if you 
all--we are going to have a hearing on all this stuff so we 
can--so the Committee, itself, can understand a little more as 
we go through it.
    Mr. Olver. On the housing privatization alone, we are going 
to have a hearing?
    Mr. Hobson. Yes.
    Mr. Olver. Well, thank you, Mr. Chairman.
    I don't know where to begin except that I want to ask a 
couple of questions about the general budget and then I want to 
go back to privatization.

                           ARMY MILCON BUDGET

    It appears to me that the request here is about a quarter 
of a billion below where it was last year on the Army's 
request. On the Army's MILCON it was about $1.1 billion in the 
fiscal year that we are presently in; for this coming year it 
is about just under $900 million in the year coming up and of 
that $900 million a sizable piece is a chemical 
demilitarization amount which has on rare occasions appeared in 
a different budget in different counts. And, so, it makes it 
look as if it is even more down in that instance.
    It appears to me that that family housing amount is 
somewhat below last year. There are some shifts, obviously, 
because what I am pointing out, I think, is that the amount 
that MILCON is down, if you take in the chemical 
demilitarization, it looks as if the comparable amount from 
last year is about $725 million versus $1.1 billion for this 
year. That is $350 million or thereabouts. And the amount that 
the allocation for this year, just under a billion for family 
housing operations, is 10 percent below. There must be some 
other places where it is up.
    But do you have any--I have a hard time here and this will 
get to the other question now going back after laying that set 
of numbers out, we understand that the Army's housing situation 
is worse, more difficult, more daunting than any one of the 
other services, than the Air Force, the Marines or the Navy. I 
will get into some questions about, again to remind me exactly 
what the proportions are in the Army's program, but under those 
circumstances it particularly worries me that the amount for 
the family housing operations seems to be down by an amount 
from last year.
    Is anything in here for the privatization or is that all in 
last year's? Is some of that in here for privatization or is 
that all in last year's, what covers the several accounts?
    Mr. Apgar. Well, first we have actually budgeted a $154 
million for housing and added $250 million to the pot in a 
five-year program from last year. That is a very important 
change in an otherwise very tight budget. And it assumes that 
that level of MILCON expenditure will continue throughout the 
five-year time.
    What it does not assume is the rate of additional 
privatizations beyond these pilot projects might occur since 
the principle of privatization is leveraging public dollars, 
MILCON dollars, there is an open question as to how far you 
want to go and could go. In theory, anything that could be 
privatized in a market sense would achieve an 8-to-10 or more 
one leverage over that set of dollars. But so far we haven't 
done that exercise or certainly haven't programmed it.
    As to the overall level of expenditure, the Army has made 
some very tough choices. The highest MILCON priorities are 
funded at 100 percent--barracks, strategic mobility, Chem Demil 
as you cited. Beyond those there are varying levels, as General 
Van Antwerp has already pointed out, of funding to require 
this. And frankly, where there are tradeoffs between military 
construction and the quality of life components of total 
military construction budgeting, they sometimes are at risk to 
other readiness priorities and that is a central problem. It is 
not new this year. And, as I understand it, it has been a 
problem for some years and remains a problem.
    General Van Antwerp. If I may just add one thing. Last year 
we had the ill-fated incremental funding scheme out of DOD and, 
so, and what Congress did and----
    Mr. Hobson. I am glad you described it as an ill-fated 
scheme.
    General Van Antwerp. Ill-fated but the great thing that you 
all did was to fully fund most of those projects forward. So, 
the actual request was fairly close. The request for 01 was 
fairly close to our request in 2000. You all helped us a lot.
    Mr. Olver. Well, there is no forward funding in this 
budget, the one that is before us now.
    General Van Antwerp. That is correct.
    Mr. Olver. But ultimately what I was making is a comparison 
between what was enacted in the 2000 budget where by that time 
there was no forward funding either, versus what we have here. 
There are some shifts but I am having a hard time identifying 
where they are. Is one of the pieces of that on the 
construction part of your overall request, which is just under 
$2.5 billion, and I think that overall enacted Army piece for 
the fiscal year that we are presently in, the 2000 budget, was 
just under $2.75 billion.
    You know, is part of that because there is no contingency?
    General Van Antwerp. There is about $58 million out of this 
year's budget that would have been contingency with the Guard, 
Reserve and the Active Force. That is that 5 percent that was 
taken out of it. So, it comes to about $58 million. So, that is 
out of this budget.
    Mr. Olver. Okay. Well, that might explain why there is a 
sizable piece but there are some other pieces that I am having 
a hard time identifying. And maybe--what has gone up and what 
has gone down. Especially when I have identified at least that 
big chemical demilitarization piece which was not in this 
budget last year. That is another large step that looks like 
you are below. And given the needs for housing and given what I 
am told about the base facilities and so on, it seems unusually 
out--I am having a hard time grasping that you, the service 
which is most in need on housing modernization and on 
facilities, barracks and other facilities, find that this is a 
year when that budget should end up being down.
    Somehow there is something missing and I don't know where 
this is.

                   HOUSING PRIVATIZATION--FORT CARSON

    General Van Antwerp. One other factor is when you do 
privatize, like in the case of Fort Carson, those operational 
dollars now don't go--then we put money into the military pay 
account from which the soldiers would pay the rent, their basic 
housing allowance. And that used----
    Mr. Olver. How much is that a factor? How big is that 
factor? Carson is now just in--it was just opened?
    General Van Antwerp. It was awarded, right. But for the----
    Mr. Olver. Is it now occupied, Carson? How many units is 
it, 2,000?
    General Van Antwerp. It is 1,800.
    Mr. Olver. Okay, 1,800. Okay. Is it now in occupancy?
    General Van Antwerp. It is now under private ownership.
    Mr. Olver. And it is now being occupied?
    General Van Antwerp. Yes, sir.
    Mr. Olver. So, for the present fiscal year there is some 
reduction?
    General Van Antwerp. Right. We are not putting operational 
funds, AFHO funds, into Fort Carson this year.
    Mr. Olver. Okay. That is fine, but if that is the case then 
in the present fiscal year there has already been a factor 
weighted into the present fiscal year, the enacted 2000 budget, 
where a reduction of those maintenance funds that might shift 
over there. Although I have to say that it was my impression 
and that may be our problem within this branch, within the 
Congress. I will have to say I thought that especially given 
the needs that have been identified on the part of getting 
housing that we were not going to lose those monies--because 
our needs are so great for housing, the number of inadequate 
units is so great, particularly in the Army--off to some place 
else.
    That apparently is a decision made within the Department of 
Defense, that you are going to reduce the amount that goes into 
the MILCON budget. That is how much?
    Well, in the case of Fort Carson, if we were talking about 
the difference between the 1999 budget and the 2000 budget, I 
think what you have said would be true. There is only three-
quarters of that that would be attributable in the 2000 budget 
versus a full year, four quarters, in the other. I don't know 
how many millions that would identify as a reason why this one 
is down.
    But it worries me because the number of dollars for your 
needs in the budget that has been offered to us is not helping 
you. It doesn't give you any step forward toward meeting that 
very great backlog of housing facility needs in the Army.
    General Van Antwerp. You not only have Fort Carson, but the 
expectation is that by the time of enactment of the 2001 budget 
we will also have Hood and Lewis.
    Mr. Olver. Already in occupation?
    Mr. Hobson. No, wait, wait. Let me in here, John.
    I want to put everybody on notice. This is a game we aren't 
going to play. He has got a very good point here. What I sense 
is just what we all worried about when we started with 
privatization is happening, and it is not just with you guys. 
It was with the Navy earlier this morning.
    Mr. Olver. That is fine. That is fine.

      MILITARY CONSTRUCTION ACCOUNT TO MILITARY PERSONNEL ACCOUNT

    Mr. Hobson. So if I am understanding correctly, did the 
Army put what they would have normally put in the family 
housing for Fort Carson, the money that would normally go in 
there, over into the military personnel account?
    General Van Antwerp. I don't know if it is an exact thing, 
but what we did, we figured out the operation requirements----
    Mr. Hobson. That is right, and that is exactly----
    General Van Antwerp [continuing]. At other installations. 
So in the event----
    Mr. Hobson. And that is exactly what we all said was going 
to happen to the MILCON account when this started, and 
everybody assured us it wasn't going to happen. And we are 
going to go back and get the records out because if you guys 
continue to do this, then we are never going to get all the 
stuff we need to do in the other things in the installations. I 
want to stop this now before it gets too far. We better send 
the messages and people better pick it up. John is right. He is 
going down the right track, and this just can't happen, or the 
military construction accounts are going to be--and I have had 
a meeting with Rudy De Leon 2 years ago or a year and a half 
ago about this very issue, that that is what was going to 
happen. They were going to shift the MILCON accounts over into 
this military personnel account, and no provision was going to 
be made for supping up that one without stealing from this one. 
That is not right.
    I want to put everybody on notice that we are going to 
have--if we have to go to war over that, we are going to have 
to go war.

                         CONTINGENCY REDUCTION

    One other thing along what he said. When he was talking 
about the contingencies--and I forgot to ask this in the Navy 
hearing, but where did that originate from? Did you come up 
with that, General Van Antwerp?
    General Van Antwerp. No, sir. DOD. Our request was for 5 
percent.
    Mr. Hobson. Okay.
    General Van Antwerp. Which is low-balling.
    Mr. Hobson. I just want everybody to know where it came 
from. That is all.
    General Van Antwerp. I can explain why that was taken. I 
heard Mr. Lynn speak at a hearing this morning, and he said it 
was because there was a sense that the Congress last year took 
that contingency money, and, therefore, we just took it in 
advance this----
    Mr. Hobson. Oh, it got social acceptance.
    Mr. Olver. All right. I guess you get the point about what 
I was delving at, and my chairman has jumped on that with both 
feet. And I think that I am worried, particularly in the case 
of the Army, I think we should be worried all along the line, 
but in particular there, where we have been told that the 
facilities, the barracks, the housing facilities have been 
particularly inadequate. That is a serious problem.
    Let me go on to another set of housing--oh, do you want to 
go on?
    Mr. Hobson. No, go ahead.
    Mr. Olver. A different set of----
    Mr. Hobson. As long as you don't mind if I interrupt you 
once in a while.
    Mr. Olver. I am happy to have you interrupt and, whenever 
you want to, to come down in strong support. That is fine. 
[Laughter.]

                             FAMILY HOUSING

    On the broader housing issue of privatization, give me just 
quickly, how many total family units does the Army have 
nowadays?
    General Van Antwerp. Worldwide, we have about 124,000 that 
we own or lease.
    Mr. Olver. 124,000
    General Van Antwerp. Right. In the continental----
    Mr. Olver. And what percentage of Army families are 
actually out on the market?
    General Van Antwerp. We house about 25 percent of our 
people on the installations.
    Mr. Olver. On the installations.
    General Van Antwerp. So 75 percent----
    Mr. Olver. So actually there is close to 500,000 total 
families.
    General Van Antwerp. Right. That would be----
    Mr. Olver. Now, you are not including bachelors here?
    General Van Antwerp. One in four families----
    Mr. Olver. We are talking of only families. One in four 
families is in base-related installations.
    General Van Antwerp. We house about--right. About 25 
percent of our families are housed on our installations.
    Mr. Olver. Well, okay, 25 percent.
    General Van Antwerp. So 85,000 is the number in CONUS.
    Mr. Olver. So 375,000, just about three times, is out in 
the community at the present time.
    General Van Antwerp. Correct.
    Mr. Olver. Okay. We are not proposing that we are going to 
ever get to the point of being able to build enough housing, 
either by privatization or otherwise, to change that 375. What 
we are doing is within the 124,000 you are proposing some new 
and some renovations, traditionally, and we are also having 
some privatization projects, which in sum total represent 2,000 
at Carson. And if I understood, Mr. Secretary, the number that 
is in our other three, it must be 12,000. So there are 2,000 in 
Carson and 12,000 in the other, and we have this in four 
different projects.
    If we--pardon?
    General Van Antwerp. Another number I might give you is we 
are calculating now, but it will be determined at Fort Hood, 
what is the deficit at Fort Hood and at Fort Lewis, and that 
will be done when this management plan is developed. But the 
estimate before housing privatization was about 7,400 sets in 
deficit. We did that additional----
    Mr. Olver. 7,400 at Hood?
    General Van Antwerp. No. Across the service. So that would 
bring you up--I don't think we will ever expect to get more 
than probably 30 or 33 percent of our families living on base.
    Mr. Olver. Do you want it to go up?
    General Van Antwerp. There is a mixture.
    Mr. Apgar. It depends.
    General Van Antwerp. If you ask families, there is always a 
great waiting list at every installation.
    Mr. Olver. At every installation.
    General Van Antwerp. There are people----

                      BASIC ALLOWANCE FOR HOUSING

    Mr. Olver. But we are also faced with the BAH situation. 
Now, I don't know whether we have really taken into account 
what the change in the BAH over a phased basis is going to have 
as an effect. Aren't we likely to have the market begin to 
provide--response? Because the BAH has gone up 20 percent and 
that secures the potential payment on the part of people so 
that maybe the private market is going to go up to more than 75 
percent by its own natural force.
    Now, I am not suggesting that that means we should do 
anything less about what is on base or in the privatization 
programs and the balance of what is in those two in our pilots 
and things like that. But it seems to me that somewhere we are 
going to have to be very watchful of what the BAH increase. If 
we really get into a matter where we are going to go up all the 
way to equalizing that, removing that discrepancy, that 
inequity between those who are on base and those who are off 
base, the private market should respond. That is what we would 
normally believe here in the economics.
    The deficit is so great on the bases that I don't think 
that has much effect upon our need--we surely can't anticipate 
what might happen 5 years from now but that doesn't have much 
effect, I think, on what I am saying about our problematically 
low numbers in these budgets for the housing initiatives that 
are there.
    And I guess I was a little worried, but, you know, talking 
with my colleague in whose district Fort Hood is, I was afraid 
that by having a huge privatization we might be putting 
ourselves into a position where in the process of completing 
that privatization while the BAH is being phased upward, that 
we might end up not needing all of those units that we were 
just privatizing on base. And I doubt that is the case.

                 HOUSING PRIVATIZATION--50-YEAR LEASES

    Mr. Hobson. But that is the reason that the deal that is 
made needs to take into consideration future changes in the 
Army and future changes in lifestyles and other things that 
could happen in the community. So you can't lock yourself 
into--this is what I worry about--50-year leases or 100-year 
deals and guaranteed on rent and, you know, all this kind of 
stuff. You know, you are going to have BRACs. The BRAC problem 
may not affect Fort Hood, but it is going to affect some 
places. And if you have a deal in there that changes those 
numbers so that it doesn't work, you have now locked yourself 
into a base that you can't get out of. That is what I worry 
about in these deals as you go through them, that you can't do 
that.
    Coming back to your exit strategy, which is in any good 
real estate transaction or loan strategy or contract that you 
make in a business, what is your exit strategy if things 
change? That is very important. What he is saying is, I think, 
very important.
    Mr. Olver. So I am a little concerned about--every time I 
see a huge project going out for privatization when we are 
making this BAH phase-in change. I am concerned about that, 
though I don't know that I can put it in quantitative terms by 
any means at all. And the Army's cases are somewhat different 
in the sense that it would appear that the Army has big, big 
institutions, essentially, and big numbers.
    Chet, you said how many? There is quite a large percentage 
that are off on the community even at Fort Hood.
    Mr. Edwards. Sure, 44,000 soldiers total. There is going to 
be renovation and building at 5,000 or 6,000.
    Mr. Olver. On the family side.
    Mr. Edwards. Can I piggyback on that to clarify? Talking 
about these huge projects, it is my understanding that--I 
forget the total number--5,000 or 6,000 housing units are part 
of the Fort Hood project. Over a period of 10 years, the net 
increase in new units is 400 or less. Is that ballpark?
    Mr. Apgar. Yes, and, of course, because of the agreement, 
as a matter of longstanding policy, as I understand it, we 
would not build in such a way that the local market would be 
threatened.
    But to your point, Mr. Chairman, earlier, if I may, there 
is a reciprocal issue here which I hope we can work with you to 
figure out. When you require us to program and specify a 
precise number of units for a market condition that may be 15 
to 20 years out and have no flexibility in that number, from a 
business point of view, if you will forgive me, that is not as 
sound a basis to structure a long-term plan. But our current 
system requires a steady-state, fixed projection. The market 
doesn't work that way.
    So to the extent not only we are adapting local market 
standards and the rest, we have to find a way with you to 
protect the public interest, certainly, in having a long-term 
projection, but also allow reviews periodically. If this were a 
purely private investment with the same scale and the same time 
frame, that review would probably occur on a formal basis every 
3 years or so, certainly periodically in between, and you would 
make a course correction. It is not 5,343 units to be renovated 
and maybe 4,900.
    Right now, I think we are getting the worst of both cases. 
We are not getting the advantage of the long-term, large-scale 
program which should produce enormous efficiencies because we 
lock ourselves into a fixed-point estimate, and yet at the same 
time, we haven't got the flexibility for an exit strategy, a 
deal review.
    So we are going to build those principles into this pilot 
project, come back to you to show you the base case, which is 
our current case together, fixed-point estimates, precise 
measurement, even though it is 20 years out, of what is built, 
what is renovated, what is demolished. But an alternative 
scenario--and this is true to the military's own principle of 
warfighting scenarios--an alternative methodology which has an 
end state that is the same but a different method of getting 
there, I think that is a really profound issue we need to 
tackle together.

             HOUSING PRIVATIZATION--MEETING LOCAL STANDARDS

    Mr. Olver. May I just ask one other little thing that comes 
out of that? Are we doing all these privatizations now, that 
they privatize on a base, are these going to have all the 
standards met that are local standards in the privatized 
projects?
    Mr. Apgar. Well, the word ``standard''----
    Mr. Olver. Standards, I mean by that water and sewer and 
local building code kinds of standards. These deals are all 
going to have those brought up to what are the local standards 
in the future?
    Mr. Apgar. Yes. There are really two levels at which we 
want to address this. One is local infrastructure and building 
standards certainly to meet to local codes, even though we are 
not, ``required to.'' But the other is local market features.
    For example, in one region of the country, the 
architectural design and the size and shape, even interior 
features, would argue for a large family room and more 
attention to the kitchen. In another location--Fort Lewis, as 
the next, will differ in this--the climate and local market 
tastes really have different standards, standards not in a 
building or technical sense----
    Mr. Olver. Fine.
    Mr. Apgar. So both those apply.
    Mr. Olver. Okay. Privatization, that is fine. Now, if we 
are also doing new housing or renovating Army housing, as we do 
new housing and we renovate present housing which is 
inadequate--and you have a lot of units of that that are 
involved in this year's proposals--are we bringing up those 
kinds of things to local codes?
    Mr. Apgar. Yes.
    Mr. Olver. I mean, we have cases where we have housing 
which is--has still considerable useful life where the 
utilities are--I don't know whether they met--I doubt if they 
met the code, stuff that was built during the Second World War, 
during the Korean War, during the early parts of the Cold War 
when we were really building up rather quickly, which has 
problems which just don't meet what are now codes in those 
areas. I don't know whether they did at that time, but is all 
the new stuff up to what would be local codes in case that 
needed to go back into a public market?
    Mr. Apgar. I can't speak to all, but we certainly have two 
basic conditions. One condition is where the military 
specifications have produced units which are up to local codes 
and are recent in the past, say, 10 to 15 years. The other set, 
though, the much larger set, are those which still have useful 
lives which were built 20 years or more ago, can be renovated, 
according to current standards would be torn down, but if they 
were, would take off line units when they still have useful 
lives, and that is where the value of the development partner 
coming in to look at the same conditions we have defined as 
renovate, demolish, rebuild, could propose a different answer, 
to say let's put half of the cost that it would take to 
demolish and build new into renovation, which will produce a 
larger number of occupiable units for the next 10 years, while 
we are demolishing and rebuilding the older stock----
    Mr. Olver. Up to full standard.
    Mr. Apgar. Up to full standard. And that speaks to this 
whole issue of a flexible approach. First, we want the 
expertise to tell us that our own standards may simply be wrong 
or too costly, and you will see those same economics that we 
do, but at the same time, a phased program that over time 
brings the Army stock up to local building code standards and 
quality standards that we want, too.
    Mr. Olver. Thank you, Mr. Chairman.
    Mr. Hobson. Before Allen starts, I just want to mention one 
thing. One of the problems I have when you say we will see them 
is that you all have a year or two to put this program 
together. Suddenly, we get 30 days to sign off or not sign off, 
and sometimes I am not even--we have had a little disagreement 
about this a couple times over, whether we really have 30 days 
or not. If we change this law, we are going to get more than 30 
days. And it is not designed to hold you down. It is the fact 
that if we have to sign off, I think we have to do some due 
diligence as to what we are doing, and 30 days in a cycle we 
all live in just not enough, and we don't have the staff to do 
it.
    Even on the ones we have got now where we are dealing with 
30 days, I think we all need to have some understanding that we 
are going to work together a little better in making sure as we 
go through the process or at the end of the process we all have 
an opportunity--and I don't want it to just be me. I want 
everybody--I mean, I know you are going to look at Fort Hood, 
and I am offering this to Norm, also, or anybody else that 
wants to look at it. We need to have--and we can be a much 
better advocate and less likely to be had by something else or 
influence this, if we have had an opportunity and our staffs 
have had an opportunity to look at this stuff.
    So if we can have that understanding, I think we just need 
to work on it.
    Allen.
    Mr. Boyd. Thank you very much, Mr. Chairman. I apologize 
for being late. Let me brag a little bit. I was attending a 
reception for the National Champion FSU Seminoles, for those of 
you interested in----
    Mr. Hobson. Is that school accredited now? [Laughter.]

                     CONTINGENCY FUNDING REDUCTION

    Mr. Boyd. They get no respect. But, seriously, I want to 
thank you, Mr. Chairman, for your fair-handed way of 
administering the committee. I really only want to ask one 
brief question, and it has to do with an issue that came up 
that you have already addressed, and that is the contingency 
funding issue.
    Now, we heard from the Navy this morning, and you have 
confirmed what we heard then, that it was a directive from 
above that that be eliminated totally. There was a reference to 
the fact that the Congress eliminated all--I think we only 
eliminated a part of it, though, not all of it. And I have 
heard maybe that the 0.38 percent across-the-board cut, that 
you guys got the rest of it in that.
    Is that a fair assessment in the 2000 budget?
    General Van Antwerp. That is a fair assessment.
    Mr. Boyd. Okay. So we are operating now--you are operating 
from a practical standpoint without having that contingency 
plan even in this current year.
    General Van Antwerp. That is correct.
    Mr. Boyd. Okay. Is the evidence such that you can do that, 
or does the Department expect Congress to put it back in? Or 
where are we? I mean, we heard the story this morning from the 
Navy. They thought it was going to be a real hardship.
    General Van Antwerp. Well, we think all the services that 
have gotten the other work committed did not cut in scope or 
quality on these projects, so we are going to go through with 
the projects as designed as to scope.
    Where your problems arise is if you have varying site 
conditions, and it happens with renovations mostly. You could 
have some issues that you just can't foresee--bad 
infrastructure, pipes not where they are supposed to be 
underground, those things.
    So what basically we have to do, probably more often we 
will have to come back for reprogramming, if necessary, or if 
we have bid savings in projects, we will be able to get some 
there. But it could roll up that at the end of the year you 
have to delay some projects from being executed into the next 
year as you--because you just don't have the funds, total top 
line in the budget. So those are some of the possibilities of 
what could happen.
    Mr. Boyd. Well, maybe we ought to ask this question of 
someone else. What was the thought process to send a budget 
request that totally eliminated it? Can you answer that?
    General Van Antwerp. No, I----
    Mr. Hobson. That is probably a four-star----
    [Laughter.]
    Mr. Apgar. I think that is a question of DOD, actually, 
sir.
    Mr. Boyd. Thank you, Mr. Chairman.

                         HOUSING PRIVATIZATION

    Mr. Hobson. All right. Let me ask a couple things. This one 
I hadn't planned to ask, but I want to talk about it because we 
keep talking about the 8-to-1 leverage and things of this sort.
    In underwriting a deal, in putting together a deal, why do 
we have to put money in them when we are already putting the 
land in them in many cases? We don't charge land leases. These 
are not subordinated ground lease deals that we are doing. We 
are giving them basically the ground free.
    With the increase in the BAH, the numbers ought to look 
better. It would seem to me that there are places--I am not 
saying this is true everywhere, but I see a tendency to take 
MILCON dollars and try to leverage MILCON dollars into the 
transactions. And I am not just saying the Army. This is true 
for the Navy and the Air Force.
    I would think in some of these places that there could be a 
private developer who, if they can do the underwriting right, 
it may work out that we don't have to put any money in. He 
might even pay us in certain cases to get into the deal with 
some of the things that we are doing for him, because some of 
the utilities where we are providing utilities in there 
already, in some ways he doesn't have to put utility lines in 
except running them into the buildings. He has got it already 
in the streets. He doesn't have to build streets in a lot of 
places.
    I am just concerned, and my general comment, and you don't 
have to really respond to this, but my comment is when these 
people are looking at these transactions or deals, as I like to 
call them, that they look at them in a traditional underwriting 
sense. Suddenly some of the people who have been traditional 
providers of services to the Government in building tanks or 
other sorts of things are going to--I don't want to do tanks. 
That is just a word that came to me, but airplanes or whatever, 
guns--suddenly are seeing that this is a big source of dollars 
here now and a way to get in.
    I worry about that because they begin to think 
traditionally inside the box. One of the things we are trying 
to do and one of the reasons we wanted to go to the--let all 
three of you do it at DOD, you know, come down this way, is to 
think outside the traditional box, and that is why we have gone 
down these roads.
    I am worried, though, that we start talking about the 
Government putting this money and the Government doing this, 
the Government guaranteeing that, and then suddenly we are back 
inside these same kind of dumb contracts that we do on some of 
the other vehicles that I have dealt with where to cancel a 
project costs more than to run it all the way out.
    That is why I worry about the exit strategy. That is what I 
worry about.
    So from that standpoint, somebody needs to look at some of 
these and say, hey, you want this deal, bid on it, and whoever 
has got the best bid and pays us the most money, we are going 
to make that deal. If you do close that base, they are going to 
wind up with that property, and then they are underwriting--you 
know, MetLife is buying for, you know, 100 years out in their 
stuff when they buy stuff for somebody else.
    So those are some considerations that I think your adviser 
guys ought to be--the people that you hire or yourself ought to 
look at.

                                BARRACKS

    I went down to Fort Bragg and I understand Fort Benning has 
got this. There are some special op forces barracks that I was 
in that you wouldn't want your kid in, and these are people 
that we want to keep. And I don't know that they are in 
anybody's plan yet because we are doing some of the other 
stuff. And these people aren't permanently there. By permanent 
standards, I mean, they are only there, like, a year or so 
training. But those training base barracks that I saw are 
atrocious. We ought to be looking at those, and we ought to put 
them at a higher priority, I think, than where they are.
    I am going to hit you with a question, and I am going to 
tell you--you saw me laughing before. The problem was I was 
thinking about this question, and then I will tell you why I 
was laughing. It is a very serious matter, but I am concerned 
about a letter that appeared in the Stars and Stripes, last 
Tuesday's Stars and Stripes. And I have got the letter here, 
and I am going to read you the letter, and then I have got a 
couple questions about it.

               FIRE SUPPRESSION DEVICES IN FAMILY HOUSING

    This is a letter to the editor, Tuesday, February 22, 2000. 
It says: ``This is in regard to the recent fire in the Roman 
Way Village housing in Butzbach, Germany. Why does the Army 
feel that there is no need to install smoke detectors or fire 
extinguishers in the stairwells, laundry rooms, and other areas 
of the buildings, like every other multi-family dwelling is 
required by law to have? Residents of the upper floors should 
be issued portable escape ladders to ensure a safe way out 
because of the stairwell. Unfortunately, we don't have any 
option to choose where we live while stationed overseas. Fire 
extinguishers are installed in schools, clinics, barracks, 
commissaries and government offices and buildings. Why not in 
government quarters?''
    ``We are all here to support our husbands during 
deployment. We shouldn't have to worry about a way out in case 
of a fire in a stairwell. All possible fire safety measures 
should be in place. Sadly, this shows how much the Army truly 
cares about families.'' And it is signed by this lady.
    Now, the reason I was laughing is I looked up and the 
fire----
    [Laughter.]
    Mr. Hobson [continuing]. Says ``Not in service.'' That is 
the reason I was laughing. When I beat you up about it, we 
ought to go beat up the House about it. They don't have one, 
either.
    But I guess the question is, I have been in several 
stairwells in the past and believe that without adequate 
warning devices, extinguishers, and escape routes, a fire can 
quickly turn into a catastrophe.
    I once had a building that I owned in which a fire started 
in a stairwell, and it can be really bad.
    We need to know what the Army's policy is with regards to 
smoke detectors and fire extinguishers in family housing units 
and, in particular, stairwells. How often are these devices 
inspected? If they are like the elevators around here--I once 
had one of my people stuck for 2 hours in an elevator in this 
building. The phone didn't work, and we found out when we 
checked around that there were three other phones or five other 
phones that didn't work in the elevators here. So I am not just 
yelling about what you do. We have done this with other people.
    Mr. Secretary, this is something that I want--I must ask 
you to have every family housing unit and public spaces and the 
stairwells inspected to ensure adequate fire safety measures in 
place. Specifically, I would like you to report back to this 
committee within about 3 weeks from now on the findings and 
what corrective actions are immediately taken to correct this 
very serious situation. We should take care of this now while 
we are aware of it, because if we are aware of it and something 
happens, shame on us if we lose a life or a young child or 
somebody.
    We just had a situation on Capitol Hill where a building 
caught on fire around here. So I would urge you to take this 
very seriously and report back to this committee within 3 
weeks. Is that doable, sir?
    Mr. Apgar. Yes, sir.

                         HISTORIC PRESERVATION

    Mr. Hobson. I have a couple of other questions. We will 
submit some for the record, but this historic preservation 
thing, you only talked about 15,000, I think, or something. It 
is a much bigger number. And you have gotten into this, I 
think, Mr. Secretary, early on. I brought this up with the 
Secretary of Defense yesterday in the hearing we had. This is a 
problem that could suck up all the money. I hear a big sucking 
sound out there, and it is not very pleasant for you all in 
doing your missions to have this there. We need to look at how 
we are going to handle this.
    Do you want to explain what you are doing a little bit 
about it?
    Mr. Apgar. I would be happy to, Mr. Chairman.
    First, with respect to the facts, the Army is the largest 
holder of historic properties in the Nation. We have 12 
national historic landmarks under the National Preservation 
Act. We have 12,000 individually listed buildings or buildings 
that are eligible for listing, and we have another 70,000 that 
will become eligible and have to be evaluated over the next 20 
to 30 years. That is the portfolio. It represents a substantial 
portion of our total facility stock.
    The situation we face given that set of facts is that we 
are stewards of a very large number of historically and 
architecturally important buildings, and buildings that are 
also central to the Army's heritage. Those are what I call the 
jewels.
    We are also saddled with a lot of junk. We are trying, with 
your help, to clear the junk, and that is a large portion of 
the 70,000 other buildings, the World War II wood and the rest, 
as part of the demolition program, which you are well aware of.
    But there is a risk in both respects of this. One risk is 
that we continue to spread limited funds to maintain, just 
because we are holders, a large number of buildings that should 
be demolished. At the same time, given our efficiencies, we run 
the risk of destroying some of the jewels while we are tearing 
down the junk, too. So we have set out a three-point plan.
    First, I have created an Office of Historic Properties and 
a small team of specialists to review our methodologies for 
both defining what a historic property is and how we manage it.
    Secondly, we have signed protocols with both the National 
Trust for Historic Preservation, the President's Advisory 
Council on Historic Preservation, for technical service support 
in looking at the National Preservation Act, all of the 
legislative frameworks, both Federal and State, under whose 
authorities we work, to see if changes can be made to 
streamline both the process and the management itself.
    Third, we are just embarking with the Corps of Engineers 
and others on a review, which I hope will lead to policy 
proposals this summer, of how we actually manage the stock. It 
costs us 2 to 3 times what it does a new unit per square foot 
to renovate and maintain, particularly the important historic 
properties. But private sector comparables are not that great, 
and my suspicion is--and I have no facts yet to demonstrate 
this, so it is purely that--that we are overinvesting, if you 
will, in renovating and maintaining some of our historic 
properties. That goes to materials, methods, as you well know 
from your own experience, sir. And so we are going to dissect 
that issue.
    If we find that we are imposing excessive standards, if you 
will, we will have to see whether they are statutory or purely 
internal and tackle them as we find them.
    I have also just mounted a major study on how to 
recapitalize the historic property stock. You think of this 
from an inventory or portfolio point of view. We have a class 
of assets, very large, which have unique characteristics. They 
are larger, they are older, by definition more difficult and 
problematic, and they are treated in our budget as if they are 
a warehouse. And that is a big problem.
    What universities and some other institutional holders have 
done over the past two or three decades is to fundamentally 
take that class of properties out of the standard facilities 
budget, treat them on their own platform, if you will, and 
through a combination of endowment and maintenance and 
different standards, and in some cases divestment, struck a 
portfolio that keeps the jewels and does something else with 
the junk, to use the metaphor.
    I believe that is an issue we have to tackle with your 
support and help and one that is profoundly important. Right 
now we are getting the worst of both worlds. Our historic 
properties are at risk because they are too expensive to 
maintain. On the other hand, we are doing it in such a way that 
we literally do compare warehouses and standard boxes with 
buildings of enormous importance at West Point or Fort 
McPherson.
    So in a nutshell, that is an initiative which the Army 
leadership has now agreed is an important priority. We clearly 
need Congress' help. We have neither the authorities nor the 
framework, and we will take the initiative to propose to you or 
to engage with you and the other committees.
    Mr. Hobson. Well, we are going to need--you need 
legislative help, and we need advice on the legislative process 
services, and they will be a little different in each of the 
services.
    Mr. Farr. Mr. Chairman.
    Mr. Hobson. Yes.
    Mr. Farr. I like that idea. I think you are right. We need 
that. And perhaps what we want to do is BRAC--sort of have a 
BRAC for historical properties. If you are not using them, get 
somebody else who does that business to do it, because I 
believe you do have to have almost a different account.
    Mr. Hobson. Yes.
    Mr. Farr. I mean, these are essentially--by declaring them 
historical, they have kind of a Cadillac status as buildings. 
Maybe they have sort of a Volkswagen budget to maintain them. I 
mean, you can't do that. You have got to either give them----
    Mr. Hobson. Well, we talked--when you weren't here, I think 
you had left this morning, we talked about the Smithsonian 
possibly even--well, there are some places where we may be able 
to find some other monies, some could be transferred that have 
historic significance and things of that sort.
    But I am concerned that we need some legislative language 
not only to give you the ability to do some things, but to 
protect you from having to do some things that you might 
otherwise have to do.
    I can tell you this, and I would like you to think out of 
the box a little bit. I took a fellow to a Navy facility who 
was a builder and does some historic stuff on the outside. And 
we walked--the Navy was giving us a number of--we will just 
pick numbers here because I don't remember the exact numbers. 
But let's say they were doing $1.9 million, $2 million that 
they wanted to put into this. I took this fellow with me, and 
we went through it in an afternoon, and we came up with a 
number of about $460,000, which, after we showed the Navy where 
we were and what the reductions were, they have agreed to do 
that and are moving forward with that, and I think cheerfully 
so--I hope.
    But there are a couple things in there that, you know--for 
example, they were going to build closets out of cherry. Well, 
you know, come on. And they were probably going to paint them. 
I don't know. But----
    [Laughter.]
    Mr. Hobson. There were other issues in there. You know, 
this is Government--it is like when I went one time to get 
tires for my official vehicle in my district, and I said, What 
kind of deal do you have on tires? And the guy said to me, Why 
do you care? The Government is paying for this. And I said, 
Hey, pal, if I don't care about the tires here, what do you 
think about when we get, you know, to Norm's deal, the B-2 
bomber, or something like that?
    You know, it starts with little stuff, and it starts with, 
you know, what are the carrot tops--and so I would suggest that 
sometimes we find--and I didn't have this guy on contract. All 
I did was buy this guy dinner. That cost me pretty good because 
we went to the Monaco. But I think if somebody goes through 
these things, there are practical people who build for their 
living in the private sector and who are--I am not saying that 
people are not concerned about cost, but I think there is just 
a difference in the way it is looked at when it is coming--it 
is like having a copay. I am a big believer in copays because I 
think if you are in it, you are a participant and you are 
buying into, you are a little more likely to look at it.
    So I would like you to, as you look through these historic 
things, one, take the ideas that Sam is starting to work on 
here, and look for some other sources of money on things that 
you don't really need to maintain, anyway, because they don't 
have it.
    The other thing I would like you to do is look at some 
requirements. There are some--what is it?--372 general 
officers?
    General Van Antwerp. 326.

                        GENERAL OFFICER QUARTERS

    Mr. Hobson. I missed a couple. One of the reasons those 
general officers insist in staying in some of those--I don't 
know all of them--is that if they go into something else, it is 
going to be smaller because we can't build anything new in 
excess of about 2,200----
    General Van Antwerp. 2,100 square feet.
    Mr. Hobson. Well, they are going to give that up? No. He is 
going to go and tell his wife we are moving out of this thing 
down to this? No way. So nobody comes to us and says build me a 
2,100-square-foot general officer's house.
    I think we need to talk to the authorizers. We are sending 
this as the authorizers. I think it would be very helpful if 
you all are in support of saying let's build appropriate 
housing--no, don't go nuts--and we already have this rule that 
says $25,000 you have got to come back to us for anyway, and 
that was done because some guys went nuts and they were afraid 
we wouldn't approve things. But we have approved some things.
    We are--you know, we are approving things, but you know we 
are reading them, too, because we ask you questions about them. 
And I think that is important. It is not a challenge. It is 
just a checks-and-balance thing.
    So I think if you will talk to the people and then we start 
building things that are real for these people, we will have 
less likely a fight over this general officer's wife wanting to 
put all this money into facility. And so we need your help on 
that.
    I am hoping--I was impressed for the most part by the 
people that came in on Carson. I am hoping that that works out. 
We had a little briefing on that, and I think that it looks 
okay. I am going to let you go forward--that we get the right 
numbers and the most cost-effective way of doing Fort Lewis and 
Fort Hood, because those are huge projects and we don't have a 
lot of time to review that. And I know we only risk a certain 
amount of money if we turn them down, but I don't want you to 
think if we don't think it is a good deal, we will turn them 
down. And so I don't want any misunderstanding about the fact 
that, you know, we are letting them go for now, but Chet is 
going to look at it and we are going to look at it. If we don't 
think we are getting the right square footage or the deals 
don't work in a way that the committee believes they should for 
the future, taking into account all this exit strategy and 
everything else we are talking about, we are going to poke at 
it.
    But I want to look at this as more of a partnership and not 
an adversarial because we all have the same goals in the end.
    Sam?

                    FACILITIES DEMOLITION--FORT ORD

    Mr. Farr. Could I ask one question? It came up that you 
have a lot of deteriorating housing in the military stock that 
you have got to tear down. But at Fort Ord we have 1,100 of 
what they call B-52 buildings that hold 52 bodies, two stories, 
World War II bachelor officer quarters, 1,100 of them. The 
Packard Foundation has done--actually paid for and done a video 
on it, the disassembling of those buildings, everything that is 
in it and what the value could be for resale/reuse/recycling. 
The study is there, the economics are there. We just don't have 
anybody to use it. And I presume--I mean, what we would love to 
do is just put them on railroad cars and take them somewhere. 
We don't want them.
    But, you know, the community is asking $10 million, which 
nobody will find the money for that. But if you have some--if 
you are going to take some down, maybe you could use the 
buildings at Fort Ord for that. And if you come up with any 
ideas of whatever uses there may be in the military inventory, 
please come get them. The railroad tracks go right next to 
them.
    Mr. Hobson. You just raised another question. Does anybody 
know what is happening to those houses? What has happened to 
all those houses that are sitting there? Are they still sitting 
there, Sam?
    Mr. Farr. Still sitting there, and we are working on it. 
That is what----
    Mr. Hobson. How many are there?
    Mr. Farr. Livable units? About another 1,100; 170 are going 
to be leased right now. That is what we asked about. But they 
have been going through this lawsuit. But they agreed on 
Tuesday that they would have them ready to go. The military is 
going to reoccupy them. They are going to be the first ones in.
    Mr. Hobson. We are going full circle? Does anybody feel 
like they have been around on this before?
    Mr. Edwards. Mr. Chairman.
    Mr. Hobson. Yes.
    Mr. Edwards. Can I ask one question about another issue? 
And I will be brief.
    Mr. Hobson. Sure.

                        UTILITIES PRIVATIZATION

    Mr. Edwards. I know we have gone a long time, but we have 
talked a lot about housing privatization. A lot of us have 
spent a lot of time, and we will spend more. But I see on page 
5, Mr. Secretary, of your written statement you talk about, 
``Our goal is to privatize all utility systems in CONUS by 
2003,'' and then you speak in the next paragraph about 
Executive Order 13123, about the Energy Savings Performance 
Contracts.
    I spoke with somebody--somebody came to my office from 
Enron the other day and talked about work they are doing with 
the Army. Does their contract fall under one of these two 
programs? And my question is, this is a pretty aggressive 
program, especially privatizing by 2003 all utility systems. Do 
we have enough data to be comfortable that this is a wise way 
to go? This is pretty aggressive. We are doing a test model 
case on housing privatization, installations privatization by 
2003. I mean, have we already proven that this is a real direct 
cost savings for the Army and still remain in control of that? 
Are you comfortable with the data to do that quickly?
    Mr. Apgar. Let me first try and just dissect the pieces you 
have raised.
    Mr. Edwards. Right.
    Mr. Apgar. We have identified 320 systems that are owned by 
the active or reserve components, and they are available for 
privatization. That is the first step.
    Mr. Edwards. When you say system, what basically does that 
include?
    Mr. Apgar. The system, that includes both the facilities 
and the commodities, if you will, and that is the next----
    Mr. Edwards. The pipe, for example----
    General Van Antwerp. Water, wastewater, electricity, and 
natural gas.
    Mr. Edwards. Okay.
    Mr. Apgar. Of the 320, we have completed 45, 11 contracts 
awarded but 34 systems exempted, and the bases for exemptions 
are either privatization is uneconomical or there is a security 
issue. And only one has been exempted for security reasons. The 
rest that have been exempted are because they are uneconomical. 
So that basic economic analysis is a very central principle.
    Once that determination has been made, then the 
privatization goes forward, and there is an aggressive program. 
Frankly, part of the problem is the sheer age and condition 
that our systems are in, and the reasons some become economical 
is that there is no outside market force that is going to pick 
them up. But that is the critical distinction, and from what I 
have learned, it is as aggressive as we can make it.
    Mr. Edwards. And is it--I mean, one of my questions in this 
case, I have been pushing privatization, have tough questions 
on that. I want to be sure that we are--I want to be 
aggressive, but maybe I have raised the question, are we being 
smart and making decisions based on actual operating expenses? 
Or are we putting in place so many privatizations? This is a 
huge program, big bucks to the private sector. Are you 
confident we are not moving too quickly? Do we have data to 
prove that what we have already put in place works before we 
commit to privatizing, you know, all CONUS with those 
exceptions by 2003?
    Mr. Apgar. Well, that is a good question, sir, and the best 
evidence actually, to date, is from a recent contract in the 
Washington area for the Military District of Washington, where 
the savings projections were carefully documented. In some of 
the earlier projects they were not. But that is a discipline 
which we are now imposing on all of it for just that reason. 
Another of the lessons learned from privatization is good data, 
good analytics up front before you commit further.
    Mr. Edwards. Because what I understand from some of these 
private groups is they want to come in and not only privatize 
the utilities at Fort Hood, they want to take all of III Corps. 
They want to take III Corps group. That is pretty big--I want 
to be sure--you know, that is a big guinea pig, and I want to 
be sure, if it is a good system, it is working, it is saving 
the military money that we can use for quality of life, for 
other programs, that is great. But I just hadn't heard about it 
until somebody dropped by a couple of days ago.
    Mr. Hobson. Go ahead.
    Mr. Olver. If I follow that correctly, you have identified 
350 such systems. You have actually looked at--or 325, whatever 
it was, and you have actually examined--you have identified 
300. You have taken about 50 or those, or 45, and only about 10 
of them, 10 or 11 of them have actually----
    Mr. Apgar. Been awarded.
    Mr. Olver. Been awarded.
    Mr. Apgar. Right.
    Mr. Olver. Out of the 45. So that is 25 percent. One might 
infer that if this is getting to be a pretty good size sample 
of the total, there might be 80 out of the 320 where it proves 
to be effective to do so, and maybe that is reasonable to be 
able to do that by the year 2003, and presumably the other 240 
of them, or whatever, are going to be--we are not going to be 
able to do that.
    Mr. Apgar. Right.
    Mr. Edwards. These 10 percent are projected to save money. 
My question is: Do we have data to show that the reality is 
equivalent to the----
    Mr. Hobson. You raise an interesting subject. I wrote a 
bill some years ago at the urgency of some people with insight. 
It was called the Forrestal bill. And the Forrestal bill was 
going to do two things. It was going to cause competition, and 
it was going to allow--and this is the part that is missing, 
and then this part that I liked even better. There were energy 
people out there who wanted to compete for energy on bases 
where we only allowed one provider, and they were going to do--
not only provide energy, they were going to provide certain 
infrastructure replacements along those facilities.
    And so I put this bill in, and as you can imagine, all 
kinds of outside utility companies got upset who had all these 
exclusives with the bases, who didn't want any competition, and 
somehow--and this administration over in OMB scored it wrong 
or--by the way, they wanted to score it, anyway. So the one 
side of the administration was encouraging this bill because 
people had come to me about it. On the other side, they killed 
the bill.
    The result of that is that I think now somebody picked it 
up and said, hey, this was a good idea from this standpoint, we 
could get rid of some of this stuff. The bad part of it I see 
from this side is I think there will be savings in a lot of 
cases, just in reductions. But we are not going to achieve the 
infrastructure replacement part of this that was going to be in 
there from people competing against each other. Because what I 
was envisioning is that three or four of these different energy 
companies would come in and compete against each other to get 
those contracts, and part of that deal would be that we are 
going to replace these lines and we are going to provide this, 
we are going to provide that.
    In these deals that I think you are seeing now, I don't 
think you are getting any of that.
    Mr. Edwards. Mr. Chairman, could I ask specifically about 
that? And, again, I am just scratching the surface on this 
issue. But one of my questions about it goes to the point you 
just made. We are about to enter an era of deregulated energy 
where, for major customers like the Department of Defense, you 
are going to get some awfully competitive pricing.
    As I understand it, in this one program I was made aware 
of, the company is actually putting in the infrastructure 
pipeline, for example, gas to the base. I want to be sure that 
this contract process doesn't give them, in effect, an 
exclusive monopoly when it comes to competitive pricing over 
the fuel that goes through those pipes. Just not having known 
much about this--and I don't know how much of this comes under 
our subcommittee's jurisdiction. Perhaps the part--because it 
affects MILCON on bases, then I guess we do have a right to ask 
questions about it. Maybe what I would like to do, Mr. 
Chairman, is just ask for a general briefing to the chairman 
and the committee on where we are on this, because it is--this 
is a big-bucks program, and I want to be sure we are not 
precluding the kind of competition the chairman has talked 
about. Maybe it is not.
    General Van Antwerp. There is competition. This is not for 
the utility itself. This is not for the commodity.
    Mr. Edwards. Right.
    General Van Antwerp. It is for the infrastructure part.
    Mr. Edwards. But, now, will they say, when 2 years from now 
the debate is over who is supplying the commodity that is going 
through that infrastructure, are they going to be able to price 
their own energy sources cheaper than the competitor?
    Mr. Hobson. I can tell you, just the threat of the 
Forrestal bill caused some people to go in and renegotiate some 
rates. [Laughter.]
    Mr. Edwards. I can imagine.
    Mr. Hobson. Allen.
    Mr. Boyd. Just as a follow-up, I just want to make sure I 
understood. The data that you have, the analysis that you have 
done of that data up to this point shows that about 20 percent 
of your facilities or your systems will fall into this 
category? Is that----
    General Van Antwerp. They were economical to privatize, 
correct.
    Mr. Boyd. All right. Well, Mr. Edwards is much more 
optimistic about deregulation nationwide than some of us are on 
the utility systems, but I think it is--the point is well taken 
that we ought to be--that is certainly a possibility, and you 
ought to be very careful about the contractual agreements that 
you have, because this whole regulatory scheme could change 
quickly.
    General Van Antwerp. One of the push-backs we are getting 
right now is that some of the regulated utilities feel they 
have exclusive rights to it and they don't want the 
competition. And we are saying because it is for the 
infrastructure on the installation that we can compete that 
infrastructure. But then they could make you pay through the 
rates. So it is very complicated, and we need to come lay it 
down----
    Mr. Edwards. Right, and it may be a great program. I just, 
because it is pretty new to most of us----
    General Van Antwerp. Yes, sir.
    Mr. Apgar. Where the economies actually come is beyond the 
infrastructure itself in being able to bundle or pool the 
commodities, because as you well know, that is where scale can 
make a difference. And that is a separate action. That is a 
management issue, separate economics from the hard assets, the 
infrastructure.
    So one of the lessons learned has been to keep very clear 
whether you are privatizing the infrastructure or so-called 
privatizing or competing the commodity, and only in some cases 
do the two coincide. That is the competitive issue that General 
Van Antwerp was raising.
    From what we have seen so far, there is more leverage in 
the commodity because that is where the prices are rising and 
we don't have control. Our infrastructure is in such poor shape 
that it would be, I think, imprudent to somehow assume that a 
large proportion of these existing systems are going to be 
privatized as infrastructure. The real leverage, the 
opportunity is in the commodities.
    Mr. Edwards. I just hope that--I mean, the scale these 
folks are talking about is trying to get the Army to make a 
decision for all of III Corps, which 37 percent of the combat 
are the Army, I just hope this is something that somebody on 
the Hill is aware of, has had a chance to review and be 
comfortable with. And, again, it may be the best--I may be the 
largest backer of this program, but right now I just don't know 
enough about it and I want to be sure it doesn't lock out 
competition down the line.
    Mr. Apgar. We have--go ahead.
    General Van Antwerp. I was just going to say, sir, that 
Enron would like to go much larger and more much regional than 
we have allowed.
    Mr. Hobson. Probably country-wide.
    General Van Antwerp. Right. And Enron did Fort Hamilton, 
but it was a very small installation. And thus far we have kept 
it very small, and we are walking before we run. They would 
like to expand it.
    Very few companies can do all four of those utilities we 
mentioned, but what they are, Enron is a broker. They will 
bring in the people. We are being very cautious.
    Mr. Edwards. Thank you.
    Mr. Hobson. Any other questions? John.
    Mr. Olver. No questions.
    Mr. Hobson. Well, thank you, gentlemen. Do you have any 
further comments you want to make? Or you will be happy to get 
out of here if I let you out of here? [Laughter.]
    Our next hearing will be Thursday, March 9th, and there 
will be two hearings that day. The Air Force construction 
hearing will be at 9:30 a.m., following by a Defense agency 
hearing at 1:30.
    I thank you all for your coming and for your attention.

    [Clerk's note.--Questions for the record submitted by 
Chairman Hobson.]

                            OVERALL FUNDING

    Question. Has the Army's program been reduced to make room for the 
chemical demilitarization program, either this year of in the future?
    Answer. The Army's program has gone down but not to make room for 
the chemical demilitarization program. Current and future chemical 
demilitarization construction program requirements were fully funded at 
the time funding responsibility devolved from the Department of Defense 
to the Army. In addition, due to future uncertainties and past history 
of the program, additional funding was programmed in the out-years to 
cover unanticipated requirements. It is not anticipated that there will 
be any impact on the future Army program as a result of the chemical 
demilitarization program.

                               TOTAL ARMY

    Question. The Army has been working to integrate the active, guard, 
and reserve forces into a total Army force structure. However, the Army 
National Guard and Reserve's infrastructure requirements continue to be 
underfunded.
    First, to what extent is there integration in the planning and 
budgeting process, especially for infrastructure requirement? How is 
the integration of forces reflected in this budget request?
    Answer. The Army program and budget process is fully integrated and 
provides open forum, detailed assessment, adequate checks and balances, 
and opportunities for multi-level decisions on allocating available 
funding to validated requirements in support of the Army.
    Active, Guard, and Reserve installation requirements are reviewed 
and validated across all three components by program and budget review 
committees. The Deputy Chief of Staff for Operations and Plans 
integrates requirement priorities across all Army missions and 
functions. The Secretary of the Army and the Chief of Staff, Army make 
final resourcing decisions.
    The fiscal year 2001 military construction Budget Request reflects 
integrated planning and programming through projects which support the 
Army's top priorities: readiness and well-being of our soldiers.
    Question. Second, has any progress been made toward developing a 
single integrated projects list, coordinating the facilities 
requirements of the active duty Army, the Army National Guard, and the 
Army Reserve?
    Answer. No. We integrated the respective programmatic requirements 
of the Active, Guard, and Reserve during the development of our 
program. However, it would be impractical and cumbersome to integrate 
the projects in the Army's Future Year Development Program (FYDP) due 
to the fact that each component is founded through a separate 
appropriation.

                              FIRE SAFETY

    Question. What is the Army's policy in regards to smoke detectors 
and fire extinguishers in family housing units, and in particular in 
stairwells?
    Answer. The Army requires that Government-installed smoke detectors 
be hard-wired and located in the dwelling unit in accordance with NFPA 
101, Life Safety Code (LSC). Smoke detectors in stairwells are not 
required by the LSC if the stairwell meets certain criteria. Army 
family housing (buildings with stairwells) are being inspected to 
insure compliance with these LSC requirements. Results will be part of 
the report that the Army will submit on 23 March 2000. The Army does 
not require or recommend issuance of fire extinguishers to family 
housing residents. Fire protection experts recommend that the first two 
things homeowners and apartment residents should do upon seeing a fire 
is to get everyone out of the building and call the fire department. 
Untrained residents attempting to fight the fire might delay early 
evacuation and notification of the fire department. Army regulations do 
require portable, hand-held, multipurpose, fire extinguishers in family 
housing units used as a Family Child Care homes.
    Question. How often are these devices inspected?
    Answer. Army regulations require family housing residents to test 
their installed smoke detectors quarterly. Neither DoD nor the Army 
requires regular smoke detector inspections. However, individual 
installations have their own operating procedures and the frequency and 
scope of smoke detector inspections will be included in the report to 
be submitted on 23 March 2000.

                            BUY-OUT PROGRAMS

    Question. The Army's construction budget main focus is the buy-out 
of inadequate permanent party barracks and joint mobility projects. 
Does the Army have any other buy-out programs in mind for when these 
current programs are completed?
    Answer. The Army has developed a facility strategy to sustain and 
modernize its facilities bringing overall Army facility condition to C2 
(mission capable with minor problems) and buy-out the RPM backlog. The 
strategy has two parts: First fully fund the minimum annual sustainment 
requirement; and second focus on modernization of selected facility 
types in programs to be accomplished in 10-year increments. Fully 
funding sustainment prevents further deterioration of facilities or 
premature deterioration of modernized facilities. Investing in facility 
modernization will bring facilities up to fully mission capable, 
current standards and will eliminate the RPM backlog. The strategy 
combines RPM and MILCON funding. The strategy builds upon the success 
the Army has had to date in improving facilities and soldier well being 
by focussing investments on specific facility types such as barracks 
and strategic mobilization projects. As the barracks modernization and 
strategic mobilization programs come to completion, we will focus on 
buying-out the modernization of other facility types such as vehicle 
maintenance facilities, classrooms, fitness centers, trainee barracks, 
USAR Centers and ARNG Readiness Centers.
    Question. At current funding levels, how long will it take the Army 
to provide adequate permanent party living quarters?
    Answer. The Army plans to complete funding of barracks for 
permanent party soldiers to the 1+1 DoD standard, or equivalent, by 
fiscal year (FY) 2008. Current funding levels support that plan.

                       FAMILY HOUSING MAINTENANCE

    Question. The budget request includes a reduction of $103 million 
from the enacted levels for family housing maintenance. Is this budget 
adequate to address the tremendous need for maintenance and repair of 
existing units?
    Answer. The $103 million reduction was across the family housing 
operations and maintenance program, which includes management, 
utilities, maintenance and repair, and leasing. The reduction to the 
maintenance and repair funding request is approximately $70 million and 
includes the reduced requirement associated with the family housing 
privatization program. The requested funding for maintenance and repair 
is the minimum essential to keep units open, safe and habitable. It 
will not improve the units or prevent the cumulative effect of 
deterioration over the long-term.
    Question. Why does the Army propose transferring $75 million from 
the family housing construction and maintenance account into the 
personnel accounts?
    Answer. The transfer is to cover the cost of additional housing 
allowances for about 13,000 military members that must be paid from the 
personnel accounts at four privatization sites. Specific transfers for 
fiscal year 2001 are: Fort Carson ($13.6 million), Fort Hood ($35.1 
million), Fort Lewis ($20.2 million) and Fort Meade ($6.2 million)

                         UTILITY PRIVATIZATION

    Question. What assurances can the Army provide that the conveyance 
of utility systems will not result in a substantial increase in long-
term utility costs?
    Answer. Privatization involves the conveyance of the utility 
infrastructure (electrical lines, natural gas lines, water and waste 
water distribution and collection systems, and treatment plants). The 
decision to privatize a utility system is based on a detailed life 
cycle analysis. If the long-term costs of privatization outweigh the 
cost of government ownership, privatization is not done. The Army uses 
competitive procurement procedures to ensure its selects the best value 
offer.

                         CONTINGENCY REDUCTION

    Question. The Department's construction budget eliminates the 5% 
contingency allowance for all projects. Contingency allowances are an 
essential element to accommodate uncertainties in project costs after 
budget submittal and during the design and construction phases.
    (a) What challenges will this budgeting approach present to the 
Army in executing its budget?
    Answer. The Army will execute the MILCON program, however without 
contingency funds, the execution of construction contracts will be much 
more difficult than in previous years, especially since we will not 
cancel projects, reduce scope or lower our standards.
    The Army's past construction program execution experience indicates 
that mandatory construction changes will be required for virtually 
every project after contract award. The lack of adequate contingency 
funds precludes the speedy resolution of these changes and impacts our 
ability to maintain timely construction progress thereby leading to 
further cost growth and claims.
    The need to borrow funds from unawarded projects may delay award of 
some projects until the start of the next fiscal year.
    Question. (b) Will any additional authorities be necessary?
    Answer. No.
    Question. If this reduction hinders program execution and projects 
need to be deferred or canceled due to a lack of funds, how will the 
Army determine which project to defer or cancel?
    Answer. Projects will be executed until funds are not available to 
award. Thus, those projects that are not ready for award until late in 
the ready for award until late in the fiscal year would be candidates 
for deferral.

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    Question. The Department proposes a Basic Allowance for Housing 
(BAH) plan that will completely eliminate out-of-pocket housing 
expenses for military members by 2005. How will this initiative impact 
the Army's family housing accounts?
    Answer. The family housing accounts are not directly tied to BAH; 
however, eliminating out-of-pocket housing expenses will have an impact 
only in the funding transfer of Army Family Housing (AFH) to Military 
Personnel Account (MPA) due to privatization of housing when and if 
additional sites are approved for privatizing.
    Question. Increasing the BAH will reduce the demand for on-base 
housing, what is the Army's plan for re-evaluating its on-base housing 
requirements and deficits?
    Answer. The Army's plan for re-evaluating on-base housing 
requirements and deficits is to conduct housing market analyses at our 
installations to validate the continued need for on-base housing.

                          ENHANCED-USE LEASING

    Question. The Department is continuing efforts to reduce base 
operating support costs. Enhanced-use leasing is one element of this 
effort. Both the Navy and Air Force are currently developing an 
enhance-use leasing pilot program. These projects envision both the 
selling and leasing of land. Is the Army planning any similar projects 
and what recommendations would you have for any new enhanced-use 
leasing authority?
    Answer. The Army is focusing on leasing. We have a pilot project 
underway at Fort Sam Houston, San Antonio, TX, aimed at fostering the 
preservation of historic property. A solicitation for the Fort Sam 
Houston project in the form of a Notice of Availability was issued on 
20 Dec 99. Prior to executing any lease at Fort Sam Houston, the Army 
will have to be satisfied that the arrangement will be in the best 
interests of the Department and the public. The Army continues to 
assess other enhanced use type leasing arrangements proposed for Fort 
Leonard Wood, Missouri; Picatinny Arsenal, New Jersey; and Yuma Proving 
Ground, Arizona. The Army will not go forward with these or any other 
initiatives without consulting with the appropriate committees of 
Congress.
    The Army continues to support DoD's enhanced use legislation, which 
may be required to support some of the specific proposals we are 
evaluating. The recommendations embodied in the legislation constitute 
modest adjustments to 10 U.S.C. 2667. These adjustments are categorized 
into the following four areas: Permits immediate use of funds without 
additional administrative procedures; Expands use of cash proceeds to 
support renovations, base operating support services and new 
construction with Congressional notification; Clarifies types of 
authorized in-kind consideration and relaxes restrictions on where in-
kind services can be applied; and allows Environmental Indemnification 
for pre-existing conditions on property considered for out-leasing.

                            BALANCED PROGRAM

    Question. Almost half of the Army's construction budget is for 
Whole Barracks Renewal. Has the Army been able to budget for a balanced 
program, one which provides proper troop housing yet still meets the 
growing infrastructure and operational needs?
    Answer. Barracks and strategic mobility are the two highest MCA 
priorities and have a defined end date. The majority of our budget 
supports this goal. Additional projects were focused to gain the most 
benefit from our limited resources. Thus, projects have been included 
that will improve the Army's ability to improve soldier readiness and 
to execute mission responsibilities.
    Question. What else is the Army doing to help the soldiers through 
its construction budget?
    Answer. In addition to improving barracks for soldiers, our budget 
provides funds for two training ranges to improve soldier readiness, a 
wash facility to assist soldiers in vehicle maintenance, a Consolidated 
Soldier Support Center to serve as a ``one-stop'' In/Out processing 
center for soldiers and families, and a child development center.

                       FACILITY REDUCTION PROGRAM

    Question. What efforts are being made by the Army to eliminate its 
excess infrastructure?
    Answer. The Army has been engaged in a Facility Reduction Program 
to eliminate excess facilities for a number of years. The Army disposed 
of 68 million square feet of buildings from fiscal year (FY) 1992 
through FY 1999. The Army has budgeted $100 million per year to 
eliminate excess infrastructure and we plan to dispose of another 7.7 
million square feet (MSF) in FY2000. We also have a long standing 
policy to eliminate an equivalent amount of infrastructure when we 
build revitalization projects. This one-for-one demolition plan 
compliments our facilities reduction program.
    Also contributing to the elimination of excess infrastructure is 
the CONUS BRAC effort and the CONUS return of installations to the host 
nations. Through the summer of 1999, BRAC closures had amounted to 52 
MSF. Overseas, 13 bases were returned to Panama in accordance with 
treaty requirements. The U.S. has announced the return of 30 sites in 
the Pacific and Korea, as well as 624 sites in Europe. These European 
sites equal 188 MSF of facilities, the equivalent of closing 12 of the 
biggest U.S. bases.

                       ALABAMA: REDSTONE ARSENAL

        SPACE AND MISSILE DEFENSE COMMAND BUILDING ($23,400,000)

    Question. The Form 1391 for this project indicates a fitness center 
will be provided as part of the project. What is the square footage of 
this fitness center and how much will it cost?
    Answer. The fitness center is programmed for a maximum of 25000 
gross square feet (or 2000 net square feet.) Construction cost 
associated with this area is approximately $249.000.
    Question. Additionally, is the equipment for the fitness center 
included in the cost of the project? If so, how much? If not, how will 
the equipment be provided?
    Answer. Fitness center equipment is not included in the Military 
Construction, Army project. The existing equipment will be relocated.
    Question. Please describe in some detail the facilities to be 
demolished as part of this project. Is the cost of the demolition 
included in the project? If so, how much?
    Answer. This project includes interior demolition of the building 
to be renovated and does not include demolition of other buildings on 
Redstone Arsenal. Demolition of an equivalent square-footage is 
required for new construction only.
    Question. What is the payback period for this project in avoided 
lease payments?
    Answer. The simple payback period for a project cost of $23.4 
million is less than 4 years with the current lease cost of $6.7 
million. The discounted payback period is approximately 7.6 years. The 
discounted payback period takes other factors into consideration over a 
27-year analysis period. Such cost items include interest rates, 
inflation imputed taxes, utility and other operating costs maintenance 
costs, salvage value, etc.

                        ALASKA: FORT WAINWRIGHT
                    CENTRAL HEATING AND POWER PLANT

    Question. What is the current status of the environmental issues at 
Fort Wainwright's Central Heating and Power Plant (CHPP)?
    Answer. The U.S. Army, Alaska filed its answer to EPA Region 10's 
Complaint on February 4, 2000. In its answer, the Army contests the EPA 
position that Congress intended ``economic benefit'' and ``size-of-the-
business'' penalties to apply to enforcement actions against federal 
facilities performing essential government missions. The Army also 
objected to EPA's bringing the action after Fort Wainwright had 
coordinated a compliance schedule with the Alaska regulator and 
incorporated it into the operating permit application, and after it had 
already obtained military construction and operational funding to 
achieve compliance. EPA and the Army have agreed to participate in an 
Alternate Dispute Resolution process that is overseen by a neutral EPA 
Administrative Law Judge. If that process does not produce a 
settlement, an Administrative Law Judge will be assigned to conduct an 
administrative hearing.
    Fort Wainwright installed continuous opacity monitors in August 
1998 and continuous emissions monitors in November 1999. Fort 
Wainwright continues to pursue the remaining compliance issue of 
reducing particulate matter emissions (opacity) by installing a 
baghouse for each boiler. The baghouse project, funded with Military 
Construction, Army (MCA) appropriations, has a programmed amount (PA) 
of $15.5 million and a current working estimate (CWE) of $17.9 million 
for fiscal year (FY) 2000. The 65% design has been completed. 
Construction contract award is scheduled for 31 August 2000 and 
construction is scheduled for completion by the end of 2002. The 65% 
design has also been completed for the Operation and Maintenance, Army 
(OMA) Hearing and Power Plant Refurbishment. The project has a PA of 
$21.2 million and a CWE of $24 million. Conjunctive award with the MCA 
project is scheduled for 31 August 2000.
    The CHPP is currently regulated by a state Operating Permit and a 
Title V Permit Application (submitted in Dec. 97). These documents 
identify all applicable requirements that apply to the operation of the 
CHPP. A compliance schedule was included in the Title V Permit 
application to address the CHPP's current noncompliance with the 
opacity standard. This compliance schedule has dates and milestones 
that must be met to demonstrate Fort Wainwright's commitment to 
operating the CHPP in full compliance with environmental regulations. 
To meet the requirements of the compliance schedule, the installation 
of the baghouses must be complete by September 2003. After carefully 
examining the construction schedule for the baghouses, Fort Wainwright 
now projects that the project will be completed by December 2002. Both 
EPA and state regulators have been notified of this change. The current 
schedule of the project will meet this requirement, as modified.

                         ARIZONA: FORT HUACHUCA

    Question. The Form 1391 indicates the current facility is on the 
National Historic Registry. What are the plans for this building to be 
re-occupied.
    Answer. Current plans are for the building to be re-occupied.
    Question. If the Army is required to maintain this historic 
building, please describe the Army's historic preservation 
responsibilities for the building and estimated annual costs?
    Answer. In accordance with Section 106 of the National Historic 
Preservation Act of 1966 and its implementing regulation 36 CFR 800 
``Protection of Historic Properties'', any maintenance and repair 
activities that are considered by the Army to be undertakings (which by 
definition may include mothballing and caretaker maintenance and 
repair, to complete rehabilitation and renovation for reuse) must be 
reviewed by the State Historic Preservation Office and others following 
the procedures defined in the regulation. The results of such 
consultation can include a Memorandum of Agreement between the Army, 
the State Historic Preservation Office, and possibly other interested 
parties, stipulating actions that the Army will take to avoid, treat or 
mitigate adverse effects to the property. We anticipate no additional 
costs.
    Question. Please describe the modified standard design used for 
this project. What is the estimate of savings in design costs by 
accomplishing this project using a modified standard-design?
    Answer. The modification to the standard design involves reducing 
the size of the facility based on the number of agents using the 
facility. The standard design, which represents an Army-approved 
functional and operational layout, provided the starting point for pre-
design discussions with the customer. By modifying the standard design, 
which is of a larger facility, we avoid unnecessary cost by only 
building what is required. No saving of design funds is expected.

                      ARKANSAS: PINE BLUFF ARSENAL

         CHEMICAL DEFENSE QUALIFICATION FACILITY ($15,500,000)

    Question. The Fiscal Year 2000 President's Budget FYDP included 
this project for $18 million in fiscal year 2002. The project was 
authorized last year at $15.408 million. However, no appropriations 
were provided. What has the Army done to reduce the project cost to 
$15,408,000?
    Answer. An in-depth value engineering analysis will be completed to 
reduce project cost.
    Question. Will the Army design the project to the full scope of $18 
million? If so, what will the Army do to reduce project costs?
    Answer. The Army will design the project to full scope while 
looking at ways to reduce project cost.
    Question. What are some of the challenges facing the Army in 
executing this project?
    Answer. Constructing the new building, renovating existing 
facilities, and moving the lab equipment while maintaining the required 
filter testing will be challenging.

                CALIFORNIA: FORT IRWIN LAND ACQUISITION

    Question. Can you update the committee on the status of the Fort 
Irwin land acquisition project, especially any additional funding 
requirements and the status of required environmental assessments?
    Answer. The Army proposes to acquire additional training land for 
the National Training Center (NTC). Advances in equipment (e.g., longer 
engagement ranges), doctrinal changes (by at least a factor of two in 
required battlespace), and Force XXI doctrinal experimentation require 
the expansion. The Army's primary challenge is to resolve an ongoing 
discussion with the Department of Interior (DOI) on mitigation to 
protect the Desert Tortoise and Lane Mountain Milkvetch.
    In December 1997, the California office of Bureau of Land 
Management (BLM) and the California office of U.S. Fish & Wildlife 
Service (USFWS), with the approval of the DOI, presented a Southern 
Expansion proposal for NTC consideration. The Army responded with a 
Modified Southern Expansion Alternative in March 1999 that proposes to 
acquire 174,461 acres of land for $90 million Military Construction, 
Army (MCA). Additional funding requirements include an estimated $18 
million Operation & Maintenance, Army (OMA) for environmental 
mitigation and $62 million Other Procurement, Army (OPA) for 
instruction.
    On 13 July 99, informal consultation between NTC and USFWS on 
protection of the Desert Tortoise was elevated to the DOI, DoD and DA 
level. The DA and DOI have formed a team to develop a mitigation plan 
for protection of the Desert Tortoise and the Lane Mountain Milkvetch.
    Congress added $19 million in the FY00 MCA Appropriation for Phase 
I of NTC land acquisition. The Army has prepared draft language for 
withdrawal of public domain lands within the expansion area that will 
be used for training. BLM has prepared a draft Environmental Impact 
Statement (EIS) covering the NTC land expansion and use of the 
expansion area for training activities. The EIS is currently on hold 
pending approval of the mitigation plan by DOI.

                         GEORGIA: FORT STEWART
          BARRACKS COMPLEX--HUNTER AAF PHASE 1C ($26,000,000)

    Question. The form 1391 for this project indicates that upon 
completion of this project, the remaining unaccompanied enlisted 
permanent party deficit at Fort Stewart will be 889 personnel. The form 
1390 for this project indicates no future barracks projects are planned 
at Fort Stewart. What is the Army's plan to address the remaining 
unaccompanied personnel housing deficit at Fort Stewart?
    Answer. The Army's plan for Military Construction, Army (MCA) to 
address the remaining unaccompanied personnel deficit is shown below. 
The remaining deficit and future barracks projects refer to the Hunter 
Army Airfield, which is a sub-post of Fort Stewart. Also, the DD Form 
1390 includes only new mission projects for fiscal years (FY) 2003 
through FY 2005, and not revitalization projects such as these 
barracks.

                        [In millions of dollars]

FY 2001...........................................................  26.0
FY 2003...........................................................  26.0
FY 2005...........................................................  12.5

    The main post of Fort Stewart does not require any MCA-funded 
projects. Barracks Upgrade Program Operation & Maintenance, Army (OMA) 
funds are renovating its existing 1970s-era buildings to an approximate 
1+1 standard, which will satisfy the main post's entire requirement.
    A recent plan included a new barracks building for Fort Stewart. 
However, in December 1999, the Army reduced barracks requirements based 
on the Heavy Division Redesign.

                       HAWAII: SCHOFIELD BARRACKS
        BARRACKS COMPLEX--WILSON STREET, PHASE IB ($46,400,000)

    Question. Please provide for the record the Army's plan (by fiscal 
year and dollar amount) to meet the 1+1 barracks standard at Schofield 
Barracks by 2008.
    Answer. The Army's plan for Military Construction, Army (MCA) to 
address the remaining unaccompanied personnel deficit is shown below. 
Amounts include the main post at Schofield Barracks and the adjacent 
sub-post of Wheeler Army Airfield. In addition to the amounts below, 
Barracks Upgrade Program Operation & Maintenance, Army (OMA) funds will 
renovate several existing buildings. Funding for all barracks is 
completed by fiscal year (FY) 2007.

                        [In millions of dollars]

FY 2001...........................................................  90.2
FY 2002...........................................................  68.0
FY 2003...........................................................  75.0
FY 2004...........................................................  77.8
FY 2005...........................................................  74.5
FY 2006...........................................................  30.6
FY 2007...........................................................  31.8

                 INDIANA: NEWPORT ARMY AMMUNITION PLANT
     AMMUNITION DEMILITARIZATION FACILITY, PHASE III ($54,400,000)

    Question. What is the current status of the first two phases of 
this project, which were funded in fiscal years 1999 and 2000?
    Answer. Newport Chemical Agent Disposal Facility (NECDF) project 
was awarded in February 1999 to Parsons Infrastructure & Technology 
Group, Incorporated as the Systems Contractor for the design and 
construction, systemization, operations and closure. The design and 
construction phase of this project is scheduled to be completed in 
fourth quarter fiscal year 2002. The design is about 30 percent 
complete and construction is on schedule. To date, $34.7 million of 
military construction funds has been obligated.
    At Newport, the government office building has been completed and 
occupied. The contractor office building has been constructed and will 
be occupied by the end of March. Roads at the site have been upgraded 
and a parking lot has been completed. Grading for the laydown areas is 
completed and rough grading for process buildings is in progress. 
Relocation and construction of site utilities (electricity, telephone, 
water and sewer) is in progress. Construction activities for the 
Chemical Demilitarization Building (digging footers and pouring 
concrete) will commence in June 2000.
    Question. This project differs greatly from other chemical 
demilitarization projects, in that it provides a pilot test of an 
alternative to incineration. As such, your estimates are based upon the 
best available data and costs are adjusted for risk associated with 
design and construction of a first-in-kind plant. What precautions is 
the Department taking to prevent the government from cost overruns?
    Answer. The Office of the Project Manager for Alternative 
Technologies and Approaches (PMATA) is diligently monitoring the 
Systems Contractor to protect the government from cost overruns to the 
fullest extent possible consistent with the contract scope. Oversight 
of the systems contractor is performed by PMATA and Industrial 
Operations Command staff, U.S. Army Corps of Engineers, and Program and 
Integration Support Contractor (PAISC) personnel.
    One of the key tools in managing the systems contract is the use of 
Earned Value Management System reporting on a monthly basis which 
provides indications of potential cost growth. The contractor is also 
required to prepare and maintain a resource loaded Integrated Master 
Schedule for completion of the project. Other mechanisms to keep in 
close contact with the contractor are the use of In Process Reviews, 
Integrated Product Teams and Design Reviews which involve government, 
PAISC and System Contractor personnel. These teams use past industrial 
experience, government experience with similar buildings and equipment, 
and the concept design provided to the system contractor by the 
government to aid in evaluating performance, cost and schedule.
    Question. How will the elimination of contingency funding affect 
project execution if cost overruns occur?
    Answer. The elimination of contingency funding is not expected to 
affect project execution. By intensely managing changes and adjusting 
the contractor's execution plan, a major cost overrun can be avoided. 
Any cost overrun, if experienced, should be minimal and can be 
effectively managed with available military construction resources.

                           KANSAS: FORT RILEY
        BARRACKS COMPLEX--INFANTRY DRIVE, PHASE 1C ($15,000,000)

    Question. According to the form 1391, the remaining unaccompanied 
enlisted permanent party deficit will be 979 personnel upon completion 
of this project. What is the Army's plan (by fiscal year and dollar 
amount) to provide adequate living quarters at Fort Riley?
    Answer. The Army's plan for Military Construction, Army (MCA) to 
address the remaining unaccompanied personnel deficit is shown below. 
In addition to the MCA amounts in the table, Barracks Upgrade Program 
Operation & Maintenance, Army (OMA) funds will renovate several 
existing buildings.

                        [In millions of dollars]

FY 2001...........................................................  15.0
FY 2003...........................................................  42.0
FY 2004...........................................................  28.0

    Question. What is the estimate of savings in design costs by 
accomplishing this project using a standard or definitive design?
    Answer. Budget estimates of design costs are based on the projected 
effort required to prepared the designs and contract solicitation 
documents. Since a standard design was available for this facility, 
design cost savings (which are difficult to quantify) were reflected 
tin the budgeted design cost.
    Standard designs yield benefits besides the potential of reduced 
design costs. The Department of Army standard design packages provide 
an Army-approved functional and operational layout for the specific 
type of facility. They provide a starting point for pre-design 
discussions with customers helping to reduce the time spent to develop 
the preliminary layout. The standard or definitive design helps reduce 
the risk of design deficiencies and assures that the design will be 
consistent with Army-wide missions and policy.

                    KENTUCKY: BLUE GRASS ARMY DEPOT
                  AMMUNITION DEMILITARIZATION FACILITY

    Question. What is the current status of the first phase of this 
work, which was funded in fiscal year 2000?
    Answer. The first phase of work for Blue Grass Army depot, funded 
in fiscal year 2000, is for Depot Support, such as communication lines 
upgrades, roads, road repairs, and security building upgrades. These 
upgrades have not yet started. A meeting is scheduled in the near 
future among the Corps of Engineers, Project Manager for Chemical 
Stockpile Disposal, and Blue Grass Army Depot to finalize the plan for 
the path forward.
    Question. Why isn't phase II funding requested in fiscal year 2001?
    Answer. Funding in the amount of $8.5 million was requested in 
fiscal year 2001 for continued Depot Support improvement activities. No 
funding was requested for Demilitarization Facility construction in 
fiscal year 2001 because the disposal technology has not yet been 
selected.

                        KENTUCKY: FORT CAMPBELL
      BARRACKS COMPLEX--MARKET GARDEN ROAD, PHASE 2C ($9,400,000)

    Question. Will the inadequate Korean War-era barracks currently 
housing soldiers be demolished as part of this project? If not, why 
not?
    Answer. The Barracks Complex Market Garden Road is being 
constructed on a new site. The Corps Support Group Barracks Complex, 
Phase 1, slated for Fiscal Year 2003 will be constructed on the site of 
these Korean War era barracks. At that time, these old barracks will be 
demolished as part of this project to make room for the new barracks.
    Question. According to the form 1391, the remaining unaccompanied 
enlisted permanent party deficit will be 2,534 personnel upon 
completion of this project. What is the Army's plan (by fiscal year and 
dollar amount) to provide adequate living quarters at Fort Campbell?
    Answer. The Army's plan for Military Construction, Army (MCA) to 
address the remaining unaccompanied personnel deficit is shown below. 
In addition to the MCA amounts in the table, Barracks Upgrade Program 
Operation & Maintenance, Army (OMA) fund will renovate several existing 
buildings.

                        [In millions of dollars]

FY 2001...........................................................   9.4
FY 2002...........................................................  43.0
FY 2003...........................................................  37.7
FY 2004...........................................................  40.0
FY 2005...........................................................  40.5
FY 2006...........................................................  53.0
FY 2007...........................................................  67.6
FY 2008...........................................................  72.2

                   MARYLAND: ABERDEEN PROVING GROUND
      AMMUNITION DEMILITARIZATION FACILITY, PHASE I ($45,700,000)

    Question. What is the current status of the first two phases of 
this project which were funded in fiscal years 1999 and 2000?
    Answer. Aberdeen Chemical Disposal Facility (ABCDF) project was 
awarded in October 1998 to Bechtel National, Incorporated as the System 
Contractor for the design, construction, systemization, operation and 
closure. This project is incrementally funded starting in fiscal year 
1999. The design and construction for this project is scheduled to be 
complete by fourth quarter fiscal year 2002. The design is 55 percent 
complete and construction is 8 percent complete. To date, $68.9 million 
of military construction funds has been obligated.
    At Aberdeen, the government/systems contractor office building has 
been completed and will be occupied by the end of March. Roads at the 
site have been upgraded and a parking lot has been completed. Grading 
for the site is completed and the site has been elevated with fill. 
External utilities (electricity, telephone, water and sewer) have been 
brought to the site. Construction activities for the Chemical 
Demilitarization Building (digging footers and pouring concrete) will 
commence in April 2000.
    Question. This project differs greatly from other chemical 
demilitarization projects in that it provides a pilot test of an 
alternative to incineration. As such, your estimates are based upon the 
best available data and costs are adjusted for risk associated with 
design and construction of a first-in-kind plant. What precautions are 
the Department taking to prevent the government from cost overruns?
    Answer. The Office of the Project Manager for Alternative 
Technologies and Approaches (PMATA) is diligently monitoring the 
Systems Contractor to protect the government from cost overruns to the 
fullest extent possible consistent with the contract scope. Oversight 
of the Systems Contractor is performed by PMATA, Industrial Operations 
Command staff, U.S. Army Corps of Engineers, and Program and 
Integration Support Contractor personnel (PAISC).
    One of the key tools in managing the systems contract is the use of 
Earned Value Management System reporting on a monthly basis which 
provides indications of potential cost growth. The contractor is also 
required to prepare and maintain a resource loaded Integrated Master 
Schedule for completion of the project. Other mechanisms to keep in 
close contact with the contractor are the use of In Process Reviews, 
Integrated Product Teams and Design Reviews which involve government, 
PAISC and System Contractor personnel. These teams use past industrial 
experience, government experience with similar buildings and equipment, 
and the concept design provided to the System Contractor by the 
government to aid in evaluating performance, cost and schedule.
    Question. How will the elimination of contingency funding affect 
project execution if cost overruns occur?
    Answer. The elimination of contingency funding is not expected to 
affect project execution. By intensely managing changes and adjusting 
the contractor's execution plan a major cost overrun can be avoided. 
Any cost overrun, if experienced, should be minimal and can be 
effectively managed with available military construction resources.
    Question. Would this work be required if there were no chemical 
demilitarization program?
    Answer. The Munitions Assessment/Processing System (MAPS) project 
would be required even if there were not a chemical demilitarization 
program. MAPS is being driven by local community concerns (Edgewood/
Harford County/Kent County, Maryland about cleanup called remediation) 
actions at the Edgewood Area of Aberdeen Proving Ground (APG-EA). APG-
EA has worked carefully with the State of Maryland and the local 
citizens Restoration Advisory Board to schedule remediation activities 
to clean up key areas of land at APG-EA, particularly those close to 
the installation boundary. One of these, the Lauderick Creek area, is 
very close to an off-post housing development. Lauderick Creek is 
suspected to contain an unknown number of old range fired chemical and 
smoke weapons. Clean up of this and other old range areas at APG-EA has 
resulted in intense pressure on the Army to find a solution to 
ultimately dispose of these recoveries without using open burn/open 
detonation due to citizens' concerns over fugitive emissions of toxic 
chemicals and noise. MAPS will be used to dispose of the majority of 
items (both smoke and chemical) recovered from these remediation sites 
under strict environmental control. Consequently, the driving forces 
for MAPS are the environmental cleanup actions at APG-EA, and the need 
to meet the requirements of the Chemical Weapons Convention once any 
chemical munitions have been recovered.
    Question. If not, why isn't this project with the ``Phase III'' 
demil project?
    Answer. The project is required.

                          NEW YORK: FORT DRUM

      consolidated soldier support center, phase ii ($10,300,000)
    Question. How many buildings are currently used to provide soldier 
support services at Fort Drum?
    Answer. Including partial occupancies, approximately 50 buildings.
    Question. Will all facilities currently used for these services be 
demolished under the Army's facility reduction program once this 
project is completed?
    Answer. In large measure, yes; however, not precisely the same 
buildings. Ft. Drum will manage the demolition so that the facilities 
most in need of repair are the buildings demolished. Some of the 
facilities occupied currently by functions that will move to the 
Support Center are in better shape than others. The intent is to 
demolish at least as many square feet of WWII space as that which will 
be constructed in the new facility.
    Question. If not, please describe the buildings that will not be 
demolished and the Army's plan for re-use of these facilities?
    Answer. Ft. Drum has not finalized plans for all buildings 
involved. Some of the facilities vacated by functions that will be 
moved into the Support Center will be back-filled by other agencies, 
and then those facilities subsequently vacated will be demolished 
instead. Square footage is the unit of measure that we manage for 
demolition as opposed to number of buildings. Our aim is to demolish at 
least an equal amount of square footage as that which will be added by 
the new Support Center. Ultimately, it is anticipated that 
approximately 14 buildings will be demolished as a direct result of 
vacating by the tenant. Another 33 buildings will be demolished as 
substituted buildings because of their state of repair or the utility 
of space management on the installation. All of the structures 
previously mentioned are WWII wood structures.
    Question. Why wasn't the cost to demolish existing structures 
included in the cost of this project?
    Answer. Ft. Drum anticipated using Facility Reduction funds to 
accomplish the demolition. All future revitalization projects have a 
demolition line item within the DD Form 1391.
    Question. What is the estimated cost to demolish the existing 
soldier support services buildings at Fort Drum under the facilities 
reduction program? When will this work be completed?
    Answer. It is estimated that the demo will cost about $973,000. 
Once the new facility is completed and the functions transferred, 
demolition will begin immediately, providing funds are available.

                       NORTH CAROLINA: FORT BRAGG
    BARRACKS COMPLEX--BUTNER ROAD, PHASE I ($26,000,000); BARRACKS 
  COMPLEX--LONGSTREET ROAD, PHASE I ($45,600,000); BARRACKS COMPLEX--
                TAGAYTAY STREET, PHASE 2B ($38,600,000)

    Question. According to the form 1391's, the remaining unaccompanied 
enlisted permanent party deficit at Fort Bragg will be 6,371 personnel 
upon completion of these three multi-phased projects. What is the 
Army's plan (by fiscal year and dollar amount) to provide adequate 
living quarters at Fort Bragg?
    Answer. The Army's plan for Military Construction, Army (MCA) to 
address the remaining unaccompanied personnel deficit is shown below. 
The 6,371-soldier deficit is the remainder after the fiscal year (FY) 
2001 funded increment or phase of the three projects. In addition to 
the MCA amounts in the table, Barracks Upgrade Program Operation & 
Maintenance, Army (OMA) funds will renovate several existing buildings.

                        [In millions of dollars]

FY 2001........................................................... 110.2
FY 2002...........................................................  86.6
FY 2003...........................................................  87.2
FY 2004...........................................................  86.0
FY 2005...........................................................  76.5
FY 2006...........................................................  76.3
FY 2007...........................................................  75.5
FY 2008...........................................................  79.4

    Question. Under current plans, will the Army meet the 1+1 barracks 
standard at Fort Bragg by 2008? What is the average annual funding 
needed to achieve this goal?
    Answer. There are sufficient funds in the plan to buy out Fort 
Bragg barracks by fiscal year (FY) 2008. However, this installation 
will be the most difficult location in the Army to achieve that goal.
    The average Military Construction, Army (MCA) funding for FY 2001 
through FY 2008 is $85 million per year.
    Because of environmental or safety constraints, new starts after 
the FY 2001 projects must be constructed on the site of existing 
facilities to be demolished. Finding sufficient swing space to house 
soldiers as buildings currently occupied by entire brigades are 
demolished will require intense management. Fort Bragg is developing a 
detailed plan to succesfully manage this complex effort to meet the FY 
2008 goal.
    Question. What is the maximum amount of barracks construction 
funding that could be placed in one fiscal year at Fort Bragg?
    Answer. The barracks construction placement at any one location is 
highly dependent on the individual characteristics of each project. 
However, because of the distance separation of these noncontiguous 
barracks projects, the amount budgeted is considered the maximum 
barracks construction placement possible in fiscal year 2001. Any 
additional construction work in this area could saturate the market and 
cause the use of less skilled tradesmen that create quality problems 
and lead to increased construction costs.

                  OHIO: DEFENSE SUPPLY CENTER COLUMBUS
           MILITARY ENTRANCE PROCESSING STATION ($1,832,000)

    Question. What is the payback period for this project, in avoided 
lease payments and utility cost as a result of this project?
    Answer. The Military Entrance Processing Station discount payback 
period is 3.2 years.

                    OREGON: UMATILLA DEPOT ACTIVITY
      AMMUNITION DEMILITARIZATION FACILITY, PHASE VI ($9,400,000)

    Question. What is the current status of the first six phases of 
work, which were funded in Fiscal Years 1995 through 2000?
    Answer. Umatilla Chemical Agent Disposal Facility (UMCDF) project 
was awarded in February 1997 to Raytheon Demilitarization Company as 
the Systems Contractor for the construction, equipment installation, 
systemization, operations and closure of the facility. The construction 
phase of this project is scheduled to be completed in first quarter of 
fiscal year 2001. To date, construction is 81 percent complete and 
$162.2 million of military construction funds has been obligated.
    Question. With no contingency allowance budgeted in the cost of 
this project, what assurances can be provided that projected operating 
schedules will be met?
    Answer. Operations should begin on schedule. Construction of the 
demilitarization facility is approximately 81 percent complete and on 
schedule for completion in the first quarter of fiscal year 2001. Based 
on the state of construction and the incorporation of lessons learned 
from the Johnston Atoll and Tooele facilities, no major changes are 
expected. Any changes should be minimal and be effectively managed with 
available military construction resources and should not impact 
construction completion.

                    PENNSYLVANIA: CARLISLE BARRACKS
                ACADEMIC RESEARCH FACILITY ($10,500,000)

    Question. The form 1391 indicates operations are currently being 
conducted in one primary facility and four support facilities. Why are 
14 facilities being demolished as a result of this project?
    Answer. The Military History Institute is housed in Upton Hall, a 
historic building, portions of three other historical buildings, and 
one non-historic building. The Army has identified fourteen other 
buildings, which are in worse condition, totaling 54,628 SF (5,075 
square meters) for demolition in support of the Army's one-for-one 
offset program.
    Question. This project includes demolition of 14 buildings totaling 
5,075 square meters. What is the total demolition cost included in the 
cost of this project?
    Answer. Total estimated cost for demolition of these 14 buildings 
is $491,000, which includes asbestos and lead-based paint abatement.
    Question. Please describe the buildings to be demolished as part of 
this project.
    Answer. The majority of these buildings are 60 years old, single 
story permanent facilities of brick construction. Missions housed in 
these buildings will be consolidated into other buildings on post. 
Specific information on each building to be demolished is as follows:
    1. Building no. 608 at 2,362 SF, brick facility built in 1940, 
administrative, general purpose.
    2. Building no. 609 at 2,572 SF, brick facility built in 1940, Army 
Education Center.
    3. Building no. 610 at 2,040 SF, brick facility built in 1940, 
administrative, general purpose.
    4. Building no. 611 at 182 SF, brick facility built in 1940, heat 
plant for Building no. 610.
    5. Building no. 631 at 351 SF, brick facility built in 1942, 
storage, general purpose.
    6. Building no. 632 at 18,450 SF, brick facility built in 1941, 
multiple current uses to include administrative, general purpose; 
storage, general purpose; Drug & Alcohol Abuse Center; Army Community 
Services Center; and Thrift Shop.
    7. Building no. 633 at 480 SF, brick facility built in 1940, 
storage, general purpose.
    8. Building no. 634 at 130 SF, brick facility built in 1944, plant 
utility building.
    9. Building no. 635 at 4,274 SF, brick facility built in 1940, 
administrative, general purpose.
    10. Building no. 636 at 480 SF, metal frame and siding facility 
built in 1934, storage, general purpose.
    11. Building no. 637 at 10,804 SF, brick facility built in 1940, 
Youth Center.
    12. Building no. 39 at 3,500 SF, concrete masonry facility built in 
1943, administrative, general purpose.
    13. Building no. 45 at 6,950 SF, brick facility built in 1940, 
administrative, general purpose and technical library.
    14. Building no. 317 at 2,053 SF, brick facility built in 1951, 
storage, general purpose.

                           TEXAS: FORT BLISS
                 RAILYARD INFRASTRUCTURE ($26,000,000)

    Question. Will there be any difficulty continuing to operate and 
meet current mobility requirements while this project is being 
executed?
    Answer. No additional difficulty will exist beyond that which is 
already there. This project is required because existing facilities 
cannot support rapid deployment within required window.
    Question. What are the plans for the six existing rail loading 
sites once this project is completed?
    Answer. To the maximum extent possible, track from the current 
sites will be used for construction of the new complex, and unusable 
track will be salvaged to offset construction cost. Of the six sites, 
one is not repairable and continued use of the other five pose serious 
safety and control.

                            TEXAS: FORT HOOD
      MULTI-PURPOSE DIGITAL TRAINING RANGE, PHASE I ($16,000,000)

    Question. Why is this project divided into two phases?
    Answer. The project was inserted into the Military Construction 
program late in the budget development cycle and funding was programmed 
on expected first year execution. Full authorization is requested to 
allow contract award for the entire project with the balance of project 
funding requested in Fiscal Year 2002.

                           WORLDWIDE VARIOUS
              UNSPECIFIED MINOR CONSTRUCTION ($15,000,000)

    Question. Provide for the record a ten-year history of amounts that 
have been requested and appropriated for unspecified minor 
construction.
    Answer. Information follows:

------------------------------------------------------------------------
               Fiscal year                 Army request    Appropriated
------------------------------------------------------------------------
1991....................................      $7,603,000      $8,603,000
1992....................................      11,000,000      11,000,000
1993....................................       3,800,000       5,500,000
1994....................................      12,000,000      12,000,000
1995....................................      12,000,000      12,000,000
1996....................................       9,000,000       9,000,000
1997....................................       5,000,000       5,000,000
1998....................................       6,000,000       7,400,000
1999....................................      10,000,000      12,500,000
2000....................................       9,500,000      14,600,000
------------------------------------------------------------------------

                           WORLDWIDE VARIOUS
                   PLANNING AND DESIGN ($72,106,000)

    Question. Will this funding level meet the known requirements for 
the fiscal year 2001 program, including the necessary work on projects 
programmed for fiscal years 2002 and 2003?
    Answer. Yes, funding is adequate to meet all our known 
requirements.

                           WORLDWIDE VARIOUS
                  HOST NATIONAL SUPPORT ($22,600,000)

    Question. Provide for the record a table that will show the 
expected distribution of this amount among the three efforts--criteria 
package preparation, design surveillance, and construction 
surveillance--and that will also show the expected distribution by 
country.
    Answer. The proposed distribution of host nation support funds is--

                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                        Japan     Korea    Okinawa   Germany    NATO      Total
----------------------------------------------------------------------------------------------------------------
Criteria Package Preparation........................     9,000       120       575         0   \1\ 300     9,995
Design Surveillance.................................     4,200       120       550       400   \2\ 150     5,420
Construction Surveillance...........................     4,050     1,660       325       800   \2\ 100     6,935
Recoupment Activities...............................         0         0         0         0   \3\ 250       250
                                                     -----------------------------------------------------------
Total...............................................    17,250     1,900     1,450     1,200       800    22,600
----------------------------------------------------------------------------------------------------------------
\1\ Funds are for the development of ``Capability Packages'' for all US Forces in Europe Approximately 80% of
  the funds would be earmarked for US Army Europe in Germany and Italy.
\2\ Design and construction surveillance for NATO Minor and Major projects for US Army Europe in Germany and
  Italy and a small portion for other Services.
\3\ Country-specific amounts cannot be identified at this time although the majority of work involves projects
  previously pre-financed in Germany. Other recoupment will be made for projects in Italy, the United Kingdom,
  and Turkey.


                                BARRACKS

    Question. Provide for the record a chart that will show the Army's 
barracks construction program at the time the ``one plus one'' standard 
was approved, and the current program through completion, broken out by 
locations in the U.S., in Germany, and in Korea.
    Answer. The DoD 1+1 Standard was approved in 1995 and was first 
reflected in the Army's fiscal year (FY) 1996 budget.
    In the chart below, the 1996 Plan is expressed in constant 1996 
dollars, while the FY 2001 Plan is expressed in program year inflated 
dollars. In Europe, with numerous closures and the return of facilities 
to the Host Nation, the 1996 original plan envisioned residual value 
payment-in-kind resources as the principal fund source. The following 
chart compares the barracks program as it was envisioned in the 
beginning and as it is in the current budget request.

                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                       FY 1996 buyout plan--           FY 2001 buyout plan--
                                                 ---------------------------------------------------------------
                                                                                                       Total
                                                       Years           Total        Buyout year      estimated
                                                                  estimated cost                  cost (FY01-08)
----------------------------------------------------------------------------------------------------------------
                                                  United States

MCA.............................................              18           $4.50            2008           $3.26
OMA.............................................  ..............            0.54  ..............            0.26
                                                                 ----------------                ---------------
      Total.....................................  ..............            5.04  ..............            3.52
                                                                 ================                ===============

                                                      Korea

MCA.............................................              25           $0.75            2008           $1.05
OMA.............................................  ..............            0.45  ..............            0.22
HN..............................................  ..............            0.55  ..............            0.05
                                                                 ----------------                ---------------
      Total.....................................  ..............            1.75  ..............            1.32
                                                                 ================                ===============

                                                     Europe

MCA.............................................              NA             PIK            2008           $0.60
OMA.............................................  ..............  ..............  ..............            0.37
                                                                 ----------------                ---------------
      Total.....................................  ..............  ..............  ..............            0.97
----------------------------------------------------------------------------------------------------------------

                        FAMILY HOUSING INVENTORY

    Question. Provide for the record a chart that will show the average 
number of family housing unites supported for fiscal years 1998, 1999, 
and 2000, and those expected to be supported in fiscal year 2001, 
broken out into government owned (U.S. and foreign), leased (U.S. and 
foreign), and privatized under Public--Private Ventures.
    Answer.

                 AVERAGE NUMBER OF FAMILY HOUSING UNITS
------------------------------------------------------------------------
                                             Fiscal year--
                             -------------------------------------------
                                 1998       1999       2000       2001
------------------------------------------------------------------------
Govt owned..................    118,361    115,526    111,125    100,974
    US......................     90,642     88,875     85,449      76,20
    Foreign.................     27,719     26,651     25,676     24,954
Leased......................     13,565     13,616     13,620     13,581
    US......................      4,200      4,304      4,319      4,319
    Foreign.................      9,365      9,312      9,301      9,262
Privatized\1\...............          0          0      1,823     13,896
------------------------------------------------------------------------
\1\ ``Privatized'' reflects total number of units privatized, units may
  have been privatized for less than full fiscal year.

                                  NATO
                 PRECAUTIONARY PREFINANCING STATEMENTS

    Question. Submit for the record a copy of the precautionary 
prefinancing statements that have been submitted to the NATO 
infrastructure committees for each European project for which funds 
were appropriated for fiscal year 1999, and for each such project 
requested for fiscal year 2000.
    Answer. No pre-financing statements were submitted for any of the 
fiscal year 1999 or fiscal year 2000 projects.
    Question. Provide an explanation for any project for which 
statements have not been submitted.
    Answer. It was determined that none of the projects were eligible 
for NATO Infrastructure funding now or in the foreseeable future.
    Question. Provide an explanation for any project for which 
statements have not been submitted.
    Answer. No pre-financing statements were submitted for any of the 
fiscal year 1999 or fiscal year 2000 projects. It was determined that 
none of the projects were eligible for NATO Infrastructure funding now 
or in the foreseeable future.

              PREVIOUSLY AUTHORIZED AND APPROPRIATED FUNDS

    Question. For the record provide a list of all previously 
authorized and appropriated housing projects (both new construction and 
construction improvements) that the Army has not executed due to the 
pending approval of housing privatization projects. This list should 
include the location, fiscal year appropriated, account, dollar amount, 
and number of units.
    Answer. The Army has three such projects:

----------------------------------------------------------------------------------------------------------------
                                                                                             Amount    Number of
                   Location                             Appropriation            Account   (millions)    units
----------------------------------------------------------------------------------------------------------------
Fort Hood, TX................................  FY98..........................        AFHC       $18.8        130
Fort Meade, MD...............................  FY98..........................        AFHC         7.9         56
Fort Hood, TX................................  FY99..........................        AFHC        21.6        154
----------------------------------------------------------------------------------------------------------------

                FAMILY HOUSING CONSTRUCTION IMPROVEMENTS

    Question. Provide for the record a ten year history of amounts that 
have been requested and appropriated for post-acquisition construction 
of family housing.
    Answer.

                        [In millions of dollars]
------------------------------------------------------------------------
                                           Appropriation
                                             requested     Appropriated
------------------------------------------------------------------------
FY00....................................       \1\ 5.303          35.400
FY99....................................          28.629          48.479
FY98....................................          44.800          86.100
FY97....................................          33.750         105.350
FY96....................................          14.200          48.856
FY95....................................          49.760          49.760
FY94....................................          67.530          77.630
FY93....................................         143.660          92.600
FY92....................................          74.980          74.980
FY91....................................          44.100          40.100
------------------------------------------------------------------------
\1\ Appropriation request based on incremental funding.

                     BRAC ENVIRONMENTAL RESTORATION

    Question. What is the Army's current estimate of the annual funding 
requirement for BRAC environmental restoration beginning in fiscal year 
2002?
    Answer. The Army program for BRAC environmental restoration in the 
Future Year Defense Plan (FYDP) for fiscal years 2002-2005 totals $425 
million.
    Question. What is the Army's current estimate of the annual funding 
requirement for BRAC other than environmental restoration beginning in 
fiscal year 2002?
    Answer. The Army program for BRAC property caretaking and 
management in the Future Year Defense Plan (FYDP) for fiscal years 
2002-2005 totals $44 million.

                   HOUSING DEFICITS AND WAITING LISTS

    Question. What is your current worldwide family housing deficit?
    Answer. The Army's family housing deficit is 7,426.
    Question. What are your three largest deficits, and how large are 
they?
    Answer. The three largest deficit locations are: Fort Bragg, NC, 
1,650 units; Fort Campbell, KY, 982 units; and Fort Bliss, TX, 466 
units.
    Question. How many families are on waiting lists for government-
provided family housing, and what is the average waiting time?
    Answer. Historically, the Army has approximately 2,000 officer 
families and 18,000 enlisted families on waiting lists for government 
family housing. The average waiting time varies by location, depending 
on bedroom requirements. On the average, officer families wait no more 
than 10 months and enlisted families wait no more than 15 months for 
on-post family housing.

                       CHEMICAL DEMILITARIZATION

    Question. Why does the Department, once again, propose transferring 
the Chemical Demilitarization program from the Military Construction, 
Defense-wide account to the Military Construction, Army account? What 
difference does it make whether this program is funded under the Army 
or under Defense-wide?
    Answer. The Defense Reform Initiative developed the Chemical 
Demilitarization Program from the Office of the Secretary of Defense to 
the Department of the Army beginning in FY99. Although Congress 
authorized and appropriated funding for the Chemical Demilitarization 
program to the Department of Defense, the overall responsibility for 
the program remains with the Army and is included in this year's Army 
budget.
    From an execution standpoint, it should not make any difference 
where the funds are appropriated provided legislative authority is 
added to mix Military Construction, Defense and Army funds on a 
particular project where needed.
    Question. Has the Army's program been reduced to make room for the 
chemical demilitarization program, either this year or in the future?
    Answer. The Army's program has gone down but not to make room for 
the chemical demilitarization program. Current and future chemical 
demilitarization construction program requirements were fully funded at 
the time funding responsibility devolved from the Department of Defense 
to the Army. In addition, due to future uncertainties and past history 
of the program, additional funding was programmed in the out-years to 
cover unanticipated requirements. It is not anticipated that there will 
be any impact on the future Army program as a result of the chemical 
demilitarization program.
    Question. Submit for the record a chart, which will show 
unobligated balances available, by Fiscal Year and by location, and the 
maximum amount of construction that could be put in place at these 
locations through the end of fiscal year 2001. We would appreciate any 
comments you may wish to add.
    Answer. The following is a chart showing unobligated balances of 
military construction funds as of the end of February 2000.

                                               UNOBLIGATED BALANCE
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                             Fiscal year--
                                                     -----------------------------------------------------------
                                                        1996      1997      1998      1999      2000      Total
----------------------------------------------------------------------------------------------------------------
Anniston............................................       0.0       0.8       7.7       0.0       5.5      14.0
Umatilla............................................       0.0       0.0       0.1       0.0      20.6      20.7
Pine Bluff..........................................       0.0       0.1       0.0       0.0      15.2      15.3
Aberdeen............................................       0.0       0.0       0.0       0.5      10.6      11.1
Newport.............................................       0.0       0.0       0.0       0.2      12.5      12.7
----------------------------------------------------------------------------------------------------------------
Note: The above amounts do not include the depot support projects.

    The maximum amount of construction that could be put in place and 
cover long lead construction material, equipment, supplies, 
subcontracts and the Army Corps of Engineers contract oversight costs 
at these locations through the end of Fiscal Year 2001 is as follows:

                        [In millions of dollars]

        Site                                                      Amount
Anniston, Alabama................................................. 166.9
Umatilla, Oregon.................................................. 191.6
Pine Bluff, Arkansas.............................................. 151.4
Aberdeen, Maryland................................................ 125.7
Newport, Indiana.................................................. 101.8
Pueblo, Colorado \1\..............................................
Blue Grass, Kentucky \1\..........................................
---------------------------------------------------------------------------
\1\ On hold pending technology selection.

    Question. For the record, describe the ``Public Law 104-208 
baseline restrictions'' and how they are being addressed.
    Answer. Public Law 104-208 prohibited the obligation of funds for 
the construction of baseline incineration facilities at the Pueblo, 
Colorado, and Blue Grass, Kentucky, storage sites until 180 days after 
the Secretary of Defense submits a report on the effectiveness of each 
demonstrated alternative technology versus incineration for the 
destruction of assembled chemical munitions. That report was provided 
to Congress on October 1, 1999. Environmental impact statements and 
permitting activities are being initiated for Blue Grass and Pueblo in 
anticipation of a technology decision.
    Question. Please provide for the record a chart which will 
show the amounts (by location) and the timeline for the entire 
Military Construction cost of the Chemical Stockpile Disposal 
Program.
    Answer. The requested information is shown in the table 
below.

                                                                [In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Fiscal year--
                                                                  ---------------------------------------------------------------------------
                             Project                                 1999 &                                                                      Total
                                                                      prior       2000       2001       2002      2003      2004      2005
--------------------------------------------------------------------------------------------------------------------------------------------------------
PM-Chem Demil Training Facility..................................     16.1     ..........  ........  .........  ........  ........  ........      16.1
Tooele, UT Facility..............................................    186.2     ..........  ........  .........  ........  ........  ........     186.2
Depot Support....................................................     11.8     ..........  ........  .........  ........  ........  ........      11.8
Anniston, AL Facility............................................    159.9         7.0     ........  .........  ........  ........  ........     166.9
Depot Support....................................................     14.3     ..........  ........  .........  ........  ........  ........      14.3
Umatilla, OR Facility............................................    157.377      24.825        9.4  .........  ........  ........  ........     191.602
Depot Support....................................................     11.2     ..........  ........  .........  ........  ........  ........      11.2
Pine Bluff, AR Facility..........................................     58.0        49.8         43.6  .........  ........  ........  ........     151.4
Depot Support....................................................     10.0     ..........  ........  .........  ........  ........  ........      10.0
Pueblo, CO Facility..............................................  ..........  ..........      10.7     80.5        83.4    10.89   ........     185.49
Depot Support....................................................      6.3     ..........  ........  .........  ........  ........  ........       6.3
Blue Grass, KY \1\ Facility......................................  ..........  ..........  ........     17.4        74.4    86.14        9.9     187.84
Depot Support....................................................  ..........      2.0          8.5  .........  ........  ........  ........      10.5
Aberdeen, MD Facility............................................     26.5        53.5         45.7     51.75   ........  ........  ........     177.45
Depot Support....................................................      1.85    ..........  ........  .........  ........  ........  ........       1.85
Newport, IN Facility.............................................     11.5        35.9         54.4     78.0    ........  ........  ........     179.8
Depot Support....................................................      2.0     ..........  ........  .........  ........  ........  ........       2.0
Planning & Design................................................    114.5     ..........  ........  .........  ........  ........  ........     114.5
Non-Stockpile MAPs Facility......................................  ..........  ..........       3.1  .........  ........  ........  ........       3.1
                                                                  --------------------------------------------------------------------------------------
      Total......................................................    787.527     173.025      175.4    227.65      157.8    97.03        9.9   1,628.332
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Funding requirement may change pending assessment of Assembled Chemical Weapon Assessment Program in consonance with Public Law 104-208.

    Question. What is the timetable and what are the milestones 
for completion of the chemical demilitarization program?
    Answer. Following is the Chemical Stockpile Disposal 
Program schedule and major milestones.

----------------------------------------------------------------------------------------------------------------
                                            Start of                Start of
              Location                    construction          systemization\4\              Operations
----------------------------------------------------------------------------------------------------------------
Johnston Atoll \1\..................  ....................  .......................  3QFY90-1QFY01.
Tooele, UT..........................  ....................  .......................  4QFY96-4QFY03.
Anniston, AL........................  3QFY97..............  2QFY00.................  2QFY02-1QFY06.
Umatilla, OR........................  3QFY97..............  3QFY00.................  2QFY02-3QFY05.
Pine Bluff, AR......................  2QFY99..............  4QFY01.................  4QFY03-1QFY07.
Pueblo, CO \2\......................  On Hold.............  .......................  ...........................
Blue Grass, KY \2\..................  On Hold.............  .......................  ...........................
Aberdeen, MD \3\....................  3QFY00..............  3QFY02.................  2QFY05-3QFY06.
Newport, IN \3\.....................  3QFY00..............  4QFY02.................  3QFY04-1QFY05.
----------------------------------------------------------------------------------------------------------------
\1\ Full-scale operations began second quarter FY94.
\2\ Schedule on-hold pending, technology selection.
\3\ Schedule represents employment of neutralization-based technology. For Aberdeen and Newport, construction is
  defined as the date on which footers are poured for the agent destruction facility.
\4\ Some systemization activities are started in the construction phase.

    Question. Provide for the record a chart showing, by location, the 
facilities and operational costs for the chemical demilitarization 
program.
    Answer. The requested information is shown in the table below.

                              CURRENT YEAR
                        [In millions of dollars]
------------------------------------------------------------------------
           Location            Facilities \1\  Operations \2\    Total
------------------------------------------------------------------------
Johnston Atoll...............  ..............      1,472         1,472
Tooele, UT...................        198           1,317         1,515
Anniston, AL.................        181.2         1,034.8       1,216
Umatilla, OR.................        202.8           989.2       1,192
Pine Bluff, AR...............        161.4           870.6       1,032
Pueblo, CO...................        191.8           862.2       1,054
Blue Grass, KY...............        198.3           710.7         909
Aberdeen, MD.................        179.3           462.7         642
Newport, IN..................        181.8           454.2         636
CAMDS, UT....................  ..............        448           448
PMCD Training Facility, MD...         16.1           119.9         136
Programmatics................  ..............      1,605         1,605
CSEP:
    (On-Post)................  ..............        496           496
    (Off-Post)...............  ..............        741           741
MILCON P&D...................        114.5     ..............      114.5
                              ------------------------------------------
      Total..................      1,625.2        11,583.3      13,208.5
------------------------------------------------------------------------
\1\ Facilities costs include the cost of designing and constructing and
  equipping using Military Construction Funds.
\2\ Operational costs include all costs to test and operate each
  facility, training and all other support costs related to the
  operations of each facility, to include environmental requirements and
  Chemical Stockpile Emergency Preparedness Program costs.

    Question. What is the timetable for the funding of all construction 
phases, for the obligation of funds, and for the construction and 
operation of the chemical demilitarization facilities at the locations 
for which military construction funds are requested--Anniston, Alabama; 
Pine Bluff, Arkansas; Pueblo, Colorado; Newport, Indiana; Blue Grass, 
Kentucky; Aberdeen, Maryland; and Umatilla, Oregon?
    Answer. The spreadsheet provided in response to Question 82 
identifies the funding requirement by fiscal year and site. The 
obligation of funds is expected to be accomplished as follows:
    Anniston: No fiscal year 2001 funds were requested or programmed.
    Umatilla: Fiscal year 2001 funds will be applied to the on-going 
contract and are earmarked for completing construction changes, 
engineering during construction, supervision and administration, and 
accomplishment of as-built drawings and will be obligated as required 
prior to construction completion.
    Pine Bluff: Fiscal year 2001 funds will be applied to the on-going 
contract and obligated at that time. The majority of the funds is 
expected to be obligation in the first quarter of the fiscal year. The 
remainder is planned to be obligated throughout the fiscal year to fund 
construction changes, engineering during construction, and supervision 
and administration.
    Aberdeen: Fiscal year 2001 funds will be applied to the on-going 
contract and obligated at that time. The majority of the funds is 
expected will be obligated in the first quarter of the fiscal year. The 
remainder is planned to be obligated throughout the fiscal year to fund 
construction changes, engineering during construction, and supervision 
and administration.
    Newport: Fiscal year 2001 funds will be applied to the on-going 
contract and obligated at that time. The majority of the funds is 
expected to be obligated in the first quarter of the fiscal year. The 
remainder of funds is planned to be obligated throughout the fiscal 
year to fund construction changes, engineering during construction, and 
supervision and administration.
    Pueblo: Fiscal year 2001 funds will be obligated when the 
construction contract is awarded.
    Blue Grass: Fiscal year 2001 funds will be obligated when the 
construction contract is awarded.
    The construction and operation timetable of the demilitarization 
facilities follows:

------------------------------------------------------------------------
                                                Operation status
                   Construction status ---------------------------------
                                             Start             End
------------------------------------------------------------------------
Anniston........  Under construction,   2 Q FY 02......  1 Q FY 06
                   77% complete.
Umatilla........  Under construction,   2 Q FY 02......  3 Q FY 05
                   81% complete.
Pine Bluff......  Under construction,   4 Q FY 03......  1 Q FY 07
                   15% complete.
Aberdeen........  Contract awarded 10/  2 Q FR 05......  3 Q FY 06
                   98--construction
                   begins 3 Q FY 00.
Newport.........  Contract awarded 2/   3 Q FY 04......  1 Q FY 05
                   99--construction
                   begins 3 Q FY 00.
Pueblo..........  Treatment method             Schedule on hold.\1\
                   under study.
Blue Grass......  Treatment method             Schedule on hold.\1\
                   under study.
------------------------------------------------------------------------
\1\ Schedules on hold pending technology selection.

    Question. What is the total design life of each of these 
demilitarization facilities?
    Answer. Plant design is not driven by ``life'' criteria but rather 
by environmental and safety requirements to achieve maximum protection 
as required by law. This equates to a design life of five years of 
continuous operation. With prudent maintenance and equipment 
replacement, the facility's life can be extended significantly. 
However, the expected operational life of all plants currently under 
construction or planned is less than five years.
    Question. Are the sums requested equal to the amount of 
construction that can be put into place during fiscal year 2001?
    Answer. Yes, for Umatilla, Aberdeen, Pine Bluff and Newport, the 
sums requested in fiscal year 2001 when added to the funds already 
appropriated total the cumulative amount of construction that can be 
put into place through fiscal year 2001. For Pueblo and Blue Grass, the 
amounts that can be placed during fiscal year 2001 will be dependent on 
the selection of the technology to be used at the respective site.
    Question. What is the current annual cost of maintaining the 
stockpile?
    Answer. The annual cost of maintaining the stockpile is $111.2 
million for fiscal year 2000.
    Question. What is the total ``sunk cost'' for the chemical 
demilitarization program through the end of fiscal year 2000?
    Answer. The Army projects that approximately $7.5 billion will be 
obligated for the Chemical Demilitarization Program by the end of 
Fiscal Year 2000. This figure includes $7.0 billion for the Chemical 
Stockpile Disposal Program and $0.5 billion for the Non-Stockpile 
Chemical Materiel Program.
    Question. No funds are requested for chemical demilitarization 
planning and design costs, which were funded in the past under the 
``Defense-wide'' account. What is the current unobligated balance of 
previously appropriated funds, by fiscal year, and what is the plan for 
obligating these funds?
    Answer. A total of $15.075 million in planning and design funds 
remains unobligated. This amount includes $1.75 million in Fiscal Year 
1996 funds, $4.124 million in Fiscal Year 1997 funds, and $9.2 million 
in Fiscal Year 1998 funds. These funds will be used to accomplish 
designs required for the Pueblo and Blue Grass construction 
solicitations The amounts of funds required are indeterminate since 
they are dependent on the technology selected and on the method of 
contracting to be used. Once these facilities are awarded for 
construction, all remaining planning and design funds will be returned 
to the Office of Secretary of Defense for reprogramming as required.

                      ARMY NATIONAL GUARD PROGRAM

    Question. Traditionally the Army National Guard has received many 
Congressional adds. Yet, the funding level has remained significantly 
below the requirements. Is the budget request for fiscal year 2001 
sufficient to meet the Army National Guard's needs? If not, why is the 
Army relying on Congress to plus up the Army National Guard's budget?
    Answer. No, the budget request does not meet the Army National 
Guard's needs. Their validated annual recurring requirements for 2001 
are $575 million. However, the budget does not meet the needs of any of 
the components for revitalization. After funding the highest 
construction priorities (strategic mobility, whole barracks renewal, 
and chemical demilitarization), there was not enough money left to fund 
revitalization at a higher level than 5% for the Army National Guard, 
10% for the active component, and 41% for the Army Reserve.
    Question. In the Forms 1391 for the Organization Maintenance Shops, 
the Army Division Redesign Study (ADRS) is cited as part of the reason 
for the requirement. Please explain what the ADRS is.
    Answer. The Army Division Redesign Study is a three phase Force 
Structure initiative to convert twelve Army National Guard combat 
brigades and slice elements from two combat divisions to required 
combat support/combat service support structure to meet wartime and 
domestic support requirements. This involves the conversion of 
approximately 48,600 ARNG positions from low priority combat structure 
to required combat support/combat service support structure.

           NEW HAMPSHIRE: ROCHESTER U.S. ARMY RESERVE CENTER
                      LAND ACQUISITION ($980,000)

    Question. According to the Form 1391, the facilities this land 
acquisition will help replace are inadequate and overcrowded. Why is 
the construction programmed for fiscal year 2003 rather than fiscal 
year 2002?
    Answer. Purchase of this land, which generally takes 9-12 months, 
in FY 2001 allows the project design and projected construction costs 
to be contained within budget. Therefore, the USAR has started a site 
search in order to secure an option to purchase when this project is 
appropriated. This will allow an accurate budget submission. Department 
of Defense Instruction (DoDI) 1225.8 requires projects submitted in the 
biennial budget to be at 35% design when the budget is submitted. 
Therefore, land must be purchased in FY 2001 to accomplish all the 
topographic and geotechnical investigations of the building site that 
must be completed prior to the training building and supporting 
facility design. DoDi 1225.8 also requires that related costs necessary 
to meet the functional criteria of a facility, including . . . '' site 
plans, . . . existing utility surveys, capacities, and sizes,'' be 
accomplished as part of the 35% design. The design process for any 
project begins at least two years in advance of the appropriation for 
the project. The design must start soon after land acquisition, or 
after securing an option to purchase, to meet the scheduled biennial 
budget submission. Without land, a reasonably accurate project cost is 
very difficult to obtain. Delaying the land acquisition until after FY 
2001 impedes the timely start of the design process and eventually has 
an adverse impact on the biennial budget submission and project costs.

    [Clerk's note.--End of questions for the record submitted 
by Chairman Hobson.]
                                           Thursday, March 2, 2000.

                         DEPARTMENT OF THE NAVY

                               WITNESSES

ROBERT B. PIRIE, JR., ASSISTANT SECRETARY OF THE NAVY
REAR ADMIRAL LOUIS SMITH, FACILITIES ENGINEERING COMMAND
GENERAL HAROLD MASHBURN, ASSISTANT DEPUTY CHIEF'S STAFF, INSTALLATION & 
    FACILITIES
REAR ADMIRAL JOHN COTTON, DEPUTY CHIEF, NAVY RESERVE

                       STATEMENT OF THE CHAIRMAN

    Mr. Hobson. The hearing will come to order.
    Our hearing this morning is going to focus on the Navy 
military construction program including family housing, base 
realignment and closure and reserves.
    Our witness today is Mr. Robert Pirie, Assistant Secretary 
of the Navy for Installations and Environment.
    I have been reading some testimony that you and I need to 
talk about, in a friendly way. Do not worry.
    Mr. Pirie. Oh, yes, sir.
    Mr. Hobson. I did go back and read some of that.
    Secretary Pirie, it is a pleasure to have you appear before 
the subcommittee again this year, and we look forward to your 
testimony and a good hearing on the construction program for 
the Navy and the Marine Corps.
    Mr. Pirie. Thank you, Mr. Chairman.
    Mr. Hobson. John, do you have any opening statement that 
you would like to give?
    Mr. Olver. I do not.
    Mr. Hobson. Okay.
    Mr. Pirie. Mr. Chairman, with me this morning, this phalanx 
of witnesses that I have brought along is Rear Admiral Lou 
Smith, who is the----
    Mr. Hobson. He and I spent an afternoon together.
    Mr. Pirie. He's with the Naval Facilities Engineering 
Command. And General Hal Mashburn, from the Assistant Deputy 
Chief's Staff, Installations and Facilities; and Rear Admiral 
John Cotton is Deputy Chief of the Navy Reserves.
    These guys came in, sir, for your questions.
    With your permission, sir, I will submit my full statement 
for the record, and just have a few high points to read, with 
your permission?
    Mr. Hobson. Sure.

            STATEMENT OF THE HONORABLE ROBERT B. PIRIE, JR.

    Mr. Pirie. I think the 2001 program we are submitting to 
you is the strongest facilities budget submitted to the 
Congress during my six-year tenure in this position.
    There is a lot to applaud in the area of housing, 
particularly the Secretary of Defense proposes to reduce out-
of-pocket expenses, housing expenses, for members who own or 
rent their homes in the community. An increase in basic 
allowance for housing would cut out-of-pocket expenses from 
about 19 percent, where they are running now on the average, to 
15 percent in 2001. And then we propose to eliminate them by 
2005. That will make housing more affordable for the nearly 
three-quarters of the Navy and Marine Corps families, and many 
single sailors and marines who live in private sector housing.
    We have also renewed our commitment to family housing 
construction. We are asking you to approve 6 Navy and 2 Marine 
Corps construction projects for the next fiscal year. These 
projects would build a total of 861 homes, all of them in the 
United States, none of them public/private ventures. In keeping 
with our philosophy of fixing what we own, nearly all of these 
replace deteriorating homes that we still need, but which are 
beyond economical repair guidelines.
    We are proceeding with our housing privatization efforts. 
There are 7 pilot projects previously authorized and 
appropriated in various stages of the acquisition process. Any 
necessary funding will come from prior year appropriations. We 
are not asking for any new PPV funds with this budget.
    I believe we are approaching success here. Later this year 
I expect to provide the Congress with the required notification 
of our intent to award contracts for most of these PPV 
projects. Because we have been slower then I had hoped, we will 
not have all of the data we would like about how PPVs work. 
Nevertheless, I continue to believe they are an important way 
that we can get more and better housing sooner for our people. 
I would ask your support, Mr. Chairman, for extending PPV 
authority for another five years.
    We are also exploring an initiative to dramatically improve 
housing for our most junior sailors assigned to ships. When 
deployed away from home port, all sailors must endure bunk 
beds, sharing cramped spaces with dozens of shipmates and 
living out of a small locker. When they return to home port, 
their peers, who are married or assigned to aviation squadrons 
or submarines, get housing ashore. Shipboard E-1 through E-4s, 
however, must continue to live aboard ship.
    A proposed new ``Home Port Ashore Program'' would provide 
these sailors housing, either in a BEQ or in the community when 
the ship is in home port. In order to create space within the 
housing budget for the rapid buildup of BQ spaces that would be 
required for this initiative, we would build new spaces to the 
``2 plus 0'' configuration, rather than the ``1 plus 1'' that 
is the current DOD standard. Ultimately we intend to return to 
the ``1 plus 1'' standard, but in the meantime, we will have 
provided decent places for our young bachelor sailors in home 
port. As we work out the details of implementing this 
initiative, we will keep the committee informed.
    I am very proud of our efforts to clean up closed bases and 
get the property into the hands of local communities. Through 
four rounds of BRAC we had a total of 178 closures and 
realignments to accomplish. Only two remain. Both will be 
completed next year. Cleanup and property disposal are now the 
major focus of our activity.
    With respect to BRAC funding, the apparent large increase 
in funding requested in 2001 requires some explanation. Last 
year's advance appropriation scheme, which met an untimely end, 
shifted fiscal 2000 funding into 2001 based on the expected 
rate of outlays. This occurred in the military construction, 
family housing construction and BRAC accounts. Congress 
rejected the idea of advanced appropriation, but made us whole 
in fiscal 2000 by restoring funds to the military construction 
and family housing accounts.
    However, BRAC funding was not restored, and this left our 
fiscal 2000 BRAC program severely short. We are doing our best 
with communities to make do with the much smaller than planned 
fiscal 2000 funds. The fiscal 2001 funds are critical to 
continue the work begun this year, and get us and the community 
redevelopment plans back on track.
    Mr. Hobson. How much is that?
    Mr. Pirie. We are asking for what, $477,000,000.
    Cleanup delays will inevitably stretch our property 
disposal schedules and be a major setback to community 
redevelopment plans.
    We have accomplished two Section 334 early transfers of 
BRAC property. The former Fleet Industrial & Supply Center, 
Oakland, California transferred to the Port of Oakland in June. 
This transfer is unique in that with funding from us, the port 
will do the cleanup as part of their redevelopment, saving both 
time and money for all parties.
    We also transferred the former Naval Air Station, Memphis, 
Tennessee to the Millington Municipal Airport Authority. In 
this case we will continue to do the cleanup, but also in 
concert with the community's redevelopment effort.
    While we have avoided including a major irritant this year 
such as advance funding for MILCON and family housing, there 
are aspects of our budget that may be problematic. One such 
item is the lack of contingency funding for military and family 
housing projects. We will certainly do our best to manage our 
projects carefully, but inevitable fact-of-life changes will 
confront us with a need to down-scope projects or reprogram for 
increased costs. I do not propose to compromise on quality.
    Another issue that we are working, but have not arrived at 
a complete solution, is that of historic and flag officer 
housing. These historic buildings represent a part of our 
national heritage, of which the Navy Department is the steward. 
We need to preserve these places for the benefit of present and 
future generations of Americans. As a general rule, these 
places are difficult and expensive to maintain. There is a real 
question in equity whether the family housing account should 
bear this burden when we have shortages elsewhere.
    The idea of creating a separate account has proved very 
unpopular, so I have created a working group to seek a long-
term solution, and I will keep you informed of our progress as 
we go along, and ideas are welcome at any time.
    Mr. Chairman, it has been a pleasure to work with this 
committee and members of the committee over the course of the 
last six years, and I very much am grateful for all the 
consideration that you have shown to the Navy and to me 
personally. I look forward to our continued dialogue.
    [The prepared statement of Hon. Robert B. Pirie, Jr. 
follows:]



    Mr. Hobson. Thank you, and I appreciate the conciseness of 
your comments, because I know members have a lot of questions 
that they would like to ask. I have a number of them here. Some 
of them you touched on, but I am going to start with the 
members that are here, and there will be some other members 
joining us, because some have planes to get.
    John, do you have any questions you want to start with?
    Mr. Olver. I am going to follow your lead on that, Mr. 
Chairman, and let my members, who may have indeed have--I am 
here, so I would them have their comments first.
    Mr. Hobson. Who has an airplane to catch? Sam, do you have 
an airplane to get to?
    Mr. Farr. I have another approps. meeting at----
    Mr. Hobson. So do I.
    Mr. Farr. But I do have some questions.
    Mr. Hobson. Go ahead. Or would Chet be----
    Mr. Edwards. No, I am willing to----
    Mr. Farr. Thank you very much, and I appreciate my 
colleagues letting me ask these questions. I have three 
questions.

              EPA AND CALIFORNIA OFFICE OF TOXIC SUBSTANCE

    The first is that at Tustin Naval Base, you have entered in 
a Memorandum of Understanding (MOU) with the Environmental 
Protection Agency (EPA) and the California Office of Toxic 
Substance that I am really worried about. I think that this is 
going to be the boiler-plate MOU for all the services, for all 
the cleanup in California, and if other states learn about it, 
it will become their standard of operation. It is very serious 
because you allow the California State Office of Toxic 
Substance to determine the quality of the cleanup and hold you 
liable for it forever. You know, on certain cleanup there is a 
strict liability, certainly, on unexploded ordinances. As I 
understand, Tustin is not that dirty a base, so the MOU was 
kind of easy to draft, but the language of the MOU--because I 
am looking at how the same office is applying its standards to 
the Army at Fort Ord. I just need you to realize that the 
California Office of Toxic Substance, which is probably going 
to be the strongest regulator in the United States, stronger 
than EPA, has essentially got a standard that it is going to 
have to be 100 percent clean. And what that means is that when 
the land is transferred, if the land were going to be developed 
for housing and it has ever had any contaminants on it, I mean 
we would never get to 100 percent. And you financially are 
liable and essentially leave the land fallow because you cannot 
clean it up to that standard.
    So would you take a re-look at that, and realize that the--
and let us chat about it, because I think that that MOU is 
going to be boiler-plate for every----
    Mr. Pirie. I will very definitely look at that.

                       NAVAL POST-GRADUATE SCHOOL

    Mr. Farr. Secondly I would like to just--appreciate that. 
You know, the crown jewel, I think, of the Navy is your Naval 
Postgraduate Schools. No other service has anything like it. 
The chairman has visited.
    Mr. Hobson. Certainly, the facility----
    Mr. Farr. And some of my colleagues here have visited. 
What----
    Mr. Hobson. Historic structures I am afraid.
    Mr. Farr. One of the things that we have been trying to 
do--and I know Congressman Edwards has been doing this in his 
community--is entering new contracts with the local communities 
on base operations. The Army has done it very effectively with 
the DLI in Monterey, but the Navy has been a little more 
reluctant, although it has a lot less real estate to govern. 
And it, frankly, gets down to an issue which I know we are all 
concerned about, is fire-fighting. The federal standard for 
fire-fighting is you must have four men on a truck. The 
California standard, which meets the same OSHA guidelines, is 
that you have to have four people to enter a building. They do 
not care how you arrive there. The federal law requires that 
you arrive on the same vehicle. The state law requires that you 
all--they do not care how you get there, but you all have to 
enter the same--four in a building.
    So what--this thing is broken down in Monterey, and I would 
like you, Mr. Secretary, to comment and tell me if it is 
possible to get a Navy directive for a more aggressive policy 
on public/private partnerships to reduce basic structure cost.
    Mr. Pirie. Well, we are putting a lot of pressure on that 
in response to the fact that we really do need to economize, 
and we really do need to bring in the private sector, who--
    Mr. Farr. Not just the private sector, the public sector.
    Mr. Pirie. Well, to bring in non-Department of the Navy 
organizations. We are inhibited in some cases by law and 
regulation. In the case of fire-fighters we have a prohibition 
contracting them out. But in general, we are quite open to----
    Mr. Farr. Why do you have that and the Army does not have 
that?
    Mr. Hobson. Is that a statutory thing?
    Mr. Pirie. I believe so. Federal fire-fighters----
    Admiral Smith. Fire-fighters and security are said to be 
inherently governmental and----
    Mr. Farr. Well, the DLI, the fire-fighting is done by the 
municipality, and at the Naval Post-Graduate School you have 23 
members on a fire station that is smaller than this building, 
full time. But I am truly concerned about the cost of base ops 
You are going through a public/private infrastructure review 
out there, and I appreciate that.
    Lastly, let me just--I just want you to know my concern is 
that we move forward on that.
    The third issue is one that is dear to the chairman here, 
and that is the debate we are facing on school modernization. 
And on the civilian side this is what Congress is talking 
about, getting money to upgrade schools. Yet we forget that we 
also have a lot of military campuses, and some of the 
instructional buildings at the DLI--excuse me--at the Naval 
Postgraduate School are 46 years old and have deferred 
maintenance. The Naval Postgraduate School has been advised by 
the N7 facilities director, that it makes more sense to 
demolish several campus buildings than to invest in 
rehabilitation. One of the recommendations is to construct new 
instructional buildings, which incorporate the state-of-the-art 
in instructional methods. These classrooms would be sized to 
different capacities to adapt to the various sized classes and 
teaching techniques currently used at the school. The 
laboratory facilities, which are designed for more computerized 
applications, are in, a 46-year-old building did not even have 
computers. Nobody invented them yet. There is a cost savings to 
the Navy. We think it is about threefold. There will be lower 
operational cost. It will be designed around current seismic 
requirements, making retro-fitting of the current facilities 
unnecessary. Sizing of the buildings would be better controlled 
by a newer facility than renovating the old one. As the school 
moves forward with this plan, I want to be able to count on 
you--hope that I can count on you for your support.
    Mr. Pirie. We have in fact put in a significant amount of 
construction in modern spaces in the recent past, and I agree 
that the school is a gem, that it is unique and a national 
asset, and that we need to move forward with modern facilities 
everywhere.
    Mr. Farr. Well, the fact of the matter is you did not put 
in--this committee raised that level, because the chairman went 
out and looked at it, and--but the request did not come on your 
priority list.
    Mr. Pirie. Having said that, we face austerity everywhere 
in the military construction projects. We have piers, runways, 
hangars that are deficient and need to be upgraded, and it is a 
matter of priorities, and this is an internal dialogue in the 
Navy that occurs every year. The committee help in this matter 
has been very, very much appreciated. We cannot do everything 
simultaneously.
    Mr. Hobson. Could have taken some of that money from some 
of those houses and put it over there in Hawaii and a couple 
other places. Just a side comment.
    Mr. Farr. Well, we can count on your support.
    Mr. Pirie. Thanks. [Laughter.]
    Mr. Farr. And I want to thank you. [Laughter.]
    Mr. Pirie. You certainly will not have me saying that this 
is a bad idea.
    Mr. Farr. Getting back to that first question, that MOU--
Mr. Chairman, I think we ought to look at that. This is the 
same issue that you are facing with all the historic buildings, 
only this is progressive rather than retroactive.
    Mr. Pirie. I am not aware of this particular one, but I 
would have to strongly agree with you. We cannot set 
precedents, particularly with the Department of Toxic Substance 
Control, which is very difficult to deal with. And we are doing 
it under a different standard here. We need to do CERCLA 
cleanups where we need to do cleanups, and not have state 
regulators arbitrating every step of the process.
    Mr. Farr. But you cannot stop that, because the land ends 
up in civilian control and has to be regulated by civilian law. 
I think that what we need here is to get down with the civilian 
regulators at the state level--and California is not a bad 
place to start, because it has got a lot of it--and figure out 
what is a standard that we can all agree to, and have some 
boiler-plate covenants, which I think they are going to be, but 
it ought to be something that is not negotiated at each base, 
because this first one is the first one out of the box. And I 
know the Office of Toxic Substance is going to use that for 
every single other cleanup, and say, ``This is what we want.'' 
And you have already signed off on it, and they will say, 
``Well, if the Navy can agree to this, then the Army can agree, 
and the Air Force can agree and everyone else can agree.'' So 
we have got a lot of work to do because we have never had the 
ability for taking unexploded ordinances and more serious 
cleanups and finding out what is mutually agreed upon, 
including the local government, what they can live with, 
because these covenants can--if we do not get there, I can just 
see us building big fences around all of these closed military 
bases.
    Mr. Hobson. If I might, we might have to have a meeting, 
just a private meeting to discuss this, because I do not know 
how this generates and where it comes up through the chain. If 
it begins to set a pattern, you all need to go back and begin 
to document that this is not a pattern, that it was particular 
to this site, so that--and that everybody recognizes that it is 
peculiar to that site at that time, and that may not be your 
position later. So you get your lawyers and you all document 
that back, and if you look at what you have agreed to, to make 
sure that it does not come out that way. So you start building 
your case now, not waiting till somebody challenges you later 
on the next one, and then you have this--but now you look at 
it.
    Mr. Pirie. Well, there is that. We resisted them strongly 
in other locations in California, Nevada and Hunters Point and 
elsewhere, and we are engaged in----
    Admiral Smith. If I could, sir, the former Marine Corps 
Station, Tustin, my folks in California--my branch offices are 
out there, who now in fact are doing those negotiations with 
our friends in the California Department of Toxic Substance 
Control, and I was briefed on that a couple of weeks ago, and 
that was seen still then as a proposal. It had not been signed 
off. And we had kind of a lengthy discussion on the West Coast 
about what we call the ``ratchet effect'' on some of these 
regulatory matters. So there is always a lot of sensitivity in 
that everything it seems that happens in our dealing with those 
folks out there--and they are trying to do the right thing, 
just as we are--everything we do is all prolonged.
    Mr. Pirie. Well, I cannot imagine Admiral Smith's people 
having signed off on such an MOU without checking with us.
    Admiral Smith. Well, we will get to you on that though, 
sir, but the last briefing I had said it had not been agreed 
to.
    Mr. Farr. The key here, Mr. Chairman, is that the Army 
essentially takes the lead on unexploded ordinances for all of 
the services, as I understand, and this is where the rubber 
hits the road, because that is where--you know, the states want 
to insure that nobody who ever stays on that land will ever 
have any problems of any kind with unexploded ordinance. We all 
agree with that. But there is a military standard which has not 
yet been adopted by the states. And they are not sure that they 
want to agree to the military standard. And therein is the rub, 
and we need to find some commonality here, and all the services 
need to participate in this, because what becomes the rules for 
one will become the rules for all.
    Mr. Pirie. Absolutely.
    Mr. Hobson. I think they have the message, right?
    Mr. Pirie. Yes, sir.
    Mr. Hobson. Chet.
    Mr. Edwards. Mr. Secretary, thank you for working to make--
those of us in this subcommittee are especially sensitive to 
the importance of quality of life issues on our military 
readiness.

                     PERCOLATION PLAN AND FORT HOOD

    Just a specific request for information in regard to my 
district. I have the former Hercules naval installation, built 
block of motors for 40 years in my district, just outside of 
Waco. There is a perchloric [ph] problem there. It is starting 
to seep into tributaries that lead into the two largest lakes 
in my district. If worse came to worse, we would have to shut 
off the water supply of 400,000 of my constituents and also the 
water supply of Fort Hood, which now represents 20 percent of 
all of the active duty Army divisions. I appreciate the 
commitment the Navy has made in the last couple of years to 
that effort, but I would like to ask you if I could.
    At the last exchange--I will not ask you to promise to do 
everything I asked you to do, but would you--I would appreciate 
you having someone report back to me where we are, what is the 
Navy's multi-year plan on this and intentions, and what kind of 
commitment of the resources could be made there? Just even a 1 
percent chance of that becoming--the worst case scenario 
becoming a reality is devastating to a lot of our area and to a 
major Army installation as well.
    Mr. Pirie. This has come to my attention in the past, and 
we are committed to making sure that that does not happen. And 
I think essentially what we can say is we have got it under 
control, or at least there is a very low probability, a very, 
very low probability.
    Admiral Smith. And it is a slow percolation, I would tell 
you, as an environmental engineer. But we can get you that 
plan. I know that that has been thought out, so I would ask to 
do that.
    Mr. Edwards. Okay. I would appreciate that. Thank you very 
much.
    Admiral Smith. Sure.
    Mr. Hobson. Mr. Boyd.

                   ELIMINATION OF CONTINGENCY FUNDING

    Mr. Boyd. Thank you, Mr. Chairman, and Mr. Secretary. I 
apologize. I have another hearing going on, a subcommittee 
hearing also, so I will be leaving after the questioning.
    But I had a couple questions. One was you noted the 
contingency provision in your oral statement, and then I read 
your written statement. What will the practical effect of that 
be? Would you like to expound on that a little bit to us? We 
eliminated--we reduced the contingency provision last year, we 
did, and you have now decided to eliminate it totally.
    Mr. Pirie. In anticipation of your reducing it further, the 
Office of Secretary of Defense just took it all away so it 
could not be reduced, but this unfortunately puts us in a 
position where any unforeseen contingency--we are talking about 
you appropriate this year, and we get started two, three, maybe 
more years down the road. And changes in the labor situation, 
changes in the price of material, changes in building 
standards--who knows what is going to happen three years from 
now? And if we do not have enough money to complete the 
project, we have to decide to down-scope the project----
    Mr. Hobson. Or you might not even start one.
    Mr. Pirie. Or compromise on quality, which is a bad idea, 
given how long these buildings have to last us, or ask for 
reprogramming, which will clog the channels with paperwork that 
flow between here and the administration. So this will create 
difficulties, practical difficulties. Admiral Smith will have 
to bear the burden of all of the execution difficulties. He can 
talk eloquently about this I am sure.
    Admiral Smith. As both the engineer, as a contracting 
officer, sir, I would tell you this does give us a lot of 
difficulties. We have--I spent a lot of time looking at cost 
growth in new construction across America, and my friends in 
private industry and engineering would tell you, on new 
construction, depending on where you live, it averages anywhere 
from 12 to 15 percent cost growth on a typical project. The 
Corps of Engineers and the Navy historically----
    Mr. Hobson. Over the life or over----
    Admiral Smith. Over the original estimate of the project 
average.
    Mr. Hobson. What was that figure?
    Admiral Smith. About 12 to 15 percent. That is cost growth 
over the original estimate of the project, and we can all 
remember projects that were more and we can all remember 
projects that were less. That is an average, industry average.
    The Corps of Engineers and the Navy historically have run 
between 8 and 9 percent cost growth. That is in part because, 
of course, we have done parametric or cost estimating on 35 
percent design before you see the estimates.
    With new tools, such as design-builds, we can run the 
models now down at 4 to 5 percent cost growth, again, well 
ahead of the industry average, doing very well, but I am not 
aware of anybody who can build even a new construction project 
on a clean site for 0 percent cost growth.
    But that leads us to what Mr. Pirie said, kind of a rob 
from Peter to pay Paul situation. And, Mr. Chairman, you are 
exactly right, what happens to us towards the end of the year 
then is we run out of cash. So we have to have projects we 
could award wait until--so we wind up with these filings of 
projects that have to be awarded, perhaps 2001 projects that 
would be awarded with 2002 money, and that kind of spirals. So 
this becomes what my aviation friends would call a graveyard 
spiral. It just keeps getting worse and worse and worse. I am 
hopeful this is not repeated in the future. It is a definite 
problem for us next year.

                      BASE REALIGNMENT AND CLOSURE

    Mr. Boyd. Mr. Secretary, if I might, one additional 
question. I hesitate to ask this, but I think it is important, 
and I know you may be aware of this or read this. You asked in 
your testimony for two more rounds of BRAC. You have got a very 
short paragraph on it in concluding--the sentence says, ``I 
again ask for your support for two more BRAC rounds.''
    Mr. Hobson. That is a common theme. The Secretary of 
Defense did the same thing yesterday.
    Mr. Boyd. I want to reflect a quote out of this morning's 
National Journal, and this is by General Jones. Quote: ``As a 
small service with the fewest military bases, I know of no 
installation I would recommend to be closed in the Marine 
Corps.'' General Jones.
    Admiral J. Johnson, CON, said his view was, quote, ``Not 
far'', end quote, from Jones.
    Mr. Pirie. The Navy and Marine Corps were very strong 
players in the '93 and '95 BRAC rounds, very strong players. We 
closed all the facilities--virtually all of the facilities in 
the San Francisco Bay area. We closed Charleston Naval Shipyard 
and Naval Station. So we have participated very vigorously in 
the last two rounds of BRAC.
    Now, that having been said, there is still considerable 
excess capacity in some of our activities. I do not think we 
have too much in the way of naval air stations or naval 
stations, real estate in port areas. I do not think we have too 
many runways. We certainly do not have too much air space or 
training space. But where the excess capacity tends to exist is 
in the industrial areas and in test and evaluation and the 
research and development areas and so forth, so that is 
probably where the Navy and Marine Corps will look in any 
future rounds of BRAC, and that is the area that was least 
successfully approached in BRAC in '95, because we were 
supposed to do so in a joint cross-service way, and basically 
the services did not--were not able to come to an agreement 
about how to do that.

                               PIER SPACE

    Mr. Hobson. Well, let me just go on to one thing here, 
interject something since you have already brought it up. What 
about pier space? If you increase the number of ships in the 
Navy, do you not then have a problem with pier space?
    Mr. Pirie. We have a problem with pier space. We need to 
build more modern piers that accommodate these ships better. 
Right now, in major ports, San Diego and Norfolk, we have to 
nest ships. In nest when groups of ships are periodically in 
port rather than deployed, we--basically--we do a calculation 
that assumes that something on the order of a quarter of the 
force is deployed all the time. If everybody came home to all 
our home ports, we could not possibly put them at piers. We do 
need more pier space, and we need more modern pier space to 
accommodate these new high-tech ships that we are spending lots 
of money on.
    Mr. Hobson. I just wanted to get it----
    Mr. Boyd. Thank you, Chairman. That is all I have. Thank 
you very much.
    Mr. Hobson. John?
    Mr. Olver. Thank you, Mr. Chairman. I just want to comment 
that 1955 was a good year. I had not noticed before that you 
were a 1955 grad of the Naval Academy. Somehow you look older 
than I do though. [Laughter.]
    Mr. Pirie. And I obviously feel a lot older than you do.

                   ELIMINATION OF CONTINGENCY FUNDING

    Mr. Olver. Oh, really? I do not know whether I should get 
any further into that one.
    Anyway, I would like to explore a little bit further this 
contingency issue. What you are saying is, that you raise it. 
You are not here defending the budget. You are here raising 
this as an issue of great concern to you in naval operations or 
in your role, even though that is part of the President's 
budget. I am correct on that, am I not?
    Mr. Pirie. I am committed to defense of the President's 
budget. We will find a way to make it work. It will be hard.
    Mr. Hobson. This is that thing where we salute and we move 
forward. We all step forward, and we try to figure out a way 
around the side.
    Mr. Olver. Well, let me just explore that one a minute or 
two further. I had to refresh my own memory here with questions 
to the staff on the traditional has been about 5 percent of 
contingency?
    Mr. Hobson. Or somewhat more.
    Mr. Olver. And in this year, what is it that the final 
result is for this year? Is it somewhere around 2 percent that 
you were allowed this year?
    Admiral Smith. No, sir, it is zero.
    Mr. Olver. In the present--I do not mean in the budget year 
pending. I mean in this year.
    Admiral Smith. This year we are actually in--actually, no 
we are in zero, because it was zero last year's number in the 
budget. So 2000 is the first year because, remember the Senate 
did it last year? Oh, they did not? So it is down to--the 
budget----
    Mr. Hobson. No, that is where you decided you were going to 
take it.
    Admiral Smith. We did not do that----
    Mr. Olver. This was a choice of how to take certain savings 
required and what does that mean?
    Admiral Smith. That is real property maintenance, sir. I am 
sorry. That is the recision we are talking about now. That is 
the recision.
    Mr. Pirie. That is not the contingency planning for 
military construction.
    Mr. Olver. What is the contingency for military 
construction in the present fiscal year, 2000, within plus or 
minus a half a percent?
    Mr. Pirie. 4 percent.
    Mr. Olver. 4 percent you are saying?
    Mr. Pirie. Yes.
    Mr. Olver. So what had been traditionally 5 is 4 in the 
present fiscal year. Do you feel you cannot live--what effect 
do you see in the present fiscal year from the things that we 
appropriated last year for these military construction items in 
the way the contingency was drafted?
    Mr. Pirie. The same kind of a thing. I mean----
    Mr. Olver. You cannot live with 4?
    Mr. Pirie. If you depend on change. Maybe this year it will 
be a great year, prices and materials will not go up, we will 
not have any labor problems, nobody will change building 
standards, and maybe we can do it, spending on account.
    Admiral Smith. And if I could, sir. What happened was there 
was a general reduction taken against MILCON last year that was 
exactly equal by happenstance to the amount of the contingency, 
so we did not spread it quite that way. We wound up with a 
titular 4 percent, say, contingency.
    To go back to what we discussed a minute ago though, what 
happens is this has an insidious effect over time, because this 
year, for example, we have 49 MILCON projects. We, obviously, 
want to award all of those at the same time. They will drag on 
out through the year. We try to award them as soon as we can.
    Mr. Olver. Sure.
    Admiral Smith. What happens is it becomes a cash management 
problem, where if you have enough money for the early awards, 
if you get good bids, great. The construction industry is 
booming in America right now. We have been living off good 
bids, frankly, for quite a while. I mean, they are rationing 
drywall in the Washington, D.C. area right now.
    Mr. Olver. So now the bids are going to go up because there 
is not----
    Admiral Smith. So the bids are starting to go up, depending 
on where you are again.
    Mr. Olver. Fine. If the--if we were to function largely 
on--I mean, the problem of doing estimates at 35 percent, that 
is a serious problem. We have had cases where you bring 
forward--I had one in my district, admittedly, where the 
estimates were made sometime ago and we did it, with the help 
of the members of the committee and the Congress, and ended up 
finding that it was 40 percent off I think, 30 percent off, 
something like that, and needed to come back. And that is a 
problem that we should not probably be doing, at least I should 
not probably be doing.
    But if we were working with 100 percent design, design 75 
percent, close to the end, cannot we be much better than the 
kinds of problems--can we not reduce those problems 
substantially?
    Admiral Smith. Something along----
    Mr. Hobson. You are always going to have a problem 
somewhere, someplace. You have to change orders when you get 
into building. I do not think you can ever, ever say that it is 
going to be perfect.
    And what they have to do is manage their money, and it may 
delay them starting the 43rd project or reprogramming off of 
something where they might have----
    Mr. Olver. At the end of the year.
    Mr. Hobson. Well, they may have some delays and stuff, 
where it is not going to happen that particular year, they can 
take that money and ship it--they really need a contingency. 
They can live with this without us. It is not a good thing, and 
it becomes a management deal within their shop of what they do. 
I do not like it, because I can tell you, I am starting a 
project now and I ran into a whole bunch of rock. You know, and 
we had to go back and talk to the guys who did the core 
drilling and say, ``You know, you guys are going to have to 
ante up for a little of this.'' So there is always something, 
John, even if you think you know everything about it. It is 
just part of what they have to live with right now, and I do 
not know how we can change that, because they came forward with 
it. We can maybe help someplace along the way, but in 
construction there is always going to be the unknown. That is 
why you have contingencies in it, because you do not know what 
is going to happen all the time. It is not like----
    Mr. Olver. I am largely trying to understand and to serve 
as devil's advocate here to make them--you are answering very 
well for them. [Laughter.]
    Mr. Hobson. Well, it is partly because I have lived with 
the same problem, and I understand their problem, but I guess 
what I have a real problem with is the attitude that--I guess 
what I would feel better about is if you did not have to defend 
where you are, and just say, ``This is what we had to do. We do 
not like it.'' It is kind of like the contingency thing. When 
we finally got around to everybody understanding that we were 
not going to do the contingency, everybody breathed a sigh of 
relief, and I think that is kind of the same thing we are in 
here. We may have to figure out--and I do not know where we 
would get the money to do it. I mean, I am going to get into 
that when you get done, about the money overall.
    But I am sorry. I have never seen a building yet that is 
exactly on time, the same cost and built exactly the same way 
as it started out. Now maybe you can do that with some little 
house somewhere, but even there.
    Admiral Smith. Yes, sir.

                                HOUSING

    Mr. Olver. Well, the Secretary has been very careful about 
the language he has used on this one. So be that.
    Let me go on to the housing issue. You know, I really do--I 
like the conceptualization of the three ways of doing housing, 
which is the triad, essentially, as you put it in your 
testimony, Mr. Secretary. The community housing, and then the 
military construction housing, and then the privatization 
housing.
    Let me just chase these numbers for a few minutes. I have 
been here--as I was listening to other--my mind works on 
numbers while it is also listening to verbal descriptions as 
they go, and so the--as I read this, you said in the testimony 
that you have about 80--a little over 80,000 units of actual 
Navy housing.
    Mr. Pirie. Navy and Marine.
    Mr. Olver. Navy and Marine, okay, fine. Navy and Marine 
housing. And that that represents, on the Navy side, about two-
thirds of all, because there is almost two-thirds of your 
housing is out in the community--excuse me--one-third really, 
because two-thirds is out in the community, and on the Marine 
side--no. On the Navy side almost three-quarters is out in the 
community, and in the Marines about two-thirds is out in the 
community. So there must be then--calculating upwards, there 
must be 175,000 units or something like that of family housing 
which is out on the community. And is it your plan to change 
the proportions, or do you expect those proportions to remain 
relatively constant? So what I read in these numbers is that 
the question of how much is either military construction to be 
dealt with or PPV to be dealt with, is the 80,000 a proportion 
which is somewhere in the range of 30 percent of all the 
housing that the Navy--family housing that the Navy and the 
Marine Corps uses is to be in those two portions, the PPV and 
the MILCON related. And the other 70 percent, taking the two 
services together, is out in the community. I do not know. You 
would not know those exact numbers, but they must be--because 
the person who knows the most about the housing, am I generally 
correct in what I am inferring here from the testimony, or how 
do you mix the populations?
    Mr. Pirie. Yes. We expect to house 75 percent of our people 
in the private sector, in houses that are owned by----
    Mr. Olver. On the Navy side. And on the Marine side 65 or 
66.
    Mr. Pirie. It is really a similar number.
    Mr. Olver. Okay.
    Mr. Pirie. So three-quarters of our people are expected to 
pay out--at present about 19 percent over and above their 
housing allowance----
    Mr. Olver. And the BAH change to remove that over five 
years should be a great help in----
    Mr. Pirie. Yeah. Not only that----
    Mr. Olver. Is that going to make people--if a BAH change 
occurs is that going to get a lot more people moving out into 
the community, because the BAH is going up?
    Mr. Pirie. Yes, absolutely.
    Mr. Olver. Are you then going to maybe not need as many 
housing units on the military construction or the PPV side as 
pieces become really obsolete?
    Mr. Pirie. We definitely hope that that will be----
    Mr. Olver. That that will be the case.
    Mr. Pirie. That that will be in effect, and because we will 
be removing the inequity between the cost to the people who 
live in the community and the cost to the people who live in 
government furnished housing will reduce the demand for 
government furnished housing. So we would expect that the 
numbers of houses that we have to provide to go down. 
Fundamentally, I think this is the right way to do it.
    Mr. Olver. Now, in your testimony I think I see--I think I 
have got this correctly, that there are eight projects totaling 
about 860 units, and this is totally new construction.
    Mr. Pirie. In some cases----
    Mr. Olver. These are just wiping out what is there. These 
are just totally inadequate houses, no reason to try to 
rehabilitate, so it is new construction in those locations.
    Mr. Pirie. Yes.
    Mr. Olver. They are relatively small pieces, and the 
average is a couple hundred thousand per unit essentially of 
what is going on for that group.
    I also see in this that you are doing a couple hundred 
million dollars worth of bachelor quarters in your program, and 
you are also rehabilitating another, about 2,500 or so units 
of--and in those cases it is somewhere in the 50, $60,000 per 
unit of rehabilitation, renovation prices; is that roughly----
    Admiral Smith. I want to say yes. It is a large number.
    Mr. Olver. Well, the language here says 1,700, and using 
traditional family housing funds to the improvement program to 
renovate 1,781 Navy at 12 locations in and out of the United 
States, and 511, which is 2,292. Yeah, 2,292 of a total cost 
there of $183,000,000 for those, which comes out to something 
over 50,000, 60,000, perhaps averaging out somewhere in that--
and it is going to be a little bit higher than that probably. 
The sum total of those two, the 2,200 plus the almost 700, 
comes to about almost 3,000, which is about 4 percent of the 
total of your family housing which is Navy operated.
    I do not see the list here. You urged us to reauthorize, 
which this committee is not into, but reauthorize the PPV 
program. And there are seven projects now, five Navy and two 
Marine that are in the PPV program on the present 
authorization. If I remember correctly, those total somewhere 
in the range of 4,000 plus or minus units.
    Mr. Pirie. Somewhere in that area.
    Mr. Olver. Which would be another 5 or 6 percent, somewhere 
in that range. So in what is presently ongoing, plus what you 
are asking here--and I do not know what the last couple years--
I am trying to sense where we are getting toward in renovation 
and so forth of the 80,000 units that you have that are owned 
housing, but also trying to sense how, if we are going to 
change the BAH over a five-year period, what impact that has 
upon the needs at the upper end here over a period of time, 
where the total number of housing units may not be the whole 
80,000. It may be that we are going to drop 20,000 or some 
number. I should not even mention a number, because who the 
hell knows at the other end? This is a process of mixing and 
matching I guess to come back to a policy that serves the 
quality of life of our personnel and gets them into good 
housing over a period of time.
    Mr. Pirie. Well, what you described here is exactly right. 
I mean we are nibbling away at 5 percent or so a year, so we 
got us a 20-year replacement cycle, which means that most of 
our people are living in housing that is over 10-years-old, and 
many of them are now living in housing with maintenance 
backlogs of more than $15,000 of repairs that are needed.
    Mr. Olver. I think the BAH change is fine.
    Mr. Pirie. The BAH change is going to help us with that.
    Mr. Olver. I think that this represents a good and balanced 
and pretty robust actual housing program. If I remember 
correctly--and I looked I think carefully in your testimony--
you are not asking any new money on the PPV side. That we have 
done for the seven projects that are out there.
    Mr. Pirie. We would ultimately I think return to this for 
other locations and so forth. But for the foreseeable future, 
our program, over the program years will be some MILCON, some 
PPV.
    Mr. Olver. Do you have a sense of how many you would like 
to--if you were given the five-year authorization extension, if 
that were to go through here, how many more units would you try 
to do within the PPV program? We have not yet--as you pointed 
out--we have not yet seen enough of those complete. Of those 
seven, are any of them complete? Does that include the one or 
two that are completed under previous----
    Mr. Pirie. We have some completed under previous 
authorities.
    Mr. Olver. But nothing under the present authority.
    Mr. Pirie. Nothing under the present authority.
    Mr. Olver. We have two such projects out there under 
previous authority, so the other seven are really the sort of 
test cases to examine how well this works and--but do you have 
a sense of how many more you might want to do under another 
five-year authorization?
    Mr. Pirie. It would really depend on market conditions and 
what we see. I think we came forward with something, with a 
total about 20,000 units last year.
    Mr. Hobson. They were going to do 11,000 in one base in San 
Diego.
    Mr. Pirie. The committee did not like that idea, so----
    Mr. Hobson. And they didn't like it to begin with, and so 
we give the same regard with everything until we look at what 
is a success, because Corpus Christi, right, John, does not 
have the right mix of people that it was designed for in it. 
And so until you can get some of these that work right, until 
we know what the configuration--now the BAH is very good, 
because the BAH is going to help do some of the privatization 
numbers better, and you will be able to do those better as a 
result of that, in my opinion.
    Mr. Pirie. No, you are absolutely right.
    Admiral Smith. Yes, sir.
    Mr. Pirie. That is one of the desirable effects of it.
    Mr. Olver. It also makes it possible to do the PPVs better, 
but it also means that you can got out on the market if you are 
closer by, and it may well be that as a result of this, that 
the worst of the housing, you may not be coming back here, two, 
three, four years from now to replace housing which is so 
dilapidated that people should not be in it.
    Mr. Hobson. But you need to get--while you are saying this, 
this also points out why it is very important how you do those 
deals on the privatization, because if you lock yourself--
John's point is very well taken. If you lock yourself in to a 
50 or a 100-year deal, and suddenly people are using the BAH to 
live off the facility, then you have commanders doing what they 
used to when I was in the service, saying, ``You have got to 
live on base because we have got to fill this stuff. I cannot 
be embarrassed by having people live off base. I have got to 
fill this stuff up.'' But if you have leases, and the 
facilities are designed such that they can transition to the 
private sector, and you have built them to the private sector 
standard, then you accomplish what I think John would like to 
get to in a way, is that you do not have this. You have 
everybody living more in the private sector in newer housing.
    Mr. Olver. Well, but it also is a reason why one does not 
do 11,000 everything at one base in its completion, or you 
might just sit there with just a lot of stuff that people 
decided they wanted to be off base within a BAH that supports 
that. So we are--it seems to me we are honing in by a number of 
these processes. Now, maybe the proposal on BAH change has come 
to us in part because we were not moving as swiftly as you 
would like to have moved, as the Defense Department would have 
liked to have moved on the privatization. I do not know. But we 
are honing in.
    Mr. Pirie. The BAH change addresses the fundamental 
inequity that the quarter of the people who live in government 
quarters are essentially subsidized, and three-quarters who are 
not lucky enough to get government quarters are penalized by 19 
percent additional housing costs, and that is just not an 
inequity we want to continue to live with, so I believe that 
Secretary Cohen really is--this is a major good step for the 
people.
    Mr. Olver. Let me just draw one other line. In the housing, 
the proposals, the places where you are doing new housing, and 
those where you are renovating housing that is part of the 
Navy's and the Marine Corps' inventory of 60 and 23,000, do 
those include both active personnel as well as--well, do they--
active and reserve, full-timers, reserve, as well as active 
personnel?
    Mr. Pirie. Yes.
    Mr. Olver. I guess that may be a wrong way to put the 
question. The full-timers on the reserve are probably 
themselves active, are they not?
    General Mashburn. They are active, sir.
    Mr. Olver. So your full-timers on reserve, in your reserve 
units would be included in the housing, but in both--both in 
the programs of new construction and the renovations where they 
are being proposed, the 12 locations and 2 locations--3 
locations for the Marines, I guess it is, of the renovation 
that I have described and gone through. Do the PPVs also 
provide for the same active people, so that reserve and the 
full-timers, whether reserve or--with reserve units otherwise, 
in those provided for.
    Mr. Pirie. Yes. These are treated, in terms of assignment 
policy, exactly the same in government quarters.
    Mr. Olver. Okay. Thank you very much, Mr. Chairman.
    Mr. Hobson. You are done?
    Mr. Olver. No. I will listen for a while.

                            OVERALL FUNDING

    Mr. Hobson. Well, I have a number of questions here I would 
like to get on the record. Some things we will submit for 
later, but there are a number of things that I think we need to 
discuss verbally. You know, I guess I may have a little 
different--maybe it is terminology, when we talk about the 
strongest budget in six years, but over last year's--and 
actives were down $143,000,000, so without this committee's 
help, you do not have as robust a deal as we had last year, but 
that is semantics maybe. I do not know. But from your 
perspective of these submissions, maybe that is true. So we 
will deal with that.
    Mr. Pirie. We are grateful for the committee's help, Mr. 
Chairman.
    Mr. Hobson. And I also want to say generally, I think you 
are going right in the privatization, and I would probably 
support, with some modifications, the change--I do not like the 
way this committee has to react within 30 days. First of all, 
we do not have the expertise. We do not get them fast enough. I 
have had a big fight with another service about--who gave me 
one, then the meter started running from their thing before I 
had even seen the thing, and so the last three days----
    [Laughter.]
    Mr. Hobson. And they were saying, ``Oh, you must have 
approved it because you did not squawk about it.''
    Mr. Pirie. Do I have a date on the letter? [Laughter.]
    Mr. Hobson. And so we need to have a better discourse 
because we are going to look at this, as you know, and we are 
going to--certainly on my watch and on John's watch, we are 
going to look at these things, and we are going to make sure 
that they do right, because we are setting patterns for the 
future, and we need to make sure that we get the best for the 
troops and the government as we go through this. And everybody 
is searching around for the right formula. Each service is 
looking at it a little differently, and that is not all bad, 
because we need to figure out what is--each service has a 
little different culture how they handle their people and what 
they want to do. I think most of the services now have gotten 
into the idea that privatization is here, and it is going to 
happen. There are some services that are somewhat--have been 
somewhat resistant to this effort, while I think the message is 
out.

                             NAPLES, ITALY

    I have got a number of specific questions. I want to switch 
to one that I just think we need to do right away, because I 
think John--I am interested in it. Let us just go to Naples, 
Italy and get it out.
    I will just read you the question, and then we will talk 
about it. I want to bring us up to date on the events in the 
past year and the current status of the Naples support site, 
what action does the Navy intend to take in light of this 
sequestration order to secure the current housing and 
facilities which have been the current housing and facilities 
completed at the support site and resolve the issue of the 
hospital, commissary and PX. Is the Navy exploring all options 
such as bankruptcy possibility of the contractor with his 
current Italian law firm, and is it prudent to proceed with the 
restructuring of the contract at this point? And has the--I am 
going to add one other thing to this. Has the Navy considered 
employing an additional--I hate to do this--expense, law firm 
to look at this. If they are not going to get rid of the 
Italian law firm that we have, had anybody who is familiar with 
Italian law that we know, have a relationship with, look at 
this problem there? And you know, many of us warned about this 
problem, and I will be very frank, I think the Navy has been 
very cavalier about this problem, because I was there well over 
a year or so ago and looked at this, and I raised some 
questions and I do not--I am going to be very frank with you. I 
am not sure it is all your fault. I think there is some State 
Department, Embassy stuff in this too, but this is going to be 
a big problem, in my opinion, and it is not going to go away 
easy.
    Mr. Pirie. Well, Mr. Chairman----
    Mr. Hobson. You can comment on what you can say about it.
    Mr. Pirie. As you know, this is a criminal action which has 
been brought against our contractor, Mirabella.
    Mr. Hobson. Absolutely.
    Mr. Pirie. Navy is not party to this, but because of the 
criminal action brought against our contractor, Mirabella, 
well, the court first ordered a stop work, and we persuaded 
them to permit work to go forward. Now they have issued another 
sequestration order, and I do not know where that goes. Now, 
our reliance on our Italian firm is simply for advice as to 
what is likely to happen. We are not involved in any 
representations to the court or anything of that kind. But 
perhaps as you suggest, it is time to get a firm in here with 
expertise in Italian law to see what they think.
    Meanwhile on the ground, anything that we have occupied and 
taken over, we want to have continued use of, and the 
sequestration order does not go to them. However, the hospital 
is not completed, the commissary is not completed, the PX is 
not completed, and work has stopped on that, and we will not be 
able to resume until we get the court to back off its order.
    Mr. Hobson. Has anybody briefed anybody on Italian law as 
to bankruptcy and reorganization, and if that is a possibility, 
you know, sometimes when you have a criminal action and you 
have things of this sort, and you have sequestration of the 
construction work, that puts great pressure on the 
organization. They do not have the ability to continue this, 
and somebody--I do not know whether you have all your lawyers 
or whatever, but somebody needs to be thinking from a 
management standpoint and from a legal standpoint, what are the 
courses that the Navy is going to have to do to protect the 
investment you have made in people that are there? I am not 
talking about money in particular. I mean the investment you 
have got in people in there now, and what are the contingencies 
of this thing? This facility has great potential for you all, 
but somebody needs to be thinking if this does not work, what 
are we going to do or how do we make it work? Are there plans? 
Are people looking at that?
    Mr. Pirie. Well, this blew up just this week. I mean it is 
very new. I do not have new stuff. Admiral Smith may have 
better news than I do.
    Admiral Smith. If I could, sir, my Naples office, of 
course, is the lead on this through my Atlantic Division office 
in Norfolk, and we do have Italian law firms under retainer 
there to give us advice and counsel on that.
    Mr. Hobson. I know you do.
    Admiral Smith. We have long talked--since this is a lease, 
it is not they are just building it, of course, and turning the 
keys over to us--about what we do in a contingency situation. I 
am happy to say that, despite the sequestration order, the 
operation and maintenance part of the lease has continued, as 
it did during the first sequestration order. And they are very 
comfortable with them continuing to operate the facilities that 
they have already turned over to us.
    My understanding this morning was that they would allow 
them to--where work was stopped, do work to protect things that 
they had already done there, put sheeting over it or to cover 
it to make sure there was no damage done to it.
    So even though this order has been issued and it is wending 
its way through the always interesting Italian legal system, 
there has been a lot of what I call common sense involved in 
how this process has flowed on site.
    Mr. Hobson. What concerns me--and I will not be a party to 
buying anything in this facility until it is totally completed, 
and we bought--had we finished something and bought it, we 
would have been in deep trouble now because the rest of the 
facility might not be there, or not be there for many years, 
based on how they go into loss.
    I hope you all step back and somebody does how you do all 
these planning things of what your options are, and I am a 
little concerned. I expressed this over a year ago, and your 
people in Naples just kind of pooh-poohed it when I expressed 
some concerns about this project and about--I mean, not about 
the construction, not about what we were getting, but about the 
process and what we were dealing with here. And I still have 
those problems. I think, unfortunately, I was proven correct on 
what was going on.
    I am still concerned about--and I don't know these people 
in the law firm you are dealing with. There is some difference 
of opinion. They have given you different opinions at different 
times on different things relating to this project. I am 
concerned about that.
    I am concerned about some other aspects of this, which I am 
not going to get into here. The messages have already been sent 
from other places about it. And, again, the Navy kind of--and 
another agency of this country kind of just said we are not 
looking at this. And I think they need to take very seriously 
what transpired in that situation. And I don't think they have.
    I don't want to get into that any more here, but I think 
that cavalier attitude is going to come back to hurt us again, 
just as it is hurting us here now, because what is happening 
now is we are not going to get these people into these 
facilities, and we are depending on that.
    So I don't know what you want to say in this forum about 
this thing. I just want to tell you, I think this is a serious, 
big-time problem, and it is bigger than just occupying 
facilities. You know what I am saying.
    Mr. Pirie. No, we take this extremely seriously, Mr. 
Chairman, and we will keep you informed of what we are able to 
develop on it.
    Mr. Hobson. John, do you have any questions?
    Mr. Olver. You have mentioned the PX and the commissary and 
the hospital. Is all the housing done there?
    Mr. Pirie. Some, but not all, of the second increment of 
housing is done. The first increment, 500, are done and 
occupied. How many of the second increment?
    Admiral Smith. I don't remember.
    Mr. Pirie. Some 380 houses in the second increment, some of 
them, but we don't know----
    Mr. Olver. There are two increments. That is the end of it?
    Mr. Pirie. That is the end of the housing.
    Mr. Olver. So it is 1,000 units of housing. How many people 
in the Naples area other than those that would be in this set 
of housing, how many total personnel would end up using this 
hospital?
    Admiral Smith. I can't remember the number.
    Mr. Pirie. Members, plus dependents, it is on the order of 
20,000.
    Admiral Smith. It is about 20,000.
    Mr. Olver. Twenty thousand, of which probably not more than 
3,000 or 4,000 will be living in this set of units of 900, or 
thereabouts, units. The others are billeted in various places 
on the community in other housing.
    What about is there a fire station? Is that complete?
    Mr. Pirie. There is a fire station, and it is----
    Mr. Olver. Is it complete and operating?
    Mr. Pirie. Yes.
    Mr. Olver. We visited a while ago. I don't think----
    Mr. Pirie. And the day-care center.
    Mr. Olver. And the day-care center. We were there a year 
ago, and some things have gone on since that time. Things do 
sometimes happen when we are not there. And I was just curious 
whether those other pieces like that, public safety, were to be 
done. And the day-care center, of course, that is useful since 
probably 600 or 700 of the units of housing are, in fact, in--
some of the 380 second stage are occupied
    Admiral Smith. Yes, sir.
    Mr. Olver. I don't want to go on about this. I have some of 
the same concerns about that particular thing. I don't think I 
know how this is to be solved, but, anyway, I join with the 
chairman.
    Mr. Hobson. That is the problem we have got. I am concerned 
about there being plans and contingency plans of where this 
goes. Is somebody advising the Navy in Admiral Smith's office 
and you, Secretary, of what our contingencies are, what we are 
going to do in this if this, this, and this happens? What is 
the law over there relating to possible reorganization and 
bankruptcy, the sale, whatever happens here? I don't know that 
anybody knows all of that or if anybody is really looking at 
that.
    I suggested about a year ago that people ought to be 
looking at stuff over there because I didn't like the way it 
was going. There were some other problems over there. I think 
he and I want to send a message. I don't think certain agencies 
in this country are looking at this in the way they should look 
at it, and I think they are rather cavalier about it, and 
people are afraid to do certain things they should be doing.
    The upshot of this is going to be we could have a big mess 
that we don't need to have. And if people will just grab hold 
of this--I hope you go away with the message that somebody 
needs to grab this thing and take a look at it.

                         HISTORIC PRESERVATION

    I want to go on to another issue, and then I am going to 
come back to the one you want to talk about. I want to talk 
about historic preservation. I raised this to the Secretary of 
Defense yesterday, and I sense this is a huge problem in our 
bailiwick that we are dealing with here, and yours.
    The Navy has under their control a large number of historic 
properties and confronts the prospect of those numbers 
increasing significantly as Cold War-era properties reach 50 
years of age. I wish I could look at 50 again.
    Operation and maintenance costs of historic properties are 
on average 2 or 3 times the costs of non-historic properties. 
If action is not taken, these costs eventually overburden the 
housing and maintenance costs, and I guess I want to know that. 
And I also want to know if you are making any proposal to the 
change of the law, because I understand--and I didn't know this 
when I took over this committee--that you can't build a general 
officer's house in excess of 2,200 square feet.
    Admiral Smith. 2,100.
    Mr. Hobson. It is 2,100-something. That isn't very big, and 
especially not for a general officer. They have egos kind of 
like ours, John--maybe even bigger.
    But I think that ought to be changed, and I think you all 
ought to press the authorizers about changing it, not to build 
Taj Mahal's either, but what I think that arbitrary limit has 
done is cause you all to gravitate to maintaining some housing 
for general officers that you would have been better served or 
potentially would have been better served by building newer 
houses for general officers. And some of the excesses that we 
have seen and some of the testimony I was telling you about--I 
do read some of that stuff, believe it or not--that I have read 
about and, frankly, am concerned about. So I would like to talk 
about that.
    Then I would like you to tell me, Admiral Smith, about 
Tingey House and where we stand after our little walk-through 
on that. And I had dinner with the guy last night at the walk-
through.
    Admiral Smith. Oh, really.
    Mr. Olver. So you know that he knows all the answers 
already. [Laughter.]
    Him being a lawyer, this is a ``gotcha.''
    Mr. Hobson. No, no. I don't know what they have done. We 
gave them some suggestions, and I think we agreed on those.
    Admiral Smith. Sure.
    Mr. Hobson. And we saved, I think, a substantial amount of 
money.
    Admiral Smith. Some $20,000, I think.
    Mr. Hobson. No. About half a million.
    Admiral Smith. A lot of money.
    Mr. Hobson. So that was good for an afternoon. I guess if 
we can walk every afternoon and save that kind of money, we 
would be----
    [Laughter.]
    Mr. Hobson. It potentially might be a little better. But 
talk about historic preservation, because it is a big problem 
for you, it is a big problem for the Army, and it is a 
problem--a lesser problem for the Air Force.
    Mr. Pirie. It is a big problem, and we need an aggressive 
program of winnowing out properties that are over 50 years that 
have really no enduring historic significance.
    We have got, in fact, a memorandum of agreement with the 
Advisory Committee on Historical Preservation, essentially a 
programmatic agreement about categories of things that we can 
dispose of without further action. So we are working to get 
tools to dispose of these things more efficiently and faster.
    Mr. Hobson. Is anybody looking at changes in the law as it 
relates to military facilities?
    Mr. Pirie. No, I don't think so, and in general, changes to 
these kinds of laws that give deference to defense are 
exceedingly unpopular and bitterly resisted by the enviro 
community----
    Mr. Hobson. Let alone pay for.
    Mr. Pirie. I know. I know that. But certainly the 
programmatic agreement will give us a lot of flexibility, and 
Admiral Smith has got a very aggressive demolition program, and 
we could not agree with you more that we need to get on top of 
this program before these things acquire lives of their own, as 
they tend to do. People tend to adopt certain structures.
    Mr. Hobson. I don't mind them adopting them if they pay for 
them.
    Mr. Pirie. Well, that is the other thing.
    Mr. Hobson. Apparently that gives you a problem. Have you 
had some problem getting the separate working--trying to fund 
some things another way?
    Mr. Pirie. I have talked to Admiral Holloway, former Chief 
of Naval Operations, who is Chairman of the Naval Historical 
Foundation and so forth, about fundraising in this area, and he 
tells me that the market is pretty, well--it is pretty tight. 
There are lots and lots of people who want charitable 
contributions to maintain historic properties and things of 
that kind. So we have to have a pretty good story.
    We do have some private funding sources for maintenance of 
some of our historical properties. The Marines are doing well. 
So we need to pursue that line as well.
    Back to the square footage of general officer housing, I 
could not agree more that that restriction has probably driven 
us into old, larger, but really sub-standard kind of houses and 
expenses to keep those places up when we don't need to. So I 
don't know when we proposed the change in legislation, but we 
certainly support the notion and I will pursue it with the 
authorizers that we ought to back off square footage 
limitations on these houses.
    Mr. Hobson. I think one of the things you might do is, if 
you are going to build--we have this rule now if it is $25,000 
or more, you have to come back and ask us. Maybe we ought to 
have some limitation on flag officer housing in a similar way. 
If you are going to go over X number of square feet and it is 
going to cost over X number of dollars, you have got to come 
back to us and ask us to sign off on it.
    You know, we seem to be the only one who squawks, but I am 
hoping that chairmen in the future will squawk about it.
    You wanted to add something about----
    Mr. Pirie. It looks like we have made a proposal for the 
change in legislation. We are ahead of the game.
    Mr. Hobson. Well, I have been talking about it for a while, 
so somebody must have been listening somewhere. But it seemed 
to me an arbitrary thing. You might want to tell the committee 
about Tingey House, and then you might want to tell them, sir, 
about where you are on your facilities so that everybody here 
knows what he is doing might be something--you probably have 
some at Fort Hood, I would imagine, that are either close or 
getting there. What they are doing is a little innovative, 
hopefully.
    Mr. Pirie. We hope so, sir. [Laughter.]
    Mr. Hobson. But tell us about Tingey House.
    Admiral Smith. Tingey House, sir, is going extremely well, 
I say as the engineer of what I would call the health and 
safety work, the first phase. You know, the structural work is 
pretty much done. We are running it on the renovated HVAC 
system right now. We are into now what I would call the 
livability function things. Were you to go in the bathroom--I 
went through it about 3 weeks ago, and the bathrooms were all 
torn up and being made a little more modern and a little more 
livable. We were getting things up to fire codes. We are 
putting doors back where you had to have doors to get in and 
out properly.
    Again, we always invite you any time you would like to 
drive down the hill and take a look at it. [Laughter.]
    But it is going well, and the things you did, I mentioned 
that smaller figure before because that was one that popped 
into my mind on the cabinetry, which we have done. It is going 
very well, and it is going to be very, very, very livable when 
we are done, which I think----
    Mr. Hobson. When do you think you are going to be done?
    Admiral Smith. It should be done in--let's see. It started 
March. By the end of next month we should be done.
    Mr. Hobson. I will come and look at it.
    Admiral Smith. Oh, good.
    Mr. Hobson. There is another house there that I think 
General----
    Mr. Pirie. The superintendent's house.
    Mr. Hobson. There is one there that if you are going to 
preserve that house, which I think you have somewhat, somebody 
needs to preserve it, first of all. Second of all, I think that 
would be a good one because it does have historic interest to 
these people.
    Mr. Pirie. Yes, sir.
    Mr. Hobson. And there could be a group that would take that 
over, and you would have a nice little complex on that 
facility.
    I don't know whether they want to do it in the way he is 
going to do his or not, but there are some innovative ways that 
we need to look at. You know, there are other ways and what he 
is going to tell you about, there are ways, I think, that in 
some of these facilities you could use--I have talked to Boston 
Capitol about this, and they haven't come back yet--of using 
the tax credit law to--in some of these facilities you are 
going to occupy, give the private sector the ability to put the 
money up and they get the tax credits from it, they get the 
lease from it, you get the benefit of using the housing, and 
there is a residual that comes back to you later, or you keep 
owning the ground and just do the building part.
    Those are kind of outside-the-box things, I realize, but I 
think we have to think outside the box.
    General, do you want to tell them what you are doing at the 
oldest, continually occupied house in the District?
    General Mashburn. Yes, sir. We only have seven general 
officer quarters that are historic: our two recruit depots at 
San Diego and Parris Island, the Ranch House at Camp Pendleton, 
of course, which is very unique because of the museum aspects 
of it, and Thorpe, 8th and I.
    The difficulty with general officer quarters that are 
historic, where is the demarcation line between what is the 
living quarters and what should be coded as a museum, as the 
Ranch House, or the representational part of the house? In 
other words, you can use O&M money, then the housing----
    Mr. Hobson. Don't go there----
    General Mashburn. Very difficult to do.
    Mr. Hobson. Then we are going to get into something really 
bad.
    General Mashburn. I am just saying it is a problem, 
particularly for the home of the Commandants. There is a 
foundation called the Foundation for Friends of the Home of the 
Commandants. They have raised money that they want to use to 
make improvements, to add amenities, to really do anything that 
the commandant and his advisers would like to have.
    The problem is we have right now some money, but because of 
the language in the 2000 legislation, we cannot use that money 
because it was not appropriated.
    Mr. Hobson. And that was unintentional.
    General Mashburn. Yes, sir. We have that money, and it is a 
very good program, and we are really looking at some type of 
perhaps language that will allow not only for the home of the 
commandants but for--and not only historic general officer 
quarters, but for those quarters that require much more than 
$25,000 a year, that, in fact, foundations can participate and 
can enhance and it really creates a better bond between society 
and the Marine Corps and the military.
    Mr. Hobson. You are trying to use a 501(3)(c), I think is 
the program, initially is what you were trying to do.
    General Mashburn. Yes, sir.
    Mr. Hobson. And that may work. The only problem I have with 
that is, one, I don't want to lose the committee's control over 
what happens at the general officer's housing. We have to be 
awfully careful that these foundations are not the--whoever 
makes the tank or the airplane that you are going to buy is the 
guy who house it is. So it is not as simple as it looks, but I 
think the one thing I liked about the tax credit thing is it 
plays out--you know, anybody can play in the game.
    But I don't know if it is a game that we can play in this 
arena. Somebody has got to look at it. I am just trying to 
think of ways that we can keep these things and people can live 
in them. I mean, you don't want to get--the Marine Corps does 
not--I mean, that house, the Marine Corps would die to keep, 
putting guards around it and fight everybody in the world off.
    General Mashburn. We have to do that now.
    Mr. Hobson. And I want to tell you, we are not unwilling to 
put money into that house in a combined thing to get it--to 
make it right, to make the house correct. And the same way on--
there is another place down that whole parade route, and that 
whole thing is probably historic area.
    General Mashburn. Yes, sir.
    Mr. Hobson. Chet, do you have anything you want to ask?
    Mr. Edwards. No, Mr. Chairman.
    Mr. Hobson. Well, I have got a couple more things here. The 
Secretary would like to talk about----
    Mr. Olver. I would just make one comment. I particularly 
here, Mr. Secretary, your comment that you are using an 
aggressive operation to make certain that we are trying to get 
down to those that are really historic and not just allowing 
everything that gets to be 75 years old to get into that 
position where it somehow has to be preserved at enormous 
expense to us.
    Mr. Pirie. It is 50 years.
    Mr. Olver. Fifty, whatever it is, fifty. And I certainly 
think that should be done. I am all for preservation of our 
most historic treasures. But some of these just really are 
not--there is a time line that you have to help us with.
    Mr. Hobson. Yes, like the barracks I went to in basic 
training, I don't think they need to keep that. [Laughter.]
    Mr. Hobson. But you might want to use one----
    Mr. Pirie. And we do.
    Mr. Hobson. For example, I was at Fort Bragg, and they have 
got all these wooden structures. Well, they don't----
    Mr. Olver. They seem to have a lot of historic preservation 
in Korea. Think of it.
    Admiral Smith. Absolutely.
    Mr. Hobson. Well, we just had a big fire over the general 
officer's house over there in the Air Force, which--well, that 
is a whole other story. You don't want to hear it. But they can 
tear down all these wooden buildings, and if they want to keep 
one so you can take troops and say, ``Look how nice you have 
it.'' [Laughter.]
    But we shouldn't have to keep them all, and that is what I 
am worried about, that somebody gets a hold of it and says, 
Wow, that all looks so nice out there, let's keep all 50 
buildings. I think Townsend's got something like that. You have 
got a bunch of ugly stuff that I have seen out there that ought 
to be gone. And you are trying to get rid of some of it, but, 
in any event, we all know that it is a problem. But I don't 
know that--I guess what we are trying to do as a committee is 
raise the level of awareness of that, and that is why I started 
talking about it about a year ago because I didn't see the 
emphasis on that that you were going to get stuck.
    Mr. Pirie. Message received.

                            COLD WAR MUSEUM

    Mr. Hobson. All right. Let's go to the Cold War Museum, 
Secretary Pirie. I see from the budget submission that the Navy 
is proposing a $2.5 million project for a Cold War Museum at 
the Washington Navy Yard. In view of the many unmet needs in 
the military construction account for housing sailors, 
rebuilding of inadequate piers, runways, hangars, and so on, 
can you explain what is unique about this project and why the 
committee should support the request? Secondly, are there any 
private funding alternatives available to the Navy for 
constructing the museum? And if so, are these alternatives 
being pursued? Then I will get into something else with you.
    Mr. Pirie. Well, in the Navy Yard, in fact, across the 
street from the superintendent's house that you mentioned, and 
across the street, also, from the existing Navy Museum, is 
Building 70, and that building was the original David Taylor 
model basin, and that is the original place where Admiral David 
Taylor began to use a tow tank and tow hull forms to determine 
hull flow dynamics and improve the building of our Navy's 
ships. So that is a historic structure in itself of some 
significance. We are going to have to, I believe, preserve that 
building. It has great significance to the history of naval 
engineering.
    That is the building that the Navy Museum wants to use to 
house the artifacts that they have from the Cold War that they 
don't have room for in the present Navy Museum, which I am sure 
you have been in down in the Navy Yard. If not, we should take 
you to see that.
    Mr. Hobson. I have been in the Air Force Museum. 
[Laughter.]
    Admiral Smith. It's a pretty museum.
    Mr. Pirie. The Navy Museum in the Navy Yard gets 400,000 
visitors a year. So essentially what we want to do is we want 
to preserve this building that in itself has historic 
significance, and we want to put in it artifacts that we can't 
display elsewhere.
    The Historic Foundation will pay considerably toward the 
maintenance of the building once they are stored and fitting 
out of the internals of the buildings. So this is not a purely 
government-funded project. We are not asking a handout for a 
new building. What we are asking is to properly restore a 
historical gem and use it and expand the Navy Museum, more 
outreach to the public, and I think, in general, a very worthy 
thing for us to be doing.
    Mr. Hobson. Well, first of all, I think your request is 
very modest this year. I don't know what it would be over a 
period of time.
    Mr. Pirie. This is it.
    Mr. Hobson. And I am not unsympathetic to it. I just got to 
tell you, we killed the Army's deal that they wanted to do a 
few years ago, which the Speaker at the time was for. So that 
tells you somewhat the sentiment of the House when it comes to 
these things. Actually, it is in Tony Hall's district, and mine 
and his are right next to each other. And Wright-Patterson is 
there, the Air Force, and they want to do a similar type--more 
expensive--Cold War extension onto that facility and are 
willing, I think, to raise a substantial amount of the money 
for that.
    I had hoped before I left this Congress someday to be able 
to try to fund that, at least part of it. I am not sure where 
we go. This is a very modest proposal, and I appreciate that 
very much. I just wish we could call it some other museum 
because it conjures up people's--you know, so we have to figure 
out how we work this.
    I am not unsympathetic to the fact of the building. I am 
not unsympathetic to the fact that we need to preserve these 
things. It is very difficult, and the priorities, when you have 
the sailors who are not appropriately housed, you know, taking 
even a modest amount, $2.5 million. So, you know, we will take 
a look at it.
    Mr. Edwards. Mr. Chairman.
    Mr. Hobson. Yes.
    Mr. Edwards. Can I ask about that?
    Mr. Hobson. Yes.
    Mr. Edwards. This is just a question I have had. I have 
talked to members. You know, I don't know what the history has 
been, if there has been any. But you talk about proudly, as you 
should, 400,000 visits to the Navy Museum every year. But 
Washington, D.C., gets 10 to 20 million visitors a year. The 
National Air and Space Museum on the Mall is the largest, the 
most visited museum in the world.
    Go to London and they have a war museum. To me, a museum, 
if it is done properly, would be a means of democracy education 
for a lot of young people who don't know what war is all about. 
The farther we get away from World War I and World War II, they 
will know even less and less about the reality of world wars.
    Has the Navy, the Army, the Air Force ever gotten together 
and approached the Smithsonian Museum about the possibility of 
somehow tying it in to the American History Museum or another 
facility on the Mall where millions of kids go. Millions of 
kids don't go over to the Navy complex. They do go to the Mall. 
And we are missing a tremendous opportunity, and I am ashamed 
that we haven't done this in years past. And I am sure we are 
going to have a World War II memorial, but we need not just 
memorials. We need museums that educate young people about this 
democracy and the price that is paid to protect it and to give 
them opportunities.
    I mean, I get frustrated when I see the Army wanting to do 
something in Rosslyn, the Navy over here, everybody wants to 
have something in their home State, where a national war 
museum, not to glorify war but to educate kids about it,and 
educate people of all ages, for that matter, it ought to be 
right here in the Nation's capital and ought to be on the Mall. 
And if London can do it, the United States of America that 
saved this world twice in the 20th century from the ravages of 
world war ought to be able to do it.
    My question to you, Mr. Secretary, would be: To your 
knowledge--and you have been in Washington over a period of 20-
something years in your public service, which I respect--has 
there ever been any serious discussions between military 
leaders at the Pentagon and the Smithsonian Museum and 
Congress, congressional leaders, about doing something on the 
Mall where it ought to be, where millions not hundreds of 
thousands of visitors would see these and learn from them?
    Mr. Pirie. Not to my knowledge. The Smithsonian--I have 
actually been around Washington for a rather long time. The 
Smithsonian in the 1940s, the old building where the 1876 
exhibit is now, was essentially a war museum and had dioramas 
and models and all kinds of educational things and so forth. I 
think the reaction of the 1960s and all that kind of stuff made 
those kinds of displays hard to talk about and hard to do. I 
don't know that we have ever had a concerted effort to do 
something of that kind.
    In Air and Space, there is a good section with respect to 
what----
    Admiral Smith. Aviation.
    Mr. Pirie. And this is a good section about what the 
trenches looked like in World War I and so forth. But no--
nothing systematic. I think it is a marvelous idea myself.
    Mr. Hobson. I would concur with that.
    Admiral Smith. Mr. Chairman.
    Mr. Hobson. I would concur that there is an effort in 
flight, I understand, to do something out at----
    Admiral Smith. The Goddard Space Center.
    Mr. Hobson. Is that where it is or is it--there is 
something going on at Dulles. The Smithsonian----
    Admiral Smith. We are building----
    Mr. Hobson. Yes, Air and Space, Mach 2 is going out there. 
But I am not so sure that either there or down here--I don't 
know what we are going to have left on the Mall, but I think 
Chet's educational part of this on both of these wars--my 
father served in World War I, and most people don't even 
remember it, of course. And, of course, Korea is something 
that, you know, a lot of people don't really remember, and a 
lot of people gave their lives over there, and it is kind of 
just not thought of. We talk about World War II, but we had 
Korea and then we had Vietnam. And we have a memorial to it. 
But I don't know that we have any real educational thing, which 
I think is something that maybe--I don't know. The Defense 
Department ought to think about that, I think overall. I think 
it would be good. You know, it would be a good healing thing, 
if nothing else.
    Mr. Edwards. Mr. Chairman, I don't know, have you ever been 
to the London museum.
    Mr. Hobson. Yes.
    Mr. Edwards. I will never forget on the 50th anniversary of 
D-Day we stopped there.
    Mr. Hobson. It has a little office where Winston 
Churchill--they have re-created that whole room.
    Mr. Edwards. Yes, and people of all ages can walk into the 
equivalent of an old World War I trench where even the lighting 
is designed to simulate what it might have looked like in an 
evening warfire situation.
    But I would at least love to be part--Mr. Chairman, you 
would be in a tremendous position to be a catalyst in this. I 
would like to at least be part of a meeting of some leaders in 
Congress, some leaders from the Department of Defense, and 
somebody at the Smithsonian and have somebody tell us why that 
is an impossible idea, because I think it would be a tremendous 
education.
    I would bet, what, 50 to 75 percent of American school kids 
at some point in their lives come to Washington, D.C.
    Mr. Hobson. A lot of students from our districts do.
    Mr. Edwards. Maybe I could follow up with you, Mr. 
Chairman, but who would be the appropriate person at the 
Department of Defense to, you know, maybe prevent any 
squabbling between the Army and the Navy and the Marines and 
just bring everybody together and say is it possible to build a 
broader--this doesn't prevent other smaller museums from being 
there to honor the Navy and the Army. But there ought to be--I 
think there ought to be a democracy education war museum, just 
like I think having the Holocaust Museum near the Mall serves a 
tremendous purpose to educate people about why we need a strong 
military.
    Tell me, who at DOD would be the appropriate person?
    Mr. Pirie. Well, I would think that Secretary Cohen would 
resonate to a suggestion of this kind.
    Mr. Edwards. Marcy Kaptur has been interested in this for 
years.
    Mr. Hobson. Well, Ralph Regula is the chairman of the 
committee that I think deals with the Smithsonian. He happens 
to be a fellow Buckeye so maybe we can talk to Ralph and see 
how we can----
    Mr. Edwards. I would feel better when I leave this 
institution if I knew we had just at least tried or pursued it 
with the right people.
    Thank you, Mr. Chairman.

                       FAMILY HOUSING MAINTENANCE

    Mr. Hobson. I have got two or three quick questions I would 
like to get through here. I notice that the Navy has 
transferred $37 million from the family housing maintenance 
accounts into the personnel accounts. Can anybody tell me about 
that?
    Admiral Smith. If we do new construction of houses 
annually, we will transfer money in and out of what becomes the 
BAH pot; whereas, we demolish houses for whatever reason to 
balance that account for people who are on allowances living in 
the community or for new construction.
    Mr. Hobson. Yes, I don't think the intent of the 
privatization deal was to switch those around like that. We 
need to be able to talk about that.
    Admiral Smith. Yes, sir. And I confess to being caught kind 
of by surprise by that. It is not an uncommon occurrence, but 
it is usually done to level the accounts for people living in 
that housing.
    Mr. Hobson. We need to talk about this because I don't----
    Admiral Smith. Yes, sir.

                             BLOUNT ISLAND

    Mr. Hobson. Blount Island, can you update the committee on 
the status of the island's acquisition project, especially any 
additional funding requirements and the status of required 
environmental assessments?
    Mr. Pirie. I will let General Mashburn give you the details 
on this, Mr. Chairman, but we have a phased program of 
approaching Blount Island, which we hope will ultimately result 
in our purchasing the island and resolving any questions about 
long-term leasing costs, things of that kind. It is a good 
operation and I think quite worthy of support.
    General Mashburn.
    General Mashburn. Yes, sir. First of all, it is very 
important to the Marine Corps, of course, for our maritime 
prepositioning program, but I think foremost it is a national 
strategic asset, as proven during the deployments for Desert 
Shield/Desert Storm. It was the most heavily used port in the 
continental United States.
    Our leases expire in 2004. Business case analysis has shown 
that it would be prudent to purchase the land that we currently 
lease, plus to purchase easements because of fear of 
encroachment and developments that might preclude the smooth 
operation of the port facilities.
    We have looked at two specific phases. One would be the 
purchase of easements, Phase 1, which we anticipate would be 
approximately $40 million, that is, $5 million that was 
appropriated last year plus a request in 2002 for $35 million. 
That is also our number one unfunded deficiency list of MILCON 
priority which has been submitted by the Commandant, $35 
million. And, again, in 2002 it is programmed.
    Phase 2 would be the purchase of the land currently leased, 
which it currently is estimated at about $119 million, and we 
are putting that in our 2002 submission.
    We are actively pursuing it. The environmental assessment 
is in pre-final draft at this time. We hope to have the finding 
of no significant impact by early June of this year.
    We currently have working groups established to provide 
communications not only to the community but to your staff, and 
your staff will be briefed and the principals will be briefed 
after that. We are using Marine Corps assets plus a contractor 
to do initial surveys at this time. The dollar figures are 
derived from 1995-96 appraisals. But once the surveys are 
completed, we will conduct new appraisals.
    The Commandant is actively engaged. We think, again, it is 
crucial to our maritime prepositioning program, but, again, it 
is a national strategic asset, not just a Marine Corps asset.

                            SIGONELLA, ITALY

    Mr. Hobson. Okay. Any questions on that? I know it is a 
priority. We got into it late last year.
    Two final questions. What is the current status of 
providing additional family housing at Sigonella?
    Mr. Pirie. It is in the master plan. We have a master plan 
for Sigonella, first class base. I do not know who----
    Admiral Smith. Let me get that for you for----
    Mr. Hobson. We have been there. We have looked at it. It 
looks to me like it is going to be one of your places you are 
going to be for a while.
    Admiral Smith. Yes, sir.
    Mr. Hobson. A lot of money in there.
    Admiral Smith. Yes, sir, and we had a project this year for 
the support site. I think you all saw it.
    Mr. Hobson. Yes, okay.
    Admiral Smith. A lot of personnel support.

                               CHILD CARE

    Mr. Hobson. In the testimony submitted for our quality-of-
life hearing, child care was listed as a high priority of the 
Navy, yet the budget request includes only one child 
development center, which is for the Marine Corps. Are we 
adequately funding the need for new centers?
    Mr. Pirie. That is one of the areas in which we would like 
to go to the private sector and get private sector support for 
child care on our bases. And I know that my counterpart worked 
quite hard on that for several years.
    We have problems with the standards for----
    Mr. Hobson. My sister said to me, I told her----
    [Laughter.]
    Mr. Hobson [continuing]. What we do in the military versus 
in the private sector, and she said nobody in their right mind 
could afford to do what you are doing here and compete with it. 
She is right near Wright-Patterson and is constantly----
    Mr. Pirie. Which is why this has proved to be very 
difficult to do, but we are trying to work our way through this 
problem.
    Mr. Hobson. Well, maybe that is something you need to talk 
to the author of. I am looking at the law. I wrote the day-care 
law when I was in the legislature in Ohio. I tell everybody we 
almost didn't have Thanksgiving over it because my sister was 
so mad at me. She survived--it does cause some interesting 
family situations. But it is something we need to do.
    The housing, the day-care, the medical, if we are going to 
keep these people in the services after we train them, then we 
have got to adequately provide for them, make sure these 
services are available to them, or you are going to lose them.
    I talked to a young Navy guy the other day on the airplane. 
I learn a lot of things flying back and forth. And he is 
getting out after 10 years. He is concerned about the change of 
life on board ship, and so is his wife. He is concerned about 
how long he is going to be gone. I didn't realize how long 
these people are gone before they are back home. He says he has 
another baby coming. He says it is not going to happen what 
happened with the last one. And they are getting paid bonuses. 
He is in a technical field. Where we pay bonuses to them to 
stay, companies are paying bonuses for them to get out and come 
back in and work and do the work on the other side.
    So we are in a tough situation. This quality-of-life thing, 
we all give lip service to it, but we have got to do more than 
that. We have got to--these are real priorities to have the 
right young people there, or people, generally, that can do the 
missions that we are asking them to do.
    So I would encourage you to continue this focus. I know 
Chairman Vucanovich, when she was the Chair, this was a big 
push with her. I would like to continue that. And I really want 
to thank you. I very much appreciate the service that all of 
you do. We have jousted sometimes, but it is not done in any 
way other than to accomplish the same goals that we all have, 
and we look forward to working with you on things, and thank 
you all for your service.

    [Clerk's note.--Questions for the record submitted by 
Chairman Hobson.]

                            OVERALL FUNDING

    The Navy military construction budget is down $143 million, or 16 
percent, from last year's enacted levels.
    Question. What is the rationale for this reduction in funding and 
will we see this trend continue?
    Answer. This reduction in the Department of the Navy military 
construction is due to a combination of factors. The Department of 
Defense decided to remove contingency funds from all construction 
accounts. This accounts for $39 million of the $143 million. Another 
$20 million results from a Department of Defense decision to use prior 
year unobligated funds to finance a portion of the Fiscal Year 2001 
request. While we weren't able to fund the remaining difference, the 
amount of funds included in the Navy's military construction budget 
request to the Congress has generally increased over the last few 
budget submissions. We are hopeful that this trend will continue.

                               2+0 WAIVER

    The Navy's proposed Fiscal Year 2001 bachelor housing projects 
reflect a 2+0 construction standard, rather than the 1+1 standard.
    Question. Why has the Navy deviated from the 1+1 standard and can 
this be viewed as a break in your commitment to the quality of life to 
the Sailors?
    Answer. In our continued commitment to improve the quality of life 
(QOL) of our Sailors, the Navy is looking at ways to address one of our 
most pressing QOL challenges--the large population of enlisted Sailors 
who now live aboard ship when in homeport. We are developing a Homeport 
Ashore program that will provide these Sailors accommodations, either 
in a BEQ or in the community. We are already trying this at Pearl 
Harbor. We plan to have a full implementation plan by this summer.
    The Navy remains committed to providing housing that meets the 1+1 
barracks construction standards. As a first step in providing ashore 
living accommodations to shipboard Sailors, the Navy was granted a 
waiver to construct/renovate permanent party enlisted barracks at the 
2+0 standard. Once we have satisfied our housing requirement at the 2+0 
standard, the Navy will proceed to construct facilities until all 
permanent party Sailors are provided a private sleeping room.

                       LEMOORE NAVAL AIR STATION

    Last year this Subcommittee expressed its concern about the living 
conditions at Lemoore Naval Air Station.
    Question. Can you please share with us how this budget request 
addresses our concerns and any future plans or schedules for addressing 
the critical quality of life conditions at Lemoore?
    Answer. The Navy has accelerated an $8.3 million Bachelor Quarters 
project that was originally planned for Fiscal Year 2002. The Fiscal 
Year 2001 budget also requests $28 million for the replacement of 160 
family housing units. The Chief of Naval Operations' Unfunded 
Requirements List, submitted to the Congress in February 2000, includes 
two Lemoore projects: a $10.1 million Bachelor Quarters (programmed for 
Fiscal Year 2004) and an additional $20.1 million family for housing 
replacement construction, that is not presently programmed.
    The Future Years Defense Plan also contains a new Corrosion Control 
Facility in Fiscal Year 2002. An aggressive planning effort is 
currently underway to define additional requirements for submission as 
part of the Fiscal Year 2002 budget request.
    The Department is developing an infrastructure improvement plan for 
NAS Lemoore based on Commander in Chief, U.S. Pacific Fleet's 
recommendations and will submit a comprehensive report to the committee 
no later than June 1, 2000.

                        GENERAL OFFICER QUARTERS

    Question. What efforts have you taken to assure there is no further 
abuse of operation and maintenance funding for maintenance and repair 
of general and flag officer quarters?
    Answer. We are updating instructions that tighten the controls and 
reinforce existing policy on the management, operation, and maintenance 
of general and flag officer quarters. We have also initiated a funds 
management review to identify and correct systemic deficiencies that 
contributed to this problem.

                       FAMILY HOUSING MAINTENANCE

    Question. Why has the Navy transferred $37 million from the family 
housing maintenance accounts into the personnel accounts?
    Answer. The Navy transferred funds from the family housing 
operations and maintenance account into the personnel accounts due to 
the planned privatization of 3,941 Navy-owned homes through the end of 
Fiscal Year 2001 as part of the Navy's family housing public/private 
venture (PPV) initiative. The family housing funds will no longer be 
needed to operate and maintain the privatized homes. The amount of the 
transfer equates to the estimated Basic Allowance for Housing (BAH) 
payment to the military families who will occupy the privatized homes.

                              BRAC FUNDING

    The Navy's share of the BRAC budget has been declining annually 
from a peak of $2.4 billion in Fiscal Year 1996 to $202 million in 
Fiscal Year 2000. However, the Navy BRAC budget request more than 
doubles to $477 million in Fiscal Year 2001.
    Question. I understand that most of the Fiscal Year 2001 funds are 
needed for environmental cleanup at closed bases. Please explain the 
need for this sudden increase in BRAC funds for Fiscal Year 2001.
    Answer. During the Fiscal Year 2000 budget deliberations within the 
Department of Defense, Navy BRAC environmental funds were shifted from 
Fiscal Year 2000 to Fiscal Year 2001 as part of a request for Advanced 
Appropriation in the construction accounts. Congress did not approve 
the Advanced Appropriation concept, and fully funded the Fiscal Year 
2000 military construction and family housing construction accounts. 
BRAC funding, however, was not similarly restored. Thus, the large 
increase in Fiscal Year 2001 BRAC funding represents requirements and 
funding, nearly all of which is to cleanup BRAC properties, deferred 
from Fiscal Year 2000 and added to our Fiscal Year 2001 requirements. 
These projects are closely tied to redevelopment and reuse of the 
property by Local Redevelopment Authorities and need to be completed to 
stay on schedule with redevelopment plans.
    Our Fiscal Year 2001 request retains this higher level of BRAC 
environmental funding. We consider this funding vital to support 
redevelopment efforts by towns, communities and cities adversely 
affected by base closures, and to keep the disposal of excess Navy 
property on schedule so that the savings can be applied elsewhere in 
Navy's budget. Fiscal Year 2001 represents the single largest year for 
planned property transfers for the Department of Navy.
    Although the four approved BRACs are to be completed by July 13, 
2001, the Department will continue to incur environmental restoration 
costs in the outyears.
    Question. Do you have any estimate of the annual level of Navy BRAC 
funding for this effort for Fiscal Year 2002 and beyond? Additionally, 
how long will the Navy continue to incur these costs?
    Answer. Fiscal Years 2002 and 2003 environmental restoration 
funding estimates are $133 million and $62 million, respectively. 
Fiscal Year 2004-2007 environmental restoration funding estimate is $37 
million annually. Fiscal Year 2004 and beyond environmental restoration 
funding is primarily for Long Term Monitoring (LTM) / Long Term 
Operations (LTO) of environmental restoration sites achieving Response 
Complete (RC). Annual costs for LTM/LTO will continue to be incurred 
through Fiscal Year 2058 when the last monitoring operation is expected 
to conclude.

                         CONTINGENCY REDUCTION

    Question. If this reduction hinders program execution and projects 
need to be deferred or canceled due to a lack of funds, how will the 
Navy determine which project to defer or cancel?
    Answer. If the contingency reduction hinders program execution and 
projects need to be deferred or canceled, the Department of the Navy 
will look at both projected award dates and mission priorities to 
determine which projects will be deferred or canceled. To date no list 
has been prepared.

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    The Department proposes a Basic Allowance for Housing (BAH) plan 
that will completely eliminate out-of-pocket housing expenses for 
military members by 2005.
    Question. How will this initiative impact the Navy's family housing 
accounts?
    Answer. The impact of this initiative on the family housing 
accounts is uncertain at this time. We have initiated efforts to 
analyze the long-term impacts of this initiative on the supply and 
demand for military housing. Although we may be able to model outcomes 
based on assumptions about supply and demand, the real effects will 
only become apparent over time as we see how both individual 
preferences and market forces react. Our objective is to strike the 
appropriate balance between reliance on the private sector and, where 
necessary, the provision of Government quarters through either public/
private ventures or traditional military construction.
    Question. Increasing the BAH will reduce the demand for on-base 
housing, what is the Navy's plan for re-evaluating its on-base housing 
requirements and deficits?
    Answer. The impact of this initiative on the Navy's on-base housing 
requirements and deficits is uncertain at this time. We expect that 
there will be a reduction in demand as families are better able to 
afford private sector housing. We have initiated efforts to analyze the 
long-term impacts of this initiative on the supply and demand for 
military housing. We are also working with the Office of the Secretary 
of Defense and the other Services to update the housing affordability 
criteria that would be used to determine family housing requirements. 
These criteria would be incorporated in housing requirement surveys and 
market analyses that are the vehicles to identify housing deficits or 
surpluses. Our objective is to strike the appropriate balance between 
reliance on the private sector and, where necessary, the provision of 
Government quarters, through either public/private ventures or 
traditional military construction.

                          ENHANCED-USE LEASING

    The Department is continuing efforts to reduce base operating 
support costs. Enhanced-use leasing is one element of this effort.
    The Air Force is currently working on a concept at Brooks AFB in 
Texas to reduce infrastructure operations and maintenance costs through 
internal business process engineering and land transactions with the 
City of San Antonio.
    Similarly, the Navy now has authority through special legislation 
to develop Ford Island at the Pearl Harbor Naval Complex. The 
envisioned proposal will comprise of both the selling and leasing of 
land.
    Question. Can you please bring us up to date on the current plans 
and any estimated schedule for developing Ford Island?
    Answer. One of the Department's goals under the Ford Island (FI) 
initiative is to implement a business-like approach in completing the 
development, based on input from private sector developers. Since 
enactment of the Ford Island legislation in the fall of 1999, the 
Department has been finalizing the FI facility requirements, 
establishing guiding principles, and defining a process for acquiring 
private sector input to complete the required Master Plan and begin the 
development.
    In the near term, the Department plans to issue a Request for 
Expressions of Interest (RFEI), and to begin the preparation of a 
programmatic Environmental Impact Statement (EIS). The EIS and REFI 
processes will be used to acquire developer and community input for use 
in guiding the overall development process. Construction under the new 
legislative authority will commence after the Master Plan and EIS are 
complete, and we have provided the required notification to Congress.
    Question. What recommendations would you have for any new enhanced-
use leasing authority?
    Answer. We concur with the legislation that OSD has proposed. We 
recommend the expansion of the types of in-kind consideration that the 
military departments may accept to include services both on and off the 
leased premises. We also recommend that military departments be 
authorized to retain the rents rather than the current requirement to 
deposit rents into a special account and have them available for 
expenditure only in the next fiscal year upon appropriation.

                         UTILITY PRIVATIZATION

    The Department has undertaken and aggressive utility privatization 
effort. The goal is to privatize all utility system unless uneconomical 
or exempt for security reasons by September 30, 2003.
    Question. What progress has been made by the Navy in achieving this 
goal?
    Answer. The Department of the Navy identified 998 Navy and Marine 
Corps utility system at 123 installations worldwide to be examined for 
privatization. As of March 1, 2000, we are proceeding with 
privatization efforts on 888 systems, after having removed from 
consideration overseas utility systems that are owned by the host 
country or are otherwise precluded because of current treaties or 
agreements. We have issued Requests for Interest (RFIs) for 78 percent 
of our utility systems, and have so far received responses on 47 
percent. We are on track to complete the RFI process by September 30, 
2000. Actual solicitations, or Request for Proposals (RFPs), have been 
issued for 20 percent of our systems, which puts us on schedule to meet 
the second milestone of releasing all solicitations not later than 
September 30, 2001.
    Question. What assurances can the Navy provide that the conveyance 
of utility systems will not result in a substantial increase in long-
term utility costs?
    Answer. The Department of the Navy plans to use Department of 
Defense economic analysis methodology to compare costs of ownership to 
assure compliance with the requirements of the authorizing statute 10 
U.S.C. 2688. We will include contract terms and conditions to protect 
the Department's long term economic interest.

                 PRIVATIZATION OF UNACCOMPANIED HOUSING

    In addition to family housing privatization, the Military Housing 
Privatization Initiative provides for the privatization of 
unaccompanied housing. However, no Service has yet launched a project 
for unaccompanied housing. It is my understanding the Navy and Marine 
Corps are considering privatization projects for unaccompanied housing 
in the Washington, DC and Quantico, Virginia areas.
    Question. Please bring us up to date on these efforts and any 
estimated schedules?
    Answer. The Navy is evaluating the feasibility of a Bachelor 
Quarters PPV project for Naval District Washington (NDW). The proposed 
scope is a 200 unit, apartment-style project intended for single 
Sailors in paygrades E-5 and E-6 stationed in the Washington D.C. area.
    The Navy is also evaluating the feasibility of a Bachelor Quarters 
privatization effort at Mitchel Field, Long Island, NY as part of a 
combined bachelor and family housing PPV project.
    The Marine Corps is exploring the possibility of privatizing a 
Bachelor Officer Quarters at The Basic School in Quantico, Virginia. 
The Marine Corps is currently conducting industry interviews.
    Question. What are the obstacles to the privatization of 
unaccompanied housing?
    Answer. The feasibility of unaccompanied housing privatization is 
extremely dependent on location-specific variables, such as 
installation requirements, housing allowances, local real estate 
conditions, etc. One potential obstacle is the legislative distinction 
between family and unaccompanied housing privatization. The separation 
of accounts may limit Service flexibility in planning and executing 
joint family/bachelor housing privatization projects when there is a 
need for both types of housing.
    Question. Are there any other unaccompanied housing privatization 
projects planned? If not, why not? If projects are planned, what are 
they, and what is the estimated schedule?
    Answer. There are no other BQ projects planned at this point. We 
are continuing to explore the potential use of unaccompanied housing 
privatization in particular to support the Navy's new initiative to 
berth shipboard Sailors ashore in homeport. Additional projects may be 
developed if they are cost effective and meet policy objectives.

                            SIGONELLA, ITALY

    Question. What is the current status of providing additional family 
housing at Sigonella Naval Air Station in Italy?
    Answer. A major lease-construction project was awarded in November 
1997 near the town of Mineo. This project will provide 404 three- and 
four-bedroom family housing units and a community center. A formal 
groundbreaking ceremony was conducted on May 6, 1998. The first 140 
units and a community center were completed in September 1999 and are 
currently occupied. A second 140 units were accepted on January 17, 
2000 and are currently being assigned to families stationed at 
Sigonella. The final 124 units will be completed by March 2001.
    A second lease-construction project near Belpasso was awarded in 
September 1999. This project will build 526 three- and four-bedroom 
family housing units and a community center, and should eliminate the 
longstanding family housing deficit. The estimated completion for the 
first 184 units is December 2001, with completion of all units by March 
2003.
    NAS Sigonella MILCON plan calls for the demolition of 88 of the 98 
on-base family housing units and the replacement of the remaining 10 
for occupancy by Key and Essential officers. The replacement project is 
proposed for Fiscal Year 2002.

                  ARIZONA: CAMP NAVAJO NAVY DETACHMENT
                  MAGAZINE MODERNIZATION ($2,940,000)

    The Form 1391 mentions Phase III of this project is planned in 
Fiscal Year 2002, but the Form 1390 does not list it.
    Question. When is Phase III planned and what is its projected cost?
    Answer. Phase III was originally planned for Fiscal Year 2002. 
However, C4 missile components are now being deactivated, thus reducing 
the requirement for storage magazines. The Phase III project has been 
deferred beyond the Future Years Defense Plan.

                 ARIZONA: YUMA MARINE CORPS AIR STATION
               COMBAT AIRCRAFT LOADING APRON ($8,200,000)

    The Form 1391 shows a contract award date of 8/01 with a design 
completion date of 4/02 and a construction start date of 5/02.
    Question. Why is funding requested in Fiscal Year 2001 when design 
completion and construction award is not scheduled until Fiscal year 
2002?
    Answer. We expect to award this project in the second half of 
Fiscal Year 2001. The project will be executed utilizing a Design Build 
acquisition strategy.
    The Form 1391 indicates ordnance is currently loaded and unloaded 
along the flightline under a CNO waiver.
    Question. How long have operations been conducted under the waiver?
    Answer. MCAS Yuma has operated with this waiver since 1978.
    Question. What is the estimate of savings in design costs by 
accomplishing this project using a standard or definitive design? Where 
was this design most recently used?
    Answer. We will be utilizing the Design Build Acquisition strategy 
vice a standard or definitive design strategy for this project. This 
acquisition strategy, frequently utilized with Military Construction 
projects, normally results in savings due to the reduced amount of 
costly change order requests. The precise savings are not available.

            CALIFORNIA: CHINA LAKE NAVAL AIR WEAPONS STATION
                  PROPELLANTS AND EXPLOSIVE LABORATORY

    For several years, the Navy has planned to construct a propellants 
and explosives laboratory at the China Lake Naval Air Weapons Station 
to replace a series of 35 outmoded facilities. The planned construction 
date had been changed a number of times already.
    Question. What are the current plans for constructing this 
facility?
    Answer. The project is programmed in Fiscal Year 2003.
    Question. Does the Department of Defense still regard this project 
as consistent with China Lake's energetic materials mission?
    Answer. Yes, the Naval Air Systems Command requires this facility 
to provide energetic material support for timely research and 
development through pilot plant operation supporting delivery of rocket 
motors, warheads, bombs and submunitions to the fleet for current 
weapon systems and new technology programs. This project will allow 
NAWCWD China Lake to more efficiently carry out its existing energetic 
materials mission.
    Question. Would constructing the laboratory at China Lake now save 
the Navy money? If so, how much?
    Answer. The project will demolish buildings that are in extremely 
poor condition, with a lifecycle cost of $40.6 million to repair, 
maintain and operate over the next 25 years. Cost of the MILCON and 
operation over the next 25 years is $27.6 million. Lifecycle cost 
savings to the Navy is $13.0 million. Savings of constructing the 
project in Fiscal Year 2001 versus Fiscal Year 2003 will depend on 
inflation rates and construction industry trends.

                 CALIFORNIA: LEMOORE NAVAL AIR STATION
                BACHELOR ENLISTED QUARTERS ($8,260,000)

    Last year this Committee directed the acceleration of quality of 
life projects at Lemoore NAS. The Form 1390 shows this project and 
another Bachelor Enlisted Quarters project programmed after Fiscal Year 
2002.
    Question. What are the Navy's plans for other quality of life 
projects at Lemoore NAS?
    Answer. The Fiscal Year 2001 budget also requests $28 million for 
the replacement of 160 family housing units. The Chief of Naval 
Operations' Unfunded Requirements List, submitted to the Congress in 
February 2000, includes two Lelmoore projects: the $10.1 million 
Bachelor Quarters programmed for Fiscal Year 2004 and an additional 
$20.1 million for family housing replacement construction, not 
presently programmed. The Future Years Defense Plan also contains a new 
Corrosion Control Facility in Fiscal Year 2002. An aggressive planning 
effort is currently underway to define additional requirements for 
submission as part of the Fiscal Year 2002 budget request.
    The Department is developing an infrastructure improvement plan for 
NAS Lemoore based on the Commander in Chief, U.S. Pacific Fleet's 
recommendations and will submit a comprehensive report to the committee 
no later than June 1, 2000.
    Question. Does this project construct a new facility or replace an 
existing facility? If replacement, will this project replace the worst 
existing bachelor enlisted quarters at Lemoore NAS? If not the worse, 
why were these barracks selected for replacement?
    Answer. This project constructs a new facility to address a 
quantity deficiency. It will not replace any existing barracks.
    Question. After completion of this project, what will be the 
remaining unaccompanied enlisted permanent party deficit at Lemoore 
NAS?
    Answer. One additional barracks will be required to accommodate 90 
junior enlisted, permanent party personnel. This barracks is currently 
programmed in Fiscal Year 2004 and included on the Chief of Naval 
Operations' Unfunded Requirements List.
    Question. Please explain the 2+0 modules. The Navy plans to 
eventually reach the 1+1 standard. Will the 2+0 modules meet the 1+1 
standard in the future or will they have to be renovated?
    Answer. The 2+0 module consists of two rooms each with their own 
bathroom and service area. Each room is designed to house two junior 
enlisted or one senior enlisted Sailor. The 2+0 rooms will not need to 
be renovated, except to remove the second walk-in closet, in the future 
to accommodate only one occupant.

             CALIFORNIA: NORTH ISLAND NAVAL AVIATION DEPOT
           COMPONENT REPAIR CLEAN ROOM FACILITY ($4,340,000)

    Question. What savings are realized by the use of prefabricated 
insulated walls, floor and ceiling panels? Why aren't they used in more 
projects?
    Answer. The subject project is a high-end clean room that will 
provide a clean area for testing hydraulic components. The use of 
prefabricated walls, floors, and ceiling panels is an established clean 
room industry practice. The savings realized by using the modular 
system were anticipated when the cost estimate was developed. These 
savings are significant, as clean rooms are very specialized; 
therefore, construction of one from scratch would be much higher. 
However, these savings are difficult to quantify.
    The Navy normally evaluates applicability and cost of prefabricated 
buildings, mezzanines, sound enclosures, wall panels, and other 
building components. These are often specified, when appropriate, for 
construction projects.

             DISTRICT OF COLUMBIA: MARINE BARRACKS, 8TH & I
                BACHELOR ENLISTED QUARTERS ($17,197,000)

    The Form 1391 mentions the demolition of condemned apartment 
buildings.
    Question. What is the cost of this demolition?
    Answer. The demolition identified with this project does not carry 
a cost to the Marine Corps. In accordance with the March 1999 
Memorandum of Understanding between the District of Columbia Housing 
Authority (DCHA) and the USMC, the DCHA will demolish the buildings on 
the site and convey to the United States, for $500,000, the site free 
of buildings, structures, and debris.
    There are three buildings to be razed. All are multistory apartment 
buildings, currently vacant and unsuitable for continued use.

                 HAWAII: KANEOHE BAY MARINE CORPS BASE
                BACHELOR ENLISTED QUARTERS ($18,400,000)

    The Form 1390 mentions another Bachelor Enlisted Quarters project 
programmed after Fiscal Year 2002.
    Question. Will these projects replace all of the inadequate 
Bachelor Enlisted Quarters at Kaneohe Bay MCB? If not, what is the 
plan, by project and fiscal year, for their replacement?
    Answer. Although these projects will not replace all of the 
inadequate room configured enlisted quarters at Kaneohe Bay MCB, the 
current President's Budget reflects the following MILCON projects:

                        [In millions of dollars]
------------------------------------------------------------------------
            Fiscal year                    Project No.          Amount
------------------------------------------------------------------------
2004...............................  P-749.................       15.655
2005...............................  P-748.................       21.906
2005...............................  P-750.................       21.906
------------------------------------------------------------------------

    Question. After completion of this project, what will be the 
remaining unaccompanied enlisted permanent party deficit at Kaneohe Bay 
MCAS?
    Answer. Upon completion of this project, the deficit of adequate 
space for permanent party will be 2,903 spaces.

                   HAWAII: PEARL HARBOR NAVAL COMPLEX
            RELOCATE SEAL DELIVERY VEHICLE TEAM ($14,200,000)

    The Special Operations Command currently has a construction project 
programmed in the outyears to relocate Seal Delivery Vehicle Team 
(SDVT) ONE from Ford Island to Pearl City Peninsula. This project also 
relocates Seal Delivery Vehicle Team (SDVT) ONE from Ford Island to 
Pearl City Peninsula.
      Question. Why are there two separate projects planned and why 
couldn't they be combined into one single project? What cost savings 
would occur if they were combined?
    Answer. These two projects were originally a single project 
designed by the same Architect/Engineer but funded by two separate 
sources: P-533 funded by Navy Military Construction and P-433 funded by 
Defense Wide Military Construction. Although P-433 was deferred by one 
year due to higher competing priorities, it will still be included as 
an option to the contract for P-533, to be executed when funds are 
authorized and appropriated. This approach will achieve the cost 
savings desired.

                   HAWAII: PEARL HARBOR NAVAL STATION
                BACHELOR ENLISTED QUARTERS ($16,500,000)

    Question. After completion of this project, what will be the 
remaining unaccompanied enlisted permanent party deficit at the Pearl 
Harbor Naval Station?
    Answer. Our present estimate of the long-term deficit is 210 
spaces. However, the Navy is developing a plan to implement its 
Homeport Ashore initiative to provide ashore living accommodations to 
Sailors currently living on ships while in homeport. When we complete 
that plan this summer, we will be able to better identify the total 
unaccompanied housing deficit.
     Question. What is the Navy's plan (by fiscal year and dollar 
amount) to provide adequate living quarters at the Pearl Harbor Naval 
Station?
    Answer. Although not fully meeting our requirement, the President's 
Budget Future Years Defense Plan includes replacement and modernization 
barracks projects at Pearl Harbor as follows:

Fiscal year:
    2001--P-593.........................................     $16,500,000
    2002--P-576.........................................      12,030,000
    2004--P-351.........................................      22,040,000
    2004--P-467.........................................       6,706,000
    2005--P-444.........................................      20,034,000

               ILLINOIS: GREAT LAKES NAVAL TRAINING CENTER
                            RECRUIT BARRACKS

    There are two projects with the same contract award and 
construction dates.
    Question. Why weren't these projects combined into one large 
contract?
    Answer. It is the Navy's intention to package these two Recruit 
Barracks projects into one construction contract.
 Maryland: Indian Head Naval Explosive Ordnance Disposal Tech Division
       joint service eod equipment support facility ($6,430,000)
    The Form 1391 mentions this facility is projected to generate 
annual savings resulting from improved efficiency.
    Question. What are the projected savings?
    Answer. It is estimated that an average of $2.0 million per year 
will be saved by moving the equipment support functions from the 
existing facilities into the new facility provided by this project.

                NEW JERSEY: EARLE NAVAL WEAPONS STATION

    Last year this Committee directed the project for Pier 2 to be 
accelerated and included in this year's budget request.
    Question. When is the project scheduled and why wasn't it 
accelerated as directed?
    Answer. This project is currently programmed in Fiscal Years 2002 
and 2003. The cost of this project could not be accommodated within our 
limited Fiscal Year 2001 budget.

             NORTH CAROLINA: CAMP LEJEUNE MARINE CORPS BASE
                BACHELOR ENLISTED QUARTERS ($14,300,000)

    Question. After completion of this project, what will be the 
remaining unaccompanied enlisted permanent party deficit at Camp 
Lejeune MCB?
    Answer. Upon completion of this project, the base-wide deficit of 
adequate space for bachelor enlisted permanent party will be 12,358 
spaces.
    Question. What is the Navy's plan (by fiscal year and 
dollar amount) to provide adequate living quarters at Camp 
Lejeune MCB?
    Answer. Although not fully satisfying our requirements, the 
Marine Corp's plan, as presented in the President's Budget, is:

                        [In millions of dollars]
------------------------------------------------------------------------
             Fiscal year                    Project No.         Amount
------------------------------------------------------------------------
2003.................................  P-101...............       16.674
2003.................................  P-135...............       13.931
2003.................................  P-893...............        8.846
2004.................................  P-151...............       14.374
2005.................................  P-963...............       18.370
------------------------------------------------------------------------

                  VIRGINIA: NORFOLK NAVAL AIR STATION

                 AIRCRAFT MAINTENANCE HANGAR ($13,300)

    The Form 1391 states there are three additional projects to 
complete the hangar plan for Norfolk NAS.
    Question. When are these projects planned and what is the cost of 
each one?
    Answer. The three additional projects to complete the hangar plan 
for Norfolk NAS are:

Fiscal year
    2001--P-522.........................................     $11,800,000
    2002--P-523.........................................       9,624,000
    2004--P-525.........................................      11,491,000

       VIRGINIA: QUANTICO MARINE CORPS COMBAT DEVELOPMENT COMMAND
                PHYSICAL TRAINING FACILITY ($8,590,000)

    According to the Form 1391, the current physical training facility 
is in a deteriorated hangar with inadequate heating and ventilation. 
This hangar also houses the Marine Corps Air Facility Crash Crew and 
Refueler Maintenance Shop, the Presidential Helicopter Squadron's 
Ground Support Equipment Shops, and the Marine Corps Air-Ground Museum 
Restoration Shop.
    Question. What are the plans to relocate these functions out of 
this inadequate facility?
    Answer. The Physical Training Facility is incompatible with the 
intended use of this facility and the existing condition of the 
building. The other functions are more compatible with the original use 
of this facility as an operational hangar, and they will remain in this 
facility until other projects, currently in planning, are funded to 
accommodate these requirements. Eventually, these functions will be 
relocated and the hangar will be demolished.
     Worldwide Various; Unspecified Minor Construction ($7,659,000)
    (The Information follows:)
    Provide for the record a ten-year history of amounts that have been 
requested and appropriated for unspecified minor construction.

                     FOR THE DEPARTMENT OF THE NAVY
                        [In millions of dollars]
------------------------------------------------------------------------
                                             Requested     Appropriated
               Fiscal year                    amount          amount
------------------------------------------------------------------------
1991....................................            13.3            13.3
1992....................................            12.4            12.4
1993....................................             5.0             5.0
1994....................................             5.5             5.5
1995....................................             7.0             7.0
1996....................................             7.2             7.2
1997....................................             5.1             5.1
1998....................................             9.9            11.5
1999....................................             8.9             9.9
2000....................................             7.3             8.9
------------------------------------------------------------------------

           Worldwide Various; Planning & Design ($63,335,000)
    Question. Will this funding level meet the known requirements for 
the Fiscal Year 2001 program, including the necessary work on projects 
programmed for Fiscal Years 2002 and 2003?
    Answer. Yes, we believe that we are adequately funded to support 
the Fiscal Year 2001 program and upcoming Fiscal Years 2002 and 2003.

                                BARRACKS

    Provide for the record a chart that will show the Navy's barracks 
construction program at the time the 1+1 standard was approved, and the 
current program through completion, broken out by locations in the 
U.S., in Europe, and at other overseas locations.

                     NAVY BEQ CONSTRUCTION PROGRAM AT THE TIME THE 1+1 STANDARD WAS APPROVED
                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
                                                          ------------------------------------------------------
                                                              1997       1998       1999       2000       2001
----------------------------------------------------------------------------------------------------------------
CONUS + HI...............................................    117,182     65,770    171,520    102,200    100,940
Europe...................................................     16,000
Other....................................................     24,100  .........  .........     30,280     15,900
                                                          ------------------------------------------------------
      Total..............................................    157,282     65,770    171,520    132,480    116,840
----------------------------------------------------------------------------------------------------------------


                                      CURRENT NAVY BEQ CONSTRUCTION PROGRAM
                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                               Fiscal year--
                                                          ------------------------------------------------------
                                                              2001       2002       2003       2004       2005
----------------------------------------------------------------------------------------------------------------
CONUS + HI...............................................    127,060     74,081    115,993    161,143    150,798
Europe...................................................     15,000      5,956     37,800
Other....................................................  .........      2,510
                                                          ------------------------------------------------------
      Total..............................................    142,060     82,547    153,793    161,143    150,798
----------------------------------------------------------------------------------------------------------------

    When the Navy developed its plan to achieve the 1+1 standard, it 
assumed a BEQ construction program that would average $120 million per 
year between Fiscal Year 2006 and 2013, at which point the standard 
would be met. The Navy is developing a plan to implement its Homeport 
Ashore initiative that would provide ashore living accommodations for 
shipboard Sailors. Therefore, the ending fiscal year and average annual 
construction funding may change as that plan is finalized.

                        FAMILY HOUSING INVENTORY

    Provide for the record a chart that will show the average number of 
family housing units supported for Fiscal Years 1998, 1999, and 2000, 
and those expected to be supported in Fiscal Year 2001, broken out into 
government owned (U.S. and foreign), leased (U.S. and foreign), and 
privatized under Public-Private Ventures.

------------------------------------------------------------------------
                                    1998      1999      2000      2001
------------------------------------------------------------------------
Gov't Owned:
    U.S.........................    80,205    77,639    73,256    70,745
    Foreign.....................     8,048     8,040     7,870     7,913
                                 ---------------------------------------
      Total Gov't Owned.........    88,253    85,679    81,126    78,658
                                 =======================================
Leased:
    U.S.........................     3,884     4,333     4,606     4,419
    Foreign.....................     1,616     1,864     2,615     3,027
                                 ---------------------------------------
      Total Leased..............     5,500     6,197     7,221     7,446
                                 =======================================
Privatized (includes existing          585       585     1,861     7,568
 and new units).................
------------------------------------------------------------------------


               NATO PRECAUTIONARY PREFINANCING STATEMENTS

    Submit for the record a copy of the precautionary prefinancing 
statements that have been submitted to the NATO infrastructure 
committees for each European project for which funds were appropriated 
for Fiscal Year 1999, and for each such project requested for Fiscal 
Year 2000.
    The Department of the Navy has not had European projects for which 
funds were appropriated for either Fiscal Year 1999 or Fiscal Year 
2000.
    Question. Provide an explanation for any project for which 
statements have not been submitted.
    Answer. None of the projects in this year's Military Construction, 
Navy budget are being considered for NATO funding.

                     BRAC ENVIRONMENTAL RESTORATION

    Question. What is the Navy's current estimate of the annual funding 
requirement for BRAC environmental restoration beginning in Fiscal Year 
2002?
    Answer. Fiscal Year 2002 environmental restoration funding estimate 
is $133 million. Fiscal Year 2003 environmental restoration funding 
estimate is $62 million. Fiscal Year 2004-2008 environmental 
restoration funding estimate is $37 million annually. Fiscal Year 2004 
and out environmental restoration funding is primarily for Long Term 
Monitoring (LTM)/Long Term Operations (LTO) of environmental 
restoration sites achieving Response Complete (RC).

                    CHILD CARE CENTERS PRIVATIZATION

    Question. Bring us up to date with the Navy's efforts to outsource 
child development center services in San Diego.
    Answer. The goal of the San Diego outsourcing study was to 
determine if the private sector could manage the current program 
utilizing on- and off-base accredited centers and on- and off-base 
certified, in-home care to expand the availability of top quality child 
care within programmed resources. The basic premise was to expand 
quality capacity within current budget in order to meet the Department 
of Navy (DON) and Department of Defense (DoD) requirements.
    In September 1998, the Commander, Southwest Region completed a 
child care commercial activities (A76) study of 10 Navy and 2 Marine 
Corps bases in California and Nevada. The government won the bid and 
successfully implemented the most efficient organization (MEO), 
resulting in substantial efficiencies. The findings were most 
encouraging, showing that Navy's internally managed program was more 
than competitive with outside child care agencies.
    As a result of the successful competition, in December 1999, OSD 
was notified that, like the Army and Air Force, the Department of Navy 
intends to use strategic sourcing to streamline child development 
programs and will exempt DoN child care programs from further A76 
studies. MEOs will still be required but they will no longer have to 
compete with the private sector. Savings will be applied to child care 
expansion programs to meet DoD potential need requirements by Fiscal 
Year 2003.

                            HOUSING DEFICITS

    Question. What is your current worldwide family housing deficit?
    Answer. As of September 30, 1999, the worldwide family housing 
deficit was 10,500 homes for the Navy and 10,700 homes for the Marine 
Corps.
    Question.What are your three largest deficits, and how large are 
they?
    Answer. The Navy and Marine Corps locations with the largest 
projected deficits are as follows:

Navy:                                                              Units
    San Diego, CA................................................. 5,068
    Norfolk, VA................................................... 1,883
    Everett, WA...................................................   587
Marine Corps:
    Camp Pendleton, CA............................................ 3,483
    Camp Lejeune, NC.............................................. 1,836
    Marine Corps Base, Hawaii..................................... 1,084

                             WAITING LISTS

    Question. How many families are on waiting lists for government-
provided family housing, and what is the average waiting time?
    Answer. As of September 30, 1999, there were approximately 18,500 
Navy families on waiting lists for family housing. For the Marine 
Corps, there were 3,732 families awaiting assignment to family housing.
    The average waiting times for assignment to a family housing vary 
from a few weeks to several years depending on a variety of factors. 
The waiting list reflects the quality, cost and availability of 
housing, commuting distances, surrounding support facilities, and 
availability of good schools.

                 NAVAL AND MARINE CORPS RESERVE PROGRAM
      GEORGIA: ATLANTA NAVAL AIR STATION--FITNESS CENTER ADDITION 
                              ($2,650,000)

    Question. Are adequate physical fitness facilities currently 
available for active duty personnel? If not, why isn't this an active 
duty project?
    Answer. Adequate physical fitness facilities are not currently 
available for active-dury personnel. The active-duty personnel at NAS 
Atlanta, however, are TARs (Training and Administration of Reserves) 
and, therefore, Reservists.
    NAS Atlanta is a Naval Reserve base, which is why this project is 
programmed under the MCNR program.

    [Clerk's note.--End of questions for the record submitted 
by Chairman Hobson.]
                                           Thursday, March 9, 2000.

                      DEPARTMENT OF THE AIR FORCE

                                 WITNESS

RUBY B. DeMESME, ASSISTANT SECRETARY OF THE AIR FORCE (MANPOWER, 
    RESERVE AFFAIRS, INSTALLATIONS AND ENVIRONMENT)

                       STATEMENT OF THE CHAIRMAN


    Mr. Hobson. The committee will come to order. This 
morning's hearing will focus on the Air Force's military 
construction program, including family housing, base 
realignment and closures, and the Guard and Reserve.
    Our witnesses this morning are Ms. Ruby DeMesme, Assistant 
Secretary of the Air Force for Manpower, Reserve Affairs, 
Installations and Environment, and Major General Ernest 
Robbins, the Air Force Civil Engineer.
    Madam Secretary, it is a pleasure to have you here. General 
Robbins, this is your first time appearing as the Air Force 
Civil Engineer but we have met a couple of times before, so we 
welcome you to the committee.
    General Robbins. Thank you.
    Mr. Hobson. We look forward to your testimony on the 
construction programs in the Air Force, the Air National Guard 
and the Air Force Reserve.
    John, do you have any comments that you would like to make 
at this time?
    Mr. Olver. Thank you, Mr. Chairman.
    Very briefly, welcome, Madam Secretary, again. We 
appreciate all of you being here to be with us today.
    This looks like a difficult budget for the Air Force. You 
have a serious backlog in a variety of ways that we have been 
dealing with over time, a lot of competition through limited 
resources and I am sure that some of the problem with this is 
some of the excess facilities that still exist in place. I 
imagine we will hear about that.
    I am interested in the Air Force's progress on the housing 
privatization and how, since we are having some proposals for 
additional privatization, how you are evaluating the prospects 
for projects for the privatization.
    So those are my general interests and thank you for being 
here today.
    Mr. Hobson. Madam Secretary, we would appreciate it if you 
would hit the highlights of what you want our committee to hear 
and then, General, if you have anything you want to say and 
then we will open it up for questions.
    And before we go on, just in case I forget it, our next 
hearing is going to be Wednesday, March 15 at 9:30. The subject 
will be military housing privatization. For those members who 
might want to leave early today, we hope you will be aware of 
that schedule. I think this is something that almost 
everybody--I know you have a keen interest in, Norm, and some 
of our other members--as we look at it because you all have a 
couple of things in your districts that are moving along.
    Let me say one other thing before we start. I have received 
a request from the Air Force, not at my bidding. I want to make 
it very clear this was not at my bidding. As a matter of fact, 
I had pushed it to the bottom because I did not want it to 
appear that I was trying to do my own base at the expense of 
anybody else's base, but there has been continued, in spite of 
that, continued efforts on behalf of Wright Patterson and the 
Air Force to include Wright Patterson, to the point of that the 
Secretary discussed it with me.
    Therefore I received a letter and I guess I am stating 
publicly that I have objection to it since everybody else wants 
to do it. I just want the committee to know that it was not 
done--and I want the Air Force and the world to know that it 
was not done at my bidding. As a matter of fact, I would have 
probably held it off longer but the Air Force seems anxious to 
continue to want to do it so I am going to accede to their 
request.
    Mr. Dicks. Mr. Chairman, we are glad to have you with us.
    Mr. Hobson. I was trying to put off some of that for a 
while.
    Mr. Dicks. You are right in there with us.
    Mr. Hobson. Yes, I know.
    Mr. Dicks. How is the reprogramming doing, Mr. Chairman?
    Mr. Hobson. We are not holding it up. We are not the ones 
holding it up. There have apparently been some questions raised 
about it but not by us.
    Mr. Dicks. Thank you.
    Mr. Hobson. That is an Army question. That is not an Air 
Force question.
    So with that, I am sorry, Madam Secretary. Go ahead.

                   STATEMENT OF HON. RUBY B. DEMESME

    Ms. DeMesme. Good morning, everybody, Mr. Chairman and 
members of the committee. We are pleased to be here this 
morning to present our Fiscal Year (FY) 2001 military 
construction (MILCON) program. And I especially want to thank 
the members of the committee for your continuing support of our 
uniformed members and their families.
    Last year was a busy and eventful year. We were highly 
successful in accomplishing our missions. Our airmen performed 
superbly both here in the United States and abroad. We are 
cognizant that we must have adequate facilities and programs in 
place to take care of our people and we are trying to do that 
by balancing the needs of the total force and minimizing any 
adverse impacts on unit readiness, on our modernization and our 
quality of life programs. I have submitted my written statement 
for the record and will take just a few moments to highlight a 
few areas of the FY 2001 total force program submission.
    Our $1.65 billion MILCON budget request is necessary to 
support our readiness objectives for our highly mobile force. 
This request includes support for the F-22 fighter, for the C-
17 Airlifter, the B-2 bomber, construction of a training range 
in Idaho and many more. We appreciate your support of last 
year's Kosovo supplemental bill that enabled us to fund more 
quality of life, force protection and environmental projects 
for our overseas locations, as well. We will continue to work 
with our European and Asian partners to burden-share the cost 
of these facilities to the maximum extent possible.
    We are doing a lot for our people but we need to do more in 
the quality of life area to address recruiting and retention 
challenges. Through various surveys and one-on-one discussions, 
we know that our military family housing program is among the 
top two reasons that our people stay with us. Our military 
housing plan contains both additional MILCON and housing 
project privatization initiatives. This year's housing program 
includes six new privatization initiatives for a total of 6,921 
additional units.
    We are also making progress with our utility privatization 
program. So far, we have identified 435 of our 640 systems as 
potential privatization candidates and we have issued a request 
for proposals for 34 utility systems in January of this year. 
We will also complete evaluation of an additional 225 systems 
by December and expect to award additional systems by 2001.
    I also thank this committee for the support of the Base 
Realingment and Clousure (BRAC) No-Cost Economic Development 
Conveyance legislation. I have personally approved four 
requests to date--for Lowry Air Force Base, Colorado, Myrtle 
Beach Air Force Base, South Carolina, March Air Force Base, 
California, and Kelly Air Force Base, Texas--and we estimate 
that we will save these communities over $140 million.
    Mr. Chairman, the Secretary of Defense has called for two 
additional rounds of base closures and we really ask you to 
support this request. We are continuing to work within our 
existing authorities to reduce Air Force infrastructure but 
there is no substitute for BRAC.
    In conclusion, we realize the Air Force would not be the 
world's premier aerospace force without your strong support 
over the years. This budget submission provides a delicate 
balance among our people, readiness and modernization needs, 
and it also reflects our commitment to provide better working 
conditions all over the world for our people. Our goal is to 
establish quality Air Force installations around the world for 
our total force personnel.
    I thank you, Mr. Chairman and members of this committee, 
and we are ready to answer any questions you might have.

          Prepared Statement of the Honorable Ruby B. DeMesme



    Mr. Hobson. Norm.

                              MC CHORD AFB

    Mr. Dicks. I would just like to thank the Air Force for the 
work that they have done at McChord Air Force Base on the 
facilities for the C-17. I do know, and I will just make this 
brief comment, that there is a mission support project that is 
in the five-year plan, 2003, that is of significant concern and 
I am going to try to talk to my colleagues on the committee 
about whether we can move that project up. It is one that deals 
with the headquarters facilities at McChord Air Force Base, 
which will be the home of the C-17 on the West Coast. We 
already have C-17s coming in there. And if we went ahead with 
this project, I am told that there are three or four other 
buildings that could be shut down that are very old buildings 
and then the people could all be relocated into this new 
facility.
    So just for the record if you could just put in any comment 
you have about this particular project, I would appreciate it.
    Ms. DeMesme. We will, sir.
    The information follows:

    The Mission Support Center is a two-phase project that is 
required in support of vital missions and community activities 
at McChord AFB, WA, home of the C-17 on the West Coast. Many of 
McChord's mission and community support activities are located 
in substandard WWII and Korean wood frame buildings that are 
widely dispersed, undersized, and functionally inadequate. The 
existing Mission Support Center is a three-story masonry 
facility constructed in 1940 as an open-bay enlisted barracks 
with a dining hall. The building is sound and should be 
preserved as a historic site on McChord, AFB.
    Phase I renovates 11,750 square meters (SM) and adds 651 SM 
at a cost of $15.3 million. Phase I is included in the 
President's Budget Future Years Defense Program for fiscal year 
2003, but could be awarded in fiscal year 2001 if authorized 
and appropriated. Phase II renovates 11,272 SM at a cost of 
$14.7 million and demolishes five one-story buildings. Phase I 
and II are stand-alone, complete and useable projects. Overall, 
this two-phased Mission Support Center project will modernize a 
total of 23,022 SM in the existing facility. Also, this project 
renovates 5,574, SM of currently unusable space in the existing 
facility and demolishes five substandard (3,351 SM), WWII wood 
frame buildings throughout McChord AFB.

    Mr. Dicks. Thank you. And just one other quick point. One 
thing we are doing on the B-2 is we are going to have 
deployable shelters for them. Now that comes under the regular 
defense bill. Will there be any military construction 
implications to that in terms of housing of personnel when, 
say, you have these shelters and you are going to deploy them 
to England or you are going to deploy them to Guam and then you 
have to move the people out there? How would that work? Or they 
would just use existing facilities at the existing bases?
    General Robbins. Sir, I recall seeing no additional 
dormitories, for example, associated with those. At Andersen in 
particular, Guam, we have sufficient billeting available.
    Mr. Dicks. What is the place where we had the B-1s and the 
B-52s in England?
    General Robbins. Fairford.
    Mr. Dicks. Fairford. So if we deployed B-2 to Fairford, you 
would just use existing facilities there?
    General Robbins. Right.
    Mr. Hobson. Tell me a little bit about, since we are on the 
committee, are these permanent shelters or do they take them up 
and down? What do you do with them?
    General Robbins. In theory, you put them up, take them 
down. The folks in the logistics world are looking at off-the-
shelf modular-type structures, preengineered buildings, 
basically.
    Mr. Dicks. And then you would put them in the C-17 or C-5 
or whatever and you would fly them out there. Say there is a 
crisis in Kosovo. That way, then you could cut down----
    Mr. Hobson. Flight time.
    Mr. Dicks. Yes, you would only have a three- or four-hour 
flight in and out of----
    Mr. Hobson. The next thing, though, is you have to have a 
repair facility to do some things----
    General Robbins. And we have that, sir, in the '04, in the 
FYDP, in the '04 program for Guam. There is, in fact, a MILCON 
project for a shelter, for a maintenance facility that would be 
more permanent.
    Mr. Hobson. In Guam?
    General Robbins. In Guam.
    Mr. Dicks. So that would give you the ability to--you could 
go from Whiteman to each theater. It is a tremendous way to 
better utilize this airplane. But I just was interested to see 
if there were any MILCON implications.
    General Robbins. Right now the only MILCON is the '04 
project at Anderson.
    Mr. Dicks. Thank you.
    Is there anything left we have to do on C-17 at McChord?
    General Robbins. No, sir.
    Factual error: There is one remaining McChord C-17 new 
mission beddown project: FY02 $4.3 million, extend Nose Docks.
    Mr. Dicks. All done?
    General Robbins. All done.
    Mr. Dicks. Thank you, Mr. Chairman.
    Mr. Hobson. Allen.
    Mr. Boyd. Thank you, Mr. Chairman. First of all, I want to 
apologize. We have another--I have another subcommittee 
hearing.
    Mr. Hobson. Everybody does.
    Mr. Boyd. I am sure I am not the only one.
    Mr. Hobson. I think Norm and I have three at the same time.
    Mr. Boyd. Well, I guess some of you that are more senior 
members have that problem, Mr. Chairman. I long for that day 
when I will have that problem.

                              TYNDALL AFB

    Madam Secretary, General Robbins, thank you for coming. I 
have a couple of questions. First of all, I want to thank you 
for your cooperation and the work that you have done to help 
prepare Tyndall for the F-22. I know that you have the last 
piece of the puzzle, I think, in the current request, which is 
the maintenance facilities and the training, simulator training 
facilities.
    Ms. DeMesme. Correct.
    Mr. Boyd. Not simulator training; actual training 
facilities.
    I assume, with the runway work and the tower work that has 
been done, that this will prepare Tyndall for the arrival of 
the F-22 training squadron?
    Ms. DeMesme. Yes, sir.
    Mr. Boyd. Well again, thank you for helping us work through 
that early.
    I really wanted to shift gears and I am not sure, Madam 
Secretary, that this would be under your area but there is a 
report--it has come to my attention that the Secretary of 
Commerce is looking at granting leaseholders the right to begin 
drilling for oil and gas off the coast of Florida in the Gulf 
of Mexico. The State of Florida has done a report which says 
basically that the greatest, most significant impact of that 
would be on the training ranges of Tyndall and Eglin Air Force 
Base.
    Are you aware of that issue or have you had any 
conversation with the Department of Commerce on that issue? And 
if so, what are your reflections on it?
    Ms. DeMesme. Yes, sir, we are aware of that. A couple 
members of my staff have met with some of the folks down in 
Florida and they discussed what--we have begun to look at, what 
some of the ramifications might be or the implications for our 
training ranges. So we are not at a point yet of knowing 
exactly what the impacts will be but we are going to continue 
to work with them.
    Mr. Boyd. Okay. If you will keep us----
    Ms. DeMesme. We will keep you apprised of what is 
happening.
    Mr. Boyd. And how that comes along.
    Ms. DeMesme. We have had a couple of meetings to date so 
far.
    Mr. Boyd. The implications are wide-ranging of that kind of 
granting of a leasing right out there.
    Ms. DeMesme. Well, we are going to keep a close eye on that 
because we certainly do not want to negatively impact our 
training capability.
    Mr. Boyd. Thank you.
    The only other issue that I have has to do with the 
elimination of the contingency funds and I know one of the 
things that we have to do at Tyndall, probably the next project 
after this current round, will have to do with a weapons 
control system, which would be hopefully a design/build, and 
some of us are concerned about the elimination of the 
contingency fund and the effect of that on those kinds of 
projects.
    Would you care to speak to that? We have asked the other 
services who have come here about the elimination of the 
contingency fund and I know that this Congress last year took 
part of that money to get everything in balance at the end, but 
we did not take all of it. But you guys took the rest of it to 
meet the .38 percent across the board.
    So is this going to hamper or hinder your efforts to do the 
MILCON projects that you need to do?
    Ms. DeMesme. Certainly, sir, it has the potential of having 
a negative impact on our ability to complete our projects. As 
you know, when you are working on a project you never know 
exactly everything that is going to be needed until you get 
involved in it. It is always good to have a contingency plan 
and funds. We have used contingency funding in the past and 
they have been necessary on many occasions.
    I will let General Robbins tell you a little bit about how 
we think this might impact us, and we know it is certainly not 
the optimum way to do business. It leaves us vulnerable as we 
are trying to complete our projects.
    General Robbins. I am sure you heard the same thing from 
the Army and the Navy when they testified. We did some research 
on the past five-year history of our total program and found 
that upwards of 90 percent of our projects experienced some 
growth and therefore tapped into the 5 percent contingency. We 
have benchmarked against industry and find that they actually 
budget more than 10 percent for a typical construction project.
    We will not be able to quantify the impact on a specific 
project until it is awarded and under construction, and then 
you find design deficiencies or you find changed site 
conditions or you have bad weather, all those things that can 
happen to make a project go south on you. But we think we have 
been prudent in how we have used contingency dollars in the 
past. We found that 80 percent of that cost growth was due to 
the kinds of things I just mentioned and only 20 percent was 
due to changes in mission or changes in the equipment that had 
to go on the building, for example, the user-driven type 
changes.
    So we believe there will be an impact. We think downstream 
there will be a rolling effect where we will find ourselves 
unable to execute some projects because we have had to borrow 
money from those appropriations to pay for changes in others. 
So we do not think this is good business.
    Mr. Boyd. Thank you very much.
    Thank you, Mr. Chairman. That is all I have.
    Mr. Hobson. Sam.

                    ECONOMIC DEVELOPMENT CONVEYANCES

    Mr. Farr. Thank you, Mr. Chairman. I have very little Air 
Force property in my district. I have one tracking station on 
top of a mountain, but I do have a lot of Air Force men and 
women who attend studies at the Defense Language Institute and 
some attend classes at the Naval Postgraduate School.
    The one thing I am very interested in is your statement 
about the No-Cost EDCs. Are any of those economic development 
conveyances made in California, do you know, on the bases in 
California?
    Ms. DeMesme. At March Air Force Base we made some, sir, and 
we are looking at the other----
    Mr. Farr. And do you have housing on the bases?
    Ms. DeMesme. Yes, sir.
    Mr. Farr. Are you having to clean up the housing?
    Ms. DeMesme. We conveyed as is. We are not cleaning out any 
lead-based paint or asbestos. We convey property as is.
    Mr. Farr. Is any of this--I believe you mentioned the 
construction of homes, private construction. Is any of that 
housing on the bases that have been closed?
    Ms. DeMesme. No, sir. We will not be putting houses on 
bases that are closed.
    Mr. Farr. Well, one of the things that I have been keen 
about with the other services that have been here as each of 
you deal with base closure with those respective communities, 
with the authorities of those communities, which is proper. But 
one thing that you all have in common in California is you have 
to deal--all the services have to--with the California Office 
of Toxic Substance, which is inventing their own standards for 
what is clean.
    Unfortunately, if you enter into agreements with that 
office, I think that is going to be the most restrictive land 
covenants anywhere in the United States. I have asked the other 
services to develop boilerplate language that can be adopted 
for these easements and covenants. I encourage you to work with 
the other services, because a deal made by one will become the 
boilerplate for all of them.
    Ms. DeMesme. Yes, sir, we are. We are working very closely 
with the other services and, of course, with the toxic waste 
offices in California.
    Mr. Farr. My point is do not work with that toxic office 
independently of the other services.
    Ms. DeMesme. No, sir, we are working in partnership on 
these initiatives.
    Mr. Farr. Because I do think we need to come up with some 
kind of standard that California will accept.
    See, the difficulty is that you are going to be liable for 
the clean-up, particularly unexploded ordnances and whatever 
other clean-up. You are liable, strictly liable forever. If 
they set a standard of clean that is greater than the federal 
or the military standard, then you are liable to their office 
to their quality standards--forever. And there is a lot of 
uncertainty in that.
    I think that this is an area that is new ground, that has 
never been tested before, where a state agency is essentially 
trying to decide what is clean as far as unexploded ordnances 
are concerned, and other clean-ups. You need to invent the 
language so that all the services are going to be mutually 
accepting, without one service doing it independently of the 
others.
    The Army has created a thing called Smart Team dealing with 
unexploded ordnances. They seemed to have taken the lead and I 
would just encourage you to work with them.
    Ms. DeMesme. We accept that challenge and we will be 
working with them, sir.
    Mr. Farr. Okay. Ray Clark over there is in charge of that.
    I thank you very much, Mr. Chairman. I also have to go to 
the Agricultural Appropriations Committee and I want to 
apologize for being late but thank you for having this hearing. 
We all love our chairman in this committee and our ranking 
member and we are going to be working closely together.
    Ms. DeMesme. Thank you.
    Mr. Hobson. Thank you, Sam.
    John.

                             OVERALL FUNDING

    Mr. Olver. Actually, it is nice that there are other 
subcommittees meeting, as long as they are not mine, so that 
one can kind of strip down to the essentials here after a 
while. Thank you, Mr. Chairman.
    You know, I suppose that in these kinds of hearings what we 
discuss ends up sounding like a litany. Every year the request 
is below the last year's enacted number by, in this case, quite 
a large number. The request here is way down from what was 
enacted last year for the Reserve, for the active Air Force, 
for the Air National Guard. In each instance, I don't know. In 
the Reserve and the National Guard, the request is like 20 
percent or 25 percent of what last year's enacted was.
    Even the active Air Force is down a considerable number. 
The total number is more than half a billion, more than $600 
million below the last year's enacted number.
    And clearly you have some problems. You have stated in your 
written testimony that the funds that you are asking for really 
only come to something like a third of the need.
    Ms. DeMesme. Yes.
    Mr. Olver. And I suppose we cannot really cover all of your 
intended need but, why are the requests so low here?
    Ms. DeMesme. Well, sir, we are trying to effect a balance 
with what our total needs are, dealing with our readiness 
issues, with our quality of life programs, military 
construction, and we just do not have enough money to fund all 
of these adequately with the new missions that we face.
    Military construction is the area unfortunately that we 
felt that we could take a little risk with because some of the 
other areas we could not. And, as a result, we are underfunded 
to the tune of about two-thirds of what we really would need. 
We have a reasonable program that we are going to try to make 
work. It certainly would help if we had more to add to it, but 
in today's constrained environment, there was not a lot more we 
could do with the budget.
    Mr. Olver. Well, one surely doesn't want to take risks with 
readiness but, on the other hand, the risks one takes with 
military construction have to do with quality of life of the 
people involved and thereby goes to the retention aspect. So I 
realize what happens when one has constrained numbers that you 
have to deal with.
    Ms. DeMesme. You are absolutely correct and that is why we 
are hoping that we can get some base closures because if we 
reduce the infrastructure, we are not continuing to spread our 
meager funds across so many bases.
    Mr. Hobson. You will get it because you will not have any 
people left. They will all quit.

                      BASE REALIGNMENT AND CLOSURE

    Mr. Olver. They will quit. They will not be retained.
    Let me, since you have raised the base closure issue, your 
testimony suggested there has been more than a one-third 
reduction in total force but only a 20 percent or so reduction 
in facilities, which means we have a lot of shell facilities, a 
lot of fixed costs that are involved in those facilities. That 
is always a controversy for us. That is why we have BRAC 
commissions, to try to get us over the controversies.
    If you were to get the Base Closure Commissions approved 
and go forward in some time frame in the future, how much in 
the way of savings would you be able to see in that and where 
is that savings going to go? Are we going to see that back into 
the budget in terms of really updating the places that finally 
are kept in that process? And is your base closure proposal 
supposed to balance out the reduction in force with the 
reduction in facilities? What is the philosophy that is going 
on here, both in savings and where it would go and where it 
would reappear?
    Ms. DeMesme. We would have to evaluate that at the time. We 
do not really know what our new mission requirements are going 
to be or what our deployment capability needs might be in the 
future.
    The intent would be to take the monies and to spread them 
across--a balanced spread across our needs. I do not believe 
that we could put it all into MILCON or that we could put it 
all into infrastructure. It will be needs-based-dependent.
    But what I can say is that it will go back into quality of 
life maintenance, whether it is in modernization, readiness or 
military construction.

                         HOUSING PRIVATIZATION

    Mr. Olver. I would hope that would be the case but I am not 
sure that--I am not confident that we will see identifiable 
numbers in savings and then see those appear in other places.
    I do commend you in this budget for, in the case of housing 
privatization, in some of the other services the housing O&M 
has been reduced as it would appear that they are beginning to 
assume some savings out of housing privatization, or most of 
those privatization programs are not yet occupied. You are 
showing at least some small increase in the housing O&M numbers 
here. That is the only part of the budget that seems to be 
showing an increase.
    I guess, after what I have just said, it cannot be really 
because of any savings that have come from the housing 
privatization because the housing privatization projects are 
not complete.
    Ms. DeMesme. Not yet.
    Mr. Olver. So it is probably an artifact at the moment, 
essentially, of this budgeting process. But that is the only 
broad category in which there is any increase in this budget. I 
really do not have much confidence that the savings you might 
accrue from the BRACs is going to appear in other places to get 
at the backlog of deficiencies that we see.

                              DEPLOYMENTS

    Now, you did mention something about deployments and I 
guess I would like to ask you in my area--it would appear that 
there is a major amount of overseas deployment occurring out of 
the Westover Air Force Base which is not in my district but 
close by. And so we have had a number of crises--all the 
Balkans issues, all the Middle East issues. Really it has been 
a decade of Desert Storm and the follow-up that has continued 
there and then the two crises in the Balkans with the Bosnian 
deployment and the Kosovo deployments and so forth and it would 
appear that a substantial amount of that flows through 
Westover.
    I assume that when we were involved in Haiti there must 
have been some southern base or bases out of which deployments 
are funneled when one is dealing with Latin America, with the 
southern part of this hemisphere, and it leads me to the sense 
that there must also be some structure whereby if you have 
crises with China-Taiwan, God forbid, and North Korea as a 
rogue state and things like that, that there must be 
deployments that move through facilities that are under your 
purview in the western part or in Alaska or something.
    Can you give me some sense of how this is structured? And 
does it always involve major reserve bases? In New England, for 
instance, the only active base is now Hanscom in Massachusetts, 
which does not have any planes there. It is active for the Air 
Force but without planes. And all the other active ones, and 
there were several over time in New Hampshire and Maine and so 
on in earlier times, are now downgraded to Guard or have been 
BRACed, one or the other.
    Mr. Hobson. They are not downgraded anymore. They are part 
of a total force. I think they would resent the fact that----
    Mr. Olver. Reclassified.
    Mr. Hobson. Yes.
    Mr. Olver. That is fine. Please, I stand corrected. Please 
take out ``downgraded.''
    Mr. Hobson. They all winced.
    Mr. Olver. Can you give me a sense of how these things come 
up to deal with crises?
    Ms. DeMesme. Generally, sir, the Commanders-in-Chief 
(CINCs) request what it is they need to meet the contingency at 
that particular location and our deployments to date have been 
based on where our equipment is located, and where our weapons 
systems were that we needed in that particular zone of 
conflict.
    As we get our Aerospace Expeditionary Force (AEF) concept 
more functional--we have already started building our wings, 
our Aerospace Expeditionary wings--we will have a rotational 
base of units already ready and whenever the CINCs request a 
unit for a specific mission, they will go from wherever that 
location happens to be.
    Now as far as logistics are concerned, we certainly like to 
move a weapon system from the closest location to save on cost 
when we can, but as we get the AEF concept really working, it 
will be on a rotational basis, and that is a total force, as 
comprised of our active and our Guard and Reserve forces. We 
are all in this together in how we are going to work together 
as a team. People will train together and they will rotate 
together, serve together, and they will know exactly when they 
are going to be deployed and how long they are going to be gone 
and when they are going to come back. And that will determine 
in the future where we leave from when we go overseas into 
these areas of conflict.
    There are some locations where we have certain types of 
equipment that will be called on more.
    Mr. Olver. As I remember, in the case of the Kosovo 
operation, some of our B-2 bombers were based here well inside, 
somewhere out in the center of the country--I do not remember 
exactly which base--and were making flights, round-trip flights 
with a period of whatever the bombing mission was along the 
way. It seemed like an incredible waste of people's energy and 
time by not having someplace where those could be functioning 
from much closer to where our crisis areas are. I am surprised 
we have not worked that one out.
    General Robbins. The projects that were discussed earlier 
by Mr. Dicks, the bomber follow-on at Andersen and in the 
United Kingdom and the Indian Ocean addressed that very 
requirement so that we would not always have to----
    Mr. Olver. Diego Garcia?
    General Robbins. Yes, sir. So we would not be flying 26-
hour round-trip missions from Whiteman Air Force Base.
    Mr. Olver. Where is Whiteman?
    General Robbins. In Missouri, right near Kansas City.
    Ms. DeMesme. We try to forward-base as many as we can.
    Mr. Olver. Well, that was perhaps a special sort of a case 
but the others, if you are moving materiel and men for 
operations in the Middle East and the Balkans, there must be 
more. I would assume that I am only seeing what goes through 
Westover, a great increase of activity, because I live within 
10 miles or so of there, even though it is not in my district. 
But what are the other bases that are particularly prominent in 
those deployments, the reserve bases, for instance, that are 
particularly dominant in that kind of an operation?
    General Robbins. On the East Coast you have McGuire Air 
Force Base in New Jersey, you have Dover in Delaware, and you 
have Charleston in South Carolina. On the West Coast----
    Mr. Olver. Are these active?
    General Robbins. Oh, yes. Yes, sir.
    Mr. Olver. McGuire and Dover?
    General Robbins. Dover, Delaware. And Charleston.
    Mr. Olver. And Charleston?
    General Robbins. Which is the C-17 base.
    Mr. Olver. Okay. So those three are active or reserve?
    Ms. DeMesme. They are active.
    Mr. Olver. Those are active.
    General Robbins. But we have total force. We have associate 
wings and my reserve friend can talk to this more than I can 
but totally integrated air crews flying the same airplane. It 
may be a reserve air crew one day, it may be an active duty air 
crew the next, or it may be an integrated crew.
    So that is the situation on the West Coast, also, where we 
have McChord Air Force Base in Washington outside of Seattle-
Tacoma and Travis Air Force Base in California are the two 
prime West Coast airports.
    Then for the bridge, if you will, on the eastern side, 
Lajes plays very prominent as we transit to Southwest Asia. On 
the west side, of course, you have Hickam, Andersen, which is 
much closer to Eastern----

                                LAJES AB

    Mr. Olver. This committee believes it has been fairly 
generous in helping to put into place some facilities at Lajes. 
Is that going well?
    General Robbins. It is going well and there is more 
requirement for a transient facility there that is in the '02 
FYDP.
    Mr. Hobson. But the guy, when I was there, when we were 
there, the guy said he never got anything until this committee 
acted and we put something in. When we were there the guy said, 
``We never get anything.''
    Ms. DeMesme. Right.
    General Robbins. And he may have been a little understating 
it. For instance, they have just gotten a new clinic there. 
They have had improvements to their housing. But I will have to 
admit----
    Mr. Hobson. You had a serious safety problem, I think, on 
landing there at night, which was not being addressed.
    Mr. Olver. We have funded now some lighting for that.
    General Robbins. Yes, sir.
    Mr. Olver. And I assume that that----
    General Robbins. Part of the supplemental.
    Mr. Olver. How far along is that project?
    General Robbins. My guess is it will be--well, I know it 
will be executed before the end of this year.
    Mr. Olver. The end of this fiscal year?
    General Robbins. This fiscal year.
    Mr. Olver. That is good. So that when we get back to 
traveling after the election we will at least be safe when we 
land at Lajes.

                           MAJOR DEPLOYMENTS

    I cannot expect you to follow my ruminations here but it 
would be useful--we have had major deployments and we can 
expect to have additional ones over in that area but you are 
looking for facility closures. You are promoting out of the 
Department of Defense facility closures and as you are 
promoting these and advocating, it would be useful for me to 
see where the flow in order to deal with crises in the Far 
East, in Latin America, which we have fortunately not had 
recently but we have had particularly flow going to the Middle 
East and it would be very useful for me to see what has been 
the flow, almost a flowchart of where materiel and personnel, 
how those have been deployed through those locations, to see 
where, in fact, are our key locations.
    Presumably deployments, which we have more of them in the 
Middle Eastern theater and in the Balkans and such or in 
Africa, they are going to go through the same places, in 
essence, and that would help me to see the picture as we go 
forward here.
    General Robbins. We can have the operational Point of 
Contact (POC) come over and give you a briefing on, say, the 
past five years if that is far enough back or maybe starting 
with Desert Storm, how we have used the aerial port--the volume 
going through and where they are going.
    Mr. Olver. It would help me understand the operations. It 
may not be so easy because we have not had many, but you might 
be able to give a sense of what you think the operations going 
in the other two major directions, where the flow would be 
there. But we have a history of flow now for several operations 
in the case of the ones to the Middle East and the Balkans that 
allow that one to be looked at rather definitively, I would 
say.
    General McKinley. Sir, some of your total force bases, from 
our perspective Bangor and Pease are part of our Northeast 
Tanker Task Force. Niagara Falls is part of that task force 
now. Your Barnes unit, A10, trains with those units day in and 
day out. They deploy to Triponi, Italy with those tankers. That 
is part of the air bridge that General Robbins mentioned.
    It is a very intricate flow and I know the Air Force 
Reserve is similarly equipped and based.
    Mr. Olver. Well, I know, Mr. Chairman, that you are going 
to want to talk about privatization but now that I have sort of 
thrown out the deployment issue, we are hearing now that the 
deployment policy is going to change so that nobody is being 
deployed more than six months.
    Ms. DeMesme. Yes, sir.
    Mr. Olver. Had that been a problem for the Air Force? My 
units from Barnes, which is in my district, they had been over 
in the Kosovo operation on substantial deployments and that has 
been reputed to be an issue for retention and so forth. The 
long deployments were leading to a lot of people just opting 
out or something.
    Ms. DeMesme. That is our goal and we have been working for 
this goal really now for a couple of years. Within the last 
year we have gotten them down to six-month rotations and I 
think----
    Mr. Olver. The rotations on the parts of Reserve and Guard 
people for the Air Force are now under six months?
    Ms. DeMesme. Yes, sir.
    Mr. Olver. There have been none that have been longer?
    Ms. DeMesme. We have some people still there for nine 
months but most of them are six months and below. We are trying 
to get them all down to six months.
    Mr. Hobson. What about the 123rd AC&W squadron deployed at 
Kuwait City?
    General Robbins. Ninety days.
    Mr. Hobson. I bet you if you check, the 123rd is longer 
than 90 days.
    General McKinley. There are some high demand/low density 
units that are that way, sir. I think General Ryan's commitment 
for the Guard is to keep Active Duty Man-day (ADM) cycles at 
90-day rotations. And anecdotally, most of our pilots spend 15 
days on location. And the Barnes unit did a great job, combined 
with Battle Creek----
    Mr. Olver. They are a great unit.
    General McKinley. A great unit. But they rainbowed. 
Reserves and us are doing a great job of rainbowing our like 
aircraft so that we minimize the impact on our employers and 
our families.
    So that is the goal.
    Mr. Hobson. But you have not achieved that goal yet.
    General McKinley. In some areas.
    Mr. Hobson. Pilots? I do not want to take John's time but 
let me tell you, there is still a problem with pilot retention. 
There is still a problem with long deployments on employers and 
it is something we have to look at.
    I think General Ryan's plan of putting in place whatever 
you call them----
    Ms. DeMesme. AEFs?
    Mr. Hobson. AEFs, is the right way to go, but I will resist 
you telling me that it is not a problem with pilot retention 
because I have had--and it is true in the regulars, and not 
just the Guard. I have had pilots tell me and I have had senior 
officers who have sons who are pilots tell me that the 
uncertainty of these deployments, the uncertainty of the delays 
puts real pressure on pilots.
    You know, you guys all went through one time where you did 
not need anymore pilots and we would let kids out of the 
academy, and this is outrageous--we let kids out of the academy 
after we had trained them because you all did not know how to 
plan. Then we come around and we have to open back up bases--
one of them happens to be mine--that we are going to do pilot 
training in now in F-16s and other things because we shut them 
down. I do not consider that good cost management by people. I 
get a little hot about that. John, I am sorry.
    Mr. Olver. To go back, then is there a goal for the Guard 
of three months and a goal for the Reserve of six months? Is 
that a target or what are we talking about?
    Ms. DeMesme. It depends on what the job is going to be 
there. We have some 15-day rotations, we have 30-day rotations 
are 60-day rotations, but we had some 90 days. When I was over 
there in the fall we had some people who started with 120 days 
and they were just serving those out but as they move out, then 
it will be down to 90 and then to 60.
    Mr. Olver. For Guard and Reserve?
    Ms. DeMesme. Right.
    Mr. Olver. I thought we were talking about six months on--
--
    Ms. DeMesme. Well, we have changed that for the Middle 
East.
    Mr. Olver. Is the Air Force policy then 90 days for both 
Reserve and Guard?
    Ms. DeMesme. Yes.
    Mr. Olver. That is what you are trying to get to?
    Ms. DeMesme. We are trying to get to that.
    Mr. Olver. What percent of the deployments now have been 
over that?
    Ms. DeMesme. I would say we are down under--I am really not 
sure of the percentage but I think probably about a third. I 
would say about a third.
    Mr. Olver. Well, you may want to refine that. I am just 
trying to understand here whether there is a substantive 
difference between the policies for the Reserve and the Guard. 
They are essentially the same?
    Ms. DeMesme. They are the same, sir. And I will send you--
--
    Mr. Olver. And the intent is to get those down under 90 
days?
    Ms. DeMesme. Under 90 days, sir. It is our intent.
    Mr. Olver. Which sounds like a real good move.
    General McKinley. The Army Guard is six months and I know 
they are experiencing some significant problems.
    Ms. DeMesme. And I think there is some confusion.
    General McKinley. But the air side is different.
    General Duignan. The AEF concept is a 90-day block and for 
those of us in the Reserve program, for the operational units 
and also for the combat support units, it is a 90-day window 
but what we do is send them over in 15-day blocks. So we take 
six people to fill that one slot for an individual that 
deploys.
    So the Air Force Reserve----
    Mr. Olver. For a 90-day total.
    General Duignan. Ninety-day total, six different----
    Mr. Olver. Fifteens.
    General McKinley. Correct.
    Mr. Olver. Tell me what rainbowing is or is that it?
    General McKinley. Well, that is it. In the instance of 
Kosovo, Barnes rainbowed with Bradley--excuse me, with Boise 
and Battle Creek.
    Mr. Olver. Oh, yes, they called it the Killer Bees. That is 
right.
    General McKinley. Killer Bees. Like airplanes. Pilots can 
fly each others' airplanes. They are trained exactly the same 
as our Air Force counterparts. The Reserves can participate in 
that, also, and it is really a wonderful program.
    But as the chairman said, we have to do better, but that is 
a goal that we are all shooting for in the Air Force.
    General Robbins. So let me give you the total picture here. 
Let's say you have a requirement for 10 people and the Guard 
and Reserve have said they are going to pick up somewhere 
between 10 and 15 percent of the requirement in Kuwait. Let's 
just say you need 10 people.
    The active duty people that will go there will be there for 
90 days and there will be a rotation of Guard and Reserve 
people over that 90-day period and they will know ahead of time 
who they are and where they are going to go and they will go 
over for two-week periods, back and forth. So about two people 
are going back and forth all the time and eight are in place 
for the full 90 days.
    When the 90 days is up, the active duty group comes back 
and new active duty group goes over. And you enter into this 
cycle once every 15 months.
    Mr. Olver. You always leave me with the impression that 
this is a very clearly thought out pattern that I can 
understand if I just saw the pattern, could look at it. That is 
why I ask these questions about the flow of personnel and 
manpower and so forth and I thank you for the general 
explanation.
    Mr. Chairman, thank you very much. I will ask more about 
housing when----
    Mr. Hobson. And it is not perfect because some people will 
go longer, some people have different missions, so while there 
is a goal of certain things, and it is not bad to give people 
the experience of being on active duty and being deployed. It 
is somewhat expensive to move those people----
    Ms. DeMesme. Right, quite expensive, yes.
    Mr. Hobson. But it is also expensive to lose those people 
and have to retrain people, so there are some trade-offs there.
    I want to ask something along what John asked. I had not 
planned to ask this. I recently went down to Fort Bragg and 
looked at some of their stuff on a quick in-and-out and there 
is a runway at Pope Air Force Base that needs to be extended to 
assist them with their deployments.
    I do not see it anywhere. I do not know what you all are 
doing but this is one of the things where the Army needs 
something to do their mission and you are in support of them, I 
think.
    Ms. DeMesme. Yes, sir.
    Mr. Hobson. So do you want to give us something for the 
record?
    Ms. DeMesme. I will give you something for the record, sir. 
I know that Pope has been working with a local community group 
because I think where they want that runway expanded it would 
be an encroachment area.
    [The information follows:]

                           RUNWAY AT POPE AFB

    The Pope AFB, NC runway extension is necessary to 
accommodate large bodied aircraft operations. The extension 
will allow the C-5 and the C-17 to take off at maximum gross 
weight to support the Army's Strategic Brigade Airdrop (SBA), 
major theatre war, and en-route missions. The existing runway 
is 7,500 feet and the extension will increase the runway to 
9,500 feet.
    This project is not yet included in the current President's 
Budget Future Years Defense Program (FYDP) because we are in 
the scoping/planning phase. It is a valid MILCON requirement 
for the Air Force to support the SBA mission. The project 
requires an Environmental Impact Study (EIS), land acquisition, 
and relocation of occupants in the construction area and 
airfield clear zone. The EIS is in progress and should be 
complete in fiscal year 2001. These requirements make up the 
first phase of the project at $22 million. Additionally, Ft 
Bragg has allowed us to start planning for the use of 750 ft 
into their property. The second phase, $26 million, will 
construct the runway and taxiway extensions.

    Mr. Hobson. I have talked to the mayor. The mayor is fully 
in accord, as I understand it. We just need money.
    Ms. DeMesme. We will get something for the record to you 
but I took a look at that when I was at Pope a couple of months 
ago and I know that we are trying to work with the Army and 
with the local community to make that happen. We have to fund 
it, as well.
    Mr. Hobson. All I can tell you is that the mayor seemed 
very receptive to moving forward with that.
    Ms. DeMesme. There was a local citizen group against it at 
the time when I talked with them but we will certainly try to 
work through those concerns.
    Mr. Hobson. He seems to be able to work them around. He 
seemed pretty sharp about it.
    I want to ask a few questions. I am going to throw you a 
couple of curves because I had not planned to ask this but I am 
going to ask it. How is the general officer house in Osan, 
Korea? Is he in there yet?
    Ms. DeMesme. Do you want to know if the roof is fixed yet?
    Mr. Hobson. Well, I want to know about the water line, too. 
Is anything done, started?
    General Robbins. I assume it is but I really do not know, 
sir.
    Mr. Hobson. Well, you can get back to me. I just threw you 
that curve.
    General Robbins. I understand. I know where you are coming 
from.
    [The information follows:]

                  GENERAL OFFICER HOUSE IN OSAN, KOREA

    All work on the Osan General Officer Quarters 1071 has been 
completed except for some landscaping. Lt Gen Heflebower moved 
in soon after the work was completed in November 1999. Lt Gen 
Heflebower is pleased to report the plumbing is now rust-free 
and the roof no longer leaks. He extends his personal 
invitation for Rep Hobson to visit Korea soon so he may see 
this house and also become familiar with the many other 
challenging facility issues that directly impact readiness and 
Qualify of Life for the 9,000 plus personnel and dependents 
within his Command.

                             RAF MILDENHALL

    Mr. Hobson. Also, I would like to know about the control 
tower at Mildenhall, England and when we are going to get 
moving on this stuff. You know, this, to me, took a little 
whacking at the expense of the Senate and some other people 
over this overseas MILCON and I want to see this money expended 
and done because one of the things you say is the Air Force is 
willing to take a risk of underfunding MILCON and spending 
those dollars on other bills. Are we also taking a risk by not 
funding operational facilities that we need? And how long are 
we going to take this risk?
    One of those operational problems is Mildenhall. Every time 
those planes land over there you are running a real risk with a 
1950s control tower there. It is not right to land a huge 
airplane in there and not be able to see him all the way on the 
ground when he is on the ground, to see him come around that 
turn. That is just one area.
    Are we doing the fire station at Ramstein in Germany?
    General Robbins. Actually, there were three at Ramstein 
that are not in the supplemental.
    Mr. Hobson. They are supposed to be. At least one of them 
is.
    But again, I heard you guys messed around with that and I 
thought we got it back in. When you say it is not in, it was in 
from here. If it got taken out, it got put somewhere else. We 
need to look at that because I particularly want to see that 
one done. Again I am going to ask another question about 
Ramstein later on.

                      BASE REALIGNMENT AND CLOSURE

    I guess what I am really concerned about, and this is more 
of a comment, for an administration that cares about people, I 
do not think we are caring about people in this budget and I do 
not think we are taking care of our people. And this has gone 
on since we started the base closure stuff, so maybe it 
precedes back even to the previous administration but I do not 
think we do a good enough job of taking care of our people.
    And I will tell you, frankly, to say that base closure is 
going to take care of people, it is not because it has not so 
far, and we have gone through three rounds of base closures and 
as far as I can tell, when you look at these bills, we go down 
on what we do for people. We do not go up in helping people. We 
use closure as an example of saying we are going to help people 
and then we do not.
    And I am going to tell you I am not going to go into 
another round of base closure and have what has happened so 
far. Most of the money is used up with the bases that we are 
giving away, later on, and it does not go for people. You look 
at what we are doing for people and if it was not for 
privatization, and I am not just blaming the Air Force, but the 
Army did not have anything in for Continental United States 
(CONUS) at one point.
    I think it is inappropriate for people to come in and ask 
about base closures and say that we are going to do more for 
people after that, when we have not. And, you know, we raised 
the pay. There was no offer from you all to raise the pay. It 
came from this Congress. The Basic Allowance for Housing (BAH) 
you guys raised but then messed up and destroyed much of the 
good that came from that. It is still on people's minds that we 
had to go back and force you all to come up with a proposal.
    Now, to the credit of the Defense Department, they did, 
when they realized they had messed up, change it and, as far as 
I know, nobody has gone back and really looked at how that deal 
was put together to begin with to make sure that the 
contractor--I understand the contractor did not even go into 
places where people lived. They just went into the community in 
general. And there is a tendency for military people to live 
together, whether it be on the base, which they have to do when 
they are on the base--they cannot get away from it, but when 
they are off-base, there is a commonality of community. People 
do not tend to run off, and you have some requirements about 
time there.
    But I really will challenge, and I should have done this 
the other day with the Secretary of Defense when he testified 
and it is not fair to you to go into this now but I am going to 
raise the question that I cannot support a base closure when I 
do not see us doing enough for people and changing the quality 
of life for people, when what we do is shut down bases.
    Now, I will talk later on--hopefully we have Brooks worked 
around to where Brooks is a better model for BRACing facilities 
or preBRACing or getting the things that we do not need anymore 
to a community, so that if we do move some things out of there 
someday--10 years, five years, whatever--if it does move, 
because we know the Air Force is going to change, that we do 
have it so it is not such a trauma on the community and they do 
not wait so long.
    Good example of that, and I keep saying this so somebody 
will look at it, is the facility at Gentile Air Station in 
Kettering, Ohio, which has--but again, it took a long time to 
get it to the mayor so the mayor could do his job. But once the 
community got it, the community has done its job.
    I am concerned that we look at the overseas MILCON and I 
know that--and you all need to ask for it because there is some 
resistance, as I found out, in the supplemental to doing 
overseas MILCON, but if we are going to send these young people 
over there, we have to give them decent housing; we have to 
give them decent facilities. They cannot be using World War II 
and previous to World War II buildings. Buildings previous to 
World War II? That tower, I think, is previous to World War II. 
And other facilities over there. We just have to find a way.
    And I think the Air Force does a better job than some of 
the services in taking care of its people but I do not think 
you find enough. I mean this bill, the Air Force, you are down 
$628 million or 43 percent from last year's enacted and it 
looks to me like there is a tendency by the Air Force to say, 
``Well, we are going to fund some of this other stuff, like 
space-based laser and some other things, and hope that this 
committee and the members of Congress will come through and can 
save us again.'' I do not know how long we can do that.
    I will give you another example. We took on a training 
mission at the Springfield Air National Guard Base but I do not 
see any money in there for the runways and the taxiways that 
are needed. I had to do some stuff at his previous base, too, 
because the Air Force was not doing it.

                         HOUSING PRIVATIZATION

    I really want to get to housing privatization.
    We have 15 minutes before we have to be there. I have some 
I will give you for the record.
    The budget request is $46 million for six new housing 
privatization initiatives. Why is the Air Force requesting 
funding for six additional projects when you have completed 
only one to date and they are still working on the development 
of nine pilot projects?
    Additionally, why does the Air Force request the estimated 
amount of the government contribution for these deals? Why not 
ask for the full amount to construct X number of units under 
traditional family housing financing in case privatization 
fails at these locations? Because obviously you have identified 
where you need housing.
    So I know we have a certain time to get to certain places 
but until we have done some things successfully, I get a little 
worried about having so many out there that you do not do the 
ones that you are planning on correctly.
    Ms. DeMesme. Sir, we do have our military family housing 
plan and these are laid out where the worst needs are, where we 
can actually go in and make some changes.
    We believe that it takes a mixture of privatized housing 
and traditional MILCON to meet our needs if we are going to 
leverage the dollars we have today and get housing available to 
our people faster than traditional MILCON.
    If we use the plan we have now, we should meet the majority 
of the need by 2011 but if we do not use privatized housing as 
well as MILCON, it will probably be 2030 and beyond before we 
get to the same level of adequacy for our families.
    So we are looking to leverage whatever we can to get things 
available now where people really need it. If we could get the 
monies for traditional MILCON, of course that would be the 
preferred thing to do, but our track record shows that that is 
not going to be possible in the near future.
    Mr. Hobson. Well, it isn't because you guys do not fight 
enough for it. If the bill has gone down, this bill--if this 
bill would have been what you all asked for last year in the 
incremental funding, you would be over $11 billion now. You 
look back at the projections of what you all projected for this 
year from last year and it would be $11 billion. I see $8 
billion.
    Ms. DeMesme. Yes, sir.
    Mr. Hobson. So how in the world were we going--I mean what 
a sham that was to come in with that deal last year. I do not 
know whether anybody really meant what they said because if we 
had done that, this year you would have been at 11. Why are we 
not at 11? Because there is still the need there.
    Ms. DeMesme. Well, traditional MILCON, of course, takes 
longer to get. It is more difficult to execute than privatized 
housing.
    Mr. Hobson. But the bill was 11. You all said this year you 
were going to ask--if we had done the incremental funding of 
last year, you would have been in asking for $11 billion this 
year. I do not mean you; that is not fair.
    Ms. DeMesme. Right, and it goes right back to our whole--it 
was not the preferred method.
    Mr. Hobson. I know.
    Ms. DeMesme. It still is not.
    Mr. Hobson. I am just sending messages. It is not fair to 
you.
    Ms. DeMesme. I appreciate that.
    Mr. Hobson. I am very frustrated. I am very frustrated with 
what I see happening. The Air Force has a tradition of taking 
care of its people over the years and we are having some 
recruiting problems. I want to try to take care of that. I am 
not trying to beat you up on this; maybe I am but I do not mean 
to do that. But I am really frustrated with where we are going.
    Robert, do you have anything you want to ask on any 
subject?
    Mr. Aderholt. I may later on. Go ahead right now.
    Mr. Hobson. John, do you have anything you want to ask on 
privatization?
    Mr. Olver. Yes, on privatization I will throw something 
out. We are going to have a whole hearing on this. It seems to 
me you are asking for a whole bunch of new projects. At the 
same time, we are embarking upon an increase in the BAH, a 
phased increase in the BAH up to whatever we believe is the 
market rent, unlike having our people have to put in 15 
percent.
    Now it seems to me that has to have some effect. If that 
much more money is going to be out in the private market, then 
we are going to have private developers who should, if market 
forces work, begin to respond on this stuff.
    Now, I do not know whether your new requests for 
privatization or MILCON, either one, are reflecting that change 
in the BAH and I will certainly want to know something about 
that from you and all the other services when we have a 
privatization hearing next week because it seems to me it is 
perfectly reasonable to have a three-pronged way in which this 
is happening on the community and in traditional MILCON and in 
privatization, for the reason that privatization, at least in 
theory, is going to get some housing into the market faster.
    Now from the experience thus far, I am not sure that that 
is the case. The case is that if we decide to give the money 
for traditional MILCON, things get done pretty quickly.
    Mr. Hobson. Relatively quickly.
    Mr. Olver. Well, relative certainly to the privatization. 
Privatization projects have kind of gone by fits and starts and 
that may be because we are in the early stages of a program, 
and maybe if they once begin to go smoothly, then they will go 
more quickly. But at the moment, once we decide to do a MILCON 
traditionally, it happens more quickly than certainly the 
production under privatization seems to have done thus far.
    But that third aspect of the new money going into the 
private market and the fact that developers will be able to see 
the BAH up at a level so that people can reach what is the 
actual market rent has to have some effect upon it.
    Ms. DeMesme. And it will, sir, but----
    Mr. Olver. And I have to see how that is being taken into 
account.
    Ms. DeMesme. We are taking that into account. The 
difference is on the traditional housing market, our people are 
expected to incur a 15 percent out-of-pocket expense. Under the 
privatized housing initiatives, we would make sure that, to the 
extent possible, the utilities are included in the total 
monthly charge .
    And we are really not asking for additional privatization 
efforts right now. We had a program in place for 10. These are 
the same 10. We have substituted one or two here and there but 
we have not expanded that program to date. We asked for 10 back 
in '96.
    Mr. Hobson. But you are only going to have a total of 10?
    Ms. DeMesme. There will be 16.
    General Robbins. This is for six more.
    Mr. Hobson. So you will have a total of 16?
    General Robbins. Total of 16.
    Ms. DeMesme. Sixteen.
    Mr. Hobson. So you have an increase of six.
    General Robbins. That is correct.
    Mr. Hobson. Now, is Wright-Patterson in that?
    Ms. DeMesme. Yes, sir.
    Mr. Hobson. That is one of the six?
    General Robbins. That is one of the 10.
    Mr. Hobson. That is one of the 10. That was one of the 
original 10. We did not approve 10 starting out.
    Ms. DeMesme. Right.
    General Robbins. It was four and then six.
    Ms. DeMesme. So it will be 16 total.
    Mr. Hobson. But I think John's question is we have not done 
four and we have not done the next six and we are already into 
attempting to do another six and we do not know whether the 
first four are going to be okay or not.
    Mr. Olver. Nor at all the effect of the new BAH.
    Mr. Hobson. We are going to get off easy today.
    Ms. DeMesme. We are looking at all of that and next week we 
will talk a little bit more about that.
    Mr. Hobson. You may not believe this after what we have 
gone through but you are going to get off easy because we are 
going to terminate the hearing. We have six minutes and we 
cannot come back, so think how lucky you are. You do not have 
to put up with us anymore today.
    Thank you very much for coming. We appreciate your 
frankness and we hope we can all be frank as we work through 
this stuff because it is important for us all to work together. 
We have the same goals and we need to talk through some of 
these things and we will get there.
    Ms. DeMesme. We appreciate that and this is the only way we 
can move forward, is to have candid discussions and find out 
what our problems are and try to correct them. We appreciate 
your help in that regard.
    Mr. Hobson. That was the spirit in which we hope--
    Ms. DeMesme. We appreciate your help in that regard.
    Mr. Olver. Mr. Chairman, if I may make just one comment?
    Mr. Hobson. Sure.
    Mr. Olver. The committee also funded a tower at Westover 
Base last year and that is ready to go. That should go into 
construction very shortly. You do a great job. I am not sure 
why we cannot get the ones out of the country, taking care of 
the needs that are offshore, when these major deployments are 
equally important and it ought to be possible to make them 
happen more quickly.
    Thank you very much.
    [Clerk's note.--Questions for the record submitted by 
Chairman Hobson.]

                            OVERALL FUNDING

    Question. In your opinion, what can be done about the lack of 
support and funding requested by the Air Force for badly needed 
facility, infrastructure and quality of life improvements? When can we 
expect to see a steady path of funding?
    Answer. We recognize that continued reductions in our 
infrastructure accounts are causing our infrastructure to deteriorate 
at an unsatisfactory rate. While this is not the desired situation, we 
felt in striking a balance between our priorities and our constrained 
Total Obligation Authority (TOA), our infrastructure requirements were 
one area we could risk deferring in order to address other urgent 
priorities. Our Family Housing Master Plan provides a ``road map'' for 
using military family housing funding (construction and O&M) combined 
with leveraging private sector funding in order to revitalize, divest 
through privatization or demolish inadequate housing. Unfortunately, at 
our current level of investment, our housing requirements will not be 
satisfied until 2018. We continue to support quality of life projects 
(specifically dormitory and fitness center projects) in our MILCON 
program, but TOA constraints may result in continued underfunding in 
our infrastructure accounts. Without additional TOA, we will continue 
to address our most urgent MILCON, Military Family Housing (MFH) and 
Real Property Maintenance (RPM) requirements and defer the rest. 
Divesting ourselves of excess facilities and infrastructure would also 
allow us to fund other urgent requirements rather than allocating 
scarce resources to maintain excess infrastructure.

                     OVERSEAS MILITARY CONSTRUCTION

    Question. Can you share with us how short the Air Force is falling 
from meeting its overseas MILCON requirements?
    Answer. Based on a 100 year recapitalization rate (the industry 
standard), the U.S. Air Forces in Europe require $97 million/year in 
MILCON. The current fiscal year 2002-05 Future Years Defense Plan FYDP) 
provides an average of $50 million/year, resulting in a shortfall of 
$47M/year. The Pacific Air Forces require $59 million/year to achieve a 
100 year recapitalization rate. The fiscal year 2002-2005 FYDP provides 
an average of $17 million (excludes Alaska and Hawaii) which results in 
a shortfall of $42 million year.
    Question. Additionally, what progress is being made in the pursuit 
of increased burden-sharing agreements with host nations?
    Answer. Pacific Air Forces (PACAF):
    Korea: The construction portion of the Korean cost sharing program 
has grown from $70 million in 1991 to $131.7 Million this year (2000) 
for all services. The 1999 contribution for U.S. Air Force construction 
was $37.9 million, and we expect to receive $31.8 million in the 
current year. For the next cost sharing agreement (2002 and beyond), 
the U.S. will pursue further increases in Korean contributions.
    Japan: the Air Force has received the following construction 
funding in recent years: 1995=$262 million; 1996=$314 million; 
1997=$285 million; 1998=$200 million; 1999=$119 million, 2000 and 
2001=$144 million (anticipated). Burden sharing negotiations are 
currently being conducted. The U.S. objective in these discussions is 
to maintain the Japanese construction contribution at its current 
level. Government of Japan officials have continued to associate the 
state of their economy with recent reductions in construction 
contributions Future years funding levels cannot be accurately 
predicted at this time.
    U.S. Air Forces in Europe (USAFE):
    The NATO Security Investment Program (NSIP) has spent the following 
on AF installations in recent years: 1995=$75 million; 1996=$122 
million; 1997=$112 million; 1998=$137 million; 1999=$256 million. The 
Air Force continues to aggressively pursue NSIP funding for eligible 
projects and to work with NATO to expand project eligibility. Our 
successful efforts led to NATO recognition of strategic airlift 
requirements. The inclusion of strategic airlift elements into the 
individual items such as runways and parking aprons is an important 
change for the Air Force. These changes will extend NSIP eligibility to 
more projects at U.S. installations in Europe.

                           GUARD AND RESERVE

    Question. Why is there such an inequity in the funding requested 
for these accounts? Is this proper balance to meet the needs of the 
TOTAL FORCE?
    Answer. In a period when we have many high priority programs 
competing for scarce dollars, we fund the most urgent MILCON needs of 
the Air Force. While we would like to see more dollars for 
recapitalization of all our facilities and infrastructure, the MILCON 
prioritization process we use today ensures that our highest priorities 
are satisfied first.
    We believe MILCON prioritization process is working for the entire 
Air Force, given the limited resources available. We are currently 
looking at adjustments to the process that will help us better target 
our most urgent needs for Active, Guard and Reserve.

                         CONTINGENCY REDUCTION

    Question. If this reduction hinders program execution and projects 
need to be deferred or canceled due to a lack of funds, how will the 
Air Force determine which project to defer or cancel?
    Answer. For MILCON, the Air Force will fund its most urgent 
requirements first. This includes new mission and weapon systems 
beddowns and projects required by law or treaty. We will then award all 
remaining projects in order of bid opening date until fiscal year 2001 
funds are exhausted. If necessary, the Air Force would fund all 
unawarded fiscal year 2001 projects as soon as fiscal year 2002 funds 
are available.
    For Air Force housing, the Air Force intends to award projects at 
full scope. The scope within each project may be reduced at project 
award or during construction to account for contingency requirements.

                        GENERAL OFFICER QUARTERS

    Question. What efforts have you taken to assure there is no further 
abuse of operation and maintenance funding for maintenance and repair 
of general and flag officer quarters?
    Answer. The Air Force rescinded the policy allowing the use of 
regular O&M funds to maintain the general officer quarters (GOQs) at 
the Air Force Academy. Our policies have been revised to comply with 
Congressional direction that all maintenance and repair in family 
housing will be funded from the family housing appropriation.
    In addition, in October 1999, the Chief of Staff and Secretary of 
the Air Force approved three GOQ initiatives that will improve our 
management of the GOQ inventory. First, we are developing a GOQ 
Facility Master Plan that will document the condition of every GOQ and 
form the basis for short and long-range investment plans for each unit. 
Second, we are building a Residents' Guide to explain, in plain 
English, the complex rules and regulations governing GOQs. Finally, we 
are developing a GOQ Management Course for our civil engineering, 
housing, and resources personnel to ensure they have the resources and 
information necessary to maintain and manage our GOQs. All three 
initiatives will be complete by December 2000.

                         HISTORIC PRESERVATION

    Question. What efforts are being undertaken by the Air Force to 
reduce costs and improve the maintenance of historic buildings?
    Answer. The Air Force stated in a 1997 Report to Congress that 
major improvements and additions to historic housing units cost more 
than the average per-unit cost for a non-historic unit. Usually, the 
historic housing units are older, larger, and require construction 
materials and architectural details typical of the historic period to 
comply with the National Historic Preservation Act. However, over time 
annual maintenance is not higher. The 1996 maintenance and repair cost 
for historic housing was $1,633 per-unit. The average 1996 maintenance 
and repair cost for non-historic housing was $3,593 per-unit. The lower 
maintenance and repair cost for historic housing can be attributed to 
the quality workmanship and durable materials usually built into these 
units. The Air Force implements the following strategies to reduce 
costs and improve maintenance of historic buildings:
    Cost Avoidance: The Air Force recently resolved a dispute with the 
Washington State Historic Preservation Officer (SHPO) regarding the 
significance of 19 base facilities. McChord Air Force Base, WA 
successfully challenged the SHPO's assertion that the facilities were 
historic and secure a formal determination from the National Park 
Service that the facilities are not eligible for listing on the 
National Register of Historic Places. Successes such as this one will 
give the base additional flexibility in their maintenance program, 
reduce costs, and reduce their National Historic Preservation Act 
compliance requirements. This strategy helps the Air Force to ensure 
resources are not spent on facilities that are not historically 
significant.
    Historic Building Inventory Reduction: In 1998 the Air Force 
completed a major Environmental Impact Statement to analyze the effect 
of demolishing historic buildings at Wright Patterson AFB, OH. While 
the buildings were historically significant the Air force demonstrated 
they were no longer supporting the mission and in some cases not 
structurally sound. The Air Force reached agreement with the Ohio State 
Historic Preservation Officer to demolish 12 historic buildings by the 
end of fiscal year 2002. Reducing the Air Force historic building 
inventory though demolition, when appropriate, reduces our maintenance 
responsibilities and costs
    In addition to demolition, the Air Force historic building 
inventory is reduced through excess property transfers and disposals. 
for example, McConnell Air Force Base, KS determined Building 1, better 
know as ``Wichita's First Municipal Airport Terminal'' no longer met 
mission needs and was in need of extensive repairs. The building which 
is listed on the National Register of Historic Places was excessed to 
the City of Wichita and now serves as the Kansas Aviation Museum. 
Conveying this property to the City of Wichita relieved the Air Force 
of the maintenance responsibility while providing an opportunity for 
the local community to reuse a historic building to the benefit of the 
public.
    Management Tools and Guidelines: The Air Force has developed a 
variety of management tools and guidelines to assist installations in 
managing historic buildings efficiently and cost-effectively. The 
primary management tool is the Cultural Resources Management Plan. Each 
installation is required to prepare a Cultural Resources Management 
Plan that provides an inventory of all historic properties and a 
general strategy for how the property will be maintained in accordance 
with the National Historic Preservation Act. In 1998, the Air Force 
completed the Air Force Historic Materials Source Book, which provides 
an exhaustive list of maintenance and construction materials for use on 
historic buildings. The Source Book includes a comprehensive list of 
suppliers to help Air Force installations obtain the correct materials 
for historic maintenance at the best possible price. Also in 1998, the 
Air Force developed the guidebook Preserving a Heritage: Standards and 
Illustrated Guidelines for Rehabilitating Historic Air Force Buildings 
and Structures, to assist installations in applying the Department of 
Interior historic preservation maintenance standards in compliance with 
the National Historic Preservation Act. Additionally, we have recently 
updated the air Force Family Housing Guide for Planning, Programming, 
Design and Construction, to include a section on the proper management 
of historic housing. Additionally, an analysis of historic buildings 
will be included in the Air Force General Officers Quarter Survey and 
the Family Housing Master Plan. One of the key indicators for 
evaluation is the physical condition of the buildings in order to 
perform a replacement in-kind analysis on how to best balance 
maintenance and repair of historic Air Force housing with the 
preservation requirements of the National Historic Preservation Act.

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    Question. The Department proposes a Basic Allowance for Housing 
(BAH) plan that will completely eliminate out-of-pocket housing 
expenses for military members by 2005. How will this initiative impact 
the Air Force's family housing accounts?
    Answer. There is no impact to the fiscal year 2001 budget and we 
anticipate minimal impact to the Future Years Defense Plan (FYDP) 
because we have programmed for revitalization of our worst housing 
first. Traditional MILCON projects in the fiscal year 2001 budget and 
the FYDP typically revitalize housing units that will be retained 
regardless of potential BAH increases or decreases. This includes 
housing projects at overseas bases, where some of our worst housing 
exists, and is needed due to unique force protection and/or quality of 
life concerns related to living in foreign communities.
    Our Family Housing Master planning process is responsive to any 
long-term impacts and any changes to out-year requirements as a result 
of BAH changes will be properly documented and future-year budgets 
adjusted accordingly.
    Question. Increasing the BAH will reduce the demand for on-base 
housing, what is the Air Force's plan for re-evaluating its on-base 
housing requirements and deficits?
    Answer. We systematically update our Family Housing Master Plan to 
address long term planning factors. The projected increase in BAH rate 
does not change the scheduled updates to the Master Plan in December 
2000 and again by December 2001. These updates ensure we have a current 
plan that addresses how and when we will revitalize, divest through 
privatization or demolish our 65,000 inadequate units by 2010.
    Our Family Housing Master Plan is responsive to any long-term 
impacts and any changes to out-year requirements as a result of BAH 
increase will be properly documented and future-year budgets adjusted 
accordingly.

                         UTILITY PRIVATIZATION

    Question. What assurances can the Air Force provide that the 
conveyance of utility systems will not result in a substantial increase 
in long-term utility costs?
    Answer. The Air Force can provide a measured assurance that the 
conveyance of utility systems will not result in a substantial increase 
in long-term utility costs.
    The Air Force is evaluating the long-term economic implications of 
utility system privatization through sound and thorough economic 
analysis procedures. This evaluation, which will yield a certified 
economic analysis, will support the best long-term option for the Air 
Force. If the economic analysis indicates that an increased long-term 
utility cost will result, privatization will not be pursued.
    With regards to the long term cost controls, our contracts include 
Federal Acquisition Regulation (FAR) provisions to control Price 
Redeterminations.
    With that said, the best long-term option for the Air Force may 
still yield an additional annual funding requirement. Defense Reform 
Initiative Directive (DRID) 49 instructs the Services to compare 
privatization costs with what the installation should be spending on 
its systems to maintain an industry operating standard. The Air Force 
currently maintains its systems below the industry operating standard 
using 1% of plant replacement value (PRV) as an allocation. 
Subsequently, the Air Force accepts the associated risk from deferred 
maintenance of the systems. We expect industry will not accept the same 
risk.
    Using DRID 49 rules of engagement, the economic analysis may yield 
an outcome that is economically feasible when comparing what the Air 
Force should be spending on its utility systems against the 
privatization costs. However, comparing the privatization costs of 
tomorrow with the current operating costs of today will yield an 
anticipated additional funding requirement.

                           RHEIN MAIN PROJECT

    Question. The Air Force has recently signed an agreement to 
transfer the mission capabilities of Rhein Main Air Base to Ramstein 
and Spangdahlem Air Base's in Germany. Can you bring us up to date on 
the status of this transfer and the impact it will have on the current 
facility and housing infrastructure at Ramstein and Spangdahlem?
    Answer. The agreement between the U.S. and the Government of 
Germany for the base closure settlement of Rhein-Main AB was signed on 
23 December 1999. The closure settlement was based on the 1959 lease 
agreement between the Federal Republic of Germany (FRG) and the 
Flughafen A.G. (FAG) which allowed the U.S. Air Force exclusive use of 
Rhein Main Air Base for ``Air Transport'' Operations. Under the terms 
of the closure agreement, the German parties will provide funding not 
to exceed DM 727.9 million for the construction of a specific set of 
replacement projects (airfield pavements, fuel, operational facilities, 
and infrastructure). As a result of the agreement, USAFE will return 
its exclusive rights of land no later than 31 December 2005. 
Negotiations of the closure agreement centered on the replacement of 
facilities required to move the airlift/air transport mission from 
Rhein Main to Ramstein/Spangdahlem. The German parties to the agreement 
did not recognize reconstruction of housing as part of the direct 
replacement of ``Air Transport'' activities. The housing requirements 
are estimated to increase by 219 units (Ramstein--137, Spangdahlem--
82). These additional families must be absorbed within existing 
Ramstein and Spangdahlem local housing communities. Similarly, facility 
construction related to current operations at Ramstein/Spangdahlem was 
not considered to be part of the closure agreement. Transferring Rhein 
Main's mission to Ramstein and Spangdahlem will not have a significant 
impact on their current facility and housing infrastructure.

  ALASKA: CAPE ROMANZOF LONG-RANGE RADAR SITE GENERATOR FUEL STORAGE 
                              ($3,900,000)

    Question. Why is this project requested in the Air Force's budget, 
rather than that of the Defense Logistics Agency's? Isn't DLA the 
``consolidated fuels manager'' of the Department of Defense?
    Answer. The tanks at the Cape Romanzof Long-Range Radar Site are 
requested in the Air Force's budget rather than that of the Defense 
Logistics Agency's (DLA) because the tanks are owned and operated by 
the Air Force and are not a part of a DLA operated system. DLA is the 
``consolidated fuels manager'' of the Department of Defense for fuels 
systems that provide fuel to multiple O&M customers (e.g., joint-use 
systems used by the Air Force and Navy).
    Question. This project is a Level 1 environmental compliance 
project. How long has the tank been out of compliance with State 
regulations, and why has this work not been performed in a previous 
year?
    Answer. The tank has been out of compliance since it failed a 
structural integrity test in 1997. The tank does not presently leak and 
is being monitored by site personnel until the compliance project is 
accomplished. This work was not performed in previous years because a 
project needed to be scoped, proposed in the MILCON process, and 
validated by HQ USAF for programming in the fiscal year 2001 MILCON 
program. Fiscal year 2001 was the first available program year after 
project scope was determined.

              ALASKA: EIELSON AFB DORMITORY ($14,540,000)

    Question. Another dormitory project is programmed in the Future 
Years Defense Plan (FYDP) at Eielson AFB. Will these two projects 
provide adequate living quarters to accommodate all unaccompanied 
enlisted personnel at Eielson AFB? If not, what will the remaining 
permanent party unaccompanied personnel housing deficit be?
    Answer. Yes, the fiscal year 2001, 120-room dormitory project and 
the fiscal year 2003, 120-room dormitory project adequately address 
Eielson AFB's current dormitory room deficit of 321 rooms. (Note: Per 
our Dormitory Master Plan, we do not program projects to address 
deficits less than 96 rooms.)
    Question. What is the Air Force's plan (by fiscal year and dollar 
amount) to provide adequate quarters at Eielson AFB?
    Answer.

------------------------------------------------------------------------
                                   Project         Scope
         Fiscal year             description      (rooms)       Cost
------------------------------------------------------------------------
2001........................  Deficit.........        120    $14,500,000
2003........................  Deficit.........        120     16,100,000
Outyears....................  Critical                120            TBD
                               Replacement.
Outyears....................  Critical                120            TBD
                               Replacement.
Outyears....................  Critical                120            TBD
                               Replacement.
------------------------------------------------------------------------

    Question. Does this project replace an existing dormitory? If so, 
does it replace the worst existing dormitory at Eielson AFB?
    Answer. The fiscal year 2001 dormitory project at Eielson AFB does 
not replace any existing dormitories, but rather adds a new dormitory 
to reduce the overall 321 dormitory room deficit at Eielson AFB for our 
permanent party enlisted airmen.
       Alaska: Elmendorf AFB Upgrade Hangar Complex ($11,600,000)
    Question. The form 1391 indicates the existing hangar was 
constructed in 1942. How far does this project extend the useful life 
of the facility?
    Answer. This project will extend the useful life 25 years.
    Question. The form 1391 indicates a full economic analysis was not 
performed because only one option met operational requirements. Please 
explain in further detail why only one option exists and why a full 
economic analysis was not performed. Additionally, why wasn't a new 
hangar at a different location considered?
    Answer. The existing maintenance hangar is structurally sound and 
the primary purpose of this project is to provide fire protection to 
protect aircraft, equipment, and people. The existing hangar is well-
located for its functions, and a new hangar sited in accordance with 
current airfield criteria would not be as operationally effective to 
meet the mission.
    Question. What assurances can the Air Force provide the Committee 
that this is the most economical option for the facility?
    Answer. The primary facility cost of this $11.6 million hangar 
upgrade, excluding supporting facilities, utilities, and overhead, is 
$7.6 million. The primary facility cost of a new facility of the same 
scope, excluding supporting facilities costs, would be over $20 
million. Based on this comparison, upgrading is the most economical 
option for the facility.
    In addition, a new facility would be difficult to site properly 
with adequate runway and taxiway clearance setbacks due to base 
development since the existing facility was built. Higher site-specific 
supporting facility costs for a new facility could result.

    CALIFORNIA: BEALE AFB WATER TREATMENT PLAN & DISTRIBUTION LINE 
                              ($3,800,000)


    Question. This project is a Level 1 environmental compliance 
project. How long has Beale AFB been out of compliance with State 
regulations, and why has this work not been performed in a previous 
year?
    Answer. Beale AFB has been out of compliance with a Safe Drinking 
Water standard for manganese since 1996. Also, the base has had on-
going exceedances of Total Coliform since 1992, resulting in five 
notices of violation. In response to an inquiry from Beale AFB, the 
California Department of Health Services stated in a 1997 letter that 
they would not grant a variance to Beale AFB for the Total Coliform or 
manganese treatment standards. The Air Force subsequently programmed a 
MILCON project to meet the treatment requirement and communicated their 
intentions to the California Department of Health Services.
    This work was not performed in previous years because interim 
measures were taken to control the Total Coliform exceedances while a 
long-term solution was developed for both the manganese and Total 
Coliform problems. A corrective measures study was performed in 1997/
1998, a design/build project was scoped and proposed in FY00 and 
rescoped and programmed in the fiscal year 2001 MILCON program after HQ 
Air Force review. Fiscal year 2001 was the first available program year 
after project scope was determined.
    Question. Is Beale AFB a utility privatization candidate? If so, 
why is this project needed?
    Answer. The natural gas utility system at Beale AFB is a 
privatization candidate. The rest of the utility systems at Beale AFB, 
including the water system, are not privatization candidates as they 
are exempt from privatization consideration due to readiness and 
mission requirements. The Air Force needs this project to correct 
ongoing exceedances of the Safe Drinking Water Act standard for 
manganese.

        CALIFORNIA: LOS ANGELES AFB FITNESS CENTER ($6,580,000)

    Question. Will this project satisfy the total space requirement for 
fitness centers at Los Angeles AFB? If not, are additional fitness 
center projects programmed? If so, in what fiscal year and at what 
amount?
    Answer. Yes, this project satisfies the total requirement for core 
fitness center space at Los Angeles AFB. There are no additional 
fitness center projects programmed at Los Angeles AFB.
    Question. Please describe in some detail the two facilities to be 
demolished as part of this project.
    Answer. The facilities to be demolished as part of this project 
are: Building 215, an auto hobby shop (17,120 SF), and building 216, a 
parking shed (616 SF). Both of these facilities were built in 1942 and 
are located in the footprint of the new fitness center. These two 
facilities are old and beyond economical repair. A replacement project 
for the auto hobby shop will be programmed in the future years program.

     CALIFORNIA: VANDENBERG AFB UPGRADE WATER DISTRIBUTION SYSTEM 
                              ($4,650,000)

    Question. This project is a Level 1 environmental compliance 
project. How long has Vandenberg AFB been out of compliance with State 
regulations, and why has this work not been performed in a previous 
year?
    Answer. Vandenberg AFB has been unable to consistently maintain 
compliance with residual chlorine requirements since 1993. Also, the 
base has had on-going exceedances of the Total Coliform Rule resulting 
in a Notice of Violation in 1997.
    This work has not been performed in previous years because interim 
measures were taken to control the total Coliform exceedances and to 
maintain chlorine residual with portable chlorinators while a long-term 
solution was developed. A corrective measures study was performed in 
1998, a design/build project was scoped and proposed in the MILCON 
process, and programmed in the fiscal year 2001 MILCON program after HQ 
USAF review. Fiscal year 2001 was the first available program year 
after project scope was determined.
    Question. Is Vandenberg AFB a utility privatization candidate? If 
so, why is this project needed?
    Answer. Yes, Vandenberg AFB is a utility privatization candidate.
    The Air Force needs this project to correct ongoing exceedances of 
the Safe Drinking Water Act standard for Total Coliform. Because this 
MILCON project is being executed as a design-build effort, the 
construction start date is projected for January 2001. If the 
construction were to be delayed and accomplished after the system is 
privatized, the anticipated construction start date is September 2002, 
based on the most optimistic privatization schedule. A delay would 
subject the base to increased vulnerability to enforcement action, 
including penalties and fines. The expenditure will also support the 
privatization ensuring ultimate acceptance by the private sector.

             COLORADO: PETERSON AFB DORMITORY ($11,000,000)

    Question. After completion of this project, what will the remaining 
permanent party unaccompanied personnel housing deficit be at Peterson 
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to 
provide adequate living quarters at Peterson AFB?
    Answer. After completion of the fiscal year 2001, 144-room 
dormitory project at Peterson AFB, the permanent party deficit will be 
481 rooms. To address this deficit, we have programmed a $11,300,000, 
144-room dormitory for fiscal year 2002; a $12,400,000, 144-room 
dormitory for fiscal year 2003; and a $12,200,000, 144-room dormitory 
for fiscal year 2005. (Note: Per our Dormitory Master Plan, we do not 
program projects to address deficits less than 96 rooms.)

COLORADO: U.S. AIR FORCE ACADEMY ADD TO ATHLETIC FACILITY ($18,960,000)

    Question. How does the cost per square foot of this project compare 
with the cost per square foot of other physical fitness centers in the 
Air Force's fiscal year 2001 budget submission?
    Answer. The estimated average cost of the fitness centers in the 
fiscal year 2001 Air Force MILCON program is $140/square foot (SF). 
This figure was adjusted to allow for differing scopes and area cost 
factors. The Department of Defense Pricing Guide average fiscal year 
2001 cost for fitness centers is $143/SF. The Academy athletic facility 
is estimated to cost $147/SF. The Air Force Academy athletic facility 
must provide many features not found in base fitness centers, such as 
extensive sports medicine facilities and space for visiting teams and 
officials. Additionally, this facility does not include large, open 
areas such as gymnasiums, which tend to be less expensive.
    Question. How is this project connected with athletic conference 
facility requirements?
    Answer. The National Collegiate Athletic Association requires 
members to comply with the gender equity provisions of Title IX, the 
educational amendments to the Civil Rights Act. This project is 
necessary to bring the Air Force Academy athletic facilities into Title 
IX compliance, meeting Mountain West Conference and ultimately the NCAA 
Division I accreditation standards.

  FLORIDA: EGLIN AFB PRECISION GUIDED MUNITIONS MAINTENANCE FACILITY 
                              ($3,340,000)

    Question. The form 1391 for this project indicates the existing 
facilities are outdated. How many facilities are currently used for 
missile and PGM maintenance at Eglin AFB, and in what year was each of 
the facilities constructed?
    Answer. Currently three facilities are associated with the PGM 
workload; building 1210 (9,556 SF, built in 1957); building 1212 (6,186 
SF, built in 1953); and building 1279 (3,200 SF, built in 1979).
    Question. Describe the economies that should result from the 
consolidation of these maintenance facilities in a central facility.
    Answer. The consolidation of these facilities in a central location 
will improve productivity, safety, and morale of maintenance personnel. 
The existing facilities are outdated, too small, dispersed, and were 
not designed to support new high tech precision guided munitions (PGM) 
and missile maintenance workloads. Safety hazards, constant delays, and 
work-arounds are common, thus negatively impacting productivity, morale 
and airman retention.
    Question. Please describe in some detail the facility to be 
demolished as part of this project. Is this demolition in the footprint 
of the new construction?
    Answer. Building 1207 (8500 SF, built in 1957), a single story pre-
engineered metal building, will be demolished as part of this project. 
This facility was once occupied by the munition maintenance 
administrative function. They vacated this facility in July 1998 due to 
its high maintenance cost and poor condition (i.e., deteriorated 
exterior metal facade, leaking roof, etc.). Since then, the Navy 
Explosive Ordnance Disposal (EOD) office is using this facility as 
inert storage. The Navy EOD office will move to building 1210, which 
will be vacated by the precision guided munitions functions upon 
completion of the new facility. This facility is not in the footprint 
of the new construction.

           FLORIDA: EGLIN AFB UPGRADE DORMITORY ($5,600,000)

    Question. The form 1391 for this project indicates the dormitory to 
be upgraded is 46 years old and contains numerous deficiencies. How far 
does this project extend the useful life of the dormitory?
    Answer. The structural components of this facility are concrete 
masonry block and reinforced concrete columns and slabs. It is 
estimated the facility structure will last another 50 years. This 
project completely renovates one wing of a two wing dormitory and 
provides a new standing seam metal roof for the entire facility. 
Standing seam metal roofs are generally warranted for 20 years. The 
utility components (mechanical, electrical, and plumbing) vary on life 
expectancy from 20-30 years.
    Question. Why wasn't the construction of a new dormitory a valid 
option, and why couldn't it meet the mission requirement as indicated 
on the form 1391?
    Answer. This project is phase two of two. In fiscal year 1996 
Congress appropriated funds to upgrade this dormitory. At that time an 
economic analysis was conducted that determined renovation was more 
cost effective. Mission requirement in this case refers to the Air 
Force policy of providing one-plus-one dormitories for our airmen. 
Based on this assumption, renovating this dormitory is the only 
economical option available to meet mission requirements.

  FLORDIA: EGLIN AUX FIELD 9 DEFENSE ACCESS ROAD ($2,360,000) UPGRADE 
                       ACCESS ROADS ($5,600,000)

    Question. The form 1391's indicate the requirement for these 
projects is due to increased traffic resulting from Special Operations 
Forces (SOF) revitalization. If so, why are these projects solely 
funded by the Air Force?
    Answer. A 1987 Memorandum of Agreement between the Air Force and 
U.S. Special Operations Command (USSOCOM) establishes MILCON funding 
responsibilities between the two organizations. Under this agreement, 
the USSOCOM MILCON program funds mission-drive facilities and the Air 
Force programs for base support facilities.
    More recently, the fiscal year 1996 MILCON Appropriations Bill, 
Senate Report 104-116, states, ``The Special Operations Command should 
continue to budget for their own operations, training, equipment 
maintenance, and storage facility requirements.''
    Question.Why wasn't this work requested as a single project?
    Answer. This project was developed as a single undertaking for the 
purpose of obtaining the necessary approvals within the Air Force. The 
project involves construction work on both Federal property and on 
public roads under this jurisdiction of Okaloosa County, FL. The work 
within the base will be executed as normal Military Construction by the 
Corps of Engineers. The Defense Access Roads outside the base will be 
accomplished by Okaloosa County. Apportionment of funds after enactment 
must therefore be between two different construction agencies. The work 
to be done on the public roads was submitted separately in the 
President's Budget to facilitate separate apportionment to the Air 
Force and Federal Highway Administration by the Office of Management 
and Budget and the Treasury. This separation also facilitates 
accounting for the separate appropriations during project execution.
    Question. Will the Air Force award two separate contracts for this 
work? If so, why?
    Answer. Yes, because these projects involve construction on 
properties under two different, mutually exclusive jurisdictions. The 
work within the base will be executed as normal military construction 
by the U.S. Army Corps of Engineers. The Defense Access Roads outside 
the base will be accomplished by Okaloosa County. Apportionment of 
funds after enactment must therefore be between two different 
construction agencies.

                   FLORIDA: TYNDALL AFB F-22 BEDDOWN

    Question. What is the future construction program (by fiscal year 
and dollar amount) for the F-22 beddown at Tyndall AFB?
    Answer:

                        [In millions of dollars]

        FY base and project                                       Amount
2001--Tyndall:
    F-22 ADAL Maintenance Facilities..............................  18.5
    Operations Facility...........................................   6.8
                                                                  ______
      FY01 total..................................................  25.3
                        =================================================================
                        ________________________________________________
2002--Tyndall AFB:
    F-22 Squad Ops/AMU and Hangar.................................  10.6
    F-22 Fuel System Maintenance Hangar...........................   2.3
                                                                  ______
      FY02 total..................................................  12.9
                        =================================================================
                        ________________________________________________
2005--Tyndall AFB:
    Flight Simulator, Phase II....................................   2.2
    Hangar Upgrade................................................   1.3
                                                                  ______
      FY05 total..................................................   3.5

\1\ Projected requirement not included in current Future Years Defense 
Program. To meet mission timing requirements, these projects will be 
included in the applicable President's Budget request.
---------------------------------------------------------------------------

    GEORGIA: FORT STEWART AIR SUPPORT OPERATIONS SQUADRON FACILITY 
                              ($4,920,000)

    Question. Will the four existing structures used by the Air Support 
Operations Squadron (ASOS) be demolished? If so, is the cost of 
demolition included in this project? If not, why not?
    Answer. The four structures will not be demolished. Army personnel 
on Fort Stewart will retain the facilities for another use.
  Illinois: Scott AFB Munitions Storage/Land Acquisition ($3,830,000)
    Question. By what date must the land acquisition be accomplished in 
order to execute the munitions storage project during fiscal year 2001?
    Answer. If land acquisition is required, the acquisition needs to 
be accomplished one month prior to award of the construction project. 
Completion of land acquisition before August 2001 would ensure award in 
fiscal year 2001. We anticipate no problems executing this project in 
fiscal year 2001.
            Louisiana: Barksdale AFB Dormitory ($6,390,000)
    Question. After completion of this project, what will the remaining 
permanent party unaccompanied personnel housing deficit be at Barksdale 
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to 
provide adequate living quarters at Barksdale AFB?
    Answer. After completion of the fiscal year 2001, 96-room dormitory 
project at Barksdale AFB, the permanent party deficit will be 405 
rooms. To address this deficit, we have programmed a $6.8 million, 96-
room dormitory for fiscal year 2004 and three additional 96-room 
dormitories in the outyears. (Note: Per our Dormitory Master Plan, we 
do not program projects to address deficits less than 96 rooms.)
 Missouri: Whiteman AFB B-2 Conventional Munitions Igloos ($4,150,000)
    Question. This project provides munitions storage igloos. The form 
1390 for this project indicates a B-2 munitions storage project is 
programmed within the next three years at Whiteman AFB. How do these 
two projects differ, and why weren't they programmed concurrently?
    Answer. In support of the B-2 mission expansion, the fiscal year 
2001 MILCON project provides storage capacity for modern conventional 
munitions such as GBU-28, Joint Stand Off Weapon (JSOW), Joint Air-to-
Surface Stand-off Missile (JASSM), and the Joint Direct Attack 
Munitions (JDAM). The future igloos addressed in the Form 1390 are an 
initiative to create a separate conventional munitions storage area. 
Presently, nuclear and conventional weapons are stored in separate 
igloos, but within the same secure area. Conventional weapons do not 
require the same high level security as nuclear weapons, so Whiteman 
AFB desires a separate area for conventional weapons. The outyear 
project is not driven by B-2 developments.
    Question. What is the future construction program (by fiscal year 
and dollar amount) for the B-2 beddown at Whiteman AFB?
    Answer. Specific B-2 driven construction at Whiteman is completed 
with the fiscal year 2001 MILCON projects requested.

Fiscal Year 2001:
    B-2 Conventional Munitions Igloos.........................$4,150,000
    B-2 Munitions Assembly Area............................... 7,900,000
          New Jersey: McGuire AFB Fitness Center ($9,772,000)
    Question. Will this project satisfy the total space requirement for 
fitness centers at McGuire AFB? If not, are additional fitness center 
projects programmed? if so, in what fiscal year and at what amount?
    Answer. Yes. This project satisfies the space requirement for 
fitness centers at McGuire AFB. Therefore, no follow-on projects are 
programmed.
      North Carolina: Pope AFB Dangerous Cargo Pads ($23,570,000)
    Question. This project includes the demolition of 24,000 square 
meters of pavement. What is the cost of this demolition?
    Answer. The pavement demolition cost for the Pope Dangerous Cargo 
Pads MILCON project is $366,000.
              Oklahoma: Tinker AFB Dormitory ($5,800,000)
    Question. After completion of this project, what will the remaining 
permanent party unaccompanied personnel housing deficit be at Tinker 
AFB? What is the Air Force's plan (by fiscal year and dollar amount) to 
provide adequate living quarters at Tinker AFB?
    Answer. After completion of the fiscal year 2001, 96-room dormitory 
project at Tinker AFB, the permanent party deficit will be 589 rooms. 
To address this deficit, we have programmed a $8,600,000, 144-room 
dormitory for fiscal year 2002; a $9,300,000, 144-room dormitory for 
fiscal year 2003; a $7,500,000, 120-room dormitory for fiscal year 
2005; and a 120-room dormitory project in the outyears. (Note: Per our 
Dormitory Master Plan, we do not program projects to address deficits 
less than 96 rooms.)
South Carolina: Shaw AFB USCENTAF Operational Weather Squadron Facility 
                              ($2,850,000)
    Question. The form 1391 states, ``This facility will provide for 
consolidation of weather personnel from Army and Air Force 
installations.'' Why isn't this project jointly funded with the Army?
    Answer. This project consolidates Air Force personnel that are 
currently assigned at Air Force and Army installations. Army personnel 
are not involved.
    Question. If the personnel and equipment to support the beddown of 
the weather squadron arrived at Shaw AFB in 1998, where do they 
currently perform their functions? Please describe in some detail the 
condition of the current facilities, and why they need replaced?
    Answer. Operational Weather Squadron (OWS) personnel are operating 
from temporary trailers originally purchased in 1992 to support the 
emergency relocation of the Air Control Squadron from Homestead AFB 
after Hurricane Andrew. These trailers are not permanent facilities and 
are at the end of their projected useful life. They are in poor 
condition and deteriorating rapidly, and they do not meet operational 
requirements of the OWS.
  Texas: Dyess AFB-Realistic Bomber Training Initiative ($12,175,000)
    Question. The form 1391 for this project indicates that the land to 
be acquired and the emitter sites to be constructed as part of this 
project are in the proximity of both Barksdale and Dyess AFBs. How far 
does this initiative take place from both Barksdale and Dyess AFBs, and 
why is it being considered a Dyess AFB project?
    Answer. Although the land being considered for the Realistic Bomber 
Training Initiative (RBTI) is in the flying proximity of the bomber 
training units of both Dyess and Barksdale AFBs, the land is in Texas 
and much closer to Dyess AFB than to Barksdale AFB. The proposed 
emitter sites range from 50 to 400 miles from Dyess AFB and 450 to 750 
miles from Barksdale AFB. Thus, RBTI is considered a Dyess project.

              VIRGINIA: LANGLEY AFB DORMITORY ($7,470,000)

    Question. There are additional dormitory projects in fiscal year 
2001, and in the outyears. Is this about the maximum rate of dormitory 
replacement that can be accomplished at Langley AFB without disrupting 
operations, roughly $7,500,000 of dormitory work per year?
    Answer. The fiscal year 2001 and outyear dormitory projects at 
Langley AFB do not replace any existing dormitories, but rather add new 
dormitories to reduce the overall 667 dormitory room deficit at Langley 
AFB for our permanent party enlisted airmen. These projects will not 
disrupt any mission operations, nor do they represent any maximum rate 
of dormitory work per year.
    Question. Will the fiscal year 1999 project replace the worst 
existing barracks at Langley AFB? If not, why were these barracks 
selected for replacement this year?
    Answer. The fiscal year 2001 dormitory project at Langley AFB does 
not replace any existing dormitories, but rather adds a new dormitory 
to reduce the overall 667 dormitory room deficit at Langley AFB for our 
permanent party enlisted airmen.
    Question. Submit for the record a list of the planned projects to 
correct all existing barracks deficiencies at Langley AFB, by fiscal 
year programmed.
    Answer.

------------------------------------------------------------------------
                                    Project         Scope
         Fiscal year              description      (rooms)       Cost
------------------------------------------------------------------------
2001.........................  Construct                96    $7,500,000
                                Deficit Dorm.
2002.........................  Construct                96     7,800,000
                                Deficit Dorm.
2004.........................  Construct                96     7,900,000
                                Deficit Dorm.
Outyears.....................  Construct                96           TBD
                                Deficit Dorm.
Outyears.....................  Construct                96           TBD
                                Deficit Dorm.
Outyears.....................  Construct                96           TBD
                                Deficit Dorm.
------------------------------------------------------------------------

    Note--Per 1999 Dormitory Master Plan, we do not program replacement 
projects for dormitories that scored less than 49 points in project 
ranking matrix, as these dormitories are not considered critical 
replacement projects
    Washington: McChord AFB--C-17 Add/Alter Nose Docks ($3,750,000)
    Question. What is the estimate of savings in design costs by 
accomplishing this project through a standard or definitive design?
    Answer. This project does not lend itself to a standard/definitive 
design because we are adding to and altering an existing hangar to meet 
the C-17 aircraft hangar criteria. Therefore, no design cost savings 
are projected.
    Wyoming: F.E. Warren MMIII Missile Service Complex ($15,520,000)
    Question. What are the Air Force's maintenance responsibilities for 
these properties?
    Answer. These properties were constructed in 1909 and are included 
in the F.E. Warren National Historic Landmark District and listed on 
the National Register of Historic Places. In accordance with the 
National Historic Preservation Act and per the memorandum of agreement 
between the Air Force and the Wyoming State Historic Preservation 
Office (SHPO) of September, 1984, the Air Force is responsible for the 
``appropriate maintenance, rehabilitation, restoration, or 
reconstruction treatments of historic properties to be applied within 
the mission and budgetary constraints of the Air Force.'' Appropriate 
maintenance includes consideration of the Department of Interior 
Standards and Guidelines for Rehabilitating Historic Structures and 
Buildings, which instructs federal agencies to utilize maintenance and 
construction materials that are consistent with the historic features 
of the building.
    Question. What is the estimated annual maintenance cost per 
property?
    Answer. The annual maintenance cost per property; Building 332, 
$99,083; Building 336, $56,619; and Building 340, $21,232.
    Question. What is the re-use plans for these facilities?
    Answer. There is no specific function identified yet. A Planning 
Assistance Team from the Air Force Center for Environmental Excellence 
is scheduled to visit F.E. Warren AFB in May 2000 to study the reuse 
potential for the historic structures that were originally constructed 
as cavalry stables. These facilities are scheduled to be vacated in 
December 2002 (dependent upon the construction schedule of the new 
MMIII Missile Service Complex). The Planning Assistance Team 
recommendations will be presented to the base leadership for 
consideration. Currently, the base has identified three candidate 
functions for re-use of these facilities including Temporary Living 
Facilities for families being transferred to/from F.E. Warren AFB, 
Visiting Quarters for official visitors, or a Consolidated 
Communications Complex. The reuse plan must take into account that the 
exterior of the buildings cannot be significantly altered due to their 
historic nature.

                ITALY: AVIANO AB DORMITORY ($8,000,000)

    Question. After completion of this project, what will the remaining 
permanent party unaccompanied personnel housing deficit be at Aviano 
AB? What is the Air Force's plan (by fiscal year and dollar amount) to 
provide adequate living quarters at Aviano AB?
    Answer. After completion of the fiscal year 2001, 102-room 
dormitory project at Aviano AB, the permanent party deficit will be 287 
rooms. To address this deficit, we have programmed an $8,200,000, 102-
room dormitory for fiscal year 2002 and an $8,300,000, 102-room 
dormitory for fiscal year 2004. (Note: Per our Dormitory Master Plan, 
we do not program projects to address deficits less than 96 rooms.)
    Question. Describe in some detail the readiness and force 
protection concerns at this location, and how this project will address 
those concerns?
    Answer. This project constructs a 102-room dormitory to address the 
current 389-room deficit at Aviano Air Base, Italy, to comply with Air 
Force policy to house all unaccompanied junior airmen on-base. 
Constructing this dormitory in the confines of the base will reduce 
exposure to potential terrorist threats. This dormitory will be 
designed in accordance with Commander-in-Chief, United States European 
Command Operations Order 99-01, Army Training Manual 5-853-1 and Air 
Force Manual 32-1071, Volume 1 force protection guidance. The salient 
design considerations addressing force protection concerns include the 
following:
    (1) Separate government vehicle and personally owned vehicle access 
and parking.
    (2) Locate parking lot at least 25 meters from the building.
    (3) Ensure ventilation inlets are not easily accessible and not 
located in areas where large amounts of people will be congregating.
    (4) Locate dumpsters at least 15 meters away from building.
    (5) Ensure doors have glazing and windows have at least 6mm of 
lamination. For double pane windows, ensure the inner pane has the 
required 6mm of laminate.
    (6) Ensure the facility is located 15 meters away from surrounding 
dormitories.
    (7) Plant trees and vegetation to block line of sight from 
perimeter.

                ITALY: AVIANO AB DORMITORY ($8,000,000)

    Question. What is the design life of this dormitory project?
    Answer. This dormitory is designed for a minimum service life of 25 
years. However, with renovations and upgrades to components, the 
structure will have an economic life of approximately 50 years.
                Korea: Osan AB--Dormitory ($11,348,000)
    Question. There are additional dormitory projects in fiscal year 
2001, and in the outyears. Is this about the maximum rate of dormitory 
replacement that can be accomplished at Osan AB without disrupting 
operations, roughly $12,000,000 of dormitory work per year?
    Answer. The fiscal year 2001 and outyear dormitory projects at Osan 
AB do not replace any existing dormitories, but rather add new 
dormitories to reduce the overall 1,258 dormitory room deficit at Osan 
AB for our permanent party enlisted airmen. These projects will not 
disrupt any mission operations, nor do they represent any maximum rate 
of dormitory work per year.
    Question. Will the fiscal year 1999 project replace the worst 
existing barracks at Osan AB? If not, why were these barracks selected 
for replacement this year?
    Answer. The fiscal year 2001 dormitory project at Osan AB does not 
replace any existing dormitories, but rather adds a new dormitory to 
reduce the overall 1,258 dormitory room deficit (the largest in the Air 
Force) at Osan AB for our permanent party enlisted airmen.
    Question. Describe in some detail the readiness and force 
protection concerns at this location, and how this project will address 
those concerns?
    Answer. Osan AB is the largest of two Air Force main operating 
bases in Korea, and is crucial to immediate generation and employment 
of airpower, strategic airlift and force reception in event of 
hostilities in Korea. Warfighting mission, proximity to hostile forces 
and importance of airpower to counter initial enemy attacks at outset 
of hostilities require immediate availability of assigned personnel. 
Separate 1997 threat assessment studies indicate that the principal 
readiness and force protection issues concern hostile forces who will 
attempt to disrupt force mobilization at the onset of hostilities. The 
November 1997 Joint Staff Integrated Vulnerability Assessment 
identified that vulnerability is especially acute where U.S. personnel 
are concentrated, e.g., off-base leased facilities. The planned 
construction of on-base dormitories, incorporating Department of 
Defense force protection construction standards, through a combination 
of host nation-funded construction and MILCON, will mitigate off-base 
housing facilities as a lucrative target for terrorist/enemy action. 
The salient design considerations addressing force protection concerns 
include the following: Collective protection system (CPS) (chemical 
protection); Emergency generator for CPS and emergency loads; 4-feet-
high window sills for bedrooms; Cast-in-place reinforced concrete 
exterior walls; Laminated exterior windows; Trash containers minimum of 
80 feet from the facility; Utility areas behind and next to the 
dormitory fenced to prevent access; Thickened exterior end wall of the 
dormitory facing the bicycle rack and street; No parking stalls within 
80 feet of the dormitory; Steel exterior doors; and Air intakes located 
high to restrict access.
    Question. What is the design life of this dormitory project?
    Answer. This dormitory is designed for a minimum service life of 25 
years. However, with renovations and upgrades to components, the 
structure will have an economic life of approximately 50 years.

     SPAIN: ROTA NAVAL STATION--ENHANCED ROTA, VARIOUS FACILITIES 
                              ($5,052,000)

    Question. The form 1391 for this project indicates that this 
project is required to replace seven facilities. Please describe in 
some detail the seven facilities to be replaced, including the year in 
which they were constructed.
    Answer. The Enhanced Rota Initiative is required to provide a 
European Southern Region Hub to meet the strategic mobility throughput 
requirements to Europe and Southwest Asia. The throughput requirement 
necessitates the construction of 16 wide-body aircraft parking spaces 
and associated fuel system.
    The facilities listed in the table below are in the footprint and 
siting area of the aircraft parking improvements and must be demolished 
and reconstructed. Demolition of the existing facilities will be 
included in the fiscal year 2002 and fiscal year 2003 Airfield 
Improvement projects. The fiscal year 2001 Various Facilities project 
designs and constructs the replacement facilities.

------------------------------------------------------------------------
                                                             Original
                Facility                     Existing      construction
                                           square meters       year
------------------------------------------------------------------------
Air Mobility Support Squadron Aircraft               534            1994
 Maintenance Shops......................
Air Mobility Support Squadron Aircraft             1,301            1994
 Forward Supply Warehouse...............
Aero Club Hangar........................             576            1974
Morgue..................................             328            1994
Aircraft Refueling Vehicle Maintenance               271            1962
 Shop...................................
Fleet Post Office.......................             799            1994
Chemical, Biological, and Radiological               226            1991
 Defense Equipment Facility.............
------------------------------------------------------------------------

    The DD Form 1391 does not list the Morgue and Chemical Biological 
and the Radiological Defense Equipment Facility. These facilities were 
added to this project as necessary within scope modifications as design 
and siting progressed. The Petroleum Oil and Lubricants (POL) 
Operations Facility and the Fuel Filter Facility, that are on the DD 
Form 1391, are now included in the Defense Logistics Agency fiscal year 
2002 Fuel Hydrant System project.
    Question. Is the cost of demolishing the seven facilities included 
in the cost of this project?
    Answer. The cost of demolishing these seven facilities is not 
included in this project. It is included in the fiscal year 2002 and 
fiscal year 2003 Airfield Improvements Projects.
    The Enhanced Rota, Replace Various Facilities project is one of 
five (three Air Force and two Defense Logistics Agency) projects 
totaling approximately $95 million over the fiscal year 2001-2003 
period that will expand the strategic parking ramp at Naval Station 
Rota, Spain. The other four projects (fiscal year 2002 and fiscal year 
2003) will construct a new ramp and associated fuel system for 16 wide-
body parking spots. This effort is collectively referred to as Enhanced 
Rota.
    Question. Why is this project not eligible for NATO funding?
    Answer. The Enhanced Rota, Replace Various Facilities project is 
one of five (three Air Force and two Defense Logistics Agency) projects 
totaling approximately $95 million over the fiscal year 2001-2003 
period that will expand the strategic parking ramp at Naval Station 
Rota, Spain. The other four projects (fiscal year 2002 and fiscal year 
2003) will construct a new ramp and associated fuel system for 16 wide-
body parking spots. This effort is collectively referred to as Enhanced 
Rota.
    The Enhanced Rota effort is potentially ``eligible'' for NATO 
Security Investment Program (NSIP) funding; however, it will not be 
known whether it will be supported (in part or total) by NATO until it 
has undergone a rigorous operational and technical review, a process 
commonly known as ``screening.'' This process could take up to five 
years. Air Mobility Command (AMC) and United States Air Forces in 
Europe (USAFE) both believe Enhanced Rota is a good candidate for NATO 
funding (due to NATO coming online with a requirement for a Strategic 
Mobility Hub in the Southern Region). However, due to the timeline, 
funds will not become available until well after the need date.
    This specific project, Enhanced Rota, Replace Various Facilities, 
would be eligible for NSIP funding to the extent that the NATO 
``screeners'' concurred that they need to be demolished to meet the 
NATO mission requirements. In this case, the NSIP program has 
historically replaced ``like for like''.
    To secure the right to collect NSIP funds for this effort in the 
future, it is necessary for the U.S. to file a Notice of Intent to 
Prefinance (NIP). In accordance with OSD policy, the Government of 
Spain (GOS) must endorse the NIP before the project can be submitted to 
the NATO committee for recording.
    Endorsing a potentially new NATO mission at Rota was too sensitive 
for the GOS to address, prior to the 12 March 2000 elections. According 
to OSD's Country Director for Spain, the GOS have informally told The 
Office of Defense Cooperation (ODC) the U.S. will get a NIP 
endorsement. The current popular party won the general election held 12 
March 2000, and with a clear majority, so we should soon expect 
negotiations for a release of this NIP by the Spanish to resume.
     Worldwide Various: Unspecified Minor Construction ($9,850,000)
    Question. Provide for the record a ten-year history of amounts that 
have been requested and appropriated for unspecified minor 
construction.
    Answer. The active Air Force information follows:

                                            [In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                    Including
                                                                  Requested       Appropriated    reprogramming
----------------------------------------------------------------------------------------------------------------
Fiscal year:
    1990.....................................................            7,000            7,000            7,240
    1991.....................................................           10,272           10,272           10,272
    1992.....................................................           11,500           11,500           20,203
    1993.....................................................           12,000            7,000            7,000
    1994.....................................................            6,844            6,844            8,555
    1995.....................................................            7,000            7,000            8,750
    1996.....................................................            9,030            9,030           11,288
    1997.....................................................            9,328            9,328           10,477
    1998.....................................................            8,545            8,545           10,681
    1999.....................................................            7,135            8,135            9,622
    2000.....................................................            8,741           11,341           11,341
----------------------------------------------------------------------------------------------------------------

          WORLDWIDE VARIOUS: PLANNING AND DESIGN ($54,237,000)

    Question. Will this funding level meet the known requirements for 
the fiscal year 2001 program, including the necessary work on projects 
programmed for fiscal years 2002 and 2003?
    Answer. No. Although this funding level budgets adequate planning & 
design (P&D) funds to complete design of fiscal year 2002 projects and 
start fiscal year 2003 designs, it will not restore shortfalls caused 
by the DoD directed $16,000,000 reduction to our fiscal year 2000 P&D 
request and prior-year Congressionally added projects and directed 
designs. Even after reprogramming $12,100,000 into the planning & 
design account, the Air Force will be forced to use more fiscal year 
2001 planning & design funds than budgeted to complete fiscal year 2002 
designs, creating a shortfall in fiscal year 2003 design starts.
    Question. Please explain why the Air Force's planning & design 
request is $26.2 million, or 48 percent, above last year's level.
    Answer. The Air Force's fiscal year 2001 planning & design request 
budgets funds to complete fiscal year 2002 project designs and start 
fiscal year 2003 designs. Our fiscal year 2001 request ($54.2 million) 
is larger than the fiscal year 2000 request ($28 million) for two 
reasons. First, DoD directed the Air Force to reduce our original 
fiscal year 2000 planning and design request ($44 million) by $16 
million and reprogram savings from prior year major construction 
projects. Secondly, our design requirements increased by $10.2 million.

                                BARRACKS

    Question. Provide for the record a chart that will show the Air 
Force's barracks construction program at the time the ``one plus one'' 
standard was approved, and the current program through completion, 
broken out by locations in the U.S., in Europe, and at other overseas 
locations.
    Answer. The Air Force did not have a line-item dormitory 
construction program at the time ``one plus one'' was approved in 1995. 
The Air Force plan in 1995 was based on a headquarters-level 
requirements analysis; it did not contain specific construction 
requirements. In 1995, the Air Force estimated that we would complete 
``one plus one'' implementation worldwide (including host-nation 
funding) by 2019.
    After completion of the Dormitory Master Plan in August 1997, the 
Air Force requirements became better quantified. We accomplished our 
goal to buyout our permanent party central latrine dormitories by 
fiscal year 1999. Now we are programming to buyout our deficit and most 
critical existing dormitories by fiscal year 2009, guided by our 
updated 1999 Dormitory Master Plan.
    The attached chart depicts the Air Force dormitory MILCON programs 
from fiscal years 1996 (the first year of ``one-plus-one'' dormitory 
construction) through 1999--major emphasis in these years was on 
eliminating permanent-party central latrine dormitories. From fiscal 
year 2000 to 2009 we plan to buyout our deficit and our most critical 
dormitories. The fiscal year 1996 through fiscal year 2000 programs 
indicate appropriated MILCON projects. The fiscal year 2001 program 
depicts the Air Force's dormitory MILCON requirements included in the 
President's Budget. Fiscal year 2002 and beyond reflect projects in the 
2002-2005 Future Years Defense Planning (FYDP) program and the 1999 Air 
Force Dormitory Master Plan.
    ``Pipeline'' student and Basic Military Training Student (BMTS) 
dormitories are not built to the ``one-plus-one'' standard, which 
applies to our permanent party airmen.



                         DORMITORY MASTER PLAN

    Question. Submit for the record the executive summary and 
``Appendix A'' of the current Air Force Dormitory Master Plan.
    Answer. Executive Summary and Appendix A (Comprehensive Dormitory 
Project Lists) attached.



                       Family Housing Master Plan
    Question. Submit for the record a copy of the current Air Force 
Family Housing Master Plan.
    Answer. Attached is copy of August 1999 Air Force Family Housing 
Master Plan signed by Secretary Peters and General Ryan.



    Question. Provide an explanation for any project for which 
statements have not been submitted.
    Answer. The projects for which NATO precautionary prefinancing 
statements have not been submitted are described below.

                            FISCAL YEAR 1999

    RAF Lakenheath, Dormitory (216 PN), MSET 953014, $15.8 million: 
Dormitories are not NATO-eligible and are not likely to ever be, 
therefore, a precautionary prefinance statement will not be filed.
    RAF Mildenhall, Dormitory (144 PN), QFQE 973010, $10.9 million: 
Dormitories are not NATO-eligible and are not likely to ever be, 
therefore, a precautionary prefinance statement will not be filed.
    Spangdahlem AB, Dormitory (108 PN), VYHK 993101, $9.5 million: 
Dormitories are not NATO-eligible and are not likely to ever be, 
therefore, a precautionary prefinance statement will not be filed.

                            FISCAL YEAR 2000

    Aviano AB, Radar Approach Control Facility, ASHE013005, $3.7 
million: Not yet filed. The requirement is to file the precautionary 
prefinance statement before entering into a construction contract. We 
will submit the prefinance statement before this project is awarded to 
any contractor.
    RAF Feltwell, Wastewater Treatment Facility, GPLS003014, $3.0 
million: Wastewater treatment plants are not NATO eligible and are not 
likely to ever be, therefore, a precautionary prefinance statement will 
not be filed.
    RAF Lakenheath, Child Development Center, MSET013001, $5.8 million: 
Child development centers are not NATO eligible and are not likely to 
ever be, therefore, a precautionary prefinance statement will not be 
filed.
    RAF Lakenheath, Consolidated Support Complex, MSET963002, $12.4 
million: Administrative/support facilities are not NATO eligible and 
are not likely to ever be, therefore, a precautionary prefinance 
statement will not be filed.
    RAF Mildenhall, Hazardous Material Storage Facility, QFQE966003E, 
$1.0 million: Hazardous material storage facilities are not NATO 
eligible and are not likely to ever be, therefore, a precautionary 
prefinance statement will not be filed.
    RAF Molesworth, Wastewater Treatment Facility, QNDR003002, $1.7 
million: Wastewater treatment plants are not NATO eligible and are not 
likely to ever be, therefore, a precautionary prefinance statement will 
not be filed.

                     BRAC ENVIRONMENTAL RESTORATION

    Question. What is the current estimate of the annual funding 
requirement for BRAC environmental restoration beginning in fiscal year 
2002?
    Answer. The estimated annual funding requirement for the BRAC 
environmental program based on the fiscal year 2001 President's Budget 
is as follows:

                        [In millions of dollars]

Fiscal year:
    2002..........................................................  89.5
    2003..........................................................  83.2
    2004..........................................................  80.6
    2005..........................................................  78.5

                           PROGRAM EXECUTION

    Question. Does the Air Force consider a project to be obligated 
when NAVFAC or the Corps of Engineers accepts a MIPR or when the 
contract is awarded?
    Answer. The Air Force considers a project to be obligated when our 
construction agent, NAVFAC or the Corps of Engineers, awards the 
construction contract.

                             AVIANO, ITALY

    Question. Bring us up to date with the current status of the Air 
Force beddown at Aviano, Italy, which has a total facilities cost of 
$404 million from all sources. When will this effort be completed?
    Answer. The NATO beddown program at Aviano includes a combination 
of $371,000,000 in NATO funds and $33,000,000 in U.S. conjunctive 
funds. The $404,000,000 provides 24 operational facilities, nine 
support facilities, seven infrastructure projects, and 17 quality of 
life projects. $180,000,000 of these projects are in design; 
$212,800,000 are in construction; and $11,200,000 are completed. The 
Aviano 2000 program will be completed by the end of calendar year 2003.
                                         Wednesday, March 15, 2000.

                       U.S. DEPARTMENT OF DEFENSE

                                WITNESS

RANDALL A. YIM, DEPUTY UNDER SECRETARY OF DEFENSE

                       STATEMENT OF THE CHAIRMAN

    Mr. Hobson. The Committee will come to order.
    This morning this Subcommittee will conduct a hearing on 
the Implementation of the Military Housing Reauthorization 
Initiative. Since the authorization of this program in fiscal 
year 1996, this Subcommittee has carefully monitored the 
implementation. We have all come a long way in determining our 
best, as this initiative can work to meet our usual goal of 
providing family housing.
    We are pleased to have with us today the Honorable Randall 
Yim, Deputy Under Secretary of Defense for Installations. Mr. 
Secretary, we look to you to provide the OSD perspective on 
this program. Following Secretary Yim, we will hear from the 
individual services. Let me just say that I think this is 
probably one of the most important hearings that we will have.
    I hope it turns out that way. I view this as an extremely 
serious subject that the Committee needs to understand, and the 
services need to understand how deeply we all feel about this 
issue, and about the patterns that we are establishing now in 
these programs are what is going to carry on in the future.
    If we do not do this right, starting out, then we could 
harm what I think we all agree is probably the right way that 
we should be going as far as the mix we should try to wind up 
getting for housing, and provide the quality of life programs 
that we want for the service people. So, we may take a little 
more time today. If we do not get done today, and I have not 
said this to anybody yet, but if we do not get this done in a 
way that everybody gets a chance to express themselves, I am 
willing to try to find some time to come back and do this. I 
think this is probably as significant a thing as this Committee 
is involved in.
    So, I am going to yield to Mr. Olver for any statements he 
might have. Then I would like you, Randall, to summarize your 
statement. We will make the whole statement a part of the 
record. Mr. Olver, do you have any comments that you would like 
to make?

                 STATEMENT OF THE HONORABLE JOHN OLVER

    Mr. Olver.  Thank you, Mr. Chairman.
    I do want to reiterate and support what you have said. This 
is as important an initiative as this Subcommittee deals with. 
The Administration, Mr. Secretary, and we will hear from you on 
this, has asked for a further authorization, a 5-year 
additional authorization.
    We have talked a lot about this being a pilot program; 5-
year, I am not sure how far beyond pilot that gets us, or what 
your intent here is, or whether you are thinking of this 
process as a pilot, or a full steam ahead to do everything. 
That then leads me to hope that I will learn from you and from 
the Members from the services, but you particularly, whether we 
have certain procedures for evaluating.
    What are the criteria? How do we assess? How do we 
evaluate? What are the proposals that we are going to go 
forward with in different geographies? I need to try to get 
that ever-clearer in my head in the context of how they are 
chosen and how the evaluations go forward. Then I want to 
ultimately hear how the whole issue of our now fully-funding 
the bar, the Housing Allowance Program, how that may affect 
what we are doing in this area.
    I want and need to understand. I need to feel that OSD has 
taken that into account. I think there must be some affect of 
our now going to full funding, rather than people who are in 
base housing having to pay 15, 19 percent in off-base housing; 
having to pay 15 to 19 percent of their costs, which we will 
now phase out. We have headed on a proposal to phase it out. 
So, those are the things that I hope to get out of this area to 
be excellent.
    Mr. Hobson.  I had a request from a fellow appropriator who 
would like to make one comment. Then if anybody else has a 
comment they want to say before we start, we will. Mr. Hoyer.
    Mr. Hoyer.  I thank you, Mr. Chairman. I want to thank both 
you and Mr. Olver for your leadership on this issue. I agree 
with you. This is a critical and important issue. I have a 
hearing at 10:00 a.m. so I cannot stay past 10:00 a.m. I do 
want to say that on behalf of Maryland and Ft. Meade, in 
particular, we very much appreciate the focus, Mr. Chairman, 
that you have brought to this, and the staff has brought to 
this, and Mr. Olver has brought to it, and all of the Members 
of the Committee who have been working with us.
    We believe this, as you do, is a very, very important 
issue. I thank you for your leadership.
    Mr. Hobson.  Any other Members?
    Mr. Dicks.  I would just like to say that I hope that we do 
not, and I am not saying this about our Committee. I hope that 
the Congress, after having given the authority to look at these 
private sector partners here, in terms of this project, is 
going to go forward with this. I represent the area near Ft. 
Lewis, Washington.
    I think when you look at the housing on the base, and you 
look at the potential that this program can bring, in terms of 
improving the quality of the housing, and getting more housing 
more rapidly, I think it makes sense to do this. I think what 
we have to do, in terms of the Congress is, now that we have 
given you the authority, the Administration, to do this back in 
1996, we have got to make sure that it works the way we all 
intend it to work and provide good oversight.
    I think that is what the Chairman is trying to do here 
today. I hope we do not continue to hesitate on going forward. 
I think we have got to do this. I know that in Texas and in 
Washington State, we feel we are ready to go. We want to do 
this. We hope that our colleagues will support us in that 
endeavor.
    Mr. Hobson.  Mr. Edwards.
    Mr. Edwards.  Mr. Chairman, I will be brief. First, I want 
to thank you for having this hearing. As we move forward, I 
think it is important that we move forward in the right 
direction with the questions that you, Mr. Olver, raised that 
need to be asked about this. I would like, though, to emphasize 
what Mr. Dicks has said. As I understand it, this Committee has 
veto power at the end of the day.
    So, what I do not fully understand is these roadblocks that 
keep popping up, not necessarily on this Subcommittee, but 
perhaps in the Senate. Frankly, it is like a Kafka trial. We 
keep moving forward and there is a roadblock. We cannot figure 
out who the roadblock is and where it is coming from. If we 
have at the end of the day, as we all understand the right to 
veto this, I hope we can have a pilot program at one or two 
sites before we have to vote on reauthorization next year so 
that we can move some dirt, and put it in place, and do it in 
the right way.
    Then at the end of the day, if we do not like the proposal 
of the developers and the military at Ft. Lewis or at Ft. Hood, 
then this Committee, as I understand through the leadership of 
the Chairman, can say no. If we do not get a chance to move 
forward at some point after this set of hearings, we will never 
even get a chance to evaluate these proposals.
    Mr. Dicks.  Will the gentleman yield for one point?
    There is one thing that is very obvious. For somebody who 
has served on the Defense Subcommittee for 22 years, we are not 
going to get there, providing the housing that is necessary for 
the men and women in the military through traditional military 
construction. It is not going to happen. So, we have got to 
look at an alternative. That is why I think this approach makes 
sense. So, I am eager to hear the witnesses. I appreciate the 
gentleman yielding.
    Mr. Edwards.  I will just finish by saying that I think as 
we ask these tough questions, and I am really genuine in saying 
I appreciate the challenges that the Chairman has raised and 
the questions he has raised, but I hope we will look at this in 
the context that every witness today will also say, where are 
we if we do not change directions? How far behind are we in 
providing quality housing for the soldier today?
    It is not much good to the young sergeant and his family, 
or the young private and his family that we are trying to keep 
in the Army today, if we tell them we have a 40-year turn 
around on the renovation of Army housing at Ft. Hood, and 
thousands of dilapidated facilities and facilities they should 
not be forced to live in while they are willing to serve their 
country. So, I hope this whole discussion day will also include 
testimony from people saying, where are we if we do not take a 
new approach.
    Mr. Hobson.  I think it is fair to say though that this law 
was passed in 1996. So, the record starts. That is where we 
are. The Army has no completed projects. As far as I know, it 
only has one in the ground under this program. The Navy did 
two, I think, two or three, some of which did not achieve the 
goals that they were supposed to achieve, but may be getting a 
little better.
    The Air Force has done one. There are currently, just so we 
know, 22 projects involving 27,911 units that are planned. We 
keep receiving requests to do more on a program that has yet to 
show that it is really working. I think the other thing we have 
had to overcome is there was some resistance, I can tell you, 
from some of the commands in the beginning. I think we have 
overcome that pretty well now.
    There would be a public statement that we are all for this 
stuff. Then there would be little asides that, well, we are 
being forced into this thing. Well, we are being forced into 
this because we do not have the money. I will share this with 
all of you, and I mean this to all of the people out here 
working. Some of us have followed this. The Navy did a good job 
in taking to heart some things when I went out a year ago and 
talked about some things.
    If we do not do this right, it will be really screwed up 
for a long period of time. We will not be able to achieve the 
goals. That is why I have tried to do some structure here. 
Before we start, I want to commend you all because I know it 
was a change from when we came in here and started looking at 
this stuff. There was a change.
    I think everybody has responded appropriately in getting 
this done or we would not be as far along on these two as we 
have been, had we not, and some others, had we not worked in 
that. Mr. Yim has kind of gotten into the oversight in this, 
which I really appreciate and I appreciate what you have done. 
So, with that, we will let you start with what you came here to 
do.

               STATEMENT OF THE HONORABLE RANDALL A. YIM

    Mr. Yim.  Thank you, Mr. Chairman, Congressman Olver, and 
Members of the Subcommittee. Let me also just begin by thanking 
the Committee for its interest in improving the quality of life 
for our dedicated military people and their families. I also 
sincerely want to thank you for the very constructive 
criticisms of this extremely important housing privatization 
program.
    They have been most helpful, particularly since I know that 
you share the same goals that the Department and the services 
share. Your concerns the past year, as well as the concerns 
raised by GAO, and in its past reports and in its current draft 
report, entitled Military Housing Continued Concerns For 
Implementing Privatization initiatives, have really been a 
catalyst for us to both examine our programs and our efforts to 
significantly improve our performance.
    My written statement is very detailed. It attempts to give 
you a history of the program, what we have done in the past, 
the various authorities, where we could use the authorities, 
some of our theories, what we are trying to achieve, and what 
we are doing to make our programs as cost effective as 
possible.
    Cost savings are a very important part of the program. It 
is fundamental. It is fundamental about quality of life and 
doing what is right for our dedicated people and their 
families. Why am I here? What would I like to try to address? I 
would like to address two areas of concerns about our program. 
Roughly, why are we doing this? Why are we putting money on the 
table for the private sector?
    Second, what are we doing to ensure that, that is used for 
what we are putting on the table? Can we get the best possible 
deal, both now and in the long-run, deals that will not fall 
apart in 5 or 10 years from now. But first, why are we doing 
this? We are doing this because over two-thirds of our housing 
inventory in the United States is sub-standard. That is about 
180,000 housing units.
    We are doing this program because we all agree that the 
fixing the housing problem is a top priority, but an 
unfortunate reality is that adequate military construction 
money has not been available to fix this problem within any 
acceptable period of time. We do not expect MILCON, as 
Congressman Dicks indicated, ever to be sufficient. We have a 
problem now that requires an attack from a lot of different 
fronts.
    We must have a substantial housing privatization program, 
as well as increases in housing allowances, combined with 
MILCON to fix these problems. I am not here to sell housing 
privatization as the be-all or end-all solution. It is not, but 
neither is MILCON. MILCON will take us about over $16 billion, 
and then maybe about 30 years or more to fix the problem.
    That is why they were really pleased when the Secretary of 
Defense, Secretary Cohen, endorsed our three-part program. 
First, by funding a plan and requesting legislation to increase 
the housing allowances to eliminate the out-of-pocket costs 
paid by service members for non-Government-owned housing in the 
United States.
    Second, by increasing the reliance on the private sector to 
meet our housing needs, through increased use of these 
allowances within the existing markets, and by stimulating an 
aggressive housing privatization program. Third, by maintaining 
military construction funding. We have established a goal of 
fixing the family housing problem by 2010 and the barracks 
problems by 2008.
    The services are on track with sufficient budgets to meet 
the 2008 barracks stall, but we have a very difficult path 
ahead to meet the 2010 housing goal. We are going to give it 
our best shot. It is precisely because we have to push very, 
very hard to meet the 2010 goal that we have to have a strong 
housing privatization program, and analyze and use all of the 
tools given to us by Congress and the housing privatization 
authorities.
    These authorities fundamentally allow us to put some value 
on the table to attract private sector innovation, cost 
efficiency, best business practices to leverage what we are 
able to put on the table, at least 3:1, but hopefully more like 
8:1, which means we can fix the problem under housing 
privatization eight times faster than we could under a 
traditional MILCON Program.
    This clearly raises justifiable concerns in Congress that, 
one, we do not know what we are doing. And two, we do not have 
the necessary expertise, we are putting too much on the table 
too soon, or we are not watching sufficiently the back-end of 
the deal, or we are not preventing the deal from falling apart 
10, or 15 years down the road.
    There is absolutely no doubt that the program has been 
executed much more slowly than anybody would have ever wanted; 
absolutely no doubt about it. This has been a function, I 
believe not because people are dumb, but because this is a very 
complex and new program. We are just not talking about a 
construction program. We know how to do that. These projects 
crash if they are going to crash not during the construction 
phase, but later during the operation and maintenance, or the 
care and recapitalization replacement phases.
    So, we had both better get better expertise on board about 
what these long-term financing and management issues are. What 
we also have to figure out is what we really want to get out of 
the program. That is what we needed to do. We had to figure out 
what to ask of the private sector. What should we be asking 
for?
    Then, how to protect ourselves over the long-term on this 
program. I believe that we have taken a lot of steps to figure 
that out by now. The answer varies, depending upon the service 
needs and the locations. When we answered these questions, we 
figured out what we wanted out of the program; what we were 
asking for.
    What we really discovered is that we want more than what we 
could pay for, using the housing allowance; what we pay our 
people. We want more. So, we created a development gap. This is 
kind of the classic American dream wish list type of a 
development gap. Let me illustrate it if I could. There is a 
chart on page 11 of the written statement.
    I took the liberty of blowing this up a little bit. Let me 
see if I can do the light thing for you all here about this 
chart and give you some examples about it.
    Simply stated, what experience has shown us is that the 
total funds available by combining developer, equity, and the 
available private sector financing is normally less than the 
total development cost of what we want. We create this 
development gap here. What we have to do is fill that 
development gap. The difference between the developer's equity 
and what they can get financed is the development gap.
    We have to fill it by use of one of the 12 or a combination 
of the 12 housing privatization orders that you have given us. 
Now, we do not want to use all of the 12 tools everywhere. They 
are not appropriate to be used everywhere. They are not even 
appropriate to use them all at the same time. We have to use 
them.
    We have to analyze to use them, depending on what is the 
most effective and the least scored cost to us for bridging the 
development gap. So, let me just give you some examples. Let us 
assume that we want a whole bunch of stuff. The developers 
cannot do it on their nickel. There is a $6 million development 
gap.
    We can use a variety of tools. OMB scores these tools 
slightly different for us. So, let us say that we have a $6 
million development gap. We, of course, can put $6 million of 
our money on the table. It is scored, of course, as $6 million. 
We can put equity in it. It bridges the development gap. It is 
not perhaps the most cost effective. It may be necessary in 
certain circumstances. We can do as the Navy is doing, bridge 
that development gap, and maybe supplementing the housing 
allowances, these differential lease payments.
    So when we pay our guys too little to be able to afford the 
type of houses that the developer wants to build or we are 
insisting they build, then we can supplement under the housing 
privatization tools by adding to the lease payments, a 
differential lease payment. OMB scores that as the net present 
value essentially of that income stream.
    For example, a $6 million development gap may be able to be 
bridged by a $5 million scored amount. So, we are able to save 
some of the up-front money. We could kick-start the program 
with a less scored amount value. If we contribute real stuff 
onto the table, we put in good houses, or houses that we convey 
ownership over to the private developer.
    Mr. Horn. What about, if I could just get in here; but you 
do not use the land in there. We do not charge in any of these 
deals. We do not give up the land and you do not charge them a 
land lease cost. I do not see that when you talk about 
conveying units. That would be probably about where it would be 
or in equity. Do I see any underwriting of the fact that this 
guy is getting the use of your land for nothing? They are not 
supporting it. I realize that.
    Mr. Yim. One of the reason we are putting the land into the 
deal, for example, giving a very low rent lease cost, we are 
actually giving them title to some of the units, not the 
underlying land. We are giving them title to some of the 
improvements on the property.
    So, we have very favorable scoring from OMB to that effect. 
To the extent you can give them that type of interest, that 
helps with their income stream or their financing. It helps 
them bridge the development gap. We have favorable scoring that 
does not allow us to count that in the up-front MILCON scored 
costs, which is a very effective way to leverage.
    Mr. Farr. Mr. Chairman.
    Mr. Hobson. Yes.
    Mr. Farr. I was told that this scoring, by the way, was 
being changed in the early 1990s. And that, that has really 
been one of our biggest problems, being able to pencil this 
out. It is a scoring problem, not a development problem.
    Mr. Yim. That is partially the case. Partially, you know, 
we have conveniently used the kind of magic of OMB scoring as 
an excuse for a lot of the problems. It is a part of the 
problem. A part of it is that we needed to understand how the 
tools worked. We were not really fighting with OMB as much as 
we did not really get, I think, how much value would be added 
to the developer by throwing these things out on the table. So, 
the tendency was to throw it out all on the table. If it was a 
financial advantage, they would pull up all of the tools. When 
we put it on the table and they might as well take it, as 
opposed to being selective about what we really needed to put 
on the table, understanding the scoring rules, and only putting 
enough that was necessary to make the deal pencil out for them.
    I believe a justifiable criticism is frankly we just put 
too much out there. We did not understand the negotiating 
leverage power that we had. We put too much out on the table. 
Now, we have to be smarter about it.
    Mr. Hobson. That is what I was going to say. I think that 
is one of the reasons that the consultants that they hired have 
been able to give them--they may not do the scoring side of it, 
but they now understand the developer may handle it. If we put 
the two together, I think we are getting little better results 
today than we were 3 years ago or so. Is the scoring still a 
problem? Do we need to work on that?
    Mr. Yim. There are a couple of the authorities that we have 
unfavorable scoring. As a result, we have not used them. We 
have certain rental guarantees, for example, certain lease to 
build type of situations where the scoring is very unfavorable 
and none of the services have used it. The theory is that if it 
looks, feels, and walks like a Government project, he gets 
scored up-front with the whole value of the subsidy.
    So, there is no advantage for us to go down that path. So, 
to the extent that we have retained too much control and OMB, 
unfavorably scores it. There are two of the 12 authorities that 
kind of have that problem. They are not prime time players, 
Congressmen. So, I do not believe we currently have a scoring 
problem. It is really getting our act together to understand 
the scoring words and what the private sector guys need to make 
the deal pencil out.
    Mr. Edwards. Can I ask, Mr. Chairman, is the thought that 
it was not the scoring part of the problem of getting private 
developers to build more 801 Projects? I am not sure of the 
exact number, but if the scoring change in the 1990s created a 
part of the housing shortage today because of the scoring.
    Mr. Yim. Now, 801, for example, became a Government 
project. So, as a result, because you were not leveraging with 
other capital coming in on your project, you got scored up-
front with all of the cost.
    Mr. Edwards. Thirty years of lease payments.
    Mr. Yim. Right. So, it was very unfavorable timing for it. 
This is a different concept. What we are saying to them is we 
are conveying over to the private sector an interest, for 
example, ownership of the units that they are building. It is 
not a Government project. We are not guaranteeing that our guys 
are in that project, even if the project is sub-standard. That 
is a significant difference than a Government project.
    As a result, if it is not a Government project, then we do 
not have to get scored about all of the costs of all we have 
put into the deal over the time life of the project. That is 
the leverage. That is fundamentally the explanation of a 
leverage effect. So, If we can get favorable scoring, we do not 
have to put so much money on the table. We do not have to do 
off-sets somewhere else to justify that money.
    We can bring in the private sector capital. It multiplies 
our money without us having to take it from some other program. 
We do not have to take it out and off-set it against some other 
program that is a priority for us. That is why the contribution 
of land, for example, reduces the developer's cost, which in 
essence bridges that development gap for us.
    The contribution of good houses to provide a positive 
income stream reduces this cost for the same reasons being that 
it comes in. It bridges the development gap. We can also do 
direct loans, for example. We can give lower interest loans. 
OMB does not score it on the total value of the loan. They 
score it kind of on a budget. They have funny budget rules that 
do not require you to count the total value of the loan.
    It depends upon the interest rate and the repayment terms 
of the loan. So, you get favorable scoring. So, we are using 
all of those tools to really fix the fundamental problems. We 
want more than what our bar rates allow us to bill. That is why 
MILCON has never allowed us to fix the problem within a 
reasonable period of time.
    We just want more for our people than what the funding 
stream. So, this development gap, and let me move onto that. 
Let me explain that. Does it always exist? No. It does not 
always exist. Most of the time it does and really for three 
reasons. I am going to stop being Vanna White here and I am 
going to put it down in 2 seconds.
    Mr. Hobson. I would like to have a copy of that.
    Mr. Edwards. It is in the testimony.
    Mr. Yim. We actually took the liberty of making some copies 
of it. So, let me talk about the development gap because this 
is really a crucial concept for us. It exists most of the time 
for three primary reasons. First, to protect our people. We are 
requiring that the private sector guys do the whole deal 
without charging our people more than the housing allowance is.
    Since housing allowances are statutorily limited currently 
at 15 percent market rate, 15 percent below market rates, a 
development gap is immediately created from the structure of 
our current housing allowance structure. We pay them 
statutorily 15 percent less that is what it really would cost 
them to rent the type of houses out on the private market.
    Now, Secretary Cohen's plan is to gradually eliminate this 
between now and 2005. We need Congress' support for legislation 
because the 15 percent cap is a legislative cap. What we put in 
the President's budget is the funding plan to gradually 
eliminate that out-of-pocket cost between now and 2005. We hope 
that you will support that legislation.
    It will go very far to bridge this development gap, but it 
is not going to solve the whole problem for two other reasons. 
The gap is also created by kind of a traditional on-base 
housing assignment pattern. For example, junior enlisted people 
on base for on-base Government housing built with traditional 
MILCON typically get single family houses with bedrooms 
sufficient to handle the number of dependents.
    Now, the same junior enlisted living off-base using his 
basic allowance for housing could not afford that type of 
house. He could not afford the same product with his housing 
allowance. So, they typically can only afford to rent an 
apartment, for example. You know that privatization can occur 
on-base and off-base. The problem that we created on-base for 
privatized housing is that it would look unfair.
    It would look discriminatory. It would be bad for morale. 
It would just look bad. The same junior enlisted guy in a 
military constructed house had a single family, and we were 
building all of these apartments for these E-4s or whatever 
under privatization it was just unfair. Now, a lot of things 
are unfair that you cannot afford. But that is a reality of how 
we do assignments on-base.
    So, our own type of assignment patterns created a 
development gap. We wanted more, even though the housing 
allowances could not support us getting that because it would 
only support an apartment for these guys. We wanted to build 
them a single family type of home. This historic gap, we kind 
of have to get our act together about how we are going to solve 
that. It is a problem.
    Finally, the gap is created by a risk of doing business on 
a military base. I do not want to argue that it is a real risk. 
The fact is that it is a perceived risk by the private sector. 
That may be just as bad as an apparent risk. The apparent risk 
is that they are worried about future Governmental actions that 
are going to disrupt or screw up the flow of income coming to 
the base.
    Mr. Hobson. It is not everybody.
    Mr. Yim. Not everybody.
    Mr. Hobson. We assumed going in, I think, that everybody 
was going to be worried about that. I have seen instances where 
people said, I would be happy if you walked because I could 
rent these in the future to other folks. There are certain 
parts of the Country where that is true. I think in San Diego, 
for example, they would die to get that property because land 
and units are high. There are other places like that.
    One of the other problems I had is we tend to assume that 
there is going to be this development staff everywhere, until 
we threw all of these things on the table. Sure, if they are on 
the table, and I am a developer, I am going to take every one 
of them. If they are not on the table, then I have got to be 
creative in how I do my deal, or how I transact the deal. That 
is one of the things that we have learned as we have gone 
through this.
    Mr. Yim. I think that is exactly right. That was the point, 
Mr. Chairman, that you made over and over again to us. I 
finally think it is sinking into our heads that we did not need 
to do all of these things. The gap does not exist all of the 
time. It does in some locations and that is why we need to use 
these privatization tools. We have to pick and choose the 
combination or when we put them out on the table.
    I think that what we are doing is really the unique risk 
problem is that it affects the availability of capital for 
these guys. So, if they think that there is going to be a 
deployment, or there is going to be a potential base closure, 
they have to kind of budget for or finance around the risk. It 
may be an unreasonable risk. We see this all of the time. You 
are in private sector stuff where the people in California are 
worried about earthquakes or something like that.
    Sometimes it is a perceived risk. Sometimes I think there 
is a real risk. Sometime there is not. But it is a finance. It 
is an aspect of the financing. So, I am not arguing rightly or 
wrongly that the risk should be taken into account under 
reporting. But the risk is a factor in the financing decisions. 
We have to be able to bridge that.
    That contributes the development gap. It is because that 
gap exists for these reasons, that we have to put something on 
the table, even though I think we would all agree that the best 
deal is the deal where you do not put up any of your own money. 
I do not think we can get that in all places however.
    So, if we have to put up some money, then what we have to 
do, and the burden is on us, is to assure that we get the best 
deal about whatever we are putting out on the table and to 
minimize the risk that we are going to have to keep putting 
money into a bad deal. Keep pushing fundamentally an unsound 
position.
    That is really the big task that we have ahead of us. So, 
are we doing a good job about looking after our money wisely? I 
think so, but I think clearly we can do better. The focus of 
the draft GAO Report that I signed out a response to last 
Friday, I signed out a response concurring with each and every 
one of the basic recommendations of the report, the GAO Report.
    Let me briefly go through them. First, the GAO said, okay. 
You guys have to get your act together and have a privatization 
evaluation plan. We have one. It needs to get better. We have 
used private sector experts since 1996 to help us develop these 
evaluation tools. They are good. They need to get better. They 
are going to get better. This is what we are doing on it.
    We have established this, what I am terming a peer review 
type of audit evaluation board with many of the gentlemen here 
in the room. The Deputy Assistant Secretaries of the services 
in charge of housing programs and probably more importantly, 
the senior service engineers who really know what is going on, 
and the key financing and programming guys.
    What this board essentially serves is a board of directors 
for the services, DoD-wide, for installation matters, for 
housing being a strong and important component of all 
installation management. We are augmenting it by our own 
private sector experts. We are going to vet the draft 
evaluation plan that is in progress down through this board.
    I have been very pleased with the use of this board over 
the past 6 to 9 months. We have been able to vet a lot of major 
issues and raise them to senior decision makers. When we needed 
a policy choice that was above our pay grade, very quickly, it 
has been very effective. It is going to get better.
    This evaluation plan is going to be in coordination with 
the services later this spring. I hope to have it out and 
vetted by this board in the summer. We are going to get better 
on those. The second GAO criticism is that you guys need to 
have a life-cycle cost analysis of these housing projects. You 
have got to project it out over the 30- or 50-year life of 
these projects; absolutely.
    We have one. It needs to get better. It is going to get 
better. Our primary plan identified not only differences in 
methodology used by the services, and how to do these life 
cycle cost analyses, but how these specific costs are being 
derived. We have expanded our requirements to include items 
such as the consultant costs, construction inspection, long-
term management.
    We are going to issue new guidance, again in coordination 
with the services through the Installation Policy Board later 
this spring. We are going to get better. The third GAO 
criticism is you need to get an integrated strategy, including 
a way to get some consistency among the services in determining 
the housing requirements, and what the housing really are. I 
agree; absolutely; no question about it. The services have 
taken different approaches.
    That is right. I applaud and I encourage the services to 
take different approaches to solving the housing shortage 
problem for them because it is very site-specific. It may be 
typical in very high cost areas. It is different than the 
larger bases faced by the Army. They should not have markedly 
different ways of calculating the requirement itself.
    The approaches should be innovative. The requirements, we 
should have some consistency in how we build them up. It is an 
OSD burden. We need to get together with our Personnel and 
Readiness people because it is divided a little bit. My shop is 
installations, logistics, and environments. We handle MILCON. 
We handle housing privatization, housing requirements.
    Housing allowances are actually set by another shop in OSD 
under Secretary Rudy DeLeon now on the Personnel and Readiness. 
We have got to integrate these two things because obviously 
they relate to each other. Just your question, for example, 
Congressman Olver, we increase the bar. It should reduce the 
housing requirements.
    It is going to make more stuff immediately available off-
base for people to be able to afford. It is going to strive 
better housing privatization. It should reduce the 
requirements. Can I give you an algorithm right now how it is 
going to do that? No. I cannot. I am going to need to see what 
that relationship is, but it should. So, I need to sync up with 
the guys who are doing their allowances to be able to disrupt.
    Mr. Olver. Mr. Chairman, may I break in here?
    With what you have just said, you have talked about the 
development gap and it is 15 percent, plus or minus I take it. 
It obviously is not in all cases. It floats. But if we are 
going to move the bar and we adopt this 5-year plan, which of 
course the Congress has to do, if we adopt the 5-year 
equalization here, I guess what I hear you saying there is it 
should eliminate the development gap, not totally because there 
are these other two factors that come in.
    It is more complicated. I must say, when I have you here 
before us, Mr. Secretary, I begin to think that I understand 
this process. That is very dangerous I suspect.
    Do you feel that you can do privatization in any and all 
places within this context that you are describing of the 
development gap and the pieces that have to fit into it; any 
and all places or not? Or is this just an evaluation way to 
tell you which ones you cannot do through privatization?
    Mr. Yim. I think that there are going to be some cases 
where it just is not going to work. We are going to have to 
just gut it out with traditional MILCON. I mean, I think that 
is absolutely the case that some of the services are going to 
give us housing master plans that have on-base requirements 
they want to maintain, even though the private sector could 
handle that because they have other values they want to 
preserve.
    They need to mobilize quickly on force protection issues or 
some other types of reasons. So, that is why I said that I do 
not believe that housing privatization is the panacea. It is 
not everywhere it is going to work. I believe, Congressman, it 
would work in most places. I will go out on a limb. I firmly 
believe most places it will work. When GAO looks at the cost of 
DoD or the services owning their house, it is significantly 
less.
    It is something like $5,000. Let me remember the numbers. 
It was like $11,200 a year, I think they said in 1998, that it 
cost the Government to own and operate houses. It was like 
$9,000-something for the private sector. A part of it was 
because they are just smarter, better. This is what they do. 
They are more efficient in how they manage it and they get 
economies of scale. They build to standards. They use like 
standard size houses and plans and construction material 
because they have a larger market that they can amortize those 
materials over. What we tend to do is really specific need type 
buildings that make fixtures more expensive, for example.
    Mr. Olver. Well, it seems to me that the pattern that is 
described here, if you had the evaluation plan, and it is 
common. It has guidelines that allow a certain amount of 
creativity by the services, but it is basically an evaluation 
plan that takes into account the right criteria. If you have 
life cycle costs over the lifetime of the deal, you put them 
in, and there is some sort of consistency in requirements, it 
seems to me that one could have a context which is a kind of 
context in which you could make all of the decisions that need 
to be made.
    Without that, it is complicated. That is true. Without 
that, I am going to try to look at this in a sort of a linear 
kind of way. On the one hand, you might have a site which has 
no housing, no local housing market which is out there in a 
very isolated place on the one end of the scale. There it seems 
to me you have got to use MILCON with maybe the possibility 
that you can use privatization.
    The private market, that 15 percent change in the bar rate, 
is not going to make a world of difference on the creation of 
housing. Privatization in that instance is going to need a 
considerable amount of incentive along the way to take care of 
the risks, one of the other factors in what your gap is. At the 
other end of the scale, you have got places where there is an 
extensive housing market. And where you could do absolutely 
nothing but let the private market provide.
    Then you have got sitting there a huge amount of housing 
that has been how we have provided it in the past, as 
inadequate as it may be; some of which is so inadequate, so 
substandard that it ought to be torn down. Some of which is 
good enough to be a part of an asset that can make a deal work, 
I would imagine at the other end of the linear scale. So, 
within that then you get into this what are the features that 
get brought together?
    An operable plan, an effective plan would begin to tell you 
when there is so much substandard where you do not even try and 
let the private market come in or you do much less than the 
whole amount of housing that is there in the area.
    Mr. Yim. I agree. I think that is right. It is a function 
of the kind of the classic OSD way of handling a problem. We 
hammered the services a year and a half ago and said you are 
going to fix this housing problem, 3 years ago, come hell or 
high water, by 2010. We do not care. You are going to fix it. 
So, that required then people to say the only way that it would 
pencil out is that we were on an entire housing privatization 
program.
    We are going to have to achieve and 8:1 or a 12:1 leverage 
effect because there is no way we can get to 2010 without that 
type of thing. So, they tried to apply the deal across the 
board to every location. I think it was your Committee that 
came back and said, now, time out. It was not supposed to be an 
all or nothing program. It was supposed to be a pilot. It is 
not going to work everywhere.
    We saw, for example, the Army scale back an entire housing 
privatization program to a mix, and appropriate mix. Military 
construction with privatization is not going to work, and 
privatization where we think it should work. I think that is 
the approach.
    Mr. Olver. Okay. I did not want to focus on a specific one. 
I guess I will not. The Chairman has already mentioned one 
where I think that we would all believe that there is an 
enormous private market there. It happens to be the largest one 
in the Navy's whole plan. It happens to be more than half of 
the Navy's whole plan.
    Mr. Hobson. If the Navy would have started, it would have 
been all of the Navy's whole plan because they were going to do 
it in one year. The initial thing I saw was 11,000 units in one 
year, which was not achievable. To the Navy's credit, once we 
all got down on their heads, they revisited it. The initial 
program was 11,000 units in one year.
    Mr. Olver. Okay. I do not remember what the initial program 
was. It strikes this member that if we cut back to about \1/3\ 
of that, then it is the one area where the change in the bar, 
which we are doing, probably could have solved that and maybe 
ultimately, depending on how much is substandard and so forth, 
I do not know which 3,300 are involved there in San Diego. 
Everybody knows what we are talking about at this point.
    So, we were originally going to do 11,000, it strikes me 
that, that would violate almost any rational plan, overall 
plan, for where the privatization were going, especially if we 
are going to remove that bar gap that we are now doing. That 
would not be allowing for the market to kind of drive things in 
the number of different directions at once.
    Mr. Yim. I think that is right. I am not disagreeing with 
what you said. I think what you saw, for example in the Navy in 
San Diego, is that although there is a very strong housing 
market, that housing market was driving up the rents and 
getting it out of sync with increases in the BAH rates. So, 
there was a problem with our sailors in that area. We were 
losing the beauty contest out in those areas about people 
renting to our sailors as opposed to jacking up the prices and 
rented it to somebody else.
    That is why they were investigating the need in a high cost 
area like that of putting differential ease payments on the 
table to make our guys look more attractive to the private 
sector market. That is a problem in certain areas. Now, we have 
to win the beauty contest in a high-competitive market, house 
market, and get our guys in this good stuff, as opposed to if 
they lose, they are at the bottom of the totem pole and they 
get the bad stuff that is available.
    That is kind of the lower third of the quality of the 
houses out there. So, what we are trying to do is not have a 
linear approach, but an approach that actually kind of looks 
ahead, projects 5 or 10 years down the road, anticipates the 
bar increases. I think that we are all hopeful that we are 
going to get the legislation that allows us to implement this 
program and take out the out-of-pocket costs.
    Look ahead, look at available other funding streams, 
budget, the up-front costs to do the deal correctly. Figure out 
what the market really can give us so that we do not put too 
much out on the table. That is why they do need to have pros 
out there that are familiar with the local housing market 
condition. It is very difficult for people just in Washington 
to really understand the housing boom in San Diego or say, the 
Silicon Valley in the San Francisco area.
    It is hard to imagine the guy is making $60,000 cannot get 
a house anymore because of the .com millionaires have raised 
the housing rates to the extent that they have. Those are the 
types of problems.
    Mr. Farr.  It is obvious that you are going to be 
convenient to the military----
    Mr. Yim. That is right. The fact there is the availability 
of some of the housing. One of the problems that we have that 
we need to work through is the BAH rates. Our market surveys 
pros, go out there and make market surveys. It is not the old 
system where you ask people what they paid, because that was 
notoriously inaccurate.
    They actually go out and do market surveys. But they are 
not factoring in as much of the availability or the temporal 
aspects of it. How long is it going to take for the increases 
involved really to kick in for these guys. So, you can get into 
an immediate problem. That is why sometimes we have to maintain 
on-base housing to handle that type of stuff.
    The Navy has another problem too for some of the guys that 
are on their end, just to give another analogy of just how 
complex it can be in non-linear thinking. They have these guys 
living on ships all of the time. When they go into a home port, 
they cannot let these guys keep living in this little cramped 
ship quarters. They can see the guys at the same grade living 
in an apartment, in barracks, and things.
    They have to get them out of the ship or they are going to 
go a little stir crazy. So, they are taking, as an interim 
standard, the 2 plus zero standard for barracks, even though we 
are insisting on a 1 plus 1 barracks standards eventually, just 
to do some interim fixes to some unique operationally-caused or 
location caused housing problems. So, it is that timing in this 
match that sometime causes us some grief in this, and why we 
need to do some of this housing privatization.
    We really liked the focus on BAH, frankly. The bar did a 
couple of things for us. One, we think we can get Congress to 
support the increase in legislation. Once it is there, frankly, 
in the pay accounts, it is less of a target for future 
reductions. Bluntly, that is the case. Secondly, it gives us a 
little bit more flexibility than investing in long-term MILCON 
housing privatization programs because the BAH can be adjusted 
much more rapidly, if there are deployments or whatever.
    You have not entered into a long-term deal by letting 
people live off of the existing market economy for available 
housing. So, it is almost a self-executed program. We thought 
it was really a very good way to directly attack the housing 
problem long-term for us. But we also need to really supplement 
that with the other two prongs of the three-prong plan: 
housing, privatization, and military construction. We are 
really pleased. We put in $3 billion over the fit-up to fix the 
housing allowance problem.
    Mr. Farr. Mr. Chairman, on the BAH, is the bar adjusted? Do 
you get a higher BAH in San Diego than you would in someplace 
else? Is it adjusted for inflation as well?
    Mr. Yim. It is adjusted for areas, yes. I believe it is 
adjusted for inflation.
    Mr. Hobson. Yes.
    Mr. Yim. It is computed every year. So, it is adjusted.
    Mr. Farr. So, in higher cost areas, the BAH will be higher.
    Mr. Yim. Yes. That is correct. It is done on market 
surveys. What was done before we went to this new Runsheimer, 
is that they would ask people. They would send out a survey. 
Some people that were living beyond what they should have, or 
they were given bad deals would report really high housing 
costs. It would be notoriously inaccurate. They would say, I am 
going to try to save some money.
    I am going to consciously decide that I am going to live in 
less adequate quarters. You know, I am going to suck it up and 
live in bad stuff. They would report then inaccurate numbers 
about what the costs really were. So, it was notoriously bad. I 
should not say bad. It was notoriously inaccurate in certain 
locations. So, the market guys were sending some pros out to do 
a market survey, which is much more effective.
    Mr. Farr. Have you ever worked this with HUD? There is the 
same thread of issues. Is there any dialogue with HUD on what 
they are doing?
    Mr. Yim. Housing Authorities can participate in our 
privatization program. I think that what some of the typical 
public housing programs do not do is they do not take into 
account the military's unique situations very well for us. So, 
we are not trying to create a public housing project. What we 
are trying to create is something that takes into account some 
of the force protection needs, the military's values of having 
people together.
    Mr. Farr. But in that, I think there is a misunderstanding 
that public housing is not done that way. We do not build 
public housing. The private sector builds it and we rent it 
from them with vouchers.
    Mr. Yim. There are other lessons that we are making.
    Mr. Farr. The reason I asked is because the authority--has 
been very interested and thinks they can build better housing 
to the needs of the military and at a cheaper cost. They can 
maintain them. They are very into this. They have a former 
military fellow who is the head of the Housing Authority. He 
has done pretty well. He is convinced that if the military 
contracts with him, he will do a better job for the same amount 
of money.
    Mr. Yim. Right now, there is no prohibition in the Housing 
Authorities either teaming or actively bidding on the housing 
privatization projects. So, we are trying to remove the 
roadblocks.
    Mr. Farr. One of the things I am very interested in is the 
project that was built in Fort Ord before it closed. It was 
called Sunbay Apartments Privatization. It was really good 
quality. The Chairman visited it. He could not believe that 
this was done. I had been told that, that project could not be 
repeated because of the scoring issue. Could you have somebody 
just check on that and explain why. Maybe I am not getting the 
whole story about Sunbay, but it is a famous apartment complex 
at Fort Ord on military land.
    When the base closed, the guy walked off with a gold mine. 
Anyway, the deal he went into was a win-win. Everybody really 
loved the project. They were wondering why more of those 
projects cannot be done on a national level. Please check that 
out and get me back a memo on the pros and consensus of Sunbay?
    Mr. Yim. I will do that.
    [The information referred to follows:]

    The question refers to the Sunbay Apartments at Fort Ord. 
That project was accomplished under 10 U.S.C. 2667, which at 
that time allowed the Army to outlease land at Fort Ord to a 
private developer. As consideration for the lease, the 
developer constructed the Sunbay apartments as a mixed-use 
development and gave priority occupancy to military members, 
including family, unaccompanied members and transients. Scoring 
was not an issue because no long-term government obligations 
were involved. Rents were based on size and amenities, as well 
as military housing allowances, and they were indexed for 
inflation. However, rents were still greater than a member's 
housing allowance. The authorities granted under the Military 
Housing Privatization Initiative provide much greater 
flexibility (including a leasing authority), and are more 
advantageous and easier to use than 10 U.S.C. 2667. The same 
type of project could be created using these authorities under 
the same conditions, specifically high demand for housing and 
expensive land costs. Most of the current housing privatization 
projects include leasing of government land as part of the 
project.

    Mr. Yim. Really, in conclusion of my statement, what we are 
asking for is an extension in the housing privatization. They 
actually expire in February 2001. We would need action this 
legislative session, Congressmen, to do this. So, we cannot 
wait until next year. It is this legislature. We would like 
your support of not only maintaining MILCON, but especially 
this session, we need to extend it. It expires February 2001.
    We are going to be putting projects in front of you. We are 
going to work with you cooperatively. All of the services have 
heard loud and clear last year. It was very constructive and I 
mean that not there has been favor with you guys. It was very 
constructive for us really to have us analyze what needs to be 
done and make the program the way it should be.
    Thank you.

           Prepared Statement of the Honorable Randall A. Yim




    Mr. Hobson. Thank you. I want to say that I very much 
appreciate, and I know the Committee does, your personal 
response to what was suggested. I thank you for your very very 
thoughtful memo that you put here in your lessons learned and 
the programs you have set forth. You have really attempted, and 
I think have, tried to intellectually approach this 
opportunity.
    I do not see it as a problem. I see it as an opportunity. I 
think you have done that. Sometimes we beat everybody up. I 
want to tell you, this is a good way to start this. Based upon 
some of this, what you have talked about here today, and talked 
about with the Members, I would urge all of you to sit down 
with the authorizors and figure out how. We can only do 
legislation for a year. So, I do not want to do it every year.
    The proposals that we are learning, or I think that we are 
learning, I think we need to get the extension so that 
everybody does not panic. We are starting today. So, we can 
talk to about what we have learned to date and give us the 
leeway to adjust ourselves as we go through this. Each one of 
these is going to be a little different. We will not have a 
full set of plans that we can duplicate.
    Community standards are different in different places. The 
military, though, will have some standards that they want 
throughout. Some people will want to be on base for certain 
mission and cultural things that they have. I think you will 
see as we get less certain about where all of these things are 
going to be, we are going to want to have the flexibility built 
into these, whether we ever use it or not, that we can change.
    Some people have always tried to have all of their people 
inside the parameter fence. You can still continue to do that, 
as long as someday we might have to move that fence. The 
ability to move that fence is there. Some people want to have 
their people off the base. That has been their tradition and 
their history. That is fine. We just need to understand that we 
are not using that or they can give it up.
    When you give us things in their community, whatever 
community they want, not some things that have no residual 
value. Again, I really appreciate the nature in which you have 
approached what has been some difficulties we were having 
trying to help us intellectually get through these and help the 
services move forward.
    Do any of you have any additional questions because we want 
to move on?

                                 TAXES

    Mr. Edwards. Mr. Chairman, I will try to be brief. I 
without want to reiterate what the Chairman said. I thought 
this was a very thoughtful presentation. If you need an 
apologist for the program, suggest that it was a panacea, 
realistic about the challenges, and the need to keep asking 
tough questions. I appreciate that, as well as the contacts of 
where we go if we do not have this program. Let me just ask 
about the quest of taxation. Has that issue been addressed? How 
would these housing units that the Government still owns the 
land, the developer owns the property for tax purposes, say, 
local school property taxes? How would these units be handled?
    Mr. Yim. My preference is that the Government retains the 
land and that they transfer ownership of the housing units to 
the private sector. They really have to transfer the units to 
be able to get some favorable--and to kick in the bond as an 
interest. What it does, is if we retain ownership of the land, 
our Counsel is saying that we can pay the higher impact aid to 
the school districts because the Government owns the land.
    To the extent that you privatized them and somebody else 
owned the land, then the property taxes are going to be paid at 
the school. We will pay at the lower end of the school impact 
aid. Many people think that is not sufficient. So, the 
preference is to try to just give up the stuff on the property, 
and keep the grounds, and pay the higher taxes.
    Mr. Edwards. I hope someone will really watch that very 
carefully. For example, that would go to Part A to Part B for 
impact aid, if it had a devastating impact on the school 
district. I appreciate your sensitivity. Thank you for your 
testimony.

                     LOCAL BUILDING CODE STANDARDS

    Mr. Farr.  Every time you talk I learn something. I really 
appreciate you being here today. The one question I was going 
to ask some of the others--that we have been told here in 
several hearings, that from now on you are going to build to 
State and Local building code standards.
    Mr. Yim.  That is correct.
    Mr. Farr.  Is that going to be for property that the 
military builds on military land as well or is it just going to 
be in the privatization side of it?
    Mr. Yim.  We wanted to see it on the privatization side. 
That is a problem for us. So, we are looking forward to do that 
on the stuff that we are going to continue to own. I mean that 
is a problem. In theory, we should be using private sector 
standards. We should be taking advantage of private 
standardized floor plans that they have, the type of fixtures 
they put into it.
    We have this really bad tendency to ask for military-unique 
goods and services to be provided to us. Not only does it 
increase the material cost, because they cannot spread it over 
a larger market, but some of the labor costs are increased 
because people just are not familiar. You cannot have workmen 
that are familiar with building this type of house that we 
want, or this type of wiring, or this type of stuff in it. You 
can find the guys that can do it out in the local economy 
because they are putting up whatever.
    Mr. Farr.  You are not suggesting that the military housing 
is shoddy housing?
    Mr. Yim.  No, not shoddy. But sometimes we traditionally 
maintain construction practices that are no longer used in the 
private sector.
    Mr. Farr.  Some of this stuff does not make sense. I think 
that you are sensitive that your projects have to fit local 
needs. You ought not to be building anything in California that 
does not meet earthquake standards.
    Mr. Yim.  Right.
    Mr. Farr.  What happened was a brand new hospital was built 
seven stories high, a 400-patient bed hospital during the 
Vietnam War. Seven of them were built around the United States. 
It was the same blueprint for every one of them. The one in 
California was abandoned. Nobody in the world could pick it up 
because the cost of retrofitting it was so great. It is now a 
Federal office building.
    If you ever abandon that building, the Federal Government 
does not own it. You are going to have a cost of tearing it 
down and retrofitting it. Then it becomes a cleanup problem. It 
was dumb to do that. I hope you will never go into places like 
California again and build buildings that do not meet 
earthquake standards.
    Mr. Hobson.  I would like to make one suggestion. As you 
review the future of the MILCON housing, rather than living 
with the old idea of building them close for villages, just 
like I would like a change, I hope that you go forth and listen 
to--a general officer's housing numbers are 2,200 square feet. 
That should be changed. I keep saying that because I hope 
somebody talks to me.
    We ought to try to see if we cannot change the culture to 
see if it is not pretty close to building the way that we would 
like to do the square footage standards that are more common. 
The residual value of what we would do would be much better 
long-term. If we build to MILCON, the MILCON is to this old 
standard. I mean, we shut that base down. Then we have hampered 
the ability of that community to utilize that facility and the 
residual value.
    It acts as a negative rather than a positive. You guys have 
gone through two more BRACs. We should not be building 
anything. We should be very careful about what we build in 
those areas. That we build things that are to have some 
residual value or we are just throwing money down the tube 
again, which I do not want to do.
    We may get some economies that I know sometimes when you 
deal with engineers, and they have been in a box or building 
military types of things, there is a little resistence 
sometimes to thinking outside the box on, you know, that type 
of thing or a modular type of stuff that you can do. I just 
would encourage all of you to just have the engineers or poke 
at the engineers. It is a little hard sometimes. My father-in-
law was an engineer. It is a little hard to talk to engineers 
sometimes, but just to get them to think beyond the tradition 
that we have been doing.
    I think you are beginning to do that. I really applaud the 
diversity that we have done in these things, but also the 
ability to think of cross services to begin to come to some 
commonality understanding which I think was needed. I think you 
have done this. I mean this in a positive way. This has been 
moved down to each of the individual services. They were all 
running around.
    OSD had not abandoned it, but kind of in a way let them go 
and that is okay. I think now what we have is you all are 
watching more closely what they are doing and bringing some 
understanding of each other of what works and what does not 
work. I think that is very positive.
    John is going to be our last speaker.
    Mr. Olver.  I want to again support what the Chairman has 
just said. Before I completely yield myself to your three 
dimensional thinking, and maybe it is more than that, where one 
of those dimensions is the different services. Before I yield 
completely to that, I want to just hand onto one little piece 
of linear and see how it fits into the multi-dimensional matrix 
that you are developing here for this set of evaluations. Do 
you expect that there are always going to be new net units in 
these plans? Is that something that developers would have to 
have to make them go?
    Mr. Yim.  Some of the projects are renovations.
    Mr. Olver.  Solely renovations?
    Mr. Yim.  Right.
    Mr. Olver.  They may be new net units.
    Mr. Yim.  That is right. It may be if there is a 
requirement and they need to build more units. That is right. 
But some of them can be just straight-up renovations.
    Mr. Olver.  Is there any inherent difference between active 
bases and reserve bases?
    Mr. Yim.  Usually reservists are living in the community. 
So their housing requirements are much, much, much less. So 
that is a difference. But it should not be, in theory.
    Mr. Olver.  Is there any reason why it cannot fit into your 
multi-dimensional matrix?
    Mr. Yim.  Typically, when we call upon the Guards and 
Reserves, they are mobilizing from the community. So, it is 
really not a housing problem for us. It is different in that 
sense. If we are stationing somebody overseas, that is a 
different program. I mean, we are building temporary houses for 
them because they are on deployment. That is a different deal 
than what we are looking at on the housing privatization.
    Mr. Olver.  Do you anticipate in this that there would be 
an occasion where you would actually privatize more units 
because there are a lot of existing there, more units than the 
present or projected need on the military side for housing for 
permanent personnel would occur?
    Mr. Yim.  I think that will be a subject of sometimes 
heated discussion between us and the services. I believe that 
we are going to see some master plans from the services that 
want to do that to look at future requirements. We are not 
convinced that, that is the way to go.
    Mr. Olver.  They anticipate future requirements. So, they 
might go up.
    Mr. Yim.  I can see that. It is just the methodology of how 
they are getting there. We are a little bit, and I should not 
say cynical. We will look very closely at whether they really 
are accurately projecting or are they really just kind of 
warehousing houses. I am being as blunt as I can. My task is to 
be sure that the services do not overdo it.
    Mr. Olver.  You were, I think, headed in a different 
direction than I asked in that question. I was going toward a 
situation where you got a base, that because of our force 
structure reduction, where we have a lot of islands sitting 
around. Some of it may still have some good asset value. Some 
of it may not. Whether or not under those circumstances you 
would deliberately create a deal where you would solve that 
problem as it is sitting there that is not really going to be 
needed, nor can we expect it would be needed by the actual 
force structure that you can anticipate for the area.
    Mr. Yim.  I think that is what we are talking about on 
getting our act together on housing requirements. We have to 
project the current and future. It is difficult. It really is. 
This is a problem not just unique to housing privatization. 
Now, if you are trying to project a MILCON project, straight-up 
MILCON, traditional MILCON, you have to kind of project all of 
these things into the future.
    It is hard for the services now to do that. Frankly, it is 
harder because we do not have, and I am really thinking about 
whether my self-preservation instincts are kicking in. Since we 
do not have BRAC authority, it is much harder for us to do 
this. We do need BRAC authority to be able to really think 
about what is the future force structure going to look like and 
what type of installation reshaping needs to occur.
    Mr. Olver.  If you build them to community standards, then 
you are much less at risk of having wasted taxpayers' dollars.
    Mr. Yim.  Yes.
    Mr. Olver.  If you built them in a configuration where the 
fence can be moved, then I think you are better. I think 
everybody can look at that without the worry.
    Mr. Yim.  I just got the feeling that the Secretary is like 
a painter here who has put a big canvas in pastels. I am still 
imagining how those pastels are going to turn into vivid, vivid 
colors that can allow one to look at this context and matrix 
and evaluate these plans as they come in.
    Mr. Olver.  Until we get something done, we are not seeing 
a lot of real bright colors. I hope they are all brilliant nice 
colors and not colors that we are ashamed to look at, at some 
point when we get done. It is my theory that when we get done, 
and I think that is one of the reasons why we are moving this 
way, when we get done, I want to look at them and be proud of 
the painting when it is finished, and not want to cover it up.
    Mr. Yim.  That is why we really need your support on two 
things. We have a hearing in front of the authorizors tomorrow 
on exactly the same issue. The two things that we need are not 
only reauthorization, extension in housing privatization 
authority for another 5 years, but also we have in our package 
the elimination of the space by grade limitations.
    That is exactly your point so that we can build to 
community standards. Right now, we are in a waiver type mode. 
We just think that the space limitation should be eliminated so 
that we can build to community standards.
    Mr. Hobson.  I thank you very much for your candor and your 
hard work in this area.
    Mr. Yim.  Thank you.
    Mr. Hobson.  We are going to take a 5-minute break. We are 
going to come back at 11:00 a.m. We are going to move some 
chairs around. We will have the three remaining witnesses. 
Thank you.
    [Recess.]
    Mr. Hobson.  The Committee will come to order.
    We will, without interruption I hope, we will allow the 
three Assistant Secretaries to make their statements. Then we 
will ask questions. There could be a vote about 11:30 a.m. I 
have to be out of here by 11:50 a.m. So, if we have a lot of 
questions, we might ask Members to submit them to you in 
writing.
    We have some other questions that we will probably have for 
you. I do not know how to proceed. Mr. Apgar.
                              ----------                              

                                         Wednesday, March 15, 2000.

                       U.S. DEPARTMENT OF DEFENSE


                               WITNESSES

MAHLON APGAR, IV, ASSISTANT SECRETARY OF THE ARMY
DUNCAN HOLIDAY, DEPUTY ASSISTANT SECRETARY OF THE NAVY
JIMMY DISHNER, DEPUTY ASSISTANT SECRETARY OF THE AIR FORCE FOR 
    INSTALLATIONS

                   STATEMENT OF HON. MAHLON APGAR IV

    Mr. Apgar.  Mr. Chairman and Members of the Subcommittee. 
It is a pleasure to be here before you to discuss the Army's 
housing privatization initiative. Let me also begin by thanking 
you, sir, and the Committee for your strong support of our 
efforts to improve the quality of life for our soldiers.
    Privatization, in a word, is essential to the Army's 
installations and facilities strategies. As the Army transforms 
for fiscal year 2001 and beyond, we must also take giant 
strides to ensure that Army installations keep pace with that 
change. We intend to help the Army achieve its overall new 
vision by implementing a complementary vision for our 
installations.
    It reads, ``By the year 2020, Army posts will fully support 
and satisfy our war-fighting needs, while providing soldiers 
and their families with the quality of life that equals that of 
their peers in civilian communities.'' No single quality of 
life issue in the Army is as important as safe, attractive, and 
convenient housing for our soldiers and families.
    Family housing provides a major and essential incentive for 
recruiting and retaining Army soldiers. Yet, when we asked them 
about their quality of life, the lack of adequate housing is 
one of their deepest concerns. We have long waiting lists at 
nearly all of our major posts in the United States. Soldiers 
living off-post are finding it increasingly difficult to rent 
or buy adequate housing. Today's soldiers are career soldiers. 
They are no longer driven by a mandatory service obligation, 
but are dedicated professionals, mature, stable, well-educated, 
and focused on the long-term.
    More than half are married. Their family housing 
expectations are similar to the expectations of their civilian 
counterparts. Contemporary living standards in civilian 
communities, especially around most of our posts, consider more 
than a functional shell, square footage, and bedroom count.
    The American Homebuilding Industry is highly sophisticated 
and consumer driven. Features like family rooms, well-equipped 
kitchens, landscaping, and extra bathrooms mark civilian 
housing, even in affordable housing for the lowest income 
groups. In short, Army families need more than quarters, as we 
provided for many years. They need a place to call home in 
communities that are safe, supportive, and attractive.
    Without the Military Housing Privatization Initiative 
authorities, the Army cannot meet the Department of Defense 
goal to eliminate inadequate family housing by 2010. As an 
example of what can be done, we recently awarded DoD's largest 
privatization project to date at Fort Carson, Colorado. I am 
pleased to report that Fort Carson's housing privatization 
effort shows real promise and has already produced visible 
results.
    Even after a few months, we are using lessons learned from 
this project to improve the process and maximize opportunities 
for interchange between developers, the local community, and 
the Army in our Residential Communities Initiative or RCI. We 
transformed the former Army Capital Ventures Initiative, the 
first stage of housing privatization after the 1996 
legislation, to RCI in July 1998.
    Using the new authorities, the Army intends to privatize 
approximately 12,000 on-post family housing units by the end of 
fiscal year 2001, in addition, to more than 2,000 units at Fort 
Carson that have recently been privatized. The three RCI pilot 
projects, by agreement with this Committee and our other 
Oversight Committees, are Fort Hood, Texas; Fort Lewis, 
Washington; and Fort Meade, Maryland.
    They are being developed and solicited using a new 
procurement methodology, the request for qualifications. For 
each of these posts, we will select, through open competition, 
an experienced master developer to work closely with the Army 
and affected stakeholders to prepare a Community Development 
and Management Plan or CDMP. We are seeking not only capital 
from these developing partners, essential as private capital is 
to the program, but also what I call the four-E's of the 
private homebuilding and real estate industries--The 
entrepreneurship, the efficiency, the effectiveness, and the 
expertise that mark the best of private enterprise.
    Their capabilities will leverage our assets to the benefit 
of Army soldiers. After we review the deal structure with this 
Committee and others, the Army will implement the CDMP through 
a lease, contract, or a limited partnership type agreement with 
the developer. The Community Development and Management Plan is 
not simply a blueprint to build housing. It sets family housing 
in the context of its neighborhood and adjacent communities, 
both on post and off post.
    That is the genius of large-scale master planned 
communities in the private sector, and it is one of the most 
powerful levers of housing privatization for the long term. We 
are also taking a number of steps to strengthen the oversight 
and management of the program. Among them, first we are 
introducing a program management information and reporting 
system along side the Army's standard accounting and budgeting 
system to better reveal our true costs and our performance 
measures, outcome, and results-based measures in privatization.
    Second, we are designing a policy issue process to more 
rigorously analyze the dozens of policy issues that are already 
apparent as we anticipate the first CDMP planning and 
negotiating agreements at Fort Hood, Fort Lewis, and Fort 
Meade. Third, we have set up an Integrated Process Team, or 
IPT, based on the model of DoD's weapons systems and a 
management committee which I chair to include three other 
Assistant Secretaries, whose policies affect our program, the 
Commanding Generals of the two major commands in our pilot, 
FORSCOM and the Military District of Washington, the Chief of 
Engineers, the Director of the Army Staff, and several others.
    Fourth, we are deepening our analysis and our analytical 
capabilities to evaluate not only life cycle costs and 
economics, as Mr. Yim mentioned, but also the full 
capitalization of debt and equity as the project moves through 
a long-term life cycle. It is not a rigid uniformed template. 
Also, to be able to relate intangible costs and benefits as 
well as intangibles.
    Fifth, by example to Mr. Farr's comment earlier, we have 
begun a formal dialogue with HUD on how their lessons learned, 
particularly in affordable housing, which is a substantial 
portion of our true mix, can help us. As a footnote, coming 
into this office from the private sector, it was ironic to me 
that our Department, our housing specialists, and those in HUD, 
have rarely, if ever, talked with each other about the very 
issues that we confront daily, and for which they have enormous 
experience and expertise, notwithstanding the mythologies about 
public housing in general.
    The Army fully supports DoD's proposal to extend the MHPI 
authorities beyond February 2001. Without them, quite frankly, 
we will not be able to meet our goal to eliminate inadequate 
housing by 2010, or to fully engage the talents and resources 
of private enterprise. At the same time, we will continue to 
use a combination of privatization initiatives and traditional 
military housing construction funds to modernize our family 
housing as a part of our three-prong strategy: privatize onpost 
wherever it is feasible, increase housing allowances to 
eliminate the soldiers' housing costs offpost, and apply MILCON 
in those locations where the private market will not support 
adequate housing.
    This is an exciting and intensely busy time for the Army as 
we address our inadequate housing shortage and strive to 
provide quality housing and other community facilities to 
soldiers and their families. Our goal is to work with you and 
your staff to provide the best program possible. In doing so, I 
hope you will also help us to place housing privatization into 
a broader perspective. Because we have to begin now, in concert 
with the Army vision, to manage our posts as a portfolio of 
strategic assets, not simply as a collection of facilities and 
projects. To do that, we must fix a fiscal model that is not 
suited to the long-term investments you make through the Army, 
and for which we are stewards, to create unique and valuable 
military real estate assets.
    In summary, we in the Army are pursuing privatization with 
vision and vigor and, frankly, confronting the many hurdles 
that privatization does face. We want to partner with the 
private sector, harnessing its entrepreneurship, efficiency, 
effectiveness, and expertise wherever we can. These must be 
true partnerships, recognizing the benefits that derive from a 
balanced relationship with shared goals and expectations, not a 
them and us contract.
    They must also be partnerships that yield best value, not 
lowest cost to the Army, protecting our military culture, 
priorities, and capabilities, even as they strive to improve 
cost efficiency and cost effectiveness. Mr. Chairman, this 
concludes my opening statement. I look forward to our 
discussion. Thank you, sir.

               Prepared Statement of Hon. Mahlon Apgar IV




    Mr. Hobson.  Thank you, Mr. Apgar.

                    STATEMENT OF HON. DUNCAN HOLADAY

    Mr. Holaday. I submit my written statement for the record. 
I will briefly summarize. I appreciate the opportunity to 
discuss the Department of the Navy's housing program with the 
Committee. As my boss, Secretary Pirie, said when he appeared 
before you, there is much to applaud in the area of housing 
this year.
    First, the Secretary of Defense has proposed reducing out-
of-pocket expenses for members who own or rent their homes in a 
local community; a reduction from 19 percent down to 15 percent 
in 2001, and with the Congress' consent, to zero by 2005. This 
will be a particularly welcome improvement for the three-
quarters of our Marines and Sailors who live in private sector 
housing, most of whom are located in high-cost coastal 
communities.
    This year's budget also demonstrates the Department of the 
Navy's continuing reliance on traditional military construction 
and improvements to help meet our on-base military family 
housing requirements. We are asking the Committee to approve 
over $360 million to renovate or replace over 3,100 homes, with 
2,800 of them within the United States.
    This is more funds than enacted by Congress last year. We 
are also proceeding with our housing privatization program, or 
as we refer to it in the Department of the Navy, Housing Public 
Private Ventures, or PPVs. We have seven previously authorized 
and appropriated projects under procurement that we expect to 
provide us with about 6,100 new, replacement, or renovated 
homes for our Marines and Sailors at a cost of about $105 
million.
    All funding for these projects will come from prior year 
appropriations. We are not requesting any new PPV funds this 
year. The Department of the Navy has developed a carefully-
considered fiscally-responsible acquisition and management 
strategy that will allow us to not only make wise choices of 
development partners, but also properly participate in the 
long-term management of these ventures.
    That way, we can ensure that our Sailors and Marines 
continue to receive the quality housing they deserve at an 
affordable price throughout the life of the project. These PPV 
projects, and the authorities that enable them, are a vital 
part of the Department's housing strategy. We will not be able, 
as with the case of the Army, we will not be able to meet the 
2010 goal unless the PPV authority is reauthorized.
    I ask your support in extending the Military Housing 
Privatization Act for another 5 years. On the bachelor housing 
front, we are exploring an initiative that would dramatically 
improve housing for about 25,000 junior Sailors that are 
presently assigned to ships. When deployed at sea, away from 
home port, all Sailors must endure bunk beds, sharing cramped 
living space with dozens of their shipmates, and living out of 
a small locker.
    When the ship returns to home ports, the peers of these 
Sailors who are married or assigned to Aviation Squadrons or 
Submarines get housing ashore, as do all Sailors who are 
assigned to shore duty. The shipboard E-1s through E-4s, the 
single shipboard E-1s through E-4s, however, are now required 
to continue living aboard ship in those cramped quarters. We 
are working out the details of a Home Port Ashore Program that 
will provide these Sailors quarters ashore either in a BE 
theater or in a local community when their ship is in home 
port.
    While the program is not fully developed, we believe that 
the portion of the Housing Privatization Authority, as it 
applies to bachelor quarters, will also be an important adjunct 
to the Home Port/Ashore Program. I urge you to help us re-
authorize those authorities also. Although not directly related 
to the Home Port/Ashore Program, the Department of the Navy is 
already in the initial stages of developing two bachelor PPVs; 
a BET at the Marine Corps Basic School in Quantico, and a BET 
at the Naval Base in Anacostia.
    It has been a pleasure working with the Committee to 
improve living conditions for our Marines and Sailors. Whenever 
we ask, they perform their duties admirably, and often in 
difficult and dangerous conditions. Ensuring that they and 
their families have adequate quality housing when at home is 
one of our most rewarding tasks.
    I look forward to continuing to work with the Committee to 
accomplish our goals. Thank you, sir.

               Prepared Statement of Hon. Duncan Holaday




                   STATEMENT OF HON. JIMMY G. DISHNER

    Mr. Hobson.  Mr. Dishner.
    Mr. Dishner.  Mr. Chairman, my prepared comments are 
submitted for the record. Let me just touch on four or five 
items that I would like to share with you on housing. In the 
area of housing privatization that the Committee and others 
approved in 1996, the Air Force is proud, along with the Navy, 
to cut the ribbon on the first project at Lackland Air Force 
Base, 420 units, at the Frank Tejeda estates, of a Congressman 
we named the project that after.
    Indicative of that was the accolades that we received, not 
for the Air Force, but for the airmen that now live in those; 
E-3 through E-7, specifically who those houses were targeted 
for and the market rates. We are very pleased to be a part of 
that. As you know, based upon the quarterly reports that we 
give you from the Air Force, that the initial 10 projects are 
under various stages of review and approval.
    So, we continue to move along. I would say somewhat 
lethargically, but the 1996 law was a pilot test. Now, we are 
to a point where the maturation of the program can move into 
some additional areas, but only using privatization as a 
balancing board along with MILCON. Both of them were to be used 
to shorten the time from 30 years to 15 years to repair those 
65,000 units that the Air Force has. We just need to work very, 
very hard.
    I might mention in Mr. Yim's testimony, I draw the 
Committee's attention to market housing done by MILCON and the 
requirements of the local community for Bolling Air Force Base. 
They are townhouses. They were just completed. We will be happy 
to set up a view of those for the Committee because that 
answers the question that was voiced before, are you building 
through MILCON market housing? I would like to draw your 
attention to those.
    Another issue that was brought up before, too, that I might 
just touch now was that the Air Force did sit down with HUD in 
1996. In 1997, particularly their corporate drains on 
mortgages, how we process, et cetera, because they have been 
there before. That, in addition to having consultants to help 
us, I think was very, very helpful to that. In the area of 
utility privatization, in 1998, as you recall, the law allowed 
us to enter into privatization of utilities.
    The Air Force looked at over 600 individual utilities at 
over 160 or 170 bases. We now have about 435 utilities left at 
a little bit over 30 bases which we are looking at. The 
schedule that we are on, that we have submitted to the 
Committee, shows that we will have those through the process 
and privatized to meet the 2003 time line target that OSD has 
requested that we meet.
    We do not see a problem with that at all. One comment on 
utility and housing privatization. Obviously, there is a 
symbiotic relationship there. What the Air Force has worked out 
to ensure that where we are privatizing utilities, that is not 
in deference to the housing privatization that may be coming 
around to create a problem, if two of them are working at the 
same time.
    Finally, in unaccompanied housing, the Air Force, along 
with the housing privatization would certainly like to see that 
extended. We have not done any unaccompanied housing, yet. In 
concert with the Navy and the two projects that they are 
starting, we do share between the services, we would certainly 
want to extend, in case something does come up that we can look 
at those and see if in fact there is a need, both in--and also 
from a financial standpoint, but also how we run our 
dormitories with our first shirts.
    That, to us, is very, very critical as to how that would be 
done. Finally, we will talk more specific later on, but we want 
to share with you where we are with the Brooks Project. That 
continues to go forward. We are very, very happy with that 
asset management project. We are very pleased that this 
Committee has been very supportive of that as a new way for the 
Government, in this specific case for the Air Force, to do 
that.
    Mr. Chairman, I stand ready to answer any questions that 
you may have. Thank you very much.

               Prepared Statement of Hon. Jimmy G. Disher




                      BASE REALIGNMENT AND CLOSURE

    Mr. Hobson.  I want to talk about a couple of things.
    I hope that the Brooks thing worked out to be successful. 
All of the services that every committee that I have been in 
have talked about two more rounds of BRAC. Congress is somewhat 
resistant to that, naturally, given our history on it. I think 
most of us would all agree that we do need to look at bases we 
cannot keep and be cost effective at the same time having all 
of these bases.
    I would like to suggest that all of you look at the 
concept. I initially was just totally opposed at the Brooks 
because I thought it was a way to BRAC proof a base, which I 
did not want to do. I worry about privatization in the same 
vein. Communities and Members can figure out ways. I like to 
know that because I kind of know what my Committee has done in 
a base that I have to try to do the thing. So, I am a little 
suspicious of what everybody else does too.
    So, I would like to suggest that as we go through the 
Brooks thing that the Army, the Navy, and the Marine Corps 
figure out and think about that maybe this helps us, even 
without a BRAC, if we never get to the BRAC, manage some of 
these facilities better, and help these communities. There are 
assets in those communities. If we get them over to them 
faster, and they can utilize them, then if a BRAC does occur, 
there is less harshness happening in that community all at 
once.
    Right now, it is a big hammer that comes down. Overnight 
practically, you lose this asset in the community. People lose 
jobs and it is a terrible thing what we do. This may be a way 
of lessening that. So, I try to look at it from it from--I 
tried to take what I thought was a negative deal and turned it 
around to where I think it is a positive for the community and 
a positive for the services.
    So, I hope you will all look at that. I am pleased to hear 
that you are sharing. There is a tendency, and I mean we all 
have differences and cultural differences, the people, and 
things of that sort. I think the sharing of the ideas, and of 
the financing, and what works and does not work is important to 
achieve the success.
    Besides HUD, and I know I have criticized these people. 
Some of their staffs I think they make too much money. Maybe 
they pay huge salaries. I would like for you to look at Fannie 
Mae, talk to them, and see if there are not some other types of 
financing sources out there. Maybe even talk to some of the big 
real estate investment trust areas, some of the large 
institutions that are out there.
    They may have an appetite as we change our configuration. 
There may be a change in appetite or product that some of them 
may wish to have, which in turn could become advantageous to 
you if you have creative people and they are thinking about 
what you do. I also think at some point, I have talked about 
this in my mind, that we should have a symposium someplace at 
one of the big institutes or the universities that are 
particularly good in real estate and challenge some of their, I 
mean, maybe it is too late for this, but you could challenge 
some of their bright young minds to look at what we are doing 
and say, is this the right way to do it or how would you do it?
    Maybe we do not get anything out of it, but we get some 
people who understand. Very few people, outside of the culture 
you are in, understand your problem. They know housing. They 
know how to build up their communities. When you interface, the 
types of mobilizations, the types of facilities that you have, 
for example the PX or the commissary concept into this, and the 
gas stations that are active on the facility and the other 
types of housing.
    Most people from the outside do not have this concept. So, 
I was thinking maybe at some point, and maybe now is not the 
time to even discuss this, but if you can all think in a 
broader context of how we educate the people in the real world, 
and not that this is not the real world, but there is another 
world. Maybe the other world is a better way of saying it, as 
to what our concepts are.
    We may get better advice from the banking and institution 
firms. We get better advice from some of the traditional real 
estate organizations, and get some of them more interested in 
what we are doing. While I am on that, and I am going to stop. 
At our next hearing, just so everybody knows, we are going to 
have some people in from the private sector. I am sure you will 
all monitor that to see what they have to say.
    They are going to be primarily what I will call providers. 
I would like to get beyond that in this more intellectual 
discussion, after we get these projects done as to what was 
learned, what was not done, and how we can educate some people 
on the outside to look innovatively at what all you are doing. 
You have some good lessons learned too, just as Secretary Yim 
talked about. You have all learned some things.
    We have all learned some things. I want to thank you for 
your testimony. We are going to be on a pretty tight schedule. 
I want to let John and Chet ask any question that they might 
have. Let me start with John and then I will come back to you.
    Mr. Olver. Thank you, Mr. Chairman.

                        LACKLAND AIR FORCE BASE

    You folks, thank you for being here. You have the advantage 
of having someone to deflect much of the discussion here 
because I think we aired a lot of the issues rather fully with 
Secretary Yim. Let me just ask a couple of things here. Mr. 
Dishner, you had said that you ribbon cut. What did you ribbon 
cut; Lackland? Lackland is not yet in usage. What did you 
ribbon cut?
    Mr. Dishner. Yes, sir. They have opened up the first 92 
units of 420.
    Mr. Olver. I see. When will they be complete?
    Mr. Dishner. They will be completed in December of this 
year.
    Mr. Olver. December, I see. So, you have actually moved 
into the first.
    Mr. Dishner. Yes, sir.
    Mr. Olver. You will finish it up in December of this year.
    Mr. Dishner. Yes, sir.
    Mr. Olver. Thank you.
    Mr. Dishner. Now, they are tearing down the barracks that I 
went through basic training.

                   FORT CARSON HOUSING PRIVATIZATION

    Mr. Olver. Mr. Apgar, at Fort Carson, which you have now 
let the contract, at what time will you have a ribbon cutting 
for the first group to be moved into and when do you expect to 
be finished with that? That is the only other one that I am 
pretty sure under the authorization that we have been working 
under that is actually in construction.
    Mr. Apgar. Well, in fact the first one occurred within 
about a month after signing because the development partner, 
very shrewdly, and certainly with our strong support, took 200 
units that had been empty and were in poor repair for a part of 
our backlog, and renovated them. Within several weeks had 
opened them for 200 families to occupy just before the holidays 
and before one of the major unit's deployment to the Balkans.
    That was, frankly, both symbolic and real. The symbolism 
was that this program can produce visible immediate results, if 
it is well-supported and if the commitment is there on both 
sides.
    Mr. Olver. So, you are into 200 of them already.
    Mr. Apgar. Already, and many more now. The entire pipeline 
is 1,823 renovations, 840 new construction because of the poor 
condition of the existing units within the first 5 years of a 
long-term partnership agreement.
    Mr. Olver. Well, I see. This is phased over a several-year 
period so that you cannot really, unlike the Lackland with its 
400 that are going to be all into by the end of this year, you 
cannot give a date. The date is several years away.
    Mr. Apgar. There are multiple stages essentially. Each of 
our projects will run through a stage of renovation in the 
first instance where they are renovatable. Then demolition and 
new construction where renovation does not make sense. That is 
where our planning process, at the point we signed the 
agreements takes place. Defining those milestones, how many 
units, at what period of time, and multiple ribbon----
    Mr. Olver. Any other deal, they will just take over the 
operation of a facility and they will collect the rents and do 
everything. That may be doing a whole lot.
    Mr. Apgar [continuing]. That is true. Each post is 
different. On average, 75 percent of our total stock needs 
renovation or replacement. At Fort Hood, there is a substantial 
backlog. Over 90 percent will need remediation and major 
treatment. On day one of the agreement, effectively they become 
asset managers receiving the revenues from the allowance 
stream. Then embarking on this multi-year, multi-phase, and 
multi-function program.
    Mr. Olver. Okay. Thank you. Since I know we are in somewhat 
of a hurry, I wanted to explore one thing. I have a couple of 
questions that I am going to put into the record for specific 
ones. I had asked the question about Secretary Yim as to 
whether there was an inherent difference between Reserve and 
Active. Then there was this sort of a corollary whether they 
would ever do, because I was really thinking more in terms, I 
do not know what the needs are in each of the places.

                      NAVY AND AIR FORCE RESERVES

    This is really a question to Mr. Holaday and Mr. Dishner. 
You are the only ones that I think are operating with Reserve 
bases in the plan as it is. Robins has 670 units in development 
in process. Mr. Holaday, there is the Naval Air Station in New 
Orleans which has 763. Then the Stewart Army Sub-Post which has 
a couple of hundred. I am surprised at that. What triggered the 
question in part was that my experience with the Reserve bases 
is that there are not that many permanent people on them.
    The permanent population of, I do not know what there is at 
Robins, and at the Naval Air Station at New Orleans that would 
lead us to be doing nearly 800 units in both cases of family 
housing in those places. Can either of you explain?
    Mr. Dishner. Robins is not a Reserve base.
    Mr. Olver. It is not a Reserve base. Okay, my 
misinformation. Am I also misinformed then on New Orleans?
    Mr. Holaday. No. In New Orleans, we actually have two 
bases. There is the Naval Base in New Orleans and we also have 
an air station in New Orleans. New Orleans is the Headquarters 
of the Naval Reserve. Both the Navy and the Marine Corps 
Reserve have their Headquarters there. So, the requirement we 
have is for any personnel who are on active duty.
    They could be Reserve personnel. We have a number of 
Reserve personnel who serve on Active duty. It could be Active 
duty members who are assigned to the Reserve Headquarters. The 
situation would be familiar at Fort Stewart, and at Chicopee in 
Westover.
    The requirement is to take care of not only Reserve people 
who are on Active duty or Active duty members who are serving 
with the Reserves, but also members from other services, and 
members who are on independent duty; people like recruiters, or 
people who are assigned to ROTC units as Active duty personnel 
are authorized to get housing. We would look at all these 
requirements as we evaluate our need for family housing. I hope 
that answered your questions, sir.
    Mr. Olver. In part. It is sometimes difficult to have 
enough detail with a chart like this. I think this is a chart 
that has been put forward by OSD that gives us a summary of 
these things. Anyway, I will defer and ask you at some point to 
give me a little bit of information about the Stewart one and 
we will get into the Chicotee one in that process probably.
    Mr. Holaday. Yes, sir. I will be happy to give you the 
details.
    Mr. Olver. Thank you.
    Mr. Hobson. Mr. Tiahrt.

                            QUALITY OF LIFE

    Mr. Tiahrt. Thank you, Mr. Chairman.
    I thank you for coming to the Committee. Just recently, the 
Chairman and I went down to Fort Bragg, along with 
Representative Robin Hayes. We toured some of the housing. In 
one of the housing areas is a new facility. The first soldier 
who was there was a private. He had been a corporal before.
    He was there with his wife and two little children. I wish 
you could have seen the smile on his face. He had come from a 
very cramped quarters. He was moving into a place that actually 
had a garage, which he had turned into a family room. He 
thought it would give the kids more room to play. He is going 
to spend probably 20 to 24 years in the military because he 
really appreciated what the Government had done.
    He thanked us. He thanked us several times as we walked 
through the facility. I was amazed. Of course, I did not see 
where he had moved from. This effort of providing housing for 
troops is, very essential in any long-term commitment for 
people to participate in a voluntary service.
    So, I want to add my support and put my shoulder to the 
wheel and do what we can to improve the quality of life. One 
thing that I would request is when you evaluate, or when you 
give us information to evaluate new units, if you would give us 
a cost per square foot as sort of a benchmark. I can go to 
Wichita, Kansas, to McConnell Air Force Base in my home 
District.
    If it is a three bedroom house or a five bedroom house, I 
can figure out what in the private market it cost to provide 
housing in a cost per square foot ratio. When we go to a lot of 
these facilities, it is really difficult for us to dig down 
because that is not the criteria that is usually available. It 
is a good benchmark for all of us, the cost per square foot.
    If it is $65 per square foot, that is a pretty good deal. 
If it is $150 per square foot, it is probably something to be 
looked into. It should not make a big difference; so, if you 
could use that for a benchmark. My question to you is when you 
look at all of the housing departments across the United 
States, and at our bases overseas too, how do you determine 
where to study? How do each of the services make a decision by 
selecting a facility?
    Is it based on need? Is it based on political? Is it the 
last phone call you got from the Secretary of the Air Force or 
the Secretary of Defense? Just tell me whatever it is for you 
to select?
    Mr. Apgar. Well, in the Army's case, we have a global 
analysis, all installations; both for the U.S. and abroad, 
based on condition, as well as requirements; numbers of 
soldiers assigned both currently and in the future. That 
evaluation is our objective measure or set of measures for 
setting priorities. In all of our current analysis, we are 
looking to the private sector where privatization was to look 
at our own analysis and either validate it or challenge it, as 
the case may be.
    There may be a difference between our view and the 
``market'' view. We need to know that and you need to know 
that. That is a global portfolio view, without any question. 
Where political influence may apply, it is only in the case 
where there are specific individual posts and issues are 
brought to our attention, which for some reason we may not have 
picked up adequately. Obviously, we depend on Congressional and 
other input for that purpose.
    Mr. Holaday. In the Department of the Navy our policy is to 
fix up what we own first. That has been our policy for the last 
6 or 7 years: to focus on improving the condition of the houses 
that we already have. Under that broad guideline, we also look 
at the condition of the housing with the intention of fixing up 
the worst first.
    We have to balance, of course, whether we are going to be 
doing renovations or replacements. Some of the housing is in 
such bad condition that the only way we can fix it is to tear 
it down and rebuild new. Other housing, we can fix by doing 
renovations.
    We take the condition of the housing and work it into the 
budget that we have available. We also try to show some 
progress on different bases throughout the Country, so we are 
not just focusing on one particular location to the exclusion 
of all others. We think it is important for service members, 
wherever they are stationed, to see some improvement in the 
conditions on the base.

                     AIR FORCE FAMILY HOUSING PLAN

    Mr. Dishner. The same with the Air Force. In fact, we have 
completed the Air Force Housing Master Plan. We look at the 
worst house first right down to the last. We assess the budget 
that we think is needed to do that. Directs whether that is 
going to be privatized housing or MILCON. In the case of 
Europe, could it be an extension of a lease? We have two 
programs underway there, to build houses under the new build-
lease program.
    Congressman, let me give you a copy of the Housing Master 
Plan because we used the same thing. It is written down, so 
that as we go over year-to-year, there is still a game plan to 
do that. We adjust that based upon what we did get in the 
previous year. So, the plan, once a year they go back and do 
it. So, I would be happy to provide that to you. It is not a 
thick document. So, it would be very easy for you to look at.
    [The information referred to follows:]

                      FAMILY HOUSING PRIVATIZATION

    Providing a single cost benchmark is complicated by the fact that 
privatization projects usually include a mixture of renovation and 
construction of new/replacement units. We typically renovate a unit 
unless these costs exceed 70 percent of the replacement cost, at which 
point we program a replacement unit. Replacement or new construction 
costs are easier to benchmark by locality. The Air Force uses the Tri-
Service Cost model to estimate and program projects. This model uses 
cost factors that are updated using construction industry trends and 
published annually. The OSD average unit cost for new construction in 
fiscal year 2001 is $64 per gross square foot/$79 per net square foot, 
and varies by area cost factor and project size. For comparison, the 
Lackland AFB, Robins, Dyess, and Elmendorf have unit renovation costs 
that range from $32 to $37 per square foot, and new construction at $52 
to $75 per square foot. Of course unit costs are only part of the 
overall project cost. A total project will include infrastructure, 
demolition, landscaping, community playgrounds and facilities, and 
related project inspection and overhead costs. In the future, when we 
notify Congress of our intent to solicit a project or make an award, we 
will provide government and the developer's estimated cost per square 
foot.
    Our pilot projects were selected based on a number of criteria. 
Because no funds were identified for privatization project scored 
costs, each candidate first had to have a MILCON project to offset any 
scored costs. Next, candidate submittals to the Air Staff had to be 
accompanied by a preliminary performa that reflected a minimum of three 
to one MILCON dollar leverage, and life cycle costs had to show an 
advantage in privatization over MILCON. Finally, those candidates 
selected for the pilot program had to have the lowest financial 
development gaps as determined by the estimated income stream as 
compared to the expenses required to execute the project.
    Candidate projects in fiscal year 2001 and beyond have been 
identified in the Air Force Family Housing Master Plan. The Air Force 
developed a privatization predictive model that relies on readily 
available data such as local economic indicators, BAH rates, and 
revitalization requirements. The model provides projections of the OMB 
``scored'' costs. The Air Force used this model to screen installations 
by determining privatization potential and cost.

    Mr. Tiahrt. Thank you very much.
    Mr. Hobson. Mr. Edwards.
    Mr. Edwards. Thank you, Mr. Chairman.

                    FORT HOOD HOUSING PRIVATIZATION

    Secretary Apgar, I planned the leadership of this 
Committee, encouraged the Army, and the Army is proving to 
follow that leadership to say, well, it would be premature to 
go to a 100 percent privatization program. We ought to continue 
until we test these pilot programs and make some additional 
MILCON, as well as some privatization funding. You said 90 
percent of the housing on post at Fort Hood is in need of major 
repair. Is that correct; significant repair?
    Mr. Apgar. Either light repair, major repair, or demolition 
and replacement.
    Mr. Edwards. Somewhere in that mix.
    Mr. Apgar. That is a sad commentary on the management of 
the Army for the last 15 to 20 years, and their budget 
requested their commitment.
    Mr. Edwards. I would agree with that. We in Congress often 
want to do the budget as well. So, the blame, you know, we will 
accept it too. I wish the Pentagon had been more aggressive on 
that front. The point is the significance of that 90 percent 
figure is that 20 percent of all of the active duty Army 
division in the world are located in Fort Hood. Two-thirds of 
those or 44,000 soldiers are married. So, by my numbers, there 
are about 30,000 married families.
    I can assure you from riding in Saturday morning parades, 
that there are a lot of little kids running around. I 
appreciate Mr. Tiahrt putting a human face on this situation. 
That is the vital reason why I like the pilot program approach. 
Let us experiment. Let us see what works and then move ahead, 
if that works, or stop the program if it does not.
    I am getting to the point where I think to test a pilot 
program, you have got to get a pilot program on the ground. 
When you came before this Committee several weeks ago, I think 
it was requested of you to provide information to this 
Committee and its staff so that we could move ahead with both 
Fort Lewis and Hood. I know Mr. Dicks feels as I do. He is 
ready to move ahead and thinks now is a prudent time to do so.
    Did you provide this Committee, to the best of your 
knowledge, the information requested for this Committee to 
review what was needed in order to move ahead with Fort Lewis 
and Fort Hood?
    Mr. Apgar. As far as I know, sir.
    Mr. Edwards. Since providing that information, have you had 
any response from the staff of this Committee or the 
authorizing committee to say the information was inadequate, or 
it was incomplete, or we need additional information, or we 
have concerns?
    Mr. Apgar. Well, now. It has been like pushing a pillow. We 
have provided a good deal of information. On the other hand, it 
is not clear if there is more needed.
    Mr. Edwards. It sounds to me as if you are going to get a 
response, which would be productive. I would like to just know 
the answer to my question.
    Mr. Apgar. Some material came forward last night.
    Mr. Edwards. It states that there is a request for certain 
dollars amounts which we have, both Committees, and elsewhere 
have some question about the amounts, the total amounts being 
used. I frankly do not have a lot of problem with the amount 
that is asked for. I just found out what that number was about 
5 minutes ago.
    There is a question that has now arisen as a result of the 
request of how much money the Army is using in this 
privatization program, which I really do not want to get into 
right now. If you look at those numbers, they are substantial 
numbers.
    Mr. Apgar. Sure.
    Mr. Edwards. On basically it was three or four projects. I 
did not see this. This just came to me. There was some mixup on 
how the money went the first time after you came to see me. You 
have to go to OSD. You had to go back to OSD again. But we are 
going to get there. We are not quite there yet. So, that is 
where we are.
    Mr. Chairman, what I would like to recommend is rather this 
back and forth, and I do not know if you knew this information 
came over last night. I do not know if the staff asked for 
additional information, subsequent to our last meeting with 
Secretary Apgar. I want to cut through all of the back and 
forth. I would like to ask the Chair if we could sit down 
together, not appropriate at this meeting, but sit down 
together and let us figure out what the Congressional staffs 
and our Committees need to review this.
    Frankly, the staffs and the Committees ought to have the 
information they need to evaluate it. I am afraid this process 
is going to go on for another year back and forth. I would like 
to sit down. Plus, there does not seem to be consistency as to 
who is just holding up the show. One week, I hear it is the 
Senate. The next week, I hear it is the House.
    So, somewhere maybe one 1-hour meeting could cut through 
all of this. Mr. Secretary, you need to be giving the 
information we need from you. Then your staff needs to get it 
to us. If we can do that, then maybe we can cut through this.
    Mr. Hobson. Let us cut through it.
    Mr. Edwards. What we need is a detailed expenditure of the 
$14 million. We do not have that. This does not really do it. 
This is only staffing summary. I think both Committees, the 
House and the Senate, need some detail on the amount of money, 
how it is being used, and where it is going. This is a 
substantial amount of money. You do not have to do it now. But 
we need to do it before we have another meeting so we can get 
this done. I think the staff has been working on that. Maybe I 
need to say it more bluntly. That is what we need.
    Mr. Apgar.  May I ask, Mr. Chairman, because this is a real 
dilemma and serious difficulty for us. If the Committees 
concerned could agree and simply produce a chart, instead of 
having a table, a matrix, and whatever it may be, a spreadsheet 
laying out the data, as well as the soft information or 
explanation to give us, we would be more than happy to respond.
    We have spent hundreds of hours on this specific issue. I 
have applied every policy and management question I could to 
get below the data. Every time we submit something, there seems 
to either be another question, or it is incomplete, or it is in 
the wrong format. If we could simply have a format, or a 
framework, or a set of definitions, it would be very helpful. 
We would, of course, respond and we would be happy to.
    Mr. Edwards.  Well, I guess what we need to do is each 
service is a little different on how they compose this. I guess 
what we need is from each of you, what you are paying for 
consulting; a breakdown on consulting services. This is the 
first time I have been asked for a reprogramming for additional 
consulting costs. I did not think the original number, the 
number that you asked for was that bad. When you added to the 
number overall, then I have to come back and we had some 
legitimate questions about the detail as to how those resources 
are being utilized and how much more is going to be needed 
because this is a funding source that we are now using up 
dollars in and I do not know whether it is real or not.
    I think that is what we need to get at. We need to stop 
sparring about it and get it done. I want you to get on with 
the program. I want to get on with Fort Hood. I want to get on 
with Fort Lewis. When you came and met with me, I said I have 
no problem with the money. That it did not come over. I do not 
know whose fault it was, but in the process, it did not go 
through who it should go through.
    So, it had to go back and that took about a month to go 
back through that. I mean, it was not us. It was OSD looking at 
it. Then Friday before the recess, something else arose. So, we 
need to get our processes down. I think you all need to look at 
it. You do not have to answer it now. Just get it to us.
    Mr. Apgar.  Mr. Chairman, how much is it?
    Mr. Edwards.  The Chairman, while he is looking, if I could 
just say that I think the information you are requesting today 
is very reasonable. Frankly, I believe it is your 
responsibility that we should get that information. We should 
evaluate it. I think what Secretary Apgar said is also fair. 
That is that perhaps we ought to formally send him a letter 
saying this is the information we need.
    You provide this information. This is what we need. I think 
it has been a confusing process. My interest is not to point 
the finger anywhere. I do not care about what has happened in 
the past. I do care about what happens in the future. The 
people that Mr. Tiahrt talked about reside in my Congressional 
District.
    They represent 20 percent of the active duty Army Division. 
So, perhaps with the Chairman's leadership and the staff we can 
do that. I think that would be very helpful.
    Mr. Holaday.  The Department of the Navy has spent $5.4 
million through 1999 from 1996. It is about 1.2 percent of our 
total development costs, which is about one-quarter of what we 
would spend on a MILCON project.
    Mr. Apgar.  Since 1995 when the program costs began to be 
incurred, Fort Carson, about $5.8 million was committed in 
direct costs. The anticipated costs for Forts Hood, Lewis and 
Meade--are approximately $4 million each. The reprogramming of 
some that we are requesting covers the consultant costs to 
support all three of the forthcoming pilots; the total program 
costs which are outside the $6.1 million and a part of the 
$14.8 include oversight now for Carson, as well as the next 
three. So, that is the year's total. I think, Mr. Chairman, I 
must say as an analyst by profession that it is important for 
the Committee to recognize that the data to manage and support 
this program was not collected directly for a long time in a 
systematic and specific way.
    So, when one goes back to history, you are pulling data out 
of a system that was not designed to report it. It is a 
traditional accounting methodology, not a reporting or 
management methodology. We have, since October when you first 
identified the need for the next few years, began to do that. 
Now, we have quite a rigorous framework. We are basically 
imposing a new information and data analysis request on a 
system that was not designed to produce it. I would appreciate 
the Committee's forbearance in working with us to make that 
happen.
    Mr. Hobson.  We will work on that. We have got to go.
    The meeting is adjourned.
    [Clerk's note.--Questions submitted for the record by 
Chairman Hobson.]

                         EVALUATION OF PROGRAM

    Question. How does the Department intend on evaluating the 
effectiveness of the program in eliminating inadequate housing more 
economically and faster than traditional military construction housing?
    Answer. The Department is developing an evaluation plan to address 
the overall effectiveness of the program in eliminating inadequate 
housing faster the more economically than military construction. As 
part of the effort, the plan will evaluate (1) the effectiveness of 
individual projects, (2) whether program goals are being met, (3) 
program questions and concerns, and (4) recommended program 
modifications. Private sector consultants and assisting the development 
of the plan, which is scheduled for completion in summer 2000.
    Question. When will a formal plan for evaluation to answer key 
quesetions such as: if the housing will be needed over 50-year terms, 
if they are operated and maintained properly, and are actual costs and 
savings in line with original estimates, be created?
    Answer. The evaluation plan should be completed in summer 2000.

                       INDIVIDUAL PROJECT SUCCESS

    Question. When do you anticipate a fair review of the effectiveness 
of an individual project will be possible (at the five-year mark)?
    Answer. Review of project effectiveness will vary from project to 
project and at various stages of implementation. For each project we 
will evaluate the effectiveness of our solicitation methodology, 
leveraging of military construction dollars and projected life cycle 
costs at the time of project award. We will continue to review project 
performance over the entire course of the program and term of each 
project individually. Some specific long-term concerns are construction 
quality and timeliness, tenant member satisfaction and occupancy rates, 
long-term maintenance and repair, sound financial practices and return 
on investment, especially for projects involving joint venture 
arrangements. However, within the first five to ten years, we expect to 
establish a fair review and a good understanding of the overall 
effectiveness of individual projects.

                          ADDITIONAL PROJECTS

    Question. Currently 22 projects involving 27,911 units are planned. 
At what pace do you believe this program should continue until we are 
able to have a fair review?
    Answer. The current pace and diversity of the projects which are 
planned and being implemented should allow a fair review of 
effectiveness of the program. We expect the current projects, due for 
completion in late FY2000 and FY2001, to provide a sufficient knowledge 
base to allow an increased pace beyond FY2001. If the Department is to 
meet its 2010 goal to eliminate its inadequate housing, it will have to 
implement privatization at a faster pace.

                             COST ANALYSIS

    Question. How do you intend on standardizing a method for the 
services to use in performing life cycle costs analysis?
    Answer. Draft guidance on life cycle costs already exists; however, 
as a recent GAO report indicates, there continues to be inconsistencies 
in how the Services calculate specific inputs to these analyses. 
Therefore, the Department's life cycle guidance is being revised to 
standardize the cost estimations used by the Service. Also, we have 
expanded the costs considered to include consultant support and other 
costs such as construction inspection. The revised guidance will 
require that the Services examine their costs in a uniform and 
comprehensive manner.
    Question. How will the value of land and current housing units be 
figured?
    Answer. The value of land and existing housing units is based on 
appraised value of the property. Where the land is conveyed without 
restrictions on its use, that value will reflect the fair market value 
of the highest and best use of the property. Where the use of the 
property is restricted to the rents based upon the housing allowances 
of the tenant members, the value will reflect the restricted income 
producing potential of the property.
    Question. Are details provided on how to estimate each type of 
cost?
    Answer. The current draft life cycle policy provides general 
guidance on estimating privatization costs. The revised guidance we are 
developing will provide more detailed guidance on estimating each type 
of housing privatization cost.

                                  BAH

    Question. In your opinion, how will the 100% BAH affect the need 
for on-base housing?
    Answer. The Department believes that eliminating service members' 
out-of-pocket expenses will decrease the demand for on-base housing. 
While only a detailed Housing Market Analyses, which is a long-term 
effort, can provide specifics on the effect of this initiative, we 
believe that the elimination of out of pocket costs will relieve 
pressure for on-base housing, reduce the need to maintain older, high 
cost units, and allow resources to be devoted to improving and 
maintaining needed on-base housing.
    Question. How do you anticipate this (100% BAH) to impact the 
privatization program? Will we find it to be more costly?
    Answer. The increased housing allowances recently announced by the 
SecDef should immediately make privatization a more viable tool in 
satisfying the Department's housing requirement. Increased allowances 
will increase the income stream available to the projects, which in 
turn, increases their debt capacity and reduces the necessary 
government contribution to close the development gap. Thus, upfront 
scoring costs will either be reduced or, if required, private 
developers will be able to build more housing. In the long run, 
increased allowances will make private sector housing more affordable 
and should reduce the need to maintain high-cost units on the 
installations.
    However, we must ensure that, with increasing allowances, 
developers do not reap ``windfall profits,'' since many projects will 
be negotiated prior to the full increase taking effect. Under any of 
the scenarios for deals which are not yet awarded, there will be 
mechanisms, such as reinvestment accounts, revenue sharing accounts, or 
increased rent for leases of government property, which will ensure 
that the long-term costs of the projects are not increased.
    Question. How will this change (100% BAH) be reflected in the 
housing plans, which are due this summer?
    Answer. The housing master plans required by P.L. 106-32 to be 
submitted to Congress by July 1, 2000, will reflect housing 
requirements identified at the beginning of FY 2000. Therefore, these 
plans will not have taken into consideration the full impact of the 
Secretary's initiative to eliminate the out of pocket costs. Once the 
Services are able to conduct detailed Housing Market Analyses, which 
project housing requirements out five years, at each installation, the 
master plans will be updated.

                                SCORING

    Question. Does OMB scoring drive the choice of privatization 
authorities used in project and in the related funding decision?
    Answer. No, OMB scoring, alone, does not drive which privatization 
authority the Services choose for a specific project. However, because 
it allows the Department to better leverage its appropriations and get 
more housing for its contribution, OMB scoring does make some 
authorities more attractive than others. Financial leverage is one of 
the key elements we consider in structuring our housing privatization 
projects. Other key elements are ensuring good housing for military 
members, minimizing government risk, protecting our financial 
contributions, and maximizing any return on our investment. All these 
factors, including OMB scoring, are taken into consideration in 
planning a project.

                          HOUSING REQUIREMENTS

    Question. With the new policy to providing in a100% BAH, what 
efforts are taking to require that housing requirement assessments are 
updated prior to proposing privatization?
    Answer. It is DoD policy that when the Services submit projects for 
renovation or replacement, The request must also include the 
appropriate Housing Market Analysis identifying the requirement for the 
project. The Department has also extended the requirement for current 
Housing Market Analysis for all privatization projects.

                             HOUSING NEEDS

    Question. What steps are you taking to improve the methods used to 
estimate housing needs and the ability of local communities to meet 
these needs?
    Answer. The Department has been criticized in various audits 
regarding the different processes used by the Services to determine on-
base housing needs. We believe there is merit in developing a more 
consistent requirements process and have begun a ground up review of 
the different Services methodologies. Additionally, a Housing Policy 
Panel has been established to review, validate and/or develop housing 
related policies and this will facilitate the development of a more 
standardized system for assessing our on-base housing needs. The 
Housing Policy Panel is comprised of subject matter experts from the 
Office of the Secretary of Defense, Services, and Defense Agencies 
responsible for housing management, budgeting, auditing, and 
allowances. We anticipate having draft guidance developed by this 
summer.

           WHEN PRIVATIZATION COSTS EXCEED CONSTRUCTION FUNDS

    Question. Is there a policy in place for determining whether to go 
forward with a privatization project if its cost exceeds traditional 
construction?
    Answer. A life cycle analysis is performed for each privatization 
project. Under existing policy, the life cycle cost of a privatization 
project should be less than or equal to the cost of the military 
construction alternative. Additionally, the Department does not solicit 
a project unless we believe we can leverage appropriations by at least 
a factor of three to one, compared to traditional military 
construction.

                          LEGISLATIVE PROPOSAL

    Army:
    Question. The current statutory authorities for the Military 
Housing Privatization Initiative (MHPI) expire on February 2001. The 
Department is requesting the authorities be extended for another five-
year period with no amendments to the current legislation. In your 
opinion, why should the MHPI authorities be extended?
    Answer. Privatization is essential to provide the best housing for 
our soldiers in the most cost effective way. It will also permit the 
Department to meet its goal of providing adequate housing to our 
soldiers and their families by 2010.
    The authorities given to the Department of Defense in 1996 have 
been invaluable tools to pursue alternative means of providing adequate 
housing to our soldiers.
    Without this authority, we will fall further behind in our goal. We 
concur with the DoD initiative to extend the existing authorities for 
an additional five years. This will allow us to incorporate lessons 
learned from our current privatization projects into future projected 
and offer suggestions to refine the authorities.
    Question. If the Act were to be made permanent, what amendments 
would you recommend to the current authorities? Why?
    Answer. We support the request submitted by the Department of 
Defense to be able to credit any reimbursements (e.g., for fire and 
police protection provided by the government in privatized housing 
areas) received by the Services into the account from which the 
services were funded and not into the general treasury.
    We also support the DoD position not to add any new privatization 
authorities or restrictions. This will allow us to continue with the 
pilot projects and institutionalize/formalize our privatization 
program.
    Navy:
    The current statutory authorities for the Military Housing 
Privatization Initiative (MHPI) expire in February 2001. The Department 
is requesting the authorities be extended for another five-year period 
with no amendments to the current legislation.
    Question. In your opinion, why should the MHPI authorities be 
extended?
    Answer. Improving the living conditions of Sailors, Marines, and 
their families is a top priority within the Department of the Navy. 
Extension of the MHPI authorities is essential in order for the 
Department to eliminate the unsuitable family housing units in its 
inventory. We are also seriously pursuing the use of the MHPI 
authorities to help provide housing for single Marines and Sailors.

                          LEGISLATIVE PROPOSAL

    The current statutory authorities for the Military Housing 
Privatization Initiative (MHPI) expire in February 2001. The Department 
is requesting the authorities be extended for another five-year period 
with no amendments to the current legislation.
    Question. If the Act were to be made permanent, what amendments 
would you recommend to the current authorities? Why?
    Answer. One change that may merit consideration would be to 
eliminate the legislative distinction between family and unaccompanied 
housing privatization projects. This would facilitate Service 
flexibility in planning and executing joint family/bachelor housing 
privatization projects when there is a need for both types of housing. 
Another change would be to allow the use of proceeds that are 
transferred into the Family Housing Improvement Fund, as a result of 
either income derived from other privatization projects or from the 
conveyance or lease of property, to be reused without the need for 
``reappropriation.'' This would allow the use of proceeds by the 
Services without an offsetting reduction elsewhere in their 
``topline.'' Congressional notification requirements associated with 
housing privatization would ensure congressional oversight over the use 
of these funds.
    Air Force:
    Question. In your opinion, why should the MHPI authorities be 
extended?
    Answer. The Military Housing Privatization Initiative (MHPI) 
authorities should be extended as they benefit Air Force members and 
their families. The MHPI authorities are essential for meeting Defense 
Planning Guidance to revitalize, divest or demolish all inadequate 
housing units by 2010. Without MHPI authorities, we will not make the 
2010 goal. This could mean our military members and their families will 
continue to live in deteriorated housing, negatively impacting their 
quality of life and overall Air Force readiness and retention.
    During the first years of the program, the Air Force focused its 
efforts on learning the responsibilities of the public and private 
parties in such initiatives and screening Air Force bases for 
financially feasible privatization candidates. The Air Force also took 
the time necessary to learn and understand the financial and business 
relationships of such endeavors and develop the detailed financial, 
real estate and legal documents necessary to request and evaluate 
proposals. Without extension of the legislative authorities, the work 
and resources already committed to the development and execution of 
these initiatives will be lost.
    Question. If the Act were to be made permanent, what amendments 
would you recommend to the current authorities? Why?
    Answer. We recommend amending section 2883 of title 10, USC, to 
allow funds to be transferred from the Department of Defense Family 
Housing Improvement Fund (FHIF) to the Air Force Housing MILCON 
appropriation. Military Housing Privatization Initiatives are market-
timing sensitive in nature, subject to the swings of the economic 
market and the community viability of a geographic area. As such, a 
housing privatization initiative that appears to be financially 
feasible and realistic when advertised could be financially 
unachievable before award due to a shift in the real estate and/or 
financial market trends. Should this occur, execution of an Air Force 
(MILCON) project to improve the military housing originally targeted by 
the privatization initiative would be highly desirable. This can only 
be accomplished if the funds appropriated and/or previously transferred 
to the FHIF can be transferred to the Housing MILCON account to fund 
the substituted MILCON project. If not amended, funds cannot be 
transferred from the FHIF to the Housing MILCON account and 
opportunities to improve military family housing through MILCON would 
be lost.

                            LIFE CYCLE COSTS

    Army:
    Question. How big of an impact will Secretary Cohen's Basic 
Allowance for Housing (BAH) initiative have on housing privatization 
life cycle costs?
    Answer. First, the higher allowances proposed by the Secretary of 
Defense will enhance housing privatization projects and therefore 
improve the Service members access to quality housing. The increase in 
BAH will increase the revenue flow to the private sector developer and 
they in-turn will be able to accelerate the quantity and quality of the 
housing being provided to our soldiers and families.
    Second, the Army has always planned and programmed for the life 
cycle costs of its housing at all installations. However, the funding 
has never been sufficient to keep pace with the deteriorating 
facilities.
    The benefit of privatization is the delivery of adequate housing 
that improves the quality of life and well being of all soldiers. The 
increases in allowances will make the projects more financially viable, 
thereby reducing the need for an up front budget contribution by the 
government.
    The Army is working with OSD to incorporate the GAO's 
recommendations to refine the methods used for establishing life cycle 
costs, and this new guidance is expected to be available in late 
spring.
    Question. Do you expect life cycle costs under privatization will 
be more than traditional MILCON? If so, do you believe it still makes 
good financial sense to pursue housing privatization at those 
locations?
    Answer. No, we do not expect life cycle costs under privatization 
to be higher than Military Construction. Over the years, the life cycle 
cost for each installation's requirements have far exceeded the Army 
MILCON budget and the Army has not been able to keep up with the 
continued deterioration of its housing.
    The Military Housing Privatization Initiatives (MHPI) authorities, 
along with MILCON dollars provides the Army with the methods to reach 
our goal of providing adequate family housing by Fiscal Year 2010. One 
of the important advantages associated with privatization is the 
ability the Army will have to tap into the expertise and efficiencies 
the private sector possesses in the areas of construction, renovation 
and property management. We believe that these efficiencies will 
translate into lower life cycle costs than traditional MILCON for 
projects of similar scope and duration.
    Additionally, the ability to provide a consistent funding stream 
under the MHPI authorities will serve to eliminate much of the funding 
uncertainty associated with traditional MILCON projects. This will 
enhance the life cycle cost savings associated with privatization.
    Navy:
    Question. How big of an impact will Secretary Cohen's Basic 
Allowance for Housing (BAH) initiative have on housing privatization 
life cycle costs?
    Answer. Preliminary analysis indicates that the full implementation 
of the BAH initiative would increase the life cycle costs of most 
privatization projects. However, privatization projects currently 
underway continue to be less expensive than military construction. It 
is important to note that the Department of the Navy's equity approach 
to privatization would result in the Service and the developer sharing 
any increased cash flow generated by additional BAH revenue.
    Question. Do you expect life cycle costs under privatization will 
be more than traditional MILCON? If so, do you believe it still makes 
good financial sense to pursue housing privatization at those 
locations?
    Answer. In general, it would not make good financial sense to 
pursue the project if a life cycle analysis showed that a proposed 
public/private venture project would cost more than the comparable 
MILCON project. We are not pursuing any projects with a negative life 
cycle cost. However, there might be an occasion where a small negative 
life cycle cost could be outweighed by the ability to renovate, 
replace, or construct more homes faster through the leveraging of 
funds.
    Air Force:
    Question. How big of an impact will Secretary Cohen's Basic 
Allowance for Housing (BAH) initiative have on housing privatization 
life cycle costs?
    Answer. The Air Force estimates that Secretary Cohen's BAH increase 
will have a moderate impact on housing privatization life cycle costs. 
Increasing the BAH will bring additional income stream to the project 
reducing the need for a government second mortgage or reducing the 
percentage of contribution to an equity (limited liability company) 
deal.
    The relationship between life cycle costs of MILCON and 
privatization will be different for each project. The Air Force plans 
on pursuing those projects where the life cycle costs of privatizaiton 
are less than or comparable (considering benefits) to MILCON. Those 
projects with the greatest projected cost savings will be favored.
    Question. Do you expect life cycle costs under privatization will 
be more than traditional MILCON? If so, do you believe it still makes 
good financial sense to pursue housing privatization at those 
locations?
    Answer: The comparison of life cycle costs between traditional 
military construction (MILCON) and housing privatization is, has been, 
and will continue to be part of the decision making process for 
determining the vehicle used to bring revitalization and/or 
construction of housing to our service members. The Air Force seeks 
housing privatization initiatives where the privatization life cycle 
cost is less than or equal to the MILCON life cycle cost before giving 
approval to proceed with a project.
    Recent OSD direction is to proceed with projects only if the 
preliminary, estimated life cycle costs of privatization are less than 
that of MILCON. However, prior to the new guidance, the Air Force 
followed guidance found in OMB Circular A-94, which states that 
``benefit-cost analysis is recommended as the technique to use in a 
formal economic analysis of government programs or projects.''
    There has only been one Air Force pilot project where the 
preliminary estimate showed the life cycle cost for privatization was 
higher (5%) than the MILCON life cycle cost. In this case, the benefits 
analysis performed on the project pointed out a significant benefit in 
getting more units renovated and constructed faster than through 
traditional MILCON while achieving greater than the required three to 
one leverage of MILCON funds, using privatization as the execution 
vehicle. Additional, history has shown that the level of funding 
necessary to execute the same scope project using traditional MILCON 
would not be available for such a project in any one fiscal year. While 
on the other hand, the private sector can, in fact, obtain the required 
level of funding within the first few years of a project and thus 
realistically be able to execute a very large scope project. 
Furthermore, analyses of the slightly higher (5%) privatization life 
cycle cost was negligible in terms of present value cost to the Air 
Force. Therefore, Air Force leadership agreed the additional life cycle 
cost for privatization over the life cycle cost of traditional MILCON 
over a 30 to 50 year deal was justified. For this project, and all 
others, final life cycle cost comparisons will be accomplished prior to 
award.

                            LESSONS LEARNED

    Army:
    Question. Have the Services conducted ``lessons learned'' seminars 
with developers and potential developers after project solicitations? 
What has been learned? What will be changed?
    Answer. The Army is in the process of consolidating the lessons 
learned from its Fort Carson project and will use those lessons learned 
as we progress through the other three sites.
    Some of the lessons learned include: the procurement process could 
be streamlined to be user friendly and less expensive to bidders and 
the Army; a much greater emphasis is being placed on identifying and 
resolving issues with key stakeholders (i.e., local governments; school 
districts; businesses; employees; and, soldiers and their families); it 
is important for the selected developer to make immediate and visible 
progress in improving the housing community; and it is essential that 
both the developer and the government be involved in resolving all 
issues of mutual interest.
    All lessons learned from the Fort Carson project will apply to RCI 
projects because the overall intent of both are to improve housing. The 
difference between these approaches is in the solicitation and 
negotiation processes, not in the desired results.
    Navy:
    Question. Have the Services conducted ``lessons learned'' seminars 
with developers and potential developers after project solicitations? 
What has been learned? What will be changed?
    Answer. Discussions with developers have been conducted as a part 
of debriefs in the Request for Qualifications/Request for Proposals 
negotiation process and at other points in the acquisition process.
    The following ``Lessons Learned'' emerged from forums with 
developers:
    The importance of defining proposed construction sites early in the 
process to identify environmental considerations, availability of 
utilities, and zoning issues. Recent public/private venture projects 
have required developers to identify proposed sites at the Step 1 
Request for Qualifications stage, thereby providing more time to 
complete environmental reviews, and to achieve any local public 
approvals that may be required.
    Local governmental jurisdictions have a role to play in most 
public/private venture projects. We need to work with local government, 
starting early in the process, regarding a range of issues likely to 
affect development.
    Financial risk and return analyses must be accurate, and must be 
kept current throughout the process. Full and careful attention must be 
paid to each detail of the deal as final agreements are drafted and 
negotiated.
    An active residual management/stewardship function is essential to 
the overall, continuing success of public/private venture projects. 
Detailed processes and procedures for every aspect of our residual 
management responsibility have been established, and are continually 
being updated and fine-tuned.
    Air Force:
    Question. Have the Services conducted ``lessons learned'' seminars 
with developers and potential developers after project solicitations? 
What has been learned? What will be changed?
    Answer. Following the completion of the Lackland AFB housing 
privatization initiative in August 1998, the Air Force hosted a lessons 
learned conference in January 1999 for Air Force personnel at the major 
commands and installations where housing privatization was planned for 
the future. Then in February 1999, the Air Force presented lessons 
learned to private industry and hosted discussions at the annual 
Professional Housing Management Association's Industry Day in 
Louisville, KY.
    Lessons learned include:
    Implement shorter solicitation periods so that offerors' financial 
packages are not as susceptible to mortgage rate changes.
    Capitalize on industry's contractor expertise to further reduce 
time but keep the Air Force as the decision maker.
    Limit design reviews to the 50% and 100% completion and check the 
design against the solicitation requirements.
    Create Project Oversight Plans and work issues relating to the 
transition from government housing to private sector housing early in 
the process.
    Partner with the successful developer immediately after project 
award in order to establish better working relationships.
    Don't specify floor plan layouts and sizes; industry of-the-shelf 
designs are generally better than government maximum authorizations.
    To ensure lessons learned are incorporated in future privatization 
ventures, the Air Force is establishing The Air Force Center for 
Environmental Excellence as our implementation focal point for housing 
privatization.
    Project solicitations for the remainder of the Air Force pilot 
projects and the fiscal year 2001 projects take these lessons learned 
into account to achieve the most efficient and best value projects.

                     FEDERAL ACQUISITION REGULATION

    Army:
    Question. It is our understanding the Services are not precluded 
from applying the FAR or parts of the FAR to a contract if it is in 
their interest. What is your position on the use of the FAR with 
respect to housing privatization?
    Answer. The Army looks at each privatization project on a case by 
case basis. We applied the Federal Acquisition Regulation (FAR) to the 
Request For Proposal (RFP) solicitation process and contracting 
procedures used to privatize family housing at Fort Carson, Colorado in 
1999.
    In addition, the Army has used the FAR to solicit, by a Request for 
Qualifications (RFQ), for the privatization of the family housing at 
Fort Hood, Texas and Fort Lewis, Washington. The FAR applies to the 
first phase of the RFQ privatization, which includes the solicitation, 
evaluation and selection of the developer/partner.
    Before the implementation of the project begins, the Army will make 
a further determination on the application of the FAR to project 
execution, based on the structure of the project.
    Question. Has the use or non-use of the FAR posed a problem in any 
of the privatization projects?
    Answer. As the Army developed its first Request for Qualifications 
(RFQ) project at Fort Hood, Texas, there was a slight delay while the 
Army ascertained if the FAR fully applied and what sections were best 
suited to the RCI RFQ housing privation effort. Since the completion of 
this analysis, there have been no unusual problems. The FAR provides a 
time-tested structure to the competitive solicitation for and selection 
of a partner, and the Army has managed within its parameters to 
successfully award Fort Carson, and will soon select a partner for Fort 
Hood, Texas.
    Navy:
    It is our understanding the Services are not precluded from 
applying the FAR or parts of the FAR to contract if it is in their 
interest.
    Question. What is our position on the use of the FAR with respect 
to housing privatization?
    Answer. The Department of the Navy uses FAR provisions when they 
promote our objectives and ease the procurement process.
    It is our understanding the Services are not precluded from 
applying the FAR or parts of the FAR to a contract if it is in their 
interest.
    Question. Has the use or non-use of the FAR posed a problem in any 
of the privatization projects?
    Answer. No. Selectively using FAR provisions to provide structure 
to the selection process has not created any problem in any of our 
privatization projects.
    Air Force:
    Question. What is your position on the use of the FAR with respect 
to housing privatization?
    Answer. The determination on applicability of the FAR to a housing 
privatization project is made on a case-by-case basis. This position is 
supported by a Department of Defense Office of General Counsel 
memorandum dated March 5, 1997. The FAR applies if there is an 
acquisition by contract with appropriated funds of supplies or services 
by and for the use of the Federal Government through purchase or lease. 
In the transactions to date, the Air Force is making real property 
available to the selected offeror to construct facilities that they 
will own and that they can rent to individual military members and 
their families. The Air Force will not own the housing and therefore 
the FAR does not apply.
    Question. Has the use or non-use of the FAR posed a problem in any 
of the privatization projects?
    Answer. The Air Force has approached their housing privatization 
projects as real estate transactions (non-use of the FAR) and have not 
experienced problems with any of the four projects we have solicited to 
date. However, we do use principles and practices of the FAR that have 
proven successful in the past.

              BASIC ALLOWANCE FOR HOUSING (BAH) INITIATIVE

    Army:
    Question. In your opinion, how will BAH increase impact the future 
of housing privitization?
    Answer. Overall, there would be minimal impact on the Army's RCI 
program if BAH were raised to cover 85% of housing costs. Raising BAH 
to cover 100% would likely impact demand for on-post housing, but we do 
not know to the extent at this time.
    Question. What is the impact on the privatization projects that 
have been completed and the projects currently in the solicitation 
process?
    Answer. It is too soon to fully evaluate the impact of the new BAH 
initiative on our projects. For the recently completed Fort Carson (CO) 
family housing privitization project, the contract has a provision 
creating escrow accounts. All revenue flows into the first of the five 
cascading escrow accounts. The escrow accounts are all dual signature, 
so the Fort Carson Directorate of Contracting controls, jointly with 
the contractor, all expenditures from these accounts. Funds from the 
escrow are drawn for necessary construction costs, operational expenses 
and agreed upon profits. This system should preclude excess revenue 
from flowing to the contractor. Should excess funds ever buildup in the 
escrow accounts, Fort Carson may authorize that they be expended on 
items from an agreed list of amenities.
    Navy:
    Question. In your opinion, how will BAH increase impact the future 
of housing privatization?
    Answer. The impact of the BAH increase on housing privatization is 
uncertain at this time. We have initiated efforts to analyze the long-
term impacts of the BAH initiative on the supply and demand for 
military housing. Although we may be able to model outcomes based on 
assumptions about supply and demand, the real effects will only become 
apparent over time as we see how both individual preferences and market 
forces react. When the private sector cannot meet our housing needs, we 
will strike an appropriate balance between public/private ventures and 
traditional military construction.
    Question. What is the impact on the privatization projects that 
have been completed and the projects currently in the solicitation 
process?
    Answer. The privatization projects previously executed for Corpus 
Christi and Everett both use differential lease payments to bring the 
member's out-of-pocket costs down to zero. As Basic Allowance for 
Housing increases, the amount of differential lease payments required 
for these projects should decrease. The extent to which the Basic 
Allowance for Housing, rent levels, and average utility costs change 
will affect the amount of the differential lease payment.
    For projects in the acquisition process, preliminary analysis 
indicates that all remain viable, meet applicable statutory thresholds 
for Government participation, and have lower life-cycle costs than 
military construction.
    Air Force:
    Question. In your opinion, how will BAH increase impact the future 
of housing privatization?
    Answer. The Basic Allowance for Housing (BAH) increase may give the 
Air Force the opportunity to use fewer authorities and possibly reduce 
the amounts of loans or guarantees to developers. This would decrease 
scored costs for the Air Force and reduce our ``up front'' expenses 
required to implement a privatization deal. Our initiatives will be 
designed such that developers will not receive a windfall as a result 
of major BAH increases. BAH increases excess to project needs will be 
directed to a holding account and ultimately to the Family Housing 
Improvement Fund. The BAH impact on future privatization initiatives 
will be addressed in updates to the Air Force Family Housing Master 
Plan. We intend to annually update our Master Plan to address the 
effects of long term planning factors, such as BAH, on future military 
and privatized housing requirements. The Master Plan is scheduled to be 
updated in December 2000 and December 2001.
    Question. What is the impact on the privatization projects that 
have been completed and the projects currently in the solicitation 
process?
    Answer. Developers in these housing privatization initiatives must 
confront the possibility of either an increase or a decrease in the 
Basic Allowance for Housing (BAH). They definitely take a risk in 
continuing to operate the housing in the event of a downturn in the 
BAH. The Air force has awarded one project at Lackland AFB. There are 
no provisions in this project to have the Air Force bring additional 
funding to the project in the event of a BAH downturn. In most of our 
future privatization initiatives including those in the solicitation 
process, there are provisions contained in the solicitation that allow 
the offeror to pledge a percentage of ordinary and/or excess profits 
(e.g., those resulting from unexpected increases in the BAH) to be 
shared with the Air Force. The amount each offeror is willing to pledge 
is one of the evaluation factors considered by the source selection 
authority when making their best value determination.

                         JOINT SERVICE PROJECTS

    Question. Is there any consideration being given to joint-Service 
projects, which would allow economies of scale in housing 
privatization? If so, where and when?
    Answer. The Army is currently participating in a supporting role 
for the military family housing privatization project at McGuire Air 
Force Base in New Jersey. The Army plans to contribute the family 
housing units at the adjacent Fort Dix. When added to the 1,950 Air 
Force units, the 750 Army units should provide sufficient economies of 
scale to significantly reduce the Government per unit contribution. The 
Army and Air Force are negotiating for a project to start in late 
Fiscal Year 2001.
    Navy:
    Question. Is there any consideration being given to joint-Service 
projects, which would allow economies of scale in housing 
privatization? If so, where and when?
    Answer. The Department of the Navy has a joint Navy/Marine Corps 
project underway in San Diego and is receptive to other Joint-Service 
projects. We also consider the requirements and assets of other 
Services in the analysis of a project.
    Air Force:
    Question. Is there any consideration being given to joint-Service 
projects, which would allow economies of scale in housing 
privatization? If so, where and when?
    Answer. The Air Force and the Army are working a joint housing 
privatization initiative for Fort Dix and McGuire AFB, NJ. This is one 
of the Air Force's 10 pilot projects planned for study in fiscal year 
2000 and execution in fiscal year 2002.

                         JUNIOR ENLISTED INPUT
 
   Army:
    Question. What input do junior enlisted have to privatization 
project development?
    Answer. During the pre-Community Development and Management Plan 
(CDMP) phase of each project, a detailed survey of soldiers of all 
ranks will be conducted to elicit input for the development of the 
CDMP.
    Of particular importance are the types of services and amenities 
the soldiers and their families believe are most important in any 
community development plan. As the CDMP evolves, there will be two-way 
communication with soldiers of all ranks through the installations 
Mayors program.
    Navy:
    Question. What input do junior enlisted have to privatization 
project development?
    Answer. The Department of the Navy's housing privatization program 
concentrates primarily on providing shelter to junior enlisted 
families, since this group is often ill equipped to secure adequate 
housing in the private sector. Therefore, senior enlisted 
representatives of the junior enlisted personnel are involved in the 
development of a public/private venture project from the beginning. 
Their most significant input occurs in the definition of the 
requirements, objectives and priorities that will be stated in the 
solicitation document, and subsequent membership on the Quality 
Evaluation Board during the developer selection process. As an 
installation approaches project execution, typically a ``town hall'' 
meeting is held to answer concerns and solicit inputs directly from 
junior enlisted families and others.
    Air Force:
    Question. What input do junior enlisted have to privatization 
project development?
    Answer. Views from all ranks including junior enlisted are sought 
out in the early stages of developing pilot privatization projects. 
Surveys, town meetings, and other forums are used to collect inputs 
which are integrated, to the maximum extent possible, into housing 
privatization projects.

                              OMB SCORING

    Army:
    Question. In your opinion, does OMB scoring drive the choice of 
privatization authorities used in project and in the related funding 
decisions?
    Answer. No, OMB scoring does not drive the choice of privatization 
authorities used for projects. However, it may have an impact on the 
available tools used in conjunction with Army housing privatization 
projects.
    Each agreement entered into by the Army, in accordance with the 
Request For Qualifications (RFQ) process, will be ``scored'' by OMB for 
budget purposes prior to approving the CDMP. Sufficient appropriations 
must be available to cover the ``scored'' amount for each agreement.
    Navy:
    Question. In your opinion, does OMB scoring drive the choice of 
privatization authorities used in projects and in the related funding 
decisions?
    Answer. OMB scoring is one of the variables the Department of the 
Navy takes into consideration when choosing privatization authorities.
    Air Force:
    Question. In your opinion, does OMB scoring drive the choice of 
privatization authorities used in project and in the related funding 
decisions?
    Answer. Yes, however, OMB scoring is only one of the numerous 
variables that determine which authorities the Air Force will use in a 
given project. The primary goal is to select a project that offers the 
best value to the Air Force. The best value determination needs to take 
numerous related factors into consideration. Some of these factors 
include risk to government resources (land, property, financing), long 
term financial viability of the project, low cost (OMB scoring), 
desirable housing for our airmen, etc. There are some authorities, such 
as the rental or occupancy guarantee, which the Air Force will not use 
due to the extremely adverse scoring implications tied to them. There 
are other authorities, such as Differential Lease Payments and Equity 
Contributions, which also have adverse scoring implications but still 
will be considered by the Air Force.

                        LAND AND UNIT VALUATION

    Army:
    Question. Under the current housing privatization authorities, DOD 
may convey or lease land, existing housing and ancillary facilities to 
an eligible entity for privatization deals. How does each Service value 
land and units with respect to the conveyance or lease of Government-
owned property in privatization projects?
    Answer. The U.S. Army Corps of Engineers (USACE) provides real 
estate appraisal analyses for Army family housing privatization 
projects.
    For the Fort Carson (CO) project, the USACE Omaha District 
estimated the fair market value of the improvements to be conveyed 
through an analysis evaluation, which included multiple regression of 
sales data and income capitalization.
    In the Army projects, the underlying land is not conveyed but is 
leased to the private sector for a nominal value, as allowed by the 
MHPI authorities. The value of the land and improvements is determined 
by its income producing potential and comparison to the existing 
market. The value determination is essential in order for the Army to 
ascertain the value of the government contribution to the deal.
    From the developer's perspective, the ability to obtain financing 
will depend upon the level of project costs the developer is required 
to finance and the value of the revenue stream. Further, the residual 
value of the assets at the end of the contract is considered during the 
economic analysis for each project since the units are conveyed back to 
the government.
    Navy:
    Under the current housing privatization authorities, DoD may convey 
or lease land, existing housing and ancillary facilities to an eligible 
entity for privatization deals.
    Question. How does each Service value land and units with respect 
to the conveyance or lease of Government-owned property in 
privatization projects?
    Answer. There are two different categories of Government-owned land 
utilized in Department of the Navy public/private venture projects.
    Category 1: Existing Navy land that will be transferred in fee to 
the private sector, with the proceeds from that transfer used to carry 
out Military Housing Privatization Initiative activities. The appraised 
land value has been used in this situation. It is valued at ``highest 
and best use,'' as preliminarily determined by third party appraisals 
and validated in the market place.
    Category 2: Existing Navy land that will be used for the siting of 
new public/private venture units. The value of such land is determined 
by the use restrictions, limitation, encumbrances and requirements 
imposed on the property by the Government as described in the lease and 
associated business agreement. The restrictions, limitations and 
encumbrances define the ``highest and best use'' of such land. The 
economic contribution of existing Navy land is a ``cost avoidance'' to 
the project and, therefore, a benefit. The Navy use of Government-owned 
assets will most often be to ``seed'' the project and strengthen its 
financial feasibility in light of the Department's objectives, 
including the availability of the housing to military families at 
reduced rents and on a preferential basis. The value of the land is a 
function of the income stream produced by the project.
    The valuation of existing units to be privatized is a function of 
the income streams that can be generated from the units. The income 
streams are based on occupancy at prescribed rents. The use to which 
the units can be put during the term of the deal is limited by the 
contractual agreement. Accordingly, value is calculated as the 
supportable debt generated by the income streams from the units less 
the renovation to the units that must be carried-out to bring them up 
to an acceptable standard.
    Air Force:
    Quesiton. How does each Service value land and units with respect 
to the conveyance or lease of Government-owned property in 
privatization projects?
    Answer: The Air Force contracts for a fair market appraisal of all 
government assets to be included in the privatization deal. The U.S. 
Army Corps of Engineers has final approval authority on all appraisals.
    The fair market value of the government assets are then used in the 
development of the government estimate for the revitalization and the 
demolition/construction that will need to be accomplished on the 
privatized housing. In the majority of the Air Force's privatization 
projects, the land will be leased to the successful offeror so we 
maintain the future use of the land. If the land is conveyed as is 
projected in the Robins AFB and Dover AFB projects, then the fair 
market value of the land is taken into account in the estimate. Units 
that are included in the deal which will require little if any 
reconstructive effort add value to the government contribution to 
offset the cost of revitalizing deteriorated housing units.

                  USE OF CONSULTANTS IN MHPI PROJECTS

    Army:
    Question. Since the Military Housing Privatization Initiative was 
authorized in 1996, OSD and the Services have used consultant firms 
extensively in all phases of privatization proposals. To what extent 
does each Service rely on consultant support for design, development 
and finalization of MHPI projects?
    Answer. The Army uses consultants to provide products and services 
that are not available in the government in situations where the Army 
does not possess the requisite skills or is not adequately staffed to 
handle all of the tasks associated with such a new, large, and complex 
undertaking.
    We believe the products and services provided by our consultants 
will protect the interests of the government during the preparation 
for, and execution of, our agreements with selected developer partners, 
and will increase the value and benefits of the program to the 
government.
    We expect continued use of consultant expertise, which is critical 
in obtaining the maximum value at each RCI site in terms of quantity 
and quality of residential communities and services.
    Navy:
    Since the Military Housing Privatization Initiative was authorized 
in 1996, OSD and the Services have used consultant firms extensively in 
all phases of privatization proposals.
    Question. To what extent does each Service rely on consultant 
support for design, development and finalization of MHPI projects?
    Answer. The Department of the Navy uses development consultants to 
provide support during the concept development, developer solicitation 
and selection, and negotiation and contract execution phases. Examples 
of the support they provide include: preparation of pro forma and life 
cycle analyses; assistance in preparation of source selection plans; 
support in the evaluation of developer qualifications and technical and 
financial proposals; and assisting the source selection authority in 
negotiating terms and conditions and business agreements with the 
preferred offeror. Consultants do not determine project requirements or 
program objectives.
    While the current role of our public/private ventures consultant is 
to support both field and headquarters personnel in specific technical 
and financial issues, we are developing greater in-house expertise on 
all phases of the privatization program. We expect that consulting 
expertise will still be required to support operational and financial 
due-diligence efforts on the executed projects.
    Air Force:
    Question. To what extent does each Service rely on consultant 
support for design, development and finalization of MHPI projects?
    Answer. In order to ensure the Air Force protects its investment 
and interests in such long-term endeavors, we have hired consultants 
from industry to help us with concept identification, financing, 
development, and documentation. Additionally, documentation for loan 
guarantees, direct second mortgage loans, OMB scoring, as well as some 
environmental, surveying and economic analysis have been performed by 
consultants. By using consultants we have leveraged our manpower to 
help us get through these resource intensive efforts. However, 
consultants have not been directly involved in intrinsic government 
functions such as Source Selection.

                            LOAN GUARANTEES

    Army:
    Question. The Army has provided a BRAC loan guarantee for the 
housing privatization project now under contract at Fort Carson, and 
the Air Force has provided a BRAC guarantee for the project under 
contract at Lackland AFB. The Army and the Air Force are also proposing 
BRAC guarantees for their other pilot projects. Why is the Army and Air 
Force providing loan guarantees for base closure, downsizing and 
deployment for these projects?
    Answer. Since the recently completed project at Fort Carson (CO) 
was the Army's first family housing privatization, we offered a loan 
guarantee, up front, in order to be sure to attract sufficient 
qualified developers to bid on the project.
    One of the lessons learned from the Fort Carson solicitation and a 
subsequent analysis of the market place was that developers may bid on 
follow-on projects, without having the loan guarantee offered up front. 
Subsequently, the Army has solicited both Fort Hood (TX) and Fort Lewis 
(WA), without an up-front offer of a mortgage guarantee.
    The Army understands that the Government may more appropriately 
address non-market risk factors than the private sector. The possible 
use of these guarantees will be evaluated separately at each 
installation based on the local market conditions and in the context of 
concluding a project structure that is most beneficial to the Army, and 
soldiers and their families.
    Air Force:
    Question. Why is the Army and Air Force providing loan guarantees 
for base closure, downsizing and deployment for these projects?
    Answer. When a developer secures financing for an Air Force housing 
privatization initiative, he or she is signing up to 30 years of 
payments back to the financial institution. The developer is planning 
to have an income stream to cover the mortgages of anywhere from 500 to 
1500 housing units. In exchange, the developer is giving first right of 
refusal for the service members to occupy those units. Should the Air 
Force close the installation or have major military unit moves or 
extended deployments that downsize the number of service members at 
that installation, then the developer can go to sources outside the 
military to try and obtain tenants to keep the income stream necessary 
to cover mortgage costs.
    Many of our military installations are not in heavily populated 
locations that could provide a secondary market for the developer. 
Without this secondary market, the developer could fail financially 
should the Air Force execute a base closure, mission drawdown or extend 
deployment that reduces the project income stream. Therefore, in order 
to generate interest in getting developers to bid on our projects, we 
find it necessary in some cases to offer a closure, drawdown or 
deployment guarantee to protect the developer financially due to an Air 
Force adverse action.
    Having this guarantee offered by the Air Force can help the 
developer obtain a lower mortgage interest rate meaning less income 
stream would need to be spent on interest payments. The guarantee may 
also result in a lower debt service coverage requirement meaning the 
developer can borrow more money from the private sector and less from 
the government. These combined savings could be used to reduce the 
necessary subsidy or to provide better or larger housing units. There 
is a scored cost associated with this guarantee that the Air Force 
would have to pay. However, this is taken into account in the life 
cycle cost analysis to determine project feasibility. More importantly, 
in many cases the Air Force will make the guarantee optional. Since the 
developers are competing on price (among other factors), they will only 
ask for the guarantee if its cost (OMB score) is more than outweighed 
by savings in interest payments. In essence, the Air Force is putting 
market forces to work and letting the developers bring forth their best 
proposal.

                          UNSOLICITED PROPOSAL
    Army:
    Question. In fiscal year 1999, the Army received an unsolicited 
proposal from an adjacent county to construct and manage housing under 
the Military Housing Privatization Initiative (MHPI) authorities at 
Fort Meade, Maryland. The Air Force also received an unsolicited 
proposal for Goodfellow AFB from the City of San Angelo, Texas to own, 
operate, and maintain privatized housing units. Have the Services 
received unsolicited proposals at any other bases? How are unsolicited 
proposals evaluated? How have the total costs of unsolicited bids 
compared to the Department's estimated cost?
    Answer. No, we are not aware of any unsolicited proposals received 
at other bases.
    Question. How will such proposals be considered under the 
privatization initiative? Do the current statutory authorities allow 
the Services to waive competition in contracting for housing?
    Answer. The Army considers open competition is a cornerstone of our 
housing privatization initiatives. We want to ensure the broadest 
possible competition; therefore, we are not considering unsolicited 
proposals for the RCI program.
    Navy:
    In fiscal year 1999, the Army received an unsolicited proposal from 
an adjacent county to construct and manage housing under the Military 
Housing Privatization Initiative (MHPI) authorities at Fort Meade, 
Maryland. The Air Force also received an unsolicited proposal for 
Goodfellow AFB from the City of San Angelo, Texas to own, operate, and 
maintain privatized housing units.
    Question. Have the Services' received unsolicited proposals at any 
other bases? How are unsolicited proposals evaluated? How have the 
total costs of unsolicited bids compared to the Department's estimated 
cost?
    Answer. The Department of the Navy has received several unsolicited 
proposals dealing with the privatization of family and bachelor 
housing. In order to be considered, without competition, these 
proposals must possess certain unique features or characteristics that 
could not be otherwise obtained through the competitive process.
    In our review of such proposals, we have found that while project 
costs may be lower than we would have otherwise estimated, there are 
concerns about the quality envisioned in the proposal and the ability 
to protect our interests during the term of the deal.
    In fiscal year 1999, the Army received an unsolicited proposal from 
an adjacent county to construct and manage housing under the Military 
Housing Privatization Initiative (MHPI) authorities at Fort Meade, 
Maryland. The Air Force also received an unsolicited proposal for 
Goodfellow AFB from the City of San Angelo, Texas to own, operate, and 
maintain privatized housing units.
    Question. How will such proposals be considered under the 
privatization initiative? Do the current statutory authorities allow 
the Services to waive competition in contracting for housing?
    Answer. Department of Defense policy favors competition and the 
Department of the Navy strongly supports that policy. The Department of 
the Navy would only seek a waiver to competition if the proposed 
project possessed certain unique features or characteristics that could 
not be obtained through the competitive process.
    Air Force:
    Question. Have the Services' received unsolicited proposals at any 
other bases? How are unsolicited proposals evaluated? How have the 
total costs of unsolicited bids compared to the Department's estimated 
cost?
    Answer. Yes, the Air Force has also received unsolicited housing 
privatization proposals for Wright-Patterson AFB and Maxwell AFB.
    Unsolicited proposals are evaluated against a number of criteria. 
First, we review for existing legislative compliance, and adherence 
with DoD and Air Force policy. Then, we check to ensure the proposal 
fulfills base housing requirements, as determined by the Air Force 
Family Housing Master Plan, and is financially feasible. Finally, we 
ensure life cycle costs don't exceed government cost to construct, own 
and operate the unit.
    If Air Force review determines the proposal has merit, the next 
step will be to solicit the general public for competition. A Request 
for Interest would be published to determine if additional entities are 
interested in a similar proposal. If there is additional interest, then 
the project will be handled on a fully competitive, Request for 
Proposal basis.
    The Air Force has not progressed to the point of comparing the 
Department's cost estimate on any unsolicited proposal.
    Question. How will such proposals be considered under the 
privatization initiative? Do the current statutory authorities allow 
the Services to waive competition in contracting for housing?
    Answer. Unsolicited proposals are evaluated against a number of 
criteria. First, we review for existing legislative compliance, and 
adherence with DoD and Air Force policy. Then, we check to ensure the 
proposal fulfills base housing requirements, as determined by the Air 
Force Family Housing Master Plan and is financially feasible. Finally, 
we ensure life cycle costs don't exceed MILCON equivalent costs.
    If after Air Force review it is determined the proposal has merit, 
the next step will be to solicit the general public for competition. A 
request for interest (RFI) would be published to determine if 
additional entities are interested in a similar proposal. If there is 
additional interest, then the project will be handled on a fully 
competitive, Request for Proposal basis.
    The current legislation does not address competition as a 
requirement for housing privatization initiatives. However, it is Air 
Force and OSD policy to ensure competition is prevalent in all our 
projects to ensure best value.

                    USE OF PRIVATIZATION AUTHORITIES

    Army:
    Question. The Military Housing Privatization Initiative provides a 
number of authorities which may be used individually or in combination 
in privatization agreements: direct loans or loan guarantees, rental 
guarantees and leases, investments, differential lease payments, 
conveyance or lease of land or facilities. Which privatization 
authorities does each Service use, and why? Which authorities don't 
they use, and why?
    Answer. For the recently completed Fort Carson (CO) family housing 
privatization project, the Army used these authorities: mortgage 
guarantee against base closure, downsizing, and deployment (sec 2873); 
convey the existing units and outlease the land (sec 2878); units built 
and revitalized to local standards for similar units (sec 2880); 
includes the provision of ancillary supporting facilities (sec 2881); 
housing occupants must pay rent by allotment, not to exceed housing 
allowances (sec 2882); and, appropriated construction funds transferred 
to the DoD Family Housing Improvement Fund (sec 2883).
    In regards to RCI, the determination as to which authorities are 
most appropriate will be made during the Community Development and 
Management Plan process at each installation. The Army will evaluate 
each of the MHPI authorities in the context of the market conditions 
and the requirements of each installation. The value of each tool will 
depend on the advantages it offers to a specific negotiation and its 
impact on the scope of a project.
    Rather than put all of the authorities on the table initially, the 
Army will listen to the ideas and the vision of the selected partners 
and strategically use those MHPA authorities that best meet the Army's 
goals. It is entirely possible that each installation in the pilot 
program will make use of different elements of the MHPI legislation. It 
is also possible that some installations will make use of very few of 
the authorities.
    Navy:
    The Military Housing Privatization Initiative provides a number of 
authorities which may be used individually or in combination in 
privatization agreements: direct loans or loan guarantees, rental 
guarantees and leases, investments, differential lease payments, 
conveyance or lease of land or facilities.
    Question. Which privatization authorities does each Service use, 
and why? Which authorities don't they use, and why?
    Answer. While we have not used all the authorities, we believe they 
are all valuable and should remain in the legislation for potential use 
in the future. The Department of the navy uses ``Investments in Non-
Governmental Entities'' (Section 2875) as the primary authority for our 
public/private venture projects. In some project concepts, we expect to 
use the differential lease payments authority (Section 2877) in 
combination with the investment authority. In such instances, 
differential lease payments are applied only in small amounts and are 
secondary to use of the primary tool, the investment authority. When 
existing Government-owned assets are transferred, we also use Section 
2878 (Conveyance or Lease of Government Assets). The Department has 
selected this combination of authorities because it offers the best 
opportunity to achieve our stated requirements and objectives while 
protecting Government-owned assets (land and/or facilities) over the 
long-term. In two cases, we have used the loan authority (Section 2873) 
either as the primary vehicle or in conjunction with the investment 
authority.
    We have chosen this approach because we feel it optimizes the 
balance between the leverage of Departmental assets, meets our 
investment objectives, provides the desired degree of Government 
control over key decisions over the life of the project, and affords 
flexibility to adapt to changes in conditions.
    Air Force:
    Question. Which privatization authorities does each Service use, 
and why? Which authorities don't they use, and why?
    Answer. The Air Force has used or will use the following 
authorities in the ten pilot projects and the six projects scheduled 
for fiscal year 2001 as outlined in the attached chart:
    2873--Direct Loans and Loan Guarantees--Based on the generally 
below-market rental rates that the service members will pay for top-
quality housing, the anticipated income stream will not be sufficient 
to allow the developer to obtain full first mortgage funding. 
Therefore, the developer may need a direct loan to help offset the 
below-market rental rates. A loan guarantee may help the developer 
obtain a lower mortgage interest rate and thereby provide a decrease in 
the overall cost of the project.
    2875--Investments in Governmental Entities--The Air Force may 
choose to use this authority for those cases where large profits are 
anticipated from the project such as Patrick AFB.
    2877--Differnetial Lease Payments--These may be required for brief 
periods of a project's life when the income stream is not sufficient to 
offset operating expenses due to the overall costs of a project.
    2878--Conveyance or Lease of Existing Property and Facilities.
    2879--Interim Leasess--This authority may be used to bring 
completed units on line prior to the overall construction completion 
and final financing of housing units.
    2880--Unit Size and Type--This authority aims to match the proposed 
privatized housing to that in the surrounding community.
    2881--Ancillary Support Facilities--The Air Force intends to have 
the successful developer provide non-revenue generating ancillary 
support facilities that do not compete with the Army and Air Force 
Exchange Service, Defense Commissary Agency and Morale, Welfare and 
Recreation activities for the benefit of the housing occupants.
    2882--Assignment of Members of the Armed Forces to Housing Units--
This authority allows our members to live in privatized government 
housing while receiving a housing allowance.
    2883--Department of Defense Housing Funds--The Air Force intends to 
use the Family Housing Improvement Fund established by the Office of 
the Secretary of Defense.
    2884--Reports--Reports are required by Congress.
    The authorities not used by the Air Force are:
    2874--Leasing of Housing to be Constructed--This authority has not 
applied to any of the Air Force projects to date and probably will not 
be used in the future because of the high up-front cost required by 
scoring.
    2876--Rental Guarantees--The OMB scored cost associated with this 
authority would make the up-front cost of the privatization project 
equal to or more that the cost of equivalent military construction. If 
we had these funds to pay such a scored cost, the Air Force would have 
funded the military construction project in the first place.



    Army:
    Question. According to the Services' data, there are approximately 
250,000 Government-owned family housing units in the United States, 
whose average age is about 34 years. Based on criteria established by 
the Services', approximately 157,000 units, or 63 percent, are deemed 
inadequate and need to be renovated or replaced. In your opinion, what 
led to the current number of inadequate housing units?
    Answer. The condition of existing housing units is a result of 
three factors. Quality of the unit when it was constructed; most 
military housing was built to minimum standards to keep initial costs 
down. Wear and tear over time; on average the units turn over every two 
years. A sustained level of funding over the years to keep units from 
deteriorating with a major revitalization about the 35 year point to 
bring it up to current standards including internal utility systems. 
Most Army family housing has met or exceeded the point of time in its 
life for revitalization. The existing funding program still leaves an 
approximate $4.9B backlog to reach the DoD goal of eliminating 
inadequate housing by FY2010.
    Question. What is the plan to address this backlog, and what is 
being done to prevent the recurrence in the future?
    Answer. The Army is developing a 2010 Plan to meet the DoD goal. In 
order to achieve the goal the Army must use a combination of 
privatization and increased funding for those locations not privatized 
and BAH increases. Once units have been made adequate then sufficient 
funding must be available over their life to prevent deterioration.
    Navy:
    According to the Services' data, there are approximately 250,000 
Government-owned family housing units in the United States, whose 
average age is about 34 years. Based on criteria established by the 
Services' approximately 157,000 units, or 63 percent, are deemed 
inadequate and need to be renovated or replaced.
    Question. In your opinion, what led to the current number of 
inadequate housing units?
    Answer. Funding levels that were insufficient to arrest, let alone 
reduce, the growing backlog associated with an aging, deteriorating 
inventory led to the large number of inadequate units in the family 
housing inventory.
    According to the Services' data, there are approximately 250,000 
Government-owned family housing units in the United states, whose 
average age is about 34 years. Based on criteria established by the 
Services', approximately 157,000 units, or 63 percent, are deemed 
inadequate and need to be renovated or replaced.
    Question. What is the plan to address this backlog, and what is 
being done to prevent the recurrence in the future?
    Answer. The Department of the Navy's goal is to ensure Sailors, 
Marines, and their families are able to obtain suitable, affordable 
housing. In recent years, we have made a significant investment in 
revitalizing unsuitable military family housing. There is visible 
evidence of improved living conditions at Department of the Navy 
installations throughout the world. For Fiscal Year 2001 the Department 
is requesting funds to revitalize 2,292 homes, build 18 new homes, and 
replace 843 homes. We plan to eliminate the backlog of unsuitable homes 
by the end of Fiscal Year 2010 through a combination of increased 
housing allowances, privatization initiatives, and replacement 
construction, improvement, and repair projects.
    Air Force:
    Question. In your opinion, what led to the current number of 
inadequate housing units?
    Answer. Over 65% of the Air Force housing units were constructed in 
the late 1950's and 1960's. The repair requirements driven by this huge 
bow wave of units nearing the end of their economic life, exceed 
available funding and has resulted in the number of inadequate units.
    Question. What is the plan to address this backlog,and what is 
being done to prevent the recurrence in the future?
    Answer. To address this backlog and insure units are adequately 
maintained after they are improved or replaced, the Air Force developed 
the Family Housing Master Plan. This plan provides a corporate housing 
investment strategy that integrates and prioritizes traditional 
construction and operations and maintenance funding with private sector 
financing within a ``single roadmap''. This plan outlines the funding 
required to meet the OSD goals to revitalize, divest through 
privatization or demolish inadequate units by 2010. It identifies the 
most cost-effective and time efficient investment option at each 
installation. Within current funding levels the Air Force will not meet 
the 2010 goal until 2018. This is an affordability issue that will have 
to be addressed in the coming years.
    Army:
    Question. Although the Military Housing Privatization Initiative 
does not require competition, OSD draft policies and procedures state 
that projects must be solicited in a manner that promotes competition 
to the maximum extend possible. However, projects are currently being 
considered which could result in sole source awards, such as the 
proposal from Boston Capital Holdings Limited Partnership for Patrick 
AFB, and the Navy's proposed project with the Virginia Housing 
Authority in Norfolk. Can you bring us up to date on any potential sole 
source awards?
    Answer. We have not awarded, and do not plan to award any sole 
source privatization contracts.
    Navy:
    Although the Military Housing Privatization Initiative does not 
require competition, OSD draft policies and procedures state that 
projects must be solicited in a manner that promotes competition to the 
maximum extent possible. However, projects are currently being 
considered which could result in sole source awards, such as the 
proposal from Boston Capital Holdings Limited Partnership for Patrick 
AFB, and the Navy's proposed project with the Virginia Housing 
Authority in Norfolk.
    Question. Can you bring us up-to-date on any potential sole source 
awards?
    Answer. The Department of the Navy is exploring a potential public/
private venture project in the Hampton Roads, Virginia area that would 
be executed through a partnership with the Virginia Housing Development 
Authority. The proposed concept is for the construction of 80 family 
housing units. OSD staff is currently reviewing the project. We are not 
considering any other sole-source projects.
    Air Force:
    Question. Can you bring us up to date on any potential sole source 
awards?
    Answer. The Air Force had signed a non-binding letter of intent 
with Boston Capital to explore ways of providing housing for our people 
quicker, better, and cheaper. Boston Capital and the Air Force were 
using Patrick AFB as a test of one new way. The non-binding letter of 
intent has been rescinded by mutual agreement, and we are moving 
forward with housing solicitations--including Patrick AFB--in more 
conventional ways.

                   IMPACT OF UTILITIES PRIVATIZATION

    Army:
    Question. The Department has undertaken an aggressive utility 
privatization effort. The goal is to privatize all utility systems 
unless uneconomical or exempt for security reasons by September 30, 
2003. How are utilities and housing privatization being coordinated?
    Answer. Both programs must be fully coordinated at the installation 
and the Major Army Command (MACOM) level to obtain the best value for 
the government. The MACOMs have the discretion to schedule the 
privatization of their utility systems to coincide with AFH 
privatization.
    Question. What is the impact of utility privatization on housing 
privatization?
    Answer. During the Community Development and Management Plan (CDMP) 
process the Army will reexamine the current and projected status of 
utilities privatization initiatives, in order to anticipate any effects 
on housing project development plans. There is the potential that 
privatization utilities will change utility rates, which in turn could 
impact the project's economic structure and projected timeline. 
However, the actual impacts will have to be determined during the 
development of the CDMP.
    Navy:
    The Department has undertaken an aggressive utility privatization 
effort. The goal is to privatize all utility systems unless 
uneconomical or exempt for security reasons by September 30, 2003.
    Question. How are utilities and housing privatization being 
coordinated?
    Answer. The Department of the Navy is closely coordinating the 
privatization of housing and the privatization of utilities systems. 
There are 3 interface scenarios for utilities in public/private venture 
housing projects:
    1. Utilities for new housing units on private land will be provided 
by the developer through private utility companies.
    2. Existing government owned housing located outside base confines 
that currently relies on private utility providers would continue to 
rely on those providers. Those with utilities we manage will eventually 
transfer utility operation to the local utility company, as we normally 
would do for family housing built with construction funds.
    3. Utilities for on-base housing units will continue to be operated 
as part of base infrastructure up to the point of the utility meter. 
The Limited Liability Company the Department uses has the flexibility 
to facilitate privatization of the utility distribution system in 
concert with other utility privatization initiatives.
    The Department has undertaken an aggressive utility privatization 
effort. The goal is to privatize all utility systems unless 
uneconomical or exempt for security reasons by September 30, 2003.
    Question. What is the impact of utilities privatization on housing 
privatization?
    Answer. The offices within the Department of the Navy responsible 
for utilities and housing privatization are working closely together to 
coordinate their efforts. No problems have arisen so far. The housing 
public/private venture management structure being used by the 
Department has the flexibility to accommodate privatization of the 
utility distribution; there should not be any significant impact.
    Air Force:
    Question. How are utilities and housing privatization being 
coordinated?
    Answer. The Air Force Utilities and Housing Privatization Programs 
are coordinating their efforts to privatize utilities in housing areas. 
On-going housing privatization efforts differ in their conceptual 
approaches with regards to the disposition of real estate )conveyance 
versus lease) and the inclusion of utilities.
    The Air Force has issued policy to ensure the conveyances of 
utility systems for the following on-going initiatives are not 
duplicated in both programs, but rather a concerted and measured 
approach is taken:
    Dyess AFB: Utilities in new geographically separated housing area 
will be owned by the developer as part of the housing privatization 
program. The developer is bringing land/utilities to the deal.
    Lackland AFB: New utilities in severable housing area will be owned 
by the developer as part of the housing privatization program. Raw land 
within confines of Medina Annex is being developed and existing land is 
being leased.
    Patrick AFB: Utilities in geographically separated housing area to 
be conveyed to the developer through the housing privatization program.
    Robins AFB: Utilities and land in geographically separated housing 
area to be conveyed to the developer through the housing privatization 
program.
    Dover AFB: Utilities in the on-base housing area to be conveyed 
through utilities privatization program. Utilities in the 
geographically separated housing area to be conveyed through the 
housing privatization program.
    Wright-Patterson AFB: Utilities in geographically separated housing 
area (Page Manor & Woodland Hills) to be conveyed through the utilities 
privatization program. Land will be leased. Utilities in other housing 
areas (not privatized) to be conveyed through the utilities 
privatization program.
    Elmendorf AFB: Utilities in three housing areas will be conveyed 
through the housing privatization program. Land will be leased. 
Utilities in other MFH areas will remain AF-owned and will be conveyed 
as part of the utilities privatization program.
    Kirtland AFB: Utilities in all housing areas will be conveyed as 
part of the utility privatization program. Land will be leased.
    Tinker AFB: Utilities in severable housing areas will be conveyed 
as part of the utilities privatization program.
    Future housing privatization efforts (i.e., fiscal year 2001 and 
beyond) which seek to convey units and land will include the underlying 
utilities. Future housing privatization efforts which seek to convey 
units, but lease the land, will not include the underlying utilities; 
these utilities will be included in the Utilities Privatization 
Program.
    Air Force:
    Question. What is the impact of utilities privatization on housing 
privatization?
    Answer. None. The Air Force has issued policy to ensure the 
conveyance of utility systems are not duplicated in both Utilities and 
Housing Privatization Programs.

                      ALTERNATIVE FORMS OF HOUSING

    Army:
    Question. Are any of the Services considering alternate forms of 
housing to maximize housing privatization funds? If so, what is being 
considered, and where?
    Answer. The Army is open to alternative forms of housing that our 
qualified developers propose during the Community Development and 
Management Plan process. On the other hand, the Army will not consider 
any form of housing which doesn't bring the privatized housing up to a 
standard at least as good as the private sector housing in the area. 
Our first privatization site, Fort Carson, received a plan that 
included traditional housing.
    Navy:
    Question. Are any of the Services considering alternative forms of 
housing to maximize housing privatization funding? If so, what is being 
considered, and where?
    Answer. The Department of the Navy uses a mix of reliance on the 
private sector, military construction, privatization, and leasing to 
meet its housing needs. Specific housing strategies are based on the 
specific conditions at an installation.
    Air Force:
    Question. Are any of the Services considering alternate forms of 
housing to maximize housing privatization funding? If so, what is being 
considered, and where?
    Answer. Yes, we are considering several forms of housing to include 
single-family, duplexes, multi-plexes/townhouses, and apartments. For 
example, the project at Dyess AFB has apartments and townhouses planned 
for the junior enlisted members. At Lackland AFB, we have duplexes and 
multi-plexes under construction. The privatization initiative at 
Elmendorf AFB has townhouses and multi-plexes planned.

                            HOUSING POLICIES

    Army:
    Question. DoD Housing policy requires reliance on communities near 
military installations as the primary source of housing for military 
personnel. Military housing may be programmed to meet needs in areas 
where the local community cannot support military housing needs. What 
is the Service policy on housing eligible military families?
    Answer. The Army's policies to first rely on the local community 
surrounding Army installations as the primary source for housing. If 
the local community is unable to provide the necessary housing, the 
Army programs acquisition of housing to meet its need.
    Question. DOD Housing policy requires reliance on communities near 
military installations as the primary source of housing for military 
personnel. Military housing may be programmed to meet the needs in 
areas where the local community cannot support military housing needs. 
How will the Military Housing Privatization Initiative (MHPI) affect 
military families housing status? Will privatized housing be used in 
place of local community or military housing?
    Answer. The Military Housing Privatization Initiative (MHPI) will 
accelerate the Army's program to provide adequate housing to its 
soldiers and families by Fiscal Year 2010.
    However, privatized housing will not replace the housing available 
in the local community. The local community/private sector is relied 
upon as the primary source of housing.
    Question. What is the Service policy on assignment of military 
families to military housing? To privatized housing?
    Answer. The Army's policy on assignment to military housing is that 
the soldier has a choice to accept or turn down on post family housing. 
The policy will be the same for privatized housing. This structure is 
both fair to soldiers and provides incentive to the developer to create 
and maintain attractive housing communities for Army families.
    Navy:
    DoD housing policy requires reliance on communities near military 
installations as the primary source of housing for military personnel. 
Military housing may be programmed to meet needs in areas where the 
local community cannot support military housing needs.
    Question. What is the Service policy on housing eligible military 
families?
    Answer. In compliance with DoD policy, the Department of Navy 
relies on the private sector to provide housing. We build military 
housing only when the private sector is unable to satisfy our housing 
requirement.
    DoD housing policy requires reliance on communities near military 
installations as the primary source of housing for military personnel. 
Military housing may be programmed to meet needs in areas where the 
local community cannot support military housing needs.
    Question. What is the Service policy on assignment of military 
families to military housing? To privatized housing?
    Answer. The local housing office maintains a waiting list for 
Department of the Navy-owned military housing and Service members are 
assigned from that list to the appropriate units as they become 
available.
    For bases with privatized housing, local housing offices will 
maintain a public/private ventures waiting list. Military families on 
that waiting list will be referred to the public/private venture 
property manager as units become available. Service members have 
priority placement rights for any vacant units and are referred based 
on their standing on the waiting list.
    DoD housing policy requires reliance on communities near military 
installations as the primary source of housing for military personnel. 
Military housing may be programmed to meet needs in areas where the 
local community cannot support military housing needs.
    Question. How will the Military Housing Privatization Initiative 
(MHPI) affect military families housing status? Will privatized housing 
be used in place of local community or military housing?
    Answer. The Department of the Navy will continue to rely first on 
the local community to meet its housing requirements. Where the 
community cannot meet those requirements, we will use either 
traditional military construction projects or public/private venture 
projects.

                            HOUSING POLICIES

    Air Force:
    Question. What is the Service policy on housing eligible military 
families?
    Answer. All military members are eligible and may apply for 
assignment to government controlled quarters. The Air Force relies on 
the civilian community first for housing. Where the local community can 
not meet military needs, the Air Force will provide suitable housing at 
installations if available.
    Question. How will the Military Housing Privatization Initiative 
(MHPI) affect military families housing status? Will privatized housing 
be used in place of local community or military housing?
    Answer. The MHPI will not affect the military families' housing 
status. The Air Force depends first on the local community to house its 
military members in accordance with OSD policy. When there is 
insufficient, adequate housing available, the Air Force depends on both 
military family housing and privatized housing for its members. If both 
Air Force owned and privatized housing exist at one installation, the 
military member will be given the choice as to which of these he or she 
will choose to live in.
    Question. What is the Service policy on assignment of military 
families to military housing? To privatized housing?
    Answer. All military members with dependents are eligible and may 
apply for assignment to government controlled quarters. The Housing 
Office maintains a waiting list by rank and family composition of 
members that are eligible to live in government controlled family 
housing. When a house becomes available, the housing staff determines 
the category of the unit (officer, enlisted, number of dependents/
number of bedrooms? and offers it to the first person on the 
corresponding list. Our goal is to place the family that has been 
waiting the longest into a house as quickly as possible. Time spent on 
the waiting list is the determining factor for establishing priority.
    The policy for privatized housing is similar. When a privatized 
unit becomes vacant, the Air Force Housing Office refers an eligible 
service member (based on rank) to the privatization manager to allow 
the member the opportunity to choose to live in privatized housing. The 
Air Force does not assign members to privatized housing.

    [Clerk's note.--End of questions submitted for the record 
by Chairman Hobson.]
    [Clerk's note.--Questions for the record submitted by 
Congressman Farr.]

    Army:
       Defense Language Institute Housing at Presidio of Monterey
    Question. In your testimony you have suggested that housing 
projects at Fort Ord are not viable. I actually believe that there is 
an agreement between the Army and the City of Marina to enter into a 
lease/lease-back arrangement to accommodate a portion of the Army's 
housing needs there. Has something happened to this lease/lease-back 
arrangement that I am not aware of?
    Answer. There have been discussions with the City of Marina 
regarding housing for soldiers, however, there is no agreement between 
Army and the City of Marina for the Army to lease/lease-back renovated 
housing units from the City of Marina. Instead, the Army will 
temporarily lease housing units to the Fort Ord Reuse Authority (FORA), 
who then will sub-lease to the City of Marina, who will in turn, lease 
to Mid-Peninsula Housing who will rehabilitate the units and rent them 
directly to service members.
    Question. Is not the problem at Fort Ord less one of available 
housing stock and a willingness on the part of the community to assist 
the Army, and more so a problem with Army clean-up of the base there?
    Answer. While negotiations of the economic development conveyance 
memorandum of agreement and environmental issues have prevented the 
Army from transferring the property to the Local Redevelopment 
Authority as projected at the start of the BRAC process, there remains 
a shortage of available housing stock. However, a recent Department of 
Justice decision to allow the Army to lease housing to FORA, based upon 
the completion of our environmental requirements, has made interim 
housing an option which will help to alleviate, but not solve, the 
housing shortage in the area.
    Question. What is the projection of housing needed to accommodate 
serivcemen and the families at the Defense Language Institute (DLI) in 
Monterey and the Presidio of Monterey? Other than the housing currently 
on line to be leased from the City of Marina, where else does the Army 
expect to obtain the necessary units?
    Answer. The Defense Language Institute and Presidio of Monterey 
currently have a requirement for approximately 500 additional family 
housing units. It is DOD and the Army's policy that the primary source 
of housing is the local community surrounding military installations. 
The recent increase in Basic Allowance for Housing (BAH) coupled with 
the Secretary of Defense's initiative to reduce out of pocket expenses 
to zero percent should make community housing more affordable in the 
Monterey, CA area.
    There is a potential for a privatization project for the Defense 
Language Institute and the Presidio of Monterey. This project could 
accommodate the growth in student load and the transfer of the 787th 
Explosive Ordnance Detachment to the Presidio. The contractors involved 
in the privatization project at Fort Carson, Colorado have recently 
visited the POM and had positive comments on the feasibility of such a 
project there.
    Question. What sort of assurance can you give that housing that is 
renovated or constructed in partnership with the private sector will 
abide by local preference regulations in choice of contractors?
    Answer. The Fort Ord Reuse Authority (FORA) and City of Marina will 
receive the property in its present condition. BRAC law prohibits the 
Army from making any improvements in its present condition. BRAC law 
prohibits the Amy from making any improvements to surplus property. The 
City of Marina is the agency that will secure the services of 
contractors for the housing renovation. The Army does not participate 
in this process and therefore is not in position to provide any 
assurance that local contractors will receive preference.
    Navy:
    Question. My question for you is similar to the one I asked 
Secretary Apgar: What is the projection of housing needed to 
accommodate servicemen and the families at the Naval Postgraduate 
School in Monterey?
    Answer. The Navy projects that approximately 1,100 families will 
require housing at Monterey. There are 603 Navy-owned units at the 
Naval Postgraduate School available for these families. In addition, 
through an Interservice Support Agreement, Navy families have access to 
476 homes at the Defense Language Institute. Through a combination of 
private sector and military family housing, the Navy expects that its 
projected family housing needs will be fully met.

    [Clerk's note.--End of questions for the record submitted 
by Mr. Farr.]
                                          Thursday, March 16, 2000.

            Housing Privatization Outside Witnesses Hearing

          ERNST AND YOUNG KENNETH LEVENTHAL REAL ESTATE GROUP

                                WITNESS

WALLACE LITTLE, PARTNER; PHOENIX, ARIZONA

                       STATEMENT OF THE CHAIRMAN

    Mr. Hobson. The Committee will come to order.
    We had a very good meeting yesterday discussing where the 
services are in the privatization effort. We are going to do 
something a little different today, which I hope will be 
illuminating. Unfortunately, our time constraints are such that 
it is not going to be as long as I would like to be.
    What we are trying to do today is kind of a learning 
session for all of us. We have people who have done projects on 
this list. We have people who have not done projects on this 
list. We have people who are consultants. We have all kinds of 
stuff on here. We would like you, in the time allotted, to very 
succinctly, and this will I hope be the end of this because we 
are engaged in a long-term situation with housing 
privatization.
    The culture is such, in my opinion within the military, 
that this is a change in doing business. Whenever you have 
change, there is a certain catharsis that goes on within the 
system. Some things work and some things do not. We are trying, 
in this Committee, to allow the services some degree of 
flexibility as they move through this. Each of them has a 
little different culture and a little different way of 
approaching things.
    As we go through it, it is a learning experience for all of 
us. It is a learning experience for the Members of the 
Committee. It is a learning experience for the services. It is 
a learning experience for many of you, and some of you not 
having dealt with the public sector before this thing. So, we 
are going to give you each a very short period of time to 
summarize your testimony.
    What I would like to do is go through each of your 
testimonies. Have you then return to your seats. Then, during 
this period, the Members can revise any questions that they 
want to ask and then we will get into that. If we have to do 
this again, or we have to have some private meetings where we 
can get ourselves a little better on the knowledge base, then 
we will do that.
    So, we are already 7 minutes behind, which is kind of not 
unusual for this mode of operation. We will start off with 
Ernst and Young Kenneth Leventhal Real Estate Group. If you 
will just summarize the base of your testimony and give us 
enough that we can get some questions for you. So, just kind of 
do that.
    If you guys keep growing together, we will not be able to 
get your names on a page anymore. It used to be Ernst and 
Ernst. Then Arthor Young. Then Kevin Leventhal. When I was in 
business, they were all out there some other way. Now, there is 
just you. Would you identify yourself?

                   STATEMENT OF MR. WALLACE A. LITTLE

    Mr. Little. My name is Wallace Little. Good morning, 
Chairman Hobson, Ranking Member Olver, Members of the 
Committee, I appreciate this opportunity to testify before you 
today. Again, my name is Wallace Little. I am a partner with 
the Real Estate Advisory Services Group of Ernst and Young.
    I have been in the real estate consulting profession for 20 
years. Ernst and Young is one of the premiere real estate 
advisory groups in the Nation. We have been involved with the 
military housing privatization since its inception in 1996. I 
have been a partner in charge of that work on this project 
since that time.
    Ernst and Young has helped to build the entire financial 
infrastructure for privatization transactions. In addition, we 
served as non-voting advisors to the Source Selection 
Committees at Fort Carson, Colorado, and Lackland Air Force 
Base, Texas. Today, we are providing a similar service to four 
other privatization projects.
    We are also working with the DoD to conduct a program-wide 
evaluation of the initiative, while studying and acting on the 
lessons learned during this implementation. This work has been 
our privilege. We know that behind these facts and figures, 
there are families and faces. Those are the men and women who 
serve our Country in uniform, and their loved ones who depend 
on them.
    In these brief remarks, I hope to convey four points 
regarding the Military Housing Privatization Initiative. First, 
privatization works. Second, the Government's interests in the 
program are strongly protected. Third, competition is 
generating creative ideas for improving military housing in a 
cost effective manner. Finally, there are a variety of areas in 
which the program can be improved.
    Mr. Chairman, privatization does work. It delivers more and 
better housing, in less time, and at less cost. The substantial 
up-front investment of time and resources necessary to build 
the infrastructure for privatization is now yielding results. 
As projects move forward, the Government is getting at least $3 
of housing for every $1 appropriated to the Privatization 
Initiative.
    For example, at Lackland Air Force Base, the Government 
received $55.8 million in construction for $6.3 million of 
appropriation. At Fort Carson, for example, the Government 
received more than $229 million in construction for its $10 
million appropriation. Privatization also enables the 
Government to receive a tangible asset in exchange for its 
investment.
    Every dollar the Government invests in privatization, goes 
directly to improving the quality of housing in the Armed 
Forces. When existing units and land are conveyed for 
redevelopment, their value is captured by military families in 
the form of new and renovated housing units, rather than simply 
being passed onto developers as a part of cash transaction. The 
Government's interest in these transactions is strongly 
protected.
    Construction is financed by private mortgages, and the 
developer assumes all economic risks on them. The Government's 
financial exposure is confined to the so-called political risks 
of base closure, downsizing, or long-term force deployments. A 
reserve has already been set aside to cover these limited 
situations.
    The developer bears the burden of proof in any assertion of 
political risk. A variety of other contractual arrangements, 
such as leases, lock boxes, and cash reserves, ensure the 
Government's interests are provided for before the developer 
sees any profit. Privatization has also unleashed the power of 
competition and the efficiency of the capital markets to 
improve both the cost and quality of military housing.
    Privatization projects have attracted wide participation 
from the private sector. That participation has, in turn, 
spurred rigorous competition, forcing developers to craft 
creative strategies for financing, design, and construction 
rather than simply bidding on preordained Government 
specifications.
    The program has seen considerable progress, Mr. Chairman, 
but none of us should rest on it. We believe the Privatization 
Initiative can be improved. We are even prouder to help improve 
the quality of life of our families and faces behind it. First, 
we believe some standardization of approaches and documentation 
between the service branches would enable the private sectors 
to meet the military's needs more effectively.
    Second, some bidders have been deterred by the length of 
time required to close a deal after an RFP has been issued. 
Generally, that process takes approximately one year. We 
believe it can be completed in half that time. Finally, we 
recommend lifting legal restrictions on the Government's 
ability to reinvest proceeds of the initiative and further 
privatization efforts.
    Mr. Chairman and Members of the Committee, I close by 
restating the particular satisfaction Ernst and Young takes in 
our work on this initiative. We are proud of the facts and 
figures that underlay this program. As I have said, we are even 
prouder to improve the quality of life of the families and 
faces behind it.
    Thank you for your attention. I look forward to answering 
your questions.

              Prepared Statement of Mr. Wallace A. Little



    Mr. Hobson.  If you will return to your seat, then we will 
get on to Jones Lang LaSalle, Inc.
    You are John Anderson.
                              ----------                              

                                          Thursday, March 16, 2000.

                        JONES LANG LASALLE, INC.


                               WITNESSES

JOHN ANDERSON, MANAGING DIRECTOR; WASHINGTON, D.C.
CHARLES WILSON III, VICE PRESIDENT, GLOBAL CONSULTING

                  STATEMENT OF MR. JOHN ANDERSON, JR.

    Mr. Anderson.  Mr. Chairman and Members of this 
Subcommittee, it is an honor to appear before you today to 
discuss Jones Lang LaSalle's involvement with the Army's 
Housing Privatization Program.
    Mr. Hobson.  You have 5 minutes.
    Mr. Anderson.  I have provided you with a more detailed 
written statement for the record, but would like to take just a 
minute to tell you about my company and our involvement with 
the Army. Jones Lang LaSalle is a leading real estate services 
and investment firm, across 96 T-markets, 34 countries, and 5 
continents.
    We are the largest global manager of properties with 700 
million square feet under management, and are the second 
largest investment advisor with $22 billion under management. 
We provide a broad range of real estate products and services, 
bringing extensive knowledge of local, national, and 
international markets.
    Jones Lange LaSalle was built on serving our client's best 
interest, which is a result in the development of longstanding 
relationships with many of this Country's in its judicial 
issues. In February of last year, we entered into a contract 
with the Army, to all but attract, and then negotiate 
relationships with private developers and management companies. 
We have done this before for the Government.
    In the early 1990s, we represented the Resolution Trust 
Corporation by establishing a $1.7 billion national land fun, 
attracting both capital and expertise from the private sector, 
and then forming partnerships with the Government. Here in 
Washington, we managed the redevelopment of Union Station, on 
behalf of a partnership lead by Jones Lang LaSalle, working 
closely with Amtrak and the Department of Transportation.
    We have, and continue to represent the GSA, the Department 
of Veterans' Affairs, and the State Department, to name a few 
more. This is an exciting and busy time for the Army as it 
works to address the housing shortage and provide quality 
communities for the soldiers and their families. We have been 
serving the Army as it is linked to the private sector, while 
conducting due diligence in preparing for negotiations at Forts 
Hood, Lewis, and Meade.
    We look forward to continuing to help the Army build its 
residential communities. Mr. Chairman, this concludes my 
statement. I look forward to your questions. Thank you.

              PREPARED STATEMENT OF MR. JOHN ANDERSON, JR.




    Mr. Hobson.  Thank you. I look forward to your questions 
and your answers. Now, Basil Baumann Prost and Associates, Inc.
                              ----------                              

                                          Thursday, March 16, 2000.

               BASILE BAUMANN PROST AND ASSOCIATES, INC.


                                 WITNESS

WIL BAUMANN, PRESIDENT; ANNAPOLIS, MARYLAND

                    STATEMENT OF MR. WIL N. BAUMANN

    Mr. Baumann.  Good morning, Mr. Hobson, Members of the 
Committee, the Committee staff, ladies and gentlemen, my name 
is Wil Baumann. I am principal and owner of Basile Baumann 
Prost and Associates, Inc. in Annapolis, Maryland. BPP is a 
real estate development consulting firm that is often thought 
of in the industry as a niche firm. We work exclusively for 
public sector clients, cities, counties, state and federal 
agencies, local development authorities, transit authorities, 
and the like.
    We specialize in structuring and implementing complex 
public-private development projects to accomplish public sector 
objectives. My partners and I have been together doing this 
type of work for 22 years. In that time, we have undertaken 
assignments for 800 clients in 43 states, resulting in an over 
$3.6 million in private investment, leveraged by about $900 
million in public investment.
    BBP has been assisting the Department of the Navy's efforts 
to privatize family housing since the program's inception in 
1995. We worked closely with the naval facilities engineering 
command, in the first two Navy pilot projects in Corpus 
Christi, Texas, and Everett Washington, under the original 
legislation.
    Since that time we have remained actively involved in the 
Navy's efforts to develop additional projects under the 1996 
legislation. I think the family housing privatization 
legislation is brilliant. If properly applied, it can 
effectively be used to meet or exceed all expectations. At the 
same time, however, I think that the privatization initiative 
presents considerable danger for the services and DoD. If not 
prudently applied, implementation of projects using the 
legislation can put our current inventories of family housing 
assets at risk, and lead to huge windfall profits for private 
developers.
    The Department of the Navy's strategy is driven by a 
continuing long-term need for family housing, and its fiduciary 
obligations to protect our valuable Government assets. Navy PPV 
projects typically include the privatization of existing 
Government-owned housing, and may include the use of 
Government-owned land for the construction of the new units.
    These valuable assets were purchased over the years, at 
great expense to the taxpayers, and maybe policy dictates that 
we not sell them, and we dare not risk losing them in some 
failed attempt to privatize.
    Mr. Hobson.  Go back. Read that back to us one more time.
    Mr. Baumann.  Navy PPV projects typically include the 
privatization of existing Government-owned housing, and may 
include the use of Government-owned land for the construction 
of the new units. These valuable assets were purchased over the 
years, at great expense to local taxpayers and maybe federal 
taxpayers, and maybe policy dictates that we not sell them, and 
we not risk losing them in some failed attempt to privatize.
    Mr. Hobson.  Continue.
    Mr. Baumann.  The Navy could convey its land and units 
directly to an independent private developer over which we will 
have little or no long-term control. Alternatively, the Navy 
could contribute or invest its land and units in a public-
private business entity or partnership that includes the Navy.
    Given our long-term need for family housing, and our 
consequent commitment to high quality operations, and periodic 
recapitalization of these units, that maybe families are going 
to continue to live in them. The Navy intends to stay actively 
involved. The investment authority, in general, and the limited 
liability company, in particular, is an effective and efficient 
means for accomplishing Navy goals and objectives for family 
housing in most of our regional projects.
    The LLC is a well-understood and clearly defined 
partnership entity currently available in all 50 States and in 
the District of Columbia, regulated by an established body of 
law designed to protect the smaller passive investor; in this 
case, the Navy. Early in the process, Congress and Navy 
officials expressed particular interest in the question of the 
Navy's liability in the business entity selected to carry out 
privatization. As the result, the details of the Navy's LLC 
strategy and plan were presented for examination and evaluation 
to the major law firms of Holland and Knight, and Hillman, 
Brown and Darrow, as well as the Big Five account firm, Price 
Waterhouse Coopers.
    All three confirmed that the LLC affords the liability 
protection sought by the Navy, while still allowing the Navy 
the active participation it must have. Good business sense 
dictates the financial structure of Navy deals. Very early in 
the PPV Program while the Navy was implementing the first two 
pilot projects at Corpus Christi, Texas and Everett, 
Washington, under the 1995 legislation, the authorities 
provided under the 1996 legislation were reviewed.
    It was concluded that the Federal Treasury had made direct 
loans to developers under Section 2873, and that OMB would 
likely score those loans at a lesser amount than the amount of 
cash actually loaned to a developer, if it could be 
demonstrated that fixed repayment of at least the principal 
amount of the loan back to the Treasury was a certainty.
    As the result of this scoring benefit, projects could be 
planned to loan more to developers than was actually available 
in MILCON funding for those same projects. Government stake, or 
participation went up, often approaching 80 percent, and 
private investment went down. Essentially, projects were being 
conceived, not based on achieving specific project objectives, 
the particular merits of the business deal, or normal 
expectations about risk in return, but rather based on the 
likely budget impacts of scoring.
    While scoring is recognized as an important factor, the 
Navy realized early on that it is not the only factor to be 
considered in the development of PPV projects. Scoring does not 
determine our basic objections, our drive, our decision-making 
process. The Navy continues to plan its projects utilizing the 
investment authority. As such, it is scored by OMB at 100 
percent of the face amount invested.
    We understand that an up-front scoring benefit might be 
achieved using the direct loan authority, but conclude that the 
downside cost to the Navy and risk to the Government would be 
far greater than any short-term budgetary benefit realized. The 
Navy believes its primary responsibility is to establish sound 
and prudent business deals.
    Accordingly, our focus is on establishing a business 
approach that best accomplishes stated objectives and then 
scoring it, rather than first determining the lowest score, and 
then backing into the requisite business deal. In closing, I 
would like to say how very honored and flattered I am to be 
invited to speak with you today.
    As proud as I am of the work done by my staff at BBP, with 
respect to this initiative over the years, development of the 
Navy's strategy and plan for privatization of the family 
housing is truly a team effort with Navy personnel. BBP is just 
a small cog in the wheel.
    Thank you very much.

                PREPARED STATEMENT OF MR. WIL N. BAUMANN



    Mr. Hobson.  Thank you.
    One comment that I want to make, and it is not a question. 
One of the things that you all should know, and I assume most 
of you know that the law is going to expire. One of the things 
that we need to do is talk to our counterparts and say, hey, 
you know, these are some things that need to be changed or to 
be done in the law.
    We have already started to see some things. I think you 
either need to tell us, and you need to tell the authorizors as 
to what you see in the law that needs to be changed and redone 
to make these transactions better, easier, faster, and cost 
effective to the Government. It does not mean that you cannot 
make a profit.
    We just do not want excess profits. Any deal has got to 
have profits in it. We understand that. We do not want them 
back either, after you have them.
    Boston Capital.
                              ----------                              

                                          Thursday, March 16, 2000.

                       BOSTON CAPITAL CORPORATION


                                WITNESS

JEFF GOLDSTEIN, VICE PRESIDENT OF PUBLIC AFFAIRS; BOSTON, MASSACHUSETTS

                 STATEMENT OF MR. JEFFREY H. GOLDSTEIN

    Mr. Goldstein.  Chairman Hobson, Congressman Olver, Members 
of the Committee, good morning. My name is Jeff Goldstein. I am 
Senior Vice President and Director of Real Estate for Boston 
Capital. I appreciate the opportunity to share with you Boston 
Capital's observations on the Military Housing Privatization 
Program.
    Boston Capital is a real estate company that has for 25 
years specialized in providing quality affordable housing 
throughout the country. Boston Capital and our affiliated 
companies employ a staff of more than 200 technical 
professionals and administrative personnel. Our company 
underwrites debt and equity financing, and establishes 
partnerships with local developers and builders to develop and 
asset-manage quality housing, regulated and in compliance with 
various agencies, such as Housing and Urban Development and the 
Department of the Treasury.
    Boston Capital has provided financial, professional, and 
technical assistance to our developer partners in the design, 
construction, and property management, compliance monitoring, 
and asset management of approximately 100,000 apartment units 
located in 48 States. Last year alone, we invested in 
properties representing 5,000 apartment units in 40 different 
States.
    Since its inception, our company has raised almost $2 
billion from among individual and institutional investors. 
Currently, we have a portfolio in excess of 2,100 residential 
properties. We currently manage a nationwide portfolio in 
excess of $5 billion. Early in 1999, Boston Capital was 
approached by individuals of the Air Force who, based upon our 
reputation and experience in affordable housing, felt we would 
be willing to assist in the privatization effort.
    Following conversations with the Air Force, Boston Capital 
proposed to develop an optimal approach to more expediently 
construct, rehabilitate, and operate alternative housing on or 
nearby various Air Force bases throughout the country. We 
envisioned our role as that of a development and asset manager, 
in close partnership with the Air Force, coordinating all of 
the elements required to provide Air Force families with cost 
effective, market fit housing in attractive neighborhoods.
    In concert with the command and leadership, we would be 
responsible for assembling a team of regional and nationally 
recognized organizations to demonstrate strong design, 
development, construction, and property management 
capabilities, and the ability to function together as a 
cohesive team.
    Boston Capital would be responsible for arranging 
competitive and dependable financing, and overseeing 
development. Following completion of construction, we would 
manage the assets on behalf of the Air Force to ensure the 
quality of the third party property management entities. We 
have compared the Air Force housing privatization process to 
that which is typically used in the private sector.
    I would like to briefly share with you some of our 
thoughts. The existing process by which the military selects a 
development team to undertake housing privatization is both 
long and complicated. A request for proposal must be developed 
and advertised. Respondent's professional history and 
qualifications are reviewed and scored.
    The respondent is ultimately rewarded a contract. At that 
point, negotiation begins. Because the housing construction 
management is not the military's core competency, this entire 
process often takes in excess of 3 years before construction 
starts. After all of that time, frankly, we are not convinced 
the military always receives the greatest efficiency and the 
greatest value for its investment.
    The process I just described is an example of why the 
private sector is better equipped to manage the entire 
development process. The private sector is much more 
streamlined in its approach to the development. What a private 
sector firm would do is identify those groups in the region 
that are qualified and capable of undertaking the work required 
to complete the transaction. A request for qualifications is 
sent out to the three or four most appropriate candidates. 
Their qualifications are confirmed. They are asked to bid 
appropriately. The process would occur amongst the major 
contracts.
    This methodically and relatively expedient process leads to 
the selection of the final development team. In our industry, 
we routinely select, underwrite, finance, approve, and close 
the transaction within 12 months and begin construction. This 
is just another example of how the private sector can better 
serve that role for the military.
    We also understand that a premium is placed on getting the 
best value for the taxpayers and, to a large extent, that is 
the reason for the RFP process. This in fact is very similar to 
our role as fiduciary to our investors. I would like to 
emphasize the priority that we all put on due diligence, cost 
management, and value.
    As we studied the housing problem, we employed guidance 
derived from the Air Force Market Fit Study recently conducted 
at the Wright-Patterson Mountain Home and Lackland Air Force 
Base. We surveyed a sample of housing unit sizes and residences 
surrounding localities and found, for example, that a 
comparable housing unit in the surrounding market was, on 
average, about 36 percent smaller than the units that were 
required for military housing standards.
    We concluded that by applying market fit criteria to those 
military housing units, the result would be quality, affordable 
housing while, at the same time, substantial cost savings to 
the Government. Mr. Chairman and Members of the Committee, the 
private sector can design and build attractive housing quicker 
than is currently happening.
    We can be cost effective. We can finance the majority of 
this with private funds. We can and should be held to the same 
level of accountability that we must work with now as it 
relates to our role as fiduciary to our investors, as well as 
to the markets that we are currently building. What we need is 
flexibility and creativity on behalf of our clients, the 
military. We need the ability to conduct a more market approach 
to competition. We need mutual trust gained through successful 
projects.
    In closing, Mr. Chairman, I would like to thank you and the 
Members of this Committee for providing Boston Capital with 
this opportunity to speak. We are confident that utilizing this 
experience with the private sector in the early identification, 
specification, development, and asset management of market 
comparable housing, we can provide the Armed Services with the 
assistance it seeks to achieve its privatized housing 
objectives.
    Thank you.

             PREPARED STATEMENT OF MR. JEFFREY H. GOLDSTEIN



    Mr. Hobson. Landmark Organization from Austin, Texas.
                              ----------                              

                                          Thursday, March 16, 2000.

                         LANDMARK ORGANIZATION


                                WITNESS

SAM KUMAR, SENIOR VICE PRESIDENT; AUSTIN, TEXAS

                       STATEMENT OF MR. SAM KUMAR

    Mr. Kumar. The Honorable Chairman and Honorable Members, 
good morning. My name is Sam Kumar and I am Senior Vice 
President of Landmark Organization. I want to say thank you on 
behalf of our organization and our President, Mark Schultz, for 
giving us the opportunity to speak before you today.
    Landmark Organization is an Austin, Texas based company 
specializing in the design and finance of public and private 
ventures. We are very proud to say that we were the developers 
on the first military housing project, the 400-unit limited 
partnership project in the Corpus Christi area built to house 
Navy sailors and their families.
    Also, we are currently the developers on the 420-unit 
privatization project at Lackland Air Force Base in San 
Antonio.
    Mr. Hobson. You still have the barracks that I went to 
basic training in. You built that; did you not? Go ahead.
    Mr. Kumar. Twenty-five percent of the project is complete 
and military families have moved into their homes. As a matter 
of fact, Secretary Cohen visited the project last month and 
helped a family move into one of the homes. We are also in the 
process of building military guest houses for Fort Bragg, Fort 
Erwin, and Fort Hunter; projects awarded using the Military 
Housing Privatization Initiative authority.
    We commend the Members of Congress for creating the MHPI 
authority. Your vision to provide great quality homes for our 
military members with minimum Government spending has come to 
fruition. At Lackland Air Force Base, every dollar of 
Government subsidy has bought $8 worth of quality homes for the 
Air Force families.
    In Corpus Christi, $9.5 million of Government contribution 
has provided 400 homes worth $32 million, not counting the 
return to the Government at the end of the partnership term. 
This is a win-win-win situation for the Government, the private 
sector, and military families. As businessmen, we believe there 
is always room for further improvement.
    We would like to show you the amount of work that goes on 
in the procurement process. The procurement process is lengthy 
and extensive to everyone involved. I had actually brought some 
proposal books from Austin, Texas just to show the length of 
proposals that we have to submit. This is an ongoing 
procurement project that is going on.
    I have stacked those books up there. That is just one 
project. It is just one copy of the amount of paperwork that we 
are submitting.
    Mr. Hobson. Before you leave, we will get a picture of 
that.
    Mr. Kumar.  One of the stations that we have been 
responding to was originally issued in December of 1998 and is 
still ongoing. Favorable interest rates included in the 
original proposal have since risen, and construction prices 
also have gone up while the procurement process continues. We 
believe the procurement process should be simple and efficient, 
consistent with the spirit and goals of the MHPI.
    Although the MHPI authority was created to minimize 
Government participation and maximize private sector 
participation, we still see a lot of Government involvement in 
the process. The MHPI authority can work better, faster and at 
a great deal more efficient if the private sector is allowed to 
work the way they have proven to be effective.
    The private sector must be allowed to perform in the manner 
that has distinguished us and made our participation in this 
process desirable in the first place. Although the MHPI 
authority was created as common law for all branches of the 
military, we have found that the Air Force privatization 
process is different from that of the Navy's privatization 
process or the Army privatization process.
    There may be more economies and efficiencies achieved for 
the Government, if the process becomes more standardized and if 
more efficient practices are adopted by all branches. For 
example, although we have successfully developed some 
privatization projects for the Navy and Air Force, there are a 
few projects of the same size with the Army that we do not 
qualify because of subjective requirements. Again, with a more 
standardized solicitation process we, in the private sector, 
will be able to demonstrate that we are competitive and ready 
to work for all military forces.
    We are an entrepreneurial organization and we love 
competition. It is our opinion that the solicitation process 
for these projects should be based upon qualifications as well 
as price. Once these factors are established and a credible 
contractor is selected, the project can move forward and the 
mission will be achieved, which is providing quality housing 
for the unique needs of military families.
    Among other issues that affect us, the recent announcement 
regarding some of the military bar rates going down at Lackland 
Air Force base and some other bases sent shock waves through 
the investing community. These rates had not gone down in 15 
years at Lackland and other bases. While investors and 
developers were willing to take the risk that the bar may not 
rise at the same rate as inflation, they were shocked when they 
found that the bar could actually go down when inflation 
occurred.
    The investing community and the developers will want 
protection against bar rates going down on future MHPI 
projects. Although the processes may need some improvement, the 
results have always been excellent, the successful projects 
that fulfilled your vision.
    Honorable Chairman and Members, we are very proud of the 
MHPI legislation, and we commend every one of you for preparing 
this unique and unsurpassable legislation to house military 
families. We would like for you to continue supporting it. Once 
again, thank you for giving us the opportunity to be here.

                  PREPARED STATEMENT OF MR. SAM KUMAR



    Mr. Hobson. We will now hear from GMH Associates, in Wayne, 
Pennsylvania.
                              ----------                              

                                          Thursday, March 16, 2000.

                          GMH ASSOCIATES, INC.


                                WITNESS

GARY M. HOLLOWAY, PRESIDENT AND CEO; WAYNE, PENNSYLVANIA

                   STATEMENT OF MR. GARY M. HOLLOWAY

    Mr. Holloway.  Mr. Chairman, distinguished Members of the 
Committee, I am honored that you invited me to be here today 
and I thank you. My name is Gary Holloway. I am the owner and 
founder of GMH Associates. I started the business 15 years ago. 
We are a national real estate development and operations 
company.
    Our two largest financing sources are Goldman Sachs and 
Company, and GE Capital. Today, we are the largest owner of 
student housing in the Country. It is through that initiative 
that we had the interest and saw the interest to get involved 
in the military housing. I started an LLC company with GE 
Capital as our financial partner to do military housing.
    We have been involved since the late part of 1999. I 
personally have traveled and visited every branch of the 
military and have seen different ports and bases, so far, to 
get a feel for what we are dealing with. I truly believe that 
the only way to understand real estate is to get out, kick the 
tires, and talk to the people.
    We have found by doing that process, that our Country is in 
sad, sad shape regarding our housing. I know the Chairman 
recognizes this fact from previous conversations that we have 
had. I do believe that this Committee and your opening 
statements regarding continuing this process is very important. 
It is not to be done in a 5-year program. It is a much longer 
program than that. All of the great developers in the Country 
that are here, any one of us can step us and build this 
product.
    There are a lot of truly great people that can come and 
bring the construction. It is all of the other things that are 
needed and necessary to make sure that this product continues. 
If you look at our housing today, most of it is 40- to 50-
years-old throughout the country. It is in very deplorable 
condition.
    The reason for that has become more the maintenance than 
anything else. The key to any developer in building any of this 
product is to make sure that we maintain it on a consistent 
basis so that our economic value in the future is not flushed 
down the toilet. It is important that we recognize the fact 
that we are here protecting our Country's dollars.
    The most important thing to this housing, in my opinion, is 
to make sure that we are affording our soldiers to a 
comfortable lifestyle that they do deserve. We are in 
competition to make sure that these soldiers, every day, are 
trying to keep themselves in the military to protect our 
country.
    Today, I think that we are truly, as a country, at a great 
disadvantage in trying to retain and maintain these people in 
the military because of the substandard living conditions we 
provide. I think it is important that we follow several 
processes. Number one, we truly believe that the time frame 
that it takes to get through this process is way too long.
    Number two, the standardization process we believe through 
all branches of the military can be standardized down to one 
format so that everybody follows the same. I am not 
recommending that each branch of the military cannot negotiate 
their own contracts. I truly believe that, that is an important 
part of this at the end of the day.
    I am recommending that the process come together. I know in 
talking with most of these individuals that we can form a 
process that makes sense for us and gets us to it quickly in a 
quicker time frame. We truly believe in our company that this 
process can be cut down to 120 days. It is done in the private 
sector. There is no reason to believe that it cannot be done in 
this sector.
    We believe that the help that we can be given by the 
military and the United States Government will afford us that 
capability. The one other thing that we believe in looking at 
is the economic feasibility that must take place. It is hard. 
You cannot separate the married family housing from the 
bachelor housing.
    When you try and work your economics out, you cannot be 
sitting there with your BAH rates from an E-1 to an E-4, 
anywhere from $600 to $650, and provide the same housing for a 
married couple that has to live in a three bedroom where your 
allowances might be $740. That economic scale must come 
together. You must be able to blend those two.
    So, some of these points that we point out, as a developer 
and owner of real estate, it is important for you to maintain 
that process. It is important for the economic feasibility. We 
know that everything else can be worked out in the private 
sector. The private sector is there to make sure that housing 
is the problem for us to take care of and that the military 
should focus on protecting our Country.
    Thank you, sir.

               PREPARED STATEMENT OF MR. GARY M. HOLLOWAY



    Mr. Hobson.  Next, we have the National Association of 
Homebuilders.
                              ----------                              

                                          Thursday, March 16, 2000.

                  NATIONAL ASSOCIATION OF HOMEBUILDERS


                                WITNESS

ROBERT LAWSON, PRESIDENT; LAWSON COMPANIES, VIRGINIA BEACH, VIRGINIA

                 STATEMENT OF MR. ROBERT A. LAWSON, JR.

    Mr. Lawson.  Thank you, Mr. Chairman and Members.
    I am pleased to provide you today with the views of the 
200,000 members of the National Association of Homebuilders on 
the privatization initiative by the Department of Defense. My 
name is Robert Lawson. I have been in the business of providing 
quality residential properties in Tidewater, Virginia to both 
military and civilian families since 1965.
    Mr. Hobson.  That is about when I was there. Go ahead.
    Mr. Lawson.  I am President of the Lawson Companies, a 
parent corporation for a group of companies that owns, manages, 
constructs, and develops real estate, homes, and apartments. I 
also served on the Urban Land Institute Panel that advised the 
Secretary of Defense in the development of the legislation that 
was ultimately passed.
    So far, the experiences we see with the privatization 
initiative are really varied throughout the services. Different 
services have made different progress in the matter of 
implementation. The Navy and the Air Force have implemented 
some smaller projects, where the Army seems to have focused on 
much larger projects.
    We have communicated the Association's concerns to the Army 
that their projects are so large that they are beyond the 
capacity of maybe all but 1 or 2 percent of the Members of the 
National Association of Homebuilders. If the scope of those 
projects could be reduced to make them smaller, they would 
receive more competition, and it would be a more sensible 
approach where smaller more localized firms could have a 
consistent replacement or revitalization of homes year-after-
year.
    For example, in the Fort Hood project where maybe 6,000 
units are involved to revitalize, I would say within a hundred 
mile radius, there may be 50 carpenters. Something does not 
match and they are going to call us.
    Mr. Hobson.  I want you to repeat that. Chet, I want you to 
hear what he said. Go back to that because I had heard this 
before.
    Mr. Lawson.  Okay. One, the large projects like the Army 
has proposed looking, for example at Fort Hood, there are some 
I think 6,000 units to ultimately be built or revitalized. 
Probably in the surrounding 100 miles, if you look at the 
demographics, there may be 150 to 100 carpenters. There are 
some specialty projects that are going to cause big problems. 
They are problems for everybody to accomplish.
    Mr. Farr.  Can I ask a question?
    Mr. Hobson.  Yes, real quick.
    Mr. Farr.  The problem we have is those 100 carpenters want 
to be employed in that project, but if you bring in a developer 
from out of town, they usually bring their own.
    Mr. Lawson.  That is his point.
    Mr. Hobson.  That is my point, plus the fact that generally 
when you move around or do military housing, you do not move 
other than supervisory employees. You do not take the crafts 
with you.
    Mr. Lawson.  You do not take the crafts with you.
    Mr. Farr.  I guess that is not true. In California, in the 
Monterey Bay area where the military is contracting out, the 
people come in from other cities and brought all of their crew.
    Mr. Hobson.  That is his point. His point is that if you 
get one of the national developers to come in, you do not 
necessarily get the local guys. Now, the National office will 
tell you that they hired the local guys.
    Mr. Lawson.  I guess the other basic problem to say is it 
is going to be very tough on the military, just because labor 
resources are not available in the locality. In Tidewater, 
Virginia that would not be the case or in the Southeast where 
primarily I have operated.
    The most critical issue for the NHB member participation is 
that if you have master developments to have it broken down 
into components, in smaller pieces, that could be handled by a 
broader portion, a larger number of developers, be less risky, 
and have less impact on the local housing market.
    We have seen it in the Tidewater, Virginia area where if 
the Navy contracts for a huge project, then the labor is almost 
in too much demand. Prices rise, both for the normal 
homebuilder and for the project the Navy is doing. We need to 
improve the procurement process so that we can create 
communities that families are proud to live in. That is what 
our membership does; especially to serve the needs of the 
military that need more affordable housing.
    We know that the ``one size fits all'' approach will not 
work. Mr. Chairman, NHB members are ready to fully participate 
in offering decent homes and suitable living environments for 
American families. We would like to work with you to refine and 
perfect the current program to allow greater participation.
    If possible, we would like to work with you and your staff 
to create a pilot program to test our assumptions and 
recommendations for reducing product size. DoD and its private 
sector partners want to provide additional military family 
housing. It can be done if we work together.
    Thank you very much for your time.

            PREPARED STATEMENT OF MR. ROBERT A. LAWSON, JR.



    Mr. Hobson.  Thank you.
    We did not do bad. We are only 20 minutes behind. For the 
Government, that ain't all bad. We have a little more time than 
we thought. I am going to pose a question and I do not want you 
to answer it right now. It seems to be a common thread that is 
going through here. It goes back to those books over there a 
little bit.
    Each of you stated that the private sector could speed the 
process. However, I have not seen any results of that yet of 
all of the guys that are working on this stuff. I assisted all 
of these consultants. I will go back to my favorite project. We 
could have been in the ground and had housing by now on one 
that I wanted the Government to speed up on, but they did not 
naturally take my advice. So, it is not done.
    I would ask all of you to say what gives, what is the 
problem, and why do we not fix it? I will tell you. Randall Yim 
who was in there, I think, is trying to do a good job, if you 
heard him yesterday. He is listening. I think some of the 
services are listening, obviously from some of the testimony 
yesterday. Some of them are trying to get with it.
    I think maybe we need a little better input from all of 
you. So, I am just going to challenge you to do that. With 
that, John, do you have any questions that you would like to 
ask?
    Mr. Olver.  I have some thoughts here. This is an enormous 
amount of material to try to sort out and make sense of at one 
time. One thing that comes through here from everyone is, is 
that we ought to be able to cut the time and the paperwork by 
half or more than half, and that would be great. We ought to 
try to figure out how to do that.
    Of course, in the beginning of a program like this, I think 
that one is especially careful in the relationships that you 
evolved because you are afraid, and partly for the reason that 
Baumann has expressed here. I will get back to it a little bit 
later.
    The Baumann statement that it presents considerable danger 
for the services and DoD. It is not prudently applied 
implementation of projects using the legislation with regard to 
current inventories of family housing assets of risk that lead 
to windfall profits to private developers. That was a statement 
that clearly was one of the things that were deeply concerned 
about here on our part.
    Really, you have got to get this stuff done. You cannot end 
up, our privatization authorization, which is 5 years old. We 
have only one unit, one project which is actually fully in 
occupation now, and one other project, of all of the lists of 
projects that are started, that we have actually got some 
occupation on, a partial phased occupation, of one other one at 
this point.
    The other thing that comes through from several of the 
testimonies is that there needs to be a standardization of the 
procedures and mechanisms that are involved here. Now, that is 
one that we have focused on. It became clear that the 
procedures were quite different really and not particularly 
standardized.
    Each service was going off and doing what it wanted to do. 
Now, Secretary Yim, as the Chairman has mentioned about 
yesterday, has been trying very hard, partly because of the 
push from the Chairman, substantially because of a push from 
the Chairman and also myself, that we needed to have better 
rationalization of those procedures.
    So, I think that they are moving toward a common set of 
planning a framework; a common planning framework, 
documentation and so forth that is needed, and how the choices 
will be made for what makes sense. I had hoped that, that will 
allow us, if we go through and have another 5-year 
authorization and indeed there is a comment that maybe it ought 
to be a much longer process.
    If you take the history of what we have been able to 
accomplish and get into in the first 5 years, we are not doing 
that well. We have really got to do a good deal better. I 
wanted to ask more specifically from Baumann, are the comments 
that you made about the risks and so forth, you started out, I 
would prefer to have someone here from the Navy to confirm 
this, but are you the primary consultant? Do you have a role in 
all of their planning, in the case of Baumann, for all of what 
they are into right now?
    Mr. Baumann.  I am Baumann, and I have been involved with 
the Navy in all of their family housing projects since 1995. In 
the first few pilot projects in the Corpus Christi effort, I 
assisted.
    Mr. Olver.  Well see, if we had known that Boston Capital 
had been hired on by the Air Force to be their primary overall 
manager of the process, they were not--projects, but they are 
the overall manager of the process. If we had known that Jones 
Lang was to be the primary consultant for the Army, may I 
assume that you play that role?
    Mr. Andersen.  Yes, sir.
    Mr. Olver.  Even though a couple of the others had said, 
for instance, Mr. Kumar has indicated that he has built both 
for the Navy and for the Air Force at Corpus Christi and at 
Lackland. We have another instance of someone else who said 
that they were involved in several places, I think.
    Now, are the comments that you make about those risks in 
relation to what the situation was then? Has it evolved towards 
a better situation? Do you see, in fact, all three of you as 
the primary consultants, do you see the evolution of a more 
standardized process here that is going to give us some 
security from the very risks that you identified? You 
particularly identified those as risks to the Government, which 
we are legitimately concerned about.
    Mr. Baumann.  Yes, sir. I do think that those risks still 
apply to our program, but the manner in which the projects are 
being packaged and put together present these risks. The 
process itself can be streamlined. In the first Corpus Christi 
deal, Mr. Kumar worked very closely with us and other Navy 
officials. We were 10 months start to finish. The RFP out on 
the street to a signed deal in 10 months.
    Mr. Olver.  I know that the Corpus Christi deal ended up 
with a 4:1 benefit for the Government. Lackland was built for 
it.
    Mr. Baumann.  Yes, sir, that is quite true.
    Mr. Olver.  I realize it was not under the current 
authorization. It has just been pointed out again that it is an 
earlier thing.
    Mr. Hobson.  But it did not wind up with the mix initially 
that it was supposed to get.
    Mr. Baumann.  Yes, sir. When the first Corpus Christi deal 
was packaged, our instructions was to develop 400 units at 
MAHC. The maximum affording housing cost was the rent that we 
could not exceed, and we did that. Since that time, all of the 
service branches and DoD have gone to a zero out-of-pocket.
    Meaning that the rents in our first Corpus deal were too 
high. So, the military families, the E-4s and E-5s, chose not 
to live there because they were a couple of hundred dollars 
out-of-pocket. The Navy has since come back and used the 
differential lease payment authority and brought those rents 
down to zero out-of-pocket.
    Mr. Hobson.  With this data in your mind, why would the 
Navy then go to 11,000 units in one year in San Diego?
    Mr. Baumann.  We did not, sir.
    Mr. Hobson.  I know you did not because I went out and 
visited it and you broke them in part. What I am saying is why, 
if you had only done 400 units, would anybody in their right 
mind conceive of doing 11,000 units in one shot? That is mind-
boggling; is it not? You do not have to get into that. I mean, 
that is the kind of stuff that drives us nuts when we deal with 
this.
    That is why when we get into this, we wonder what the heck 
is going on out there; not just with the Navy. I can show you 
things in other services that are just as mind-boggling as we 
go through this. A part of it is the reason that John and I 
insisted on having some people like you and some other people 
in consulting with these services.
    In my opinion, and I do not know if you had the authority, 
but I was wondering if Randall is back in it too from OSD. 
Nobody was minding the store from OSD as everybody went off and 
started running around doing their thing.
    Go ahead, John.
    Mr. Olver.  The 4:1 with what the Chairman has already 
indicated as sidelines to that, is up to 8:1 in the case of 
Lackland, the two that Mr. Kumar spoke to. Then in the case of 
Carson, the number is 23:1. Now, I do not know what the 
differences are there, in terms of the numbers of new units to 
be provided in the process, and how much was relatively high 
quality that did not require an enormous amount of money in 
reinvestment in order to put it up to standard.
    That is an enormous variability from 4:1, to 8:1, to 23:1. 
That is the order of the ones that have been evolved over time; 
whether we are going to have a lot of them to get up in the 
23:1.
    Mr. Baumann.  Well, I want where somebody pays us to do the 
deal.
    Mr. Olver.  There may well be some where that ought to be 
done. I am not sure, because we are guaranteeing a certain 
amount of money in the bar.
    Mr. Baumann.  That was the point that I was trying to 
raise, sir. That I think that there are still considerable 
risks in the program, and that some of these projects that get 
up to 20:1, we have to scratch below the surface a little bit 
and see whether or not our units are really at risk.
    Mr. Hobson.  How many times does the owner of a property 
come to you, or a developer and say, hey guys, have I got a 
deal for you. I am going to give you the ground. You do not pay 
me anything for the ground, and I am going to give you, going 
in, cash flow because I am going to give you my existing units 
where you get cash flow.
    Believe me folks, you are not going to con me on that. That 
does not happen very often in the real world. You have got an 
owner here who says to you, and not only that, but he says to 
you, hey, do not worry about the equity. We are going to make 
you put up a little, but you know. Not only that, we are going 
to give you a second mortgage, which we are going to guarantee, 
not you.
    We are going to give you occupancy guarantees that you 
cannot get anywhere else. I mean, these can be fantastic deals. 
What I am worried about is our guys are so desperate to get 
this housing that we end up in deals that down the road, and I 
think you all have expressed this, that we all regret that we 
have done.
    My problem is that I do not think the military understands 
the value of what they are giving or what they are making 
available in these transactions to all of you.
    Mr. Kumar.  I am very concerned that we are giving away our 
assets. Unless we do it absolutely right, I believe we are in 
great danger of giving them away or risk losing them.
    Mr. Olver.  At the other end of that, Mr. Chairman, Mr. 
Kumar, at the end of his testimony, made some comments here 
about the announcement of changes in the military bar rates 
going down at Lackland. Well, that was done after a market 
study. I mean, you are all people involved in the market. 
Saying that we ought to do housing closer to the market, well, 
if the market study says that the bar rates were too high for 
the market, and someone else said that there ought to be 
flexibility on size because the market says that the size of 
units actually could be considerably smaller, but we have had 
others testify yesterday that they need more flexibility to 
make larger units.
    So, that was going in the opposition direction, at least, 
as I remembered it. It is pretty hard to keep this stuff all 
peculating in some proper context. The comment that I was 
quoting from you, Mr. Kumar, and you made it in your testimony, 
at the end of it, was that the investing community of 
developers would want protection against bar rates going down 
on future MHPI projects.
    I am not sure why, in all of this process, one has to 
protect against the market. If the market rates are going down, 
you should not need a protection against that, it would seem to 
me.
    Mr. Hobson.  Identify yourself.
    Mr. Kumar.  My name is Sam Kumar of Landmark Organization. 
The market in this case in Lackland and other bases that we are 
talking about actually went up.
    Mr. Olver.  So, that was an inaccurate market study. 
Perhaps you would say that there was an inaccurate market 
study?
    Mr. Kumar.  I think in this case, the members of the 
Department came out and said this was a one-time adjustment 
because all of this time they had been adjusting the bar rates 
on the members out-of-pocket costs. But this time they went and 
did a survey and based the bar rates based on what a comparable 
member in the civilian society will be paying for a similar 
home.
    Mr. Olver.  Basically, I would think that you, as a group, 
would say if the market survey is correct, then following that 
ought to be adequate protection.
    Mr. Kumar.  We would like for her to be indexed with the 
CPI. We are okay with that, sir.
    Mr. Olver.  But there are adjustments that may have been 
made incorrectly or correctly. I do not want to dwell on that. 
It just was a feature that puzzled me. One other thing I wanted 
to comment, and Mr. Chairman you were with the representative 
from Baumann that commented about the San Diego case in the 
Navy.
    I had brought it up yesterday. I was wondering about the 
size of that one. I was told that, that had originally been 
three times as large. In fact there was an effort to basically 
privatize the whole thing at once; 11,000 brought down to one-
third. That satisfied me. Three thousand no longer strikes me 
as a great problem.
    The gentlemen over here from the Homebuilders, Mr. Lawson, 
really addressing I think the Fort Hood situation, is concerned 
about the fact that we are doing 6,000. In the case of Fort 
Hood, the number of people who are stationed at Fort Hood is 
about six times that or some number like that. My colleague 
from Texas would be able to say it.
    If you get down to doing 300, or 600, or 500, you are never 
going to meet, you are never going to get where you have got to 
be. I think that there is a scale in what we are doing here, 
depending upon the needs of the particular location, which 
ought to be doing 20 percent, 30, 25, 33, something like San 
Diego, which is now at one-third, even though that may get you 
to 1,000.
    In the case of out there, I think we are at or less than 20 
percent. There is no way, if you wanted to put six smaller 
deals together, that puts you through all of that process for 
six smaller deals to get 500 out of each, or 1,000 out of each, 
but you still only have 50 carpenters anywhere close by. You 
are still going to have to import a lot of personnel to do it, 
if you want to get at what is the need, the demonstrated need, 
at a major base where there is a large number of people.
    So I am skeptical about the process. I mean, there is good 
reason. I would hope that the standardization process that 
Secretary Yim is trying to do among the organizations would 
bring these forward in some more reasonable way. I do not think 
that just automatically we should cut them down to 500, 1,000, 
or 300, or 400 Lackland-size units.
    Mr. Hobson.  Chet.
    Mr. Edwards.  Thank you, Mr. Chairman.
    Just a couple of comments and then I would like to ask Mr. 
Andersen some questions. First, for the record, as maybe all of 
you know now, the bar reductions are history. That is done to a 
large extent because the Members of this Committee, on a 
bipartisan basis, worked on that.
    Secondly, the Department of Defense has committed $3 
billion of additional dollars in the next 5 years to increase 
bar reimbursement rates. I think you made a very good point. If 
all we are going to get out of this is the military gives away 
free lease on land, virtually free lease on land, for 30 or 50 
years, and we turn over the title of property built at 
taxpayers' expense to private developers, and all we get is fix 
some light bulbs and clean up the kitchen floor, then obviously 
this is a horrible deal. We would not want to be a part of it.
    I would hope that, and assume, a part of any major deal, 
the developer goes in and builds parks for military school 
children, of which there are a lot, and bicycle paths, and 
build communities. I would hope that the structure on these 
deals is such that the developer does not get immediate 
positive cash flow. Frankly, from my laymen's perspective, 
amateur perspective, I want the cash flow to be in such a way 
that you have to be in this deal for quite awhile to see real 
positive cash flow.
    I do not want an incentive to have cash up-front and then 
get out of the deal and leave the taxpayers and military 
families holding the bag. Can I ask Mr. Andersen to come sit at 
the table?
    Mr. Andersen, for the record, you are with LaSalle Partners 
I understand?
    Mr. Andersen.  Yes, LaSalle Partners and Jones Lang merged 
last year. So now it is Jones Lang LaSalle.
    Mr. Edwards.  Like the Chairman, I am trying to keep up.
    Mr. Andersen.  I have a hard time myself with the new name 
being 15 years as LaSalle.
    Mr. Edwards.  For the record, you worked as a consultant to 
the Army, particularly on the Fort Hood RFP. Is that correct?
    Mr. Andersen.  Yes, sir.
    Mr. Edwards.  Then let me focus on Fort Hood, since that is 
one of the major potential pilot projects here.
    Mr. Hobson.  Chet, this is the first RFQ that has been 
offered. This is a major change in a policy. We are trying 
something different here.
    Mr. Edwards.  This is a Request For Qualification v. and 
RFP.
    Mr. Hobson.  Carson was not that.
    Mr. Edwards.  One of the things this Committee has said 
over and over is that we have got to get this right. I agree 
very strongly with that, for all of the reasons, including the 
fact I represent the 44,000 soldiers at Fort Hood. Mr. Baumann 
touched on something that I think is important to a lot of us 
on this Committee.
    I think it is important that we have assurance that we not 
only have a quality project in the first 12 months, but 47 
years out, if it is a 50-year deal. It seems like Mr. Baumann 
suggested that if we just turn the property over to a private 
developer, the military loses control. What if you have a fight 
between the military commander at Fort Hood and 40 years from 
now the property owner says, no, I am not going to fix this or 
that. That is not a part of our contract?
    Have you looked at the limited liability company structure 
that Mr. Baumann referenced. Is that a part of the potential 
structure in the deal with Fort Hood, as you perceive it, or is 
that one of the serious options that you have looked? Whether 
the answer is yes or no, tell me how we guarantee the military 
families and the military commander, quality maintenance 40 
years from now.
    Mr. Andersen.  I assume we are talking about a typical 
limited liability corporation as a form of combining a couple 
of entities earlier, but there are many ways to structure 
partnerships. In any partnership agreement or document that 
ties the Army to the private sector, one will need to stipulate 
certain responsibilities that developer will have for the 
ongoing development and maintenance of the property over a long 
period of time.
    I think it was your point earlier that it is imperative 
that we tie that developer into the success in the project and 
their deliverable responsibilities before they share in the 
lucrative profits that they anticipate by participating and 
contributing to resources and capital. One of the benefits of 
the Request For Qualifications that we expect to achieve is 
that we go into a situation with a highly qualified entity, 
very capable, that can lead this effort from the private sector 
standpoint.
    I think some very good points have been made from my 
colleagues here today. They will likely, I would expect, leave 
that. It gives space for many people in the local community. I 
would expect with the Homebuilders as well. It is typically an 
approach that a master developer takes when they come in to 
lead and engage a major program of this magnitude.
    So, we would structure that partnership to make sure that 
they did not take their cash flow in the early days and leave 
the Army. This is very different from an RFP. An RFP, in my 
experience, is very well-suited to a straightforward, more 
narrow set of circumstances. For those of you who are familiar 
with when you have a very clear user need, and that is 
presented to a number of developers to meet that user's need.
    They can respond specifically to those specifications. 
Typically when you are tying together land owners and 
developers, it is a complex situation. It demands flexibility. 
The landowners typically have various interests. Clearly, here 
the Government has certain interests that traditional private 
sector landowners might not.
    Even in the private sector, the landowner may want to 
participate in the development, participate in certain risks 
and rewards. So, one typically engages in a communication to 
understand each other's objectives, and crafts the partnership 
to address those objectives.
    Mr. Edwards.  So, when you focus on the Fort Hood project 
in particular, you have focused on the idea of structuring this 
in a way where the military commander and the taxpayers still 
have a major voice in saying that we have quality maintenance 
x-number of years from now.
    Mr. Andersen.  In terms of the quality of housing that is 
developed provided, there will be certain standards that will 
be set that the development entity will need to deliver upon. 
There will be certain remedies that will be structured in there 
to accommodate any mishaps along the way. There will also need 
to be some provision made for changes in the private sector 
that may not enable them to remain qualified to continue. So, 
we will have to talk about exit strategies.
    Mr. Edwards.  I think that is important. The military 
commander will not sign off on this deal, and also may this 
Committee have the right to veto any deal made. So, to see that 
the military has a voice, ensuring long-term continuation of 
maintenance, quality maintenance.
    Just one quick question and answer. I want to respect other 
Members' questions on this. In terms of a response, what would 
be your response about magnitude of size on the Fort Hood 
project, and not enough carpenters in the area to make that 
deal work? Even the possible suggestion of dividing it up among 
five or six different smaller companies.
    Mr. Andersen.  My perspective, I would love to go back to 
my local homebuilders and tell them that they can all have a 
piece of this. I am not sure about economies of scale and 
whether structurally that would work.
    Mr. Edwards.  How would you respond to the comment?
    Mr. Andersen.  I think it is important to stay focused on 
what the Army's objectives are at Fort Hood, in terms of the 
period upon which they want to deliver new housing stock into 
the marketplace.
    It is our job to track the private sector in a competitive 
fashion to make sure we deliver. That is going to be the job of 
the private sector partner. They are going to have a mission, 
in terms of a time line and a certain number of units that need 
to be developed or reconstructed over a period of time.
    Their job is going to be to go out and get the appropriate 
resources, capital, and expertise from wherever it can best be 
delivered to meet the Army's objectives. My responsibility is 
in serving the Army and meeting their housing needs at Fort 
Hood.
    It will therefore attract and create a competitive 
situation for that same talent pool or same carpenters that may 
be drawing up other projects, whether they be brought from the 
outside. Again, my mission is to serve the Army and make sure 
that their objective is to get that housing built on time and 
on budget.
    Clearly, it will have an impact. By the way, I would expect 
that this will be a staged development. Things will have to 
happen in an orderly fashion. There are other operating 
requirements that will be taking place. First and foremost, 
that is an Army base. It needs to operate.
    So one needs to marry the real estate objectives with the 
operating mission of the Army there with the financial 
objectives of both the Army and the private sector. Those three 
things will govern I think our relationship with guiding that 
structured contract.
    Mr. Edwards.  Thank you, Mr. Chairman.
    Mr. Scribner.  Could I just make one other comment, if I 
could please, to some comments that were made here to a 
question that you bought up, Mr. Chairman?
    Mr. Hobson.  Yes.
    Mr. Scribner.  Standardization, speed, we are all trying to 
get to a faster program. Standardization, of course, takes 
time. We are learning, like the natural world.
    Mr. Hobson.  You had 6 years.
    Mr. Scribner.  I think it is wonderful that we are 
experimenting. We need to learn from each other. When I worked 
at the RTC, the Resolution Trust Corporation, for example, the 
partnership structure we negotiated for the National Land Fund 
was replicated many times thereafter. There was some 
flexibility into it, but it became a standardized document for 
partnerships.
    I think we need to share amongst ourselves. We will find, I 
think, that certain issues will become standardized. Other 
issues will need to remain customized elements to meet the 
objectives. So, I think where we are, we need to drive toward 
standardization, but maintain some flexibility to customize the 
program. It is a very natural process. I think we will all see 
great acceleration in this program.
    The last comment on speed is we are doing our best to 
respond. We believe in 6 months to negotiate. Maybe as my 
colleagues suggested earlier, negotiate the program at Fort 
Hood. That is something we have in our control to do and to 
deliver to you. Then we look to you, of course, to help us 
streamline the approval process.
    Mr. Hobson.  The problem is I only have right now the 
current law. You guys take 6 months. I have got 30 days, with a 
very limited staff, to try to review what you guys have taken 6 
years, maybe sometimes, to get to. I do not think that is quite 
fair. So, we are going to try to change that a little bit.
    Mr. Scribner.  Those are difficult stacks to go through.
    Mr. Hobson.  I cannot read those. Well, I read pretty fast, 
but I am not going to read them. Let me just say one thing that 
I wanted to attack. One of the things, and I do not mean this 
to Fort Hood or anyplace else. The Army officer has a different 
objective than we do. His immediate objective is housing.
    I do not care what it cost, I have got to get it done. Our 
goal is a little different than that. We have to meld those 
things together. We have to get him that housing. We have to 
also get it to him within the constraints of what we are doing. 
That is one of the reasons they have gone to the private 
sector. I do not mean that as a lecture.
    The officer's mind-set and what he has to do is different. 
He is a war fighter. He has got to prepare his people for 
battle. We have to prepare his housing. It is just different. 
The economics of it makes it different. If he could, he does 
not care about the economics because his job is to get that 
housing. On the other side of it, you guys have to guide them 
into the right program. Todd.
    Mr. Tiahrt.  Mr. Andersen, do you have to comply with 
Federal Acquisition Regulations as a part of the process? When 
you get a request for a portfolio or a quote, do you have to 
comply with the FARs? I assume that is why you are having all 
of this paperwork here.
    Mr. Andersen.  That is not my paperwork, by the way. That 
is paperwork on the RFP.
    Mr. Tiahrt.  In going through the Request For Qualification 
process, do we have to comply with the FAR?
    Mr. Andersen.  No. I actually completed a project.
    Mr. Tiahrt.  What are the requirements that you have? If 
you build a house in the private sector, you have to abide by 
the building standards. You get a set of blueprints and you 
have a one- or a two-page contract to build a house.
    Mr. Andersen.  I expect these homes were built to market 
standards.
    Mr. Tiahrt. What are the requirements that you have to fill 
when you do 3,000 housing units?
    Mr. Andersen. From a regulatory standpoint, Barry, I am 
going to ask you clarify that.
    Mr. Tiahrt. Well, you are asking to streamline the process 
here. There is something that drives the length of time.
    Mr. Andersen. It is a set of requirements.
    Mr. Tiahrt. What are those requirements?
    Mr. Andersen. What I would like to do from a regulatory 
standpoint is to get back to you because I am not sure that I 
can answer that accurately. So, I apologize, but one of my 
colleagues here would be better able to respond to that if you 
would like. Why don't you, Barry, because you will be accurate. 
I do not want to misstate something. This is Barry Scribner, by 
the way.
    Mr. Scribner. Barry Scribner from Jones Lang LaSalle.
    In terms of the Request For Qualification process, it is 
under the FAR for the procurement piece of that. Once you 
finish the procurement end of that, and you have selected the 
partner, then the negotiation begins. The requirements, unlike 
the RFP, are not nearly as severe as they are under the RFP.
    Mr. Tiahrt. Well, the RFP is probably structured so that 
you have to make certain sections that come out of the FAR. It 
probably goes A through I, or A through U, or the certain 
sections that apply, plus addendums. I think that is a part of 
the process that you face that causes this to be ten-fold. That 
is probably one of the biggest ten-folds in the response. You 
have got to go through all of those requirements.
    We have heard several suggestions that we cut down the 
time. It was Mr. Holloway who suggested that we cut down to a 
120 days.
    Mr. Scribner. It was 120 days.
    Mr. Tiahrt. It is going to take a different set of 
requirements to meet 120 days. I would be curious, what would 
those set of requirements look like in comparison to the 
Federal Acquisition Regulations? If you have these cumbersome 
regulations to try to build a house, and you looked at the 
private sector, and you get a set of blueprints.
    You know what the building standards are. The County has 
them. Every contractor has to pass a test to use them. So, you 
have got a set of blueprints and a two-page contract. Then you 
go build a house v. 8,000 pages of Federal acquisition 
regulations, plus blueprints, plus standards, plus military 
standards, and we could go on forever. So, I would be curious 
at what it would look like to meet 120 days. What set of 
requirements would you expect the Government to use.
    Mr. Hobson. You do not have to do it now, but that would be 
interesting for all of us to see just some sort of mark process 
about what that would be. I am sorry.
    Mr. Tiahrt.  Let me just say this. I have watched Northwest 
Wichita develop 8,000 family housing units, individual homes, 
over the last 5 years. It was multiple contractors. It took a 
long time. It progressed in a logical manner because of zoning 
and other reasons.
    Mr. Scribner. I do not know how you can go with 11,000 
units, one developer, and expect them to go in some type of 
smooth process. I think that segmenting this makes a lot of 
sense to me. Four hundred living units set in one effort I 
think is sort of stretching. I do not know you can get 3,000 in 
a logical manner without involving multiple builders.
    I think that is what we were looking at with the National 
Homebuilders. It is very difficult to get one guy to lead a 
bunch of independent businessmen like that. So, I think that 
sort of limits who can provide the services. So, I would agree 
that we need to break it down into small units. So, I would 
agree that we need to break it down into smaller units.
    Mr. Tiahrt. My real question would be how do you make a 
120-day bid process? I would like to see how we do that and 
still get some kind of confidence that the system is going to 
work.
    Mr. Andersen. Well, just a brief comment. The FAR, when you 
go with an RFP process, the FAR says you have to lay out all of 
the requirements. With the RFQ, still operating under the FAR, 
but a different section, we have a document about 50 pages 
thick that establishes the qualifications that we expect for 
the developer.
    Once that procurement phase is done, then you can apply the 
market standards. It is not that the FAR so restricts you in 
that piece of it, it is more that the FAR, in order to produce 
an RFP covering all contingencies, that requires a lot of time 
to prepare, and it is very costly for developers to ensure that 
they have answered each one of those specifications. It has 
more to do with the specifications required under an RFP.
    Mr. Tiahrt. We are going to have to try one. There are a 
couple of them. That is why we are looking.
    Mr. Andersen. And in fact, it is the local building codes 
and zoning. I just wanted to clarify, of course, every 
community has their own building codes and zoning regulations 
which govern the private sector. I would expect that would be 
the main governing party to the quality, the construction, et 
cetera that we are looking for in the marketplace.
    So, I just wanted to clarify that there is ongoing out of 
these governments in the local communities that will keep the 
stands to wherever you expect them to be.
    Mr. Tiahrt. Yes.
    Mr. Holloway. A couple of comments, please, if you would.
    Mr. Hobson. Your name?
    Mr. Holloway. Gary Holloway, thank you. We are talking 
about the size of the projects. One of the things that we have 
to focus on in true privatization is that in order to have a 
cohesive agreement, not only between the military and the 
developer, it is important that somebody take over that 
project. Meaning, somebody is going to maintain those units.
    A part of the problem is not so much in the development, as 
to whether you are going to develop 11,000 new units and how 
that process goes, but it is more important as to who is going 
to run the show while those units are in place today; whether 
it is a redevelopment program, whether it is a new construction 
program.
    A part of the things that the Chairman pointed out, which 
is the thing that baffles me a little bit, the ground is 
already there. The revenue stream is already there. It exists. 
The question is why are private developers, such as myself and 
some of the other large developers in the country, and even the 
small developers for that standpoint, we can go out and do what 
we do. We can build thousands of units a year. That is not a 
problem. We can do it efficiently. We can do it at a high rate 
of speed.
    Mr. Tiahrt. All of that garbage and it goes under this 
stuff.
    Mr. Holloway. Well, a part of the problem is that the red 
tape that is created, whether it is created between the 
military, the consultants, or the Government itself is a part 
of the problem that you have to look at. In the private sector, 
when we go out and we buy a piece of ground, we can be in the 
ground, if we are moving at the right pace, probably within 4 
to 6 months. That is a question going through zoning and 
everything else.
    Mr. Tiahrt. Four to 6 months, you must really know how to 
do it.
    Mr. Holloway. Well, we do it pretty well, sir.
    Mr. Tiahrt. A part of the problem is that it would last 100 
years. Every time somebody tried to do something wrong 
according to the Government, they wrote a regulation to prevent 
it from happening again. So, we have 100 years' worth of 
regulations for millions of instances of something that could 
have gone wrong.
    The Wright Brothers' contract is a two-page contract to 
build airplanes for the Federal Government. Just to hang 
engines on the tankers right now is a 5,000-page contract. It 
has gotten out of control. So, that is why I am trying to find 
out how do we streamline the process? Is it waivers or new 
legislation? That is what I want to get to.
    Mr. Holloway. Two things. It is very important. The process 
has been an on-again, off-again process over the last 5 years. 
I think that has been a part of the problem for all of the 
people trying to get into the business. They have had a hard 
time adapting and changing, and making a true commitment to 
this.
    I think what you have to realize is we are looking at 
probably somewhere between a $30 billion and $40 billion 
program here to really go and do what has to be done to our 
housing across the Country. To do that, you cannot do that with 
pilot projects with 400 units at a clip. We have to realize 
that these are big initiatives.
    These are big programs. The people from the private sector 
are used to dealing with big projects. They can step in. They 
can maintain. They can operate. They can do the things that 
need to be done. What we have to do is kind of clear the red 
tape a little bit and make room for people do business. Thank 
you.
    Mr. Tiahrt.  Thank you.
    Mr. Hobson. Sam.
    Mr. Farr. Thank you, Mr. Chairman.
    First of all, I want to thank you and Mr. Olver for having 
this meeting. I think that this is really essential that we 
spend a lot of time this year trying to deal with the issues 
that Mr. Tiahrt just talked about. There is a process going on 
now about reinventing Government and trying to figure out how 
we make it more effective and efficient.
    Mr. Chairman, let me tell you how I got interested in this. 
I was a County Supervisor and developed all of these zoning 
laws. I was very involved in a lot of environmental issues 
because that is what my history is about. One thing we never 
knew anything about, from the Monterey Peninsula, was this 
great big piece of real estate, 28,000 acres, called Fort Ord, 
which had 33,000 people on it.
    They way the military did it is that just did it all in-
house. Essentially, they have built--where the contracting is 
left from here in Washington, D.C., to some contractor who 
would come in and build the housing there, and not do anything 
local because the Federal Government owned the land. The 
Federal Government is exempt from zoning.
    The Federal Government is exempt from local code standards. 
The Federal Government built some houses. Do you know what? 
During the 1980s they built more housing at Fort Ord than at 
any other base in the United States. Then the BRAC closed it. 
So, all of a sudden, the local communities got in and looked at 
it. They said, my God, look at all of this stuff out here. 
Guess what they also said?
    We could have built this housing a lot better, a lot 
cheaper, because of the same reasons that you talked about. The 
Government owns all of the land. You have got all of these 
exemptions from everything. You can do it anyway you want. I 
think what is coming is a sense of guess what? The military is 
stuck with it.
    It is a thing now I have got to pay for all of the 
incredible clean-out. They have all kinds of asbestos and lead. 
You cannot even hook up a house with water because the pipes 
are different. You cannot get fire insurance because the 
windows are the wrong size. Now, these are houses built in the 
1980s. They look like the houses right up there.
    Mr. Holloway. They are still sitting there; right?
    Mr. Farr. They are still sitting there vacant some 8 years 
later, with the windows all broken in them. Now, what the 
private sector has come in and said, because with base closure, 
all of the local contractors say, we want some of the work. 
Now, some of the things that have come out of this is we have 
been able to go out to every contractor in a 100- mile region 
and say, are you interested in any Federal contracts? Put 
yourself on a list.
    And if you need the upgrading skills in order to bid on 
this, guess what? We got the community involved to say, we will 
train them. Just tell us what kind of skill level you want to 
train to. So, we have got all of the labor unions. We got all 
of the community colleges. We got all of the contractors. 
Everybody is in love. We think, why did we not ever do this in 
the first place? So, my interest in this, and I think it goes 
to this whole discussion.
    Mr. Holloway just opened up my net. We did not think about 
it. We are not the only Committee that deals with housing. 
There are governments out there that builds student housing. 
The Federal Government out there builds housing for Forest 
Services, for Park Services. We have HUD that builds housing.
    We go out to the private sector and have HUD do it. We 
ought to look at all of these tools that the Federal Government 
is using in their different agencies and figure out what is the 
best tool? Housing is housing, regardless of who you are 
building it for. You ought to build it, one, to local 
standards.
    You have to have the quality of life that Mr. Edwards 
talked about. You developers know that. You are willing to put 
in trade-offs. In this case the trade-offs are really cheap 
because, again, we own the land. I think what you are on to, 
Mr. Chairman, is we have to create a system that is less top-
down oriented, where ``one size fits all.''
    I do think we have to have some standards. I agree with 
you, but you have to also allow local control. You are not 
going to want communities with higher building standards, and 
higher quality standards. They are going to require that the 
Government be a good partner, a good neighbor, and build to 
those same standards.
    What strikes me is if you add this all up, we ought to be 
building the best housing in America for the military. We have 
more to offer than the private sector has. There is no reason 
why we cannot turn this system into where we are looking, we 
are apologizing for the kind of housing for our military, where 
we cannot be the envy of the housing market.
    I think you are capable of doing that, Mr. Chairman. I do 
not have any specific questions. I just want to follow-up on 
Mr. Tiahart. How do we get there from here? I would love for 
the panelists to come together with this group, and maybe 
others can get into more specifics. Mr. Yim, yesterday, I hope 
you all get a copy of his testimony.
    In fact, maybe we can provide it for you. He has some 
lessons learned in here. He quotes right out, 12 authorities 
that are given to the military, Department of Defense, through 
existing law, which are up for reauthorization. He points out 
that these tools, these are incredibly effective tools and 
incentives.
    I think we need to review those along with all of the other 
regulations to see how we can reinvent housing for the military 
that will lead us to a path of having the best of housing in 
this Country, rather than the apology for housing in this 
Country. Thank you, Mr. Chairman, for doing that.
    Mr. Hobson. The other thing that is troublesome in this too 
is this idea that the residual here, I mean, is a problem to 
lenders and stuff. If you build this right, for example, San 
Diego. If you built to the community standards that he is 
talking about, this may not be true in every place, but in a 
lot of these places, the residual is probably the greatest 
value you have got, if you built it right.
    You are not going to be stuck with a bar. You will really 
at the community. That will have gone up probably dramatically 
as it is more difficult to build things some places. So, this 
idea, and I have had people tell me, oh, we have got to have 
everybody's guarantees because of the residual, that is just, 
you know, guys, that does not pass the smell test in some 
places.
    I guess that is what troubles me and one of the reasons I 
try to get consultants in here along the way is to make sure 
that because of the officers deal is get it. The problem is we 
have to look beyond that and say, well, when we got it, where 
did we get it? Where do we go when it does not work, or when we 
are out of it, or when we want to get out of it. So, we have to 
look broader than he looks or she looks at her current command 
situation. Mr. Boyd.
    Mr. Boyd. Thank you, Mr. Chairman.
    I would just like to say that the hearing was very helpful 
and informative for me. I probably knew very little about the 
tales of this issue. It has been very helpful, very 
informative. Maybe you could help me to understand. I am 
interested in this whole discussion about the maintenance.
    That is a key. I think several of you addressed that issue. 
Maybe you can help me understand the structure we have here. I 
know we have asset managers or managers that the services 
contract with, like Mr. Andersen and your firm, and Boston 
Capital.
    My question is when those folks contract with a developer, 
for instance, Mr. Baumann, you are the developer and Mr. Kumar. 
And you guys ultimately are responsible for the maintenance, I 
assume. Is that correct? I got a nodding of heads here, Mr. 
Reporter.
    So, Mr. Goldstein, why do you not take the mike? I was 
interested too in this discussion that has gone on here today 
about the size of the development; that we can manage it in the 
private sector. Mr. Andersen certainly addressed that. Mr. 
Holloway did.
    What is your idea about the effect in size of that 
development? If you got 11,000 units, how do we break it down 
in a way to get done?
    Mr. Goldstein. Jeff Goldstein at Boston Capital.
    Congressman, would you allow me to answer your first 
question first with regards to upkeep? I think it is an 
important issue to hit on and I do not want to lose sight. What 
an organization like Boston Capital would do would in fact be 
an asset manager.
    In essence, our thought on this whole concept is that there 
would be a property manager; people who would be responsible 
for collecting rents, and ensuring that the properties are kept 
up. The role of the asset manager, in essence, would be the Air 
Force or the military's representative to ensure that things 
are happening correctly. That the property is in fact being 
kept up.
    Mr. Boyd. What about the reserve accounts? What I mean is 
who controls the reserve accounts for repairs, maintenance, 
rehab that has to be setup? Is that you, as an asset manager, 
or is that the guy down here, the developer?
    Mr. Goldstein. Well, I think the ongoing maintenance of the 
property is controlled by what I will call the lower tier, by 
the property manager. The ongoing maintenance, the reserve 
accounts, the long-term capital needs are controlled by the 
asset manager.
    Mr. Boyd. I am sorry to interrupt. Did we, or the Air Force 
in this case, and then ultimately the Department of Defense 
looks to?
    Mr. Goldstein. Correct. I would like to add two things to 
that. One is I think it makes a lot of sense for an asset 
manager to be compensated on a performance basis. That in fact 
if the things that the Air Force has contracted out for do not 
happen, then the asset manager does not receive compensation.
    Furthermore, to a question that I think some of the other 
Members asked earlier, a partnership agreement or the agreement 
that governs a limited liability corporation would in fact 
specifically state how cash flow would be distributed.
    In fact, a partnership agreement can clearly state that 
unless the following things happen, no cash flow is distributed 
in any given year. So, there are many ways to build in 
protections from within any transaction to ensure that.
    Mr. Boyd. You might say, you have done a good job. We might 
give you a little reward.
    Mr. Goldstein. Right.
    Mr. Boyd. So, would you like to tackle the second question? 
That is the size or would you prefer somebody like Mr. 
Holloway?
    Mr. Hobson. He already said it.
    Mr. Holloway. I have a comment on the maintenance too, if 
you get a chance.
    Mr. Hobson. Let me just stay around for a second.
    I would like to let this go and I would like to come back. 
If the Members want to come back, I think this is a good 
learning experience for everybody. If you all do not mind, why 
do we not go vote. I think it is just one vote. I would like to 
suggest we go vote on the rule. Then why do we not come back 
just as fast as we can and let everybody get their questions 
answered, if you all do not mind.
    I think this is good for us and I hope it is good for you 
that we do it. Is it all right with you guys?
    [Chorus of ayes.]
    Mr. Hobson. All right, we will do that.
    We will go vote right now and then come back.
    [Recess.]
    Mr. Hobson. The Committee will come to order.
    Is there anybody looking at, I do not think these are 
particularly creative findings and techniques, but reads his 
possible owners, investors conduit financing techniques, loans, 
Fannie Mae? There are all institutions out there. Some of those 
are getting a little more inventive.
    There are pension funds. There are companies who buy, for 
some long-term investments that are a little lesser than what--
used to do in some of their pension or investment funds, that 
might have an interest in the product. They might make some 
different thoughts to it than what we have been doing. I know 
we tend to look at civic cases.
    The other thing I would like to throw out to you all is 
there are some, and this is one of my pets, historic 
preservation, the tax stuff that I think is still there. There 
are a number of historic properties that the military has. When 
you went around and looked at some bases, there were a whole 
bunch of buildings. This is different than what we are talking 
about here.
    There is a whole number out, but since you all are here, I 
am going to use the opportunity to get this out. There are 
70,000 buildings in the Army alone that could become available 
to get on the historic register. If those all get on the 
historic register, well, they all will not get on. It is a 
major problem that the military is going to have to begin 
looking at.
    The Navy has a number that is not as high as that. The Air 
Force has a few less. They inherited them mainly from the Army, 
but it is a real problem that is out there. A problem is an 
opportunity for creative business persons. So, we need to look 
at that.
    Mr. Little. Mr. Chairman, can I respond?
    Mr. Hobson. Sure. Come up and tell him who you are, because 
he gets upset if you do not get on the record. And he is the 
big guy. You do not mess with him.
    Mr. Little. I am Wallace Little. I am with Ernst and Young. 
I just wanted to respond briefly to the Chairman's comments 
about financing and our responsibilities and our work with the 
Department of Defense, and working on the overall designs of 
programs and the legal documents. That is one of the things 
that we pay a lot of attention to. That is the efficient access 
to capital. The primary purpose of accessing capital 
efficiently is simple.
    Bring down the cost of money, which translates into lower 
cost housing or more housing for the Government's dollar. In 
terms of the techniques, there are a number of techniques that 
we have been looking at. We have seen transactions that have 
gone through the secondary mortgage markets, through single 
asset securitization transactions.
    We have looked the REET, as you mentioned, the potential 
for REET structures which is a securitization of equity, 
capital coming from the markets.
    Mr. Hobson. What about the housing authorities.
    Mr. Little. Using local housing authorities to use their 
financing and legal capabilities to provide finance. That is 
another opportunity. Their taxable; there might be 
opportunities to tax exempt the laws, if the rules allow tax 
exempt financing in that connection.
    Again, there are a number of ways to skin a cat and to 
finance these transactions. What you have been talking about, 
for example, the Fannie Mae transaction, using a secondary 
mortgage market institution, is to sort of cut out the middle 
man, the traditional retail lending commercial banks and going 
right to the capital markets and accessing the capital, the 
pension funds, the life insurance companies, the banks, and 
other large financial investors who are interested in this type 
of funding, housing.
    Housing has become more and more the preferred financing 
and investment vehicle, not only within the United States, but 
throughout the world. Just to close my remarks there is that 
yes, indeed, financing is very important. There are extremely 
creative, efficient, and low cost capital methods of bringing 
financing to this dramatic program. We have paid a great deal 
of attention in conjunction with our team membership with the 
Department of Defense to make that happen.
    Mr. Hobson. Thank you.
    John, when we left, you were talking.
    Mr. Boyd. Yes, sir.
    Mr. Hobson. Go ahead. Do you want to finish your questions?
    Mr. Boyd. Did you finish?
    Mr. Hobson. He was in a second question. Maybe he did not 
want to, but we are going to make him anyway.
    Mr. Goldstein. Jeff Goldstein, Boston Capital.
    Just as I sat down before, would you mind if I go back one 
and answer your question, Mr. Chairman?
    Mr. Hobson. Yes.
    Mr. Goldstein. One of the financing techniques that we have 
been looking at that we think makes a lot of sense is utilizing 
bonds with credit enhancement. By using a taxable bond with a 
credit enhancement, in essence we can do two things. We can 
lower the cost and we can stretch out the amortization.
    By stretching out the amortization, we reduce the annual 
debt service payment. It would allow us to, in essence, finance 
more. Secondly, as it relates to historic credit, it is a 
wonderful opportunity because, in essence, we can bring in a 
whole other class of investors whose only economic benefit is 
the receipt of this tax credit, and will not share in things 
like cash flow, appreciation, and things like that.
    Mr. Boyd. Well, they actually cannot.
    Mr. Goldstein. Absolutely.
    Mr. Boyd. I have never liked deals that just rely upon tax 
credit. I like cash flow.
    Mr. Goldstein. And to be perfectly fair, as a partner in a 
partnership, they have to have some economic interest in the 
partnership.
    Mr. Boyd. Right.
    Mr. Goldstein. So, thank you for allowing me to answer that 
question. To get back to, I think, the last question on the 
table, some of my colleagues here have answered very well the 
question as to how big or small a development can or should be.
    I think John Andersen made a good point. Really, it is up 
to the Armed Forces to tell us what in fact it needs. If I have 
a need to get 11,000 done, that is fine. In fact, maybe we 
should not do it all up-front, but we do have to master plan it 
up-front. We do have to understand what the ultimate goal is 
and let us decide how quickly we can do it. Maybe that means 
parceling it out to four or five different developers or 
development companies.
    Mr. Boyd.  And that is not all bad because you get some 
competition from those people.
    Mr. Goldstein.  That is right.
    Mr. Boyd.  They are going to present their product a little 
better than the other guy, a little faster.
    Mr. Goldstein.  That is right.
    Mr. Boyd.  A little more quality and things of that sort. 
So, it will vary. I guess somebody said it before. These are 
not going to be cookie cutters, but we can standardize some 
methodology, some semantics, and some procedures to make it 
more efficient. Each one of these is going to be different.
    The base is located in a different location. For example, 
you are not going to build in San Diego the same type of 
facility that you are going to build at Fort Hood, although 
they are going to both be substantial projects. The communities 
are different. You have different pressures in each community. 
Some of them will be the same. It is hard to find anybody to 
get all of the crafts done in San Diego because they have so 
much business.
    Mr. Goldstein.  Right.
    Mr. Boyd.  It is hard to get them to do it. If you go to 
Fort Hood, it may be a different story that they have got all 
of the business for the local community, if they need it. Where 
do you find the crafts for the subs to come in to do that work. 
When you start importing subs from elsewhere, then that creates 
another problem.
    So, these are all things. So, it can be cookie cutter to an 
extent, but I do not want to get cookie cutter to something I 
just, you just brought me a couple of reprogramming, that where 
some people in the military tried to use cookie cutters and I 
sent them back because the cost almost doubled in some of these 
cooker cutter approaches. I said, I am not going to approve 
that until you explain to me how you screwed up.
    Your answer was it was a cookie cutter. I said, it is not 
his fault, because that is what they gave him. I said, I want 
more on that before we sign off. Now, it is not a big deal, but 
it sends messages. Thank you.
    If I could use Mr. Holloway.
    Mr. Hobson.  Yes.
    Mr. Boyd.  I wanted him to speak to the maintenance issue.
    Mr. Hobson.  He takes care of student dormitories. He has 
got big maintenance problems.
    Mr. Holloway.  That is true. Fortunately I can say that 
student housing today is a lot different than when you lived in 
it and certainly when I lived in it. Addressing the maintenance 
issue I think is the key factor to everything about 
privatization. As I mentioned earlier in my testimony, there 
are a thousand developers that can build this, from small 
homebuilders, and then you could put a 50-unit project, two 
large developers coming in and doing 300, 400, 500 units to 
thousands of units.
    It is not a problem finding that. The problem is the 
cohesiveness of making sure that once you go to a privatization 
and those assets are moved to a central bank that, that central 
bank is knowing what to do in protecting those. I agree with 
Jeff 100 percent that a master plan should be put in place, but 
it should be put in place with one owner/developer who can then 
sub out different sections of the project to bring other 
developers in.
    In fact, when it gets into cash flow and asset management, 
it is one team's responsibility for them to oversee. We 
nationally manage student housing, as I mentioned earlier, at a 
level unlike anybody else. We will see close to 200,000 
maintenance requests a year. We respond to those requests, and 
complete 94 percent of them within 7 hours. That is an 
unbelievable number.
    We complete 99 percent of those within 24 hours. What I 
personally saw just at Fort Lewis was unbelievable. Sitting and 
talking with all of the different groups on every base that I 
have been to and every Fort that I have been to, I take the 
time to sit down and hear what the soldiers have to say. Their 
response time on average to get a toilet fixed is 60 to 90 
days.
    Remember, they are out there, now deployed, and their 
spouse is sitting at home worrying about this. Who are they 
calling? Who are they getting to? It is that piece of the 
business that is so important. Maintaining a good quality of 
life to them is more important than anything else. Creating a 
community for them is really the key.
    We believe in our business that we are not developers. We 
are long-term owners of properties. One of the statements that 
came up here earlier was that we are looking at projects that 
are 50 years old. You cannot be in a project for 50 years and 
not have your people be a part of that community and be a part 
of understanding where this thing is going.
    I mean, you are there for the long-haul. Most of the assets 
we have owned since I started my company and are still on my 
company's books. Granted, we did sell some a couple of years 
ago when the market was very hot, but it was a good time to 
take some money off the table. For the long-play in our student 
housing business, and that is a long-play for us, we understand 
that maintaining that asset is the key to the game.
    We do it better than anybody. We have proven it in the 
marketplace and we understand it. The Chairman is right. If you 
can maintain student housing, then you can maintain anything in 
the country. We, on average, will turn over 75 percent of our 
rooms in a 2-week period in the month of August. We totally 
repaint, recarpet, refurnish everything that has to be done in 
those units to bring them back up to the same quality and 
standards that we will accept around the country.
    If you can think about the magnitude of that, it is almost 
near impossible. But in a 2-week time frame, we turn around 75 
percent of the 33,000 beds that we now own. So, that is in a 2-
week time frame. So, maintenance is the key. We stress it. We 
believe in it. Unlike just being a developer, we are long-term 
owner, and that is the key. Thank you.
    Mr. Hobson.  Thank you.
    Mr. Boyd.  Mr. Chairman, I have one. I really would just 
ask Mr. Lawson. Mr. Lawson, you opened a can of worms about the 
size of the units. Do you have anything that you want to add 
after both the asset managers and developers or are you 
comfortable?
    Mr. Lawson.  No. I am a lot more comfortable when I hear 
they are looking at timing and involving other people, maybe in 
smaller parcels, over a long-term period of time. I am also a 
little uncomfortable in one answer that I heard. In recognizing 
that the properties and the projects could get so large that 
they cause an apparent conflict in your economy or your 
locality between your current builders and the fellow coming in 
from out-of-town paying big Government wages.
    Mr. Hobson.  But that is just the nature of the beast.
    Mr. Lawson.  And that is the nature of the beast.
    Mr. Hobson.  We have got a facility, for example, in Chet's 
district that has got 40,000. It is a city. It is going to 
have, whatever it does, it has an impact upon that community. I 
do not think they want it pulled out. They may complain about 
certain parts of it from time-to-time, but it is just the 
nature of it.
    I do not know. It is going to be different again in each 
one. There are some in the 400-unit deal. There is question in 
my mind that there are a lot of builders that can build that. 
In the 1,000-unit a year, that is a big deal in any town.
    Any major community, 1,000 units by a developer is a lot of 
units. So, I do not know. We just have to watch how we do it. I 
think most of us come from communities where we like to see 
local input into it. But you are right, it does have an affect.
    Mr. Lawson.  If I could take just a minute, there is 
another, I think, inherent issue that ought to be put on the 
table.
    Mr. Hobson.  That is why we are here. We want to hear it 
all.
    Mr. Lawson.  When I heard Mr. Baumann talk about the Navy 
wanting to protect its assets, which I am quite sure it does, 
but when I have discussed the housing issues in my area, I find 
that the people that the Navy is most interested in housing are 
certainly the lower rates where, in essence, even with the new 
increased housing allowances, they cannot go out and rent, at 
market rates, for those allowances the decent housing they 
need.
    So, if in fact I am in to work with the Navy to product 
that housing at this rent level, it is not economic. It becomes 
economic because into this partnership, the Navy has to put an 
asset in. In essence, it has to put it in at less than its true 
value because we have got to subsidize these sailors because we 
do not pay them enough. That is the core of this issue.
    In given market areas, it is impossible for some of our 
younger rates to afford decent, sanitary housing on what we, 
the U.S., pay them.
    Mr. Hobson.  That is why they buy down. I call it a ``buy 
down.''
    Mr. Lawson.  A ``buy down.''
    Mr. Hobson.  That is basically what they do.
    Mr. Lawson.  Yes, sir.
    Mr. Olver.  In the case of Fort Hood, my recollection is 
that in this 6,000-plus project, that there is actually only a 
net of 400 new houses in that; a net of about 400. I do not 
know what the net is. It varies all over the place in different 
instances. The other 6,200 or thereabouts are rehab, 
reconstruction of existing housing where the housing is base an 
asset that is worth doing.
    So, it is not as if this new builder is coming in. I 
recognize that you and your comment about the wages that are 
being paid. It is not as if there is a huge new amount of 
housing in any of these, I think. There will be some in a 
number of them, but not primarily. Primarily, what we are 
trying to do is to find a way of maintaining and upgrading 
housing that is there, which we are not able to do on the 
regular market.
    Mr. Lawson.  I am not aware of the details, and just how 
much construction, and how much rehabilitation there is to go. 
It is just the question of most of our membership is national 
association. Even if it is rehab, that is probably way beyond, 
unless it is broken up by a ``master developer,'' way beyond 
where many of our members would be able to participate. Our 
membership, when you drive around your community and you see 
the 6,000 houses that got produced, that is who did it. They 
did not do it in one big 6,000-unit deal that somebody 
mentioned. There was a series of them doing that portion of it, 
which they did best.
    Mr. Hobson.  Why do not you guys from the old Ernst and 
Ernst, E&E, come back up. Mr. Baumann, Boston Capital, and 
Jones Lang LaSalle. I am going to read the questions and I want 
you to answer.
    What is the timetable from conception to ground breaking 
under the RFQ process? That is for Boston Capital and LaSalle.
    Mr. Goldstein.  Jeff Goldstein of Boston Capital.
    The process obviously would vary from base-to-base 
depending on size, specifications, et cetera, and so forth. But 
I think what I had said in my testimony is that it is certainly 
conceivable to, from the day of inception of the idea, to a 
construction closing to be 12 months or less.
    Mr. Hobson.  What is the timetable from conception to 
ground breaking for the RFP process?
    Mr. Little.  Our experience is based upon two transactions 
that have been awarded and gone to final contract closing, and 
then other projects that are in progress. From the start of the 
RFP process to actual award, we are talking about a 1-year 
period. Our experience tells us, however, as I have indicated 
in my prepared remarks that we think that particular period of 
time can be cut in half with improvement in the process.
    Mr. Hobson.  Who could consult on Fort Carson? What was 
their experience with the FAR at Fort Carson.
    Mr. Baumann.  That was a project for which we had an 
involvement. The experience with FAR was that the initial 
procurement, and again I am not a FAR expert and I was not 
involved in the actual underlying procurement issues, but there 
were two basic procurements.
    The first, Fort Carson I, if you will, there was a protest 
by an unsuccessful bidder. He raised certain objections to the 
process. I am not familiar with the details of course. His 
protest withstood in the Court of Claims and the process had to 
be started all over again. Then we had Fort Carson II, if you 
will, and that process took a little less than 1-year from 
start to finish.
    Mr. Hobson.  As I understand it, Fort Carson II is doing 
pretty well.
    Mr. Baumann.  Fort Carson II we think is an extraordinary 
success, yes.
    Mr. Hobson.  I just want that all understood. Fort Carson 
is a different program than what is being proposed for Fort 
Hood and for Fort Lewis. So, we are trying some different 
things here to see which is the way to go. Some indication was 
given I think earlier, that the RFP process, or it is the RFQ 
process could be more expeditious I think, or less problem 
because you did not have to mess with the FAR as much.
    My only concern in that is that one of the reasons why I 
want to go through it is that I do not truly, well, I want to 
be sure at the end of the day when we do this. I do not know 
how are we going to have the expertise to do this. This is the 
problem that I discussed with the members here. I have got to 
keep the numbers in front of me.
    In the RFQ process, and we are trying to find patterns 
again. I am not sure at the end of the day, at that level, that 
we know what our numbers are. We have some thoughts. We have 
had a beauty contest in which we evict somebody. In the RFP 
process, we know at the end of the day what our numbers are. 
Whether we got the right deal or not is another story.
    At least we know where we are. If we are taking the same 
amount of time, again, I want to go through this. I am trying 
to lay out what my concerns are, or what our concerns are, so 
that when we get done with all of this and we begin to look 
back at what we do, we have some concept of where we are. I am 
pretty satisfied now that Mr. Griffin took to heart some things 
that we talked about, about a year ago.
    Mr. Lawson.  I am Lawson.
    Mr. Hobson.  Yes. And I can tell from your testimony that 
you two have talked to each other.
    Mr. Lawson.  Yes, sir.
    Mr. Hobson.  But I was concerned about the limited 
liability corporation and its ability not to become an owner. 
Now, I think you have satisfied that. So, I am pretty satisfied 
with that. I am not set on how we are going here. I just want 
to be sure that we are not buying into something that we all 
later say, gee, we messed up on that one.
    So, I am going to be a little concerned as we go through 
this because I know where we wind up with RFP. I am not sure 
where we wind up with the RFQ. I am worried about delaying 
getting into things because of the RFQ. We all hope it works. 
That it gets it done faster, but I am not sure about that.
    Mr. Andersen.  Just a report on the timing today on the RFQ 
process, the first phase is the solicitation of interest. That 
is a 60-day period. That is what we experienced at both Fort 
Hood and Fort Lewis. You get the responses. So, 60 days for the 
first phase.
    Then we go into the evaluation phase wherein those 
responses are evaluated to select the entity that we would go 
forward and negotiate. That is from tentatively a 60- to 90- 
day period. While currently the party has been selected, we 
have not announced it.
    Mr. Hobson.  What do you mean you have not announced it? 
Somebody did.
    Mr. Andersen.  Apparently, there was an article on it, but 
it had not been formally announced. That is intended to be a 
60- to 90-day period. It is very important that we stay on 
schedule. One of the messages that was of this old meeting when 
we started the initiation of it, was the reliability and trust 
we build with the private sector. That we stay on schedule when 
we tell them we are going to do something.
    So, I just wanted to make that point. When you go from the 
solicitation to the evaluation and you select someone, then we 
are going to the CDMP or Community Development and Management 
Plan where we negotiate and settle upon the partnership 
structure and engagement. That is intended to be wrapped up 
within 6 months, at which time you can begin, assuming there 
are no more hurdles with your approval, constructing homes and 
going forward.
    Mr. Hobson.  So, we will not start the homes for 6 months.
    Mr. Andersen.  We would be beginning the development 
process.
    Mr. Hobson.  But you will have a specific plan that has 
been negotiated in place. I think one of the benefits we hope 
to achieve is when we sit down first with the selected party, 
we anticipate spending some good time listening and learning 
their vision, their plans, and that will help us understand 
what their objectives are as we get into the negotiations.
    Through that period, we will have very specific development 
and management plans negotiated, contracted, and then 
implemented. After that, what will be then, a 1-year period 
about from the original letting of the solicitation to the 
selection and negotiation. We also do not know exactly where we 
are going. That is what happens when you get into a negotiating 
process.
    Now, when you get done with your part, where does OSD sit? 
Do you have to go back to them? Are you going to come to us? Do 
we have to wait until you get through them? I mean, I do not 
want to slow it down, but if you have to go to OSD and we do 
not know what is going on, then after OSD gets done, then we 
have to do it. Then it takes awhile.
    I think we need to figure out how we, I think, Mr. Apgar 
and I talked one time about we have some briefings along the 
way of us.
    Mr. Andersen.  You offered for that and we think that is a 
wonderful idea to meet with this group every couple of months 
or as frequently as you would like to meet to keep you informed 
and engaged, so we do not have any surprises.
    Mr. Hobson.  Right.
    Mr. Andersen.  So that what we negotiate is, you know, we 
will benefit from your ideas, your insights. We welcome 
approaching us as a team. We do not want to get to the end of 
the stage and have people be surprised. That would be a bomb.
    Mr. Hobson.  Well, if we turn it down, then we have to 
start all over again. I do not want any misconceptions. If it 
is not right, if we do not have the comfort level, we are going 
to turn it down. My goal is not to turn it down. But I want you 
to understand that as we go through these things, if they do 
not pass, not only the numbers test but the smell test, we are 
not going to do them.
    We want to do them because we need to get on with this 
program. We have to do it in a way that makes sense. I want to 
try every different approach that we can to make it work. I am 
glad that Fort Carson is working well. Anybody else want to 
comment?
    Mr. Kumar.  Yes, Mr. Chairman.
    Mr. Hobson.  This is Mr. Kumar.
    Mr. Kumar.  A couple of comments that were going around the 
table. I will not take more than a couple of minutes here. As 
far as the maintenance goes, Congressman Boyd has addressed 
that. With the projects we are doing, we are a one-stop shop. 
Meaning, we are responsible for the development. We are 
responsible for the financing of the project. We are 
responsible for the property management. We are responsible for 
the maintenance. We have taken on all of those responsibilities 
and obligations within our firm.
    We do have some contractors that work for us to maintain 
the units. On the Navy and Lackland projects, there was a 
question about a windfall for private developers. The 
Government is very skeptical about the private developers not 
able to get a windfall. I just wanted to say on the Navy 
project, I think our cash flow is about $100,000 a year for 400 
units, out of which the Navy gets about one-third of it.
    So, realistically in the private development sense, the 
cash flow that comes out is substantially significantly lower 
than what you would see in private development.
    Mr. Hobson.  Do you give tax benefits from the way you 
built that project?
    Mr. Kumar.  On the Kings World project, we had a little bit 
of a property tax abatement that was negotiated with a local 
city for 5 years, but that was plowed into the development end 
of it. We even mortgaged that.
    Mr. Hobson.  Where does the depreciation go for the 
buildings? Does that go to you?
    Mr. Kumar.  The depreciation goes to the developer, yes 
sir, on that particular project.
    Mr. Hobson.  They just want to get it all.
    Mr. Kumar.  Definitely.
    Mr. Hobson.  You get the nice part. I want to get the other 
part.
    Mr. Kumar.  Okay. On the Navy project, like it works out to 
be about $20 per month per unit. It is $13 per unit per month 
is what the developer is getting. On the Lackland project, we 
will not see any positive cash flow for at least 8 years, but 
we are okay with it because we have committed to the long-term 
success of the program and the long-term success of our firm, 
with respect to this program.
    Mr. Hobson.  I want to talk about what you mean by ``cash 
flow.'' You are not talking about a return on equity. You are 
going to have a negative after you pay the water bills and the 
taxes? Do you have to come out-of-pocket on those for 8 years?
    Mr. Kumar.  On year-1 and year-2, definitely we will have 
to come out-of-pocket. But for years 3 through 8, it will just 
be adequate enough to pay the mortgages.
    Mr. Hobson.  So, you will have cash flow. You just will not 
have a return on equity.
    Mr. Kumar.  That is right. That is exactly correct.
    Mr. Hobson.  That is different.
    Mr. Kumar.  There will not be any positive cash flow until 
after the mortgages have been paid out. There will not be any 
cash coming out of the project.
    We have worked with E&Y, a couple of folks from E&Y, Joe 
Faccone, Jay Polis, and Wil Baumann with the Department of Navy 
on several of these projects. They all have the same mentality, 
to bring the best value to the Air Force or the Navy, to the 
Department they are working with.
    The reason why some of the projects do get extended, like 
one of the projects that we are working got extended for about 
13 or 14 months primarily because there were cities that the 
military had to make agreements with. So there were very unique 
legal agreements that had to be done for those projects.
    We understand those. It was just if there was a way we 
could channel the process so that it works a little better. I 
think it will be beneficial for all of us. On a project like 
Fort Hood, we are a $200 million company. We only do $200 
million worth of work every year. Our net worth is 
approximately about $30 million.
    On a project like Fort Hood, most probably when you go the 
RFQ route, when they select a participant, they are going to 
select somebody with $100 million net worth. That is what 
happens for Mr. Larson and developers like theirs. There is not 
going to be a home developer that has got a net worth of $25 
million in probably a 200-mile radius around that base. 
Actually, Fort Hood is pretty close to Austin also.
    We are about 40 miles away. We knew if we proposed on that 
solicitation, our qualifications, we would not get selected 
because we were only $30 millionnet worth. $30 million net work 
is even though a large net worth for construction companies, we 
just thought we were not going to be a player. That is how it 
evolved.
    Mr. Hobson.  Is that a result of our RFP process or RFQ 
process?
    Mr. Kumar.  RFQ process.
    Mr. Hobson.  If it were an RFP process, would you have bid?
    Mr. Kumar.  Yes, sir, we would have.
    Mr. Hobson.  That is interesting. John.
    Mr. Olver.  You are going to have to explain that one for 
me. Why is an RFP process, if the project is the same, 6,000 
under an RFQ process, why would you not be able to come into 
the process in an RFQ, but you could come into an RFP? I do not 
understand that.
    Mr. Kumar.  The reason is in an RFP process, Congressman, 
they have qualification concepts, a price component, and a 
value component. So, when we submit our qualifications and we 
are selected to proceed to the next phase, at that stage, all 
of the proponents are equal. After they have been qualified, 
they are all equal and the Government selects the company that 
has the best value, price-wise, quality-wise, technical 
capability-wise, and so forth. We have a better chance of 
winning a proposal or a qualification like that, rather than 
just an RFQ process where we do not advance to the next stage.
    Mr. Holloway.  That is true with the public housing ones. 
They would not be able to procure that.
    Mr. Olver.  Well, all right. This is going to lead me into 
sort of a sorting out in my head of who does what here. As I 
understand it, Mr. Holloway, you have not done a military 
privatization. Is that correct?
    Mr. Holloway.  That is correct.
    Mr. Olver.  You have a lot of experience with student 
housing, let us say, and a lot of other things. I was really 
stung by your comments about maintenance and how you do 
maintenance. I can imagine why that would be, if you have got 
colleges that are going to have parents calling in every day to 
the colleges. All hell would break loose, if a toilet was not 
fixed in 90 days. Whereas, the people in the Armed Forces are 
viewed as captive audience, I think is something like that.
    Mr. Holloway.  That is very true, sir.
    Mr. Olver.  Mr. Kumar, you have done two. You were the 
developer, the property manager, and I suppose one might say 
the asset manager as we evolve. You are all of those things for 
two modest-size projects which were Corpus Christi and Lackland 
Air Force Base.
    Mr. Kumar.  Yes, sir.
    Mr. Olver.  You are now describing that you cannot qualify 
under the RFQ process, under the Army's procedure. Let me just 
make certain that I understand. Mr. Little, for Ernst&Young, 
you were a part of the selection committee that chose Mr. 
Kumar, Landmark, for Lackland. You were also a part of the 
selection committee for Carson.
    So, you are not in any way involved in the actual 
development of any of these projects that we have been talking 
about yet, of those that have actually been up and given out.
    Mr. Little.  For both Lackland and Fort Carson, we were 
involved in the concept design of the projects, the use of 
facilities. We advised, on a non-voting basis, the Source 
Selection Committee, and helped close those transactions.
    Mr. Olver.  Who is the developer for Carson?
    Mr. Little.  For Fort Carson, the developer is J.A. Jones, 
I think. Some of the information is sometimes procurement-
sensitive. I am just thinking about, before I answer, as to 
whether or not I should be answering in a public forum, but 
J.A. Jones is the developer of Fort Carson.
    Mr. Olver.  The Carson one is a batch of 2,500 or 
thereabouts, 2,600 units. Yes, it is already in construction. 
Some of them are already being lived in. Some of them are 
completed. It is a 5-year phase-in, which goes, Mr. Lawson, to 
your comment in part. That one at the 2,500 level is about a 5-
year phase-in. So, it is not doing a huge amount each year. It 
is according to how big the contractor is, the one to be on. He 
is no little guy.
    Mr. Little.  J.A. Jones is a sizeable developer. I do not 
quite recall what his net worth is, but let me comment on the 
criteria in the underlying process. As indicated, there are 
certain specifications that are required; the requirements of 
the RFP process. A part of the underlying process includes a 
look at the developer in terms of its corporate capabilities, 
his track records.
    There is a review of financial statements. There is a 
review of its corporate net worth and the resources it can 
devote to the project over its entire life, including the 
ownership period. We are totally satisfied and we feel 
confident that the developers that were selected for these two 
projects have the corporate capabilities to maintain and 
operate those projects.
    Mr. Olver.  Well, Lackwood is totally in. Presumably, it 
was able to do it. In the long-run, we will see how it turns 
out.
    Mr. Little.  Right.
    Mr. Olver.  In the case of Carson, at least the contractor 
is out there. It is in process. They are living in some. It 
will be phased in over time.
    Mr. Little.  Yes.
    Mr. Olver.  I was asking you, Mr. Little, well maybe you 
can tell me. Is there anything inherent in your understanding 
of the RFQ and RFP process? Is it correct just to confirm that 
the RFQ is going to automatically eliminate Mr. Kumar and 
Landmark from this?
    Mr. Little.  That is a question that I would have to say 
that I cannot respond to because I have not been a part of the 
RFQ process. So, I do not know of its workings and its 
requirements.
    Mr. Olver.  Then let me go back and ask, are you a primary 
developer, the primary developer doing the job that Landmark 
was doing on any of the projects you talked about?
    Mr. Kumar.  No, no.
    Mr. Olver.  You were doing?
    Mr. Kumar.  Consulting and financial advisory. We are not 
developers.
    Mr. Olver.  Right. Now, the goal that Jones Lang is playing 
for the Army is picking up some of the roles that you, and 
apparently some others on a selection committee were doing in 
going through the process of seeing who should be the 
developer.
    Mr. Kumar.  Right.
    They picked up that with a contract from the Army to these 
three big projects at Lewis, Hood, and Meade.
    Mr. Kumar.  Yes.
    Mr. Olver.  Okay. Are the Navy and the Air Force both using 
RFP processes?
    Mr. Baumann.  The Navy uses a two-step RFP-to-RFP, all in 
one document.
    Mr. Olver.  In one document.
    Mr. Baumann.  Yes, sir, and the process takes about 11 
months, start-to-finish.
    Mr. Olver.  To two ``NP'' in one document.
    Mr. Baumann.  Yes, sir. We even make them first respond to 
the qualifications section, but they get to read the real deal 
in the RFP to determine whether or not it is something that 
they want to propose on. Then we ask them to submit their 
qualifications in response to step one. The Navy reviews short 
lists, four to five players that they want to have respond to 
the RFP.
    Then those four or five respond to the RFP. The Navy again 
reviews and makes their selection, negotiates the deal, and the 
whole process, start-to-finish, is 11 months.
    Mr. Olver.  Could Mr. Anderson come up and also Mr. 
Goldstein? I am now, I think, talking to the three who are 
managing the three major processes here. Are you using a simple 
RFP or is it also more complicated?
    Mr. Goldstein.  Jeff Goldstein, Boston Capital.
    Previously the Air Force, up until now, has always used, 
well, I should not say ``always''. In my experience, it has 
been an RFP process. Our goal, quite frankly, in order to 
simplify, would be to move to an RFQ process. I guess I would 
like to, and I am not sure if this is a statement or a 
question, but if you are going with an RFQ process, and in 
essence the Air Force or whatever branch specifies what 
qualifications they are looking for, I am not sure why you 
would necessarily cut out those that do not have large net 
worth.
    Mr. Olver.  Well, that is what I want to know.
    Mr. Andersen.  I would just like to comment that I am not 
sure Landmark was actually cut out. I think Landmark decided 
competitively not to bid because it was your perception that 
they would be cut out.
    Mr. Olver.  That you would be cut out.
    Mr. Andersen.  Everyone needs to decide which game they are 
going to play. They decided this was not the ball game they 
were going to play.
    Mr. Olver.  Okay. Now, we are getting into what I want.
    Mr. Andersen.  That has been the comment of a lot of 
people, though, on the RFQ, is that they cannot play. That it 
is structured in such a way internally. That is why I am 
letting this go because I think this is a good exercise for all 
of us to listen and hear. We tend to hear all of these things 
behind the scene someplace. That nobody ever gets out in an 
open forum.
    Mr. Olver.  So, we got a ``Q,'' a ``PQ,'' and a ``P'' going 
toward a ``Q.'' In the case of the Air Force, the biggest 
proposals that you have coming in to us is for Offutt Air Force 
Base, which has 2,500 or thereabouts. The largest one that I 
know of, that the Navy is involved with, is San Diego at 3,000-
plus.
    The list that I see has the one I mentioned. Offutt is not 
one that we have yet approved. Kirtland is the largest, which 
is just under 2,000. Your big one, you have got a couple, two 
of them, Lewis and Meade, which are in the 3,000, 3,900 range. 
You also have Hood. You did not have anything to do with 
Carson.
    Mr. Andersen.  That is correct.
    Mr. Hobson.  And we did not have anything to do with 
Offutt.
    Mr. Olver.  Not yet, but presumably they would like you to 
at some point, whether they have told you that or not. I am 
assuming that to be the case.
    Is there any reason why you, as the primary asset manager, 
whatever here. It is first process manager and then, as you 
have described in your testimony, you end up in the long-haul 
as being asset manager. I am curious about that relationship.
    For the moment, is there anything that precludes any of you 
in the position of process manager deciding this one is too 
big. We want to bring in a group of developers that might do 
each of them a third, or more in your case, or something. Is 
there anything that would preclude that from being the case in 
your role as process manager here?
    Mr. Andersen.  I would just say that in the RFQ process, it 
is my belief that people were fully able to team up with each 
to submit responses. So, what we enabled the private sector to 
do, and encouraged them to do through our forums, was 
communicate with each other, understand their best practice 
capabilities, how they could complement each other as it 
relates to capital raising; and the facilities management side 
and the development side.
    Mr. Olver.  Would you even encourage that within the 
Request For Qualifications?
    Mr. Andersen.  Yes.
    Mr. Olver.  Is it written in there in the guidelines that 
they can collaborate to put forward a proposal, which allows 
for some degree of competition in the way the thing gets cut 
up?
    Mr. Andersen.  It is in the Navy, sir.
    Mr. Olver.  It is.
    Mr. Andersen.  I know in our comments in the public forums 
that it was in fact encouraged that people meet with each other 
and decide how they could best for a strong team to compete. It 
may have been within our documents themselves, but it was 
certainly a part of our communication in the marketplace.
    Mr. Olver.  One of the things that my colleague, within 
whose district Hood lies, would be concerned about cutting 
something into too small slices. It is that you lose the 
capacity to get amenities into the development. Whereas, if you 
are working with a fairly large unit, you can get parks, 
playgrounds, and other things like that.
    Think of it in terms of a whole community for the 6,000 
units. Maybe we ought to be thinking about community for a much 
smaller group of units, in the first place, of putting 
amenities into this, which leaves you with economies of scale 
problems. I guess. Now, is there any inherent reason why we 
cannot get those amenities? How would we make certain that they 
are in there in the smaller projects?
    Mr. Andersen.  If I could answer it, Congressman. I think 
it is important. I have a picture of these forums in the 
process. We have had wonderful turnouts in Fort Hood and in 
Fort Lewis, with parties from all elements of the industry. 
They come and they meet with each other. Just like we were 
chatting earlier.
    They meet each other in the breakout sessions and they 
share business cards. They can go on the web and find out who 
else is participating there and contact each other. There is a 
rich dialogue that takes place from various specialty members, 
I would say, in the community that want to team up with other 
lead developers.
    Some people, obviously, cannot lead the response to the 
RFQ. So, they will try to establish a relationship and attach 
themselves to a lead entity to provide, for example, an 
amenities focus, if that is their strength. So, from what I 
have witnessed, I see in fact a community dialogue taking place 
in a team spirit to respond. Now, we will see as we get into 
the next stage whether in fact we find a very balanced RFQ 
team.
    Mr. Olver.  Again, I am trying. If a ``P'' worked at 
Carson, which it seems to me, do it. And if a ``P'' has worked 
before, and if the ``QP'' worked before, what is the reason for 
going to a ``Q,'' which the perception in the community, 
whether it is right or wrong, is that we only wind up with the 
big guys, or one big guy?
    Let me tell you in the vernacular I hear. It is a beauty 
contest. You have heard this. I mean, I am not telling you 
anything. This is the first time we could do it in a forum 
where we can all discuss it. It is a beauty contest by people. 
They feel that at the end of the day, and there are some 
suspicions about it, that not everybody can play in the game, 
or at least gets a fair shake.
    I do not care whether everybody plays in the game, but I 
think everybody who can ought to be able to play and get a fair 
shake in the game.
    Mr. Hobson.  I think it might be interesting to hear Mr. 
Goldstein comment on why he is headed toward a ``Q'' process. 
Maybe it will evolve into one which is ``P,'' or ``Q,'' or 
``PQ.''
    Mr. Olver.  I want to know first, why he got to one. Then I 
want to know how he got to his. Then why you are going where 
you are. Then that ought to get it all out by then for sure.
    Mr. Goldstein.  Sure. The RFQ process enables two parties 
to engage, when you have a very complex situation, in a 
flexible environment bringing creativity to structure 
something. You asked the question earlier about the capital 
markets, which I did not address at that time, but I will now.
    There is a lot to tackle here, in both providing quality 
housing at an advantageous cost. One of the ways to do that, 
for example, is to stratify the different tiers of the capital 
and the debt markets it will bring. Having capital market 
forums and learning from the rating agencies, and other equity 
debt players, what their ideas are.
    We will learn further as we identify this leading 
development management partner or team, their own ideas on how 
best to raise capital and capitalize this project. We will work 
with them. We will bring our ideas and their ideas together. We 
will go out and meet with the capital markets and drive home a 
very cost efficient structure to benefit this process.
    Now, if the process manager already knows how best to 
structure this to capitalize it, the right master plan 
development plan to put in place, the right ongoing management 
plan, I mean if you have that so that you can put the 
specificity into an RFP so people have an even understanding of 
what you are trying to create here, how you are trying to 
capitalize it, and then they can respond against RFP, then that 
may be the right approach.
    I believe that there is sufficient uncertainty and 
complexity, if you want flexibility to come to the RFQ process. 
That is why I feel comfortable working in the existing 
governance that you provided to us. That would be my response.
    Mr. Olver.  I do not know if you would like to add further 
to that?
    Mr. Baumann.  Well, sir, we in the Navy think that we know 
exactly what it is we want. We have a specific requirement, 
number of units, that grew in size, quality, amenities, 
community, playgrounds. We know exactly what we want. We are a 
little shaky on our requirements section sometimes on exactly 
how many units we want.
    We have a very good picture in our mind of the quality 
level that we hope to achieve. We developed the RFQ/RFP process 
primarily because we think it fosters competition. It builds 
the most competition amongst the most players or spreads the 
net the widest we can to involve small regional developers, who 
often bring incredible creativity to the party in the manner in 
which they finance these deals.
    So, we tried to setup our process so that we do not just 
look at the huge national and international developers. The RFQ 
is designed to be quick, easy, short, and simple for the 
development community to essentially materials off-the-shelf to 
describe to the Navy what their qualifications and experience 
are to participate in this project.
    We do not want to energize them to spend great deals of 
money chasing our projects, because the history in the last few 
years has not been so great. We are trying to make it easy for 
the best developers in the country, those that are interested 
in our projects, to respond and to get involved in the 
competition.
    Naturally, we gravitate towards an RFQ process, but we 
cannot just stop there because of the concerns that you raised 
earlier. We do not know what the numbers are at that time. We 
just had a beauty contest. We know we have got a good qualified 
developer, but we have no idea whether or not he is willing to 
put the assurances on the table that we think we need when 
dealing with the Government assets. So, we developed the RFQ 
and then added to that the RFP where we tell them what the deal 
is. We tell them exactly what we want them to do. Give them 
room to be creative. Give them room to finance the project 
using pension funds, or conduit financing, or credit 
enhancement, or taxable bonds as we have heard today.
    All of those are good things and we want to give that 
ability to the development community, but we do not want to 
dictate to him exactly how he is going to finance it. We do 
want to dictate to him exactly what the product looks like at 
the end because our guys have got to occupy them.
    If the base gets closed, you have got to be able to deal 
with them on the market at a later point. That is the major 
thing on quality, it seems to me, which we never really worried 
about.
    Mr. Goldstein.  Well, this is the other end of the 
spectrum. I think I can probably best describe our view by 
describing what we looked at out at Patrick Air Force Base down 
in Florida. In essence, the Air Force spent a tremendous amount 
of time and effort putting together an RFP process.
    It was a wonderful document that got down to incredible 
detail, with respect to what it is they wanted, how it is they 
wanted this to look. Our feeling is that if you are truly going 
to go to a privatization concept, that the Air Force or any 
branch should say, look, this is the piece of land I have.
    This is the amount of money I have to put in or not. This 
is how many units I need, and these are the grades. This is 
what you guys do for a living. You tell me what it should look 
like. You be creative and you come back to me and propose to me 
how big the two bedroom units should be and how big the three 
bedroom units should be.
    Prove to me why it makes sense. So, that is why we believe 
that it makes much more sense to go to an RFQ process where we 
get qualified participants to come in and be creative, within 
the guidelines set by the military, and propose.
    Mr. Olver.  But you get some numbers with that. Is that 
what you are saying?
    Mr. Goldstein.  Absolutely.
    Mr. Olver.  I was beginning to think that ``Q'' was the 
process that you pretty much had to use when you were talking 
about the very largest things. Then you like pulled people 
together within that, by the chosen developer pulling them in 
or by the process manager pulling them in. But you, of course, 
under the Air Force, are not dealing with huge projects. Even 
Patrick is under a thousand. So, that sort of makes me stand 
back on that.
    Let me ask this. How many people applied for qualification 
in the case of Hood? Ballpark.
    Mr. Andersen.  That is being administered by the Army and 
Price, Waterhouse, Coopers as their advisors. The selection 
process is being involved by others. We are not leading the 
selection process at all.
    Mr. Hobson.  We need to make that request at some point 
because I think we would like to know.
    Mr. Olver.  I guess then, what I would like to then ask is 
how many deals have each of you gone through which involved a 
qualification process?
    Mr. Andersen.  I would be happy to answer that.
    Mr. Olver.  Yes.
    Mr. Andersen.  At some point, qualification is critical at 
almost every response that we do. I have been there for 15 
years at our firm. Often times people will lead; whether they 
lead with a qualification and they go to an RFP or not. The 
qualification is a part of any selection process. So, I just 
wanted to make that clear.
    As I mentioned earlier, I am on our investment committee, 
Lang and Development Investment Committee, and I lead our land 
services practice. We do agency advisory investment development 
work. So, my main practice at Jones Lang LaSalle is 
development-driven. So, I am working on development product all 
of the time.
    Development is a complex asset class. So, it is more 
typical in that category not to respond atypically to an RFP, 
in my experience, but to find out which horse you want to ride, 
so to speak. Who is the developer who can get the job done 
through the entitlement phase, through the planning phase, and 
negotiate with that party.
    I, in many cases, put together land development 
partnerships with land owners where they just selected us when 
we were the developer, with Amoco, and our award-winning 
project in Chicago. We worked with the land owner and major 
corporation, our own development company, to put together the 
right development plan, partnership, structured the economics, 
et cetera, and then managed that going forward.
    Mr. Olver.  Maybe it was not a very useful question; I am 
not sure.
    Mr. Andersen.  Well, I am sorry that I did not answer it 
correctly.
    Mr. Olver.  No, no, no.
    Mr. Andersen.  The point is, I am very comfortable in my 
environment responding to the RFQ process because it is a 
complex assets class that I principally deal with. It takes an 
engagement of people to drive out the right solution for the 
complex problem. That is my environment.
    Mr. Hobson.  I sort of sense that there is no right answer.
    Mr. Olver.  There may not be a right answer. There is no 
necessity for us trying to separate ``P'' and ``Q.'' You use it 
kind of jointly.
    Mr. Andersen.  I do believe that the Navy's comments on 
competition are very valid comments. We intend, by the way, to 
drive a very competitive cost efficient solution with the party 
that is selected in the RFQ, or we will not recommend going 
forward. It is our job, as your advisor, to know what that is 
and to negotiate from a position of strength. We fully intend 
to do that.
    Mr. Edwards.  Can I follow-up, John?
    Mr. Olver.  Yes.
    Mr. Edwards.  Just to be clear, is the end result the RFP 
process that you negotiate with one person, one entity 
selected? You do not end up with two or three? It is for all of 
you, if each of you could answer.
    Mr. Andersen.  The way our process is set it is different. 
We are operating under different guidelines.
    Mr. Edwards.  You are dealing with the Army.
    Mr. Andersen.  With the Army. The development management 
entity is identified to us. We are to sit down and engage in 
the development of this development and management plan, and 
structure the partnership, and hopefully put together a great 
comprehensive plan for the Army. Then agree on the legal 
documents, and with your approval, go forward.
    Mr. Edwards.  If I may, we can come back. I understood 
that, that development entity could be a collaborative. It 
could be a team of several, if they would not be able to 
capitalize the whole project, or had that experience with doing 
as a single the whole 6,000 or something. Then you could have a 
team that had collaborated to put forward the RFQ.
    Mr. Andersen.  At the end of the RFQ process, the Army 
would have one team. Regardless of the entities, the number of 
entities on the team, you would have one team.
    Mr. Edwards.  How about the Navy? How about the Air Force?
    Mr. Baumann.  In the Navy, sir, we put out an RFQ. It is a 
short list of four to five of the major players that have 
responded to us. We asked all four of those to prepare 
proposals and then select our one.
    Mr. Goldstein.  Well, I think that there will always only 
be one team. There can be multiple developers within a team, 
but there has to be one oversight.
    Mr. Holloway.  Sir, I have been doing this for about 20 
years, mostly for cities and counties. We put out RFPs all of 
the time trying to do downtown redevelopment projects. I am 
strictly a public-private partnership representative. I solely 
represent the public sector on all of these projects. That is 
where this process came from. The cities have been using the 
RFQ/RFP quite successfully for years.
    Mr. Edwards.  Very good. Thank you.
    Mr. Hobson.  Ask him why. If this is being done out in the 
real world all of the time, why is this so difficult when the 
services do it? I mean, it does not make sense to me that we 
have created this huge system of reinventing the wheel. Maybe 
all this hearing comes down to this. It is being done every 
day.
    Why is it so darn difficult? And I was going to use another 
word, but why is it so difficult to get Fort Hood going? To 
have gotten Fort Carson done and all of these other places, 
when in the real world, people do this every day?
    Mr. Olver.  May I answer that, Mr. Chairman?
    Because we put together huge sets of long regulation around 
the thing in the first place.
    Mr. Hobson.  No, no. Cities have huge, huge bureaucracies 
to deal with in these major cities. Obviously, you have worked 
through them. Is there some game going on here in the military 
that we do not have in the other structures. You have the same 
dominant kind of people that you deal with in the military.
    They just do not have bars on their shoulders. They may 
have worse. You have city councils. Good God, dealing with 
those people. What is the difference here from your 
perspective? If anybody wants to join in, what is the 
difference?
    Mr. Baumann.  I believe it is a new program. We have got 
growing pains. We do not have a lot of core competencies. Some 
branches and services have not done this before. We are used to 
going out and buying our milk on units, and own them and 
operate them ourselves. So, this is kind of a new way of doing 
business. Cities and counties have been doing this for years. 
It should not be that hard.
    Mr. Andersen.  Sir, I do not know the answer other than the 
FAR that we have to deal with, and the level of oversight that 
we have to go through, and the chain of command that we have to 
go up on every issue and every order. I will say that I think 
the Navy has got it down.
    We have put out two projects. We have five in solicitation 
right now, and hopefully more coming, with your approval. We 
think we have figured out the right way to do it.
    Mr. Olver.  My only comment would be that obviously the 
more parties that get involved, constituents and stakeholders 
are involved, that exponentially the communication demands go 
up and slow down enterprises. It is not just unique to the 
Government sector, in any business or operation. Because you 
are working with multiple constituencies, Federal, big 
agencies, local municipalities, and the private sector. It has 
to do with the numbers of people that care about the process. I 
think it is very simply that. To the extent that you can 
streamline your governance of it, we will do the best to do the 
same.
    I think some of it may be too. There was a resistance I 
think in some level of services, and maybe even in the Congress 
to do privatization. I think hopefully now that we are in the 
boat, that we are going to do it. It is just a question of how 
we do it, when we do it. Get the dollars right. I think maybe 
some of this will go away.
    I think there has been some behind-the-scenes over the type 
of new--in certain areas of the Government, then to have 
repeated the process. I think one of the things that we are 
trying to do at this hearing and at other hearings is to say, 
it is here. We are going to have it. We are going to deal with 
it. There is no other way to get around the problem that the 
services have housing their people and the appropriate quality, 
without going to privatization.
    I noticed that people that wear uniforms have been somewhat 
resistant to that. I think those days have got to be over.
    Mr. Baumann.  I would say the resistence is falling as we 
build trust out in the field.
    Mr. Olver.  But as you build projects, we get projects that 
way, that we can all live with.
    Mr. Hobson.  Chet
    Mr. Edwards.  Mr. Chairman, could I have Mr. Baumann to 
stay there, and Mr. Holloway come up? I would like to just 
shift gears a little bit, back to the structure of the 
partnership, whatever you might want to call it, between the 
military and the private partner to make this work.
    First, Mr. Holloway, I wish you were the property 
management of some of my Congressional Offices in Billings in 
which I live. I would like to have that kind of response. 
Obviously, not every company, and certainly over a 50-year 
period, would even want a company to always be committed to 
that level of quality.
    So, we have got to have a legal structure in place for the 
military commander to continue to have influence and a lot of 
control over ensuring the quality of the maintenance for 10 
years, 30 years, 40 years out. Mr. Baumann, you referenced 
this.
    I guess I would like to ask first, Mr. Baumann, are there 
specific deals that are structured out there today that are 
examples in your opinion about a good structure to maintain 
Government control over quality assurance, and also badly 
structured deals where you think maybe we have given up control 
and will not have the influence we should have, since your 
quality houses are 30 years from now.
    Mr. Baumann.  Sir, I have very little knowledge of the 
other deals; how they are doing. I really cannot say whether 
that is a bad one or that is a good one. I know in the Navy 
what we do is take a portion of the bar, a bi-rent, and pardon 
my being cavalier, drop that into a recapitalization account.
    It flows through, pays rent, pays operating expenses, drops 
money in an escrow account for future recapitalization of the 
units. The Navy has control of that account. It is not a 
developer account. He cannot pull money out of there without 
the Navy's permission. Now, that money sits there. Our deals 
are 50-year deals. We bill them on day-1. In year 11, we take 5 
percent of the units and we recap them, every year for the rest 
of the project.
    So, from 11 to 30, we do all of the units, 5 percent per 
year. Years 30 to 50, we do them again, 5 percent per year. The 
first time we recap them, we spend $20,000 per unit. We are 
setting aside enough money dropping into this account to do 
$20,000 per unit in today's dollars; not the future year 
dollars of when we are actually recapping them, but in today's 
dollars.
    Then we do the same thing again in years 30 through 50. 
Again, this time at $40,000 because the units are declining. 
That is where people are going out in time. So, what we are 
doing in the Navy is ensuring that the money is there for the 
recapitalization of these units. Now, my crystal ball is not 
very good at 5 years. It is certainly not very good at 30 
years. So, it would be impossible for us to say now whether or 
not $20,000 in today's dollars in the right number for that 
particular unit.
    We have done a lot of studies based on the age of the unit, 
when we start with it, the locale that it is in, the manner in 
which it is being kept up along the way, to feel comfortable 
that we have enough money or we do not. Then when the time 
comes when that unit needs remodeling, we do not rely on the 
private developer, just by himself, to go out and decide what 
needs to be done to that unit.
    Left to his own devices, he might want to spend $5,000 
instead of the $20,000 that has been set aside. So, we are 
partner in a partnership. So, we go out with the developer as a 
team and we look at each unit. Then we say that unit needs a 
new bathroom, needs counter tops, needs this, needs that. Cost 
it out for me, Mr. Developer. He is with us on this trip.
    He costs it out; $21,000. We pull $20,000. We say, gosh, we 
have only got $20,000 in the recap account. You have got to 
change something. All we have is $20,000 to spend. Then we pull 
that money out of the recap account and spend it.
    Mr. Edwards.  Could I ask that as a follow-up to this 
meeting today that you send the Committee a letter through the 
Chairman's Office outlining what you think the key criteria, 
whether it is 3 or 33, criteria for us evaluating at the end of 
the day whether the relationship, the structure of the 
partnership protects the interest of the military and the 
taxpayers so that we do not realize the concern, the risk that 
you mentioned in your opening testimony?
    Mr. Baumann.  I would be flattered, sir.
    Mr. Edwards.  If you would include in that how we structure 
it, so that in the case of a private entity wanting to sell out 
its interest, or in the case of bankruptcy, how we would 
protect the military families and the military's interests over 
that.
    Mr. Baumann.  I would be delighted.
    [The information referred to follows:]



    Mr. Edwards.  Mr. Holloway, again, I know you have not done 
military housing, but quality control is quality control. 
Obviously, you have it in your company. From your perspective 
as an owner and a manager of a huge number of student housing 
units, what do you think the key components of the structure 
should be between the military and a private entity to ensure 
both an interest for the project for the private entity and 
fairness there, but also to protect the interests of the 
military and the taxpayers, to ensure quality and maintenance 
years out, knowing that not every employer in the world, over a 
period of 50 years, is going to make a commitment to quality 
and maintenance that you have?
    Mr. Holloway.  Well, sir, a couple of things on that issue. 
Number one, I believe that the Government is our partner going 
in. So, if you take that aspect, the ground is not owned by us. 
It is already owned by the U.S. Government. To every business 
deal, the ground is worth something. It does not matter what 
cost you put in.
    Over, above, and beyond that I believe that joint ventures 
are the way to go for the Government. They should be a long-
term owner in this situation with us on the private side. Only 
by having that ownership interest does it guarantee the same 
aspects for them as far as the asset value at the end of the 
day. One of the comments that has been made here, if you dig 
down in it and pay attention as to what is happening, no 
private investor in today's economy, and I heard my colleague 
here talk about having negative cash flows in the first 2 
years, and then barely making it in the next 8.
    I guess if that is the game, I know I certainly cannot 
afford to play because I am not in this game to be sitting and 
getting an ``at-a-boy'' on the back and the Government saying 
thanks for helping us out, but you did not make any money. If 
that is the game, I think most of the people in the room here 
should learn that we should not be here, and the Government 
housing that got there today is pretty much going to maintain 
itself at the pace that it is.
    When you go out and you study what is out there, you look 
at the assets and the values of what we are paying on these BAH 
rates, and you recognize I just visited not only Fort Lewis, 
but Fort McGuire. At both of those I just saw new bachelor 
housing. When I was told the price construction for that, I was 
totally blown away.
    Mr. Edwards.  It is good to hear somebody else say that.
    Mr. Holloway.  I will just put a couple of numbers that I 
heard. We saw one building that was $8 million, with 108 beds. 
So, your average cost per bed is somewhere around $75,000. In 
our college housing today, we build brand new, stick out of the 
ground, we buy the land. Remember that land is already 
included.
    We buy the land. We include full swimming pools, tennis 
courts, basketball courts, full community centers with high 
speed Internet access to every unit. We provide telephone 
service in every unit. The base telephone is provided to the 
occupant when they move in. We make money in telephones. My 
belief in everything that we do here with the Government, the 
Government should make money in every part of this process.
    That is why they should be a partner with us. They should 
make money on the Internet. They should make money in the 
telephone system. They should make money as we make money 
driving down the operational cost.
    Mr. Edwards.  What is your cost per bed?
    Mr. Holloway.  Pardon me?
    Mr. Edwards.  What is your cost, your average cost per bed?
    Mr. Holloway.  On construction?
    Mr. Edwards.  Yes.
    Mr. Holloway.  Brand new, out of the ground we run 
somewhere around $27,000, brand new. Now, what we are providing 
that you are not, in the newest housing that I saw at Fort 
McGuire the other day which was called one-on-one, which is a 
bedroom, a bedroom, and a bathroom in between, and a so-called 
kitchenette.
    Now, the amazing thing to me is people have not figured 
this out. The bachelor getting housing and a kitchenette does 
not get a food allowance, but they do get a meal ticket to eat 
over in the mess hall. So, why in God's Name would I, as a 
bachelor who is having a tough enough time living on the income 
that I am getting from the Government today, not be eating my 
meals in the mess hall?
    So, we built these kitchenettes that really do not service 
anything. Do I think it is a good idea to have a kitchenette 
with maybe a microwave and a small refrigerator. But a full-
blown stove so that these people coming in can cook their meals 
when they cannot afford to buy the food did not make a lot of 
sense to me.
    More importantly, when you get inside of this room and you 
look at the square footage, it is clostrophobic. Our units are 
1,250 square feet. We have four bedrooms, four baths, or two 
baths as the case may determine, full kitchens, full living 
rooms, full dining rooms, fully furnished. We are fully 
furnished at that price as to what we are putting out.
    Here is the scary number. If you want to go to our actual 
bedroom, I guess our actual bedroom today is probably somewhere 
in the 15X20; 10X11, 10X12. That is just the bedroom. So, what 
I saw, I do not think that whole room was 10X11, to be quite 
honest with you. The cost to construction, remember we are 
dealing with college students. There is nobody more destructive 
in the Country than college students. I say that, but in a very 
affirmative way. What we are dealing with in the barracks 
housing is exactly the same thing that we are dealing with in 
college. We are dealing with 19-year-olds that are in there. 
For the most part, it is their first time away from home.
    When I see the over construction that we have built, I mean 
these things are going to last not 50 years, but 100 years. The 
problem with that is lifestyles change. Nobody is here for the 
next 100 years. I am certainly not here for the next 100 years. 
There is no reason. Assets have a depreciable life. In that 
depreciable life, they should be paid off over that depreciable 
life.
    That is where your investment occurs. The investment for 
the Government is the ground. In a true partnership, the ground 
should be paying a ground lease back at a minimum, with some 
kind of forced savings going back in. As you construct it and 
they are saving, we should share in the savings. If we can 
accomplish that, it becomes a partnership for everybody.
    Mr. Edwards.  Let me ask you this. One way to ensure 
developer commitment to long-term quality maintenance is a 
structure where you do not have positive cash flow until the 
out-years. You are saying in this day and age, in this economy, 
you cannot expect to get a lot of quality developers competing 
on a deal like that.
    You suggested we have a joint partnership or a joint 
venture. How do you structure it? If you were sitting where we 
are, knowing the knowledge that you have, how would you 
structure it to be sure that the Government or the military 
always has the ability for their commander to say, you have got 
to fix up these houses?
    Mr. Holloway.  Well, that is under a separate contract, 
Congressman. What happens, you have to separate a business deal 
into various pieces. On the first side of the business deal, 
you have your equity. The equity is what I am going to put in 
as a private developer, and also the credit to what the 
Government may also put in as a private owner, be it the value 
on the ground or be it a cash supplement that they may loan in.
    Mr. Edwards.  You are right. That is what we do.
    Mr. Holloway.  When you take those things and you put them 
in, as the case may be, that becomes the equity side of the 
transaction. The equity side of the transaction is done totally 
different than the management and maintenance of the program. 
At any time, we can be fired. If we do not meet certain 
standards, if we do not live up to certain standards, anybody 
should be able to be removed from that situation.
    That does not remove them from the equity portion because 
they still have invested money. They still deserve to get a 
return on their money. Now, the way to ensure that beyond one 
more point is also to tie-in probably a penalty clause that 
even affects their equity side, so that they are geared to stay 
in.
    Remember, a truly great property management company is 
going to make money from the property management. You want them 
to make money from the property management. If they are not, 
you are going to get exactly the same results that you are 
getting out in the field today. People do not care. The biggest 
problem that I see out there today when you talked about on-
base is that it is truly paid for by the Government.
    So, at no point in time does the resident living there 
really care about what is happening. They do not jump up and 
down about their maintenance because they do not pay the rent. 
I am not saying that they should pay the rent, but it has to be 
credited through the system. As a private developer, I would 
much rather have the check coming from the Government than I do 
from all of the soldiers coming in and out.
    I do not want to be chasing somebody who has moved from 
Fort Carson to Fort Hood trying to collect my money. That is 
not what I am recommending. That is where the partnership works 
very well for both the Government and us. Some of the things 
that we have looked at, and some of the biggest problems of the 
community, when you get out there and certainly in some of the 
forts, maybe in even more than I recognized, a lot of the 
spouses cannot get jobs, and I mean meaningful jobs.
    The reason that they cannot get meaningful jobs is because 
everybody is concerned as to when their next appointment 
somewhere else is or when they are going to be pulled out of 
that environment. So, it is hard for an employer in the 
community to say this is what we are willing to do. A part of 
our process incorporates that.
    We have created a training facility that we would like to 
train a lot of these people and get them involved in the 
community. What we recommend and what we need are community 
assistance, community residents, people that are interested in 
taking care of the swimming pools, the tennis courts, and 
watching over.
    Now, if we do that with our own people, from a property 
management standpoint, that becomes cumbersome and expensive. 
Whereas, if we can do that with people already on the base, 
then we can do several things. We can train them in the mode of 
property management, which allows them the flexibility when 
they move from base-to-base that they can setup and pickup a 
job in that community, and more importantly, be an asset to the 
community itself.
    There is one thing in the real estate business today, there 
is a shortage of great property managers. There is a shortage 
of great technicians. There are things that, from a training 
skill standpoint, they are easy to setup and work in every 
community. So, it is those things that if we work together and 
we understand where this is all going.
    There is so much more money. The ancillary money that is 
not even mentioned today that is going through the cracks is 
incredible, and just from phone systems alone. So, there are a 
lot of things out there that I think working together as 
partners I think makes more sense.
    If I can comment one minute on the RFQ/RFP process, and the 
``P'' process, and the ``Q'' process. It goes back to my 
opening comments. Why in four branches of the military do we 
have four different systems versus let us pick one that we 
like? Whether it is Mr. Baumann's, which I happen to agree with 
to a large degree, because why should we be scrutinized in 
either an RFP process or an RFQ process, and not be able to get 
in front of these people and tell them our story?
    Who are we? How can you make a decision based on somebody's 
numbers and their facts and say this is a great company? What 
is your vision? When I sit here in front of you, I can tell you 
what my vision is. I think you can read it and you can 
understand it. I think it is important for the decision makers 
to understand what it is we are trying to accomplish. If we sit 
here and we believe that we are not going to be out here making 
a profit, then we are kidding ourselves, because I would rather 
take my money and put it in the stock market and at least hope 
that Yahoo goes up tomorrow. Where it is today, I cannot sit 
here and tell you that I am willing to take an 8-year stretch 
and not make any money.
    Then what I am really telling you is, I am either hiding it 
in my development phase, or I am hiding it in my construction 
phase, or I have it in my management phase, but somewhere out 
there--pardon me?
    Mr. Edwards.  All of the above.
    Mr. Holloway.  All of the above. Well, that is true because 
every one of them is a separate business. So, that is our view.
    Mr. Edwards.  Thank you. Thank you both. Thank you, Mr. 
Chairman.
    Mr. Hobson.  Just let me make a couple of comments.
    Property management looks easy to a lot of people. It is 
not easy. You can make money in it, but it is something that 
you have got to watch. It is like the restaurant business. 
Everybody thinks that everybody gets rich being in the 
restaurant business. There are a lot of property management 
companies.
    It is hard to find people that are skilled in doing certain 
types of work. The Navy does a limited liability corporation in 
which they setup a lot of reserves and controls. In some 
situations there have been some deals where if there are 
profits made, that they are shared both with the Government and 
the developer. So that there is an encouragement for him to 
make money and not to try to hide things so that everything can 
be, as you would, if you were in a private deal with one of 
your developers, the guy who is developing for, say, Arco, or 
whoever.
    There are probably some incentives for them to get certain 
efficiencies, certain rents, and things of this sort. I guess 
the one thing that comes out of here to me that I had not 
really thought about before, but when you discussed about the 
way the communities, the cities, which I think are awfully hard 
and difficult.
    Just going out trying to re-zone something today is, you 
know, somebody said in a couple of months. I never got one. I 
think it went faster than I thought it would and then that 
scared me because then I owned the piece of ground for about a 
year before I could get in the ground. That answers your cost, 
except if you are dealing with the Government.
    It is somewhat frustrating to me to see the way we do. This 
is probably the reason why we are having these hearings. It is 
somewhat frustrating to me. I try to look at these things and I 
am hoping our Committee does. I think from the question you 
heard today, is that we are trying to look at this as if we 
were the owner of the property, which we are.
    We have a client that we want to provide something for, 
which is the military. We are trying to get value in our 
dollars and in our assets the same way you would do it as if 
you were in the private sector. Now, there is somewhat a 
difference in this in that the military has very little history 
in what we are undertaking. That is a part of the problem.
    There has been some resistence to this. I am hoping that, 
and I appreciate all of your willingness to sit through all of 
this because none of us have had lunch yet. I am on a diet. So, 
it does not make any difference to me, but to others it does. I 
want to shut this down. John has got one more question. I will 
let him ask his question, and then I want to let any of your, 
our witnesses, if there is anything that you want to say before 
we go, I want you to feel comfortable in saying that.
    Then if there are any comments that you want to submit for 
the record or off the record afterwards in writing, we will be 
happy to take those too. John.
    Mr. Olver.  Thank you again, Mr. Chairman.
    I just realized that while I had the three of them up here 
before the three service managers. By the way, the Navy is 
also--the Marine things come under you. Is that right?
    Mr. Olver.  Okay. There was one other question that I 
wanted to ask. Actually, it comes from the testimony of you, 
Mr. Goldstein. I will read the sentence that I am focusing on. 
It reads from your testimony, ``Boston Capital would be 
responsible for arranging competitive and dependable financing, 
oversee development, and following completion of construction, 
we would manage the assets on behalf of the Air Force and 
assure the quality of the third party property management 
entities.''
    So, in your consulting role, you would arrange for the 
financing and choose a developer and so on, which is now 
clarified because we have gone beyond that. Then you have a 
process after the construction where you are still in I guess 
what you call asset management. Who owns this property?
    I am curious whether this is different in any significant 
way, which is why I wanted to ask rather than putting it in 
writing because I would like for you to respond to each other 
on the role that each of you plays. Is it similar or different 
than the way it is conceptualized with the particular services?
    Mr. Goldstein.  I do not believe it is significantly 
different from what anybody else is talking about. The 
ownership in our view, the land would still be owned by the 
military. In essence, there would be a ground lease. In 
essence, what we would do is at as--if an organization, for 
instance, like Gary's was the property manager's, and they were 
collecting rents, and they were taking care of the ongoing 
maintenance, there would be things like rent rolls and incoming 
expense statements generated on a monthly basis.
    This is something that we would not expect the Air Force to 
necessarily receive, go through, and do an analysis on, and 
make decisions on. That is what an asset manager's role would 
be; to aggregate all of these various reports that are coming 
from all of these various properties and, in essence, be the 
owner's representative in terms of telling them what is good, 
what is bad, what is positive, what is negative, what 
recommendations we have with respect to actions moving forward.
    Mr. Olver.  So, you are serving the service that you are 
contracted over the life of the lease.
    Mr. Goldstein.  That is correct.
    Mr. Olver.  Essentially as a management company during that 
time.
    Mr. Goldstein.  That is correct.
    Mr. Olver.  For which you will continue to get a fee.
    Mr. Goldstein.  Presuming that certain hurdles are met, 
correct.
    Mr. Olver.  Is there any difference in how your 
relationship to your services, Mr. Baumann, and Mr. Anderson?
    Mr. Baumann. Nobody has offered me a 50-year custodial 
arrangement in the Navy yet, no, sir. I figure when we sign the 
deal with the private developer, BBT, my firm, leaves. Now, the 
Navy still has a continuing responsibility. In our program we 
call it residual management.
    Mr. Olver.  They are to do the residual management, 
apparently with their arrangement with the Air Force. I have 
not seen the arrangements. So, you are out the door once the 
project is done; once the development is complete.
    Mr. Baumann.  That is correct.
    Mr. Olver.  You have some oversight through the development 
and completion of the construction.
    Mr. Baumann.  Yes, sir, and actually my role in the 
construction completion is minimal, if at all. We have outside 
architects that are exposed to make sure that the construction 
is proceeding in accordance with the final working drawings 
that are a part of our contract.
    Pretty much I am gone when we sign a deal. Now, we do have 
EFDs and field officers in all of our divisions. We have guys 
in the fields on all of these bases, not BBP, but the Navy 
does, that are perfectly capable of checking the reports on 
operations, handling the day-to-day function of the property 
that was spoken about earlier. I, as a consultant, am gone.
    Mr. Olver.  Okay. For Jones Lang; your understanding of the 
relationship.
    Mr. Andersen.  Well, we presently--
    Mr. Olver.  You would just like to get something off the 
ground.
    Mr. Andersen.  Yes, we would. The management function that 
we have been discussing is very familiar to us in our business. 
The way I would frame it is that the Armed Services need an 
advocate, and advisor, on an ongoing basis to represent their 
ownership interests. That is what we refer to as the asset 
manager, managing the ownership and operating issues that the 
Army would receive.
    We have not yet been asked to play that, but I--as a major 
role, but I believe it is a very important and necessary one. 
That is to protect the Army's interest. So, I support that as a 
structure issue.
    Mr. Olver.  So, Jeff, we had three different things. We 
have you who seems to think that, that is an arrangement as a 
part of your relationship as it was contracted. The Navy says, 
no, we are out. But obviously then it is back to the Navy who 
has got to do the oversight.
    Mr. Goldstein.  There may be four. There may be another one 
because I do not know what Carson, what do you do at Carson?
    Mr. Olver.  Do you have an ongoing relationship to Carson?
    Mr. Andersen.  I would just add that it is a major business 
that many of us provide. We would expect that as we grow our 
relationships to earn that right, or to have somebody come in 
who is very qualified to provide that.
    Mr. Olver.  I am not sure that if we were talking about the 
reason we are getting into privatized housing is that we have 
not been able to fund that and properly maintain it. So, we 
probably ought to have somebody who is in that relationship on 
the part of the services. I would think I would tend toward the 
Air Force's role.
    I am sorry, Mr. Little.
    Mr. Little.  Just to clarify our role as consultants and 
financial advisors. We are not owners. We are not operators. We 
are not project managers or property managers. After a contract 
has been awarded and closed, and construction has started, our 
responsibility is now engagement. That typically involves 
advising and working with the Department of Defense or the 
services in terms of oversight.
    Mr. Olver.  Who is doing the Air Force ones that are 
finished? Who is running Lackland. Is the Air Force running 
Lackland or is the developer still there?
    Mr. Little.  The developer, and that would be Landmark.
    Mr. Olver.  So, you are running it?
    Mr. Kumar.  Right. We are running it.
    Mr. Little.  They own the property. They are the owners and 
the operators.
    Mr. Edwards.  I would just like to make a very brief 
comment. I think all of us in this room are committed to 
wanting to make this project work. We all understand, of 
course, the credibility of this as we start to move forward and 
get projects up.
    One thing I want to say, having been out of the commercial 
real estate business for I guess 15 years now, I do not know 
who all of the players are. I do not know what all of the 
interconnections are between the capital sources, the 
developers, the property managers. I used to work with the 
Trammel Company in the early 1980s and these things have 
changed the industry dramatically since then.
    I do think, Mr. Chairman, it is important that if there is 
ever any potential conflict of interest that a Washington Post 
reporter could put in the front page of the paper, we need to 
be sure that all of the players involved understand the 
sensitivity of that and get that out front, even if it might 
bring criticism.
    We can undermine the credibility of this entire program, if 
there is ever an attack in the Wall Street Journal, the 
Washington Post, or the New York Times on somehow this process 
being self-served in any way. I think that credibility is 
crucial. Listening to the experts here today, I am thrilled 
that you have been brought into this process.
    You brought creativity, innovation, and expertise that 
frankly we would not have had, just dealing with the full-time 
military personnel. So, I am thrilled with the expertise in 
this room today. I guess I would say that when I was in the 
private sector, that kind of conflict of interest question 
might not have been that big of a deal, but in the public 
sector, it is just crucial that we ensure that there are fire 
walls and no potential suggestion about anybody who would like 
to undermine this whole process against all of our interests.
    The firewall is an insurance if there is complete integrity 
and no conflict of interest. That is with no suggestion. I do 
not have any reason to believe there has been a conflict of 
interest, but I just wanted to get that on the table. Thank 
you, Mr. Chairman.
    Mr. Goldstein.  As I said, I am still involved with this 
just a little bit, but I do not think there is anybody here 
that audits me or I deal with that I do not do any, I do not 
want to even fool with the public sector stuff, especially 
after sitting through all of this stuff. I do not know.
    Mr. Olver.  There had better be big dollars in it someplace 
because an awful lot of folks are looking at it, but I sure do 
not want to mess with them. I think this has been a very good 
hearing. We have had 2 days of good hearings on this subject. I 
think it is good for our Members to understand what you all do.
    I think it is good for you to hear the discourse that goes 
on here and the questions that we have, because I think that we 
can be better stewards and you will be better stewards of what 
we are all trying to get by working together, listening, and 
understanding each other together.
    This is not to be an adversarial situation. It is designed 
to get this product out there to the young people in the 
services in the right way. If we go forward with that attitude, 
we are going to get where we need to all be. If we have 
secondary agendas or other things, it is not going to work.
    I want that understood. We are going to make it work, but 
we need you all to work with us to make it work. This is going 
to get bigger, not smaller. The military may change and get a 
little smaller, but that just makes our job a little more 
crucial that we have this stuff in the right place, and that 
the residual value of this is there, so that we do not create 
another problem when we go down the road.
    So, I thank all of you for coming. Wait a minute. Do any of 
you have anything that you want to add? Yes, sir.
    Mr. Andersen.  I would like to make two quick comments. One 
is on your scale point. There are tremendous efficiencies, both 
in the operating level from scale, in terms of getting cost 
efficiencies. When you have one sub-component that needs to be 
subsidized by another, you can accomplish that to meet the 
overall community's mission.
    Also, from the public forums we heard from our capital 
markets. There is tremendous potential for this overall group 
as we look at the cash flow streams that can be created and 
segmented. If you can reach scale and not work on a base-by-
base basis, but work across the Department of Defense's overall 
asset pool, and tap into the capital markets, you will get a 
deeper, broader playing field that accesses lower cost capital.
    So, people should begin thinking creatively about how we do 
that in a collective fashion. The second point, the last point 
I would like to make is that I have enjoyed all of the comments 
on the ``P v. Q,'' the ``P,'' and the ``Q,'' and the comment 
that was made earlier from Mr. Holloway about wanting to state 
his vision and enabling the decision makers.
    We are not, by the way, the selection party for our 
process. That is the Army and Price-Waterhouse. But I think it 
is important in the selection process to receive not only the 
detailed qualifications, in terms of deliverables, but to be 
able to receive the man and the team with the vision and listen 
to them. In effect, we have in our process that capability to 
go to a few select parties, as we select the winning bidder, to 
sit down and listen to the plan and your vision, and assess 
that.
    We will not be doing that. I am very much used to doing 
that in the practice of selecting parties. I think that is a 
very strong point. It gets a little bit to the combination of 
the ``Q'' and the ``P.'' Their points are well-made. Thank you.
    Mr. Hobson.  One point I want everybody to remember. He 
said one thing that I hope all of you remember. Look at his per 
square foot cost. Look at the private sector per square foot 
cost. Then you go look and see what our per square foot costs 
are and it drives me nuts. It is like buying the hammer, in the 
procurement of one of the services, you know, you buy an $800 
hammer when you can go down to the grocery store or the 
hardware store and buy one for $9; a pretty good one for $9 to 
$12. I bought one the other day. I have actually bought one 
cheaper than that because I did not need a very good one.
    Those are the things we have got to look at as we go 
through this. We get driven into these huge per square foot 
costs that I do not know how you can all justify them when we 
look at these deals. I think that is one of the things that 
when we look at the simplicity of this, especially if we are 
giving you the land, and we are giving you the income stream 
up-front and all of this other stuff. Why the per square foot 
costs cannot be more reasonable to me is stuff that I will look 
at. That is what worries me in the deals that go through. I 
cannot see the numbers soon enough. Then all of a sudden, we 
have wasted all of this time.
    Mr. Andersen.  You would not commit to go forward unless 
you expected there would be a substantial cost savings. That is 
a metric that goes to the core of the whole privatization 
program. That is the metric that will be used in negotiating 
the CDMP.
    Mr. Olver.  A part of that difference though is as you have 
pointed out Mr. Chairman, the nature of the beast. We could go 
into the details of that, but it is also partly, as I think you 
and I have seen some of these cases where, as Mr. Holloway has 
suggested, they look as though they are being built for 100 
years, and the whole scheme of things may be quite different.
    Mr. Hobson.  That is why we need to put all on those. We 
need to look at all of these criteria as we go through it to 
make sure that we get more realistic private sector numbers. It 
will be more. I do not expect that any time you deal with the 
public arena the costs seem to go up. I want to make everybody 
aware that we are not going to let them go beyond reasonable 
stuff.
    Thank you all. The hearing is adjourned.
    [The following testimony was submitted for the record.]



                               WITNESSES

                              ----------                              
                                                                   Page
Anderson, John...................................................   632
Apgar, Mahlon, IV..............................................203, 556
Baumann, Wil.....................................................   638
Calkins, C.L.....................................................   762
Cotton, Rear Adm. John...........................................   305
Deegan, Dr. J.F..................................................   736
DeMesme, R.B.....................................................   371
Dishner, Jimmy...................................................   556
Finch, F.J.......................................................   121
Goldstein, Jeff..................................................   645
Hall, R.E........................................................   121
Herdt, J.L.......................................................   121
Holiday, Duncan..................................................   556
Holloway, G.M....................................................   664
Kumar, Sam.......................................................   655
Lawson, Robert...................................................   671
Little, Wallace..................................................   627
Lizarraga, D.C...................................................   739
Lokovic, J.E.....................................................   771
Lynn, W.J., III..................................................     1
Mashburn, Gen. Harold............................................   305
McMichael, A.L...................................................   121
Pirie, R.B.......................................................   305
Plewes, Maj. Gen. T.J............................................   203
Robbin, Maj. Gen. Ernest.........................................   371
Smith, Rear Adm. Louis...........................................   305
Squier, Brig. Gen. M.J...........................................   203
Van Antwerp, Maj. Gen. R.L., Jr..................................   203
Wilson, Charles, III.............................................   632
Yim, R.A.........................................................   511


                               I N D E X

                              ----------                              

                                OVERVIEW

                                                                   Page
Advanced Appropriations..........................................    53
Average Age of Facilities........................................    58
Barracks.........................................................    56
Base Operating Support...........................................    46
Base Realignment and Closure Funding History.....................    91
Base Realignment and Closure............................22, 31, 54, 105
Base Structure and Force Structure...............................    16
Basic Allowance for Housing (BAH) Initiative.....................   102
Basic Allowance for Housing.................................26, 33, 106
Bidding Process..................................................   119
Bosnia and Kosovo................................................    24
Breakage and Design..............................................    89
Chairman, Statement of...........................................     1
Chemical Demilitarization........................................    52
Contingency Construction.........................................    92
Contingency Reduction............................................   102
Davis-Bacon and Privatization....................................    24
Davis-Bacon: Costs...............................................    89
DoD Environmental Project List...................................    89
DoD Life Safety/Health Project List..............................    90
Environmental Levels.............................................    90
Execution Rates..................................................    91
Facilities Reduction........................................44, 55, 106
Family Housing--Annual Maintenance and Repair....................    59
Family Housing--Average Age of Units.............................    59
Family Housing--Deficit..........................................    59
Family Housing--Maintenance Costs................................    59
Family Housing--Replacement Value................................    59
Family Housing Integration.......................................   103
Family Housing Maintenance.......................................   109
Foreign Currency Exchange Rates..................................    88
Fort Ord, California.............................................   109
Forward Operating Locations in Ecuador and Aruba.................    30
Forward Operating Locations......................................    40
Funding Levels...................................................    28
General Officer Quarters........................................41, 103
General Provisions: Deletions....................................    55
Historic Houses..................................................    41
Historic Preservation--Cooperative Agreements....................    49
Historic Preservation--Coordination with Housing Privatization...    51
Historic Preservation--Costs.....................................    51
Historic Preservation--Feasibility Studies.......................    51
Historic Preservation--Historic Property Inventory...............    50
Historic Preservation--Private Funding...........................    49
Historic Preservation Activity Accounts..........................    48
Housing Allowances...............................................    59
Housing Privatization.......................................16, 43, 107
Incrementally Funded Projects....................................    43
Inflation........................................................    60
Lost Design......................................................    89
Lynn, Prepared Statement of the Honorable William J., III........     7
Lynn, Statement of the Honorable William J., III.................     2
National Missile Defense.........................................    46
NATO Security Investment Program.................................    52
Non-Appropriated Funds...........................................    60
Overall Funding..................................................   102
Planning and Design.............................................64, 100
Privatization of Unaccompanied Housing...........................   109
Real Property Maintenance........................................   100
Shift in Costs...................................................   102
SOUTHCOM Housing.................................................    54
Summary and Reconciliation......................................86, 100
Troop Housing--``1 Plus 1''......................................    56
Troop Housing--Average Age.......................................    58
Troop Housing--Budget Request....................................    57
Troop Housing--Cost to Buy-Out Troop Deficit.....................    57
Troop Housing--Deficit...........................................    57
Troop Housing--Inadequacies......................................    57
Unaccompanied Personnel..........................................    58
Unobligated Balances.............................................    53
Unspecified Minor Construction...................................    90
Utilities Privatization..........................................   105

                            QUALITY OF LIFE

``1 Plus 1''--Status of..........................................   185
``1 Plus 1''.....................................................   184
Basic Allowance for Funding......................................   175
Basic Allowance for Housing......................................   179
Chairman, Statement of...........................................   121
Family Separations due to Affordable Housing Shortages...........   200
Finch, Prepared Statement of Chief Master Sergeant Frederick J...   160
Finch, Statement of Chief Master Sergeant Frederick J............   159
Hall, Prepared Statement of Sergeant Major Robert E..............   123
Hall, Statement of Sergeant Major Robert E.......................   122
Herdt, Prepared Statement of Master Chief Petty Officer James L..   139
Herdt, Statement of Master Chief Petty Officer James L...........   136
Housing Privatization............................................   177
McMichael, Prepared Statement of Sergeant Major Alford L.........   148
McMichael, Statement of Sergeant Major Alford L..................   146
Military vs. Civilian Community..................................   186
Overall Funding..................................................   174
Quality of Life..................................................   178
Recruitment and Retention........................................   181
Retention......................................................178, 187
TRICARE..........................................................   186
Working Conditions...............................................   191
Alabama--Redstone Arsenal........................................   287
Alaska--Fort Wainwright..........................................   288
Apgar, Prepared Statement of the Honorable Mahlon IV.............   207
Apgar, Statement of the Honorable Mahlon IV......................   203
Arizona--Fort Huachuca...........................................   288
Arkansas--Pine Bluff Arsenal.....................................   289
Army MilCon Budget...............................................   263
Army National Guard Program......................................   303
Balanced Program.................................................   287
Barracks.......................................................274, 297
Base Realignment and Closure Restoration.........................   299
Basis Allowance for Housing....................................268, 286
Buy-Out Programs.................................................   285
California--Fort Irwin Land Acquisition..........................   289
Chairman, Statement of...........................................   203
Chemical Demilitarization........................................   299
Clean-up Operations at Closed Bases..............................   259
Contingency Reduction.....................................267, 272, 285
Enhanced-Use Leasing.............................................   286
Exit Strategy....................................................   262
Family Housing Construction Improvements.........................   298
Family Housing Inventory.........................................   297
Family Housing Maintenance.......................................   285
Family Housing...................................................   267
Family Reduction Program.........................................   287
Fire Safety......................................................   284
Fire Suppression Devices in Family Housing.......................   274
Fort Carson--Housing Privatization...............................   265
Fort Hunter-Liggett..............................................   258
Fort Lewis--Housing Privatization................................   260
Fort Ord--Facilities Demolition..................................   279
Fort Ord Family Housing..........................................   256
General Officer Quarters.........................................   278
Georgia--Fort Stewart............................................   289
Hawaii--Schofield Barracks.......................................   290
Historic Preservation............................................   275
Housing Deficits and Waiting Lists...............................   299
Housing Privatization--50 Year Leases............................   269
Housing Privatization--Meeting Local Standards...................   270
Housing Privatization--Taxation Issue............................   262
Housing Privatization..........................................254, 273
Indiana--Newport Army Ammunition Plant...........................   290
Kansas--Fort Riley...............................................   291
Kentucky--Blue Grass Army Depot..................................   291
Kentucky--Fort Campbell..........................................   292
Maryland--Aberdeen Proving Ground................................   292
Military Construction Account to Military Personnel Account......   266
NATO Precautionary Prefinancing Statements.......................   298
New Hampshire--Rochester U.S. Army Reserve Center................   303
New York--Fort Drum..............................................   293
North Carolina--Fort Bragg.......................................   294
Ohio--Defense Supply Center Columbus.............................   294
Oregon--Umatilla Depot Activity..................................   294
Overall Funding..................................................   284
Pennsylvania--Carlisle Barracks..................................   295
Presidio of Monterey--Additional Housing Needs...................   259
Previously Authorized and Appropriated Funds.....................   298
Texas--Fort Bliss................................................   296
Texas--Fort Hood.................................................   296
Total Army.......................................................   284
Utilities Privatization........................................279, 285
Van Antwerp, Prepared Statement of Major General Robert L........   207
Van Antwerp, Statement of Major General Robert L.................   205
Worldwide Various--Host Nation Support...........................   296
Worldwide Various--Planning and Design...........................   296
Worldwide Various--Unspecified Minor Construction................   296

                                  NAVY

2+0 Waiver.......................................................   359
Arizona--Yuma MCAS...............................................   363
Arizona--Camp Navajo.............................................   363
Barracks.........................................................   368
Base Realignment and Closure Environmental Restoration...........   369
Base Realignment and Closure...................................336, 360
Basic Allowance for Housing (BAH) Initiative.....................   361
Blount Island....................................................   357
Calfornia--China Lake Naval Air Weapons Station..................   364
California--Lemoore Naval Air Station............................   364
California--North Island Naval Aviation Depot....................   365
Chairman, Statement of...........................................   305
Child Care Centers Privatization.................................   369
Child Care.......................................................   358
Cold War Museum..................................................   353
Contingency Reduction............................................   361
District of Columbia--Marine Barracks............................   365
Elimination of Contingency Funding.............................335, 338
Enhanced-Use Leasing.............................................   361
EPA and California Office of Toxic Substance.....................   331
Family Housing Inventory.........................................   368
Family Housing Maintenance.....................................357, 360
General Officer Quarters.........................................   360
Georgia--Atlanta Naval Air Station...............................   370
Hawaii--Kanehoe Bay Marine Corps Base............................   365
Hawaii--Pearl Harbor Naval Complex...............................   365
Hawaii--Pearl Harbor Naval Station...............................   366
Historic Preservation............................................   348
Housing Deficits.................................................   369
Housing..........................................................   340
Illinois--Great Lakes Naval Training Center......................   366
Lemoore Naval Air Station........................................   360
Maryland--Indian Head Naval Explosive Ordnance...................   366
Naples, Italy....................................................   345
NATO Precautionary Prefinancing Statements.......................   369
Naval Post-Graduate School.......................................   331
New Jersey--Earle Naval Weapons Station..........................   366
North Carolina--Camp LeJeune Marine Corps Base...................   367
Overall Funding................................................344, 359
Overall Funding..................................................   359
Percolation Plan and Fort Hood...................................   335
Pier Space.......................................................   337
Pirie, Prepared Statement of the Honorable Robert B, Jr..........   309
Pirie, Statement of the Honorable Robert B, Jr...................   306
Privatization of Unaccompanied Housing...........................   362
Sigonella, Italy...............................................358, 363
Utility Privatization............................................   362
Virginia--Norfolk Naval Air Station..............................   367
Virginia--Quantico Marine Corps Combat...........................   367
Waiting Lists....................................................   370
Worldwide Various--Planning and Design...........................   368
Worldwide Various--Unspecified Minor Construction................   367

                               AIR FORCE

Alaska--Cape Romanzof............................................   423
Alaska--Eielson AFB..............................................   423
Alaska--Elmendorf AFB............................................   423
Barracks.........................................................   433
Base Realignment and Closure Environmental Restoration...........   509
Base Realignment and Closure...................................405, 414
Basic Allowance for Housing (BAH) Initiative.....................   421
California--Beale AFB............................................   424
California--Los Angeles AFB......................................   424
California--Vandenberg AFB.......................................   424
Chairman, Statement of...........................................   371
Colorado--Peterson AFB...........................................   425
Colorado--U.S. Air Force Academy.................................   425
Contingency Reduction............................................   420
DeMesme, Prepared Statement of the Honorable Ruby B..............   373
DeMesme, Statement of the Honorable Ruby B.......................   372
Deployments......................................................   406
Deployments, Major...............................................   409
Dormitory Master Plan............................................   440
Economic Development Conveyances.................................   403
Family Housing Master Plan.......................................   453
Fiscal Year 1999.................................................   509
Fiscal Year 2000.................................................   509
Florida--Eglin AFB...............................................   425
Florida--Tyndall AFB...........................................401, 427
General Officer Quarters.........................................   420
Georgia--Fort Stewart............................................   427
Guard and Reserve................................................   420
Historic Preservation............................................   420
Housing Privatization..........................................406, 416
Illinois--Scott AFB..............................................   427
Italy--Aviano AB...............................................430, 509
Korea: Osan AB...................................................   413
Lajes AB.........................................................   408
Louisiana--Barksdale AFB.........................................   427
Missouri--Whiteman AFB...........................................   427
New Jersey--McGuire AFB..........................................   428
North Carolina--Pope AFB.........................................   428
Oklahoma--Tinker AFB.............................................   428
Overall Funding................................................404, 419
Overseas Military Construction...................................   419
Pope AFB Runway..................................................   413
Program Execution................................................   509
RAF Mildenhall...................................................   414
Rhein Main.......................................................   422
South Carolina--Shaw AFB.........................................   428
Spain--Rota Naval Station........................................   431
Texas--Dyess AFB.................................................   428
Utility Privatization............................................   422
Virginia--Langley AFB............................................   429
Washington--McChord AFB........................................400, 429
Worldwide Various--Planning and Design...........................   432
Worldwide Various--Unspecified Minor Construction................   432
Wyoming--F.E. Warren AFB.........................................   429

              HOUSING PRIVATIZATION--DEPARTMENT OF DEFENSE

Additional Projects..............................................   303
Alternative Forms of Housing.....................................   622
Apgar, Prepared Statement of the Honorable Mahlon IV.............   560
Apgar, Statement of the Honorable Mahlon IV......................   556
Base Realignment and Closure.....................................   594
Basic Allowance for Housing....................................604, 610
Chairman, Statement of...........................................   511
Cost Analysis....................................................   604
Defense Language Institute Housing at Presidio of Monterey.......   624
Dishner, Statement of the Honorable Jimmy G......................   579
Dishner, Prepared Statement of the Honorable Jimmy G.............   581
Evaluation of Program............................................   603
Family Housing Privatization.....................................   599
Federal Acquisition Regulation...................................   609
Fort Carson Housing Privatization................................   596
Fort Hood Housing Privatization..................................   600
Holaday, Prepared Statement of the Honorable Duncan..............   573
Holaday, Statement of the Honorable Duncan.......................   570
Housing Needs....................................................   605
Housing Policies.................................................   623
Housing Requirements.............................................   605
Individual Project Success.......................................   603
Joint Service Projects...........................................   611
Junior Enlisted Input............................................   611
Lackland AFB.....................................................   595
Land and Unit Valuation..........................................   612
Legislative Proposal.............................................   605
Lessons Learned..................................................   608
Life Cycle Costs.................................................   606
Loan Guarantees..................................................   614
Local Building Code Standards....................................   552
Navy and Air Force Reserves......................................   597
Olver, Statement of the Honorable John...........................   511
OMB Scoring......................................................   612
Privatization Authorities, Use of................................   616
Privatization Costs Exceed Construction Funds....................   605
Quality of Life..................................................   597
Scoring..........................................................   604
Taxes............................................................   551
Unsolicited Proposals............................................   615
Use of Consultants in MHPI Projects..............................   613
Utilities Privatization, Impact of...............................   621
Yim, Prepared Statement of the Honorable Randall A...............   527
Yim, Statement of the Honorable Randall A........................   514

                HOUSING PRIVATIZATION--OUTSIDE WITNESSES

Andersen, Prepared Statement of Mr. John, Jr.....................   633
Andersen, Statement of Mr. John, Jr..............................   632
Baumann, Prepared Statement of Mr. Wil N.........................   641
Baumann, Statement of Mr. Wil N..................................   638
Chairman, Statement of...........................................   627
Goldstein, Prepared Statement of Mr. Jeffrey H...................   648
Goldstein, Statement of Mr. Jeffrey H............................   645
Holloway, Prepared Statement of Mr. Gary M.......................   666
Holloway, Statement of Mr. Gary M................................   664
Kumar, Prepared Statement of Mr. Sam.............................   658
Kumar, Statement of Mr. Sam......................................   655
Lawson, Prepared Statement of Mr. Robert A.......................   673
Lawson, Statement of Mr. Robert A................................   671
Little, Statement of Mr. Wallace A...............................   628
Little, Prepared Statement of Mr. Wallace A......................   630

                                
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