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


                                     

                         [H.A.S.C. No. 106-40]

 
                                HEARINGS
                                   ON
                   NATIONAL DEFENSE AUTHORIZATION ACT
                    FOR FISCAL YEAR 2001--H.R. 4205

                                  AND

              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                MILITARY READINESS SUBCOMMITTEE HEARINGS

                                   ON

                  TITLE III--OPERATION AND MAINTENANCE

                               __________

                              JOINTLY WITH

                     COMMITTEE ON GOVERNMENT REFORM

                   SUBCOMMITTEE ON THE CIVIL SERVICE
                             MARCH 9, 2000

                           Serial No. 106-164

                               __________

                             HEARINGS HELD

                 FEBRUARY 29, MARCH 1 AND MARCH 9, 2000

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                
                                     
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                                   deg.

_______________________________________________________________________
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                               __________

                    U.S. GOVERNMENT PRINTING OFFICE  
64-887                      WASHINGTON : 2001




                    MILITARY READINESS SUBCOMMITTEE

                 HERBERT H. BATEMAN, Virginia, Chairman
SAXBY CHAMBLISS, Georgia             SOLOMON P. ORTIZ, Texas
WALTER B. JONES, Jr., North          NORMAN SISISKY, Virginia
    Carolina                         JOHN M. SPRATT, Jr., South 
BOB RILEY, Alabama                       Carolina
DUNCAN HUNTER, California            OWEN PICKETT, Virginia
JAMES V. HANSEN, Utah                ROBERT A. UNDERWOOD, Guam
CURT WELDON, Pennsylvania            ROD R. BLAGOJEVICH, Illinois
TILLIE K. FOWLER, Florida            ADAM SMITH, Washington
JAMES TALENT, Missouri               JAMES H. MALONEY, Connecticut
TERRY EVERETT, Alabama               MIKE McINTYRE, North Carolina
JIM GIBBONS, Nevada                  CIRO D. RODRIGUEZ, Texas
DONALD SHERWOOD, Pennsylvania
              Peter M. Steffes, Professional Staff Member
              Joseph F. Boessen, Professional Staff Member
                       Mary Ellen Fraser, Counsel
              Thomas E. Hawley, Professional Staff Member
                    Diane W. Bowman, Staff Assistant
                                 ------                                

                     COMMITTEE ON GOVERNMENT REFORM
                   Subcommittee on the Civil Service

                   JOE SCARBOROUGH, Florida, Chairman
ASA HUTCHINSON, Arkansas             ELIJAH E. CUMMINGS, Maryland
CONSTANCE A. MORELLA, Maryland       ELEANOR HOLMES NORTON, Washington, 
JOHN L. MICA, Florida                    DC
DAN MILLER, Florida                  THOMAS H. ALLEN, Maine

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
                      Garry Ewing, Staff Director
                 Susan Waren, Professional Staff Member
                         Bethany Jenkins, Clerk
            Tania Shand, Minority Professional Staff Member

                                  (ii)

  




                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2000

                                                                   Page

Hearings:

Tuesday, February 29, 2000, Fiscal Year 2001 National Defense 
  Authorization Act--Adequacy of the Fiscal Year 2001 Budget 
  Request to Meet Readiness Needs................................     1
Wednesday, March 1, 2000, Fiscal Year 2001 National Defense 
  Authorization Act--Real Property Maintenance and Infrastructure 
  Sustainment Funding............................................   151
Thursday, March 9, 2000, Fiscal Year 2001 National Defense 
  Authorization Act--Civilian Personnel Readiness, joint with the 
  Committee on Government Reform, Subcommittee on the Civil 
  Service........................................................   279

Appendixes:

Tuesday, February 29, 2000.......................................    33
Wednesday, March 1, 2000.........................................   191
Thursday, March 9, 2000..........................................   319
                              ----------                              

                       TUESDAY, FEBRUARY 29, 2000
 FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--ADEQUACY OF THE 
        FISCAL YEAR 2001 BUDGET REQUEST TO MEET READINESS NEEDS
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bateman, Hon. Herbert H., a Representative from Virginia, 
  Chairman, Military Readiness Subcommittee......................     1
Ortiz, Hon. Solomon P., a Representative from Texas, Ranking 
  Member, Military Readiness Subcommittee........................     3

                               WITNESSES

Dake, Gen. Terrence R., Assistant Commandant of the Marine Corps, 
  U.S. Marine Corps..............................................    11
Keane, Gen. John M., Vice Chief of Staff, U.S. Army..............     4
Lyles, Gen. Lester L., Vice Chief of Staff, U.S. Air Force.......     7
Pilling, Adm. Donald L., U.S. Navy, Vice Chief of Naval 
  Operations.....................................................     6

                                APPENDIX

Prepared Statements:

    Dake, Gen. Terrence R........................................    76
    Keane, Gen. John M...........................................    37
    Lyles, Gen. Lester L.........................................    66
    Pilling, Adm. Donald L.......................................    47
    Rabkin, Norman J., Director, National Security Preparedness, 
      National Security and International Affairs Division, U.S. 
      General Accounting Office..................................    88

Documents Submitted for the Record:

    Active Fixed Wing............................................   103
    Active Rotary Wing...........................................   103

Questions and Answers Submitted for the Record:

    Mr. Bateman..................................................   107
    Mrs. Fowler..................................................   150
                              ----------                              

                        WEDNESDAY, MARCH 1, 2000
  FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--REAL PROPERTY 
           MAINTENANCE AND INFRASTRUCTURE SUSTAINMENT FUNDING
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bateman, Hon. Herbert H., a Representative from Virginia, 
  Chairman, Military Readiness Subcommittee......................   151
Ortiz, Hon. Solomon P., a Representative from Texas, Ranking 
  Member, Military Readiness Subcommittee........................   156

                               WITNESSES

Curtin, Neal P., Associate Director, National Security 
  Preparedness Issues, National Security and International 
  Affairs Division; accompanied by Brenda S. Farrell, Assistant 
  Director, National Security Preparedness Issues, National 
  Security and International Affairs Division....................   152
Mashburn, Maj. Gen. Harold, Jr., Director of Facilities and 
  Services Division, Office of the Deputy Chief of Staff for 
  Installations and Logistics, U.S. Marine Corps.................   175
Robbins, Maj. Gen. Earnest O., II, the Civil Engineer, U.S. Air 
  Force..........................................................   173
Smith, Rear Adm. Louis M., Commander, Naval Facilities 
  Engineering Command, U.S. Navy.................................   172
Van Antwerp, Maj. Gen. Robert L., Jr., Assistant Chief of Staff 
  for Installation Management, U.S. Army.........................   170
Yim, Hon. Randall A., Deputy Under Secretary of Defense for 
  Installations..................................................   163

                                APPENDIX

Prepared Statements:

    Chan, Kwai-Cheung, Director, Special Studies and Evaluations, 
      National Security and International Affairs Division, U.S. 
      General Accounting Office..................................   252
    Curtin, Neal P...............................................   198
    Mashburn, Maj. Gen. Harold, Jr...............................   244
    Ortiz, Hon. Solomon P........................................   195
    Robbins, Maj. Gen. Earnest O., II............................   235
    Smith, Rear Adm. Louis M.....................................   228
    Van Antwerp, Maj. Gen. Robert L., Jr.........................   221
    Yim, Hon. Randall A..........................................   205

Documents Submitted for the Record:

    [There were no Documents submitted for the Record.]

Questions and Answers Submitted for the Record:

    Mr. Bateman..................................................   269
    Mr. Hansen...................................................   277
    Mr. Ortiz....................................................   277
                              ----------                              

                        THURSDAY, MARCH 9, 2000
FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--CIVILIAN PERSONNEL 
                               READINESS
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bateman, Hon. Herbert H., a Representative from Virginia, 
  Chairman, Military Readiness Subcommittee......................   279
Cummings, Hon. Elijah E., Jr., a Representative from Maryland, 
  Ranking Member, the Civil Service Subcommittee.................   284
Ortiz, Hon. Solomon P., a Representative from Texas, Ranking 
  Member, Military Readiness Subcommittee........................   282

                               WITNESSES

Cipolla, Frank, Director, Center for Human Resources Management, 
  National Academy of Public Administration; Michael Brostek, 
  Associate Director, Federal Management and Workforce Issues, 
  General Accounting Office; accompanied by Barry Holman, 
  Associate Director, Defense Management Issues, General 
  Accounting Office..............................................   285
Disney, Dr. Diane M., Deputy Assistant Secretary of Defense for 
  Civilian Personnel Policy; David L. Snyder, Deputy Assistant 
  Secretary of the Army (Civilian Personnel Policy); Betty S. 
  Welch, Deputy Assistant Secretary of the Navy for Civilian 
  Personnel; Mary Lou Keener, Deputy Assistant Secretary of the 
  Air Force for Force Management and Personnel; and David O. 
  Cooke, Director of Administration and Management, Office of the 
  Secretary of Defense...........................................   299
Mica, Hon. John L., a Representative from Florida................   280

                                APPENDIX

Prepared Statements:

    Brostek, Michael.............................................   341
    Cipolla, Frank...............................................   326
    Cooke, David O...............................................   415
    Disney, Hon. Diane M.........................................   358
    Holman, Barry................................................   341
    Keener, Hon. Mary Lou........................................   400
    Scarborough, Hon. Joe, a Representative from Florida, 
      Chairman, the Civil Service Subcommittee...................   323
    Snyder, Hon. David L.........................................   378
    Welch, Hon. Betty S..........................................   391

Documents Submitted for the Record:

    [There were no Documents submitted for the Record.]

Questions and Answers Submitted for the Record:

    Mr. Bateman..................................................   431
    Mr. Chambliss................................................   449
    Mr. Underwood................................................   450
106th CONGRESS
2d Session

                               H. R. 4205

To authorize appropriations for fiscal year 2001 for military 
    activities of the Department of Defense and for military 
    construction, to prescribe military personnel strengths for fiscal 
    year 2001, and for other purposes.

                               __________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 6, 2000

 Mr. Spence (for himself and Mr. Skelton) (both by request) introduced 
   the following bill; which was referred to the Committee on Armed 
                                Services

                               __________

                                 A BILL

To authorize appropriations for fiscal year 2001 for military 
        activities of the Department of Defense and for military 
        construction, to prescribe military personnel strengths for 
        fiscal year 2001, and for other purposes.

  Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``National Defense Authorization Act for 
Fiscal Year 2001''.
          * * * * * * *

                  TITLE III--OPERATION AND MAINTENANCE

              Subtitle A--Authorization of Appropriations

SEC. 301. OPERATION AND MAINTENANCE FUNDING.

  Funds are hereby authorized to be appropriated for fiscal year 2001 
for the use of the Armed Forces of the United States and other 
activities and agencies of the Department of Defense, for expenses, not 
otherwise provided for, for operation and maintenance, in amounts as 
follows:
          (1) For the Army, $19,123,731,000.
          (2) For the Navy, $23,300,154,000.
          (3) For the Marine Corps, $2,705,658,000.
          (4) For the Air Force, $22,346,977,000.
          (5) For the Defense-wide activities, $11,920,069,000.
          (6) For the Army Reserve, $1,521,418,000.
          (7) For the Naval Reserve, $960,946,000.
          (8) For the Marine Corps Reserve, $133,959,000.
          (9) For the Air Force Reserve, $1,885,859,000.
          (10) For the Army National Guard, $3,182,335,000.
          (11) For the Air National Guard, $3,446,375,000.
          (12) For the Defense Inspector General, $144,245,000.
          (13) For the United States Court of Appeals for the Armed 
        Forces, $8,574,000.
          (14) For Environmental Restoration, Army, $389,932,000.
          (15) For Environmental Restoration, Navy, $294,038,000.
          (16) For Environmental Restoration, Air Force, $376,300,000.
          (17) For Environmental Restoration, Defense-wide, 
        $23,412,000.
          (18) For Environmental Restoration, Formerly Used Defense 
        Sites, $186,499,000.
          (19) For Overseas Humanitarian, Disaster, and Civic Aid 
        programs, $64,900,000.
          (20) For Drug Interdiction and Counter-drug Activities, 
        Defense-wide, $836,300,000.
          (21) For the Kaho'olawe Island Conveyance, Remediation, and 
        Environmental Restoration Trust Fund, $25,000,000.
          (22) For the Defense Health Program, $11,244,543,000.
          (23) For Cooperative Threat Reduction programs, $458,400,000.
          (24) For Overseas Contingency Operations Transfer Fund, 
        $4,100,577,000.

SEC. 302. WORKING CAPITAL FUNDS.

  Funds are hereby authorized to be appropriated for fiscal year 2001 
for the use of the Armed Forces of the United States and other 
activities and agencies of the Department of Defense for providing 
capital for working capital and revolving funds in amounts as follows:
          (1) For the Defense Working Capital Funds, $916,276,000.
          (2) For the National Defense Sealift Fund, $388,158,000.

SEC. 303. ARMED FORCES RETIREMENT HOME.

  There is hereby authorized to be appropriated for fiscal year 2001 
from the Armed Forces Retirement Home Trust Fund the sum of $69,832,000 
for the operation of the Armed Forces Retirement Home, including the 
United States Soldiers' and Airmen's Home and the Naval Home.

SEC. 304. TRANSFERS FROM THE NATIONAL DEFENSE STOCKPILE TRANSACTION 
                    FUND.

  (a) Transfer Authority.--To the extent provided in appropriations 
Acts not more than $150,000,000 is authorized to be transferred from 
the National Defense Stockpile Transaction Fund to operation and 
maintenance accounts for fiscal year 2001 in amounts as follows:
          (1) For the Army, $50,000,000.
          (2) For the Navy, $50,000,000.
          (3) For the Air Force, $50,000,000.
  (b) Treatment of Transfers.--Amounts transferred under this section--
          (1) shall be merged with, and be available for the same 
        purposes and the same period as, the amounts in the accounts to 
        which transferred; and
          (2) may not be expended for an item that has been denied 
        authorization of appropriations by Congress.

                  Subtitle B--Environmental Provisions

SEC. 311. REIMBURSEMENT FOR CERTAIN COSTS IN CONNECTION WITH THE FORMER 
                    NANSEMOND ORDNANCE DEPOT SITE, IN SUFFOLK, 
                    VIRGINIA.

  (a) Authority To Reimburse EPA.--The Secretary of Defense may pay not 
more than $98,210.00, using funds described in subsection (b), to the 
Former Nansemond Ordnance Depot Site Special Account within the 
Hazardous Substance Superfund established by section 9507 of the 
Internal Revenue Code of 1986 (26 U.S.C. 9507) to reimburse the 
Environmental Protection Agency for costs incurred by the agency in 
overseeing a time critical removal action (TCRA) under CERCLA being 
performed by DoD under the Defense Environmental Restoration Program 
(10 U.S.C. 2701) for ordnance and explosive safety hazards at the 
Former Nansemond Ordnance Depot Site in Suffolk, Virginia, pursuant to 
an Interagency Agreement, entered into by the Department of the Army 
and the Environmental Protection Agency on January 3, 2000.
  (b) Source of Funds.--Any payment under subsection (a) shall be made 
using amounts authorized to be appropriated by section 301 to 
Environmental Restoration, Formerly Used Defense Sites.
  (c) CERCLA Defined.--In this section, the term ``CERCLA'' means the 
Comprehensive Environmental Response, Compensation and Liability Act of 
1980 (42 U.S.C. 9601 et seq.).

SEC. 312. PAYMENT OF FINES OR PENALTIES IMPOSED FOR ENVIRONMENTAL 
                    VIOLATIONS.

  The Secretary of the Military Department concerned may pay from funds 
otherwise available for such purposes not more than the following 
amounts at the locations and for the purposes indicated below:
          (1) For the Department of the Army:
                  (A) $993,000 for Walter Reed Army Medical Center, 
                Washington, D.C., under the Resource Conservation and 
                Recovery Act, in satisfaction of a fine imposed by 
                Environmental Protection Agency Region 3, for a 
                Supplemental Environmental Project.
                  (B) $377,250 for Fort Campbell, Kentucky, under the 
                Resource Conservation and Recovery Act, in satisfaction 
                of a fine imposed by Environmental Protection Agency 
                Region 4, for a Supplemental Environmental Project.
                  (C) $20,701 for Fort Gordon, Georgia, under the 
                Resource Conservation and Recovery Act, in satisfaction 
                of a fine imposed by the State of Georgia, for a 
                Supplemental Environmental Project.
                  (D) $78,500 for Pueblo Chemical Depot, Colorado, 
                under the Resource Conservation and Recovery Act, in 
                satisfaction of a fine imposed by the State of 
                Colorado, for Supplemental Environmental Projects.
                  (E) $20,000 for Deseret Chemical Depot, Utah, under 
                the Resource Conservation and Recovery Act, in 
                satisfaction of a fine imposed by the State of Utah, 
                for a Supplemental Environmental Project.
          (2) For the Department of the Navy:
                  (A) $108,800 for Allegany Ballistics Laboratory, West 
                Virginia, under the Resource Conservation and Recovery 
                Act, to the West Virginia Division of Environmental 
                Protection to pay a cash penalty.
                  (B) $5,000 for Naval Air Station, Corpus Christi, 
                Texas, under the Clean Air Act, to Environmental 
                Protection Agency Region 6, to pay a cash penalty.

                       Subtitle C--Other Matters

SEC. 321. REIMBURSEMENT BY CIVIL AIR CARRIERS FOR SUPPORT PROVIDED AT 
                    JOHNSTON ATOLL.

  (a) In General.--Chapter 949 of title 10, United States Code, is 
amended by adding at the end the following new section:

``Sec. 9783. Reimbursement by civil air carriers for support provided 
                    at Johnston Atoll

  ``(a) Authority of the Secretary.--Subject to subsection (b), the 
Secretary of the Air Force may issue regulations requiring payment by 
civil air carriers for support provided to them at Johnston Atoll.
  ``(b) Types of Charges.--Any regulations issued under subsection 
(a)--
          ``(1) may charge, but not exceed, the actual costs, including 
        indirect costs, of support provided by the United States to the 
        civil air carrier;
          ``(2) may only include charges for support requested by the 
        civil air carrier or required to accommodate the civil air 
        carrier's use of Johnston Atoll; and
          ``(3) shall provide that charges under them shall be in lieu 
        of any otherwise collectable landing fees.
  ``(c) Support Defined.--In this section, the term ``support'' 
includes the costs of construction, repairs, services, or supplies, 
including, but not limited to, fuel, fire rescue, use of facilities, 
improvements required to accommodate use by civil air carriers, police, 
safety, housing, food, air traffic control, and suspension of military 
operations on the island (including operations at the Johnston Atoll 
Chemical Agent Demilitarization System).
  ``(d) Disposition of Payments.--Notwithstanding any other provision 
of law, amounts collected from a civil air carrier under this section 
shall be credited to the appropriations under which the costs 
associated with the support were incurred. Amounts so credited shall be 
available for obligation for the same period as the appropriation to 
which credited.
  ``(e) Pay-As-You-Go Scoring.--From the cash proceeds resulting from 
services provided to civil air carriers at Johnston Atoll under the 
authorities provided by this section, for which the Air Force does not 
have existing authority to retain, up to the following amounts shall be 
transferred to Miscellaneous Receipts in the Treasury:
          ``(1) In FY 2001, $219,000;
          ``(2) In FY 2002, $219,000;
          ``(3) In FY 2003, $219,000;
          ``(4) In FY 2001, $219,000; and
          ``(5) In FY 2001, $219,000.''.
  (b) Clerical Amendments.--The table of sections at the beginning of 
chapter 949, United States Code, is amended by adding at the end the 
following new item:

``9783. Reimbursement by civil air carriers for support provided at 
Johnston Atoll.''.

SEC. 322. USE OF EXCESS TITANIUM SPONGE IN THE NATIONAL DEFENSE 
                    STOCKPILE FOR MANUFACTURING DEPARTMENT OF DEFENSE 
                    EQUIPMENT.

  (a) Transfer Authorized.--Upon the request of the Secretary of a 
Military Department or the Director of a Defense Agency, the Secretary 
of Defense may transfer excess titanium sponge from the stocks of the 
National Defense Stockpile for use in manufacturing defense equipment.
  (b) Non-Reimbursable.--Transfer under this section shall be without a 
requirement to reimburse the National Defense Stockpile Transaction 
Fund. The recipient Military Department shall pay all transportation 
and related costs incurred in connection with the transfer.
  (c) Relationship to Other Disposal Authority.--The quantity of 
titanium sponge transferred under this section may not exceed the 
amount identified as excess in section 3304 of the National Defense 
Authorization Act for Fiscal Year 1998 (Public Law 105-85, 111 Stat. 
2057). Transfers to the Secretary of the Army pursuant to section 3305 
of the National Defense Authorization Act for Fiscal Year 1996 (Public 
Law 104-106, 110 Stat. 630) take precedence over transfers under this 
section.

SEC. 323. CLARIFICATION AND EXTENSION OF PILOT PROGRAM FOR ACCEPTANCE 
                    AND USE OF LANDING FEES CHARGED FOR USE OF DOMESTIC 
                    MILITARY AIRFIELDS BY CIVIL AIRCRAFT.

  Section 377 of the Strom Thurmond National Defense Authorization Act 
for Fiscal Year 1999, Public Law 105-261, is amended as follows:
          (1) in subsection (a)--
                  (A) by striking ``1999 and 2000'' and inserting 
                ``2001, 2002, and 2003''; and
                  (B) by striking the last sentence of such subsection 
                and inserting ``Authority to carry out a pilot program 
                under this section shall terminate September 30, 
                2003.'';
          (2) by amending subsection (b) to read as follows:
  ``(b) Landing Fees Defined.--For purposes of this section, the term 
`landing fees' shall mean any fee established under or in accordance 
with regulations of the military department concerned, whether 
prescribed by fee schedule or imposed under a joint-use agreement, to 
recover costs for civil aircraft use of the department's airfields in 
the United States, its territories and possessions.'';
          (3) in subsection (c), by striking ``Amounts received for a 
        fiscal year in payment of landing fees imposed'' and inserting 
        ``Landing fees collected.''; and
          (4) in subsection (d)--
                  (A) by striking ``March 31, 2000'', and inserting 
                ``March 31, 2003,''; and
                  (B) by striking ``December 31, 1999'' and inserting 
                ``December 31, 2002.''.

SEC. 324. ECONOMIC DISTRIBUTION OF DISTILLED SPIRITS.

  Subsection 2488(c) of title 10, United States Code, is amended--
          (1) by striking paragraph (2); and
          (2) by redesignating paragraph (3) as paragraph (2).
          * * * * * * *
 FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--ADEQUACY OF THE 
        FISCAL YEAR 2001 BUDGET REQUEST TO MEET READINESS NEEDS

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                           Military Readiness Subcommittee,
                        Washington, DC, Tuesday, February 29, 2000.
    The subcommittee met, pursuant to notice, at 2:04 p.m., in 
room 2212, Rayburn House Office Building, Hon. Herbert H. 
Bateman (chairman of the subcommittee), presiding.

OPENING STATEMENT OF HON. HERBERT H. BATEMAN, A REPRESENTATIVE 
    FROM VIRGINIA, CHAIRMAN, MILITARY READINESS SUBCOMMITTEE

    Mr. Bateman. The subcommittee will come to order. This 
afternoon, the Subcommittee on Military Readiness is meeting to 
get a better understanding of current readiness of the military 
services, and to get an assessment of the current and next 
year's budget requests to adequately sustain acceptable levels 
of readiness.
    We have asked the vice chiefs of staff from each of the 
four military services to give us their views on these issues. 
The vice chief of staff of each of the military departments is 
charged with overseeing the day-to-day operations of their 
respective services.
    Over the past five years, the Subcommittee on Military 
Readiness has taken issue with the shortages in the 
Administration's budget proposal in several areas that the 
subcommittee believes are critical to maintaining readiness in 
the military services.
    These areas include base operations support, real property 
maintenance, depot maintenance, ship repairs and overhauls, 
operational tempo, quality of life improvements, and mobility 
enhancement funds. Between 1994 and 2000, this committee 
recommended over $10 billion in additional funding to the 
Administration's requests in just these areas.
    However, this significant additional attention has not 
corrected the continual shortfalls in these accounts. One of 
the reasons for these shortfalls has been continued unscheduled 
and unbudgeted deployments which have caused severe strain on 
personnel and equipment. I am glad to see that, at last this 
year, funding for all of our current operations has been 
included.
    However, I see on the horizon some contingencies that just 
may pop up and which aren't included and which again can have a 
very, very detrimental affect on your planning and execution of 
the budget that we authorized and for which funds are 
appropriate.
    Another reason is the high cost to maintain equipment that 
is well past its designed usage with little relief in sight.
    After an initial look at the budget proposal for fiscal 
year 2001, it would appear that for the first time in many 
years, there is growth in the readiness accounts. This is good 
news, but this growth is primarily a reflection of a 
significant increase in the price of fuel and for normal 
inflation.
    Setting aside these growth factors, there is very little 
new money to arrest and turn around the declining readiness 
problems that are plaguing our military. In addition, the 
budget before us projects that readiness funding levels will 
decrease by nearly $2 billion in fiscal year 2002.
    As they have done in previous years, the chiefs of the 
military services provided the committee with their lists of 
unfunded priorities for fiscal year 2001 that total $15.5 
billion and estimated that the unfunded shortfall in the next 
five years to be at $84.2 billion.
    Even after this committee's addition to the budget request 
of $3.2 billion last year to reduce the readiness unfunded 
priorities of the military services, the list continues to 
grow.
    Although the fiscal year 2001 budget request does contain 
increases in other important areas such as procurement and 
military personnel, the allusion that the level of funding for 
readiness meets all of the services requirements is overstated. 
It is beyond my understanding how improvements to military 
readiness can be met with only inflationary increases, 
decreases in funding in the coming years, and ever-increasing 
unfunded requirements that are many billions short in several 
critical areas.
    Another area that has concerned me and many members of the 
subcommittee is what the services do with the funds Congress 
authorizes and appropriates. A recent General Accounting Office 
(GAO) report notes that over a five-year period from 1994 to 
1998, the Department of Defense (DOD) changed funding in 
various operation & management (O&M) accounts by almost $43 
billion compared with the amounts of money the Congress 
originally designated for those accounts.
    Article One, Section Eight of the Constitution requires 
that Congress provide for the military. I and the members of 
the committee take this responsibility very seriously. I 
understand that operational needs of the military require the 
movement of funds during the year of execution, but movements 
of this magnitude outside of the normal legislative process are 
clearly not acceptable.
    Also unacceptable is the continual under-execution of funds 
provided by Congress. As an example, during this same five-year 
period, the Navy it is said under-executed its ship depot 
maintenance account by over $1.2 billion. The Air Force under-
executed its primary combat forces account by $988 million.
    And the Army, in only two years--1997 and 1998--under-
executed its combat divisions account by $580 million. These 
three specific service accounts are considered by DOD to be the 
most directly related to readiness and have been designated by 
Congress as high priority readiness-related accounts. It is my 
intention to find out why these critical readiness accounts are 
consistently under-spent.
    What we would like to hear from our witnesses today is what 
has been done with the significant amounts of additional 
funding provided by Congress to fix readiness, what are the 
reasons why we are not there yet, and what it will take to not 
only arrest the decline in readiness, but to provide a 
permanent, sustainable course of action to return readiness to 
acceptable levels.
    We would also like to hear from our witnesses on their 
assessment of current readiness and the risks involved in 
maintaining readiness in the current and projected budget 
levels.
    Because we owe it to the American taxpayer and our military 
men and women to ensure that there is sound stewardship over 
the resources that are entrusted to the Department of Defense, 
the hearing today is especially important. The issues we will 
discuss today have the potential of affecting military 
readiness now and in the future.
    Our witnesses today will be--and we are very pleased and 
honored to have them with us--General John M. Keane, Vice Chief 
of Staff, U.S. Army; Admiral Donald L. Pilling, Vice Chief of 
Naval Operations, U.S. Navy; General Lester L. Lyles, Vice 
Chief of Staff, U.S. Air Force; and General Terrence Dake, 
Assistant Commandant, U.S. Marine Corps.
    Prior to hearing from our witnesses, I will now yield to 
the ranking Democratic member of the subcommittee, Mr. Ortiz, 
for any comments he may choose to make.

   STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE FROM 
     TEXAS, RANKING MEMBER, MILITARY READINESS SUBCOMMITTEE

    Mr. Ortiz. Thank you, Mr. Chairman. I join you in welcoming 
our distinguished witnesses, the vice chiefs of staff and the 
assistant commandant of the U.S. Marine Corps, to this hearing 
today. I thank them for their service to this great nation, and 
I look forward to their assessments of the readiness posture 
and funding issues.
    As we start the second session of the 106th Congress, I 
also want to thank you, Mr. Chairman, for your dedicated and 
impartial leadership of the readiness subcommittee. I am 
certain that I state for my colleagues in saying how much we 
appreciate your sincere interest in improving the readiness, 
Mr. Chairman, of our military forces, and the impartial manner 
you have been leading the activities of the subcommittee.
    It is very instructive for me to reflect back on my tenure 
on the readiness subcommittee; and I feel compelled, in this, 
our first readiness subcommittee hearing of the century, to 
take a little time to share some of my thoughts and concerns.
    First, I remain impressed with the outstanding performance 
of our uniformed personnel and dedicated civilian personnel. 
They have performed diligently under some very trying 
circumstances. Even under the stress of high operating tempo 
(OPTEMPO) and the uncertainty of outsourcing and privatization 
initiatives, they have continued to perform more with less. 
They deserve all the accolades that we give them.
    I am disappointed, though, that we must continue in this 
century to fight to improve the overall readiness posture of 
the force. Making real and sustainable progress in getting rid 
of the repair and the spare parts problem, or making a dent in 
the real property maintenance backlog, appears to be 
impossible.
    Like you, Mr. Chairman, I am concerned about where did all 
of this money go. Does the department really consider the 
readiness account a slush fund? What is going to be the result 
of them doing all of the so-called DOD efficiency initiatives 
and the Congressional acts to the budget request? 
Notwithstanding all of the new and innovative maintenance 
concepts and the out-sourcing initiative, we are still 
struggling with the same issues--a prudently maintained 
infrastructure and a marginally acceptable level of force 
readiness.
    To make matters worse, the marginally acceptable equipment 
readiness comes on the backs of already over-worked personnel. 
As we try to understand the adequacy of this budget submission, 
I hope each of you will address budget assumptions and 
considerations that continue to puzzle me, and that is how to 
incorporate savings from future outsourcing initiatives in the 
current budget, and what would be the impact of not achieving 
the savings as identified?
    I also think it would be helpful to share with the 
subcommittee your experience with achieving the savings that 
have been projected so far. I would like to know how the 
services budget for the conduct of the value self-sourcing 
studies? Have any of you conducted any studies on the impact of 
the outsourcing initiatives? On the retention and productivity 
of the civilian work force? Have the initiatives made a 
difference in attracting the quality and quantity of new 
workers needed to take care of our aging work force concerns?
    Mr. Chairman, the answers to those questions are critical 
for our understanding of the Administration's budget request. I 
am not convinced that the Department has a thorough 
understanding of the cost or consequences that are associated 
with some of these reform initiatives. I ask these questions 
today because the hearing schedule does not permit a separate 
outsourcing hearing session before we mark up the bill. I do 
believe that any answers they provide us today would be very 
instructive.
    Again, I welcome our distinguished witnesses here today, 
and I look forward to their testimony and responses to the 
questions. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz, and now General Keane, 
and our other witnesses, we have your written statements. They 
will be made part of the record in their entirety; and General 
Keane, if you would like to proceed, followed by Admiral 
Pilling and by General Lyles and then General Dake, we will be 
happy to hear from you.

STATEMENT OF GEN. JOHN M. KEANE, VICE CHIEF OF STAFF, U.S. ARMY

    General Keane. Mr. Chairman, thank you. Chairman Bateman, 
Congressman Ortiz, distinguished members of the readiness 
committee, I'm honored to be here today with my fellow vice-
chiefs, and thank you for the opportunity to appear before you 
to discuss the President's 2001 budget request and its impact 
on Army readiness.
    I also will submit this brief opening statement; and as we 
indicated, the much longer version for the record. I just want 
to take this opportunity to thank all the members of the 
committee for your support for Army readiness. During the past 
five years, you have contributed $741 million to Army readiness 
over the President's budget request.
    What that has translated to us is improved readiness that 
has bolstered our depot maintenance, training in OPTEMPO, and 
also our ammunition management programs, which support the 
entire Army.
    As Chairman Bateman indicated, over the last ten years, 
they have really been very busy years for us since the end of 
the cold war. It has simply been one of the busiest times in 
the last, 20th century; and throughout this period, our Army 
has focused on its primary mission--that is, to train and win 
its nation's wars. Our number one priority has been, and will 
continue to be, maintaining a trained and ready Army. By 
trained and ready in Army language, we mean C-1, and 
traditionally we have been a C-1 Army; but frankly, we are not 
a C-1 Army today. That is not to say that we cannot accomplish 
all that the nation expects of us, but the farther we move away 
from the C-1 standard, the greater the risk involved, and the 
greater the price we pay in the long term.
    You began the reversal of our readiness decline last year. 
We thank you for that support, and we need your support to 
continue that momentum. The President's budget request provides 
the required resources to meet our most compelling readiness 
requirements. The budget allows us to fund our ground OPTEMPO 
accounts at 100 percent of validated requirements for the 
active component, the National Guard, and the Reserves, and our 
air OPTEMPO at nearly 100 percent as well.
    It is, however, a budget with little flexibility. We have 
had to make some tough choices with this budget, and there are 
some areas specifically in real property maintenance in depot 
maintenance accounts that we are not able to be as proactive as 
we would like. Real Property Maintenance (RPM) remains under-
funded for all three of our components in 2001.
    The budget formed 69 percent of the requirements for the 
active component, 63 percent for the National Guard, and 75 
percent for the Army Reserve. These RPM shortfalls will likely 
increase the risk of higher future costs due to deferred 
maintenance and renovation of older facilities.
    Depot maintenance support receives a slight boost in 2001, 
but overall depot operations are still only funded at 80 
percent of the requirements for the active component and 77 
percent for the Reserve component. The shortfall could force us 
to defer maintenance and upgrades for some of our major combat 
systems, thereby increasing the likelihood of reduced 
operational readiness rates and affecting, certainly, the 
availability of our equipment for training.
    Let me say that last October, General Shinseki and 
Secretary Caldera announced the Army's vision for the future, a 
vision which involves no less than the complete transformation 
of our Army into a force that is more strategically responsive 
and dominant across the full spectrum of our operations.
    That force will have stretch goals to deploy a combat 
brigade in 96 hours, a division in 120 hours, and five 
divisions within 30 days. This budget request allows us to 
begin the movement toward that transformation. We have embarked 
on a journey to make the most dramatic changes to our Army 
since World War II, to make the Army more responsive today and 
to shape our capabilities for tomorrow.
    With your help, we intend to do three primary things with 
this budget: to protect the readiness of the Army, number one; 
and number two, to provide a quality of life experience for our 
soldiers and their families; and number three, to begin the 
transformation of our Army.
    To accomplish all of that, we have submitted our portion of 
the President's budget, and we have also identified $5.4 
billion in unfunded requirements that would be tracked from 
those three goals.
    We appreciate your continued support and your 
consideration. Mr. Chairman, thank you for the invitation to 
appear today. I look forward to your questions.
    [The prepared statement of General Keane can be found in 
the Appendix on page 37.]
    Mr. Bateman. Thank you, General Keane, and Admiral Pilling.

 STATEMENT OF ADM. DONALD L. PILLING, U.S. NAVY, VICE CHIEF OF 
                        NAVAL OPERATIONS

    Admiral Pilling. Thank you, Mr. Chairman, distinguished 
members of the committee, thank you for the opportunity to 
discuss the Navy's operations and maintenance budget with you 
today.
    Today's Navy is the most capable and the most ready in the 
world. Over 45 percent of the fleet is under way today, either 
deployed or engaged in training for deployment. The men and 
women of three carrier battle groups and three amphibious ready 
groups are en route to or on station in the Mediterranean Sea, 
in the Arabian Gulf. Another battle group and amphibious group 
are operating in the Western Pacific. These Naval forces are 
maintaining our forward presence and are ready for combat 
operations if the nation needs them. This is the core of what 
our O&M budget buys.
    With your permission, I would like to talk about three 
specific items: personnel, current readiness, and then 
recapitalization.
    Our readiness depends on our ability to attract and retain 
high quality motivated and trained sailors, even as the 
nation's strong economy imposes significant challenges in 
recruiting and retention. Last year's focus on recruiting with 
the assistance of this committee resulted in the Navy meeting 
its fiscal year 1999 recruiting goal. It will take at least 
this much effort and money to sustain success in recruiting 
this year.
    Retention of sailors once we recruit them continues to be a 
problem. Although we are seeing some improvement as a result of 
the recent pay and bonus improvements, retention rates in all 
categories remain below our steady state targets. Those gains 
that we have been able to make in recruiting and retention have 
improved readiness. The number of gapped at-sea billets has 
declined from a high of over 18,000 in 1998 to roughly 9,200 
today.
    Today the readiness of our deployed forces continues to be 
satisfactory. This is validated by the impressive performance 
of our fleet units in Operations ALLIED FORCE and SOUTHERN 
WATCH. Our non-deployed readiness has always by design been 
lower than that of our deployed forces, because the Navy 
operates on a cycle of readiness that peaks as a ship or a 
squadron departs for deployment.
    The strain of high OPTEMPO, frequent deployments, and aging 
ships and aircraft is seen in the progressive decline of our 
forces' readiness in between their deployments. O&M funding 
shortfalls today, when they occur, have a greater and more 
rapid impact on non-deployed forces than in the past.
    In the area of aviation, we have repriced the Flying Owl 
program within operations and maintenance to better reflect the 
increase in costs associated with sustaining our aging 
aircraft.
    Aircraft depot maintenance funding is sufficient to ensure 
that deployed squadrons have 100 percent of the necessary 
aircraft, while non-deployed have at least 90 percent. Also as 
a result of lessons learned in Kosovo, fiscal year 2001 
includes $23 million in funding for spare parts and equipment 
necessary to establish one additional EA6-B squadron.
    In the area of ship operations, our operations and 
maintenance funds are adequate to achieve our ship OPTEMPO 
goals of 50.5 underway days per quarter for deployed ships, and 
28 underway days per quarter for non-deployed ships. We are 
concerned with funding for ship depot maintenance as our fleet 
commanders are telling us that we have underestimated what it 
will take to properly support planned availabilities.
    The reductions that we had to take in our O&M appropriation 
as a result of the fiscal year 2000 rescission of .52 percent 
were targeted at real property maintenance to protect the 
critical fleet flying hour and maintenance accounts. This $120 
million reduction will have a serious impact on the readiness 
of our shore facilities.
    Looking to the future, increasing our investment to support 
the recapitalization and modernization of our Navy is essential 
to maintaining operational readiness. Adequate readiness can 
only be sustained in the future with a modernization and 
recapitalization program that delivers sufficient numbers of 
technologically superior platforms and systems to the fleet.
    I remain concerned that we are falling behind in this 
effort. We need to invest now with a focused and expanded 
program to maintain superiority through the first half of the 
21st century.
    Balancing the fiscal and operational needs of today with 
the defense requirements of tomorrow is a challenging task. We 
cannot accomplish this alone. We need your continued support.
    Mr. Chairman, again, I would like to thank you and this 
committee for all you have done for the Navy, and I look 
forward to working with you in the future; and I will be happy 
to answer any questions the committee might have.
    [The prepared statement of Admiral Pilling can be found in 
the Appendix on page 47.]
    Mr. Bateman. Thank you very much, Admiral Pilling, and now 
we are pleased to hear from General Lyles.

 STATEMENT OF GEN. LESTER L. LYLES, VICE CHIEF OF STAFF, U.S. 
                           AIR FORCE

    General Lyles. Mr. Chairman, good afternoon. I want to also 
thank you and Mr. Ortiz and the rest of the members of the 
committee for your very strong support to all of the services, 
and particularly to the U.S. Air Force.
    I would like to just make a few brief comments relative to 
the readiness posture for the U.S. Air Force and the many 
challenges that we face today and certainly into the future.
    1999 was another banner year for the Air Force. Our forces 
were deployed throughout the world in various contingencies, 
starting at the beginning of the year in DESERT FOX over the 
skies of Iraq, to ALLIED FORCE, to the continued operations of 
Operations NORTHERN WATCH and SOUTHERN WATCH, and the 
humanitarian operations both here and abroad.
    We showed in Kosovo, as an example, that your Air Force, 
our Air Force, was ready when the nation called, as it is today 
literally across the world. Today we have some 90,000 airmen 
who are stationed throughout the world and the United States. 
We have some 250 aircraft that are permanently stationed across 
the world in various contingencies, and we have been successful 
in all the different missions that the country has called upon 
for the U.S. Air Force.
    Yet, in spite of those successes, we still have faced many, 
many challenges, and those challenges in some respects, Mr. 
Chairman, reflect the balanced budget that we tried to put 
together and reflect in the President's budget. The challenges 
are in the area of people, readiness, infrastructure, and 
modernization; and if you don't mind, I will just briefly make 
a comment about the first three--people, readiness and 
infrastructure.
    We have increased the funding for our readiness posture, 
particularly for spares support for all of our various programs 
and all of our supporting activities. We increased the funding 
in 1999, beginning in 1999 to address the shortfalls that we 
had over the past years. We continue that increase in funding 
in the year 2000, and the President's budget for 2001 reflects 
a continuation of that particular posture.
    I am optimistic that the sustained funding for readiness 
will allow us to turn around the readiness decline that we have 
experienced over the last several years, but we have not yet 
reached that particular goal. All the indicators, the leading 
indicators are very, very positive, but they have not yet 
reflected in what's happening out in the field, and what is 
happening in the troops that are deployed.
    Overall readiness of our major operation units are down 26 
percent since 1996, and 11 percent in the last year alone. 
Today only 68 percent of our combat units are reporting 
readiness in the top two categories, C-1 and C-2. That's far 
short of our goal of 92 percent. Overall for the U.S. Air 
Force, both combat forces and support forces, 82 percent of our 
forces are at the C-1 and C-2 level, but again, it doesn't 
reach the goal of 92 percent.
    We are taking a number of steps, Mr. Chairman, to try to 
reverse this readiness decline. The first, as I indicated 
before, is to readily remedy the issue relative to parts 
shortage. We have funded spares at 100 percent in fiscal year 
2000, and we reflect that again in the President's budget for 
2001.
    We have taken process initiatives and contract initiatives 
to reduce vendor lead time to make sure we can get the new 
components that we are procuring out to the field and out to 
our depots as rapidly as we possibly can. We are making 
upgrades and improvements in reliability to literally all of 
our platforms. We have some 279 initiatives totaling $2.8 
billion across a fighter--impacting the F-16 and F-16 engines 
particularly--the C-5 program, the C-130 program, KC-135 
program, and many, many others.
    We are also taking steps to make sure we are addressing the 
concern for our people, and particularly the expeditionary 
nature that the Air Force finds itself involved in. Our 
Expeditionary Air Force (EAF) concept that we initiated 
formally beginning this past fall is proceeding very, very 
well. We are in the initial steps of our EAF concept, but the 
Commanders in Chief (CINCs) are very, very supportive and so 
far very, very pleased with everything we are trying to do to 
support them while giving a better definition to the 
expeditionary nature of the U.S. Air Force.
    We think, Mr. Chairman, that we have the right fixes, and 
that we are going to turn the mission capability rates around; 
but we have not reset yet, and our indicators though positive, 
have not shown the results out into the field, and we will 
continue the emphasis in this particular area.
    In the area of people, because of the pace of our 
operations around the world, we are now, today, 40 percent 
fewer than we were ten years ago, but yet 400 percent increase 
in OPTEMPO for our people. Our airmen are working harder than 
ever before, and the strain is beginning to show.
    Mr. Chairman, thanks to you, this particular committee, and 
the rest of the Congress, we are beginning to take the positive 
steps to help our people, and particularly those in the field. 
You have improved the pay and benefits for our airmen last 
year, and for their families; and we thank you graciously for 
all the things that you have done to help them in that 
particular area.
    The compensation package will be a very, very strong 
benefit toward us being able to support our people with the 
quality of life that they deserve; and as I mentioned before, 
our expeditionary Air Force is providing both the 
predictability and the stability to our airmen that they need 
to accomplish their mission.
    Mr. Chairman, another factor in readiness, the very, very 
complex readiness equation, is the issue of recruiting and 
retaining good people, and retention and recruitment for the 
U.S. Air Force. We are facing the toughest environment that we 
have had in decades. Our robust civilian economy and the low 
propensity to enlist for all of our people around the United 
States have made this a major, major challenge for us, 
something we have never faced before in the U.S. Air Force.
    In spite of an increase of 600 people last year above what 
we have normally recruited, we still missed our recruiting 
goals by about 1700 people last year, even with the higher goal 
that we established for ourselves. We're already this year, so 
far, some 1700 still short for the numbers we need in fiscal 
year 2000.
    We are taking actions to try and remedy that particular 
situation, but enlistment and retention go hand in hand. Our 
enlistment and retention remains a major concern for us. We are 
missing our goals in all of our categories for first term 
enlistments, second term enlistments, and career enlistments.
    We have taken a number of steps to encourage our young 
people to enlist, and to stay in the U.S. Air Force, and to 
make it a career. We have added re-enlistment bonuses; some 73 
percent of the Air Force skills now receive a re-enlistment 
bonus. That's up from 34 percent in fiscal year 1997.
    We have a full court press to improve our recruiting skills 
and recruiting manpower. We are the lowest service in terms of 
the numbers of recruiters out there in the field, and we're 
trying to change that for the U.S. Air Force for now and the 
future. We're going to be increasing the number of recruiters 
by some 850 by April of 2001 to bring our number of recruiters 
up to about 2,000. Today we are about 900 or so.
    We have also increased TV advertising for the first time 
for the U.S. Air Force. Our numbers in fiscal year 1999 were up 
to about $70 million; and for 2000 and 2001, we're going to be 
at about $65 million to begin advertising and telling the story 
for the U.S. Air Force, and again, enticing people to want to 
recruit and come into the U.S. Air Force.
    And finally, we have expanded incentives so that initial 
enlisted bonuses are offered for now 100 skills in the U.S. Air 
Force. That's up from a low of only four skills just a couple 
of years ago.
    Finally, in the area of infrastructure, we are making 
strides to try and stay balanced in terms of our infrastructure 
funding. We are nowhere near the numbers we need to keep the 
infrastructure where it should be, and to make improvements in 
that area that need to be addressed.
    Infrastructure is sort of the Peter that ends up the one we 
rob to pay for Paul, and all the other different areas that we 
have in our affordability equation for the U.S. Air Force. As a 
result of this, our RPM backlog is growing to about the tune of 
$4.3 billion. We are at the level now where all we can do is 
maintain RPM at literally one percent. That's enough for 
preventive maintenance only, and it limits us to repairs only 
as we address our shortfalls.
    MILCON levels are steady from where they were last year, 
but they are one-third of what our validated needs are; and in 
the area of military family housing, we're taking steps to 
address the military family housing plan that we presented to 
Congress last year. This plan was applauded by Congress, but we 
need to make sure we have the funds in the out-years to address 
all the different things we need to make that plan a reality.
    The bottom line, Mr. Chairman, is that readiness is very, 
very fragile for the U.S. Air Force. While, like the other 
services, we would never, ever stop short of accomplishing the 
mission, we will be doing it at higher risk if we can't address 
some of these issues that I just outlined to you; and we are 
trying to make sure in our balanced budget that we are trying 
to address each one of those areas.
    Let me close, Mr. Chairman, by just making a comment. I 
know you just recently returned from a trip to Europe with some 
of the members of this committee and other Members of Congress, 
and you had an opportunity to address and see and talk to 
really the secret, if you will, for the success of the U.S. Air 
Force, indeed for the other services, and that's our troops out 
in the field.
    They are dedicated. They are proud. They are doing 
everything they can to support the mission and to support this 
country. Their morale is very high in spite of the challenges 
that are ahead of us, and they fully appreciate everything that 
the Congress has been trying to do for them.
    What we owe to them is literally the very best in quality 
of life, in equipment, and support and modernized weapon 
systems that is possible, given all of our budget constraints.
    Mr. Chairman, I thank you for the opportunity to talk to 
you, and I look forward to answering any of your questions. 
Thank you.
    [The prepared statement of General Lyles can be found in 
the Appendix on page 66.]
    Mr. Bateman. Thank you, General Lyles.
    General Dake.

STATEMENT OF GEN. TERRENCE R. DAKE, ASSISTANT COMMANDANT OF THE 
                MARINE CORPS, U.S. MARINE CORPS

    General Dake. Thank you, Mr. Chairman, Mr. Ortiz. Thank you 
for allowing me to come before this great committee and speak 
to you about your Marine Corps.
    The help that this committee and the Congress gave the 
Marine Corps this past year was very much appreciated. It 
represented a turn in what had been a long decline in the 
funding for the Marine Corps in many ways. There is more to be 
done, and we look forward to working with this committee and 
Members of the Congress to take on that future load.
    The Marine Corps is ready. We are a force in readiness, as 
you have directed us to be. We balance that readiness across 
four pillars, and it is a balancing act as we do that. The 
first pillar is our people, the Marines and their families. 
Today the Commanding General of the Marine Corps Recruiting 
Command told me that we would make our recruiting goals for the 
56th month in row, and we did by the end of this day. This is a 
leap year, and I have to say we are glad we have an additional 
day in February in which to make those goals, because 
recruiting continues to be a very tough business, and one in 
which we are engaged heavily throughout the Corps, from top to 
bottom.
    We believe also that the things which this committee was 
instrumental in doing such as retirement, fixing the pay table 
reforms, the pay raises, and as I travel around the Corps, it 
means a great deal to Marines and their families; and if there 
is something remaining to be done in that area, they would tell 
you that Tricare or medical care is of a concern to them, and 
I'm sure you have heard those same things in your travels.
    The second pillar of our readiness is our legacy of 
equipment. You spoke about it earlier, Mr. Ortiz, when you 
spoke about older equipment that is aging and taking longer to 
repair; and we do so and maintain the readiness on the backs of 
our Marines. It takes us longer, but it also costs us more to 
repair that same equipment. On many occasions, the parts that 
we need to repair it are no longer made by any contractor, and 
it takes them time to retool and then time for all of those 
parts to improve our readiness.
    But having said that, our readiness has improved. We are 92 
percent on the ground for Marine ground equipment readiness; 
and we have arrested the decline in the aviation side, 
particularly on our helicopter aviation, so we remain a force 
in readiness on those counts.
    We look for ways in which we can find an economy of force, 
if you will, to take care of the legacy of equipment, such 
things as remanufacturing. We will remanufacture our Light 
Armored Vehicles (LAV's). We will remanufacture some of our 
trucks. We will buy new trucks as well as the second version of 
the HMMWVs. We are looking for ways in which we can make it 
easier to maintain and buy in a cost-effective way to bridge 
the gap to modernization in those accounts.
    The third pillar is infrastructure. This, too, is where we 
have taken money and put it into our readiness accounts so that 
we can meet the mandate of the Congress to be a force in 
readiness. We have some good news. Each year we have put more 
than $50 million into our BOQs; and by 2004, there will be no 
Marine that will live in either a squad bay type of barracks, 
nor use a gang head. Those are good news items.
    We have arrested the decline in backlog of managed real 
property which was headed to be a billion dollars by 2003. That 
is now arresting steadily. However, it still remains at $685 
million of backlog in repair which we have insufficient funds 
to work off in that period.
    We also look at our family housing. We will have all of the 
family housing that needs to be refurbished and repaired; it 
will be completed by 2010. That's one of the things that we are 
looking to increase as we work our infrastructure over the next 
year.
    The one infrastructure item which we would like to take on 
with the Congress this year, and that is the funding for the 
procurement for the Blount Island command. Blount Island is a 
port off of the East Coast. It's in Florida and is in fact is 
used to refurbish and repair our equipment. It's on our 
maritime pre-positioning. This is the equipment that gives us 
the sustainability for real time as we put Marines, wherever 
they are around the world, into combat or operations, they will 
use the equipment aboard those ships.
    In a longer context for the nation, Blount Island 
represents the busiest port during DESERT SHIELD and DESERT 
STORM. It loaded more ships out than any other East Coast port. 
We believe it is not only a Marine Corps asset; but a national 
asset, and we enjoin you to work with us to take on the 
procurement of that particular command.
    Our final pillar is modernization. Modernization is really 
long-term readiness. It is really the final answer to the 
legacy systems and how you combat the readiness degradation 
that they represent.
    We are looking at long-term readiness; our premier program 
on the ground sides is our Advanced Amphibious Assault Vehicle 
(AAAV). On the air side is the MV-22 and Joint Strike Fighter, 
and those continue. We are also looking to do things in the 
mandate, or the common knowledge is fix artillery. We are 
looking for the Lightweight 155 as a program which is our 
modernization of artillery and others as we have outlined in 
our plans.
    In war fighting areas, the Commandant has brought back the 
Marine Expeditionary Brigade. In conversations and meetings 
with the Chief of Naval Operations (CNO) and the commandant 
sponsoring Navy/Marine Corps leadership, we have come away with 
the Marine Expeditionary Brigade. This is what I call the 
middleweight fighter. It bridges the gap between our Marine 
Expedition- ary Unit (MEU) Special Operations Command (SOC) 
which is about battalion level force, and our Operational 
Maneuver from the Sea (OMFTS), which are a division level 
force.
    The Marine Expeditionary Brigade comes with its own ground, 
its air, and its sustainability for 30 days. It is a potent 
force that the Commandant is bringing back.
    We have many good things that we are working on this year, 
much to the credit of this committee and the Congress, that we 
have had funding beyond what we have seen in the past. However, 
there is more to go.
    I look forward to working with the Congress on that, and I 
look forward to your questions. Thank you.
    [The prepared statement of General Dake can be found in the 
Appendix on page 76.]
    Mr. Bateman. Thank you very much, General Dake. Thank you 
all. The last Quarterly Readiness Report that the committee has 
received was the period ending September 30th of last year. We 
have now had another quarter ending December the 31st. Has that 
Quarterly Readiness Report been completed and in your hands?
    General Keane. Yes, sir, it has been completed, and I was 
told it was leaving the building either yesterday or today; and 
clearly we can do better at providing that report to you. We 
truly understand that.
    Mr. Bateman. I have been anxiously awaiting it, and I don't 
understand why we would have to wait that long; and I am almost 
embarrassed to have to ask when are we going to receive it, so 
please expedite that.
    General Keane. Well, the Army, just to be up front with 
you, our portion of that, we have been late seven out of the 
last ten quarters, and we are going to fix it. After that 
conversation I had with you in your office, we intend to do 
something about it.
    Mr. Bateman. All right, thank you, General. Your statements 
and the written versions that I reviewed last evening are all 
replete with shortfalls in many accounts, none perhaps as 
significant as your real property maintenance accounts. Did I 
hear for the Air Force that there's a $4 billion backlog of 
real property maintenance?
    General Lyles. When you look in the aggregate, Mr. 
Chairman, that's the true number. That reflects decline or lack 
of funding for real property maintenance or RPM over the last 
four or five years, and what we project for the future. The 
funding we had last year, the funding we have in the budget 
this year keeps us at, or gets us to a one percent real 
property maintenance level, if you will. It allows us to do 
emergency repairs to sustain things, but it doesn't allow us to 
make the kind of major changes you need to literally turn that 
situation around.
    We will not allow people to sit in leaky buildings, as an 
example, but we won't be able to fix the roof completely, or to 
replace the roof, and those are the kinds of things that we're 
going to be facing with that kind of funding level.
    Mr. Bateman. I have difficulty understanding why people 
aren't yelling and screaming and banging their fists on the 
table if you've got those kinds of problems; and they continue 
to be unfunded year after year after year. It appalls me to 
have senior military leaders leave my office with almost a tone 
of gee whiz, this is getting so much better, I'm going to get 
69 percent of requirements in this budget.
    I don't think 69 percent of identified requirements is 
acceptable, and I hope you are going to help the committee with 
the Administration and with the American people to understand 
that you have vital needs which are being unfunded; and we 
cannot do this for you unless you help us. The way you can help 
us is being very forthcoming and high profile in asserting that 
the need is there.
    I'm going to suspend before I get more frustrated, and 
recognize Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman. I have a couple of 
questions for General Keane. Maybe he can help me. Do you know 
for the Army to recapitalize its air and ground fleet, it would 
appear logical that the Army would also need to recapitalize 
its repair and maintenance depots for recapitalization work 
that they place.
    What are the Army's plans to recapitalize the 
infrastructure, equipment and facilities at Corpus Christi Army 
Depot in order to recapitalize the Army aviation fleet? Maybe 
you can give me a little--
    General Keane. Mr. Congressman, you know that we do have a 
recapitalization effort with development of our Long Bow Apache 
helicopter, and some improvements we'll be making to the CH-47; 
and quite frankly, we are looking very hard at elimination of 
the AH-1 Cobra and the UH-1 because they are Vietnam era 
aircraft as well.
    In reference to your question about depots, and 
specifically Corpus Christi, the depots are funded out of the 
Army working capital fund, and their RPM, if you will, or 
recapitalization effort, comes from the rates that they're 
charging in terms of the repair and maintenance that are 
conducted at those facilities.
    And those are competitively established, as you know, so 
that is where the monies come from to do repair and maintenance 
in those facilities. Let me just be up front with you. We have 
absolutely no intention of letting that depot decay so that the 
infrastructure falls down around it; and then the Army says 
this is too tough, we've got to walk away from it. That's not 
our intent.
    Our intent is to make certain that that facility continues 
to function, and that the facility is adequate to meet the 
needs of those great people that work in that facility.
    Mr. Ortiz. You know, and I think if I--and correct me if 
I'm wrong--it would take about $400 million to repair all those 
Apaches that have to be repaired. Is that cost now, is that 
going to be included in your supplemental to make up the cost 
that it took? I don't think that the money that was spent was 
in the budget.
    General Keane. That's correct, the money is not in the 
budget. The money is in the supplemental; and it is also 
identified as unfunded requirements, part of the $5.4 billion 
that we have as an unfunded requirement.
    Mr. Ortiz. I had some other questions, but let me also pass 
to some of the other members, and I will come back around for 
the next round.
    Mr. Bateman. Mr. Hansen.
    Mr. Hansen. Thank you, Mr. Chairman. Mr. Chairman, I hope 
you realize that General Lyles will be the commander of Air 
Materiel Command in a short time. It used to be the commanding 
officer of Ogden Air Logistics Center (ALC), and 
congratulations to General Lyles because I don't know a more 
capable fellow to do it, or officer.
    You know, General Lyles, if I may ask you, or any of the 
other folks who are there, you know, some of the extreme 
environmental groups have filed a federal lawsuit that would 
prohibit any over-flights under 2,000 feet; and they have 
wisely done it in Washington, D.C. because there is a certain 
judge here that goes along with them about on everything, if I 
may say so.
    Tell me what effect, if they are granted that until a 
National Environmental Protection Agency (NEPA) or 
Environmental Impact Statement (EIS) statement is done, and the 
length of time of those--and I'm sensitive to this as Chairman 
on the Committee on Public Lands--it would take a long time and 
cost big, big bucks--what effect would that have on readiness 
if they were successful? What if the judge grants them that?
    General Lyles. Well, Congressman Hansen, as you well know, 
one of the major elements to readiness is training, proper 
training for our people, particularly to prepare them to go in 
harm's way situations, as an example. We depend on the ranges 
that we have, all the ranges--test ranges, development ranges, 
training ranges--to be the element that allows us to train our 
forces to go to any sort of scenario they may have to face.
    If we are faced with the situation where we can't provide 
adequate flying at the right kind of levels, elevations to do 
the proper training, that would tremendously, tremendously 
impact our ability to support readiness factors for our forces.
    The ranges are getting fewer and fewer as it is, and the 
numbers and the encroachment sort of threats are becoming more 
and more of a viable concern to all of us, and we are trying to 
do everything we can to protect and make sure we keep them at 
least where they are today, if not the ability to expand them 
in the future.
    Mr. Hansen. Admiral, I guess you would have some of those 
same concerns with the Navy air?
    Admiral Pilling. Yes, sir. I mean, we have requirements for 
our pilots to be able to do low level flights as part of the 
training syllabus.
    Mr. Hansen. I am sure the Marines are dragging your wheels 
through the grass all the time, aren't you? Isn't that part of 
your work?
    General Dake. That's an important part of what we do. We 
would be really hard-pressed for readiness if we could not do 
those types of training.
    Mr. Hansen. You will support us if this committee sees fit 
to do something to remedy that problem, I would hope.
    General Lyles. That's correct, yes, sir.
    Mr. Hansen. General Lyles, let me ask you one more, if I 
could. As you know, Secretary Peters has issued a waiver for 
50/50 legislation which may be necessary to support the 
transition of workloads from the closing of Kelly and Kelly 
Logistics Center (KLC). I will discuss this as according to 
ALC; however, after closer investigation, I'm somewhat 
concerned that some of the folks in the Air Force don't see it 
the same way the secretary sees it, and with any problem the 
Air Force may have complying with the 50/50 is not with the 
transition workload, but rather part of the much deeper 
problem.
    In fact, in an Air Force Materiel Command letter signed 
only two weeks ago, it states, ``these bridge contracts may 
represent a sense of a much larger problem and should not be 
the only justification to support the air waiver with 50 
percent limitation.''
    It goes on to say the problem is much larger and extends 
beyond fiscal year 2000. The letter identifies the much greater 
problem as ``the general trend to move logistic support to the 
private sector and increasing costs of contract and interim 
logistic support.''
    Now, I know you are not the commander there yet, General, 
and this doesn't fall on your watch; but I am just kind of 
curious, can you kind of tell the committee whether the Air 
Force problem of complying with the 50/50 law is indeed much 
deeper and long term than is indicated by this recent waiver 
request?
    General Lyles. Congressman Hansen, I think the answer and 
the comments that you have heard from Secretary Peters are 
really the corporate and right strategy for the U.S. Air Force. 
That is, we believe in 50/50. We are going to do everything we 
can to make sure we don't violate the law. I just became aware 
of that letter that you referred to just today, and we need to 
go back to make sure that all of our people understand that 
this is something that we are serious about, and we are going 
to already have initiated the sort of processes to make sure we 
look at any sort of activity that can potentially move workload 
and give us a situation where we knowingly, or even 
unknowingly, violate the law.
    The bridge contracts were a situation, I think everybody 
understands, we were somewhat forced into that situation 
because of the readiness posture, in part. We literally 
underestimated what it would take to move the workload from 
Kelly and also from Sacramento. The bridge contracts allowed us 
to remedy that situation and help our readiness.
    We cannot allow any systemic sort of processes out there to 
take the workload away from us and violate the 50/50, so we 
will be watching that very, very closely. I know who signed 
that letter, and I will be talking to that individual very 
soon.
    Mr. Hansen. Thank you, Mr. Chairman. May I ask another 
question?
    Mr. Bateman. Certainly.
    Mr. Hansen. Thank you, Mr. Chairman. Admiral, a great 
concern in my mind--and I guess it is because of my visits to 
Puerto Rico as Chairman of the Public Lands and Parks 
Committee--is this problem in Vieques. Do you have another 
place, General, where you train with live fire in coordinated 
areas on the East Coast?
    Admiral Pilling. Where we can do all of the combined 
training?
    Mr. Hansen. All of the combined training.
    Admiral Pilling. No, sir, there is no place that we know of 
on the East Coast. We have a commission to study this by the 
Center for Naval Analysis to look at alternatives if we have to 
leave Vieques as a result of the referendum the states place 
next year.
    Mr. Hansen. Is it a true statement, then, that you are 
sending out people that really haven't passed the final test, 
so to speak, in your carrier battle groups and your Marine 
people? Would that be a correct statement?
    Admiral Pilling. They are--we have three destroyers that 
have just deployed, the battle group that is on its way into 
the Mediterranean. They are on their way up to Cape Wrath in 
Scotland to try and finish up the naval surface fire support 
that they couldn't do at Vieques. They are up there now. They 
are at 15-foot seas, and it doesn't look like it's going to be 
a very easy task for them to get qualified up there, so we are 
not getting the training we need.
    Mr. Hansen. No disrespect to the kind of agreement that you 
folks are working out with the folks in Puerto Rico, but 
there's 48 states that we do live firing in right now, and I 
would feel it would be a terrible precedent if we have to now 
take a vote on live firing on where you can and cannot do it as 
if it would follow along with the suggestion that has been put 
forth.
    I was down there at one time as Chairman of Public Lands 
and Parks, and a large developer said I can't see a place in 
the Caribbean that would be greater than this to put in 
beautiful beaches and all that type of thing.
    I hope those folks down there don't get the idea that they 
are headed that way. I personally feel that this is a grave 
mistake on the part of the Administration, and it should be put 
back just as it was prior to that time, and I further think the 
Justice Department is making a terrible mistake when you've got 
people that are trespassing in an area that they don't go out 
there and tell them they can't disobey the law. I mean, that 
would happen any other place.
    General Lyles knows, just west of the Ogden Air Logistics 
Center, we have an area called the Utaques Training Range. It 
is huge. It's one of the biggest ones around, clear air space 
to 58,000 feet. Now recently some of the environmental people 
are saying well, we ought to go out there and camp there, they 
won't throw us off.
    They did that, and they just about closed down Hill Air 
Force Base, because what could we do? I can't believe, Mr. 
Chairman, and I say it respectfully, that this Administration 
is not going down there and making people obey the law. I 
further can't believe that they are going to the point that 
they are going to say fine, you can vote on it, and if you vote 
to let us bomb you, we will give you $40 million.
    Well, my goodness, the island itself is probably 200 to 
$300 million, and frankly, I think this committee or the 
committee ought to do something that is more dynamic to put 
this situation back as it was prior to this political fiasco we 
have gotten into.
    Thank you, Mr. Chairman. Is that clear enough? [Laughter.]
    Mr. Bateman. I would take issue with the gentleman in one 
respect. You said you would respectfully disagree. I am not 
even into--
    Mr. Hansen. Did I say respectfully? I apologize.
    Mr. Bateman. I am not even respectful in my disagreement 
with the ridiculous position that this Administration has taken 
and the incredible mess that we've gotten ourselves into vis-a-
vis Vieques. It is as bad as, I believe, we are giving them $40 
million if they vote to let us bomb them, and then we will give 
them $50 million more. There is no other place that is under 
the sovereignty of the United States of America where our 
national security needs require a local referendum of voters 
before our national security interest can be pursued and 
protected.
    I think it is outrageous, just as the gentleman from Utah 
did, but we will pass on now to Mr. Pickett.
    Mr. Pickett. Thank you, Mr. Chairman. Gentlemen, welcome. 
Good to have you here today. The quality of life issue for our 
people is very important, because it has a lot to do with 
retention and recruiting. I know we talked a lot about several 
things, of housing and health care, and the resale system and 
things of that sort.
    One thing that hasn't gotten much attention in recent years 
I think is the DOD's school system for the military families 
that are stationed overseas, and how do you all believe that 
this is working, and what kind of feedback are you getting from 
the military people whose children are attending these schools 
overseas?
    General Keane. I'll lead off, if you would like. We have 
had feedback on the DOD school system. It runs a spectrum. Our 
soldiers and families in Korea feel the school system is 
adequate. Our soldiers and families in Europe have challenges 
with the school system. The staffing, they indicate, is not 
what it should be. They also indicate that some of the 
facilities that they are having to send their children in are 
decaying and are not the kind of adequate facilities that you 
would want to send American children to school in.
    The CINC in the European command, I don't want to speak for 
him, but I will tell you that he came forward as far as the 
joint requirements oversight council and solicited support from 
the services for the DOD school system and identified to the 
services some of the problems that I just enumerated to you.
    General Lyles. Mr. Pickett, let me speak from the Air 
Force's perspective. I think the schools and the quality of 
schools is a very, very important mission for quality life for 
our people overseas, and it is an area that our commanders over 
there are trying to address, and address in a very aggressive 
manner.
    We are very, very pleased that our two commanders, primary 
commanders overseas, former General Johnny Jumper, used to be 
the commander of the U.S. Air Forces in Europe, and General Pat 
Gambol in the Pacific, both had taken strong initiatives to try 
to define a school improvement program. That's not the formal 
title, but that's essentially what it's all about.
    It contains essentially four dimensions. Making sure that 
we have the right kind of technologies in our schools so that 
they can be up to date and get the right kind of information 
and teaching quality to our students; to make sure that the 
teacher ratio, the teacher-to-student ratio, is appropriate--we 
want it to be no worse than 18 to 1, which is sort of a 
national standard; it has been a lot worse in the past--to make 
sure we have proper accountability for the teachers, that they 
are properly certified, and to make sure that we are watching 
this and watching literally on almost a daily basis. They have 
made great strides as a result of this sort of school 
improvement program, and we now are going to make sure that we 
continue to support it and start monitoring and maxing funds to 
support that every year as part of our program.
    Admiral Pilling. As you know, the Navy presence overseas, 
permanent presence overseas, isn't very great; but in referring 
to the JR review that General Keane mentioned, the staff sort 
of used several methods to look at the schools, particularly in 
Europe, because that was where the CINC, the CINC over there, 
was complaining about.
    On the matrix of scores on tests and costs per student, the 
DOD schools overseas were better than the average in the United 
States. They were not as good as Fairfax County, and so that 
was where the rub is. The CINC clearly would like them to be as 
good as we find as a relatively well-off part of this country.
    Mr. Pickett. Thank you very much. I don't know if you want 
to add anything.
    General Dake. I would only add that in Okinawa, where the 
preponderance of Marines are forward deployed, the DOD schools 
are very important to us. My children went to each of those, a 
boy and a girl, and they graduated from these schools, so it's 
important, and high quality at least in the Pacific. We don't 
have the experience with the European schools.
    Mr. Pickett. I know that there have been some comments 
about the backlog and the maintenance of real property, and 
there appears to be a continuation of a backlog in having 
available enough spare parts; and there is also, there appears 
to be a backlog in the depot maintenance in all of the 
services, but I would like to ask each of you, if you were able 
to get more funding for your respective services, where would 
be your first priority for funding in the year 2001?
    And I say that in looking at this three-year comparison I 
see here, it looks like it has been pretty nearly a flat level 
funding over the past three years. I don't see how you are 
making it when you take into account the inflation, even though 
the inflation is perceived to be modest. I don't know how you 
all can make it from year to year on the same dollar amount.
    But could you tell me what your first priority would be if 
you get more funding?
    General Keane. Yes, sir. Our first priority overall would 
be in the readiness account, to buy back one, to bring up Base 
Operations (BASOP's) up to 100 percent although it is funded 
higher than this year than it has been in the past, our RPM and 
also our depot maintenance account.
    We are losing in the RPM business, frankly. The industry 
standard I think, as everyone knows, is about three percent to 
recapitalize, and the Army is somewhere around one percent, and 
we can't keep up with it is frankly the issue. I know 
Congressman Bateman mentioned 69 percent. That's the Army 
number.
    Believe me, we would like to make that number higher, but 
given the other things that we must do as well, and try to 
balance an Army budget with the programs that we have to fund 
is a tough choice.
    So our only answer, to be quite frank about it, is you have 
to increase our top one hit. We can't get there within this 
budget.
    Mr. Pickett. Admiral Pilling.
    Admiral Pilling. Probably our first priority would be 
increasing the sources for recruiting and retention; but of the 
three categories that you mentioned, I think spares in 
particular, aviation spares, would be at the top of the list. 
Second would be depot maintenance, and the third priority for 
us would be real property maintenance.
    The first two are much more closely tied to deployed 
readiness because as you know, we put our emphasis on 
readiness.
    General Lyles. Congressman Pickett, I guess our response 
would be very much in line with the under-funded priority list. 
The number one thing on that list is retention and recruiting 
initiatives, about $60 million that we are asking for in the 
Unfunded Priority List (UPL), mainly because that is such a 
major dimension of readiness that you don't usually think 
about.
    The other major items that are part of the UPL are base 
operating support, which is the day-to-day operations of our 
installations and facilities, and the RPM, which is another 
major dimension for, again, readiness, and third, the 
infrastructure guide log that you talked about earlier.
    What's not reflected on the top ten for our unfunded 
priority list are spares; and the reason why is because with 
the help of Congress, we put about a billion dollars over the 
last year or so in getting our spares numbers back up, both in 
terms of Kosovo supplemental, additional money that the Air 
Force and Congress put its spares; and we are now waiting for 
the turn-around of the results of the spares increase that we 
funded over the last two years.
    We put a premium, a higher premium on RPM, base operating 
support, and recruiting and retention because of that previous 
funding of the spares.
    Mr. Pickett. General.
    General Dake. We have an unfunded priority list of $1.4 
billion in 2001. That's all those four areas that I spoke 
about--personnel accounts, and in there I'm talking things from 
recruiting through those accounts; our infrastructure, which 
has been up there for our readiness, and in many cases, not so 
much on O&M that has been a problem, is we have taken it from 
accounts and moved it into our readiness accounts to keep our 
readiness high.
    Modernization is our long-term readiness. We do believe in, 
of course, our legacy system, so the $1.4 billion is straight 
across those four pillars.
    Mr. Pickett. Okay, thank you. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Pickett. Mr. Riley.
    Mr. Riley. Thank you, Mr. Chairman. Gentlemen, it is good 
to see you again. I have one question for General Keane. 
General Keane, we are about to make this transformation to a 
medium armed vehicle that you and I talked about in my office a 
few weeks ago. With the level of procurement the way it is 
today, and the shortfall that we have across the board that we 
have in all the services today, how do you plan on funding 
that, or do you essentially plan to take some some of the 
existing equipment that we have out there now, modify it, and 
make it into that medium category?
    General Keane. Yes, that was a tough question for us. We 
clearly, one, we recognize the need, we have to change and get 
a more responsive force so that we can move strategically. The 
issue is how do you fund it?
    We had to take a look at our own equipment infrastructure 
and make some tough choices in our modernization program. We 
recommended to Congress to kill seven systems over the 
following years to give us some of the funding to start this 
program up, and also the restructuring of two programs, most 
notably the Crusader program and our Forward Scout combat 
system.
    That was part of the strategy. The other part of the 
strategy was to obtain from Department of Defense and the 
Administration at least half the dollars to help get us 
started, and that contract was established. So that gets us 
going in the early years.
    And our challenge will still continue to be there; because 
while there was savings from those programs that we are 
recommending termination for, most of the savings in those 
programs does not come until the later years, where the 
acquisition of those pieces of equipment lie. Right now, a lot 
of those programs are still in R&D, so there is not as much 
money there.
    In the later years, it starts to pay for itself with the 
termination of those systems. So we are in a struggle, to be 
quite frank about it, to transform this Army with the kind of 
budget numbers that we have; and we had to do some of that, 
obviously, out of our own hide to be able to do it, to be very 
frank about it. And they were--every single one of those was a 
tough choice, because obviously we had a requirement for those 
programs or we never would have submitted that request to the 
Congress to begin with.
    Mr. Riley. Do we have equipment out there that is available 
today? And it seems like it just makes sense if you could take 
some of the equipment we have today and modify it, bring it 
back on line. You could do it not only cheaper, but you could 
also do it faster. I don't know that we have the time to make 
that deployment or that change in our--
    General Keane. That's a good question. We clearly are 
looking to design an objective force for the future, and we are 
putting that objective force in research and development right 
now, and providing some monies to do that, and also with the 
help of Defense Advanced Research Projects Agency (DARPA), we 
hope to get some technology answers in the 2003 time frame, and 
then produce the objective force in 2012.
    What we are doing now is trying to acquire some of the 
characteristics of that force in the near term with off-the-
shelf technology; but we made a decision ourselves, what we 
wanted was a fair and open competition, and we did not want to 
predispose ourselves to any of the technologies that exist out 
there to include some of those that we have been using 
ourselves, like 113 armed personnel carriers that have been in 
the Army ever since I have been a part of it.
    So the companies that have owned those legacy systems, if 
you will, are part of this competition that we intend to take 
place in May and June, and also others who have provided other 
types of capabilities--for example, real capability solutions--
to achieve this overall capability that we are looking for.
    We wanted fair and open competition in an attempt to get 
the best available that is out there. That was our thought 
process. By doing that, it has taken us a little longer to get 
to that major competition; but we think in the long run it will 
better serve our soldiers and the American people if we have 
that fair and open competition.
    Mr. Riley. One more question, Mr. Chairman, if I can, is 
that I hope you will look at as we open this up to open and 
fair competition, I hope that the depots will be included in 
that competition.
    One of the things that I particularly hope you will do is 
look at the partnering arrangements we have like the AIM-21 
program in Aniston where you combine the best of both worlds, 
and I think it's very, very effective.
    So I would encourage you as you go through this process, to 
tell everyone that is going to be participating in this 
competition to look at the options of partnering the way we did 
in Aniston on the AIM-21. I think it's a wonderful program.
    General Keane. Sir, we agree with you, and something that 
has not received much notoriety with the transformation 
strategy because inside the Army to a large degree and maybe 
even outside, we are a platform-center organization; and at 
times we can't help ourselves. We just have a tendency to look 
at these platforms that we have, and in which new ones we're 
trying to acquire, but an important part of the transformation 
is a recapitalization of our legacy force, and principally I'm 
talking about increased locality for our life force, and 
recapitalization of our heavy armored force.
    We have made what we think is a critical decision, and that 
is to take the Abrams tank back to zero hours and zero miles. 
In other words, we would re-do that tank except for its hull, 
and obviously it will be digitized as well. We see that tank 
being around for the next 20 years, to be quite frank about it, 
as well as the supporting systems that are around in support of 
the Abrams tank.
    So we intend to recapitalize a portion of our heavy armored 
force to make certain that we still continue to have that kind 
of overlap. If we have to go toe-to-toe with an adversary that 
has that kind of capability, we want to make certain that 
America has an Army that can defeat anybody else's Army with 
that kind of capability.
    Mr. Riley. Thank you, General.
    Mr. Bateman. Thank you, Mr. Riley. Admiral Pilling, as 
recently as Sunday, I was on one of the P-3Cs, land-based P-
3Cs, that you make reference to in your written statement. I 
want you to look into something for me.
    Admiral Pilling. Sure.
    Mr. Bateman. On at least that one, and I don't know whether 
it is characteristic of all of them, the toilet in the plane 
doesn't function, and there is some work-around substitute for 
it, and some of the most enormously skilled and talented people 
you have fly on that plane for up to 12-hour flights during 
their mission, and some of them are women, and this is a 
preposterous result, and even if it ends up with a scandal of 
an 800 dollar toilet seat, something needs to be fixed. Would 
you look into that for me?
    Admiral Pilling. Absolutely, sir.
    Mr. Bateman. Mr. Ortiz.
    Mr. Ortiz. Thank you. I have a question that maybe Admiral 
Pilling and General Dake can assist me. I have been monitoring 
the tragic accident that occurred in Vieques; and as we look to 
what the proposal has been, you know, when you have a lemon, 
all you can do is make lemonade, and this is where we are at 
right now.
    But what about the $40 million that has been, that is going 
to be used for Vieques now? Is that coming out of an Office of 
Person- nel Management account? Your overall maintenance 
account? Or is that a supplemental? How are you going to work 
this $40 mil- lion?
    Admiral Pilling. As I understand it, none of those dollars 
are in the defense budget. They are all in the budgets of the 
other agen- cies, such as Commerce and Transportation, and they 
are all fo- cused entirely on infrastructure on the island of 
Vieques.
    Mr. Ortiz. I see.
    That answered my question, Mr. Chairman. I don't have any- 
thing further.
    Mr. Bateman. Mr. Hansen.
    Mr. Hansen. Thank you, Mr. Chairman. Okay, gentlemen, maybe 
you can help me on an issue. Yesterday I was out in the west 
and was talking to an officer of one of the Reserve units, and 
he got into this question of retention and recruitment, and he 
said ``I really can't understand this.'' He said ``they have 
lowered the tests of mental agility'' or whatever you call 
that, and he said ``on physical,'' he said, ``I have these guys 
and I am always filling out forms because they can't do''--and 
then he listed it, and I can't re- member what it was--what 
they had to do in a six-month period, and they had two shots at 
it, and if they didn't make it, they were out the door.
    It was so many push-ups, had to run two miles and such--I 
can't remember all of them--and so we talked about it for a 
while, and he said ``what if they had ten shots at it?`` He 
said ``I think some of them could have made it.`` But he said 
they just had those two, and he said so they can't do three 
more push-ups or sit-ups in that length of time, but why do we 
cut them out?
    He said ``If I gave them more tries, they could probably 
make it.`` I was sitting there wondering. I mean, I'm sure 
there's got to be lines drawn somewhere, and you have got to 
make some things. I remember when I was in boot camp when I was 
18 years old; they were pretty strong on some of those things. 
We all had to pass that, and it was fine. It was kind of 
enjoyable when you are at the peak of your capacity, but some 
of these guys don't do those things, especially in the Reserve 
units.
    I'm just wondering why those--you are lowering one, but you 
keep another one high like that with some folks that can't 
quite make it.
    I'm speaking out of the other side of my mouth--I sound 
like a politician here--but I was also talking to an instructor 
pilot for hel- icopters for the Army, and he said he had been 
instructed to lower the grades that he would normally give so 
that he didn't flunk as many guys out.
    Now, you've got to help me here. Am I wrong on both of 
those counts?
    General Keane. Well, Mr. Congressman, I don't know for 
sure, to tell you the truth. What I can tell you is certainly 
mental agility standards are not being lowered. Second, 
physical training stand- ards are very important to an Army, as 
you can well imagine. We have to have certain levels of 
physical strength and stamina to meet the requisites of the 
battlefield, and we clearly administer to our standards--to our 
people on a periodic basis physical training tests to ensure 
they are meeting those standards; and if they fail it, we give 
them a reasonable period of time so that they can pass this 
test, and also we give them some counseling to ensure they 
understand what is at stake here.
    I will be more than happy to take a look at it, what's 
taking place with this organization; and maybe we could speak 
privately about who the organization is so I can focus in on it 
a little bit better.
    Mr. Hansen. Excuse me, General. He says he is losing five 
percent of his group every year, five percent because they 
can't do three more push-ups. You don't agree with that?
    General Keane. I can't speak to it. I have no specific 
knowledge. I will tell you this, and I'm not going to hide this 
from you, we have more challenges with American youth today 
than what we used to have in terms of their physical strength 
when they come to us. A lot of them are overweight, and a lot 
of them do not meet acceptable physical standards, and that's 
what basic training is all about; and then we have to maintain 
and sustain those standards over time.
    For the most part, we are being very, very successful in 
doing that. I have to take a look at this thing and focus in on 
it to give you a much better answer than what I can here today, 
sir.
    Mr. Hansen. Are we lowering the standards at all on people 
who are flying aircraft or helicopters, these expensive 
airplanes we buy?
    General Keane. I have no knowledge of that. The only thing 
that we did, we did do this, in the last couple of years, we 
did cut back on the number of flight hours, flying hours that 
it was taking to graduate as a pilot in the Army. We are 
corrupting that, and we have discovered that what we wound up 
doing for ourselves is burdening the receiving unit, and they 
have to compensate by doing some additional individual pilot 
training that we reduced in flight school, initial entry flight 
school in the Army.
    That's the only standard that I'm aware of that we moved 
away from, and we are putting that back to where it was. In our 
judgment, it was a mistake.
    The other I'm not familiar with at all. I am not suggesting 
it may not have happened, but I just don't know the facts of 
it.
    Mr. Hansen. Thank you.
    General Lyles. Congressman Hansen, we have not lowered any 
standards either from the Air Force, obviously, certainly for 
our pilots and the kind of training that they have to go 
through. But even though we are strapped for recruiting, we 
have also taken a stand that we are not going to reduce the 
standards for our enlisted folks coming into the U.S. Air 
Force.
    We have been challenged as to why our rate of acceptance of 
graduates, GEDs, is lower than the other services, but we have 
made a conscious decision that we want 98 percent of our people 
coming in on enlisted force to have high school diplomas, not 
GEDs--only two percent GEDs--and we have decided to stick to 
that even though it would give us some marginal increase to our 
recruiting numbers if we were to lower it down to 95 percent, 
as an example.
    We think it's the right thing to do, given the technical 
complexity of all the things we are trying to do in the U.S. 
Air Force, and we are going to stick by that, at least for the 
time being.
    Mr. Hansen. General Dake, would you like to respond?
    General Dake. Yes, sir, I would like to address a bit what 
we call the first term enlisted plan, so if people come in for 
a four year enlistment, we are concerned about the number of 
them which actually complete their full four years.
    We have reduced those who had--we had about 58 percent of 
the Marine Corps was in our first term. We are a very young 
force. At 8,000 a year, 8,000 people--not each year, but 8,000 
in our first term failed to complete it for various reasons. It 
could be physical fitness, it could be humanitarian, there 
could be a lot of other reasons why people do not make it 
through that first term of enlistment.
    We think that is very important that we increase that. We 
have actually reduced our attrition by 22 percent. We think 
that's a combination of things that we have strengthened rather 
than reduced standards, that we have strengthened things like 
the crucible in our recruit training, that we have looked to 
the commanders to be more involved so that if there is a 
problem of a Marine in their command, that they personally get 
involved to make sure that everything is in fact done, not just 
by regulation, but also by that which makes sense to the 
readiness of their command.
    We believe that 22 percent reduction equates to 1800 
Marines which in our recruiters is about two battalions worth 
of Marines that we keep now that over the past five years, we 
would have been losing by those same rates.
    So it is an important thing to have this first term 
enlistment, that they complete that; and we believe if you work 
hard at it and give command attention, you can make a 
difference, and we have done that without lowering any 
standards.
    Mr. Hansen. Okay.
    Admiral Pilling. Let me just comment on the Navy. The only 
thing we have changed on entry standards in the last couple of 
years was during the drawdown as we were getting smaller, we 
required 95 percent of our recruits to have high school 
degrees. When we finished the drawdown, we went back to the DOD 
standard which we had maintained all through the 1980s of 90 
percent high school degree graduates.
    And on PT, physical readiness standards, we are changing 
our program right now. You take your test every six months, and 
if you have three failures in four years, last year we would 
have thrown you out. That's three failures in four years, so 
it's a year-and-a-half process.
    We are going to change that this year to three failures in 
four years means you can't reenlist, but you stay until the end 
of your enlistment.
    Mr. Hansen. Thank you, General. I appreciate that. Thank 
you, Mr. Chairman.
    Mr. Bateman. General Keane, during the course of the 
weekend, I met with a warrant officer in the Army, and if my 
recollection of the facts is correct, he was in Kosovo detached 
from his unit during the course of a three-year tour in 
Germany, but six months of that tour he will spend in Kosovo.
    He expressed a concern and a negative factor in whether or 
not he would be willing to stay in the service, that he would 
expect to go to another short tour, i.e., probably Korea, 
because he had a long tour in Germany.
    Now, I think if that is anything like accurate, the Army 
needs to be refining the way it is looking at its personnel for 
purposes of reassignments. If he does a three-year tour in 
Germany, six months of which is in the worst of circumstances 
in Kosovo, that is not exactly the kind of thing that you then 
want to send your guy off onto another hardship tour.
    So I hope the Army would be looking at kind of a 
reassignment policy, and not perhaps just assuming everybody 
who got a tour in Germany is equal to everyone else that has a 
tour that was supposed to have been in Germany, but ended up 
with part of it being somewhere else.
    General Keane. Yes, sir. I thank you for that question, and 
by the way, just many thanks for the time you spent with our 
troops in Bosnia and I know that you probably don't want any 
personal acknowledgement of this, but we truly appreciate the 
fact that you were on a patrol of soldiers and that you truly 
found out what it is like for them day in and day out.
    For our soldiers who were deployed to Germany for a routine 
three-year assignment, it is almost a certainty that they will 
do six months, at least, and possibly longer, in Bosnia or 
Kosovo. It is also probable that they will do another six 
months in that three-year assignment as well.
    What we are doing in our personnel management is to ensure 
that those soldiers, whether it is six months or two six-month 
tours, we have a safeguard in place to prevent them from going 
to short tour overseas assignments.
    I'll be up front with you. About a year and a half ago, we 
had some of these problems, and I was the commander of some 
people that that was happening to, and we had to put these 
safeguards in place to ensure that the system would, that that 
would not happen.
    So we think we have got that fixed, and it has been fixed 
for some time now. So that youngster can be assured he is not 
going to go on short term assignments, but he could possibly 
face another six month assignment--I don't know how long he has 
been in Germany as well--because that's the demands that are 
there.
    Mr. Bateman. Thank you, General. Let me advise you, the 
subcommittee and the panel, that I have to go and make a phone 
call, and so I'm going to ask Mr. Riley if he would preside, 
and I also want the panel to be aware that I will have some 
questions that I want to submit to you for the record, and that 
Ms. Fowler, who has had to go to a leadership meeting, if she 
doesn't get back, she has some questions which she will be 
submitting for the record.
    Mr. Riley, if you would.
    Mr. Riley [presiding]. Gentlemen, I just have one question, 
and this may be an oversimplification. First let me say that 
I'm glad we don't have these mental agility and physical 
agility tests for Congressmen. If we did, I don't know how well 
we would survive.
    But when you look today at the reduced level of training 
like we have talked about in Vieques, our chiefs come in and 
tell us that we are $84 billion short over the next five years, 
our OPTEMPO levels are probably the highest they have ever been 
in peace time. We have an almost critical manpower shortage in 
just about all of the branches.
    This is a readiness committee. On a scale of one to ten, 
where is our readiness level today?
    General Keane. Well, on a scale of one to ten for the Army, 
we are somewhere around a seven or eight, I would probably put 
it at. When you consider all of what we're talking about in 
terms of readiness, you know, we measure readiness in a 
readiness report; and we are essentially looking at the numbers 
of people we have, the equipment that's there, and the 
training.
    But in the Army, we would like to argue more that readiness 
is clearly more than that. It is some of the other things that 
we have discussed here. It is our base ops capability, it's our 
RPM strategy, our depot maintenance strategy, as well as the 
amount of ammunition that we have. It's what we have in war 
reserves that deal with all of those issues.
    And personnel readiness, not just the numbers of people, 
but the quality of the life experience for our people is a 
factor in human readiness that's important in all the services.
    So to be quite frank about it, we are challenged in those 
other areas, and that's how I would categorize it for the Army.
    Admiral Pilling. For the same reason General Keane points 
out how difficult it is to put a single number on it, because 
the Navy deliberately under-resources non-deployed units so 
that all of our forward deployed units at the pointy end of the 
spear are C-1, C-2 units; on any given day we might have 40 to 
50 percent of our ships and squadrons not ready to go.
    So that would say we are somewhere around a five or six on 
a sale of ten. The easier way to describe it is in terms of 
risk, I think. The risk you have with the non-deployed force, 
the force that is in the integral and training cycle, if you 
have accepting contingency, that's a high risk contingency to 
get finished in the time lines that are laid out in the war 
plans.
    General Lyles. I have to agree with Admiral Pilling. I 
think you need to look at this very, very complex equation in a 
lot of different ways. The number that we sort of attest to is 
about 6.5 to seven, and that reflects primarily our combat 
units and those that are at the C-1 or C-2 level.
    But when you look at the definition of C-1 and C-2, it 
doesn't mean that we won't accomplish the mission, it means 
that the risk will be a little bit higher in accomplishing the 
mission, and we might make some trades and things like that to 
make sure that those units that are at the pointy end of the 
spear can get everything accomplished and do it very, very 
successfully.
    But the best number we would have to say would be 6-1/2 to 
7, and it reflects just those at C-1 and C-2.
    General Dake. Sir, the Marine Corps as a force of 
readiness, we sacrifice a lot to try to keep that high, so that 
our deployed forces are well-trained and equipped when they go. 
We have chosen to take risks in the reserve equipments that 
they do not have at their home stations. That is where if you 
were to look at our ground equipments which the readiness is 
high--over 92 percent of those that's in our possession in the 
active side.
    If we were to go to the Reserve side, that which they have 
on their stations would be above 90 percent as well, and that 
which is in the depots and waiting for call is where we have 
chosen to take some risk, so that is where we would find, if 
there were more funding to bring readiness up, it would go to 
areas such as that.
    But I would also say that we are balanced in the C-1, C-2 
category and we are holding costs; and, in fact, you will see 
an improvement from the one quarterly report that is referenced 
I think at the end of September or the beginning of September, 
and the one in December. We have actually had some units that 
will in greater number go to C-1 and C-2, so I don't know how 
to quite put a number on it for you, sir, but that's our 
sacrifice to move toward readiness.
    Mr. Riley. Gentlemen, if you can't put a number on it, I 
don't know how we ever will up here, and I guess that's what 
I'm trying to do. The last two-and-a-half years, we have 
constantly talked about all the problems, but until we get to a 
point that we can realize on this committee where we are, 
because the next question is if we are at fives and sixes and 
sevens now, where will be five years from now without a major, 
major infusion of capital?
    General Dake. Point well taken, sir, about my not putting a 
number on it so how can you. I think the answer that I would 
pose to that is that as we look at where we took the 
billpayers, that's where we would look for the funding in this 
case, in 2001 of $1.4 billion to restore us to that which we 
believe is what is needed.
    Mr. Riley. Well, and I think that's what the chairman was 
trying to get to a little earlier. If we are at a six or a 
seven now without a major infusion of money within the next 
four to five years, where would you say that the Army will be 
five years from now if we are at seven now?
    General Keane. We'll decline.
    Mr. Riley. How much?
    General Keane. Probably one or two, I would imagine.
    Mr. Riley. So we will be down to fives.
    General Keane. Right. And clearly that, that is in the 
context of the total readiness complexity that I was talking 
about. It goes beyond just a report, and that's what your 
struggle is. There is no readiness report that will satisfy 
that question which you have asked. This is much more complex 
than that report.
    Mr. Riley. It is, and I think it's the complexity that 
keeps us from doing our job on this committee. There are so 
many things out there that we need to simplify this to a term 
that we can go out and we can sell it, you can sell it. If we 
don't, I think we will continue to go around trying to 
arbitrate various provisions, and not look at what is really 
required for overall force.
    A few weeks ago we heard a report in the full committee 
about the train wreck that is coming, and I took the little 
book, the little pamphlet they gave us, took it home and read 
it. I will be honest with you. It was frightening, and I guess 
that's my point. If we were starting at a ten today, or a nine 
or a ten, four or five years from now maybe we would be down to 
a seven, but if you are telling me we are at fives and sixes 
now, and we have got this train wreck coming, especially with 
procurement, or the inability to have those procurement levels, 
it seems to me like unless we do something very drastic within 
the next year or two, you guys are going to have a problem that 
you can't, almost cannot control.
    General Keane. Congressman Riley, I think you're sensing a 
bit of frustration from all of us in some respects in how do we 
define this, and how do we define a good quantifiable number.
    If you look as an example, I think all of the services are 
reflecting today; we're addressing people issues. We're trying 
to make sure we're addressing recruiting and retention. That 
helps readiness in the future. We are addressing things like 
modernization, which is future readiness. We are addressing 
readiness itself in terms of spares and things of that nature; 
and if we can keep that up, that will help us.
    The one area that I think we all are suffering from, and 
that we're all concerned about, is infrastructure, and I'll be 
honest with you, I'm not quite sure if you're addressing three 
of the four, and not addressing the fourth, whether that means 
you will continue to go down, or you will level off, or 
slightly come up a little bit.
    We're not quite sure of the exact science in this, and I 
can't give you a good quantifiable number, but I feel positive 
that at least three of the areas are being addressed 
positively.
    Mr. Riley. Let me give you one option. We all know the 
level of deployments we have all over the world with every one 
of your branches. At what time do we step up and say we can't 
continue to have all those deployments all over the world using 
up our men and our equipment? At what point do we go out and 
ask our allies to take a larger role?
    If this Administration is not committed to adequately 
funding the troop strength that we have now, when do we, and 
how do we, talk to our allies about increasing their share of 
the burden?
    General Keane. Well, I'll take a stab at it, sir. First of 
all, in terms of the basic deployment that we're conducting in 
Bosnia and Kosovo, I think you are aware that our allies 
participated in both of those deployments as well; and 
certainly in Kosovo, for example, the latest deployment the 
Army is involved in with our 6,000 soldiers, clearly the sum of 
the allied involvement clearly exceeds the Army's 
participation.
    I think our CINCs and the Chairman and our civilian leaders 
work towards that end, to get greater participation in these 
operations and deployment that we have around the world, and I 
think they have had some success with it. But I wouldn't hide 
from you that these deployments really take a toll on us.
    I would say this, though. Our soldiers on these deployments 
that you visited, and Congressman Bateman and his colleagues 
have just returned from, our retention rates during those 
deployments go off the charts. The Army actually exceeded its 
retention objectives last year by 6,100 soldiers, and we're 
doing good this year.
    We attribute a portion of that to the satisfaction and 
generally sense of self-worth and self-esteem that comes from 
doing something that's important and makes a difference in 
other people's lives, so those deployments, while they take a 
toll on family readiness, there is also something special that 
is happening to the individual soldier that's participating.
    What we have to do is make certain we are treating those 
deployments equitably for our soldiers, and we're not over-
burdening them as well.
    The other point I'll make to you is, I wouldn't hide this 
from you, I mean, we are looking at the Army in terms of its 
size. I mean, do we have the right size Army? Number one, we 
have to be able to recruit for the Army, and we do that. And we 
are being challenged by that. Last year we came up 6,300 short. 
This year we have made our recruiting objective in every single 
month to include this month, but we know we are going to be 
challenged in the next three months.
    We believe we have to recruit for the size of the Army that 
we have. We're going to bring all of our war fighting divisions 
up to 100 percent strength by doing some things internal to the 
Army that we have been unwilling to do in the past.
    Those will be tough calls for us, but we're going to take 
this readiness from a people perspective off the table and 
solve that problem for ourselves; and we do have a study 
ongoing in terms of what the size of this Army is based on the 
foreseeable future and the operational deployments that we're 
facing.
    When we've got that answer, we will come back and present 
it to you as well as others, to the Administration. Thanks.
    General Lyles. Congressman Riley, the Kosovo was a major 
lesson learned again for air power, and when I say air power, 
I'm not just talking about the U.S. Air Force, I'm talking 
about Navy air power, Marine Corps air power.
    The United States did the bulk of the missions, obviously, 
from the air, and we have proved once again that our modernized 
capabilities across the board for the three services are very, 
very important for prosecuting successfully and efficiently 
that kind of contingency warfare.
    We are starting, and have started for some time, to 
dialogue with our allies, to urge them to get precision guided 
munitions, to urge them to get more stand-off munitions, to 
urge them to get the intelligence surveillance, have platforms, 
even to urge them to get more airlift capabilities so we don't 
have to depend just on the United States to provide those, in 
those kinds of contingencies like we saw during Kosovo.
    It's an uphill situation for them, obviously, and major 
investments that they will have to commit to, but we want to 
make sure that we are opening this dialogue and urging them to 
be prepared to take on some of these missions in the future.
    Mr. Riley. So have you met with any success?
    General Lyles. At least they are listening and they're 
talking and within their budgets, to date, obviously, nothing 
that I could pinpoint, but at least they're talking about it, 
and I think to some extent, some of our allies realize that 
they were in somewhat of--I won't call it an embarrassing 
situation; they wanted to contribute more, and did not have the 
sort of platforms, and those I talked to, particularly the 
senior airmen in some of those countries, they realize that 
they're--they just need to stand up and be accounted for in 
some of these areas.
    Admiral Pilling. Sir, if I could go back to your issue on 
single number characterization of where we are going, I think 
the chiefs have told you that if the OPTEMPO remains the same 
with the current force structure, and the current environment 
for people as far as recruiting and retention, the number is 
going to be $84 billion.
    Mr. Riley. That's right.
    Admiral Pilling. If you're going to try and balance near-
term readiness and far-term readiness. It's $84 billion.
    Mr. Riley. And I guess that's my point. There doesn't seem 
to be a consensus to try to find that $84 billion. Without that 
$84 billion, where will we be four or five years from now? 
That's what I'm saying. When I read this report and looked at 
our OPTEMPO level, the way it is today, if we don't drastically 
reduce that, if we don't make some of these procurements, if we 
don't get at least part of that $84 billion, it seems to me 
like three or four years from now, our soldiers and our sailors 
and our airmen are going to be at extreme risk that I don't 
believe that we should put them in.
    It is going to be up to you gentlemen to sell this, and 
that's what I'm saying. I think sometimes we make it so 
complicated and so complex in these hearings when we talk about 
each individual thing that is going on, that it's hard to 
understand how dramatic this change is going to be unless we do 
something relatively soon, and I see no sentiment in the 
Administration to make that happen.
    And like I said, it is beginning to frighten me. When I 
talked to people on Airborne Warning and Control System 
Aircraft (AWACs) last year, who had done already back-to-back 
six month tours, and he said I'm getting out of this. He said 
I've got two kids at home and I will not do it. I joined the 
Air Force to fly, and I love it, but I will not be gone from my 
children a year and a half at a time.
    We've got to make some very critical decisions. We either 
cut back our deployments, or we put these young men and women 
at an unacceptable level of risk, as far as I'm concerned.
    General Dake. Sir, could I mention--
    Mr. Riley. Yes, sir.
    General Dake. Could I talk about deployments a bit? It is 
somewhat different on the part of the Marine Corps insomuch as 
we are forward-deployed. It is a cycling thing that we do. We 
base our DEPTEMPO on new Special Operations Crafts (SOCs) off 
of the East Coast, with 58 percent of the Marine Corps being in 
that first term.
    They really joined to do something. They joined for some 
bit of adventure. We at least are seeing the stressors of 
constant deployments within our professional force, the ones 
who are beyond their first term, now they are called to go 
again and now their families are growing; that's where I think 
we must find balance.
    There's two types of deployments, the types you do on a 
national basis, where you sail off and do the business of the 
nation, and the other that we generate ourselves to go to 
Twenty-Nine Palms, for example, to train up. Either way, that 
Marine is away from his or her family.
    We try very hard to try to control the training 
deployments. We don't believe that the operational deployments 
that we have been given, as long as they stay in an SOC that we 
are manned and equipped to do, we can handle that on a 
sustained basis.
    We have got to control our own deployments for training and 
those types of things which are our own self-generating. Now, 
deployments outside of those scheduled ones are the ones that 
will become increasingly difficult to do.
    Mr. Riley. Gentlemen, you have a tremendous task ahead of 
you, you really do. The only thing that I would like to leave 
you with is just that each one of the branches, each one of you 
individually, are going to have to become strong advocates, 
strong proponents for additional funding or a reduction in 
deployments, because if not, I think that this country faces 
some perilous times ahead.
    I want to thank you for your candid opinions. Thank you for 
the service you give to this country, and thank you for 
appearing before this committee.
    Thank you very much.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
      
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                   QUESTIONS SUBMITTED BY MR. BATEMAN

                        Under Execution of Funds

    Mr. Bateman. Why does the Army consistently request 100 percent 
funding for it operating tempo accounts and then consistently 
underexecute these available funds?
    General Keane. We request full funding for our operating tempo 
(OPTEMPO) accounts (the readiness Sub-Activity Groups (SAGs) 111, 112, 
113, 114, and 115) because they form the basis of our training 
requirements to provide trained and ready forces to meet the National 
Military Strategy based upon the Army's Combined Arms Training Strategy 
(CATS).
    However, our ability to successfully execute this training is 
reliant upon the training support and infrastructure available to the 
commander. As an example, a unit cannot successfully conduct range 
training without the targets to support that event. Targets are not 
part of OPTEMPO accounts, but are obviously needed to execute this 
training. Commanders need to balance resources to fully support 
training. In addition to training concerns, commanders must provide for 
a minimum acceptable quality of life for soldiers and families. These 
quality of life requirements also compete for scarce resources in 
accounts that have not been traditionally funded. When quality of life 
and other essential base operations are not funded adequately, 
commanders are faced with the tough decision whether to train to 100% 
or migrate a small portion of those funds to other accounts. Finally, 
when units are deployed for scheduled events, like peace keeping 
operations, or unscheduled activities, like disaster relief, they may 
lose the opportunity to train on their combat vehicles, further 
decreasing the ability to fully execute their OPTEMPO miles.
                     Future Tank Mile Requirements
    Mr. Bateman. Why is actual historical use not factored into the 
Army's Training Resource Model when determining future tank mile 
requirements?
    General Keane. Historical use is factored into the Army's Training 
Resource Model in the form of cost factors, and these are used to 
determine future tank mile resource requirements. The Cost and Economic 
Analysis Center (CEAC) computes a cost per mile based upon a three-year 
moving average. Future tank mile requirements are not directly related 
to historical miles driven. Requirements are based on the Combined Arms 
Training Strategy (CATS), which provides for a mix of live, virtual, 
and simulation in training.
                            Operating Tempo
    Mr. Bateman. Where did the Army spend the $400 million intended for 
operating tempo in fiscal year 1999?
    General Keane. During any fiscal year, there are several things 
that can happen to cause execution of a program to differ from the 
appropriated amount. First, there are transfers ($102 million) that 
result from undistributed congressional adjustments that are spread 
across all programs. Second, there are transfers ($126 million) that 
result from Headquarters, Department of Army either fixing ``Army-
wide'' bills which result from changes in policy or economic 
environment, or funding new requirements that have emerged since the 
budget request was submitted. The Army leadership is actively involved 
throughout this process and makes the tough choices on the most 
pressing requirements. After all the Congressional and HQDA transfers 
are applied to the base funding, it is then sent to our Major Commands 
(MACOMs) for execution. In the past two years, we have decreased the 
amount of the HQDA transfers by over 60%, which in turn provides the 
MACOM commanders more flexibility with the funding they are provided.
    The commanders in the field must balance priorities during the 
course of the fiscal year, often resulting in the further transfer of 
OPTEMPO funds. We have always fully funded the OPTEMPO account at the 
expense of other readiness accounts, such as Base Operations Support 
(BOS) and Real Property Maintenance (RPM). Due to funding constraints, 
many of the requirements in these areas remain unfunded, eventually 
impacting directly on our soldiers' quality of life. OPTEMPO, BOS, and 
RPM are normally the commander's largest accounts and provide the 
maximum amount of flexibility. The majority of the transfers that we 
make are from one readiness-related account to another, or to support 
training ranges, airfield operations, and related activities; all 
critical elements in keeping our forces trained and ready. In FY99, 
OPTEMPO funds were transferred to the following accounts: RPM ($66 
million), BOS ($23 million), and Force Readiness ($52 million).
    Finally, we also provide an offset to our contingency based on the 
forces we have deployed. The OPTEMPO funding that was programmed for 
these units is transferred to our Miscellaneous Activities account to 
offset the costs of these operations. In FY99, $23 million was 
transferred for this purpose.
                      Tank Mile Training Readiness
    Mr. Bateman. Because Army commanders are not achieving the 800-tank 
mile-training goal, how is actual training within a range of 630 to 654 
tank miles, from fiscal year 1996 through 1998, affecting readiness 
levels?
    General Keane. The Army requires the resources that have been 
provided to sustain our ability to train as well as conduct that 
training. There are numerous factors such as time, personnel, 
equipment, ammunition, and available training facilities that affect a 
commander's training level evaluation. Reduced training funds do not 
necessarily have an immediate impact on training readiness. The impact 
is often subtle and cumulative over time, not manifesting itself in 
reported readiness until sometime in the future. Missed training 
opportunities today cannot be easily made up and will ultimately result 
in poorer trained units and leaders who missed critical experience.
    Under current reporting procedures, the unit commander determines 
the training level for his unit by estimating the number of additional 
training days required for the unit to become fully trained on its 
mission essential task list (METL). The METL is a list of those 
critical wartime tasks the unit must be able to perform to accomplish 
its wartime mission. METL proficiency is a function of training 
frequency, duration, and intensity. Reducing tank miles affects both 
the frequency and duration of unit training events. Additionally, per 
Congressional guidance, the Army continues to develop a reporting 
system that is more objective in nature.
                      O&M and RPM Budget Requests
    Mr. Bateman. Why is the Army not submitting realistic budget 
requests that would fully fund the costs for operating and maintaining 
bases and related real property?
    General Keane. The Army submits balanced, realistic budget requests 
given the top-line constraints, which preclude full funding of all 
readiness accounts. The Fiscal Year 2001 budget funds Real Property 
Maintenance and Base Operations Support at a critical level to continue 
operations with tolerable risk. Critical levels for fiscal year 2001 
are 96 percent of total requirements for Base Operations Support and 69 
percent for Real Property Maintenance.
                       Readiness/OPTEMPO Balance
    Mr. Bateman. How do Army commanders balance the increased readiness 
risk by decreasing the desired operating tempo requirements?
    General Keane. The commander is the one best suited to make the 
decisions regarding increasing readiness risk by migrating Operations 
and Maintenance (O&M) funds used for unit training to other purposes. 
This flexibility is provided to the commander to maximize the benefit 
from available funding to meet the full spectrum of the unit's training 
needs as well as the installation's quality of life needs. The 
operating tempo (OPTEMPO) requirements are based on the Combined Arms 
Training Strategy (CATS), which provides a menu of tasks that are 
associated with events that when executed will result in a combat ready 
battalion. Each commander makes an assessment of the status of the unit 
and determines what events to conduct and the area and degree of risk 
to assume. He/she may shorten or eliminate training events or lessen 
their intensity with the view in mind that he/she can make up the 
shortfall in the time between notification to deploy and actual 
deployment. There are many variables associated with these decisions, 
and we rely on the local commander's judgment.
    Mr. Bateman. Specifically, how is readiness affected by continually 
achieving less in operating tempo goals?
    General Keane. Today's Army is capable of fulfilling its current 
missions as outlined under the National Military Strategy, within 
acceptable ranges of risk. Declining resources, however, has meant that 
commanders have, at various times, been compelled to make choices 
between quality of life resourcing and training resourcing. Commanders 
train their units to the extent of resources actually available. In 
some cases, this has meant that their readiness is less than desired, 
increasing risk, as reflected in their readiness reports. Increased 
risk in readiness does not mean that the U.S. Army would not prevail in 
any scenario. Instead, it means the potential loss in national treasure 
could be higher.
    Mr. Bateman. What units are affected the most? Please be specific.
    General Keane. Units that are forced to function outside their 
normal METL proficiencies tend to have their readiness affected, since 
their activities are not directly related to their warfighting 
missions. Their additional missions are not necessarily a component of 
their readiness rating. In general, combat support elements seem to be 
affected to a greater extent than combat or combat service support 
elements, whose missions more closely approximate their METL tasks.
                     Transfer of Contingency Funds
    Mr. Bateman. For fiscal year 1997, the Army transferred over $1.4 
billion from the centrally-managed Contingency Account into O&M 
subactivities where it was used such as in combat units, tactical 
support, and force-related training and special activities. However, 
for fiscal year 1998, the Army transfer $1.6 billion from the 
centrally-managed Contingency Account into one subactivity for 
miscellaneous or additional activities. What are the pros and cons that 
the Army has learned by transferring contingency funds into one special 
account opposed to several individual subactivities like divisions and 
corps combat forces?
    General Keane. Accounting for the majority of Army contingency 
operations costs in a single, separate subactivity account allows us to 
more accurately identify all contingency costs. This includes 
incremental costs for direct support of the operation and training 
offset costs for training not conducted due to deployment. This also 
allows us to clearly identify budget execution by element of resource 
and operational phase. The result is also an ability to more accurately 
estimate the funding required for subsequent years of an ongoing 
contingency, or estimate the cost of an unplanned contingency of a 
similar type. We found that transferring funds into several subactivity 
accounts made it more difficult to separate contingency costs from 
normal baseline training costs.
                    ARNG Enhanced Brigade Deployment
    Mr. Bateman. We've put a lot of resources into the National Guard 
enhanced brigades. How many times have they deployed, and why are they 
not used more often?
    General Keane. During fiscal years 1999 and 2000, six infantry 
companies from the 39th (Arkansas) and 41st (Oregon) enhanced separate 
brigades were deployed in support of Operation DESERT FOCUS, providing 
security for patriot missile batteries in Southwest Asia. Elements of 
the 30th (North Carolina), 45th (Oklahoma), 48th (Georgia), 155th 
(Mississippi), 116th (Idaho), 76th (Indiana) and 218th (South Carolina) 
brigades are currently scheduled to deploy in support of Stabilization 
Force (SFOR) rotations 8 thru 12 for operations in Bosnia. Presently 
all 15 enhanced separate brigades are fully integrated into existing 
warplans. The Army National Guard (ARNG) enhanced separate brigades 
have been utilized when the situation required and current planning has 
incorporated these capabilities to best support a variety of scenarios. 
As the Army begins it's Transformation to a lighter, more responsive, 
and more lethal force, ARNG enhanced separate brigades will be called 
upon to mitigate risk as Active Component (AC) units transition to 
objective organizations.
    Mr. Bateman. Do you believe that the purchase of the M-Gator, a 
low-cost off-the-shelf piece of equipment, is necessary to the needs of 
the Army? If so, why is it not on the budget?
    General Keane. The M-Gator would provide the Army, in particular 
our light units, with an increased capability to perform their mission. 
The Army views the ``Drop Zone Mobility Enhancement System'' as a unit 
level procurement and did not fund the system as an Army centrally 
managed line item in the procurement budget. However, commanders in the 
field may purchase the M-Gator out of their day to day, operating funds 
(OMA).
    Mr. Bateman. Do you believe that the purchase of the M-Gator will 
be included in future budget requests?
    General Keane. At this time, there is no plan to include the ``Drop 
Zone Mobility Enhancement System'' in future budget requests.
    Mr. Bateman. As a light Infantryman, can you comment on the utility 
and need for the system in our Light Divisions?
    General Keane. The Army's Light Divisions require a high degree of 
mobility and must be rapidly deployable. An M-Gator type vehicle, which 
is easily deployed, would provide Light Divisions with an increased 
lift capability that would assist in the movement of supplies and light 
equipment, and the evacuation of casualties.
                          Unexecuted Accounts
    Mr. Bateman. GAO's recent report on O&M fund movements-Defense 
Budget: DOD Should Further Improve Visibility and Accountability of O&M 
Fund Movements (GAO/NSIAD-00-18, Feb. 9, 2000) found that the Navy has 
consistently underexecuted its funding for ship depot maintenance by 
about $1.2 billion or 10.5 percent from fiscal year 1994 through 1998. 
This subcommittee is encouraged to learn that the Navy obligated most 
of its funding in fiscal year 1998 for ship depot maintenance, however, 
when viewed over a five year period, the amounts not used for ship 
depot maintenance need explaining.
    Why did the Navy not use all of its available funding for ship 
depot maintenance in light of its ship overhauls and other ship depot 
maintenance requirements?
    Admiral Pilling. In any year of execution, requirements arise which 
must be funded from within available resources. When this occurs, the 
Navy must balance this new requirement against currently funded 
operations and commitments, including ship depot maintenance, and 
decide which programs will be sacrificed to accommodate the higher 
priority new program. Also, ship depot maintenance takes it's fair 
share of Congressional undistributed reductions which, until fiscal 
year 1999, were not reflected in the appropriated amounts and thus 
appear to be programmatic decreases by the Navy. Over the five year 
period referenced (FY 1994-98), these reductions amounted to almost 
$200 million. Last, there are sometimes programmatic decisions made 
during the year of execution which lead to funding changes. For 
example, the latest QDR directed ship force structure reductions that 
led to the cancellation of fiscal year 1998 availabilities for ships 
that were to be decommissioned as a result.
    Mr. Bateman. Where did the Navy ultimately spend these funds if not 
obligated to meet these ship depot maintenance requirements?
    Admiral Pilling. As noted above, there are many different programs 
that may have higher priority emergent requirements in a given year. In 
particular, contingency operations are often not fully financed by the 
Overseas Contingency Operations Transfer Fund (OCOTF), necessitating 
transfers, usually from maintenance accounts which afford greater 
flexibility, to operating accounts.
                            Flight Training
    Mr. Bateman. Concerns have been expressed that funding has been 
insufficient in the recent past to train pilots to be combat proficient 
in all areas of their aircraft's capabilities, e.g. air-to-air, air to 
ground, etc. The FY01 budget funds tactical air flying hours to 
maintain primary mission readiness (PMR) at 85% of requirements, that 
same as last two years.
    Given the sophistication of the systems Navy pilots have to 
operate, shouldn't funding and flying hours be increasing?
    Admiral Pilling. Whenever there is an increase in the 
sophistication of any weapon system there is a need for training to 
that capability. The issue is determining, funding, and fielding the 
appropriate training system for each increasingly sophisticated task. 
In the case of naval aviation the answer is in a proper mix of flight 
hours for dedicated training and simulator hours in a device whose 
capabilities and fidelity match those of the aircraft. The current 
budgeted flight hours will provide the dedicated airborne training 
necessary as long as all the other required elements are available. 
These are aircraft capable of flight, enough people to fly and maintain 
these aircraft, an adequate supply of spare parts on the supply 
shelves, as well as the availability of practice weapons and weapon 
ranges to fire them. These training hours must not be sacrificed to 
sustain an increased forward presence operational tempo, nor can the 
funds be used resource other priorities or the result will surely be 
decreased training opportunities and declining readiness. The remaining 
element of this naval aviation training readiness equation, simulators, 
must also be addressed. Given the expense of precision weapons and 
their increased range, there are few opportunities to experience live 
training. Simulators with the same high degree of sophistication as our 
aircraft can provide a significant portion of the fundamental training 
requirements leading up to the final exam of actual aircraft weapon 
firing. The numbers and sophistication of these simulators must be in 
balance with the previously noted elements that comprise the aviation 
readiness equation. The answer to your question is in achieving this 
balance.
    Mr. Bateman. Are you confident that you can maintain aircrew 
proficiency, safety, and all other training requirements with this 
level of funding?
    Admiral Pilling. As discussed above, as long as we keep all the 
elements of the aviation readiness equation in balance, the budgeted 
hours will accomplish what you describe.
                    Navy Marine Corps Intranet NMCI
    Mr. Bateman. In June of this year, the Navy intends to award a 
contract to one prime vendor who will have the responsibility for 
purchasing, operating and maintaining all of the Department of the Navy 
(DON) computers and video capabilities. The contract is for five years 
with three options years. At an estimated $2B per year, this contract 
could have a total value of $16B. There are currently no funds 
identified in either this year's budget or the budget request for 
fiscal year 2001 to pay for this contract.
    Why is the initiative, referred to as NMCI, not included in the 
fiscal year 2001 Budget request?
    Admiral Pilling. All of the Department of the Navy claimants have 
traditionally budgeted for their Information Technology (IT) network 
and support services in operating accounts and specifically identified 
modernization programs which are subsequently reported in their IT 
budget extracts. These requirements are based on their unique needs. 
NMCI is envisioned as a new approach in contracting for IT services 
within the Department of the Navy. It's a firm fixed price, 
performance-based services contract. To meet our future strategic 
computing and communications capability, IT is a required ``utility'' 
for our future, bought from the commercial sector just as we buy other 
types of utilities (e.g., water, telephone, and electricity). The NMCI 
contract has 37 Service Level Agreements (SLA) developed using industry 
best practices. Industry will be paid, or penalized, depending on their 
ability to satisfy the SLAs at each of our customer's site. By managing 
NMCI as an end-to-end capability under a single commercial service 
provider, we will be able to provide greater access, interoperability 
and security to the communication and data exchange to all of our 
Sailors and Marines. The claimants will continue to budget for their 
local needs under the NMCI contract. To give the Congress better 
insight into where these funds will be coming from to pay the NMCI 
bill, we have prepared a 300b-like exhibit and will prepare a 53-like 
exhibit for fiscal year 2002 and out.
    Mr. Bateman. Does the Navy consider this a major acquisition? Why 
or why not?
    Admiral Pilling. The Department of the Navy does not consider NMCI 
to be a major acquisition. NMCI is a service contract that will provide 
IT services much like a utility. The DON and DOD have agreed that a 
tailored Oversight Framework is appropriate and signed a memorandum of 
agreement (MOA) to this effect on March 8, 2000. The MOA was signed by 
the Deputy DOD CIO, Deputy DON CIO, and Deputy Assistant Secretary of 
the Navy (C4I). Additionally, in accordance with OMB Circular A-11, 
Part III, DOD works with OMB to determine oversight requirements, which 
has not yet been accomplished with respect to NMCI.
    Mr. Bateman. Does the Navy believe that the NMCI contract must 
comply with the Clinger-Cohen Act? If not, why not?
    Admiral Pilling. NMCI fully embraces and implements the principles 
of the Clinger-Cohen Act (CCA). Under NMCI, we are reengineering the 
way we do IT infrastructure planning and execution. Using industry best 
practices, we are improving the agency's performance, improving both 
our warfighting and warfighting support missions, and making use of 
commercial services in our NMCI effort by adopting a seat management 
type approach to IT outfitting used by industry. This is consistent 
with our DON IT Strategic Planning efforts and with our support of the 
DOD Strategic Plan. Also, as part of our NMCI effort, we will be fully 
compliant with the Joint Technical Architecture (JTA), our naval 
Standards and Architecture plans, and the emerging DOD Global 
Information Grid (GIG) efforts. We are taking a common industry 
solution based approach built around the Gartner Total Cost of 
Ownership model across the Department that will quantify the net 
benefits of our approach. We've adopted industry based Service Level 
Agreements to measure performance of the NMCI and of the vendor 
selected to implement it. We've established a tiered oversight process 
of this initiative that includes JCS, USJFCOM, USCINCPAC, DISA, OSD, 
and all elements of the Department of Navy.
    Mr. Bateman. Has the Navy discussed the budgeting implications of 
this initiative with OMB? If not, why not?
    Admiral Pilling. Our preliminary discussions with OMB have, to 
date, been limited to our approach to Small Business participation. We 
are in the process of scheduling NMCI briefings to the OMB senior staff 
to discuss all of the other elements of this initiative.
    Mr. Bateman. Does the Navy consider the NMCI contract as the 
purchase of a capital asset? Why or why not?
    Admiral Pilling. The Department of the Navy does not consider this 
to be the purchase of a capital asset in accordance with the definition 
of capital asset in OMB Circular A-11, Part III. Specifically, the NMCI 
concept is that the service provider will own and operate the equipment 
and infrastructure to provide IT services, much like a utility. The 
contract is a ``services'' contract, not a lease contract.
    Mr. Bateman. Does the Navy consider the NMCI contract to be a 
capital lease? If not, why not?
    Admiral Pilling. No. The Department of the Navy does not consider 
the NMCI contract to be a capital lease under the DOD Financial 
Management Regulations, Volume 4, Chapter 7, or OMB Circular A-11. 
Generally, capital leases are treated as a means to acquire an asset. 
The intent of NMCI is to acquire a service, not a capital asset. NMCI 
is a multi-year commercial services contract, under which the service 
provider will own and operate the equipment and infrastructure similar 
to a utility. The DON has no legal interest or title in the property.
    Mr. Bateman. Is the Navy fully complying with OMB Circular A-11 for 
its NMCI contract? If not, why not?
    Admiral Pilling. IT budget reporting requirements are documented in 
Part 1, Section 53, ``Information Technology'', and Part , ``Planning, 
Budgeting and Acquisition of Capital Assets''. Section 53 provides 
guidance for the preparation of Exhibit 53, i.e., IT budget exhibit. 
The DON currently reports all IT resources by functional area and major 
and non-major IT acquisition program in Exhibit 53 in accordance with 
the OSD budget guidance. Contractual vehicles used by IT acquisition 
programs to acquire resources are not separately identified, except as 
noted below under the discussion of Exhibit 300b. All IT resources 
acquired from the NMCI contract will be reported in the future in 
Exhibit 53 under the applicable IT acquisition program, as is currently 
the case with the resources acquired from the separate, individual 
contracts which NMCI will replace.
    Part III of OMB Circular A-11 contains guidance for the preparation 
of Exhibit 300b. An Exhibit 300b is required for major acquisitions 
(paragraph 300.3) only, which for the fiscal year 2001 budget request 
OSD and OMB have mutually agreed are the major IT acquisition programs 
so designated in OSD (C3I) memo of May 5, 1999 and reported in Exhibit 
53 as discussed above. Currently, there are no ``contracts'' designated 
as ``major'' for which an Exhibit 300b is required.
    However, because of the size of the NMCI effort and its importance 
to the Department, we developed and submitted a 300b-like document to 
Professional Staff Members from both the HAC and HASC. This action was 
completed by the Department of the Navy CIO March 6, 2000.
    Mr. Bateman. How many government employees will lose their jobs as 
a result of the NMCI contract being awarded?
    Admiral Pilling. The Department is currently involved in a 
comprehensive evaluation of both the number of civilian jobs that will 
be affected by NMCI implementation, and the impact that this change in 
jobs will have on our existing civilian workforce.
    While the Department of the Navy (DON) does not currently possess 
the end-to-end capability that will be provided under NMCI, at the 
local level, DON activities do operate IT networks and provide 
communication services. In many cases, these local services are 
currently provided by the commercial sector. In other cases, these 
local functions are performed by military and/or government civilian 
personnel. Consequently, while not the intent of NMCI, when DON 
transitions to an NMCI contract, network administration and operations, 
and communications positions currently performed by in-house personnel 
will be displaced.
    Information workers are in high demand in both the private and 
public sectors. Recruiting and retaining such workers is a continuing 
and deepening challenge. Implementation of NMCI will displace some DON 
employees who possess highly valued information skills from their 
current positions, and we will make a concerted effort to retain these 
workers on the Navy Marine Corps team. Civilian employees currently 
performing these functions will either have to transition into other 
important IT competencies within the Department, such as knowledge 
management, legacy systems support, application development, etc., or, 
if they want to continue to work in the network operations field, will 
have to transition to the private sector.
    A clause that addresses a right of first refusal has been included 
in the NMCI Request for Proposals (RFP), to allow affected personnel to 
be considered for employment with the winning contractor. In addition, 
a provision addressing retraining opportunities has been identified as 
an option item in the NMCI RFP. Our on-going evaluation will also fully 
consider additional options to provide assistance and support to our 
valuable employees during this transition process. Our expectation is 
that, through our concerted efforts, coupled with both the versatility 
of our IT professionals and the shortage of IT expertise nation-wide, 
we will be able to minimize the impact on our civilian workforce.
    We will keep you informed of our progress, and provide you with the 
results of our on-going analysis.
    Mr. Bateman. Why is the Navy not conducting a cost comparison under 
OMB Circular A-76 for the functions affected by NMCI?
    Admiral Pilling. The issue of A-76 applicability was studied in 
detail and the Department of the Navy Office of the General Counsel 
made a determination that the NMCI encompasses what will become a 
recurring Department of the Navy need for services that can be obtained 
from a commercial source. Accordingly, the policies and guidance 
contained in OMB Circular A-76 and its revised supplemental handbook 
are applicable. However, it is the Navy's position that the NMCI may be 
acquired without the need to conduct an OMB Circular A-76 cost 
comparison because it falls within the exception applicable to ``new 
requirements.'' The secure, end-to-end global functional services we 
will be procuring under the NMCI contract is not a function currently 
performed by Department of the Navy employees or military personnel.
    Mr. Bateman. Please identify, specifically, how the Navy will pay 
for the NMCI contract this year and in fiscal year 2001.
    Admiral Pilling. Every year, the DON CIO submits an Information 
Technology (IT) Budget extract to Congress that highlights the 
Department's expenditures in IT, across the board. These same funds 
will be used by the claimants to procure services from the NMCI 
contract.
    In fiscal year 2000, approximately $20 million of the Operations 
and Maintenance (O&M) monies slated to satisfy our basic IT operations 
and service requirements have been identified and put into ready 
reserves to support the beginning of the claimant's transition to NMCI 
during the last quarter of fiscal year 2000.
    Three steps have been taken in our spiral maturity process for 
determining our outyear funding for NMCI. The initial reference point 
is the Department's $3.46 billion fiscal year 2001 IT Budget 
submission. The office of the DON CIO analyzed the claimant's fiscal 
year 2001 IT Budget submissions for all programs and support efforts 
that appeared to fund any services that would be obviated by NMCI. For 
the purpose of this initial evaluation, the DON CIO office erred on the 
side of conservatism, excluding many appropriations and all civilian 
salaries. This analysis indicates approximately $1.62B of the total 
fiscal year 2001 IT Budget could be applicable as the NMCI source of 
funding. After completing this analysis, we reviewed the current per 
seat cost estimates from the NMCI Business Case Analysis (BCA) that 
showed an estimated $1.52B spent by the claimants in these areas. This 
data was then compared with known fiscal year 2001 NMCI implementation 
plans that reflect our cost projections. Please Note: The projected 
FY01 costs of NMCI are the cost for number of seats transitioning to 
NMCI in fiscal year 2001. This cost is SOURCE SELECTION SENSITIVE but 
was previously provided under protective marking. Please see our 
detailed NMCI FY01 Funding Source Review submission dated March 17, 
2000.
    To ensure the fidelity of the initial answers to the NMCI funding 
source review, the Department's Reinvestment in Infrastructure (RII) 
Group, a business management review board with senior level 
representation from across the claimants, is conducting a detailed, 
claimant-by-claimant analysis and bottom up review of their 
expenditures and IT budget submissions. Not only are they evaluating 
the funding components that made up the $1.62B estimate generated by 
the DON CIO, they will evaluate all CIO excluded funding appropriations 
and all other cost-of-doing business elements ensuring that all aspects 
of funding that might be obviated by NMCI are captured.
    To complete the funding source review, the results of the RII 
Group's analysis will be compared to the final NMCI contract proposal 
costs, after the vendors have completed their due diligence. During due 
diligence, the vendors will be visiting Navy and Marine Corps bases and 
stations to determine what portions of the Department's existing 
infrastructure can be used in their performance solution. Once 
determined, the Department will be credited for those investments, 
further reducing the NMCI seat costs. This final review will determine 
if any additional adjustments might be required in the fiscal year 2001 
budget so that they may be addressed with Congress prior to the start 
of execution.
    Mr. Bateman. Why does the Navy not consider this initiative an 
Acquisition Program or Major Automated Information Systems Program as 
defined under DOD Regulation 5000.2R?
    Admiral Pilling. The Department does not consider NMCI to be either 
an Acquisition Program or a Major Automated Information System as 
defined by DOD 5000.2-R. NMCI is a contract vehicle for ordering a 
prescribed level of performance-based commercial IT services at a fixed 
price per seat. These Information Technology services will be 
contracted for similar to a ``utility'' and will be funded annually by 
the operations and maintenance appropriation. As such, NMCI does not 
meet the criteria for designation as an acquisition program.
    However, the Department of Defense (DOD) and the Department of the 
Navy have agreed that a tailored Oversight Framework is appropriate. We 
are jointly implementing the oversight framework agreed to in our March 
8, 2000 memorandum of agreement. The PEO (IT) in his concurrent 
assignment as the Enterprise Acquisition Manager for Information 
Technology (EAMIT) has been assigned responsibility for NMCI.
    Mr. Bateman.Does the Department of Defense, including the Office of 
the General Counsel, fully agree with the Navy's plans for NMCI and 
specifically to the above questions?
    Admiral Pilling. The former Deputy Secretary of Defense 
(DEPSECDEF), current acting DEPSECDEF, Department of Defense Chief 
Information Officer (ASD C3I) and immediate staff, Office of the 
Secretary of Defense (Program Assessment and Evaluation), Joint Chiefs 
of Staff J6, Joint Forces Command J6, Pacific Command J6, and numerous 
OSD personnel have been briefed on our NMCI efforts. We requested and 
obtained both ASD C3I and DEPSECDEF's approval to release our RFP to 
industry. The Joint and operational staff mentioned above are part of 
our contract and technical oversight teams.
    In a recent letter to the General Accounting Office, the DOD CIO, 
Mr. Arthur Money, was quoted as saying, ``My office fully supports the 
goals of the NMCI acquisition. It will establish an enterprise-wide 
capability within the Navy providing its service members and employees 
end-to-end, secure and assured access to a full range of voice, video 
and data services. The NMCI will expand operating capability of naval 
forces by eliminating interoperability problems and other impediments 
to productivity and speed of command, while at the same time reducing 
the security risks and overall costs. As it becomes fully interoperable 
and secure, it is positioned to serve as a major component of the 
Global Information Grid (GIG).''
    As for specific review or agreement of the OSD staff to the answers 
to your questions, the OSD C3I staff helped jointly prepare all of the 
oversight guidance on NMCI and its designation as a Special Interest 
Initiative. They have not reviewed or commented on the Department of 
Navy's positions with regard to applicability and interpretation of 
various provisions of A-76 or A-11. Likewise, while aware of the 
strategic elements of our approach toward financing and personnel 
management, OSD has not specifically endorsed them.
    The DON Office of General Counsel previously discussed with the DOD 
Office of General Counsel DON's position on applicability of A-76 and 
other related statutes. Additionally, discussions are being initiated 
on the Department's other responses as discussed above. We will keep 
you advised of their progress.
                Flying Hour Funding Affect on Readiness
    Mr. Bateman. Explain movement of funds intended for the Air Force's 
flying hour program from fiscal years 1995 through 1998 and what 
affect, if any, this has had on readiness. Is movement of funds from 
the Air Force's flying hour program continuing for fiscal years 1999 
and 2000?
    General Lyles. Between FY95 and FY97, the movement of funds from 
the Air Force flying hour program was negligible, averaging less than 
.4% of the budgeted funding. In FY98, execution of flying training 
programs was impacted by declining mission capable rates and high 
opstempo due to contingency operations. Contingency deployments 
precluded full execution of home-station training sorties and, as a 
result, the Air Force did not fly the hours as originally programmed. 
Consequently, unobligated flying hour funds were used to relieve 
chronic high priority readiness shortfalls, as reported in GAO's 8 July 
1999 report: Defense Budget: Observations on the Air Force Flying-Hour 
Program. In FY99, we experienced a similar outcome due to increased 
commitments in Operations Desert Fox and Allied Force. However, for 
FY00 we are currently on course to execute our flying hour funding as 
programmed. Many years of high operations tempo, coupled with aging 
equipment, the lack of spare parts and engines have impacted our near-
term readiness. The Air Force has experienced a decline in mission 
capable rates of approximately 9.9% since FY94. Additionally, low 
retention of maintenance personnel has caused a corresponding increase 
in non-mission capable for maintenance (NMCM) rates. The Air Force is 
addressing these issues through increased funding for spare parts and 
numerous retention and recruiting initiatives.
                   Funding for Primary Combat Forces
    Mr. Bateman. Will the Air Force highlight the funding for primary 
combat forces and explain to what extent movement of funds has taken 
place in this subactivity, particularly in fiscal years 1994 to 1996?
    General Lyles. According to the GAO's report, Defense Budget: DOD 
Should Further Improve Visibility and Accountability of O&M Fund 
Movements (GAO/NSIAD-00-18, Feb. 9, 2000), the Air Force moved the 
following funds from the Primary Combat Forces subactivity in fiscal 
years 1994 through 1996.


--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                    Constant 1999 dollars in millions
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Fiscal Year                                                                                                    Difference  between  Congressionally  designated and  obligated  Amounts                                                                         Percent Change
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1994............................................................................................................................................................                                                                    71.7                                                                                                           2.5
1995............................................................................................................................................................                                                                   148.3                                                                                                           4.8
1996............................................................................................................................................................                                                                   217.2                                                                                                           7.9
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    The GAO report addresses Congressionally designated funds which it 
defines as the budget request plus or minus any allocated changes made 
by the Congress.
    In an effort to provide field commanders maximum flexibility to 
respond to changing mission requirements, the Air Force does not 
generally limit the movement of funds between subactivity groups unless 
specifically required to by law. However, limitations are placed on the 
high priority readiness activities, and the Air Force does report 
funding adjustments in these activities in the annual ``End of Year'' 
report. The movement of funds reflects the ever-changing situations 
faced by our field commanders and, given the substantial lead-time (~2 
years) between initial programming and actual execution, these 
variances are not surprising.
                    Funding Source for Real Property
    Mr. Bateman. The Air Force reported that it moved $155 million into 
its operating forces real property maintenance subactivity but did not 
indicate where the funds came from in the fiscal year 1998 high-
priority readiness-related transfer report. The Air Force did state, 
however, the funds were needed for repairs to runways, maintenance 
hangers, utility systems, roofs and other real property assets.
    What was the funding source for the $155 million used for real 
property maintenance in fiscal year 1998? Depending on the subactivity 
that was the source for this funding, how was effected-subactivity 
impacted?
    General Lyles. Funding was sourced by field commanders from various 
accounts which would suffer the least impact. Specific reporting 
systems do not track the specific movement of funds.
                        Mission Capability Rates
    Mr. Bateman. What are your current mission capable rates and what 
has been the impact of the last few years decline in these rates?
    General Lyles. The current mission capable (MC) rate for total Air 
Force (Active, Reserve & Guard) is 74.2% for April 2000. This is a 2.8% 
increase from the previous month. Active Air Force MC rate is 77.4% and 
the Reserve Component MC rate is 69.7% (both as of April 2000).
[GRAPHIC] [TIFF OMITTED] T4887.070

    MC rates for fighter aircraft as a group have increased over the 
past 12 months, rising from 74.9% in May 1999 to 77% in April 2000. (A-
l0, F-l5, F-l5E, F-l6, and F-ll7)
    Bombers MC rates (B-1 and B-52 combined) have varied over the past 
12 months, from a low of 61.4% in Sep. 1999 to a high of 70.6% in the 
month of Oct. 1999; the April 2000 rate is 64.8%. The monthly rates 
have been slightly higher but fairly consistent with the previous 
fiscal year.
    Strategic airlifters overall MC rates have decreased over the past 
12 months, from 73.7% in May 1999 to 68.4% in April 2000. (C-5, C-17, 
and C-141)
    Other aircraft, particularly the KC-135, have diminished the 
overall AF MC rate. The KC-135 has suffered significant problems with 
the stab-trim actuator which grounded much of the fleet during the past 
six months, but this situation improved in April 2000.
    The annualized MC rate for Total AF is 72.4%. This is a 1.1% 
decrease from the FY99 rate of 73.5%. The annual MC rate for the Active 
AF is higher at 75.8%; the Reserve Component falls below Total AF with 
an MC rate of 67.2%.

IMPACT: Decreased MC rates have driven down sortie generation 
capabilities, which in turn, have negatively impacted the ability of 
combat forces to maintain their required level of training. It should 
be noted that improvements in monthly MC metrics through April provide 
leading indication on annual rates. If that trend continues, the annual 
rates should begin showing the improvement later this year.

Note: FY00 annual numbers are Oct. 1999 through April 2000. Aggregate 
AF figures are based on the following aircraft: A-10, F-15, F-15E, F-
16, F-4 (through FY98), F-111 (through FY97), B-1, B-52, C-5, C-17, C-
141, E-3, C-130, and KC-135.
[GRAPHIC] [TIFF OMITTED] T4887.071

               Decline in Aircraft Mission Capable Rates
    Mr. Bateman. Is the steady and substantial decline in aircraft 
mission capable rates reason for concern? Specifically, are current 
mission capable rates for any of your key aircraft, such as the C-5, 
lower than the rates that you need to have to meet the demands of your 
most demanding contingency missions?
    General Lyles. The Air Force needs to maintain a strong global 
readiness and warfighting capability to support our national military 
strategy. The nature of rapidly responsive aerospace power requires 
high levels of readiness. Therefore, our steady and substantial decline 
in aircraft mission capable rates is reason for concern.
    While the overall strategic fleet has shown a decline in mission 
capable rate, the C-5 is of greatest concern. The importance of our C-5 
fleet was highlighted during Kosovo operations. Although the C-5s flew 
only 34% of our overall intertheater missions, they were critical in 
moving over 50% of the outsize equipment along the deployment phase 
from CONUS to Europe. According to the Chairman of the Joint Chiefs of 
Staff (CJCS), Allied Force was ``the most precise and lowest-
collateral-damage air campaign in history-with no U.S. or allied combat 
casualties in 78 days of around-the-clock operations and over 38,000 
combat sorties.'' A portion of that success belongs to the C-5's 
responsive movement of precision munitions from CONUS into the AOR.
    The C-5's readiness remains a significant concern. The C-5, which 
is important to every peacetime deployment we undertake today, is even 
more critical in an MTW scenario where we are required to move 
significantly more unit equipment from CONUS. Based on the Mobility 
Requirements Study-Bottom-Up Review Update (MRS-BURU), the C-5 Galaxy 
fleet is expected to achieve a 75% MC rate in order to meet warfighting 
CINC requirements. Today, the C-5 maintains an MC rate of approximately 
61%. Substandard MC rates put wartime scenarios at risk. Moreover, a 
substandard MC rate means fewer tails in peacetime to support on-going 
daily ops, humanitarian relief efforts, Presidential support missions, 
and contingency operations.
    The Air Force is putting together a C-5 modernization program that 
will work to raise C-5's reliability but even if we succeed, based on 
the time required to complete RDT&E and subsequent modifications, we 
will not see MC rates rise significantly until 2005, and assuming full 
funding for these programs, we will not reach the 75% MC rate until 
approximately 2014. Air Mobility Command is examining its current and 
forecasted combat power projection shortfalls, using the Mobility 
Requirements Study 2005 (MRS-05) scenarios, in its ``Oversize and 
Outsize Analysis of Alternatives.'' We are hopeful that the 
recommendations from that analysis will suggest an operationally 
effective, best-value force mix of C-5 and C-17 aircraft solution to 
meet today's and tomorrow's Oversize/Outsize requirements.
[GRAPHIC] [TIFF OMITTED] T4887.072

             Unacceptable Aircraft Mission Capability Rates
    Mr. Bateman. Which aircraft have potential problems in maintaining 
acceptable mission capable rates, and what are the required and actual 
mission capable rates of each?
    General Lyles. Several airframes as outlined below are experiencing 
difficulties in achieving and maintaining acceptable mission capable 
rates. This is due to a combination of supply and maintenance issues, 
such as lack of skilled maintenance technicians, retention problems, 
prior years underfunding, effects of aging aircraft, OPTEMPO, and 
technical surprises.


------------------------------------------------------------------------
                                                                  ACTUAL
                    AIRCRAFT                       LEAD MAJCOM      MC
                                                       GOAL        RATE
------------------------------------------------------------------------
B-1............................................             67%   54.8%
C-5............................................             75%   58.6%
E-3............................................             85%   73.4%
KC-135.........................................             85%   66.8%
------------------------------------------------------------------------

                Actions to Improve Mission Capable Rates
    Mr. Bateman. What action is being taken to improve the mission 
capable rates of these aircraft?
    General Lyles. The Air Force has implemented several actions to 
improve mission capable rates. In particular, we have focused on 
improving spare parts support to the warfighter through improved 
funding, expedited parts deliveries, partnership with Defense Logistics 
Agency (DLA) to improve support and funding for low demand--high cost 
aviation assets, and stabilization in the depot transition. Also, we 
are improving the supply processes and incorporating those into the 
logistics transformation plans.
    In FY99, DOD added $904M in cost authority to support increased 
sales and to purchase or repair spare parts. The objective was to 
restock the shelves with critical spares and reconstitute the fleet 
from Kosovo operations. In addition, with the help of Congress in the 
FY00 PB, Air Force was able to fully fund the increased consumption of 
primary operating stock . . . . spares to support the peacetime flying 
hour program. In the case of engine components, typically the most 
expensive and hardest to support spares, the Air Force Materiel Command 
has implemented innovative contracting methodologies. The General 
Electric Engine Corporate Contract (for example) reduces the 
acquisition lead-time for its fighter engine components from 400+ days 
to 90-150 days. Also, Logistics Transformation efforts are underway to 
improve internal processes by increasing accountability/responsibility 
for Supply Chain Managers, reducing customer wait time, enhancing total 
asset visibility, and improving metrics to track execution.
    Anecdotal evidence indicates spares support to the field is 
generally improving. Backorders for reparable spare parts have been 
reduced 54% from December 1998 to April 2000. The latest monthly (April 
2000) Total Not Mission Capable for Supply rate for fighter aircraft is 
11.8%, the best seen in 23 months. The Air Force remains cautiously 
optimistic that overall MC rates will continue to improve.
          Funding Contributing to Low Mission Capability Rates
    Mr. Bateman. Was insufficient funding a contributing cause of these 
lower-than-required mission capable rates and, if so, what requirements 
were not funded and what caused the funding shortfall?
    General Lyles. Yes, insufficient funding was a contributing factor 
to the decline in mission capable rates. Spare parts shortages arose 
from funding problems in the 1990s, and are a major contributor to the 
Air Force's readiness decline over the past several years. Downsizing 
of the Air Force spare parts inventory went too far. Supply systems 
were pushed to the limits as Air Force units deployed more often. As a 
result the non-mission capable rate attributed directly to supply 
shortfalls increased from 8.6% in FY91 to 14% in FY99.
    In FY99-01, Congress, DOD, and Air Force took specific actions to 
address shortfalls in spare parts funding. This combination of support 
fully funded the validated peacetime spare parts requirement. However, 
after working through Kosovo lessons learned and completing a thorough 
review of the levels required in the Readiness Spares Package (RSP) 
kits, there is an FY01 shortfall of $75M, which is included on the Air 
Force UPL.
              Aircrews not Getting the Right Flying Hours
    Mr. Bateman. The subcommittee understands that many of the aircrew 
members deployed for contingency operations are getting a lot of flying 
hours, but not necessarily the right flying hours.
    Is this still the case, or if not, what has been done to correct 
this situation?
    General Lyles. Home station flying is made up of almost 100 percent 
training. On the other hand, flying in support of contingencies is 
defined by the contingency air tasking order. Its requirements are by 
nature often narrow in scope, repetitive, and offer little opportunity 
to train to the full spectrum of normal requirements. The result is 
that sometimes aircrews can find themselves needing to accomplish 
certain training events even though they have flown as many or more 
hours than they would have during the same time at home station. Most 
aircraft training events must be accomplished every 45 to 90 days. Many 
of these are generic and can be completed while flying in support of 
the contingency. Sometimes, however, all training cannot be 
accomplished. To relieve this situation, the Air Force has implemented 
several initiatives. First and foremost, the implementation of the Air 
Expeditionary Force concept provides stability and predictability 
necessary to accomplish training and most operational requirements. 
This concept provides for aircrew training throughout its 15-month 
cycle ensuring that they are trained to meet operational needs during 
its 90-day rotation. A spin up period immediately prior to deployment 
provides the opportunity to ``front-load'' training. A reconstitution 
period following redeployment provides the opportunity to restore all 
unit mission areas. Second, at Operation NORTHERN and SOUTHERN WATCH up 
to 5 days a month are dedicated to training. Last, in light of the Air 
Expeditionary Force, Air Combat Command is re-examining aircrew 
training requirements with the intent of aligning training with the AEF 
schedule. This initiative is still being developed but promises to 
provide insight into better ways of keeping aircrew training on track 
during contingencies.
    Mr. Bateman. How concerned are you with this shortfall in depot 
maintenance funding and will this impact on your ability to meet your 
mission requirements and/or future contingency operations?
    General Dake. The depot maintenance backlog is currently at a 
manageable level and poses no serious threat to near term readiness. 
However, a continued rise in backlog will ultimately degrade readiness 
as Operating Force Commanders are forced to apply scarce O&M funding 
towards maintenance of equipment that cannot be inducted to the Depot 
for repair. Funding the depot maintenance shortfall is a proactive 
measure which will reduce depot maintenance backlog to a more 
acceptable level while allowing Operating Force Commanders the ability 
to use their resources according to their financial plan.
                           Readiness Funding
    Mr. Bateman. From your point of view, what readiness critical 
requirements are unfunded or underfunded in the fiscal year 2001 budget 
requests? What are the near-term and long-term readiness impacts of 
this underfunding?
    General Keane. We are nearly $1 billion dollars underfunded in 
readiness requirements for fiscal year 2001. Our most pressing 
underfunded requirements include duty military occupational specialty 
qualification and leader development for the Reserve Component, some 
Title XI program costs, test and evaluation, training devices and range 
modernization, installation information infrastructure modernization, 
sustainment systems technical support, and real property maintenance. 
These programs have been funded only to essential levels to reduce risk 
to a tolerable degree.
    In the near-term, we will continue to lag behind in duty military 
occupational special qualification, thus creating a wider gap to cross 
in funding to attain our required level of service-wide skills 
qualification. Testing constraints will delay new equipment fielding. 
Our infrastructure will continue to erode and lack essential 
connectivity to support training and deployments, and our maintenance 
of critical combat systems will be less efficient. Each of these 
individual effects will degrade our current operational readiness. In 
the long-term, attaining necessary levels of warfighting capability by 
the timeframes envisioned by our National Military Strategy will be 
placed at greater risk as individual modernization programs (hardware 
and equipment) are delayed due to lack of funding.
    Admiral Pilling. The Navy's highest priorities as reflected in the 
Chief of Naval Operations' Unfunded Requirements List of 9 February 
2000 are in the areas of personnel and readiness. These personnel and 
readiness priorities are as follows:
    1. Personnel End Strength and Recruiting Incentives
        77.0M
    2. Readiness Aircraft Procurement, Navy APN-6 Spares
        174.0M
    3. Readiness Fast Combat Support Ship AOE Depot Maintenance
        40.0M
    4. Readiness Ship Depot Maintenance
        142.3M
    5. Readiness Real Property Maintenance
        136.6M
    6. Personnel Career Sea Pay
        118.7M
    7. Readiness Amphibious Assault Ship LHA Midlife
        32.0M
    8. Readiness Training Ordnance
        26.0M
    9. Readiness Laser Guided Bombs and Bomb Kits
        20.0M

    Any funding that can be appropriated to address these unfunded 
areas would be of great benefit to Navy preparedness.
    We are meeting our near-term obligations but not funding these 
priorities will place the Navy's long-term readiness at risk and 
continue to make it increasingly difficult to prepare our deploying 
battle groups for deployment. Battle groups that are not deployed or 
preparing for deployment are in C-3 or C-4 status and current 
underfunding in these critical readiness areas makes it increasingly 
difficult to move them through the Inter-Deployment Training Cycle to a 
C-2 and ultimately C-1 readiness status.
    General Lyles. The increased costs of maintaining our aging 
aircraft fleet has forced the Air Force to allocate an additional $300 
million into Depot Level Reparables (DLRs) in FY01. These funds would 
otherwise have been used for base support and real property maintenance 
requirements. Both of these programs directly support quality of life 
and our worldwide mission and were already fiscally constrained. In 
addition to shortfalls due to aging weapons systems, base support 
requirements ($145 million) and Real Property Maintenance ($278 million 
for mission critical projects) are further stressing our O&M budget. 
Furthermore, during development of the FY01 Budget, the Air Force has 
identified 24 programs totaling over $2.8 billion in critical unfunded 
requirements in the categories of Readiness, People, Infrastructure, 
and Modernization. Each contributes to near-term or long-term readiness 
of the Air Force. In addition to DLR costs, our top readiness 
shortfalls are engine repair production ($75 million), readiness spares 
packages (RSPs) ($62 million), and training munitions ($79 million). 
Infrastructure requirements include $1.1 billion for MilCon and $650 
million for Military Family Housing. Finally, modernization 
requirements total over $400 million for KC-135 re-engining, C-32 
communications upgrades and the EELV.
    General Dake. As our Commandant, General Jones, has testified, his 
focus is on the support of the Operating Forces and, specifically, the 
primacy of the Marine Air-Ground Task Force (MAGTF). The readiness of 
the MAGTF rests on four pillars: (1) our Marines and their families, 
(2) our legacy systems, (3) our infrastructure, and (4) our 
modernization effort. These pillars must remain strong in their own 
right and in the correct proportion so that the structure of readiness 
remains solid now and in the future. Thus, our challenge is to maintain 
the individual strength of each pillar, while achieving a proper 
balance in our application of resources amongst the pillars. Because of 
the need to balance readiness, we were unable to fully fund all of our 
requirements.
    As General Jones discussed in his 9 February letters to the 
Chairman and Ranking Minority Member of the Committee, the Marine 
Corps' most critical Fiscal Year 2001 shortfall total approximately 
$1.5 billion. These shortfalls are spread across our four readiness 
pillars. They include recruiting and retention initiatives, family 
housing, barracks and other quality of life projects in support of our 
Marines and their families. Critical support for our legacy systems 
through depot maintenance, corrosion control, and Operating Forces is 
also included. Bridging modernization through updating our existing 
ground and aviation platforms continues to be stressed. Concerning our 
aging infrastructure, accelerating both family housing and military 
construction projects, and devoting more resources to maintenance of 
real property is highlighted. Finally, increasing the pace of 
modernization for both our ground and aviation equipment is identified 
for additional funding.
    We have and will continue to maintain our near-term readiness--
mainly through the efforts of our young Marines. But hard work is 
becoming overwork as our major ground and aviation weapon systems are 
facing block obsolescence. The key to the health of Marine Corps 
readiness is the modernization of our equipment and infrastructure. 
During the 1990's, in order to maintain near-term readiness, we had to 
forgo much of our planned modernization. Because of this, many of our 
ground and aviation weapon systems now face block obsolescence. 
Adequate infrastructure and modernization has become a near-term 
readiness issue. These modernization and infrastructure shortfalls are 
reflected in our unfunded priority list. Over $1.0 billion of the $1.5 
billion total unfunded priorities is Research and Development or 
Procurement funds to upgrade/extend the life of or replace our legacy 
systems. An additional $0.3 billion is infrastructure support--Family 
Housing, Military Construction and Real Property Maintenance.
                Contingency Operations Readiness Impact
    Mr. Bateman. The deployment of personnel in support of contingency 
operations (CONOPS) has increased over the last few years. This 
increased pace of operations has fallen most heavily on small number of 
critical units with unique specialties, including special forces, 
electronic warfare, and military police. What other types of forces 
have been heavily effected by CONOPS?
    General Keane. An analysis of Army units indicates that our air 
defense artillery, armor, and military intelligence units have also 
been affected by CONOPS. The effect of CONOPS on particular types of 
Army units is a function of the number of forces available to respond 
to requirements. Units with relatively small numbers in the force 
structure are subject to greater involvement in support of CONOPS. 
Whereas unit types with larger force structure may have the ability to 
more evenly distribute deployments over a larger structure. For 
example, our Patriot units have recently experienced an increase in 
deployment to provide support for CONOPS. The Army has taken steps to 
reduce impacts to these units including sourcing of the Kosovo and 
Bosnia missions under a single corps to improve deployment 
predictability and enhanced readiness.
                           Pace of Operations
    Admiral Pilling. While EA-6B's supporting the electronic warfare 
mission cited above, are the platform within the Navy that has been 
impacted the most by contingencies in recent years, SAND DECK and EP-3 
aircraft are also small communities that have been heavily tasked 
during contingency operations.
    General Lyles. In general, all our units are suffering from the 
effects of the high TEMPO and subsequent downturn in readiness as a 
result of our participation in worldwide contingencies over the years. 
Those units and career fields that were heavily engaged in Kosovo 
operations this past year were particularly hard hit.
    There are, however, certain career fields and units that have been 
tasked more heavily than others. This is true not only for active duty 
units but also some reserve component assets. These include our ``Low 
Density/High Demand'' (LD/HD) systems such as our command and control 
assets; our intelligence, surveillance, and reconnaissance assets; and 
our special operations and rescue assets. Other systems such as 
airlifters, tankers, and some specialized fighters have also seen heavy 
taskings.
    The personnel associated with these systems historically have been 
experiencing TEMPO in excess of the Air Force target maximum of 120 
days deployed in a 365 day period. These skills include linguists, 
intelligence specialists, airborne warning and control personnel, 
combat controllers, and para-rescue personnel as well as load masters, 
specialized maintenance career fields, and flight engineers. Security 
forces personnel, special tactics teams, civil engineers, and 
communications specialists have also had a history of high deployment 
rates. Currently, in-flight refueling technicians, services personnel, 
fire protection specialists, vehicle operators/maintainers, fuels, and 
munitions personnel round out the top skill levels reported as having 
high TEMPO.
    General Dake. Marine Corps readiness has not been significantly 
impacted by long-term or prolonged contingency operations. In the past, 
our normal forward-deployed forces have met most contingency 
requirements, and in terms of unit deployments, the scope of our 
deployments have not gone much beyond our normal deployment level. The 
Marine Corps averages 23,000 Marines forward deployed at any given 
time, and with the exception of a few specialized personnel or high-
demand low-density assets, it has been these Marines that have been 
used routinely to respond to contingencies through out the world. The 
predictability built into our unit deployments has been essential to 
reducing the stress associated with higher operational tempo. Achieving 
predictability while complying with National Military Strategy and the 
Department of State's Forward Presence Agreements is accomplished 
through the execution of our time tested rotational deployment cycles 
and our participation in the SECDEF directed Naval Force Presence 
Policy.
                      Readiness of Affected Forces
    Mr. Bateman. How has the readiness of these forces been impacted 
over the last few years?
    General Keane. The overall impact of extended deployments on the 
readiness of these units has decreased. This is due in part to our 
ability to maintain training proficiency while deployed. As deployment 
locations mature, units are provided training opportunities to sustain 
warfighting skills.
    Reducing contingency operations (CONOPS) deployment time reduces 
degradation of warfighting skills. For combat units, readiness reports 
indicate a degradation of warfighting skills as they train for and 
focus on peacekeeping missions, conduct the mission, and redeploy. 
While in a deployed status, units are frequently not afforded adequate 
range and training facilities to conduct collective training on 
warfighting skills. For example, armor and infantry units do not have 
available facilities or time to sustain and conduct crew gunnery 
qualifications and unit level maneuvers when deployed in support of 
CONOPS. Only upon redeployment can these units execute training plans 
on collective warfighting tasks. This trend is not as severe for combat 
support and combat service support units because portions of their 
wartime tasks may be conducted under the conditions of the CONOPS 
mission. Because extended CONOPS require a rotation of units, up to 
three units may be involved in the various stages of preparation, 
execution of the mission, and retraining of warfighting skills. As 
such, the CONOPS impacts on readiness have an affect on up to three 
units.
    Admiral Pilling. The mission readiness of these units was basically 
unaffected by the surge in operating tempo caused by contingency 
operations. There were some parts issues caused by the increase over 
planned flying hours. If surge operations had continued there would 
have likely been impacts to training readiness.
    General Lyles. Unpredictability and duration of TEMPO demands have 
led to declining retention across the force, but most severely in mid-
career pilots and sergeants with special skills. These increased 
peacetime deployments negatively impact wartime training and 
participation in exercises. Quality of life issues emerge as stay-at-
home and deploying forces struggle to cope under strain of increased 
TEMPO. We are hopeful the Expeditionary Aerospace Force (EAF) concept 
will structure the Air Force to respond to increased peacetime demands 
of our National Military Strategy and enhance our ability to maintain 
wartime readiness for both the near- and long-term.
    General Dake. The readiness of our forward-deployed forces has not 
been significantly impacted by long-term or prolonged contingency 
operations. Most contingency requirements have been responded to by our 
normal forward-deployed forces or by rescheduling normal deployments to 
a newly required location. The Marine Corps averages 23,000 Marines 
forward deployed at any given time and these Marines are used routinely 
to respond to contingencies throughout the world. Prolonged 
contingencies, such as Somalia, and peacekeeping endeavors have 
provided unique training opportunities to Marine Corps forces but come 
at the expense of increased operating costs and wear and tear on our 
legacy equipment.
                Deployment Impact on Personnel Readiness
    Mr. Bateman. The deployment of personnel in support of contingency 
operations has increased over the last few years. This increased pace 
of operations has fallen most heavily on a small number of critical 
units with unique specialties, including special forces, electronic 
warfare, and military police.
    Would you please identify key indicators that would provide the 
best measures of deployments' impact on personnel readiness?
    General Keane. There are several indicators the Army uses to 
evaluate deployment impact on personnel readiness. These indicators 
include the number of training days a unit requires after a deployment 
to achieve combat readiness, the skill tempo by military occupational 
specialty (MOS), and the deployment tempo of high-demand/low-density 
units. Additionally, a semi-annual survey of military personnel 
provides anecdotal information on the impact of deployments on 
soldiers. The results of analyses conducted on the affects of 
deployment on retention provide only general conclusions. However, 
studies show some level of deployment is acceptable. It increases 
morale, unit cohesion, MOS competency, and job satisfaction, all of 
which improve personnel readiness. However, when the length and 
frequency of deployments increase, it negatively affects the Army's 
ability to retain soldiers and man the force and, therefore, negatively 
affects readiness.
    Admiral Pilling. SORTS, PERSTEMPO, and Retention rates are 
indicators that would identify the impact that contingencies have upon 
involved units.
    General Lyles. People continue to be our most vital resource--they 
are the most critical component of readiness. The intense demands we 
place on them as the perform the Air Force missions around the world 
require highly motivated, highly skilled, professional airmen. However, 
we are performing more missions with fewer people. Indeed, today's 
active duty force is smaller than at any other time in Air Force 
history.
    Recruiting and retention of our force are key indicators in the 
readiness equation. The negative retention trend exacerbates the high 
operations TEMPO problem because it places greater burden on those who 
continue to serve. Quality of life issues emerge as stay-at-home and 
deploying forces struggle to cope under strain of increased TEMPO.
    The EAF concept helps ensure that the nation has trained aerospace 
forces, as well as providing our people relief from the high TEMPO in a 
turbulent world.
    General Dake. The key indicator's that best measure contingency 
deployments' impact on personnel readiness would be the unit 
commander's assessment rating of his personnel readiness as reported in 
the Status of Resources and Training System (SORTS) and the unit's 
personnel retention rate. Marine Corps forward-deployed forces maintain 
a high personnel readiness rating and traditionally these units have 
high retention rates.
                           Pace of Operations
    Mr. Bateman. What are the advantages and disadvantages of changing 
the force structure to increase the number of critical units with 
unique capabilities, assuming no increase in total force structure?
    General Keane. The Army uses the Total Army Analysis (TAA) process 
to optimize the force structure to meet its requirements. Since the end 
of the Cold War, these requirements have changed and, in some cases, 
placed increased demands on certain units with unique capabilities. As 
we resource the force structure in preparation to fight two nearly-
simultaneous major theater wars (MTW), we consider the requirements for 
these unique units in smaller scale contingencies (SSC) and engagement 
operations. We have used the discipline of the TAA process and its 
associated force feasibility review to analyze the impacts of 
activating, converting, and inactivating units and to prioritize those 
force structure changes to ensure we properly execute our core mission 
of winning the Nation's wars. Increasing the number of unique units is 
an advantage to enabling execution of our engagement and SSC missions, 
but we must assess the risk of our ability to execute the MTWs if the 
increase to these unique units is made at the expense of our 
warfighting units. As we progress through the Army's Transformation, we 
will continue to optimize our force structure to maintain the Army's 
ability to operate across the full spectrum of requirements.
    Admiral Pilling. The challenge is to respond to the dynamic 
strategic environment facing our Navy within the framework of a 
constrained budget. The fact that we have a shortage of critical units 
with unique capabilities today is one indication that the QDR 1997 
battle force may not be enough in the future. Fewer ships, aircraft, 
and personnel are available today to accomplish the same naval 
missions, coincident with a marked increase in crisis response and 
contingency requirements--there is no elasticity left in the fleet. 
However, undue shifting of resources to react to today's problems 
mortgages the future and is not the answer; we must merge both. Our 
resource investments must be linked to the strategic organizing 
principles derived from the Navy's vision of the future. Fundamentally, 
the solution lies in matching our investments for the future--
modernization and recapitalization--to the pace of emerging threats so 
that readiness is not sacrificed. Resource allocation must be driven by 
strategic vision if we are to build the right Navy for today, and 
tomorrow, while staying under the top line.
    General Lyles. Assuming no increases in force structure, any 
changes to force structure would be to the detriment of other programs. 
It does not make sense to decrease other programs to gain these 
advantages.
    General Dake. The size and composition of the Marine Corps' force 
structure is based on the 2 MTW requirement. Without an increase in 
force structure, increasing the number of units of a given type will 
result in the reduction in the number of units of another type required 
to meet the 2 MTW requirement. While affording increased capability in 
one area, increasing the number of unique units without an increase in 
force structure simultaneously increases risk in another area.
                      Funding For Training Centers
    Mr. Bateman. It is the Subcommittee's understanding that the budget 
information contained in these reports (budget year, current year, and 
prior year) is available when the President submits the budget request 
in early February, yet the committee continually receives O&M 
justification material by late February/March timeframe. We are 
encouraged to learn that, for the first time, all the services will be 
providing these materials on the Internet. Thus, it is expected the 
information will be available earlier because printing delays will no 
longer be a consideration. Yet it is the end of February and none of 
the services have their justification material available on the 
Internet. Given that O&Mthe largest appropriation groupin the Defense 
budget, what efforts are underway that would allow for details in 
justifying this request to be available earlier?
    General Keane. The current budgeting schedule and milestones within 
the planning, programming, budgeting, and execution system do not allow 
for earlier submission of budget justification materials. To facilitate 
access to budget justification material, the Department of Defense 
requires all unclassified budget justification material be posted on an 
access-controlled Internet web site by all submitting organizations. 
This allows wider access to the justification material by interested 
parties on Capitol Hill.
    Admiral Pilling. The Navy has ongoing efforts to streamline and 
automate the information provided as justification of our O&M budget 
estimates. This has shortened our response time somewhat in the past 
year, and promises to produce even more time savings in the future, 
allowing us to send justification material to OSD and OMB more quickly 
after their budget decisions are finalized.
    General Lyles. The Air Force provides O&M budget justification as 
required by OSD and OMB. These materials are required within 30 days of 
submission of the President's Budget and we will make every effort to 
meet or exceed this requirement.
    General Dake. We are not aware of any efforts to provide O&M 
justification earlier. As a small portion of the overall Department of 
Navy budget, we strive to meet the deadlines set by the Secretary of 
the Navy to support the official submission of justification materials. 
Once the President's Budget is made available to the Congress, we 
quickly engage with the Congressional Staff regarding the details of 
the O&MMC budget.
                      Funding for Major Exercises
    Mr. Bateman. To what extent are you fully funded for major 
exercises, and for the advanced combat unit training levels you desire?
    General Keane. Combat training center rotations are the biggest 
exercises our units conduct. The National Training Center, the Joint 
Readiness Training Center, and the Combined Arms Maneuver Training 
Center are the crown jewels of Army collective training. In fiscal year 
2001, the training centers' operations are fully funded to conduct 
scheduled training rotations. Because of competing requirements, the 
Army has taken risk with the recapitalization and modernization of the 
combat training centers (CTCs) that support these exercises. The 
opposing forces (OPFOR) tracked vehicle fleet of M551 and M60A3 tanks 
and M113 armored personnel carriers continues to age, requiring 
extensive maintenance costs as these systems quickly approach the end 
of the useful lives. The instrumentation systems, built 20 years ago 
with 1970's technology, are losing feedback capability and will not 
support digital equipment. To continue to garner the maximum training 
benefit from the centers, and keep them relevant to current and future 
operational environments, we must modernize the training centers' 
prepositioned fleets, OPFOR fleets, and instrumentation systems to 
provide maximum training benefit for, and feedback to, the rotational 
units.
    Admiral Pilling. Today, Navy's readiness is adequate to meet all 
operational commitments. On any given day, approximately 35% of our 
forces are deployed around the world and ready for combat if necessary. 
The remainder is at home in various stages of readiness as they prepare 
for their next deployment. The Navy trains for a deployed combat ready 
presence and completes all required training as part of the Inter-
Deployment Training Cycle. The uncertain future of the availability of 
the Vieques training range continues to pose a significant challenge to 
our Carrier Battle Groups as they try to find a means to establish 
combat proficiencies prior to deployment.
    General Lyles. The FY01 President's Budget fully funds the Air 
Force requirement for major exercises and advanced combat unit 
training, with the following exceptions.
    As identified on the FY01 Air Force Unfunded Priority List (UPL), 
there is a shortfall of $125M in FY01 for training munitions. These 
munitions are critical to train aircrews to 100% of combat ready 
requirements. Without this, degraded readiness levels could be 
experienced, or WRM munitions might be expended for this training.
    Although not on the Air Force FY01 UPL, there is also a shortfall 
in the JCS Exercises program. The FY01 President's Budget requested 
$37.1M. This supports only 60% to 70% of Theater CINC requirements. The 
Appropriation committee marks reduced the $37.1M by $12.2M to $24.9M. 
This supports only 40% to 50% of the Theater CINC requirements.
    General Dake. The Marine Corps has four major training and exercise 
programs. These programs are Combined Arms Exercises (CAXs) at 
Twentynine Palms, Ca; Mountain Warfare Training Center (MWTC) courses 
at Bridgeport, Ca; Weapons and Tactics Instructor (WTI) courses at 
Yuma, Az; and our Marine Expeditionary Unit (Special Operations 
Capable) (MEU(SOC)) pre-deployment workups on the east and west coasts 
and in Okinawa, Japan. These four programs are essential for us to 
provide trained and ready Marine units. As Service priorities, these 
programs are fully funded.
               Preparation and Conduct of Major Exercises
    Mr. Bateman. To what extent have reductions in training ordnance 
and declines in mission capable rates affected the preparation for and 
conduct of these exercises?
    General Keane. Exercises tend not to be impacted by either of these 
items as commanders focus available resources on those units preparing 
for and executing the exercises. Approximately 65 percent of the annual 
Army ammunition budget funds training ammunition to meet historic 
execution levels. We have been very successful meeting our C-1 
readiness goals with this level of training ammunition support, but the 
Army Vision anticipates increased ammunition requirements with 
increased training costs. Despite shortages of funding, mission capable 
rates have not substantially impacted exercise training or execution.
    Admiral Pilling. Navy's deployed readiness remains satisfactory, 
but because of our cyclical readiness posture, we expect non-deployed 
readiness to be at a lower level. The Navy has leveled the steady 
downward trend in readiness, after reaching a high in the 80s. The 
enhancements provided in the fiscal year 2000 budget address some of 
our most pressing needs. With the help of Congress, we have applied 
considerable resources to ameliorating the problem, but it will take 
time for the positive effects to be reflected throughout the Fleet and 
operating forces.
    General Lyles. There have been no major impacts to preparation for 
and conduct of exercises due to training ordnance reductions or 
declining mission capable rates. The impact of ordnance shortages on 
preparation for and conduct of exercises is mitigated because of the 
priority commands tend to place on major exercises vice day-to-day 
training. Additionally, the Air Force strategy is to use War Reserve 
Material munitions when possible to partially fill the training 
shortfalls. Although this strategy facilitates higher rates of 
training, it is also decreasing our WRM Munitions stockpile and results 
in a slight increase in the risks associated with a 2-MTW scenario. As 
identified on the FY01 Air Force Unfunded Priority List (UPL), there is 
a shortfall of $125M in FY01 for training munitions.
    In cases where applicable weapon systems have experienced a decline 
in mission capable rates, we are using the same strategy of exercises 
taking priority over home station training.
    General Dake. Competing priorities for fiscal resources do not 
allow us to fund training munitions to the required levels stated in 
our aircraft Training and Readiness manuals. The Marine Corps in 
conjunction with Naval Aviation is recommending that beginning in FY02 
we base line training ordnance funding at 70% of that required by 
aircraft T&R manuals. Currently, the fleet trains with those munitions 
made available to them and to date has not experienced a degradation in 
training readiness significant enough to effect SORTS. Some of the 
ordnance used to support training comes from warfighting inventories 
which are currently not being adequately replaced to maintain the 
inventories at present levels. At this point, the overall affect of 
reduced training ordnance and decreased mission capable rates is 
subjective and difficult to measure. Our aviators continue to deploy 
ready for combat and required training is being accomplished. However, 
the quality of training suffers when training munitions are funded at 
less than optimum levels.
                      Training Center Requirements
    Mr. Bateman. The committee is aware that individuals and units 
arriving at the major training centers are not adequately trained to 
compete with resident opposing forces when they initially arrive at the 
training centers. To what extent have you had to lower the training 
center requirements for newly arriving individuals such as pilots?
    General Keane. The Army appreciates the committee's support of our 
combat training centers. The CTCs remain the Army's crown jewels for 
training our leaders and soldiers in executing their wartime mission 
essential tasks. The centers achieve this enhanced training readiness 
through strict adherence to doctrinal training standards. Units arrive 
at the CTCs at different levels of training readiness due to 
operational mission requirements or limited home station training. 
Based on these differences, the CTCs, in coordination with the division 
commander of the training unit, establish training conditions for the 
unit in order to ensure the soldiers and units receive the best 
possible training experience. This condition setting allows soldiers 
and units to achieve significant improvement in their training 
readiness. If soldiers or units are at risk because of training 
weaknesses, then conditions are created to allow the soldier or unit to 
safely conduct the training.
    Admiral Pilling. Navy's deployed readiness remains satisfactory, 
but because of the cyclical nature of our deployments, we expect non-
deployed readiness to be at a lower level. As reflected in recent Navy 
``Bathtub'' graphs, the post-deployment Air Wing Readiness rating drop 
off is occurring earlier in the readiness cycle and is falling deeper. 
As a result, Air Wings remain at lower readiness levels longer during 
the Inter Deployment Training Cycle. This lower level of readiness 
requires a steeper ramp-up prior to deployment. At the Naval Aviation 
Strike Warfare Center, Fallon, this equates to pilots arriving for 
training less prepared than in the past. Additionally, training 
requirements have increased over the past as the threat, systems, 
weapons and tactics have become more complex and the opportunities to 
train with required systems have decreased.
    General Lyles. The Air Force continues to produce quality combat 
pilots who have the skills needed to perform the Air Force's flying 
missions; evidence their success in Operations Allied Force and Shining 
Hope. During Allied Force our sustained combat operations equaled that 
of a major theater war, as the Air Force flew the majority of the 
NATO's 38,000 combat sorties. We provided over 900 personnel and flew 
more that 700 airlift sorties in support of Shinning Hope, providing 
civil engineering, logistics, and security for many thousands of the 
more than 1.3 million displaced Kosovars.
    However, maintaining a mission ready aircrew force has become 
increasingly more difficult for several reasons. Operations tempo 
(OPTEMPO) has increased fourfold since 1990. Additionally, a strong 
economy continues to draw large numbers of pilots from the military to 
the airlines. The challenges have been significant from the maintenance 
perspective as well. The effects of increased OPTEMPO, low retention of 
maintenance technicians, aging aircraft and equipment, and lack of 
spare parts end engines have combined to cause decreased aircraft 
mission capable rates.
    Implementation of the AEF is but one example of our efforts to 
improve the quality of life of our Air Force people. Our airmen are 
well trained, motivated and ready to serve. As a result of outstanding 
support from the Administration and Congress we've taken a number of 
steps to improve retention. Pay table reform and enhanced bonuses for 
pilots and other critical specialties will all go a long way toward 
closing the wage gap between our airmen and their civilian 
counterparts. To offset the pilot shortage, the Air Force has doubled 
its pilot production since the mid-90's. In FY99-01, Congress, DOD, and 
the Air Force took specific actions to address our shortfalls in spare 
parts funding. In the Air Force FY00 and 01 President's Budget, we 
fully funded the spare parts validated requirement.
    As laid out in the Air Force's FY01 budget program and beyond, a 
balanced and integrated approach that focuses on four fundamentals--
people, readiness, modernization, and infrastructure--is key to the Air 
Force maintaining a quality aircrew force whose size and readiness 
enable it to accomplish the mission today and tomorrow. Continued 
congressional support will facilitate the essential readiness and other 
improvements the Air Force needs to continue to produce quality combat 
pilots, and remain the world's preeminent aerospace force.
    General Dake. The Marine Corps has not had to lower training center 
requirements for newly arrived units or pilots. Our training program is 
not designed, nor do we expect, to have combat units or pilots arrive 
fully trained when they arrive at our training center.
    At our principal training center in Twenty-nine Palms, we conduct 
10 Combined Arms Exercises (CAX) a year.
    The CAX Program is the centerpiece of the Marine Corps' live-fire 
unit training. It uses a building block approach which sequentially 
trains and integrates all combat systems into a full combined arms 
live-fire evolution. The mission of the CAX program is to train a 
Marine Air Ground Task Force (MAGTF), centered around a reinforced 
rifle battalion (the Ground Combat Element or GCE). Emphasis is on 
planning the integration of fire support and mechanized maneuver in a 
desert environment, and then executing the plan with the full array of 
ground and air weapons live-fire. As the premier expeditionary and 
live-fire combined arms and maneuver training program in the United 
States, participating CAX units enjoy many unique training 
opportunities not duplicated anywhere else.
    Commanders receive approximately three days of instruction focused 
on the tactical skills necessary to successfully employ combined arms 
in a mechanized desert environment. These classes emphasize such skills 
as fire support coordination and engagement area building.
    The first week of CAX focuses on company level training at the 400 
series ranges. Individual Marines receive intensive, professional 
instruction and rehearsed live-fire practical application of fire-and-
movement techniques and fortified positions clearing procedures. As 
individuals, fireteams, and squads perfect their live-fire skills under 
the close, personal observation of experienced, tactical instructors/
evaluators, the training progresses into platoon and company level 
live-fire combined arms attacks.
    The second week of CAX focuses on mounted (helicopter and assault 
amphibian vehicle (AAV)) tactics. The training then logically evolves 
into battalion level combined arms evolutions which synergistically 
bring together all elements of the MAGTF in offensive and defensive 
scenarios. Detailed after-action reviews (AARs) follow each evolution 
to reinforce the positive and negative lessons learned at all levels.
    The CAX program culminates in the third week with a three day final 
exercise (FINEX) designed to increase the Marines' understanding of the 
effects of both his weapon system and those that will support him on 
the battlefield. This FINEX is a live-fire exercise that does not 
include force on force training.
                                Training
    Mr. Bateman. The Chairman of the Joint Chiefs of Staff's (CJCS) 
joint training exercise program continues to require a large 
commitmentin funding, personnel, and resources. How do we keep cost 
down while conducting the necessary training? Are you adequately funded 
to participate in these exercise? What operations tempo (OPTEMPO) 
concerns do you have with the current level of Joint Chiefs of Staff 
exercises?
    General Keane. Army funding in support of the CJCS exercises 
program has been significantly reduced during the last few years. 
Starting in fiscal year 1999, Army funding for CJCS exercises has been 
reduced 30 percent ($58.2 million to $40.9 million). Funding 
constraints have required the Army to reduce participation in CJCS 
exercises in recent years. Unified commands and Army component commands 
analyze every training event in CJCS exercises to ensure that Army 
forces receive the maximum training value for resources expended.
    The 30 percent reduction in Army funding for CJCS exercises which 
was implemented in fiscal year 1999 still allowed the Army to support 
the Commanders in Chief (CINC's) critical joint training requirements. 
Because of additional Congressional reductions in Army support to CJCS 
exercises in fiscal year 2000 ($10 million), the Army is not adequately 
funded to support the CINC's critical joint exercise requirements. It 
has been necessary to reduce Army participation in CJCS exercises due 
to Congressional funding reductions.
    We are very concerned with OPTEMPO and will continue to make every 
effort to keep it at an acceptable level. While CJCS exercises increase 
Army OPTEMPO, the primary contributors to increased OPTEMPO levels are 
operational commitments in Kuwait, Bosnia, Kosovo and the other force 
presence requirements.
    Admiral Pilling. The significance of declining readiness among non-
deployed forces is that these units constitute critical follow-on 
forces that are expected to rapidly deploy in the event of a Major 
Theater War (MTW). The deeper the ``bathtub'' becomes, the greater the 
risk to being able to respond with combat-ready, follow-on forces. The 
Chairman of the Joint Chiefs of Staff recently assessed higher risk for 
accomplishing a two MTW scenario. This, in part, was due to the 
readiness degradation observed among Navy's non-deployed forces.
                          JCS Training Program
    General Lyles. We keep cost down while conducting the necessary 
training by restructuring, realigning, consolidating, and elimination.
    Restructuring involves changing the forces involved in the 
exercise. This may involve changes in the numbers and/or types of 
forces participating, as well as their employment locations. For 
example, United States Air Forces, Europe participated in some 
exercises by flying from home station instead of deploying to another 
location.
    Realigning can be accomplished by changing deployment, employment, 
or redeployment dates. This can have significant advantages by 
enhancing joint training through participation in multiple exercises 
while decreasing deployment or redeployment times for the forces 
involved and utilizing air mobility assets more efficiently. This may 
involve a slightly longer time away from home for the forces involved 
but reduces the number of man-days and potentially eliminates the 
requirements for a second or third deployment.
    Consolidating allows the CINCs and the Air Force to combine 
exercises to meet multiple objectives. This works well when different 
CINCs can use the same overarching exercise to execute one or more 
exercises. For instance, TRANSCOM executed TURBO CHALLENGE in 
conjunction with PACOM's RSO&I. Combining exercises in this manner 
allows the Air Force to have personnel accomplish several different 
training objectives during a single deployment.
    Due to our current fiscal constraints, we are not able to 
adequately fund 100% participation in these exercises. Although not on 
the Air Force FY01 Unfunded Priority List (UPL), there is a shortfall 
in the JCS Exercises program. The FY01 President's Budget (PB) 
requested $37.1M. This supports only 60% to 70% of Theater CINC 
requirements. The FY01 Appropriation Committee marks reduced the PB 
request of $37.1M by $12.2M to $24.9M. This supports only 40% to 50% of 
the Theater CINC requirements. For example, USAFE program has been 
funded at approximately 63% of the total requirements since FY96. 
Wholesale exercise cancellation has been averted by the selective 
reduction of participation and by operating from home stations, 
reducing readiness values of the exercises. A reduction in FY01 may 
force USAFE to curtail or cancel current planned events in support of 
several joint and combined exercises at the expense of readiness and 
engagement in Europe and Africa. In addition, USAFE's capability to 
work and fly with other allied nations and to stand up JTFs for real 
world operations will suffer.
    Overall, the effects on OPSTEMPO from the exercise program is only 
a small part of total OPSTEMPO and PERSTEMPO. JCS exercises account for 
1.4% of the time personnel are on temporary duty (TDY) while 
contingencies account for 22.7% of personnel TDY time.
    General Dake. The Marine Corps places a high priority on joint 
training and exercises. Joint and Service exercises are complementary 
forms of required Service combat proficiency training and not mutually 
exclusive. Joint exercises allow the Marine Corps to demonstrate its 
ability to rapidly project forces globally, and also enhance 
interoperability with other Services, allies and coalition partners. 
The key to funding, planning, and conducting Service and joint 
exercises is to ensure we maintain the proper balance between them.
    Our Marine Force commanders strive to meet the requirements of 
multiple commanders. Unlike other Service component commands which 
characteristically support only one geographic combatant command, each 
Marine Force supports three combatant commanders' exercise and 
engagement programs: The Commander, U.S. Marine Corps Forces Atlantic 
(COMMARFORLANT) supports U.S. Joint Forces Command, U.S. European 
Command, and U.S. Southern Command, and the Commander, U.S. Marine 
Corps Forces Pacific (COMMARFORPAC) supports U.S. Pacific Command, U.S. 
Central Command, and the sub-unified command, U.S. Forces Korea.

KEEPING JOINT TRAINING COSTS DOWN WHILE CONDUCTING NECESSARY TRAINING:

    The best way to keep joint training costs down is to ensure that we 
are conducting only necessary joint training. From a Service 
perspective, ``necessary joint training'' is based on joint warfighting 
requirements. These requirements should be the driving factors behind 
all Joint Training System (JTS) events. To be ``requirements-based,'' 
exercises should be scheduled and conducted by forces needing to meet 
those joint training requirements. Once a force successfully performs 
all its required tasks, it is then considered trained and ready for 
joint operations. Any joint training for that force after it meets all 
its joint training requirements is redundant.
    A major challenge to ``keeping joint training costs down while 
conducting necessary training'' is that all joint exercises are not 
based on the joint warfighting training requirements for the forces 
involved. Combatant commanders also view joint exercises as theater 
engagement opportunities. Service components are tasked by their 
combatant commanders to participate in exercises beyond those required 
for their training in order to support other Service components, 
staffs, and theater engagement events. From the perspectives of the 
force provider and the actual participating forces, an exercise is an 
exercise and the same costs are there whether it's warfighting 
requirements based or engagement requirements based.

JCS EXERCISE FUNDING:

    In recent years, JCS exercise funding has decreased, with 
decrements coming in the year of execution, while joint exercise and 
engagement requirements have increased. Marine Forces have been placed 
in a dilemma that challenges their Service-joint exercise balance: 
either justify to one or more combatant commanders why their respective 
exercises won't be supported, or fully support all the exercises by 
taking operation and maintenance (O&M) funds from their Service 
programs. The funding for Service participation in JCS exercises has 
not kept pace with the increased joint exercise and engagement 
activities required by the combatant commanders.

OPTEMPO CONCERNS:

    We have OPTEMPO concerns with the increasing number of joint 
exercise and engagement activities for our finite number of operational 
units.
    Our Marine Forces' staffs are also challenged by the hectic 
``commander-staff-tempo'' to meet the planning and administrative 
requirements of these multiple exercise programs. One typical joint 
exercise usually features several conferences for concept development 
and initial, mid, and final planning. Besides these temporary 
additional duty (TAD) requirements, the commander and his staff must 
also train to respond to real-world contingencies in any of their 
respective combatant commands' theatres. Contingency support in one 
theatre often does NOT eliminate simultaneous exercise support in 
another supported theatre.
                           Personnel Training
    Mr. Bateman. In your personal opinion, are the personnel within 
your respective commands receiving the required training to develop the 
necessaryskills to perform all of the tasks that will be assigned to 
them?
    General Keane. I am confident in our training doctrine and our 
leaders' abilities to apply it in their training programs to produce 
trained and ready units. The primary objective of our training strategy 
is to produce soldiers, leaders, and units trained to a specific Army 
standard. Army training is adequately resourced to execute the combined 
arms training strategies to achieve a standard of readiness that 
supports execution of the National Military Strategy. The combined arms 
training strategy is an overarching concept that provides training 
strategies for America's Army. They are task-based, two-year training 
management programs that use proponent-developed strategies to support 
unit training. Combined arms training strategies will continually 
evolve and be refined as units apply these strategies in developing 
their training and resource requirements.
    Admiral Pilling. As part of an effort to reduce the workload on our 
sailors, we issued a directive that reduced the number of inspections 
and assist visits imposed on the Fleet during the Inter-Deployment 
Training Cycle by 25%. By consolidating training evolutions and 
eliminating redundancy, where it made sense, we have achieved greater 
efficiency. The additional time given back to the commanding officers 
allows them to conduct unit training and at the same time improve the 
quality of life of Sailors.
    General Lyles. Our forces are well trained today to perform their 
missions. The Kosovo operation showed that we have the best-trained 
force in the world even with the many stresses on our personnel and 
readiness training. However, the 400% increase in the number of 
deployed forces since the end of the cold war is straining the ability 
of the Air Force to continue to meet its training requirements and 
readiness. High operations tempo, aging equipment, and the cumulative 
effect of too few dollars raises concerns about future readiness. To 
ensure the Air Force can maintain its quality of training and readiness 
in the future will require a decrease in tempo by increasing the force 
structure and/or reducing our commitments.
    General Dake. Yes. We have developed Occupational Field training 
tracks which allow all Marines to accomplish tasks/missions appropriate 
for their rank and experience level.
                      Funding for Training Centers
    Mr. Bateman. In your personal opinion, are the training centers in 
your commands adequately funded and do they have all the necessary 
equipment to perform their training?
    General Keane. In fiscal year 2001, the training centers' 
operations are adequately funded to conduct scheduled training 
rotations. The recapitalization and modernization of the centers, 
however, are not adequately funded. The opposing forces (OPFOR) tracked 
vehicle fleet of M551 and M60A3 tanks and M113 armored personnel 
carriers continues to age, requiring extensive maintenance costs as 
these systems quickly approach the end of the useful lives. The 
instrumentation systems, built 20 years ago with 1970's technology, are 
losing feedback capability and will not support digital equipment. To 
continue to garner the maximum training benefit from the centers, and 
keep them relevant to current and future operational environments, we 
must modernize the training centers' pre-positioned fleets, OPFOR 
fleets, and instrumentation systems to provide maximum training benefit 
for and feedback to the rotational units.
    The training centers are given high priority due to initial entry 
training requirements, but there are still significant unfunded needs 
for life cycle replacement of organizational clothing and individual 
equipment, training aids and devices, conduct of field training 
exercises, barracks maintenance, and garrison support. Additional 
funding is needed to support new training for a digital force while 
continuing to train analog systems. Likewise, leader development and 
self-development programs require additional funding to keep pace with 
Army Transformation and digitization of the force.
    Funding for repair parts, range modernization, combat training 
center (CTC) modernization, replacement of furniture, and maintenance 
and upgrade of simulators is much lower than required. Requirements for 
training aids, devices, simulators and simulations (TADSS) at training 
bases have either been filled, partially filled, not filled, or are in 
need of upgrades due to tactical system change, refurbishing due to 
equipment age, or lack of repair parts. This includes modernization of 
the CTCs.
    Constrained resources either in the training mission area or in 
program manager programs contribute to shortfalls in total quantities 
of TADSS being fielded to the training base or to the lack of upgrading 
or refurbishing the TADSS currently fielded.
    Additionally, changing force structure and the fielding of new 
systems have aggravated the situation at training bases due to the 
requirement to keep old TADSS needed to train old systems still in the 
Active and/or Reserve components. Additionally, inadequate TADSS levels 
and TADSS configured with obsolete systems reduce the ability to train 
on all required tasks, provide adequate hands-on time, and causes 
increased TADSS usage to meet the training load.
    Admiral Pilling. Training centers have a finite number of aircraft 
available for training and compete with deploying Carrier Air Wings for 
parts and maintenance personnel to support these aircraft. As an 
example, the Navy Strike and Air Warfare Center (NSAWC) has an adequate 
number of older variant F-14s/F-18s to accomplish their training 
mission. However, these older aircraft are inherently less capable and 
require increased maintenance support to maintain a Ready For Training 
status. Further, parts support is provided at a lower level of priority 
than for deploying Carrier Air Wing aircraft, and aircraft maintenance 
is accomplished within the constricts of a civilian contract rather 
than by Navy assets.
    In order to achieve the NSAWC mission, we augment NSAWC aircraft 
(on a limited, ad-hoc basis) with aircraft from a Reserve Composite 
Squadron (VFC-13). As a longer term solution, we are working with the 
Air Force to upgrade the quality of the adversary aircraft.
    General Lyles. The Air Force strives to procure and utilize 
training equipment and simulators used by Technical Training Centers 
that is the same or similar to what is used in the field. There are 
significant deficiencies. The 10 Mar. 00 Air Force Inspection Agency 
``Eagle Look'' report on Aircraft Maintenance Training Devices 
Management identified 25% of 223 training devices as not being current 
with the weapon system they support; therefore, they could not be used 
for training. When new operational systems are fielded today, training 
equipment needed to support the system is procured at the same time as 
the operational system. This was not true for past legacy systems. For 
example, some Space Operations training for legacy systems are 
conducted using outdated, homegrown systems unlike what is used in the 
field. This will continue until the entire legacy system can be 
replaced.
    A primary concern is the sustainment of training equipment once it 
has been procured. Adequate funding is not always readily available to 
maintain training equipment that matches the field. Your continued 
support and assistance will help us continue to match training and 
field equipment.
    General Dake. Yes, The funding posture for 29 Palms is a total of 
approximately $60M in fiscal year 2001. Maintenance of Real Property 
(MRP) and Base Operations Support (BOS) make up over 70% of this 
funding. The Enhanced Equipment Allowance Pool (EEAP) makes up 17%. 
Funding is sufficient to cover maintenance and personnel requirements. 
The funding posture is similar to the rest of the Marine Corps in that 
funding is not robust, but adequate to support the mission without 
degrading readiness.
                           Training Equipment
    Mr. Bateman. In your personal opinion, is the equipment that the 
training centers within your respective commands train with the same or 
similar to the equipment that trainees will be assigned to upon 
completion of training?
    General Keane. Equipment at the training centers is similar to 
equipment in the field but I would caveat that training modernization, 
to include the combat training centers, is not keeping pace with force 
modernization. In many cases, our training base receives equipment 
years after a trainee's arrives at their follow on unit.
    Some soldiers are being ``trained down'' to outdated automation 
systems rather than ``trained up'' to the latest systems already in the 
field because the available equipment will not accept the upgraded 
software. This necessitates additional training time at the soldiers 
gaining unit to bridge the gap.
    Admiral Pilling. The Navy trains and deploys onboard the same ships 
and aircraft they train with during the Inter-Deployment Training 
Cycle. Every effort is made at our fleet training commands to provide a 
training environment similar to at sea conditions.
            Equipment Similar that Trainees will be Assigned
    General Lyles. For the most part, training equipment and simulators 
used by Technical Training Centers are the same or similar to what is 
used in the field. However, there are significant deficiencies. The 10 
Mar. 00 Air Force Inspection Agency ``Eagle Look'' report on Aircraft 
Maintenance Training Devices Management identified 25 percent of 223 
training devices as not being current with the weapon system they 
support; therefore, they could not be used for training. When new 
operational systems are fielded today, training equipment needed to 
support the system is procured at the same time as the operational 
system. This was not true for past legacy systems. For example, some 
Space Operations training for legacy systems are conducted using 
outdated, homegrown systems unlike what is used in the field. This 
continues until the entire legacy system can be replaced.
    Technical training's biggest problem is sustaining training 
equipment once it has been procured. Just recently, AETC was able to 
replace outdated 386 computers at Keesler AFB, where communication/
computer training is conducted, with state-of-the-art computers. 
Unfortunately, adequate funding is not always provided for technology 
refresh efforts needed to keep training equipment current, matching 
what is used in the field. While funding has been provided for 
hardware, no funding has been programmed for interactive courseware 
development-training modernization that is critical in ensuring 
students arrive mission-ready to their first duty stations. Sustaining 
training equipment due to rapidly changing technology is difficult to 
fund in today's fiscally constrained environment.
    For Airlift/Tanker, Fighter, SOF, and Air Battle Manager flying 
training most equipment is the same or similar to equipment used in the 
field. C-130s training at Little Rock is performed exclusively on C-
130Es, while the operational fleet consists of various models (E, H1, 
H2 and H3). Since C-130Es represent only about 43% of the total C-130 
fleet, most operational units must accomplish some difference training 
on their assigned model aircraft. This training varies from model to 
model. E-to-H1 training may require only a short top-off course, 
whereas E-to-H3 training is much more extensive. The new C-130J (and 
the future C-130X) are different enough from the current fleet and each 
other to require their own unique training systems. The C-5, C-17, and 
C-141 fleet at Altus is representative of the operational fleet. 
However, unlike the C-17 and C-141, the C-5s's cargo compartment 
trainer is inadequate (a metal platform with metal poles defining the 
width and breadth of the cargo compartment only). Load masters depart 
Altus as unqualified loadmasters. At their home they require an average 
of 120 days to achieve full mission ready status, to include survival 
school, thus driving a bill for operational units and impacting their 
C-ratings. The KC-135R fleet at Altus is not compatible with the KC-
135E training some AFRC/ANG crews receive. The R-model and E-model have 
different engines, engine instrumentation, electrical systems, and 
auxiliary power units. Crews go to a follow-on difference course (2 
weeks) to fly the E-model after training at Altus. In addition, while 
the front-end crew on KC-135R models fly in a full-visual color display 
environment with up-to-date avionics, the boom operators (who deliver 
the fuel--aircraft's primary mission) train on 1960s circa technology, 
two dimensional ``pong-like'' screens with circa 1950s/1960s technology 
simulated communications and life support equipment. The result is some 
negative learning and added flying required for boom operator students. 
[Booms do not drive sortie generation, pilot students do.] Neither AETC 
nor AMC were able to secure funding in the Program Objective Memorandum 
(POM) for an upgraded simulator although both commands supported it. F-
16s at Luke AFB are Block 25 and 42. No operational units have these 
blocks of aircraft. Even though Block 25/30 and Block 40/42 aircraft 
are similar, there are enough differences to impact training, since 
AETC aircraft are frequently not upgraded to the level of the aircraft 
in the field. NVG training is still being worked as an issue, and the 
Block 50 HARM Targeting System is a very different weapon system and 
mission that will require academic training at Luke followed by flight 
training once operational. Training equipment for the F-22 is being 
procured as part of the acquisition process and will, therefore, be the 
same as fielded aircraft. For Special Operations Forces, the MC-130H 
Talon II is the same version for both training at Kirtland and in the 
field. However, for the MH-53, training is accomplished using an older 
J-model while the field uses the M-model which has an improved 
navigation and electronic warfare suite. Students trained in the J-
model require additional training and certification at their 
operational units in the MH-53M. Additionally, in the MC-130, Kirtland 
trains crews in the MC-130P (Combat Shadow), an AFSOC version of the 
HC-130. The Combat Shadow has improved navigation systems, but an older 
version radar than the ACC field units. For HH-60 training, the same 
version helicopter is used, but without the Integrated FLIR (Forward 
Looking Infrared) system that allows enhanced crew capabilities for 
night/low visibility conditions. For AFSPC and AMC future crewmembers 
the UH-1N is the same version for training at Kirtland and in the 
field. The training equipment used for Air Battle Managers is the same 
or similar to equipment used operationally.
    General Dake. The equipment at our Formal Training Schoolhouses is 
the same or similar to that which our Marines will use when they reach 
the Marine Operating Forces.
                           Levels of Training
    Mr. Bateman. In your personal opinion, are you, within your 
respective services able to accomplish the level of training required 
by the organizations that trainees are assigned?
    General Keane. Yes. The principal goal of initial entry training 
units is to develop soldiers of character who are competent in their 
warfighting and technical skills, possess warrior spirit, successfully 
contribute to their first units, and successfully complete their first 
enlistment. We maintain a dialogue with the gaining units to gauge the 
quality of our product. We balance unit requirements with our ability 
to deliver trained soldiers within the limits of time, money, and 
available resources. There are sometimes resource constraints that do 
not allow us to expose soldiers to every piece of equipment they may 
encounter at their first unit, but we deliver soldiers with the 
fundamental skills that provide the basis from which units can further 
develop them into seasoned veterans.
    Admiral Pilling. The Navy's primary combat training is conducted 
during the Inter-Deployment Training Cycle. Our ships and aircraft 
undergo maintenance and sharpen warfighting skills and proficiencies 
that have migrated to a basic level due to crew turnover and a lack of 
opportunity to train while in maintenance periods. Advanced training 
allows us to deploy combat ready troops. The Navy has found that the 
cyclical posture makes the most effective use of constrained resources. 
However, this efficiency means that funding shortfalls, when they 
occur, have a greater and more rapid impact today than in the past.
    General Lyles. Our forces are well trained today to perform their 
missions. The Kosovo operation showed that we have the best-trained 
force in the world even with the many stresses on our personnel and 
readiness training. However, the 400% increase in the number of 
deployed forces since the end of the cold war is straining the ability 
of the Air Force to continue to meet its training requirements and 
readiness. High operations tempo, aging equipment, and the cumulative 
effect of too few dollars raises concerns about future readiness. To 
ensure the Air Force can maintain its quality of training and readiness 
in the future will require a decrease in tempo by increasing the force 
structure and/or reducing our commitments.
    General Dake. There are no readiness impacts that I am aware of 
that can be traced back to shortfalls in the institutional training 
base.
                          Adequacy of Training
    Mr. Bateman. Forces engaged in peace operations often lack the 
opportunity to fully train in their warfighting skills. What efforts 
are being taken to provide adequate training when these forces return 
to regular units?
    General Keane. Since the end of the Cold War, the Army has 
significantly increased its role in peace operations. We have deployed 
countless soldiers and units across the globe to perform humanitarian 
and combat tasks. In every deployment, the Army has captured the 
lessons learned, integrated them into our training base, and trained 
them at our combat training centers. Last year, General Shinseki 
mandated that units would execute a deployment exercise as part of 
their battle command training program warfighter exercise. 
Additionally, the Combat Maneuver Training Center and Joint Readiness 
Training Center execute mission rehearsal exercises for units selected 
for deployment to Bosnia or Kosovo. This training prepares soldiers and 
units to handle the arduous tasks associated with peace operations, as 
well as maintain combat readiness. We have found that it takes roughly 
a year to return these soldiers and units to a high readiness state 
once they re-deploy to home station. This readiness is achieved through 
annual training requirements for weapons, individual soldiers, and unit 
training.
    Admiral Pilling. The Navy prepares itself during the Inter-
Deployment Training Cycle to conduct a broad spectrum of operations. 
Whether we are flying air strikes over Kosovo, or maintaining a forward 
presence in the Gulf our forces are ready to conduct combat missions 
from the sea.
    General Lyles. Returning units enter a `Pause' period followed by a 
`Normal Training and Exercise' (NTE) period, in accordance with AEF 
procedures. The length of time required to regain pre-deployment skill 
levels is dependent on the length of the previous deployment, the 
experience level of the crews, as well as the types of missions and 
aircraft flown. Weighing these factors, the retraining time is 
scheduled based on the extent the unit was deployed and the personnel 
and operations tempo they maintained. The Pause and NTE time frame, for 
other factors (training, equipment, deferred maintenance, and 
manpower), is also very dependent on the specifics of each unit/
capability.
    Genera Dake. Whenever a unit or detachment is deployed apart from 
the parent unit for a period of time, leaders and commanders at all 
levels make an assessment of the subordinate units' capability to 
execute its warfighting missions upon return. If a unit's warfighting 
capability has been degraded, then leaders and commanders will design 
an accelerated training program to assist the unit in regaining 
proficiency in individual mission essential tasks and overall unit 
capability. For units at home station, the training will involve 
exercises and training events in and around the home station that 
address warfighting deficiencies. Additionally, units may be scheduled 
to participate in a Combined Arms Exercise at Twenty-nine Palms, 
California, or a unit may be scheduled to enhance individual and unit 
skills at the Mountain Warfare Training Center in Bridgeport, 
California.
    Units forward deployed, both Marine Expeditionary Units (Special 
Operations Capable) (MEU(SOC))s, as well as infantry battalions, 
artillery batteries, and fixed wing and rotary wing squadrons deploying 
as part of the Marine Corps Unit Deployment Program (UDP), have an 
aggressive schedule of events during their deployment that normally 
includes large scale exercises involving some degree of sustainment 
training. For example, from April through September 1999, 26 MEU(SOC) 
participated in Operation SHINING HOPE, providing security to Albanian 
refugees fleeing Kosovo; Operation NOBLE ANVIL/ALLIED FORCE, NATO's 
bombing of Kosovo; and Operation JOINT GUARDIAN, NATO peace enforcement 
of Kosovo. While conducting port visits following these operations, 26 
MEU(SOC) was tasked to provide support to Operation AVID RESPONSE, 
earthquake relief operations in Izmit, Turkey. Following the 
termination of U.S. support to Operation AVID RESPONSE, 26 MEU(SOC) 
immediately went into preparation for two significant bilateral 
training exercises designed to work on improving relation with the 
participating nations, while also providing valuable sustainment 
training for the Marines and sailors of 26 MEU(SOC). Units 
participating in the Unit Deployment Program are also scheduled to 
participate in exercises that take place in the Pacific theater. The 
Foal Eagle and Balikatan series of exercises are two examples of these 
exercises, which provide excellent individual and unit sustainment 
training opportunities.
    Mr. Bateman. Given the high pace operations, a smaller force 
structure and constrained resources, can you say unequivocally that 
today our forces are receiving the same quality training and training 
experience and are obtaining levels of proficiency across the spectrum 
of skill, requirements as five or ten years ago?
    Admiral Pilling. Carrier Battle Groups today, in general, are 
deploying at a level of readiness below where they were a decade ago. 
While nearly every unit in the past decade has deployed combat-ready, 
that degree of readiness has diminished over time. It is important to 
note that Defense Planning Guidance specifies a range of readiness each 
unit must be within before entering their theater of operations. Over 
the past decade, Navy has remained within this range.
                            Quality Training
    General Lyles. Today we operate throughout the world with a 40% 
smaller force structure and with two-thirds fewer overseas bases than 
only a decade ago. As a result, almost 40% of the deployable active air 
force are operating outside the U.S. from 12 overseas bases and 16 
forward operating locations. Deployments have become a way of life for 
our airmen.
    The Expeditionary Aerospace Force (EAF) concept represents a 
transformation from Cold War operations, changing how we organize, 
train, equip and sustain our forces to meet the challenges of today's 
global security environment. Organized around 10 EAF's employed in 
pairs for 90 days over a 15-month cycle, the EAF concept provides 
better trained aerospace forces to the CINC's while adding 
predictability and stability to the lives of our airmen.
    The combination of several years of constant high operations tempo, 
aging aircraft and years of underfunding our spares account have taken 
a toll on readiness and understandably raises concern for the future. 
Recent operations in Kosovo though, reinforced the fact we have the 
best-trained force in the world. Our fiscal year 2001 budget program is 
based on sustaining our decisive fighting force through a balanced 
program that addresses today's readiness while fostering innovative 
solutions to the challenges of the future. We continually scrutinize 
the state of our overall readiness and with the help of Congress are 
taking positive steps to correct deficiencies. To ensure the Air Force 
can maintain its quality of training, proficiency and readiness in the 
future will require the continued support of the Administration and 
Congress.
    General Dake. The readiness of our Operating Forces is the highest 
priority for the Marine Corps. It was ten years ago and remains so 
today. Not only does the training standards we hold ourselves to remain 
high, but we have strengthened the way we make and transform Marines. 
We recruit the highest quality men and women. We retained our proven, 
tough, demanding recruit training program and enhanced it to ensure our 
Marines are ready to prevail in the future. Following recruit training, 
these new Marines come under the Cohesion program, which carries them 
as a team through their military occupational specialty training into 
the Operating Forces, resulting in more cohesive units. This 
transformation process is sustained through the reinforcement of core 
values and by holding Marines strictly accountable throughout their 
careers. Our quality training and transformation process provides 
stronger, smarter, and more capable Marines who have the maturity and 
flexibility to meet the challenges of the 21st Century battlefield. We 
cannot use the term ``unequivocally'' because the yardsticks to measure 
``now'' and ``ten years ago'' are not available because both technology 
and the type and size of the anticipated adversary have changed. 
However, we can say that in many cases Marines are receiving better 
training than they were. For example: Technology infusion at the Marine 
Corps Communication Electronics School has reduced the time to train, 
improved retention and decreased attrition in Basic Electronics 
training. The Training Development System, implemented in the last 
year, requires entry-level training to focus on core requirements and a 
distribution of follow-on training. This results in providing more 
Military Occupational Specialty qualified, trained Marines to the 
Operating Forces than in the past. To some degree, austerity has forced 
us to find ways to do things smarter, cheaper, and in many ways better.
    Mr. Bateman. What has been the impact on readiness of these 
diversions of funds from training accounts? How do you make up for 
training that did not occur?
    Admiral Pilling. The Navy has seen a slight decline in training 
levels as reported in the Status Of Resources and Training System over 
the past ten years. That said, today's Navy is the most capable in the 
world and continues to demonstrate forward-deployed readiness in 
meeting America's security obligations across the globe. It is 
important to note that Defense Planning Guidance specifies a range of 
readiness each unit must be within before entering their theater of 
operations. Over the past decade, Navy has remained within this range.
    General Lyles. The Air Force maintains a delicate balance between 
mission and support areas. Decentralized execution of funding provided 
to our Commanders gives them the flexibility to balance mission and 
support requirements. We are not aware of any impact to readiness due 
to funding transfers.
    General Dake. Diversions in funds have affected the preparation for 
exercises. Training exercises are tremendous builders of combat 
readiness due to the synergies of combining realistic, combat-scenario 
operations and logistics in high tempo. Individual and small-unit 
preparation training in advance of the exercises must be performed 
without, or with less than optimal resources. To gain training 
synergies during the exercises, equipment must be ready and capable. 
Individual and small-unit training in advance is often sacrificed 
immediately prior to exercises in deference to performing remedial 
maintenance on the equipment so that the unit is ready for the 
exercise. While we can never make up for training that did not occur, 
commanders make every concession to try to tailor their units's 
training schedules so that the participants can ramp up steeply but 
safely to training standards. Our training centers accommodate the 
commander's needs to the greatest feasible extent. Recognizing that we 
can never make up for lost training, we find that we can't afford to 
train every Marine in every task that might be expected of him or her. 
Using the axiom of the student now becoming the instructor, we assure 
that specialized skills are resident in enough Marines that we can 
collectively meet all requirements without excessive expenditure or 
unacceptable personnel tempo.
    Mr. Bateman. Would it not be better to adequately fund the accounts 
that habitually are underfunded and therefore, provide enough funds for 
training so training doesn't need to be cancelled?
    Admiral Pilling. Navy's overall readiness trend continues to be 
satisfactory. Deployed readiness remains high, but because of our 
cyclical readiness posture, we expect non-deployed readiness to be at a 
lower level of readiness. This is a direct result of units entering the 
Inter-Deployment Training Cycle, where ships and aircraft undergo 
maintenance and warfighting skills and proficiencies migrate to a basic 
level due to crew turnover and a lack of opportunity to train while in 
maintenance periods. We have found that this cyclical posture makes the 
most efficient and effective use of constrained resources. However, 
this efficiency means that funding shortfalls, when they occur, have a 
greater and more rapid impact today than in the past.
    General Lyles. The Air Force budget submission represents a 
balanced program of priorities within current funding constraints. Our 
budget request reflects the Air Force's top priorities and our Unfunded 
Priority List (UPL) prioritizes those requirements that could not be 
funded in the budget.
    General Dake. Yes, habitually underfunded accounts eventually 
become regarded as ``bill payers'' and as a result the quality of their 
intended purpose is eroded. Cancellation of training is a serious 
matter. The scheduling and timing required to get the right person to 
the right training is often subject to opportunity in a high Op-tempo 
environment. Cancellation therefore often equates to a training 
opportunity lost and a capability never attained.
                              Spare Parts
    Mr. Bateman. The committee is aware that spare parts are scarce and 
mission capable rates have suffered as a result in all the services.
    What is your sense of the adequacy of spare parts in your major 
operational units?
    Admiral Pilling. Spares availability for major operational units is 
for the most part sufficient, though there are pockets of concern that 
need to be resolved. The most challenging area is aviation spares 
allowances in support of non-deployed units. Spare parts levels on 
deployed units are adequate to support the current operational tempo, 
but achieving and maintaining deployed unit spare part support has 
meant diverting assets from non-deployed units. A recent study of the 
Navy's capacity to surge multiple aircraft carrier battle groups 
confirmed that a great deal of aviation spare parts pooling and 
diversion from shore sites would be necessary to support some wartime 
scenarios. The majority of the support problems result from imbalances 
among the appropriated and working capital fund accounts provided for 
spare parts as described below in question 35. During the last Program 
Objective Memorandum (POM) and Budget cycle, the Navy began a concerted 
series of actions to address these spares support problems. In 
particular, the Navy has addressed shortfalls with the Aircraft 
Procurement, Navy, Budget Activity 6 (APN-6) account that is used to 
fund planeside spare parts on ships and at naval air stations. Due to 
lead times involved with the procurement of technologically complex 
aircraft spare parts, these actions will take time to manifest 
themselves in the form of improved readiness.
                         Spare Parts--Adequacy
    General Lyles. Anecdotal evidence indicates spares support to the 
field is generally improving. Backorders for reparable spare parts have 
been reduced 54% from December 1998 to June 2000. Deliveries are ahead 
of schedule for the FY99 add of $382M in Obligation Authority for ``bow 
wave'' requirements to restock shelves. In addition, the get well 
program for engines is making slow, but steady progress; there are 
currently only 6 of 26 engine types Air Force wide not meeting War 
Reserve Engine (WRE) requirements. Along with Air Force efforts to 
improve reparable spare parts availability, we have partnered with the 
Defense Logistics Agency to execute the Aviation Investment initiative 
for consumables. DLA is investing $500M over a four-year period to 
increase support levels for aviation and engine related parts; 53% of 
this is targeted for Air Force weapon systems.
    The latest monthly (May 2000) Total Not Mission Capable for Supply 
(TNMCS) rate for Air Combat Command fighter aircraft is 11.4%, the best 
seen in 24 months. The overall Air Force TNMCS rate decreased 
(improved) from 16.1% in Sep. 1999 to 13.4% in May 2000. The Air Force 
remains cautiously optimistic that the supply rate will continue to 
improve. However, future years' full funding is needed to sustain 
improvements in supply availability. In addition, aging aircraft, high-
demand aircraft issues, and depot workload transition difficulties 
continue to pose challenges for the supply system.
    General Dake. We are optimistic that recent additional funding for 
spare parts of equipment in our major operational ground units will be 
adequate in the short term. Additionally, the introduction of new 
systems to the operating forces will help sustain ground equipment 
readiness rates.
    Our major aviation operational units sense of adequacy of spare 
parts can only be viewed in relation to all measurements as outlined in 
the graphs and text below. Not Mission Capable Supply (NMCS) represents 
the percent of time that an aircraft is down for parts. This 
measurement provides an indication that there is a parts problem. In 
summary, on the fixed wing side, the adequacy of spare parts has been a 
problem due to problems with the AV8B engine. The removal, inspection 
and repair of these engines resulted in unanticipated demand for spare 
parts. Increasing the availability and safety of the AV8B aircraft has 
been the subject of the Harrier Action Review Panel (HARP). On the 
rotary side, the adequacy of spare parts has increased as we are 
overcoming problems with CH53, Gearbox assemblies, Swash plates and 
Rotor Compressors and CH-46 Transmissions. Details are as follows:
    On the Fixed Wing side we have experienced a slight decreasing 
trend in readiness, from 74.5 percent in FY90 to 71.7 percent in FY00. 
This decline can be attributed to a noticeable increase, from 11.1 
percent in FY90 to 16.7 percent in FY00, in the percentage of time that 
an aircraft is down for parts. This is illustrated on the graph below 
as Not Mission Capable Supply (NMCS). Issues with the AV8B Engine have 
caused a significant increase in NMCS time and a resulting decrease in 
Mission Capable rates.
    [The information referred to can be found in the Appendix on page 
103.]
    On the Rotary Wing side we have experienced a continued increasing 
trend in readiness, from 64.8 percent in FY90 to 76.3 percent in FY00. 
This rise in Mission Capability (MC) results from a significant 
decrease, from 23.3 percent in FY90 to 12.8 percent in FY00, in the 
percentage of time that an aircraft is down for parts. This is 
illustrated on the graph below as Not Mission Capable Supply (NMCS). 
The decrease in readiness that occurred in fiscal years 1996 and 1997 
was as a result of problems with CH53, Gearbox assemblies, Swash plates 
and Rotor Compressors and CH-46 Transmissions. The focused effort to 
resolve these issues has resulted in the steady upward trend in 
readiness since FY96.
    [The information referred to can be found in the Appendix on page 
103.]
    Mr. Bateman. What do you think the principle reasons are for spare 
parts shortages?
    Admiral Pilling. A combination of factors in recent years, has led 
to a decline in available aircraft spare parts. The primary reason for 
spare parts shortfalls has been the increased age of aircraft, coupled 
with the upward demand for material to maintain these aging aircraft. 
We are seeing trends where components are failing more often and 
repairs to these components are more complex and longer to repair. In a 
growing number of cases we are experiencing failure of items which had 
never been forecasted to fail. This growing demand level continues to 
squeeze the spares budgets and is exacerbated by the shortage of 
adequate funding within Naval Air Systems Command (NAVAIR) to support 
program related logistics/program related engineering. These two 
efforts are central to the process where engineers keep ahead of 
reliability problems and develop engineering fixes to maintenance 
problems.
    A second major cause for spares shortfalls has been the imbalance 
between the three inter-related funding streams which support aviation 
spares levels. Frankly, the significance of maintaining the balance of 
these funds had not been determined until this past Program Objective 
Memorandum (POM) cycle. The specific accounts in questions are:

 Aircraft Procurement, Navy-Budget Activity 6 (APN-6)--APN-6 is 
used to procure planeside spares commensurate with procurement of new 
aircraft and modification of existing aircraft. Allowances are computed 
via a readiness based spares analysis, a process which ties the spares 
package for an aircraft to the readiness that each part provides to the 
overall availability of the aircraft to perform its mission. Since 
these planeside spares allowances are computed with a readiness based 
model, any APN-6 shortage will directly reduce the available spares, 
and will directly negatively impact readiness.
 Operations and Maintenance, Navy (O&M, N)--O&M, N funds are 
provided in the Flying Hour Program (FHP) for customers to buy spares 
when needed in support of operations and training. Ideally, when a 
spare is needed to repair an aircraft, the spare was previously bought 
with APN-6 funding and is available on the planeside shelf to complete 
the repair. FHP funds are then used to replenish the planeside shelf 
stock spares as they are consumed in support of daily operations. There 
have been instances in the past, where planeside shelf stock was used 
to complete repairs, but replenishment was delayed due to lack of FHP 
funding. These replenishment delays naturally result in queuing 
problems throughout the entire supply chain and if not stemmed, could 
result in a large bow wave of unfunded requirements. There have been 
instances where a lack of FHP funding has resulted in deferring 
replenishment/repair action from one fiscal year into the next.
 Navy Working Capital Fund (NWCF) and Defense WCF(DWCF)--
Wholesale supply system spare parts are bought and managed by the Navy 
and the Defense Logistics Agency (DLA) through the use of NWCF and DWCF 
obligational authority. These wholesale spares are procured and stocked 
in order to prevent a potential ``lead-time delay'' from manufacturers, 
distributors, and civilian/military repair depots by ensuring 
availability when needed. In short, the working capital funds buy the 
readiness lead-time for the operators. If the spare is not procured in 
advance of Fleet demand, then there is the risk that material will not 
be on hand to support operator needs.

    The relationship and balance between these accounts (APN-6; FHP 
O&M, N; and NWCF/DWCF) is critical to providing readiness through spare 
parts support. Under-funding of appropriated accounts (APN-6 and FHP 
O&M, N) will have a direct negative impact on wholesale obligational 
authority (NWCF/DWCF) resulting in less than adequate spares support 
for required Fully Mission Capable rates. The under-funding of the APN-
6 and FHP O&M, N accounts described above have impacted NWCF/DWCF 
obligational authority adversely over the past few years. Maintaining 
these three funding streams is key to maintaining the overall health of 
aviation. All of the factors and relationships described above have 
resulted in degradation of spare parts supplies in support of Naval 
Aviation.
    Last, over the past decade Navy, as well as other services, has 
reduced wholesale inventories in response to Department of Defense and 
National Performance Review goals. These inventory reductions have 
resulted in elimination of intermediate spares levels, more reliance on 
agile transportation, and a reduction of obligational authority at a 
time when additional funding is required to support the growing spare 
requirements for our aging aircraft. Reduction of inventories is not in 
itself a bad objective . . . inventory reductions out of the context of 
the overall logistics and maintenance process can lead to 
inefficiencies and a decrease in aircraft readiness.
    General Lyles. The Air Force Materiel Command looked at this and 
concluded a primary reason was the constrained spares funding of the 
mid 1990's which leaned out inventories. With the help of Congress, the 
Air Force is making significant strides to fully fund spares 
requirements. However, the funding shortfall is just one part of the 
problem. A combination of other factors include increased failures due 
to aging weapon systems, technical surprises, poor forecasting, 
production shortages and vanishing vendors, aggressive inventory 
reductions, degraded consumable item support, and the effects of 
workload transfers associated with the BRAC closures. The Air Force is 
committed to improving spares support and several initiatives are 
underway to attack spares problems on all fronts.
    General Dake. As equipment continues to age and is maintained 
beyond its planned service life, unplanned failures or spikes in usage 
may occur which may necessitate additional repair part funding. 
Ultimately, the answer to achieve sustained improvements in our ground 
equipment readiness is to continue to modernize and field equipment 
with high reliability which will help minimize the demand for 
repairable funding.
    The principle reason for the spare parts shortage for our fixed 
wing aircraft is directly attributed to problems with the AV8B engine 
that resulted in over fifty bare firewalls. Improper manufacture of 
critical components has made it essential to remove and replace engines 
and engine related components. The removal and replacement of these 
engines resulted in a surge of unanticipated requirements for parts 
that are not normally expected to fail.
    The problem with the failed parts was the result of a quality 
control process problem that emerged on the Pegasus assembly line. 
Although not known to be directly responsible for any of the FY99 Class 
A mishaps, these problems are critical and have contributed directly to 
the large number of aircraft without engines and the very low 
availability across the Harrier fleet.
    Historic underfunding of the Reliability Centered Maintenance 
concept has also been targeted as a cause of recent aircraft/engine 
related readiness problems. Specifically in the Component Improvement 
Programs (CIP) and Program Related Logistics (PRL) accounts. These 
accounts are critical to long-term engine performance and reliability. 
They provide for data collection, trend and cause analysis, corrective 
design/engineering and improved component testing. Over the last 5-7 
years, as funding has decreased, the number of unanswered Engineering 
Investigations has grown and the length of time to field approved 
changes has reached an average in excess of 9 years. Program funding 
level has been sufficient only to be reactive to mishaps vice 
proactively identifying and correcting problems before they lead to 
mishaps. The Marine Corps recognized this and in 1997 formed the 
Harrier Review Panel to identify the who, what, where and how of 
required corrective actions.
    Mr. Bateman. The committee is aware that one of the most often used 
methods of overcoming parts shortages is to cannibalize parts from a 
like type of aircraft and put it on the vehicle or aircraft to make it 
operational.
    What is your cannibalization policy?
    Admiral Pilling. While the Navy does not have a published goal for 
cannibalizations, recent fleet surveys have indicated that the current 
level of aircraft spare part cannibalizations is adversely affecting 
job satisfaction of maintenance personnel and pilots. At a minimum, 
Navy would like to see a decline in the total cannibalization rate to 
the levels achieved in 1995 & 1996. Some level of cannibalization is 
inevitable in order to maintain the deployed squadrons at the highest 
levels of readiness. However, the current level of cannibalization is 
impacting retention and is therefore unacceptable.
    General Lyles. The Air Force cannibalization policy allows a 
cannibalization action to occur when a not mission capable (NMC) 
condition will prevent the accomplishment of a mission and the required 
assets are not immediately available from supply. Prior to a 
cannibalization action, a verification is conducted confirming the 
required component can not be sourced from on base assets within the 
allotted time. In addition, the cannibalization decision authority 
considers man-hour availability, impacts, and the risks of damaging 
serviceable equipment. Additionally Major Command guidance for 
cannibalization actions identifies specific procedures, individual 
responsibilities, and documentation requirements.
    General Dake. The Marine Corps does not utilize cannibalization to 
maintain its ground equipment readiness. However, it can be authorized 
on an exception basis when an operational commitment is imminent, and 
only when a required part cannot be obtained in a timely basis. 
Approval for such a procedure is strictly regulated and controlled.
    For Aviation the cannibalization policy as outlined in OPNAV 
instruction 4790.2G. is as follows:
    a. Ensure an aggressive and effective management program is in 
place to control cannibalization of aeronautical equipment. To the 
maximum extent possible, ensure selective cannibalization actions are 
planned to prevent aircraft from being in a non-flyable status for more 
than 30 consecutive days.
    b. All cannibalization actions shall be authorized and directed by 
Maintenance Control (a division within a squadron).
    c. All levels of command are directed to actively pursue 
appropriate courses of action to properly manage cannibalization within 
their areas of purview. In assessing the effectiveness of this 
undertaking, it is imperative management guides, such as supply 
material availability, A799 rate, repair turn around time, point of 
entry effectiveness, and supply response time be considered in 
conjunction with such measurement criteria as cannibalizations per 100 
flight hours and cannibalization maintenance man-hours per 
cannibalization.
    Mr. Bateman. Do you maintain good records of the cannibalizations 
that take place?
    Admiral Pilling. Records are not centrally maintained for spare 
part cannibalizations associated with ships and submarines. Because of 
maintenance procedures and on board system redundancy, ship and 
submarine spare part cannibalization are infrequent and have only a 
very minor, if any, impact on readiness. Cannibalizations of spare 
parts among aircraft are much more prevalent in the Navy. Because spare 
parts cannibalizations are much more prevalent, accurate centralized 
records are maintained and updated real-time in the Naval Aviation 
Logistics Command Management Information System (NALCOMIS). Maintenance 
personnel input all cannibalization actions in NALCOMIS as they occur. 
These cannibalization records are maintained in Naval Aviation 
Logistics Data Analysis (NALDA) database. These records can be accessed 
electronically on demand at various Navy commands.
    General Lyles. Yes, the Air Force policy requires documentation 
anytime a cannibalization action is taken. These actions are recorded 
in the core automated data system (CAMS). In addition these maintenance 
actions are reviewed and validated to ensure accuracy.
    General Dake. If cannibalizations are authorized for ground 
equipment, strict managerial control practices are adhered to at the 
command and maintenance facilities.
    For Aviation units all cannibalization actions are required to be 
documented as outlined in OPNAV instruction 4790.2G. They are 
documented daily and reported via maintenance data systems monthly to 
be viewed at all levels of the Chain of Command.
                              Spare Parts
    Mr. Bateman. What are the trends?
    Admiral Pilling. The cannibalization trend per 100 flight hours for 
the past 10 years appears below. The cannibalization rate in 1999 
indicated the first downturn in that metric since 1995. The source of 
the information is the Naval Aviation Logistics Data Analysis (NALDA) 
database.


------------------------------------------------------------------------
                               Year                                 Rate
------------------------------------------------------------------------
1990..............................................................  10.4
1991..............................................................  10.4
1992..............................................................  10.2
1993..............................................................   9.8
1994..............................................................   9.6
1995..............................................................   8.4
1996..............................................................   8.4
1997..............................................................   9.1
1998..............................................................   9.3
1999..............................................................   8.9
------------------------------------------------------------------------

    General Lyles. Cannibalization actions per 100 sorties for overall 
Air Force have leveled off in recent years but we continue to pursue 
spare funding and policy changes to drive further reduction. As the 
chart below indicates, FY00 CANNs per 100 sorties were 11.7 (through 
May 2000) versus 12.3 for FY99-lowest rates since 1996.
    Although CANN rates decreased for most weapon systems, we have 
focused on several critical aircraft spare parts issues that remain a 
source of CANN activity. The B-1 has experienced about 84 CANNs per 100 
sorties since FY97. The C-5 MC rates increased from approximately 45 to 
55 percent since FY95. We expect ongoing initiatives to diminish these 
rates over the next year.
[GRAPHIC] [TIFF OMITTED] T4887.073

    General Dake. There are no outstanding trends for ground equipment. 
Cannibalization is the last resort for supply support in the Marine 
Corps.
    For Aviation units from FY96 until present there has been a 28% 
increase in the number of cannibalization actions for fixed-wing 
aircraft and a 3% increase for rotary-wing. The increase in 
cannibalizations on the fixed wing side is also attributed to the 
problems outlined above with the AV8B engine.
                       Savings From A-76 Studies
    Mr. Bateman. The pressures on service budgetsare obvious. One key 
of many for success, is the aggressive privatization, or A-76, studies 
underway that must create substantial savings. What will happen to your 
budget if your A-76 studies yield the savings you projected?
    General Keane. If our A-76 studies don't yield the savings 
reflected in our budget, installations will have to re-prioritize 
requirements to ensure that all salaries and other ``must-fund'' 
requirements are paid.
    Admiral Pilling. The savings have already been taken against 
applicable program elements. The A-76 program is an element of the 
Navy's Strategic Sourcing initiative. This effort recognizes the 
benefits of doing a review of an entire function using business process 
efficiency efforts in conjunction with A-76. The net effect of the 
Strategic Sourcing effort is providing installation infrastructure with 
a greater ability to streamline operations and achieve cost saving 
using a variety of approaches. Using an approach that is tailored to 
meet the unique requirements of a function provides increased 
flexibility to achieve targeted savings. Our experience to date with 44 
A-76 studies completed demonstrates the projected savings target is 
achievable. After all efforts have been exhausted to achieve 
efficiencies (and total projected savings), if a shortfall still exists 
then other programs will be reduced, deferred or eliminated. Across the 
Future Years Defense Plan (FYDP), the solution would require 
transferring resources from other programs or recapitalization accounts 
back into base operating support. This is very unpalatable because of 
the negative effect it would have on force structure and long-term 
readiness.
    General Lyles. In the past three years, we have experienced between 
35% and 40% savings for Air Force cost comparisons. However, if a 
particular A-76 cost comparisons does not provide the expected savings, 
any shortfalls will be covered within Air Force Total Obligation 
Authority. The Air Force has taken the expected savings into account 
and allocated those savings to force modernization priorities through 
the outyears. A-76 savings are clearly contributing to the cost 
effectiveness of the Air Force.
    General Dake. The Marine Corps is continuing to aggressively pursue 
the identification of opportunities for potential A-76 competitions. If 
these opportunities do not yield the savings identified, the Marine 
Corps will continue to search out other areas where Business Process 
Reengineering, Regionalization, Activity Based Costing, and other 
improvement methodologies may be utilized. We anticipate that we will 
make our projected savings even if additional A-76 opportunities are 
not forthcoming.
                   Senior Readiness Oversight Council
    Mr. Bateman. a. In your opinion, how effective has the Senior 
Readiness Oversight Council (SROC) been since its inception?
    b. What significant contributions has the Council made in dealing 
with readiness issues?
    c. What are some of the tangible items that have emerged from this 
process?
    d. Since the inception of the JMRR process and the SROC a little 
more than a year ago, how have these reviews improved our ability to 
assess readiness? What trends have been identified as a result of these 
reviews?
    General Keane. a. The SROC has been an effective mechanism for 
addressing key readiness issues. The monthly meeting of the senior 
civilian and military leadership has provided a forum for examining 
both near- and far-term readiness. The flexibility of the Office of the 
Secretary of Defense in determining agenda items has ensured that 
current, relevant topics were discussed.
    b. The SROC, together with the Joint Monthly Readiness Review 
(JMRR) and the Quarterly Readiness Report to Congress (QRRC), has 
provided greater insight into Army readiness at the operational and 
strategic levels. In particular, it has given the Army and other 
Services the opportunity to communicate issues and trends and to 
develop coordinated approaches toward problem resolution.
    c. The SROC process has highlighted many of the Army's top 
readiness concerns and contributed to addressing these concerns in the 
past few years. Tangible results include: increased funding for 
recruiting; formation of an integrated process team to review current 
chemical-biological defense readiness standards; detailed planning for 
Balkans disengagement; and decisions regarding the equipping and 
locating of war reserve pre-positioned sets.
    d. The JMRR ties together all levels of readiness assessment by 
providing a comprehensive analysis of the military's ability to execute 
the National Military Strategy. The combatant commanders in chief and 
combat support agencies identify readiness deficiencies that are 
reported to the SROC each quarter, which results in direct visibility 
by senior decision makers. This process has identified several trends 
relevant to the Army, i.e., shortages of combat support/combat service 
support assets, the need to replace aging equipment, shortages of key 
personnel, and shortages of strategic sea and air lift assets.
    Admiral Pilling. a. From the Office of the Chief of Naval 
Operations perspective, the SROC has been effective in the following 
ways:
    (1) Visibility of U.S. Navy Readiness issues at the Office of the 
Secretary of Defense (OSD) Level.
    (2) OSD visibility of joint readiness issues, including those 
relating to the U.S. Navy.
    (3) Consensus building between Services, Joint Staff and OSD on 
implementation of new laws or programs.
    b. While it is difficult to identify a readiness issue that was 
resolved solely through the Senior Readiness Oversight Council (SROC) 
process, it is clear the SROC process ensures senior leadership 
visibility on key readiness issues on a monthly basis. As stated above, 
the consensus building within the Department of Defense is critical 
when dealing with the Planning, Programming, and Budgeting System 
process.
    c. The key benefit of the Senior Readiness Oversight Council (SROC) 
process is the coordination between the Services, Joint Staff and OSD 
on issues prior to the briefing. The SROC process allows different 
organizations within the Department of Defense to work together on 
issues in an efficient and timely manner. Otherwise, issues of 
readiness interest could be assigned for group study and be delayed in 
committee. While the SROC is not a decision making forum, the 
scheduling of a particular readiness issue for the SROC brief 
facilitates movement in the decision making process of Service, Joint 
Service and Office of the Secretary of Defense leaders.
    d. The JMRR process allows visibility of viewpoints of both 
operators and planners. At the end of the JMRR Process, operators have 
a sense of the relative importance of readiness degradations. The JMRR-
SROC link allows the inclusion of the possible political, budgetary and 
fiscal realities. In the end, both processes help military leadership 
prioritize the funding and execution of warfighting plans.
    For OPNAV, the JMRR and SROC process has been invaluable in 
educating the other services and Office of the Secretary of Defense in 
the uniqueness of Navy readiness. Navy readiness terms, such as, 
Bathtub and Inter-Deployment Training Cycle are now common parlance in 
DOD.
    General Lyles. a. The SROC brings the senior civilian and military 
leadership together in monthly meetings to review significant readiness 
topics. Its focus is primarily to provide advice to the Secretary on 
matters of broad policy related to readiness. This forum provides the 
Air Force and its sister Services the opportunity to communicate our 
key concerns to not only keep senior leadership informed but enables 
them to take appropriate corrective actions.
    b. The SROC is one of several avenues to address both near-term and 
long-term readiness issues. Combined with the other forums that include 
the JMRR and Quarterly Report to Congress (QRRC) the SROC continues to 
help place emphasis on those programs that has garnered significant 
gains for the Services over the past two years.
    c. The SROC process has highlighted many of our top readiness 
concerns and contributed to addressing these concerns over the past few 
years. This has resulted in the following: reversed REDUX retirement 
plan, efforts to close the pay gap, increases to Depot Program 
Equipment Maintenance, increases to Readiness Spares Packages, and $20B 
topline increase for the AF for FY00-05.
    d. The JMRR and SROC have: highlighted declining unit readiness; 
assessed CINCs and Combat Support Agencies ability to integrate and 
synchronize units and equipment provided by the Services to meet day-
to-day wartime requirements; and identified appropriate CINC 
deficiencies. We have seen a steady improvement in the number of 
deficiencies over the past 2 years which is an indicator that the JMRR 
and SROC process works.
    General Dake. a. In my opinion, the Senior Readiness Oversight 
Council has been a highly successful forum for vetting Marine Corps 
readiness issues.
    b. From a Marine Corps perspective, the council provides visibility 
into and assessment of the Marine Corps' unique contribution to the 
National Military Strategy. The Council provides a forum to examine 
readiness issues and concerns that challenge the services and offers 
opportunities for attacking those challenges. Additionally, the council 
is a vehicle for the Joint Staff and the Office of the Secretary of 
Defense to hear and address Service concerns as they relate to joint or 
DOD initiatives, activities, and/or policies.
    c. The Marine Corps has been able to bring attention to its top 
readiness concerns: recruiting and retaining personnel, the costs of 
maintaining legacy equipment, and the need to modernize both our 
equipment and infrastructure. For example during the September SROC, 
the Marine Corps addressed recent readiness challenges associated with 
our AV-8B Harrier community after the Harriers were grounded due to 
problems associated with engine production quality, lower readiness 
rates, and increased mishap rates. A get-well plan to restore the AV-8B 
community's operational health was briefed at the SROC. Subsequent, 
SROCs were used to provide updates to the plan as required. 
Additionally, the SROC affords the Services the opportunity to voice 
their concerns and express their opinions on the potential impacts of 
Defense legislation and Joint and/or DOD driven initiatives.
    d. The JMRRs and SROCs effectively allow the Marine Corps to assess 
its readiness and contributions to joint warfare. In the latest JMRRs, 
our personnel readiness was satisfactory as we continued to meet 
recruiting goals and put a concerted effort into our retention efforts. 
Our ground and aviation equipment readiness remained high, but are a 
concern due to the age of this equipment and the rising costs 
associated with maintaining it. Aviation training readiness continued 
to be a challenge in some units due to maintenance requirements and 
aircrew shortages. Training readiness for ground units continued on 
track commensurate with unit deployment cycles. Our Maritime 
Prepositioning Squadrons continued to maintain a high level of 
equipment readiness as the squadrons rotated ships through the Blount 
Island facility for their regularly scheduled maintenance cycles.
             Department of Defense (DOD) Dependent Schools
    Mr. Bateman. More often than we would like, we hear complaints from 
parents about DOD schools. But, the news is not all bad-recent news 
reports have touted the test scores coming out of DOD schools, 
particularly for minority children, as a success story. How does your 
service view DOD schools, both overseas and domestic?
    General Keane. We believe that the DOD school system delivers 
quality education to our soldiers' children in the United States and 
abroad, but there are areas that can be improved. Across America, local 
school districts need to modernize facilities and upgrade their 
instructional technology systems. Likewise, this is also a challenge 
for the DOD schools that educate our children. The Army strongly 
encourages parental involvement in the schools, which helps to improve 
both the system and the results it produces. Some curriculum concerns 
voiced by parents relating to materials DOD introduced were 
successfully resolved through the school home partnership program.
    Admiral Pilling. The Navy views the Department of Defense (DOD) 
schools as a key supporter of the installation mission by providing a 
high-quality education for the children of our active duty forces in a 
drug-free, safe environment. Thus, DOD schools are an important 
enhancer of family quality of life on the installation. According to 
standardized test scores, students in DOD schools are doing very well 
as compared with their counterparts in civilian United States school 
districts, especially in terms of minority achievement, and general 
satisfaction with many aspects of DOD schools, both overseas and 
domestic, is high, according to surveys. While there are always areas 
that need improvement, and individual problems at the local level that 
need to be resolved, DOD schools, both overseas and domestic, are more 
than adequately fulfilling their core mission.
    General Lyles. There are 31,000 children enrolled in Air Force 
supported schools operated by DOD overseas and in the United States and 
its territories. Surveys indicate that concern for the education of 
their children is among the most important quality of life issues for 
our families. We continue to work very closely with our DOD school 
leadership to adequately resource and prioritize for the educational 
needs of our children. Significant program improvements have been 
achieved in the past year including full day kindergarten programs, 
reduced pupil-to-teacher ratios in grades 1-3, and additional manning 
for school counselors and psychologists. Our goal is a world class 
school system that can serve as a model of excellence.
    General Dake. The Marine Corps views both overseas and domestic DOD 
schools as supporting the installation mission by providing a quality 
education foundation for students in a drug free, crime free 
environment, thus enhancing family quality of life.
    Mr. Bateman. Are your commanders able to work with school officials 
at the local level to resolve issues?
    General Keane. Yes. There is a great deal of cooperation between 
school officials and the Army installations they serve. The Army has 
individuals designated as a school liaison officers who work for local 
commanders. The liaisons are responsible for the day-to-day interface 
with the military communities and school personnel.
    Admiral Pilling. In most cases, relationships between local schools 
and installation commanders are strong, but of course these 
relationships will naturally vary from one command to the next. Some of 
the formalized relationships between commanders and customers and the 
school include such things as local councils, school liaison officers 
acting as a day-to-day point of contact between school officials and 
base commanders, school advisory committees, school adoption programs 
and parent-teacher organizations. These contacts enable most issues to 
be resolved at the local level. In those cases where a local issue is 
reflective of a larger policy concern or legislative remedy, other 
forums such as the Dependents Education Council, which consists of 
senior representatives from the major commands, serve as avenues for 
problem resolution and input to the Department of Defense Education 
Activity.
    General Lyles. Our parents and commanders are working with school 
officials at the community level to forge partnerships toward this end. 
We are particularly proud of the active role that parents are taking in 
supporting schools. Our commanders are focused on addressing dependent 
education issues with school administrators and staff. We will continue 
to make improvements in remaining goals including better school system 
response to parental concerns, facilities and maintenance, summer 
school programs, advanced placement course offerings, staffing of small 
schools, and distance learning opportunities. We appreciate the 
Congressional support for our dependent schools, which are an essential 
element of our ability to attract and retain good people.
    General Dake. In most cases, relationships between local schools 
and installation commanders are strong, whether they are DOD schools or 
are governed by a local education agency. For example, the Joint 
Venture in Education Forum brings the state of Hawaii and military 
officials together to resolve education issues affecting military 
children in the state run school system. Our current relationships with 
school officials enable resolution of most issues at the local level.
    Mr. Bateman. Considering that military bases are in a partnership 
with local communities in places where there are no DOD schools, do you 
think local community schools receive enough impact aid money to 
provide a decent education for military children? Should DOD provide 
more funding to ensure that local schools are properly compensated for 
teaching military children, particularly as housing privatization 
initiatives place more military children into local schools?
    General Keane. Most schools districts do not have enough money to 
meet all their needs. Impact aid is a Department of Education function 
and the Army would welcome funding increases.
    Admiral Pilling. Since this program and its funding are 
administered by the Department of Education and given directly to local 
school districts, which may each have their own highly localized 
funding structures, it is difficult to assess whether each local 
community school is receiving enough Impact Aid money to provide a 
decent education for military children. However, it is true that the 
Impact Aid program, as a whole, has historically not been funded to its 
full entitlement and that impacted schooldistricts in a number of 
locations struggle to provide a decent education for not only military 
children, but for all children attending those schools.This struggle is 
often a result of the amount of Impact Aid funding a particular school 
district receives, but there may also be other factors unrelated to 
Impact Aid at play as well.
    Impact Aid is provided not only to school districts impacted by 
military children, but also to school districts impacted by other 
federal presence, such as for children residing on Indian lands or in 
federal low-rent housing projects. Specific Department of Defense 
funding to ensure appropriate compensation of local schools for 
military family members would be unnecessary if the entire Impact Aid 
program was fully funded and all school districts impacted by a 
qualifying federal presence received their full entitlement to funds 
according to their reported student populations. However, the 
Department of Defense has a responsibility to take into account the 
impact of its policies and practices on local school districts and to 
take steps wherever possible to minimize their effects. For example, 
housing privatization initiatives can affect both the amount of Impact 
Aid funding support for the local school (where federal ownership of 
the land is retained by the federal government, Impact Aid funding 
support for local schools is maintained) and also the student 
population of the school district (as new housing units are built on 
land where previously units did not exist, student population within a 
district can increase).
    General Lyles. We fully support the Impact Aid Program authorized 
by the Congress and administered by the Department of Education. We 
believe that this is the most appropriate way to compensate local 
communities which are impacted by the presence of military children and 
which may be disadvantaged in funding local schools from a normal tax 
base perspective. We have conducted no analysis of the adequacy of the 
current impact aid funding levels. We would have to defer to local and 
State education officials and the Department of Education for an 
accurate assessment including the potential impact that housing 
privatization may have. At this time, the only impact we foresee with 
housing privatization is to increase the number of houses in local 
communities that are subject to local taxation, which in turn should 
increase the local tax base.
    General Dake. The current funding for impact aid appears to be 
insufficient to offset the costs incurred by public schools impacted by 
Federal entities. For example, Oceanside Unified School District in 
California receives on the average $1,040 per military child in impact 
aid, while spending $5,670 to educate that child. Analysis of this 
nature, by locality could be useful for future decisions.
                      The Aging Civilian Workforce
    Mr. Bateman. Aging workforce: We continue to hear anecdotal stories 
about an aging workforce among DOD civilians. The concern is that the 
current ``baby boomer'' workforce will retire all at once, leaving 
serious gaps of hard to find skill among our civilian workforce. Have 
you been briefed on this issue, and does your service have plans to 
address it?
    General Keane. The Army is fully aware of this issue. In 
preparation for the expected losses, we are trying to increase our 
entry-level intake to professional, administrative, and technological 
occupations through the Army career intern program. The intern program 
is designed to prepare employees in these occupations for successful 
performance and advancement. In addition, we are now employing more 
aggressive and effective recruitment strategies. We are centrally 
funding a student career experience program for college juniors and 
seniors who may be noncompetitively placed in intern positions. To 
compete with private industry, we are offering recruitment bonuses for 
engineers, scientists, and computer specialists, as well as accelerated 
promotions for engineers, permanent change of station moves for all 
interns, and in some cases, advanced in-hire rates of pay. All of these 
initiatives will help us grow the leaders of tomorrow, accomplish the 
necessary transfer of institutional knowledge, and restore a more 
balanced age distribution to our workforce.
    Admiral Pilling. As a result of years of downsizing, the Department 
of the Navy employs a workforce that is rapidly approaching retirement 
age. As the labor shortage intensifies, competition for qualified, 
dedicated employees is becoming even more challenging. The Department 
of the Navy is committed to improving our efforts and our results in 
attracting a workforce that reflects the diversity of our nation and 
meets our mission needs.
    We are revitalizing our recruiting efforts to ensure that accurate 
and effective job information is readily available to a cadre of well-
trained and experienced recruiters. This year, we are conducting 
recruiter conferences and training aimed at enhancing our recruitment 
efforts at colleges, universities, and career fairs. We have developed 
standardized guidelines and materials for use by recruiters, and are 
identifying opportunities for sharing resources and best practices. Our 
goal is to ensure the Department of the Navy is seen as an employer of 
choice by our current workforce and by high quality candidates for our 
future jobs.
    We are also revitalizing our apprentice programs. During the past 
ten years, our apprentice programs slowed down to a trickle. More 
recently, the Navy has received additional funding earmarked for 
revitalization of the apprentice program.
    Finally, we are working with the Center for Naval Analyses to 
assess the wellness of our civilian workforce to determine where we are 
now, and where we should be heading, to ensure we have the right people 
with the right skills in the right jobs to support the Department's 
many missions.
    General Lyles. Yes, I have been briefed on this issue. The Air 
Force does have plans to address it. As a point of clarification, when 
we use the terminology ``aging workforce,'' we do not mean 
chronological age. We have seen no research to lead us to conclude that 
age is a meaningful predictor of knowledge, skills, abilities, or 
performance.
    Our workforce shaping concept centers on ``the age'' of the 
workforce in terms of experience mix and ``the age''' of the skills our 
employees possess. First, we are concerned with recruiting and 
retaining adequate numbers of quality personnel at all levels of 
experience to ensure we have a viable pool of candidates on-board and 
available for positions of higher responsibility as today's incumbents 
retire. This can be thought of as ``succession planning.'' Second, we 
have historically relied on the lateral entry flexibility inherent in 
our semi-open civilian personnel system to fill any voids in experience 
we may observe. However, the demographics of the United States 
professional population as a whole lead us to believe we must begin to 
craft a ``grow your own'' policy for sustaining certain segments of our 
workforce. Our civilian system needs to evolve toward one which builds 
on the best practices of both the current civilian and military 
personnel systems. With that as a backdrop, we see an increasing 
reliance on workforce analysis and modeling as being critical to 
properly framing our policies and programs to meet our needs.
    To provide commanders with a state-of-the-art, sustainable civilian 
workforce capable of meeting tomorrow's challenges, we have developed a 
workforce management strategy which includes the following solutions: 
managing our accessions with properly sized force renewal programs; 
pursuing legislative initiatives that would help us entice scientists 
and engineers from academia and industry to invigorate our research 
laboratories; expanding and targeting training and retraining; and 
pursuing legislative initiatives for separations management through the 
use of buyouts (incentives) for voluntary, targeted force shaping.
    General Dake. Yes, I've discussed this issue and the broader issue 
of civilian workforce development with the Commandant and his staff. In 
fact, the Commandant asked our senior civilian leadership to undertake 
a project to revitalize our career development program for civilians 
and take a more active role in charting civilian career paths, 
providing for skills and leadership development, and planning for 
succession. That project is well under way and I believe it will result 
in better opportunities for our civilian Marines as well as a more 
structured approach to the way we handle workforce planning.
                   Civilian Personnel Regionalization
    Mr. Bateman. Regionalization: DOD and the military services are 
completing a civilian personnel regionalization initiative that takes 
about two thirds of local base civilian personnel offices and relocates 
some of the personnel and most of the support functions to these 
distant regions. We have heard some field commanders complain that 
service has worsened under this new system. What are your views on this 
program?
    If you view service as poor under this new system, what should be 
done about the situation?
    General Keane. The regionalization initiative has caused some 
turmoil and changed the way we do business. However, we are now seeing 
improvements in the quality and timeliness of service. For example, job 
fill time is steadily improving. We are filling a record number of jobs 
using fewer personnel specialists. With the development of the Army 
Civilian Productivity System (CIVPRO), we now have the ability to 
accurately measure fill time. With CIVPRO, we are able to track, down 
to the installation level, the average number of calendar days it takes 
to fill positions-from the date a recruitment request is received in 
personnel, to the date a job offer is accepted. The classification 
program has also improved. The backlog has been eliminated and the 
classification process is now much more responsive.
    The quality and timeliness of service is improving; however, we 
believe it is important to consider streamlining command and control of 
the entire civilian personnel process to further improve the delivery 
of services. In January 1999, a General Accounting Office study found 
that there are too many organizational and personnel layers between 
customer and service provider. The study also found that standardized 
processes and procedures necessary to achieve efficiencies are not 
being followed.
    A recent Army study reported that splitting civilian personnel 
service responsibilities between two separate command elements is not 
efficient because the division of work generates differences in policy 
application and decreases service consistency. The study recommended 
streamlining command and control of regional and installation personnel 
centers and unifying installation personnel center command and control 
under the Office of the Assistant Secretary of the Army (Manpower and 
Reserve Affairs). The Army is interested in exploring the concept of 
streamlining command and control of the civilian personnel process.
    Admiral Pilling. The Department of the Navy's civilian human 
resources community is focused on fully implementing one of the most 
ambitious reorganizations of civilian human resources management in the 
past 30 years. Looking back, we have made tremendous progress in this 
effort. Looking forward, we still have significant room for 
improvement.
    During the last year, performance standards for our Human Resources 
Service Centers were established by the Human Resources Service 
Delivery Board of Directors (BOD), which is comprised of Senior 
Executive Service and Flag officers representing our largest commands. 
When compared to the BOD metrics, we find that performance standards 
are consistently being met by six of our eight service centers. We are 
actively engaged in helping the remaining two centers to improve 
performance to the acceptable level. While any performance shortfall 
can be a problem for our field commanders, we are encouraged by the 
improved performance of the majority of our service centers, and expect 
to see continuous performance improvement in all of our centers in the 
immediate future.
    Regionalization is working, but is not problem free. Some of our 
Human Resources Service Centers (HRSC) have experienced problems 
adjusting to the new organizational structure, new standardized 
procedures and the tremendous processing workload. We recognize these 
problems and are working hard to solve them.
    The process of providing regionalized human resources service 
delivery was predicated on the availability of new technology (the 
Modern System) to be provided by the Department of Defense (DOD). 
Deployment of the Modern System has been delayed, and is now scheduled 
for completion during calendar year 2000. We are hopeful the Modern 
System will significantly improve the quality and timeliness of 
civilian human resources services to the Department of the Navy.
    It has now been 4 years since we began the DOD-mandated 
regionalization of civilian Human Resources (HR) service delivery. We 
are accumulating data on performance at each of our service centers, 
and see some encouraging trends. To ensure that we continue to pursue 
the right path toward excellence in human resources service delivery, 
we have embarked on a functionality assessment, which will focus on HR 
functions across the Department. We expect to have this process 
completed by September 30, 2000.
                       Regionalization Initiative
    General Lyles. Regionalization of civilian personnel services is a 
November 1993 Program Decision Memorandum (PDM) directed effort to 
regionalize and consolidate civilian personnel processes in exchange 
for anticipated resultant manpower savings. A Program Budget Decision 
(PBD) required an increase in civilian personnel servicing ratios from 
1:60 (one personnelist for each 60 employees) to 1:71, envisioned to be 
achieved by regionalizing service. Further, the servicing ratio is 
projected to go to 1:88 following modernization of the personnel 
information system.
    In response to these requirements, workload transition and 
realignment of personnel resources to the Air Force Personnel Center 
began in August 1996. Regionalization efforts proceeded through January 
1999 at which time approximately 48% of the Air Force civilian 
workforce was receiving service from the Air Force Personnel Center, 
and the Air Force achieved a servicing ratio of approximately 1:68. 
However, extensive and ongoing internal assessments, as well as 
customer feedback, indicated that levels of service previously provided 
had not been maintained.
    In order to address customer service concerns, a hiatus from 
transitioning further workload to the Air Force Personnel Center was 
established in January 1999, and additional personnel resources were 
assigned to the center to accommodate the workload already in place. In 
addition, customer service functions involving face-to-face contact 
with managers and supervisors were returned to local civilian personnel 
offices with corresponding personnel resources. These measures resulted 
in demonstrable improvements in customer service and the center's 
timeliness metrics.
    Many challenges remain in order to meet mandated servicing ratios 
while providing world class service in a centralized environment. We 
are establishing a team specifically dedicated to examining our 
civilian personnel policies and practices with a view toward 
reengineering them and taking full advantage of economies that can be 
gained through the use of technological advances and centralization. We 
also continue to review and evaluate the distribution of work and 
resources within the Air Force Personnel Center and between that 
organization and the local civilian personnel offices in order to 
arrive at an optimum operations structure. We are also optimizing our 
information management system and making personnel services available 
via the worldwide web. We believe that these efforts will help us meet 
our customer service obligations as we strive to achieve the DOD-
directed servicing ratios.
    General Dake. The concept behind regionalization was based on the 
expectation that centralization of personnel processing and other 
``back room'' personnel processes could be done with significantly 
fewer people and no degradation of service to the customer. Our 
experience under regionalization to date has not met that expectation. 
In fact, service in such critical areas as filling vacancies in a 
timely manner with quality people, paying our civilians properly and on 
time, and providing responsive counseling on benefits and retirement 
has worsened. In large part, this degradation in service is a function 
of reducing the civilian human resources professional workforce before 
we had the automated process enhancements in place to make the 
remaining staff more effective. The long awaited DOD Modem Defense 
Civilian Personnel Data System is still in the testing phase and has 
not yet proven capable of delivering everything we expect from it.
    We need to take a fresh look at how we deliver civilian human 
resources services both at the regional level and local level. If we 
find, as I expect we will, some processes were centralized that should 
have remained at the local base or station, we need to correct that. 
Also, I believe we need to relook at the resource levels for this 
function. If our initial cuts were too deep, we should step up and 
provide the resource levels we need to make the process effective. Once 
we are confident the function is properly resourced, we need to set 
challenging measures of effectiveness and hold our civilian human 
resources professionals accountable for meeting them. The Department of 
Navy has already begun this review in the form of a functionality 
assessment of the civilian human resources process. I am hopeful it 
will give us the answers we need to give our commanders and civilian 
employees the quality service they deserve.
                                  Fuel
    Mr. Bateman. The fiscal year 2000 budget assumed significant 
savings in fuel costs. As we all know, those assumptions proved wrong 
and necessitated a $1.2 billion increaseto all of the O&M accounts for 
the coming year. Consequently, each of the services must not only pay 
higher costs but the new rates also include a charge to make up for the 
too low rate charged last year. What impact are these higher prices 
having on your operations and ability to continue to train and maintain 
readiness?
    General Keane. The increased fuel costs represent decreased buying 
power for units, especially those tactical units whose budgets are 
under continual pressure from other external forces such as military 
airlift costs, which must be reimbursed. Since training has priority, 
commanders must decide where to take the funds needed for the 
additional fuel costs. The ability to continue to train and maintain 
readiness will be achieved by taking risk in other areas.
                Fuel, DOD Agencies, And Revolving Funds
    Admiral Pilling. When fuel (or any other working capital fund 
commodity or service) prices are set by OSD, the Services budgets are 
modified to reflect the changed requirements. That is, when fuel prices 
increase, our budget is increased to enable us to pay the higher price. 
Therefore, our training and other readiness operations are not affected 
by changes in fuel prices.
    General Lyles. Rates for DLA spare parts are stabilized and will 
not change during year of execution. Should rising fuel prices put a 
financial strain on DLA, budget rates will be adjusted accordingly. 
Transportation (fuel) costs are a small portion of overhead expenses 
and therefore not a significant factor in overall spares pricing. 
TRANSCOM does not establish rates specifically for spares; each 
service's Working Capital Funds (such as the AF Materiel Support 
Division) pass a composite rate to TRANSCOM to be incorporated into 
overall Transportation Working Capital Fund (TWCF) rates. Although 
TRANSCOM's channel costs are higher due to increased FY01 fuel prices, 
FY01 TWCF rates are stabilized and the higher costs will be passed to 
the customer during budget year vice execution year.
    General Dake. Higher prices have had a dual impact. First they have 
forced us to look for efficiencies in operating and training. When that 
avenue is exhausted, we reduce training in the number of tasks that we 
might expect of a Marine rather than reducing the quality of training 
across the spectrum. Second, because our sister services are feeling 
the same pricing impacts in consolidated and co-located training 
environments, they often compensate by reducing support to tenant 
units, including Marines. This shifts the cost burden to the tenants, 
thereby reducing the amount of funds available for students to attend 
the school house.
                      Effect of Higher Fuel Costs
    Mr. Bateman. Have the higher fuel prices affected other 
ratescharged in revolving funds the same way, thereby compounding the 
effects on strained service budgets?
    General Keane. The depot maintenance and ordnance activity groups 
in the Army working capital fund projected the cost of fuel during 
fiscal year (FY) 2001 to be $2 million more than when the rates were 
set in the Fiscal Year 2001 President's Budget. When the cost of fuel 
was increased in the budget, funds were added to the customer's 
budgets, so that the same amount of training and operations were funded 
at the revised price. Revolving fund rates were increased by equivalent 
amounts. The total Department of Defense budget was increased by the 
amount that fuel costs increased.
    Admiral Pilling. Estimated Fiscal Year 2001 Navy Working Capital 
Fund fuel costs were projected to increase somewhat over fiscal year 
2000 levels, most significantly in the Military Sealift Command 
activity group (approximately $29M). Customers were provided additional 
funding in order to afford the increased rates.
    General Lyles. Fundamentally, the revolving fund concept 
accomplishes what it was designed to do and provides the customer 
flexibility by absorbing gains/losses throughout the fiscal year. The 
working capital fund must break even, not necessarily annually, but 
over the long term by recovering losses through future price increases. 
Like any functioning system when assumptions do not materialize, you 
deal with the consequences. In this instance, the benefit of stabilized 
rates and enabling the customer to plan and budget more confidently, 
outweighs the time lag problem from stabilized rates to the year of 
execution.
    General Dake. No, not in the current fiscal year. The revolving 
fund both buys and sells fuel at the Defense Logistics Agency's (DLA) 
stabilized prices. This ``stabilized rate'' policy serves to protect 
appropriated fund customers from unforeseen cost changes such as the 
recent fuel price increases.
               Effect of Higher Fuel Costs on Spare Parts
    Mr. Bateman. Have TRANSCOM and DLA rates for spare parts also risen 
as a result of fuel costs rising in the economy?
    General Keane. The Department of the Army does not have access to 
information to address this issue. The Department of Defense is in the 
best position to respond to this concern.
    Admiral Pilling. To the best of our knowledge, the Department of 
the Navy is not aware of significant cost increases from the United 
States Transportation Command (TRANSCOM) or the Defense Logistics 
Agency that are specifically identifiable to rising fuel costs. While 
it seems plausible that a portion of their rate changes may be fuel 
driven, we do not have visibility of the individual cost factors which 
were used to build their overall rate change.
    General Dake. No, not in the current fiscal year. The revolving 
fund budget is based on sales and purchases at stabilized prices. This 
``stabilized rate'' policy serves to protect appropriated fund 
customers from unforeseen cost changes such as the recent fuel price 
increases.
                         Revolving Fund System
    Mr. Bateman. While the revolving fund system stabilizes ratesfor 
the year of execution, does this system work well when assumptions do 
not pan out and you are in effect stuck for two large bills in the next 
year (having to pay this year's high rate and make up for last year's 
underpayment)?
    General Keane. Department of Defense revolving fund policies and 
procedures provide the services alternatives in offsetting execution 
year losses. The services can request to spread the required rate 
increase over two years to lessen potential program impacts. This gives 
the Services some flexibility in offsetting prior year losses. The 
system works well in that it protects customers from losing buying 
power in the year of execution. Further, through the budget process, 
the system facilitates fully funding the customers for budgeted rates.
    Admiral Pilling. Stabilized rates play an important role in 
preserving approved Department of the Navy (DON) programs by insulating 
customers from the adverse effects of changes in costs during 
execution. Although there may be significant rate increases in the 
future to offset a combination of prior year losses and projected 
increases in future Defense Working Capital Fund costs, there is some 
benefit to the DON of having the lead-time to prioritize requirements 
and realign resources within the budget cycle. If fuel costs were 
allowed to fluctuate during execution, the sudden requirement to re-
prioritize requirements and realign resources to fund higher fuel costs 
could have a serious, negative impact on DON program and mission 
performance.
    General Dake. Yes, the current Office of the Secretary of Defense 
(OSD) procedures for establishing prices/rates within the working 
capital fund business areas and for adjusting customer funding work 
well. OSD sets rates/prices at levels required to recover the cost of 
products or services provided by a working capital fund business area. 
Actual gains or losses realized are reflected in offsetting adjustments 
to stabilized rates in subsequent fiscal years. Additionally, during 
the budget review process, OSD adjusts customer's appropriated fund 
accounts to finance the fluctuations. Thus, the customer doesn't have 
to realign funding from other programs during the year of execution to 
cover unplanned cost increases. Nor does the customer normally have to 
absorb rate/price changes in subsequent years. OSD procedures ensure 
customers are adequately funded in the future to cover rate increases/
decreases that result from the unplanned losses and gains.
    Mr. Bateman. I was on one of the P-3Cs, land-based P-3Cs, that you 
make reference to in your written statement. On at least that one, and 
I don't know whether it is characteristic of all of them, the toilet in 
the plane doesn't function, and there is some work-around substitute 
for it, and some of the most enormously skilled and talented people you 
have fly on that plane for up to 12-hour flights during their mission, 
and some of them are women, and this is a preposterous result, and even 
if it ends up with a scandal of an 800 dollar toilet seat, something 
needs to be fixed. Would you look into that for me?
    Admiral Pilling. Navy has recognized the need for upgrading toilet 
facilities on its P-3C aircraft. A 1994/95 study was conducted with the 
requirement that toilet facility options considered be compatible with 
both genders, private and secure, usable at all sites, and 
environmentally friendly. One option considered from this study 
resulted in an Engineering Change Proposal (ECP P-3-423) for 
installation of flushable toilets. This ECP was updated recently and 
the toilet has now been installed on Customs P-3 aircraft, although due 
to cost and length of installation time considerations, it has not been 
installed on P-3C aircraft. The study recommended options that were 
implemented in 1995 to modify the current P-3C toilet incorporating 
privacy and security upgrades. Navy is completing additional reviews of 
current Commercial Off the Shelf toilet facility options that may 
provide a more cost effective installation, meeting the requirements 
above but requiring a less complex and shorter duration installation 
than a true flushable toilet. Future modifications will be implemented 
to provide suitable facilities for our P-3C aircrews while balancing 
cost, satisfaction of flight safety requirements and complexity of 
installation considerations.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MRS. FOWLER
    Mrs. Fowler. Navy P-3s played a critical role in the Kosovo 
campaign, where they performed armed surveillance and reconnaissance, 
precision targeting, and strike missions. I recently received the 
Navy's brief on this and it was most impressive.
    However, the P-3 program remains unsettled today. The Navy was 
recently compelled to negotiate a significant restructuring of a major 
P-3 maintenance and repair contract, the net result of which will be 
the early termination of the Sustained Readiness Program (SRP).
    As I understand it, there are currently some 19 P-3 Update III 
aircraft that will not now undergo SRP after residing at the 
contractor's site for extended periods. These aircraft are in dire need 
of depot maintenance. Meanwhile, high OPTEMPO rates have placed a heavy 
burden on those P-3s that were not scheduled for SRP. According to my 
information, P-3 Commodores on both the East and West Coasts are 
wrestling with a severe shortage of flight worthy assets.
    The CNO's FY01 Unfunded Requirements List includes funding for 
other important P-3 programs, including AIP, but it does not reference 
the need for additional O&M dollars for the P-3 community.
    Does that reflect the Navy leadership's belief that the FY01 budget 
request adequately reflects depot maintenance requirements for the P-3, 
or is it just that the final decision on restructuring the SRP program 
did not occur until after the CNO's list was completed?
    Admiral Pilling. The latter supposition is correct. The 
recommendation to discontinue SRP inductions after the 13 P-3s which 
were already in process was made in mid-January, 2000 and the stop work 
order was not issued until January 21. By this date, staffing for the 
CNO's FY01 Unfunded Requirements list was well underway. An agreement 
in principle between the Navy and Raytheon was reached in mid-
February--past the February 16, 2000 date of the CNO's report. The 
official contract modification was ultimately signed on March 31, 2000.
  FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--REAL PROPERTY 
           MAINTENANCE AND INFRASTRUCTURE SUSTAINMENT FUNDING

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
                           Military Readiness Subcommittee,
                          Washington, DC, Wednesday, March 1, 2000.
    The subcommittee met, pursuant to call, at 10:06 a.m., in 
room 2118, Rayburn House Office Building, Washington, DC, Hon. 
Herbert H. Bateman (chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. HERBERT H. BATEMAN, A REPRESENTATIVE 
    FROM VIRGINIA, CHAIRMAN, MILITARY READINESS SUBCOMMITTEE

    Mr. Bateman. The subcommittee will please come to order. 
And I apologize to our witnesses and to all others that we are 
later getting underway than the schedule calls for. My 
colleagues have conferences hither there and yon and other, I 
am sure, vital business that would deter them from being where 
they are supposed to be at this hour. I hope they will be 
joining us in great numbers shortly.
    I would like to welcome everyone here today to the 
Subcommittee on Military Readiness Hearing on Real Property 
Maintenance. This is a critical quality of life area with a 
funding backlog that continues to grow with no indication that 
funding in the future will improve. The committee understands 
that the Department of Defense (DOD) does not have a 
comprehensive strategy for managing its maintenance and repair 
needs. Each military service sets its own standards for 
maintaining its property using different methods to assess 
property conditions, prioritize repairs, and allocate funds. We 
are told that in some cases, bases and major commands within 
the services sometimes applied their own assessment criteria 
and do so inconsistently.
    I must tell you that it baffles me as to how the military 
departments can determine their actual needs and make 
intelligent decisions about how much money needs to be budgeted 
without having a consistent policy. Due to systematic 
underfunding, it seems obvious to me that the backlog of 
repairs and maintenance can be expected to continue to grow in 
future years as has been the case in the past. The transfer of 
scarce funds from other readiness accounts will continue to be 
necessary.
    As an example, records indicate that from fiscal years 1994 
through 1999, the services moved $7.1 billion from other 
accounts into real property maintenance and base operations 
over and above the amount requested and authorized by the 
Congress. Although the amount varied between each service, 
Department of Defense records show that a portion of this money 
was moved from unit training funds, such as flight hours, tank 
miles, and steaming days. This, of course, has a direct impact 
on readiness. Now, I want to learn from our witnesses what we 
can expect in this area in the future.
    For the past five years, Congress has been adding money to 
the defense budget, only to read in the press that it is pork 
that the military didn't ask for and doesn't want. I submit to 
you that had we not added over $10 billion to the military 
readiness budget during the past several years, the state of 
readiness and backlog of real property maintenance would be 
much worse than it is.
    We are very fortunate to have two panels of witnesses today 
who can help us understand the magnitude of the problems in 
real property maintenance management and some of the efforts, 
hopefully, that are ongoing to improve the situation. The first 
panel is made up of General Accounting Office representatives 
who are doing research in some of the areas associated with 
real property maintenance. I look forward to their testimony to 
help us understand the past funding of real property 
maintenance, especially the transfers that have been necessary 
in this area.
    Our second panel is made up of representatives from the 
Department of Defense and the four services who work these 
problems on a regular basis. The panel can give us insight into 
the challenges they face and some idea about how we can all 
work toward improving the working and living conditions of our 
men and women in the military services. We look forward to 
their testimony.
    The gentleman from Texas, Mr. Ortiz, and the Ranking Member 
of the subcommittee, is detained on some other business and 
will be joining us shortly. He has asked that I submit his 
written statement for the record.
    [The prepared statement of Mr. Ortiz can be found in the 
Appendix on page 195.]
    Now we will begin with our first panel of witnesses, which 
consists of the following General Accounting Office witnesses: 
Mr. Neal P. Curtin, Associate Director, and Ms. Brenda S. 
Farrell, Assistant Director, National Security Preparedness 
Issues, National Security and International Affairs Division of 
the General Accounting Office. Mr. Curtin, Ms. Farrell, we 
welcome you; and your written statements will be made a part of 
the record, and you may proceed in any way you see fit.

   STATEMENT OF NEAL P. CURTIN, ASSOCIATE DIRECTOR, NATIONAL 
      SECURITY PREPAREDNESS ISSUES, NATIONAL SECURITY AND 
   INTERNATIONAL AFFAIRS DIVISION; ACCOMPANIED BY BRENDA S. 
  FARRELL, ASSISTANT DIRECTOR, NATIONAL SECURITY PREPAREDNESS 
  ISSUES, NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION

    Mr. Curtin. Thank you, Mr. Chairman. As you mentioned, we 
have submitted our statements for the record and we, actually, 
submitted two statements, one that summarizes work that we just 
issued yesterday and a report on a movement of funds, and the 
other summarizes work we did last year on the overall issue of 
the DOD management of the real property maintenance. I thought 
what I would do is take a few minutes this morning in my 
opening remarks to provide some background and perspective on 
those issues and kind of a brief overview of what General 
Accounting Office (GAO) has been saying about these issues over 
the recent past.
    DOD and the military services are responsible for 
maintaining more real property than any other entity in the 
world. And some numbers that illustrate that, more than 320,000 
buildings; those buildings contain about 2.1 billion square 
feet of space and include such diverse things as day care 
centers, barracks, aircraft hangars, utility generation plants, 
supply depots, and such unusual items as piers, and railroad 
lines; 1.1 million square yards of pavement for things like 
runways and parking areas; tens of thousands of miles of roads 
and bridges. All of those items have a plant replacement value, 
a total value, that is upwards of $1/2 trillion; that is over 
$500 billion.
    Most of the funds to operate and maintain those facilities 
come out of the operation and maintenance accounts; 
specifically, through base operations and real property 
maintenance sub-activities. So maybe a couple of definitions 
there would be helpful. Real property maintenance funds are 
used to maintain and repair all those myriad facilities and 
structures. DOD and the services have been spending about $5 
billion annually out of this real property maintenance area.
    Base operations, on the other hand, funds the services that 
provide the basic operation of the installations; things such 
as utilities, base communications, snow removal, security, and 
morale, welfare and recreation activities. And base operations 
funding runs in the range of $12 to $13 billion annually in 
recent years.
    In a 1997 report, GAO talked a little bit about what has 
happened to the DOD facilities since the post-cold war 
drawdown. And what we said was that the reduction in forces and 
in spending in real dollars in DOD was reduced by 30 percent or 
so, been roughly a 30 percent reduction. But DOD facilities 
worldwide in terms of the numbers of installations have only 
been reduced by about 21 percent. And in fact, in terms of 
square feet of installations, the reduction has only been about 
10 percent. But during that same time, the real property 
maintenance funding was reduced by about 40 percent, a much 
greater cut than the space reductions.
    So this is part of what has led to the backlog in 
maintenance and repair projects that you refer to. In our work 
last year, we reported DOD's latest estimate of the backlog. It 
had grown from about $8.9 billion in 1992 to $14.6 billion in 
1998. And I think it is safe to say that that backlog has 
continued to grow since then. Nothing has happened in the last 
year-and-a-half that would have reduced that backlog.
    In that 1997 report, we recommended that DOD establish more 
consistent criteria and facility condition data, as you 
mentioned, use those tools to establish a better strategic 
approach to facility management and make sure that unneeded and 
obsolete facilities were being demolished to save operation and 
maintenance funds. At about the same time, and for several 
years, we included the defense infrastructure management area 
in our GAO high risk series among the government programs that 
we consider most vulnerable to fraud, risk, abuse, and 
mismanagement. In this case, the reason for including it on the 
list is because of the excess capacity and the lack of an 
overall facilities management strategy. There really is a risk 
of losing the value of those facilities.
    In September of last year, then we reported again on real 
property management and, again, we cited the inconsistencies 
that still existed in the policies and practices among the 
different services and, again, the lack of an overall DOD-wide 
strategy. In fact, we went so far as to say in that report--and 
I will quote from that--without an overall management strategy, 
the services real property maintenance is in disarray. We 
reported that the services were funding only a portion of the 
facilities maintenance requirements, thus allowing the backlog 
to continue to grow. And we made several recommendations aimed 
at improving the DOD-wide approach and strategy for real 
property maintenance. And we understand that DOD has taken 
recent action to implement some of those recommendations.
    We have been briefed on some of what DOD is doing and, 
clearly, they have initiated some promising activities and 
approaches. And it is still a little early to make sure they 
are going to work; implementation is always the key. It is 
easier to start some of these initiatives than to complete 
them. But I do feel comfortable in saying that, you know, at 
this point, DOD has been responsive to our latest report.
    Against that backdrop, the Fiscal Year 2000 Defense 
Authorization Act mandated GAO to study various aspects of real 
property maintenance and base operations funding. The overall 
concern that the conference report expressed is with the impact 
of all this on readiness. And specifically, we were asked to 
look at four things, and one of them is the movement of funds 
by the services into and out of the real property maintenance 
and base operation sub-activities after the initial 
Congressional action. Second, the impact of the movement of 
these funds on unit training and quality of life issues. Third, 
the backlog of maintenance and repair and the impact that it 
has on readiness. And finally, DOD's management structure and 
process for handling facility management.
    The report issued yesterday focuses on just the first 
aspect of the act, dealing with the movement of funds. And I 
think we need to work with the committee and with the Senate 
side as well to decide what issues to pursue next and what 
priorities are going to be coming out of this hearing and any 
action this year.
    Regarding the movement of funds, let me just quickly 
summarize the report we issued yesterday. During 1994 to 1999, 
the period we are asked to look at, the four services--and this 
is the active component only--moved about $7.1 billion into 
base operations and real property maintenance over and above 
the $88.6 billion that Congress originally designated for those 
areas. That is about an eight percent increase over that 
period. The largest movement of funds was in the early years of 
that period, with the Army and Air Force moving the largest 
amount and the largest percentage of funds. Almost three-
quarters of the increase was for base operations, with the 
remainder going for real property maintenance.
    While it is difficult in DOD's system--in fact, you really 
can't do it in DOD's system--to directly track where the money 
comes from and where the money goes in the operation and 
management (O&M) accounts, we did want to try to get a handle 
on what was happening during this same period for unit training 
because the concern we had is that money was moving from 
training into these real property and base operations areas. 
And we found kind of a mixed situation there for unit training.
    The Army was the only service that consistently had a net 
movement of funds out of unit training, and they had movement 
into base ops and real property maintenance. From 1997 to 1999, 
for example, the Army obligated about $1.1 billion, or about 12 
percent less for unit training than Congressionally designated. 
The Air Force moved funds out of training in the early years of 
our study, 1994 to 1995, but they actually moved greater 
amounts into training in the last four years. And the Navy and 
Marines consistently moved funds into unit training, about 
eight percent above the Congressional designations. So the 
picture there is not clear in all the services.
    DOD has considerable discretion to move funds among these 
sub-activities; and in many cases, Congress is notified of 
these movements. And some degree of flexibility is important, I 
think, in letting the services adjust to changes that occur 
during the year. At the same time, though, it is important that 
good, consistent judgments are being made to assure that funds 
are going to the most important activities and the most needed 
areas. And this is where the overall policy and strategy needs 
to come into play. That is where it is important, if you have 
that baseline, then you have better assurance that the money is 
moving in the right directions.
    A couple of comments to conclude here on readiness and the 
implications of the movement of these funds for readiness. I 
want to reemphasize that we have not drawn any conclusions at 
this point about the effect of this movement of funds on 
readiness. Moving funds into base ops and real property 
maintenance by itself doesn't automatically mean that readiness 
is being degraded by that movement for a few reasons. Most of 
the funds that we saw moving went into the operating forces 
budget activity, which is the main, most closely associated 
with readiness, the main activity. And a lot of those funds 
would go for things like repair of runways, or repair of 
maintenance facilities, that could have a direct positive 
impact on readiness and may be very good decisions.
    Other funding could improve the quality of life or morale 
welfare and recreation activities that would have an indirect, 
but still, could have a positive impact on morale and 
readiness. Even the movement of funds out of training doesn't 
always imply a degrading of readiness, although it is a 
concern, certainly. Training efficiencies during the year may 
have reduced the need for funds, or some training may have been 
cancelled, freeing up funds for other priorities. Those are the 
kinds of details that we would really need some extensive study 
to get a good handle on, and that is one of the things we need 
to talk about for future work.
    Let me stop there, and I hope that overview has been 
useful, and I would certainly be glad to take any questions.
    [The prepared statement of Mr. Curtin can be found in the 
Appendix on page 198.]
    Mr. Bateman. Thank you, Mr. Curtain. As is apparent, we are 
now joined by our distinguished Ranking Member, Mr. Ortiz, 
whose statement has been made a part of the record. But if you 
have any comments you would like to make, they are welcome at 
this time.

   STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE FROM 
     TEXAS, RANKING MEMBER, MILITARY READINESS SUBCOMMITTEE

    Mr. Ortiz. No. I just want to take this opportunity to 
welcome the witnesses this morning, and I am sorry I was late. 
I had a prior meeting, but I am happy that you are here. And I 
hope to learn something from you, and I know that we will. 
Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz. Ms. Farrell, do you have 
any comments that you would like to offer before we begin 
questions?
    Ms. Farrell. I will be happy to take any questions on our 
report that was issued just yesterday and build upon what you 
would like to address.
    Mr. Bateman. Very good. Well, let me try the generic 
approach to the problem we are wrestling with. It is apparent 
to me from what you have said, that we just can't sit here and 
point fingers, and say you moved lots of money from here to 
there without knowing the policy and the rationale that 
underlie why you moved the money from here to there.
    But it also occurs to me that if there is no Department of 
Defense-wide standard or criteria by which each of the services 
is held accountable for managing the maintenance of its real 
property, we are losing a very important management tool and 
coming to grips with how much is vital and how much is 
essential to see by some measurable, general criteria or 
standard of looking after our public assets that are held by 
the Department of Defense.
    It also occurs to me that we perhaps need some inventory of 
Department of Defense assets, real property assets which have 
reached a point where it may be a lot more efficient to provide 
the funding to demolish them than it is to continue to maintain 
them. And we ought to be, perhaps, developing an inventory of 
such facilities in order that we can see that we appropriately 
fund it in order that we can achieve over time the savings that 
can be put into doing other things that are more important.
    The bothersome thing about this is I am hearing you, Mr. 
Curtin, say that in some instances we have taken money from 
training and put it into real property maintenance. In other 
instances, I am hearing you say that we have done the reverse. 
And I don't know whether to be mad at somebody for doing one or 
mad at somebody for doing two; but don't we need some way that 
we can get a handle on where the money is moving and why it is 
moving that way if the Congress really is going to play in the 
orthodox traditional role in the formulation of a defense 
budget, which under the Constitution, it is our essential 
responsibility to do?
    Mr. Curtin. Yes. The best tool right now to get any kind of 
handle on this, and we tried to use it in the work we did this 
year, are the high priority readiness reports that the 
committee has required DOD to provide. But they are anecdotal 
for the most part, and they don't always talk about the impact 
on readiness. They will tell you which account money moved from 
and which account it moved into, but it is hard to get a good 
feel that that was a good judgment, that yes, it moved from an 
area that the need was less into an area where the need was 
greater.
    And that is the best thing that is out there right now, but 
it is still inadequate to really do what you are saying, to 
really be comfortable that the Department is being a good 
steward of these funds and a good steward of the properties.
    Brenda, I don't know if you have--
    Ms. Farrell. I agree. The value of the priority readiness 
reports was evident in the report that we issued a couple of 
days ago on the movement of all O&M funds, where we identified 
the 43--
    Mr. Bateman. Pull the microphone closer, please.
    Ms. Farrell. Yes, sir. Can you hear me now, Mr. Chairman?
    Mr. Bateman. Yes.
    Ms. Farrell. I was saying that I agree with the value of 
the high priority readiness reports, and those reports have 
been most helpful. And the other report that we issued earlier 
this week, looking at the total movement of O&M funds, where we 
identified $43 billion that had been moved between the period 
of fiscal year 1998--it was 1994 through 1998. Those are for 
selected activities. Those are areas that Congress has 
designated to be of high priority readiness. Those reports 
should continue, but DOD could be encouraged to maybe elaborate 
on the detailed explanations for the reasons for those 
movements.
    Mr. Curtin. And again, if the Department and the services 
had a better overall strategy and some overall consistency in 
the way they do things, you could feel more comfortable about 
the movement of these funds. But right now, I don't have that 
comfort level at all.
    Mr. Bateman. Is it realistic for the committee to, in the 
Defense Authorization Bill, to include a provision directing 
the nature and type of some new reporting so that the 
Department of Defense, all the services, and the committee 
could have a better handle on the policy decisions about 
movement of funds?
    Mr. Curtin. I am reluctant, I think, to recommend more 
reporting from DOD. I think Ms. Farrell's idea of making the 
current high priority readiness report more useful would 
probably be a good way to go. And again, I think you made a 
very good point earlier about the data. And we have said that 
in all the work that we have done, that DOD just doesn't have a 
good handle on what its facilities inventory is and the 
condition of that. That is the starting point. Until you have 
that, it is hard to be comfortable that the funds are moving to 
the right place, no matter what reporting we do, I guess.
    Mr. Bateman. I hate to use the onerous term, reporting, 
because we get more reports now than we can read. But I am 
interested in data, and strike the word report--
    Mr. Curtin. I understand.
    Mr. Bateman.--and say, do we need to require in some 
uniform methodology data from the Department of Defense and 
each of the services in order that they, as well as we, can 
look at it to measure the extent to which there is a problem 
and how to best get a solution to the problem?
    Mr. Curtin. That may be something to look at, Mr. Chairman. 
I don't have a good comfort level right now to exactly what the 
best data would be for you to get, but we can look at that. I 
mean--
    Mr. Bateman. I am going to ask you if you would look at it 
and give me the benefit of your thinking on it. I have not sat 
here and listened this morning, and all of a sudden, had a 
blinding flash of rationality that tells me I know exactly how 
to fix this problem; but the Secretary and all of the services, 
I think we all have got to be looking at a better way that we 
can look at a set of data and be able to come to better 
management decisions. And so I am earnestly soliciting your 
help in doing that. Mr. Ortiz.
    Mr. Ortiz. Since Mr. Sisisky has been here waiting longer 
than I have, I will yield to Mr. Sisisky.
    Mr. Bateman. That is sure generous of the ranking member, 
and I am pleased to--
    Mr. Sisisky. And I appreciate he didn't mention age either 
so that makes me feel a little better today. Isn't the problem 
money? Money is the problem. Every time we have a contingency, 
something comes down from the Pentagon, cut the base ops 20 
percent or 30 percent. Isn't that really the problem?
    Mr. Curtin. The services tend to put the money into 
operating tempo (OPTEMPO). You are right. And whatever is 
leftover tends to go to--
    Mr. Sisisky. And then we don't know when they have a 
supplemental, whether it goes back in, and I am willing to bet 
it doesn't. We have been cutting base ops for so long it is 
just beyond belief, you know. How do you get data on it, you 
know--you can't. I think that is the real problem. And you 
know, we can fence the money. We do it in military 
construction. If we appropriate money, authorize money, for 
military construction, that is what it is used for. And I don't 
think even in the contingencies they can take out of that fund. 
And maybe that is what we have to do.
    I mean, sometimes we have a problem and we look for 
difficult answers to it, but it may be simple answers to it. 
But that doesn't solve the problem as I see it now, because we 
are so far behind, and getting behind, in real property 
maintenance that it is beyond belief. It will never catch up. I 
mean, you know, that is why I said, money, everything is money. 
As a matter of fact, the Chairman mentioned about destroying 
buildings. We did have a fund for that. I know in a shipyard 
that I represent, man, we are tearing down buildings as fast as 
we can get them--amazing amounts of money being saved. You 
don't heat them, you don't have to repair them, you know, all 
of these things. That is the way to do it, but fence the money. 
If we can find a way to fence the money in there, that they 
can't put their hands on it--I don't know how the gentlemen in 
uniform can even manage what they do to be very honest with 
you, not knowing what is going to happen.
    Let me ask you another question. I also notice a trend to 
privatize public works in areas. Has that had any effect? Did 
you take a look at that to see about the maintenance?
    Mr. Curtin. I haven't tried to make that connection, no.
    Mr. Sisisky. I may ask the military people whether they 
have seen anything on that.
    Mr. Curtin. They may have better information on that.
    Mr. Sisisky. Because you know, when you have to let a 
contractor fix the sewerage, you may say, let it go. We don't 
have the money there. But if you have got the people there in 
public works, they may fix it, you know. I am just thinking out 
loud. But no matter what you do, and no matter what criteria, 
and no matter what strategy is taking place, you still have got 
to have the money to do it, and it has to be consistent. And 
some of these bases are just reeling from the problems of base 
ops and other things, because 20 percent cut, on a 20 percent 
cut, on a 20 percent cut, and it just goes on and on.
    Mr. Curtin. The only caution I would make, the only comment 
on that--and I agree, ultimately, you have got to have money to 
make this work--but we would sure like to see a better handle 
on just what facilities we have, and the condition they are in, 
and something more consistent across services, so that money is 
going to the right places. If you want to provide additional 
money, that is fine, but make sure it goes to repair the 
facilities that need it the most. And I am not sure right now 
DOD could know that because of the lack of this--
    Mr. Sisisky. Well, it isn't just a lack of that, a lack of 
accounting system that would--I mean, let us be honest, you 
know. I hate to say it out loud, but--
    Mr. Curtin. So there is a lot of data problems in DOD.
    Mr. Sisisky. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Sisisky. And now, Ms. Fowler.
    Mrs. Fowler. Thank you, Mr. Chairman. And thank you, Mr. 
Curtin, for being here. This is an interesting report, and I 
share the concerns that have been expressed already by the 
Chairman and Mr. Sisisky, because we go around to these bases, 
and we see the facilities and the problems, and money that is 
not getting spent where it needs to be, and it is our young 
peoples' quality of life that suffers so often. And then we 
wonder why we are losing them in the process.
    And I noticed in going through your survey, that you 
surveyed about 517 bases and major commands, and pointed out 
that the major commands only requested funding for about 20 
percent of their known real property maintenance needs in 
fiscal year 1997, and they were funded at an even lower rate. 
Did you determine why these major commands were requesting so 
little of their required funding? Is that same practice still 
going on today as far as the requests we are getting from the 
major commands? And is this indicating that maybe the backlog 
is even greater than what they are showing us on paper?
    Mr. Curtin. I think--on the first part of your question, I 
think the major commands have put their emphasis on OPTEMPO, 
and the traditionally funded tank miles, and airplane hours, 
and steaming hours, and those get the funding that the services 
compute that are needed; and they work from there. And 
probably, the lowest priority for funds becomes the real 
property maintenance and the base operations. They feel they 
can squeeze those, defer as much as possible, and then fund the 
OPTEMPO. And I don't see that changing anytime in the future if 
it is left to the services.
    In terms of the backlog, this backlog of maintenance and 
repairs is an interesting area and; clearly, the numbers have 
been growing. But again, what I am afraid of is that a lot of 
the facilities in that backlog are things that, as Mr. Sisisky 
said, really should be torn down. And we have been carrying 
them on the books and we have been spending operations and 
maintenance money on them. And we can't get a good handle. It 
is another area where the services are inconsistent as to how 
they define that backlog and what is a critical backlog versus 
deferrable types of backlog. They have several different 
categories that the services use. And no one that I know of has 
been able to state with any comfort level that that number is 
any good.
    Now, we talked about the 15 billion backlog. That is DOD's 
number. I would definitely call that an unaudited number. GAO 
has never had a chance to get a good look at that number, but 
as you say, the accounting systems, in general, are 
problematic. So I don't have much confidence in that number.
    Mrs. Fowler. This is what is so distressing, because at a 
time when all of us on this subcommittee and on this committee, 
really, are trying to get more dollars into our defense budget, 
because there are critical things we need, when time and again, 
things like this are shown where the Defense Department is not 
using good accounting practices, you can't find an audit trail, 
where the money is going. You can't document what the needs 
are. It makes it very difficult for those of us who are 
proponents of trying to get more funding into defense to defend 
that. And we somehow--any suggestions you can give us, because 
I know that is what the Chairman is looking for, how to hold 
the Pentagon's feet to the fire.
    And we keep being told this year after year, oh, we are 
putting these good practices in, we are changing this system. 
And it still isn't being done. I looked at this list of some of 
the current promising practices that they are trying to do but, 
yet, not all of the military services have implemented these; 
and they have got a long way to go. So I think what we are 
looking for is what can we do to hold their feet to the fire. 
We set these accounts, we put the money in, they move it 
anyway.
    As I said, we get these reports. Reports don't mean a hill 
of beans, because they are still going to move it where they 
want to move, use it how they want to use it, find ways around 
it. Anytime you do a law, there is always a loophole to it. And 
so it is very frustrating to us and frustrating to the people 
we deal with on a daily basis out on these bases that are 
struggling to keep them up. And we say, well, we have sent this 
amount of money. Well, they sure aren't seeing it.
    So any suggestions I think we can get from GAO on how to 
better get a handle on this, and how to get this Defense 
Department to be more accountable and more receptive to the 
need to do that, because we can't just keep putting the money 
in when it can't be accounted for. We want to put it in, but we 
want to get it--you know, we have got to show just like any 
business in this country, that it is being spent wisely, and 
accounted for, and auditable, and we know where it is going. So 
thank you for what GAO is doing, and we just appreciate any 
further advice and assistance you can give us on this. Thank 
you.
    Mr. Curtin. Thank you.
    Mr. Bateman. Thank you, Ms. Fowler. Before I recognize Mr. 
Ortiz, let me try to get something clarified. As I recall what 
is in your statement and your testimony is that this is not a 
phenomena, that all the money that gets moved around gets moved 
from tank miles, steaming hours, flying hours, to real property 
maintenance and base operations support. Sometimes that 
happens, there are some where that has occurred. But more often 
than not, it is the reverse, where real property maintenance 
funds go into augmenting operational accounts and doing 
operational requirements.
    Mr. Curtin. Well, it is interesting the way I think it is 
working, as best we can piece it together, is I think in the 
budget process and the budget buildup, real property 
maintenance and base ops, are getting a fairly low priority and 
the OPTEMPO, and tank miles, and things are getting the 
priority. But what we saw in terms of movement during the 
course of the year is that most of the movement, the net 
movement--there are ins and outs during the year--but the net 
movement is into--is back into base ops and Real Property 
Maintenance (RPM), because it was the lowest priority and was 
underfunded to begin with.
    And, in fact, you see kind of a pattern where early in the 
year money seems to be pulled out of base ops and RPM and used 
for training events or special things that come up that need 
funding. And then toward the end of the year the money moves 
back as the services found out they couldn't execute their full 
training program, or contingency money came available during 
the course of the year. Money moves back into these RPM and 
base maintenance accounts, and that makes it a harder 
management problem for the installations and for the commands 
as well, because they are never quite sure through the course 
of the year how much they can count on.
    And a lot of their funding tends to come at the end of the 
year, a lot of the increase in funding is towards the end of 
the year and they have to make some quick decisions on what 
facilities will get the priority. So it is a difficult 
management task. I mean, you talk about the frustration of the 
installation commanders, there really has to be a high level of 
frustration. And we feel that as auditors, we want to get our 
hands on some hard numbers. But certainly the installation 
people feel it the worst.
    Mr. Bateman. Well, I am sure they do, and their frustration 
is even more important than my frustration. But I certainly 
have a lot of frustration, because I know that during the 
period that I have chaired the subcommittee, we start in the 
authorization process that we are responsible for primarily, 
with we are going to fund what is said to be necessary for 
every steaming day, for every tank mile, for every flying hour 
that is necessary for training purposes. That has been just an 
article of faith in the way we approach putting together the 
authorization bill. And yet, that doesn't necessarily mean that 
is what happens to it at the end of the day.
    Mr. Curtin. No.
    Mr. Bateman. Okay. I am sorry to be taking--
    Mr. Curtin. On that point, they don't pick on the Army so 
much, but the Army, in our data at least, seemed to be the 
service with the most movement out of unit training for 
whatever reason; and we would like to get behind that a little 
bit.
    Mr. Bateman. It might be something like Bosnia and Kosovo.
    Mr. Curtin. Well, that would do it, yes. That gets your 
attention.
    Mr. Bateman. Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman. Now, my question would 
be what benefits do you think would result from the presence of 
the DOD-wide strategy for addressing the RPM crisis?
    Mr. Curtin. Well, I think because the funds are so 
limited--and maybe we can find a way to get more money into 
that--but with the limited money, we have got to be sure that 
money is going to the facilities, and the installations, and 
the specific activities within that installation that are the 
highest priority based on a lot of factors. I mean, based on 
how important they are to the mission and, you know, what kind 
of condition they are in.
    Without some kind of coherent plan across the department, 
you may--see, what we see is buildings being classified one way 
in the Army and completely differently in the Navy. And we look 
at them, and most experts look at them, they say they are about 
the same condition. So where do you put your money? And until 
you can come up with something more consistent, you don't have 
a good handle on where you should spend that next dollar to 
have the best impact on our facilities across the board.
    Mr. Ortiz. You know, and maybe this should be a question 
for the next panel, is there a central depository where the 
different agencies, the services, report as to the building in 
each command that should be destroyed or have no useful 
purposes? And like Mr. Sisisky just stated, where we can save 
money by demolishing those. Do we know what we have around the 
different military bases?
    Mr. Curtin. Well, I think the next panel can talk about 
that in more detail, but as it turns out, that is one area in 
which DOD, I think, has gotten its act together a little 
better, based partly--maybe I can give some credit to GAO 
here--our 1997 report put a lot of emphasis on that, and I 
think as a result of that, there is a special fund now and 
plan. DOD has a pretty good handle on what they want to 
demolish, the numbers of buildings, the number of square feet. 
I think they are fairly well into that program now and they 
have got a target date. I mean, that is one of the places where 
they have tried to get a better handle on it and they are a 
little farther along. I feel a little better about that area 
now.
    Mr. Ortiz. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz.
    Mr. Hansen.
    Mr. Hansen. Thank you, Mr. Chairman. I really don't have 
any questions for the GAO, but I do have some questions for the 
next panel. My problem is that I have to go a resource meeting 
in a couple minutes. So I would ask that I could submit these 
written questions to the Army and the Air Force, which I feel 
very strongly about. Would that be--
    Mr. Bateman. That certainly would be in order. And I 
understand the unfortunate conflicts that we have. But yes, any 
questions you may have can be submitted for the record.
    Mr. Hansen. Thank you.
    Mr. Bateman. Let me mention before we bring forth the next 
panel that I have been furnished with figures from the unfunded 
priorities list from each of the military services for real 
property maintenance for fiscal year 2001. For the Army, this 
says $250 million; for the Navy, $136.6 million; for the Marine 
Corp, $49 million; and for the Air Force, $437 million; which 
totals $873.3 million.
    That figure, as large as it is, is woefully less than what 
I had been told is the outstanding backlog of real property 
maintenance. Is this, at least in part, because one of the Vice 
Chiefs of Staff of one of the services said to me almost with 
an approving tone, gee, this year's budget funds 69 percent of 
our real property maintenance requirements.
    Can we have confidence that these figures do, indeed, 
represent the only unfunded priorities of each of the services 
for real property management? I don't know whether the GAO 
panel has any response to that, but it is sort of forewarning 
the next panel that we would like to hear from you.
    Mr. Curtin. It may also be a rhetorical question, Mr. 
Chairman. I don't know how it could represent all the needs.
    Mr. Bateman. Does anyone else have a question? Mr. Smith, 
any questions of this panel? All right. If not, then thank you 
very much for your testimony and for your important work that 
you have done for GAO and, especially, for this committee.
    Mr. Curtin. Thank you. I look forward to continuing to work 
with you.
    Mr. Bateman. Our next panel of witnesses consists of Mr. 
Randall A. Yim, Deputy Under Secretary of Defense for 
Installations; Major General Robert L. Van Antwerp, Jr., Deputy 
Chief of Staff for Installations and Housing for the United 
States Army; Rear Admiral Louis M. Smith, Commander, Naval 
Facilities Engineering Command and Chief of Navy Civil 
Engineers; Major General Earnest O. Robbins, II, The Civil 
Engineer of the United States Air Force; and Major General 
Harold Mashburn, Jr., Assistant Deputy Chief of Staff, 
Installations and Logistics for the United States Marine Corps.
    Secretary Yim, we would be pleased to hear from you. Your 
full statement will be made a part of the record, and you can 
proceed in such manner as you choose.

  STATEMENT OF HON. RANDALL A. YIM, DEPUTY UNDER SECRETARY OF 
                   DEFENSE FOR INSTALLATIONS

    Secretary Yim. Thank you very much, Mr. Chairman. Good 
morning, Mr. Chairman, Mr. Ortiz, distinguished members of this 
committee. I want to thank you for the strong support of the 
military program, to provide it, and the strong support for the 
people that are defending our country, both military and 
civilian. I also want to, particularly, thank you and my 
colleagues at GAO for your recognition of the important role 
that installations and infrastructure plays in maintaining 
readiness, and of the interrelationship between the many 
components of readiness and installation.
    Military installations, in our view, are the foundation for 
a strong national defense and the platforms from which our 
forces successfully execute their very diverse missions. We are 
aware we maintain and deploy weapon systems, and where we train 
and mobilize for combat; in short, we are the foundation for 
the projection of power whenever and wherever needed. But 
installations are also where our military and civilian people 
live and work and where they become key members of the 
communities. And real property maintenance is absolutely the 
key for us in maintaining that foundation. We have to maintain 
the facilities that they support, not undermine or compromise 
our missions or quality of life.
    In short, I am really just saying what you already 
recognized, that there is a crucial relationship between 
readiness, and training, and missions, and weapon systems, and 
the quality of life, and the condition of our facilities, and 
that we have to recognize these relationships and take the 
appropriate steps to maintain and improve the condition of our 
facilities. And we are, frankly, talking a bit more than money. 
But please don't take my comments wrong, money always helps. 
Our great task is to become more cost efficient as well as 
enhance the performance of our facilities to support the 
military missions.
    So not only must we maintain proper funding levels for our 
facilities, but we have an obligation to spend that money more 
wisely and as efficiently as possible. We are continually faced 
with the stark reality of having to balance facility funding 
needs with other priorities, such as weapons, recapitalization, 
and modernization, research and development, and quality of 
life, and other requirements. So we have to not only make the 
best use of the funding we do receive as a result of this 
difficult balancing process, but we need to find ways to cut 
our costs and save money that can be used to support our other 
major programs as well as installations.
    And when I talk about cutting cost, I am not talking about 
blindly cutting cost or blindly closing facilities. I believe 
that when we are talking about cutting costs, it is 
inextricably tied to finding better ways of doing our business, 
because these process improvements are really the key, I think, 
to the long-term savings that we hope to achieve. And finding, 
however, these process improvements involve change, and this 
change can be very difficult for us. But there it is also a 
time, as my colleagues in the military will indicate, of great 
change in the military. Our services are really substantially 
reshaping their force structure and operational constructs to 
meet the challenges that they are facing now of asymmetric 
threats, of home land defense, of specific targets against non-
traditional areas like our computer information management 
systems.
    And so, too, must the installations match up, reshape, to 
support these mission requirements. We have to be as adaptable 
and multi-faceted as the military is going to--we have to adopt 
better business practices, we have to become interoperable as 
the military is trying to be with our allies. So we cannot 
afford, both on a monetary sense and in a mission sense, to be 
physically isolated either technologically or physically from 
the communities in which we operate. For example, by creating 
proprietary systems of installation management that are 
incompatible with the rest of the world or commercial off-the-
shelf applications.
    We need to recognize this and then take steps to assure 
that installations are viewed as integral parts of the new 
weapon systems that we are fielding and the training missions 
that we require. We can't afford to field these new leap ahead 
technology weapon systems but lack the installations or 
platforms to support them. We cannot ask our people to perform 
these complex new missions without the facilities to house and 
train them, and this is precisely the reason why you will see 
all of us here in installations playing an important role in 
the upcoming Quadrennial Defense Review (QDR) process. We must 
prepare ourselves to have an important role in the QDR in May 
2001 when it will come out. And as importantly, we have to have 
the proper analytic tools available to us to be able to 
intelligently participate in the Quadrennial Defense Review.
    So one of the things I am talking about is just as we seek 
leap-ahead technology for weapons platforms, we have to find 
leap-ahead training and knowledge management techniques for our 
installation commanders. But to meet these cost efficiency and 
performance enhancement goals that we have set, we have to 
spend some of our money and intellectual capital on devising 
new and interactive ways to learn about these very complex 
installation management issues that we face, such as utility 
and housing privatization, such as energy deregulation, 
outsourcing. And I think that we have pioneered in the military 
these wargaming scenarios. Perhaps there is something like 
that, that we can also pioneer and just disseminate into 
complex installation management techniques out to the field, on 
the field commander to rely upon.
    Now, we are really committed to reshaping the installation 
infrastructure through several related initiatives, and I am 
going to briefly touch on a few of them. They include the 
privatization of our housing and utility systems. We need to 
manage our energy much, much better. We spent $2.2 billion on 
energy commodities alone. There is a lot of money to be made 
there. We need to outlease some of our underutilized 
facilities, not dispose of them, but perhaps make better dual 
use of them. We need to competitively source, rely on the 
private sector, frankly, for a lot of our noninherently 
government functions. And we have to improve the standards of a 
lot of our critical facilities like barracks and dormitories. 
And of course, we do need additional rounds of base closure. 
The Department must be able to pursue all of these initiatives, 
because they really complement each other, and no single one 
replaced the other one.
    Let me talk briefly about Base Realignment and Closure 
(BRAC). The argument that we are making for BRAC I think is 
relatively straightforward. We are simply wasting money on 
maintaining facilities and bases, excess capacity that we 
neither use now or have a need of for the future. And while we 
can debate the magnitude of the cost savings, there is little 
doubt that we have achieved savings during the first four 
rounds of BRAC. Our estimates of about $14.5 billion by 2001, 
and about $5.7 billion every year thereafter, were actually 
called reasonable and credible by the CBO and the GAO.
    But I want to emphasize that when we talk about BRAC, we 
are talking much more than just a comptroller-driven drill 
here. We need the authority to really realign and reshape our 
installation structure to meet the rapidly changing force 
structure in mission requirements envisioned by the Army, for 
example, in vision 2010, or the Air Force in the aerospace 
expeditionary force concept.
    The 1997 QDR talked about the need for two more rounds of 
base closures. Our December 1999 mobilization report that we 
submitted to Congress said that we had not closed assets that 
we could not reconstitute or really made some--we did not make 
fundamentally unsound decisions in the four prior BRAC's.
    And most importantly, what we are talking about, if we are 
proposing BRAC rounds in 2003 and 2005, we can then take 
advantage of installation's role in the 2001 Quadrennial 
Defense Review to really have a plan on how the installations 
need to match up with the changing force structures and act 
accordingly. We are on the path for demolition. We have set 
targets by 1993, to demolish over 80 million square feet. We 
are more than half-way on that path, and we are actually under 
budget right now on the cost of demolition. That is probably 
not going to maintain, because we are kind of picking off the 
easy stuff to demolish, and it is going to increase a little 
bit; but we are going to meet that 80 million square feet. And 
as Congressman Sisisky and others have mentioned, it is going 
to be a big benefit for us. We just don't need to maintain that 
stuff.
    We do have to also stretch our RPM dollars by adopting 
these best possible business practices, and we have to tap the 
best brains, not only in the private sector but also within our 
very strong public employees. And so we have to really make a 
strategic decision, who is in the best position to supply us 
with basic goods and services, not only now but into the 
future. And we believe that privatization or competitive 
sourcing, the competition aspect is not only the best way to do 
that but also the fairest way to do that. That is why we are 
aggressively seeking privatization of our utility distribution 
systems combined with effort toward better energy management 
and getting better deals in the energy commodity market, 
particularly with so much deregulation going on throughout the 
country.
    That is why we are pursuing housing privatization, relying 
on experts in the private sector to help us meet a really 
critical family housing shortage. We have over 200,000 
inadequate family housing units. We just wouldn't be able to 
fix that within a reasonable period of time using just MILCON. 
We need to leverage against the private capital. We are getting 
about an eight-to-one leverage effect, which means we can 
improve our family housing condition about eight times as fast 
as if we were just relying upon traditional MILCON. I know we 
have some examples in Texas in Congressman Ortiz's area.
    Let me spend a few minutes--just a minute on housing. 
Secretary of Defense Cohen prioritized housing as one of his 
two top priorities, improving family housing as one of his two 
top priorities this year, along with reforming our healthcare 
system. He has proposed a three-part program, increased 
reliance on housing privatization, a robust MILCON, where 
housing privatization doesn't work, and a substantial increase 
in the basic allowance for housing.
    Now, the Basic Allowance for Housing (BAH), the basic 
allowance for housing rate, will allow more people to 
immediately have better quality housing options off-base, 
because they can afford to live off-base. It also, because that 
is the principal economic driver for housing privatization, it 
will stimulate more and better--not only more, but better 
housing privatization projects. And hopefully, it will take the 
pressure off of our on-base housing requirements where we 
maintain old, or outdated, or cost-ineffective facilities, 
because we have to meet the housing need.
    We are also seeking legislation to make better use of our 
underutilized properties by enhancing leasing. We are talking 
about trying to really give an incentive at the installation 
level. Part of our problem, I think, as GAO correctly points 
out, is that a lot of our money for installations gets shifted 
around. We need that flexibility, we really do. But if we can 
have enhanced leasing opportunities where we make dual use of 
facilities, then we can keep that money, be it in kind 
contributions or real money at the installation commander 
level, without having it go up the chain and then come back to 
us. Because frankly, it doesn't come back to us in the same 
shape that it went up the chain. That would be a big plus 
forward for our installation commanders. And those programs are 
described in much more detail in my statement.
    Now all of this sounds kind of good, but I want to hit one 
other point that is squarely on your criticism, sir, and the 
GAO criticisms. We can't really do all this stuff, and we can't 
effectively participate in the QDR. We can't advocate for our 
positions unless we have--we significantly improve our 
analytical tools. To effectively go where we need to go, we 
have to know where we are. And I accept, I agree with, your 
criticisms, GAO criticisms, that the Department has lacked, the 
services have lacked, comprehensive data not only on what we 
have, but what we need; and we have migration of funds. There 
is no question that those are the facts.
    Here are some of the things that we are trying to do to 
address these problems. As the first panel indicated, the GAO 
issued a report last September on real property management 
needs improvement, or in disarray, I think was one of their 
conclusions. The Senate Armed Services Committee (SASC) 
conducted a hearing in October--excuse me. Both before and 
after the hearing, I, personally, with my staff, met with GAO. 
We went over their report. After the hearing, we went over the 
report. We went and visited the sites identified in the reports 
this last winter to get firsthand knowledge of those tools. I 
had the pleasure of meeting with Mr. Curtin yesterday to 
discuss his report. Some of the things we are going to do, we 
have committed to follow-up exercise with him. But more than 
that, just kind of talking with people, we are trying to 
develop some really basic analytic tools here.
    We need to first, as you point out, Mr. Chairman, 
accurately inventory what we have. The models that we are 
creating to validate our requirements fundamentally depend 
upon--this is the concept of garbage in, garbage out--you have 
to know what you are sticking into the models before it can 
spit out accurate data for us. So we are really trying to 
improve the integrity of our real property inventory now. The 
services have all submitted preliminary data to us. We are 
screening it and scrubbing it. We hope to have a much, much 
better handle on exactly what we have within the next coming 
months because, simply, it is true; the services do report the 
data slightly differently. So we are hoping to get some 
consistency in that.
    Second, we are devoting a lot of our effort to improving 
the RPM requirements determination process to better justify 
RPM funding in our constrained fiscal environment. We are the 
advocates for installations here. If we cannot really lay on 
the table true requirements with the level of precision that 
can guide site specific decisions, either in the MILCON or the 
RPM budgets, then we are just not effective advocates.
    We cannot defend the programs when we go up against the 
wrong comptrollers or other programmers and compete for the 
limited budget resources. And this has really been one of our 
most persistent problems, a lack of sufficient RPM funding 
caused, in part, by our own inability to know exactly what we 
need, compounded by an inability to effectively compare 
requirements across the services. So this is what we are trying 
to do, and we know this is not an overnight fix, and this has 
been an endemic problem for the Department of Defense and the 
services.
    We are trying to lay the foundation to really correct this 
problem. First, we are making extensive use of an Installation 
Policy Board which I chair along with the senior leaders here 
of the services, not only on the civilian side, the uniform, 
and perhaps more importantly, we have brought the senior 
service engineers and then representatives from the financing 
and program community. I am very pleased with this board. We 
meet every single month. We are treating this board as the 
Board of Directors for Installations within the Department of 
Defense. It is augmented by outside planning and fiscal policy 
experts. We are allowing this board then to do peer review and 
auditing of the installation requirements, trying to get some 
consistency and standards across the services, and then serve 
as an effective forum where we can't solve it at our level, 
frame the issue, elevate it up to the senior levels as much as 
possible. Every single month we are meeting. I am dragging 
these poor gentlemen to these meetings every month, but I think 
we have been very effective about that.
    Second, we are developing--or the board is supervising the 
maturation and the development of three very important 
analytical tools for us. First is a facility strategic plan. We 
knew that we had to give some thought if we were ever going to 
justify to Congress, which has very legitimate concerns about 
our request for BRAC. We had to have a strategic plan about how 
the installations would fit and match up with the force 
structure. We have some discussions about that now. There has 
been talk about what type of information do we need, what types 
of facilities we need to maintain. We are going to have the 
fruits of our labor be fed into the QDR discussions that are 
being built up now for May 2001, and we hope to then really 
have a strategic aspect of the QDR for facility planning.
    Next, we are really supervising in the board the 
development of a facility sustainment model using auditable--I 
think some of you used that term--auditable data input that 
will properly model and identify the funds that will keep our 
facilities in good working order. This is really going to 
enhance our ability to make estimates of what we really need 
and then defend us better in the budget process. And it is 
based on validated commercially bench marked maintenance costs 
for each type of facility and then, of course, an accurate 
inventory of our property.
    We have already developed a cost factor handbook that I 
would like to introduce for the record, sir, based on private 
sector techniques for real property maintenance and 
construction. We are in the final validation of our real 
property inventories. We hope to have this facility sustainment 
model on line for fiscal year 2002 budget programming and 
preparation. That means late spring, early summer, actually 
have the model up and running.
    [The information referred to is retained in the committee 
files and can be viewed upon request.]
    We really like this. This is, for example, use the 
building--a variety of outside factors like the Building Owners 
Management Association, a nationally recognized organization 
that provides data on maintenance and repair costs. We have 
used a lot of commercially bench-marked factors to get a handle 
on what we should be spending on maintenance and repair. For 
example, outside sources use maybe 2 to 4 percent of the plant 
value for maintenance and repair for RPM. We have a goal of 
around 2 percent, but we are not really close to that. We are 
probably somewhere around 1-1.5 percent. It is hard to really 
even estimate what we are spending because we use several 
different sources.
    And finally, we are overseeing an installation readiness 
reporting system for the first time. And your committee was 
really the impetus for this. The installation component is 
going to be included as part of the overall operational 
readiness reporting being submitted by the services and DOD, 
roughly, the spring of this year. So we are developing, rolling 
up the various services different ways of reporting the status 
of readiness of installations. The Army has perhaps the most 
developed model on that. We are getting some consistency, and 
you will see that from us in the spring.
    And let me conclude now. I know I am running over. Let me 
conclude with the words, if I could, of Will Rogers. He said 
that even if you are on the right track, you are going to get 
run over if you stand still. And I believe that we are on the 
right track. We have a lot of work to do, though. And I think 
that this subcommittee and GAO has really been a catalyst for 
us. We are trying not to stay still, but we are trying to move 
with some speed and innovation.
    One of the innovations, again, if I can give a commercial, 
is the leap ahead training management techniques for our 
installation commanders and our field leaders. We asked these 
guys to be full-fledged city managers in very, very complex 
areas with half-day training and two-day training entering--get 
us a better deal on the energy deregulation market. People are 
studying this for years as they go up against the energy power 
managers.
    And I think we need to have this leap ahead knowledge 
management, knowledge training tools, such as the wargaming 
interactive stuff that I have talked about, and I think it is a 
function that, I am no longer 20 years old, but I can't imagine 
some of the potential that some of the computer based gaming 
technology could lead for us. But we would like to see some 
devotion of thought to really leap ahead management techniques 
so we can disseminate to the field. And then I think that would 
be a big benefit for us.
    So again, thank you for your continued support of our 
program, sir.
    [The prepared statement of Secretary Yim can be found in 
the Appendix on page 205.]
    Mr. Bateman. Thank you very much, Secretary Yim. I want to 
tell you I am very impressed with your testimony. What you have 
said is a source of considerable comfort to me and, I am sure, 
the other members of the subcommittee. It would appear to be 
that you are getting about doing the kind of things that we 
hoped someone was going to be doing in order to develop the 
management and analytical tools that are going to be helpful to 
all of us in getting our hands around this very difficult 
problem of real property maintenance and base operations 
support funding, and making sure that those were taken care of, 
and not taken care of at the expense of training and other 
programs or vice versa. What you have said is, indeed, very 
encouraging.
    Let me now ask General Van Antwerp if he would address the 
committee.

 STATEMENT OF MAJ. GEN. ROBERT L. VAN ANTWERP, JR., ASSISTANT 
     CHIEF OF STAFF FOR INSTALLATION MANAGEMENT, U.S. ARMY

    General Van Antwerp. Thank you, Mr. Chairman, members of 
the committee. It is just great to be here with you. This is a 
subject that is near and dear to everyone on this panel's 
heart. I would like first just to say about Mr. Yim--we kind of 
chuckled when he said about the meetings he gathers us for--
this team has been forged by Mr. Yim this year far beyond our 
expectations. There is a great trading of ideas, there is some 
very innovative things we are doing to try and get a handle on 
this, and I just give him the credit; not to make his head feel 
bigger, but he is just doing an outstanding job with all of us, 
and we in the Army surely appreciate that.
    There is no question in our minds that facilities' 
condition is a component of readiness in the Army. And as has 
been said three of the last five years, the Army migrated money 
into the RPM account. And it is a recognition of many factors, 
Kosovo and other factors, but it shows you the sense of the 
commanders out there in the field. I want to thank you for the 
Congressional adds that we have had and the quality of life 
enhancement funds that have been very crucial to us and help us 
in that. But as Mr. Sisisky says, it is dollars to a great 
extent. There is only so much you can do on the initiative 
realm before it comes down to dollars.
    Of course, I am sure you are all aware of the Army's new 
vision to transform itself. A lot of that vision will impact 
our installations as we try and project our power quicker. It 
means we have to look at our airfields and those power 
projection things. We also have to look at how we are training 
our force, our new force. Some of the things we see there will 
be the need for if we change equipment, and as we transform 
equipment, will be for the equipment shops. The other part of 
that is probably for more urban type training, mount training. 
So we are very much looking at the effect of the transformation 
on our facilities.
    The Army has a comprehensive strategy. It involves the 
active, the Reserve, and the Guard, and it is one--we all have 
the same standards. So when you get a report from our 
installation status report that says the facilities in the 
Guard is rated at C-3, that is on the very same standard as the 
facilities in the active force.
    From our viewpoint, the Army has about 166,000 facilities. 
The average age of those facilities is 44 years old. There is 
two factors that really impact: one is the number of facilities 
that you have to maintain, and the other factor is the 
condition and age kind of lumped in there. As all the services 
are doing, we have a very good program for demolition. The Army 
feels right now, based on our installation status report we 
have 28 percent excess infrastructure. And we have a program, 
we have about 150 million square feet.
    Back in 1992, there was identified in our status report 
that we needed to demolish, that we don't need to maintain and 
be putting money into keeping them up. To-date, we have 
demolished 68 million square feet. We will take another 10 
million down, roughly, in 2001, with what is in the 2001 
budget, so we are getting there. When the installations tell 
you they could use a lot more--Fort Hood, if you could give 
them another 10 million today, they would use it; Fort Bragg, 
another 10 million today. They can't get this down fast enough.
    The second part, I will just tell you that we are funding 
RPM at 69 percent this year, and it is woefully inadequate. We 
did make a change from last year with about the same level of 
funding in RPM as last year. We dropped ten percentage points, 
roughly, in how we are satisfying the requirement. That is 
because we understand the requirement much clearer now, and we 
made--we bit the bullet and said we are going to make a change 
and accurately reflect, based on standards, what is the 
backlog. If that backlog had current funding, we hope to be--
and hope isn't a strategy--but that we plan to be by 2005 at 80 
percent at the current funding, at 69 percent in 2001. But that 
is still woefully low, because 100 percent keeps it just like 
it is.
    Our unfunded requirement of $250 million that you 
addressed, that will get us--if it is sustained, it will get us 
to the 90 percent mark by 2005, if it is $250 million addition 
every year. That still doesn't get at the big backlog. We have 
over a $15 billion backlog in quality. But it will get us so we 
are sustaining close to that level of 100 percent. You combine 
that with a military construction program that is renovating, 
remodeling and upgrading facilities; that and the 90 percent 
RPM will get us to a good position.
    I just want to conclude by saying that it has to be a 
balanced strategy, I think, between RPM and MILCON. And that 
strategy has really two pieces: it has the sustainment piece 
and it has the modernization piece. And our challenge is to 
balance those. What we have done up to this point is go after a 
very focused program. We have gone after permanent party 
barracks for quality of life of our soldiers, a readiness 
issue. We have gone after strategic mobility in order to 
upgrade so that we can project our forces from our power 
projection platforms.
    We do have a future strategy that is in my written 
statement. We would be glad to talk further if there are any 
questions. And sir, that concludes my statement. And again, it 
is great to be with you here today.
    [The prepared statement of General Van Antwerp can be found 
in the Appendix on page 221.]
    Mr. Bateman. Thank you very much, General. And now, Admiral 
Smith.

    STATEMENT OF REAR ADM. LOUIS M. SMITH, COMMANDER, NAVAL 
           FACILITIES ENGINEERING COMMAND, U.S. NAVY

    Admiral Smith. Good morning, Mr. Chairman, members of the 
committee. I am Rear Admiral Lou Smith, the Commander of the 
Naval Facilities Engineering Command, and it is a pleasure to 
be here before the committee this morning. I would request, 
sir, that my written statement be included for the record.
    Mr. Bateman. It will be included.
    Admiral Smith. Thank you, sir. I do appreciate this 
opportunity to be here this morning to talk about real property 
maintenance, and I thank you for your ongoing support for this 
program within the Navy. I talk a lot in my written testimony 
about our efforts to overcome the challenges of maintaining our 
aging infrastructure within the limited resources we have. We, 
in addition to get more dollars into the program, are trying to 
reduce the size of requirement. We do this through our ongoing 
efforts for regionalization and consolidation to eliminate 
redundancies we have and consolidate where we can.
    We, too, have a very aggressive demolition program. It is a 
program that was beefed up in fiscal year 1996. The results are 
seen around the Navy. We have demolished almost 7 million 
square feet already. We hope to get to 10 by 2002. It looks 
like now we will demolish another 5.5 million by 2002. And I 
would add for Mr. Sisisky that the added serendipity we have 
had there is that people are saying how pretty our bases look 
now that we have torn down a lot of these--yes, sir. It is 
amazing. We are also pursuing privatization in areas. Mr. Yim 
mentioned utilities; we are looking at that. We are looking 
hard at a lot of other areas, such as housing, that aren't 
necessarily inherently governmental, that we could get from the 
private sector and, again, reduce our facilities requirement.
    Our RPM funding this year is good news for us. If you look 
at it, it is an increase from last year. Last year, our asset 
protection index, what was mentioned before our percentage of 
funding to our plant value, was at 1.6 percent; this year, it 
is at 1.8 percent. We are getting closer to that industry 
threshold of 2.0 percent. This allows us to do some, what we 
call tailored funding, where we will fund our mission critical 
infrastructure, such as quality of life, piers, runways, 
utilities, and training facilities to a C-2 rating condition. 
This will also help us to significantly slow the growth of the 
backlog of maintenance and repair in our other facilities.
    Ideally, I would hope to strive for C-2 readiness in all of 
our facility categories to avoid continuing deterioration, but 
the truth is we are a long way away from being there. With our 
fixed top line, our RPM program continues to be a balancing 
account that is needed by our warfighters to support higher 
priority readiness programs and emergent requirements. 
Accordingly, we work very closely with Mr. Yim and his staff, 
as well as the other services, to develop tools that better 
clarify the impact of these RPM reductions.
    In fiscal year 1999, our number of mission categories 
reporting C-3 or C-4 facilities condition increased for the 
first time in five years. Mr. Chairman, I would tell you it is 
imperative we need to reverse this trend. Deep down, the Navy 
does believe that the measure of our readiness is closely 
linked with the quality of our shore facilities. Quality 
facilities improve the quality of life for our people, reduce 
our cost of ownership, and as always, impact our ability to 
train and retain our sailors.
    This concludes my opening statement, sir. I would be more 
than pleased to answer any questions you or the rest of the 
committee may have.
    [The prepared statement of Admiral Smith can be found in 
the Appendix on page 228.]
    Mr. Bateman. Thank you, Admiral Smith. And now, we look 
forward to hearing from General Robbins.

   STATEMENT OF MAJ. GEN. EARNEST O. ROBBINS, II, THE CIVIL 
                    ENGINEER, U.S. AIR FORCE

    General Robbins. Good morning, Mr. Chairman, members of the 
committee. I appreciate the opportunity to address the Air 
Force's real property maintenance requirements with you this 
morning. With your permission, I also will submit my full 
testimony for the record.
    As you know, we manage our facilities in infrastructure 
through two major programs, as was previously pointed out. 
First, the real property maintenance, or RPM account, provides 
funds to maintain the Air Force infrastructure already in 
place. Second, the military construction appropriation allows 
the Air Force to replace antiquated facilities and to bed down 
new weapons systems. And although the focus of today's hearing 
is obviously on the RPM account, success in both of these areas 
must be complimentary to allow us to provide the quality 
facilities we need to support our missions and our people.
    While there are clearly several areas where we have 
achieved notable successes as a result of excellent 
Congressional support, continued constraints in RPM and MILCON 
are beginning to show in degraded facilities and supporting 
infrastructure, as you have determined during your visits.
    In fiscal year 2001, RPM in the Air Force is funded at what 
we in the Air Force call the preventive maintenance level, or 
PML. And this will allow us to accomplish only the day-to-day 
maintenance required to sustain real property facilities and 
infrastructure. It does not provide the resources necessary to 
accomplish much of the needed maintenance and repair. And 
although the Air Force continues to operate, we are 
increasingly required to develop work-arounds which impact Air 
Force combat capability and operational efficiencies. Examples 
include deteriorated airfield pavements, which require longer 
aircraft taxi times, reduced munitions storage capability due 
to degraded storage igloos, and increased foreign object damage 
risk to aircraft engines.
    The Air Force's current level of RPM funding defers most 
non-PML maintenance and repair, resulting in a current backlog 
of some $4.3 billion. Now, we have developed an RPM metric, 
which we call the Facility Investment Metric, or the FIM, to 
identify requirements above and beyond those day-to-day 
maintenance requirements I have mentioned. The FIM stratifies 
facility requirements based not on facility condition, but on 
mission impact, and allows us to identify and track our most 
critical needs.
    We mentioned the inventory earlier. The active Air Force 
has about 108,000 buildings; of those, about 58,000 are 40 
years old or older, and so we obviously face a challenge in the 
day-to-day maintenance and repair that we encounter in the 
field. On the demolition front, since 1996, the Air Force has 
demolished some 1,700 buildings. And as Dr. Yim indicated, we 
are on the right glide slope to meet the DOD guidance to 
complete the demolition program.
    The scenario I have laid out for you, if we project it out 
to continue until fiscal year 2003 when the RPM program funding 
finally begins to increase within the Air Force budget, funding 
is currently projected to grow from one percent of the plant 
replacement value, which it is in the 2001 budget, to just over 
1.4 percent by fiscal year 2005. This means our backlog will 
not disappear overnight and Air Force operations and readiness 
will continue to show increasingly adverse effects. Until then, 
the Air Force must limit RPM funding to the preventive 
maintenance level so that we can fund higher priority programs 
within our current total obligation authority.
    There is good news regarding facilities. The Air Force has 
benefited over the past four years from Congressional adds to 
the RPM account for quality of life enhancements. This effort 
has allowed the Air Force to greatly improve conditions in our 
dormitories and other traditional quality of life facilities. 
And we deeply appreciate your support in this high visibility 
and high impact area.
    We obviously still have a lot of work to do. The Air Force 
currently has over $200 million worth of validated unfunded 
dormitory requirements. There also exists nearly $400 million 
of other validated unfunded quality of life requirements, such 
as child development centers, community centers, fitness 
centers, youth centers, and so on. Your support for quality of 
life enhancements will continue to have a positive effect on 
our airmen in the field.
    It is our responsibility to provide policy makers and 
decision makers with informed assessments of requirements along 
with our best engineering judgments regarding impacts on 
readiness and quality of life. We continue to capitalize on the 
limited resources at our disposal, and just as importantly, on 
the ingenuity and dedication of our officers, enlisted 
personnel, civilians, and contractors to operate and maintain 
our bases to the best of our ability.
    However, tough choices still lie ahead for the Air Force. 
As General Ryan stated during his recent testimony before this 
committee, the Air Force has identified a priority list that 
includes items related to personnel, readiness, modernization, 
and a very large need to support our infrastructure.
    In conclusion, Mr. Chairman, I want to thank the committee 
again for its strong support of Air Force programs and the 
benefits they provided the Air Force in terms of readiness, 
retention, recruiting, and the quality performance of our 
people. I would be happy to address any questions.
    [The prepared statement of General Robbins can be found in 
the Appendix on page 235.]
    Mr. Bateman. Thank you, General Robbins. And now, we look 
forward to hearing from General Mashburn.

   STATEMENT OF MAJ. GEN. HAROLD MASHBURN, JR., DIRECTOR OF 
FACILITIES AND SERVICES DIVISION, OFFICE OF THE DEPUTY CHIEF OF 
    STAFF FOR INSTALLATIONS AND LOGISTICS, U.S. MARINE CORPS

    General Mashburn. Thank you, Mr. Chairman, members of the 
committee. I certainly concur with all the comments my 
colleagues have made, and I really appreciate the opportunity 
to address Marine Corps concerns for real property maintenance. 
I think from the discussions we have had today, we understand 
what an onerous task this is as far as management.
    You have heard General Jones, our Commandant, say that we 
have four pillars of readiness: Marines and their families, our 
legacy systems, infrastructure, modernization; all of that 
coming from the bottom line and the top line--very difficult to 
really look at those. However, looking at real property 
maintenance, it goes across all pillars, even looking at 
maintaining our legacy equipment, our old equipment, it 
actually does.
    Is it true that we have deferred maintenance to help fund 
new timeliness? Certainly, it is, but we have done it during 
the budget process, knowingly doing it because of essentials, 
not the other way around. I can remember last August when all 
the monies came in that perhaps were not being able to be 
executed. We went out for a call to the field, what programs 
can you execute, installations, by 30 September--$66 million 
worth. They were executable because they were ready, and we 
were able to execute $29 million in a very short period of 
time--just fantastic work by the field.
    And actually, if you look at the history over the past 
several years, we have been able to execute more in real 
property maintenance than was actually anticipated at the 
beginning of the fiscal year. We have several goals: the 
unfriendly priority list of $49 million was mentioned. That is 
required to reach one of our goals, which is to reduce the 
backlog of maintenance repair to $106 million by 2010. That is 
a goal, and that this why it is on deficiency.
    Another goal is the recapitalization rate. Presently, our 
recapitalization rate, while industry's is at 50 years, is well 
over 100 years. Our goal is modest, 70 years. Real property 
maintenance funding request for 2001, we have requested an 
increase of $50 million; and it is a substantial increase, but 
it funds 90 percent requirement. Last year, we were able to 
reduce our backlog in maintenance repair with the programming 
request for 2001. We are looking at a $20 million reduction in 
backlog maintenance repair; again, looking at sustained funding 
increases of perhaps $49 million a year to reach that 2010 
goal.
    Funding is the key. Is it adequate? It is adequate to 
maintain old facilities with sometimes band-aid approaches? We 
must sustain increases to reach our goal through 2010. We must 
combine it, as my colleagues have said, with strong demolition 
plans and a very strong military construction plan.
    We are working together with Mr. Yim and the other 
services, of course, to really look at how we can orchestrate, 
first, the inventory upon which to base our requirements, and 
then to really be able to establish our goals for the end 
state. As a major concern, when we talk about the four pillars 
of readiness, again, maintenance real property transcends all 
pillars. It is critical because it is quality of life.
    We talk about quality of life. Sometimes we think about 
family care centers, family service centers, commissaries, 
PX's. Quality of life to Marines means something else: all 
about good roads, runways that don't have foreign object damage 
to the aircraft, basic infrastructure requirements. That is 
quality of life; quality of life that brings back our Marines 
alive.
    Again, thank you very much, Mr. Chairman, for your support. 
I look forward to answering any questions.
    [The prepared statement of General Mashburn can be found in 
the Appendix on page 244.]
    Mr. Bateman. Thank you very much, General Mashburn, and all 
of the witnesses who are part of this panel. Secretary Yim, I 
want to repeat again how pleased I am to get the indications 
from you that there is a very concerted, and I sense, a well-
conceived effort to get your hands around the managerial and 
analysis problem that underlies so much of what we have been 
talking about today. I want to commend you for that and for all 
of the members of the military team who flank you for their 
understanding of the wisdom and necessity of doing that.
    I want to return to the matter of BRAC and base closures. 
And I don't mean this in a vagaritive kind of way, but I think 
the perspective--or perception here on the Hill is that we 
would be into that process before now except for some loss of 
confidence in whether or not the last process in some manner, 
at least, allegedly, is perceived to having been politicized. 
Leaving that aside, I have no doubt but what we have more 
facilities than the downsized armed services require, and that 
we need critical analysis and decision making as to what to 
keep and what to arrange and rearrange.
    But you are talking in terms of two BRAC rounds. Explain to 
me, if you would, why you say two instead of one well-conceived 
and properly executed round.
    Secretary Yim. What we are estimating is about a 23 percent 
excess infrastructure, and the thinking is that that is too big 
of a bite to take in one round itself. That is quite a bit of 
excess infrastructure to take down. What has happened in the 
prior BRAC rounds, particularly, in 1993 and 1995, is the 
experience has shown that from the 1993 round, and you could 
make additional adjustments and tweaks in the subsequent 
follow-up round in 1995. And that is what we are envisioning, a 
2003 round and a 2005 round, again, to make those tweaks and 
adjustments.
    It is--and frankly, if you ask us, well, would you take one 
round? Yes, we would definitely take one round, and we would 
try to do the very best job we could in that one round. Our 
analysis is that given the amount of the infrastructure that we 
believe needs to be taken down and shifted around--because it 
is not just closure, it is realignment, the two would benefit 
us more.
    Mr. Bateman. I am sure you are aware that the base closure 
process is a very, very turbulent and traumatic kind of 
phenomena for hundreds of communities throughout America. It is 
nonetheless going to be something that at a point in time we 
must do. I just have some hesitation as to whether we need to 
put them through it twice as opposed to doing it 
comprehensively and doing it soundly once. I want to have you 
express your views as to why the dual round instead of a single 
round.
    Secretary Yim. One of the things we are doing also, Mr. 
Chairman, is to try to mitigate the impact of it. And with the 
help of Congress last year, we were able to--and Congressman 
Ortiz and Congressman Rodriguez--enact legislation to allow us 
to transfer the assets of our closing military bases to the 
communities at no cost for job generation purposes. And that, I 
think, has gone a long way to mitigating the impact or economic 
dislocation and trauma that the communities go through. But 
there is still no question that this is a traumatic process, 
just like any of our downsizing efforts, and we understand your 
point very well, sir.
    Mr. Bateman. Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman. I appreciate you all 
being with us today and the fine work that you have done under 
the circumstances. And I know that money happens to be the 
problem, of which we don't have enough. But I am going to be 
asking some questions for all of the services. And my first 
question would be the question that I asked the prior panel, 
what benefits do you think will result from the presence of a 
DOD-wide strategy for addressing, you know, the RPM crisis, and 
how do you assess your service infrastructure recapitalization 
program? And then, what are your long-range plans for breaking 
the cycle of increasing the RPM backlog? And maybe you can give 
us a little input as to what we can expect.
    Mr. Bateman. If you would suspend for a moment--Mr. Ortiz, 
I find myself in the situation where I made an improvident 
commitment to be somewhere at 11:45. So I am going, with the 
utmost confidence, proposing you of the responsibility for 
presiding over the hearing at the point where I have to leave, 
which is going to be in about two minutes.
    Mr. Ortiz. That is fine, and I will not let Mr. Sisisky 
call for a vote.
    Mr. Bateman. Well, I might even be willing to go along with 
that.
    Secretary Yim. Thank you very much. Yes, we are trying to 
get some degree of consistency, but the biggest problem we have 
is--and it has been suggested that we have a floor, for 
example--is that I believe that we really do need the 
programming flexibility. We do see a lot of money being spent 
on training in the first part of the year, and then a lot of 
money coming in to RPM at the end of the year, as General 
Mashburn has indicated. That is actually good for us, because 
the only people that really can execute at the end of the year 
when money falls out is really the installation guys. So we 
really are benefiting from that type of budgeting system.
    The problem we face is that people are accused of having 
soft requirements within our own systems, our own comptrollers. 
The RPM needs, you don't know what you need, you don't really 
know what you have. How can you really say that this $10 
million is really going to improve readiness? It is very 
difficult for us to create algorithms or connections between a 
specific mission readiness and a specific dollar devotion to a 
particular facility. So people accuse us of having soft 
requirements.
    That is why it was very important for us to have this 
cooperative effort to get to a facility sustainment model that 
had commercial bench marks. So what I believe, where we are 
headed, is we are not going to get a floor unless it is 
mandated. That is not what the services nor the Department is 
requesting. However, what we need to do is increase the 
visibility of the decisions, either to fund or not to fund, and 
that is what we are attempting to do in the facility 
sustainment model so we can say to our programmers, okay, we 
know that you need this $50 million, but this $50 million would 
have done this, and the consequences of not giving us that $50 
million this year and only giving us 20 is this. And we hope to 
get to that level of granularity in our model.
    Mr. Ortiz [presiding]. Any of the services who would like 
to respond to my question?
    General Van Antwerp. Yes, sir. I would like to just say I 
think the facility sustainment model that Mr. Yim is working 
with the services; we have had the installation status report 
for several years--it is pretty mature at this point, and it is 
somewhat akin to that and will fold into that. I think the key 
to that is the standards that you have so you know exactly what 
the condition is, and what this facility sustainment model and 
the installation status report does, it actually--you go out 
and you look at a facility. You have a checklist, and when you 
are done, you know whether that--you know the sustainment costs 
and you know the modernization costs of that facility. So that 
is the first part.
    And then it gets into how do you break this chain that you 
alluded to. I think it is a combination of getting rid of, as 
we have already discussed, what we don't need anymore, so we 
are not pouring valuable dollars into that. And then the second 
part, you have to get this funding up to a level that while you 
are trying to sustain, it is not deteriorating at a greater 
rate. We are on a downslope right now because of chronic 
underfunding. And so we have to get it up to a level that 
allows us to--no fooling, not let the stuff we have go down 
further.
    You combine that with a good program of military 
construction and modernization, and you take some of those C-4, 
what we would call a C-4, not mission capable facility, and you 
either tear it down or build a new one, or you really go in and 
modernize it. I think that is how you break it. We know the 
cost of that in the Army, to break that in RPM is about $500 
million a year. Frankly, if we are going to do that over the 
next several years to sustain it, that very high level will 
break this trend that we are in right now.
    Mr. Ortiz. Admiral.
    Admiral Smith. Sir, I would offer that I really would check 
into everything that has been said so far. Within the Navy, I 
think, it is just a few simple words. The first is to focus 
what we have. We are spending money on operational facilities, 
quality of life facilities, training facilities, things that we 
know we are going to have and we are going to keep. We are 
going to get rid of things we don't need anymore, whether that 
is by demolition, or by outsourcing, or by privatization. We 
are going to consolidate where we can. And I would be remiss if 
I talked--and we are going to coordinate that, obviously, with 
our MILCON program to recapitalize our plant ashore. But I 
would be remiss if I didn't also mention that we are going to 
have--if we are going to have the discipline internally to 
break this cycle of poverty, we are going to need to educate 
our people. And it is not just our base commanders. It is also 
the people who live and work in these facilities as well as the 
people who fund those, our good friends in the comptroller 
business in Washington about not just a metric, but also, what 
this does and what the payback is for us.
    Our former Commanding Officer (CO), Admiral Boorda, used to 
say, quality of life is the last thing that happened to you 
today, and we are very sensitive to the fact that if you can 
live in a wonderful brand new one-plus-one barracks but, yet, 
at your workplace, the roof leaks, you have got an old 
typewriter instead of a word processor, that is not going to be 
an incentive for you to stay around in the Navy whether you are 
a civil servant or an active duty military member. So it is a 
multi-faceted approach, but I think we are on top of it and we 
are making enormous progress.
    Mr. Ortiz. Thank you. Mr. Robbins.
    General Robbins. Yes, sir. I would only add on the facility 
sustainment model, I think the beauty of it, and its utility to 
us as engineers, will be that because it is based on and bench 
marked against industry standards, commercial standards, as 
opposed to something that perhaps was just dreamed up, if that 
is the right term, internal in the Department of Defense--will 
allow us to better articulate and justify our requirements 
within the various corporate structures of our services, the 
Air Force Council, in my case, where we won't be just talking 
what civil engineers think we need, but Mr. Yim will have 
delivered to us a model that we can point to and say this is 
the way the rest of the world, commercial airports, 
universities, other government agencies, state governments, et 
cetera, approach this very nagging problem that we have. So I 
think that is the primary benefit that we see from developing a 
new model that we can all abide by across the uniformed 
services.
    Mr. Ortiz. Thank you very much. General.
    General Mashburn. Yes, sir. The only thing I could add is 
we must maintain the flexibility that is provided by not 
fencing real property maintenance money. For instance, I 
mentioned the four pillars of readiness, our legacy systems, 
very old equipment. During the course of a year, what happens 
if our vehicles' transmissions have a severe breakdown 
throughout the fleet--not under warranty--very difficult to 
handle unless there is something unfenced. If you have to weigh 
repairing the Amphibious Assault Vehicle's (AAV's) versus 
repairing an old building, I think the commandant is right in 
making a decision as far as warfighting. So I just request that 
we be allowed to maintain the flexibility of managing the 
program with added emphasis on reporting properly.
    Mr. Ortiz. Thank you very much. I now will yield to my good 
friend, Mr. Sisisky, for any questions that he must have.
    Mr. Sisisky. Thank you. You don't want a fence then. Is 
that what you are saying? You want the flexibility to move that 
money around. Is that what you just said?
    General Mashburn. Yes, sir.
    Mr. Sisisky. And you think that is the proper way to do it?
    General. Mashburn. I do, sir, with better management tools.
    Mr. Sisisky. Thank all of you for being here today. Mr. 
Yim, I have never had the pleasure of seeing you before. As 
these gentlemen will testify, I was a pretty outspoken member 
of the Military Construction Committee, but they wouldn't let 
me serve on it this year.
    I would just get back for a minute to BRAC, and I know what 
the Chairman's--we have talked about it many times, the fear of 
two BRAC's. And the fear is not over two BRAC's, the fear is 
messing it up. For instance, in 1993, they closed the Naval 
Aviation Depot (NADEP) in Norfolk; that is the Air Rework 
facility. They closed it, basically, because the captain who 
was commanding the place took a gamble on 600 employees--this 
is a true story--that they were going to get enough business, 
when he should have RIF'd or laid them off, but he didn't do 
it, and he readily admitted it. So the cost went up and they 
took that picture right at that time and they closed it. Two 
years later, they sent it to Jacksonville. Two years later, 
they closed Jacksonville, Cecil Field, and sent all the 
airplanes to Norfolk. Now, they repair the airplanes in 
Jacksonville, and all of them were sitting up in Norfolk, so 
they had to fly down to get repaired.
    But I can tell you a worse one than that. The Navy, was 
it--I forget the name of it, but it had to do with 
communications and radio work. It was done at the Norfolk Naval 
Shipyard in the annex, St. Julian Annex. So they closed 
Charleston in that year. I forget what year it was. They took 
all those ships out of Charleston, but they put the 
communications system, so now, the only one that benefited was 
U.S. Air, because then they had to fly from--you know, so that 
is our fear of two, you know, maybe you wouldn't mess up, you 
would be more careful in one. But you are going to have enough 
trouble just getting one through, so I don't know. But just 
prepare yourself for that.
    I think that's what they--you know, all this talk about--
all of you talked about the real estate aspect of it. Nobody 
mentioned anything about base operations. That thing is 
really--am I imagining that that is hurt worse than anything, 
all the cuts in that? Is that my imagination or is it just base 
commanders complaining? Anybody like to--
    General Van Antwerp. I could just for the Army, we are in 
2001, this budget funds the base ops at 96 percent to run the 
base. So I think it is really more in the RPM--
    Mr. Sisisky. Excuse me. Ninety-six percent of what figure?
    General Van Antwerp. Of the requirement.
    Mr. Sisisky. Of the requirement?
    General Van Antwerp. Yes, sir. So that is the--
    Mr. Sisisky. While you have got the microphone, you made a 
statement about the 90 percent mark in 2005. That is what you 
want to get to in real property maintenance?
    General Van Antwerp. At least that high. I mean, I will 
tell you a--
    Mr. Sisisky. Well, let me just tell you what the problem is 
in that. You have been snookered, because they are basing that 
savings on an illusion that privatization is going to produce 
about $5 billion. Now, you prove it to me that it is going to 
do $5 billion. I am telling you, your fund is going to be 
shrunk if you base it on that. And that is what I worry about. 
And a lot of other things that are happening in the Department 
of Defense, based on an illusion that it may happen.
    I am not sure, Mr. Yim, when you said that the savings are 
real, coming off of the BRAC, that we do know that they are 
real. I got so upset eight years ago. I put the largest 
amendment that has ever happened in this place, a $70 billion 
amendment, and guess what it was for--to do away with DBOF 
because everybody was dipping their hands in the DBOF fund, 
which had to do with the D-builders all around and shortening 
those, you know. So you know, I worry, because I have seen it 
happen, you know, if we are going to save it in the accounting 
system is probably not the best that we will even know.
    Public works, now, is that an illusion of mine, too, that 
you privatize mostly public works. And is that saving a lot of 
money?
    Admiral Smith. If I could take that one, sir. I answered 
this, of course, as a two-time public works officer and a 
former Commanding Officer (CO) of a DBOF-funded activity, I am 
sensitive to everything that you were talking about. We, of 
course, have a very active Commercial Activities (CA) 
outsourcing program, and public works utilities, of course, is 
a part of public works, and this is my third round of A-76 in 
my career. And I don't think any of them were easy, and this 
one isn't any easier either. We have gone back and, of course, 
we are in the middle of a lot of studies. We are studying 
everything from janitorial services and trash collection up 
through, basically, utilities privatization and outsourcing of 
vehicles for our fleets.
    We are finding savings. We found some substantial savings, 
and I would be glad to detail those for you for the record. The 
savings, what our friends in the comptroller shops have already 
taken from the budgets, that is not always a match, and I think 
that is what you were alluding to before, sir; but there is 
money to be saved there. There is money for us in the facility 
side to save there. Within my clemency at Naval Facility 
(NAVFAC), I have 1,200 people who work on managing, 
maintaining, operating, and repairing utility systems. I am not 
sure I need any of these people. Now, I never say never--I 
mean, I never say always, because I know I have got people 
doing that on Diego Garcia; and it is hard to get Hawaiian 
Electric to hook a line up all the way to Diego Garcia.
    But I think the point here is that we not only can save 
some money, and that is reason enough to keep doing it, but 
also, it does have a ripple effect back into our facility 
requirements on base, because where we can outsource utilities, 
we don't need a utilities shop on base anymore. Usually, the 
local power company or whoever will provide that in their own 
facilities off base.
    Mr. Sisisky. Well, in the largest Naval installation in the 
world, you are doing that right now. I don't know if you 
gentlemen know, but down in Norfolk there is one commander of 
everything. He is in charge of every base that is around there, 
everybody reports to him. But public works, you know what 
bothers me; if you have people with sewerage, or anything, and 
they do maintenance work, but you save money by letting them 
go, and you privatize it so you do it when you have a problem, 
then that may be a problem. And that is why I say the savings 
may be an illusion to some degree.
    Admiral Smith. Yes, sir. And that is always a concern, 
again, that you estimate the savings higher than they actually 
are. From a provision of service side, I do remember--that is 
why I have got all this gray hair--when we first contracted out 
things like trash collection, and we had several contractors 
default, it is kind of well, what happens once you get rid of 
the trash trucks and you can't pick it up yourself.
    Mr. Sisisky. I will tell you a better one than that. They 
hired a foreign company to fix cranes. I didn't realize fixing 
cranes was about $250,000, these huge cranes at the shipyard.
    Admiral Smith. Portal cranes, yes, sir.
    Mr. Sisisky. So they hired this company, and it was a 
foreign company, said they could do it for $50,000. Well, what 
they did, they went bankrupt like in nine months. So do you 
know what I did? They have got a little thing in military 
construction budget, and you probably know, building a railroad 
down there. What we are going to do now, and it will pay back 
in five years, we are building a railroad to move the cranes 
all around the yard and do away with half the cranes. It makes 
sense.
    Admiral Smith. Yes, sir.
    Mr. Sisisky. So you say that it is not an illusion, or is 
an illusion, that we are saving money, or you don't know?
    Admiral Smith. I would say, sir, it is not an illusion. We 
are saving money. It is a question of how much and, again, does 
it match the projections.
    Mr. Sisisky. I know the one question I really want to ask 
all of you, though. When they dip into RPM or base operations 
for contingencies, what percentage do you get back? Do you get 
it all back, half back? The Marine Corps said they got $6 
billion--or $29 million back.
    General Van Antwerp. I didn't understand what percentage 
that was that he--
    Mr. Sisisky. I don't know either. That is why--
    General Van Antwerp. From the Army's standpoint, I will 
have to get that one for you for the record. We do get some of 
it back. There is no question about it. Is it 100 percent? I 
would speculate no.
    Mr. Sisisky. I don't want you to get in trouble.
    General Van Antwerp. I know. Thank you, sir. I appreciate 
that.
    Admiral Smith. Sir, I would have to say the Navy is 
happiest forward deployed around the world, and if we have got 
to take money out of RPM, well, there is enough Naval officer 
left in me to say, so be it. But I would say--I will take that 
also, if I could, that we get most all of it back. We do pretty 
well at the end of the year. But again, it is a matter of 
priorities. It really is.
    Mr. Sisisky. General Robbins.
    General Robbins. I think the prudent thing for an engineer 
in the Air Force to say would be, since we don't have any money 
to start with, we don't have any to lose. Perhaps, the more 
politically correct answer would be, it would be hard to say 
how much is diverted from RPM to go to contingencies to start 
with, as was alluded by one of the panelists earlier. We tend 
to be underfunded in the budget process itself. And so to 
determine how much we didn't get because a contingency comes 
along becomes a pretty difficult accounting problem.
    I know of no instance in my previous experience at Air 
Combat Command, sir, down at Langley, which you are familiar 
with--I don't remember us ever taking money that we already 
distributed to the wings and air combat command for RPM, 
pulling it back and saying we need to fund contingencies with 
this. What really has happened is we have seen a decrease in 
the year-end fallout money that comes our way, because it tends 
to be used to pay for those contingencies.
    We got a good healthy chunk of money after the Kosovo 
supplemental. Whether it is distributed, dollar for dollar, 
where we would have put that money in the first place or not is 
almost impossible to determine.
    Mr. Sisisky. All right.
    General Mashburn. Yes, sir. I would say it competes very 
well. I would not at any time say we could get 100 percent 
reimbursement, but it competes very well.
    Mr. Sisisky. I do have another question, but I will let my 
friend over here ask some questions. I am sorry. Then I will 
come back.
    Mr. Ortiz. I yield to my good friend and colleague from 
Texas, Mr. Rodriguez. Congressman.
    Mr. Rodriguez. I know Congressman Sisisky is very shy and 
so I want to thank you for yielding to me. I wanted to share 
with you, we have in San Antonio, and I am sure throughout the 
country, a lot of old bases, like Fort Sam and Randolph, that 
have some beautiful structures. And I know the last thing we 
want to do is knock some of those down. In fact, in some cases, 
the communities would not allow us to do that.
    But I wanted to throw out the question in terms of whether 
we need to do anything special in terms of historically for 
those historical sites that are throughout the country, in 
terms of making sure we maintain them appropriately because we 
want to do that for historical reasons. Also, in terms of I 
realize that a lot of them are still being utilized; and so I 
wanted to make sure, you know, I want to get your feedback on 
that one.
    Second, I wanted to also--I know, Mr. Yim, you mentioned a 
little bit in terms of the Brooks project in San Antonio; and I 
would want for you maybe to make some comments, because I think 
that not all bases are the same, but there are some 
opportunities out there--not, you know, despite BRAC, or 
whatever, but to also look in terms of some cost-effective 
measures in terms of reducing the costs and cost operations. 
And I would want for you also to make some comments in that 
area.
    Secretary Yim. Yes. Thank you. First, on the historic 
issues, the historic properties, and this is more than just 
historic quarters; we have historic buildings, facilities. What 
we are suggesting is in our proposal for enhanced use leasing 
of our underutilized facilities, that the historic properties 
give a character to our installations and, actually, are often 
coveted by the private sector to use for representational 
events, conferences. It gives a cachet that is very nice for 
the private sector to use; and since we don't use a lot of our 
historical facilities to the full extent, that that is perhaps 
a vehicle that we could have some dual use, or renting of our 
facilities, and then capture the money in our enhanced use 
leasing proposal, and then keep it at that installation either 
to help maintain that historic property or to fund other real 
property maintenance or other infrastructure requirements.
    And I think that would--that would give then some 
functional significance to the preservation of our historic 
properties. If we are just looking at preserving them for their 
historical sense without a functional significance, there is 
always pressure to demolish them or underutilize them. We would 
like to give an economic, functional significance to them in 
that manner; and I think that is a good vehicle.
    Our data seems to show, and I think many people think it is 
much more expensive to maintain historic properties than 
others, that is probably not precisely true. It is more a 
function of the age rather than their historical character 
itself. And then if you also look at the life cycle cost of 
them, if we are putting a slate roof, for example, back on an 
historic property because that is what the appearance was, it 
has a much longer useful life than other types of building 
material. So over the cycle, the life cycle, it is about the 
same as most of our other facilities. But that is one that we 
would like to look at.
    The other significance of historic properties is people are 
beginning to lose contact with the military and what role the 
military plays. And to the extent we can use historic 
properties as draws for the general public to come onto our 
bases or participate, it gives them a better sense of what the 
military is all about, and that fulfills another important goal 
for us.
    With respect to Brooks, as you know, sir, I am a very big 
advocate of Brooks and other projects like Brooks. Brooks is a 
project where we are actually asking a partnership in a true 
sense between the military installation and the community to 
help us with our operating costs. We are talking about concepts 
even as innovative as perhaps even leasing the whole--or 
conveying the whole property to the community and leasing back 
on the assumption that the private sector, taking advantage of 
the economies of scale, can be more efficient in management of 
installations than we can. And plus, it allows us to fulfill 
that other goal I just talked about, integrating the military 
function, military life, with the community, and giving people 
a better sense of what we do. So I think there is great 
potential in Brooks. We were able last year to get legislation 
allowing us to proceed. We have some reports back to Congress 
on that, in July, on progress for that. But you will see that 
my office installation is very, very strongly supportive of 
those type of concepts.
    I would like to mention one other thing, if I could, too, 
on our funding. And to go back to Congressman Sisisky's view, 
we do have problems with estimating the savings. And sometimes 
our budgets are--the comptrollers take more in assumed savings 
than perhaps we really can deliver. I also have to mention that 
last year, Congress in the Appropriations Act took $100 million 
from us on assumed savings from competitive sourcing. And that 
was quite a hit that we took from our own budget lines. So we 
would ask your support in helping us maintain our projections.
    Mr. Rodriguez. Thank you for those comments. Let me add one 
other thing. When you talked about historical sites, I know--
and I would ask that, you know, because I think we have some 
unique sites out there. I have the distinction also of having 
Fort Ringo that was one of the forts that goes back a long 
time--not Bill Ringo, Fort Ringo. And it was turned over to the 
school district down there. And it is a beautiful facility 
right on the Rio Grande out there in Rio Grande City. And it 
used to be called Davis Landing way back in the 1850's, and so 
it is a beautiful facility. Yet, you know, and so you see some 
of those sites out there. And I think we have an obligation, I 
think, to all Americans that we kind of safeguard some of those 
sites. And I am not sure, exactly, how to go about that, but I 
would hope that maybe in the future we would come up with some 
recommendations as to how to do that.
    In reference to your comments, also, regarding Brooks, I 
think it is a unique opportunity. Not all communities would 
want to do that. Fortunately, we do have a community in San 
Antonio that is willing to move forward on some of that. 
Mainly, because of experiences from the closure of a base that 
had 20,000 people there, and that is Kelly. And so I want to 
thank you for being here and your comments. Thank you. And I 
relinquish the remaining time to my colleague.
    Mr. Ortiz. I think that Congressman Sisisky has another 
soft question for--
    Mr. Sisisky. Well, just following on him, an historical 
thing, it is amazing what you can do with buildings today. We 
have historical plaques, Civil War plaques, at the Norfolk 
Naval Shipyard, and we have modernized those buildings. Now, 
they look terrible from--I mean, they are brick, they are not 
terrible, but they are old buildings. But you should see what 
they have done on the inside. It is unbelievable with 
computers, and carpets, and lighting, and everything. We have 
also built a very expensive hospital down there, and one of the 
buildings, you cannot tear down, so we will make that the 
administration building. So you know, there is something.
    But what I wanted to ask you, I have told General Van 
Antwerp this story, and it has to do with family housing. I was 
over in Korea last fall, and I was having lunch with a group of 
soldiers. And you know, you go around the table from the state, 
I am from Fairfax, Alexandria, Fredericksburg, Richmond, and I 
get to this last one, and he says, Congressman, I am from Fort 
Lee, Virginia, and my family is living in the house while I am 
over here that you helped build. And I will tell you, I have 
never had a feeling in my life like that. But it was on base.
    And this is what I am asking you. I tried when I was on 
military construction to do something simple like the Virginia 
Housing and Development Authority, to loan money to sailors, 
because the Navy was in a position not to guarantee completely; 
but if you are an east coast sailor, you will usually be placed 
in Norfolk. If you are a west coast sailor, you would be in San 
Diego or Bremerton. So they could buy a house, even the lower 
enlisted person with very little interest rate.
    But how important do you think--and I know this is true 
with the Army. And of course, now, with the new expedition in 
the Air Force and Marine Corps, how important is it living on 
base in a family atmosphere where a young man or woman knows 
that when they are overseas, their family is in a family group. 
How would you weigh the importance of that?
    General Van Antwerp. Sir, I would say from an Army 
standpoint, it is very important. If you just look at the 
waiting list of people wanting to move on post, you will find 
they are enormous. They can run two years, over two years. 
Right now, we house about 25 percent of our people on our 
installations, so the majority of people live off the 
installation. But there is no question that it is the most 
attractive, both probably from a financial standpoint, from a 
community security standpoint, from having all of the benefits 
of living on post for the activities that are there for youth, 
just a lot of pluses why you want to do that.
    But we--you know, our deficit on post is huge, if we would 
try and bring the percentage up much.
    Mr. Ortiz. And if I may, I think that because the military 
owns the land, if there is enough land on base, then it would 
be cheaper to build--and correct me if I am wrong--than it 
would be to, either if it is a joint venture on the outside, 
because of the land that is owned. Now, many of the bases might 
not have as much land. But maybe you can add that to the 
question that Mr. Sisisky just asked.
    General Van Antwerp. I would just--in our one housing 
privatization that we awarded recently at Fort Carson, 
Colorado, part of that contract is to build 800 new sets. Of 
that 800 sets, that number was devised in working with the 
local population. We are finding that out in the economy, they 
can do mostly the two bedrooms. But the three and four bedrooms 
for our junior people, what they can't get out on the economy 
for what their allowance is, that is what we are going to build 
on the installation. And with that land, the little cost of 
land, if you have the space, it is a winner. So you are exactly 
on target there, sir.
    Mr. Ortiz. Admiral.
    Admiral Smith. Thank you, sir. First off, to say the Navy 
is for the large part coastal and urban, over 80 percent of our 
sailors live out in town in the community right now. That 
doesn't mean that the socialization that is offered by being on 
base and living in the community isn't of value to us, 
especially, when our sailors will deploy for six months or 
longer at a time. So that is an important thing to us to be 
able to provide to our service members.
    Within the seven Planning, Programming and Budgeting (PPB) 
actions we have ongoing right now, some of them in Texas, we 
are also looking at using some of the authorities that the 
Virginia Housing Development Authority (VHDA) has in the 
Tidewater area. Land fleet had already proposed yet another 
pilot project; and they brought that to Washington, and we are 
talking to the Navy Secretary and Mr. Yim's staff about perhaps 
proposing that forward. I mean, that is not soup yet, but I 
think you all will be hearing from us shortly about that 
because, again, that is a wonderful agency down there. And our 
goal, as always, whether it is married family housing or 
bachelor housing, is to try to help more sailors faster.
    Mr. Sisisky. I will tell you what made me ask the question 
if you really want to know the truth, other than that young man 
thrilling me in Korea. We were interviewing dependent wives 
after Kosovo. I went down to Norfolk with the President and the 
Secretary of Defense. And one of the dependent wives said, you 
know, what really worries me--and she said, not in Norfolk, 
Virginia, because this is a military town, not in Norfolk, 
Virginia; but we are kind of treated like being on welfare all 
the time--we are second class citizens. People think we just 
get doles out from the government, and she was very sincere. 
She was in other places that I have been. She said I just want 
to make it plain, that this isn't Norfolk.
    And I wonder if that permeates through the system. That is 
why I mentioned the on-base housing versus the off-base 
housing.
    Secretary Yim. I think, Congressman, that I have to give a 
slightly different view, too. There is some doubt on the other 
side, in fairness to the issue, that particularly with families 
now that have working spouses, that if they could afford better 
quarters off-base, that they would prefer to live off-base. 
There was a recent study, for example, to that effect. Now, 
there is always going to be a need, always a need for on-base 
housing. We are never going to go completely away from that. We 
also are privatizing on-base housing so we can keep it on base 
but have the management responsibility shifted to the private 
sector, and there is some benefits of doing that.
    When we overbuild on-base housing, there is quite a tale 
that goes along with it--roads, and support centers, and child 
care centers, and schools, et cetera. So there is quite an 
associated cost that sometimes also can be shifted to the 
community. I think that the increases in the basic allowance 
for housing, we are going to see does it really drive down a 
lot of the requirements. Is the Rand study correct, are people 
going to prefer to live off base? And I think we are going to 
see a mix of people still preferring to live on base, but more 
and more people actually preferring the off-base alternatives 
if they can afford quality quarters.
    Mr. Sisisky. If they can buy now. May I--because this is 
something that is bothering me, and I haven't been on a 
military construction subcommittee to really get in it. I was 
in it for a while. Do we have any real estate experts in the 
Department of Defense now? I mean, for leasing. Let me tell you 
why. I raised cain--I mean, you can't believe--over Southcom's 
leasing down in Miami. I could not believe that anything like 
that--and then, you know, the government Corps of Engineers did 
it, but he doesn't have the expertise to do it. I doubt whether 
you gentlemen have the expertise. But there are people that are 
skilled, that knowing how to make a deal, you know, and maybe 
you are the ones. I don't know.
    But do we have anybody, because Mr. Hamre promised me he 
was going to get some people in there that really were experts, 
because you mentioned privatization on federal land; and you 
are getting complicated deals here that are not easy deals, 
because you may say you are 100 years behind, but we are going 
to catch up through privatization; and it may be costing so 
much money that you are really not catching up.
    Secretary Yim. That is a concern, sir. And I mentioned that 
we needed to get better knowledge management tools out in the 
field. There is a lot of in-house, it is smart people. And it 
is not because they are not smart, it is because they don't 
have the experience. This is a very different deal for us, and 
this is not a housing construction project. What we are looking 
at is a management project over time. The deals don't crash and 
burn in the first couple of years because they look like a 
standard construction project and we can do that. They will 
crash and burn if the financial or cash flows aren't sufficient 
to be able to do the repair and replace the roofs in the tenth 
year, or the fifteenth year, or the O&M account isn't 
sufficiently funded and the guys go bankrupt on us.
    A lot of people, a lot of the services are augmenting with 
outside real estate experts that have worked this issue for 
either public entities or for private sector and bringing on 
that expertise and really learning how to do this. That is why 
we have had, frankly, a slow pace of housing privatization.
    Mr. Sisisky. It has been slow, there is no question about 
that.
    Secretary Yim. And I think we, justifiably, should be 
criticized for it has been slow. We have had some fits and 
starts. This is all part of this kind of market research, 
because we didn't even really know, frankly, what to ask for 
when we went out to the private sector. And I think we are 
getting better on that.
    Mr. Sisisky. All right. I will let everybody go to lunch.
    Mr. Ortiz. Just one more question if nobody else has any 
questions. You know, I know that industry has a cost analysis 
system, more or less, how much it costs to maintain a square 
foot of building. And when you look at that, it may be a newer 
facility versus an older facility. Could you give me the 
difference, more or less, how much it would cost to maintain a 
newer facility and an old facility?
    Secretary Yim. I think that I will need to take that one 
for the record, because there will be a variety of different 
factors. So let me not just give you a cavalier attitude or 
answer. We will look at that more closely. That is what we 
tried to do with this costing handbook, is to try to get 
commercially benchmarked measurements on what it would cost to 
maintain both old and new facilities.
    Mr. Ortiz. Thanks, Mr. Secretary. General.
    General Van Antwerp. Sir, I would just say that right now 
in the Army, we are around $3.50 per square foot, but that is 
for all the buildings. And as you recognize, if it is a new 
building, it could be less. I personally think, based on the 
private sector and what we found, it is somewhere in the $5 to 
$6 range, $5 to $6 a square foot. It is very dependent on the 
type of building, the type of use. A warehouse space is much 
less than a child care center, for instance. So it has some 
dependence on that. But it is up in the $5 to $6 range, I would 
think.
    Mr. Ortiz. Thank you. Anybody else? If not, we want to 
thank--I am sorry.
    General Mashburn. Sir, if I could address Mr. Sisisky's 
question concerning base housing and the requirements for 
dependents of deploying members; historically, we have found 
that we have concentrated so much on the 25 to 30 percent of 
our military families who live on base and we greatly neglected 
that 70 to 75 percent who lived off. We found that many of our 
young Marine families desire to go to their home and be with 
their parents and family when our young Marines deploy. So I 
think in the entire package of benefits, we really must 
concentrate on Basic Allowance for Housing (BAH), medical 
benefits, so that when they go home, they feel like they are 
still part of the military.
    Mr. Ortiz. Thank you, sir. If there is no further 
questions--he moves, Mr. Sisisky. I am glad he is my friend. 
Let me thank Mr. Secretary and all of you for being here. I 
think that this was a very informative hearing this morning. We 
want to thank you, and if there is no further business, this 
meeting is adjourned.
    [Whereupon, at 12:15 p.m., the subcommittee was adjourned.]
      
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                            A P P E N D I X

                             March 1, 2000

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 1, 2000

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             QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD

                             March 1, 2000

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                   QUESTIONS SUBMITTED BY MR. BATEMAN

    Mr. Bateman. BACKGROUND: GAO noted in its opening statement that 
before 1996, base operations and real property maintenance were not 
separately identified. Since then, the services have budgeted and 
obligated money to each of these areas separately. Real property 
maintenance funds are used to maintain and repair buildings, 
structures, warehouses, roadways, runways, railway tracks and utility 
plants. Base operations funding is used for services such as utilities, 
base communications, snow removal, security, and morale, welfare, and 
recreations activities.
    What brought about this change in the military services' budget 
structure in 1996?
    Mr. Curtin. A Department of Defense program decision memorandum 
dated October 27, 1994, directed the Under Secretary of Defense 
(Comptroller) to lead a study to develop alternative budget structures 
and reporting methods for the operations and maintenance (O&M) 
appropriations. The objective was to determine if changes should be 
made to improve visibility into planning, programming, and execution. 
DOD considered real property maintenance funded through O&M significant 
not only in dollar terms ($5.1 billion in FY 1996) but also in terms of 
the quality of life of DOD personnel, and therefore personnel morale 
and readiness. Although real property maintenance was separately 
identified in the budget structure for the military services budget 
estimate submission it was merged with base operations in the 
President's budget request. The merger created a base support O&M 
program that was nearly 19% of the O&M budget in fiscal year 1996. 
Thus, to improve visibility of both real property maintenance and base 
operations the study recommended separate identity in the O&M budget 
structure for these two areas.
    Mr. Bateman. BACKGROUND: GAO noted in its testimony that during 
fiscal years 1996 through 1999, the services' reported obligations were 
$2.7 billion (4.5 percent) more for base operations and real property 
maintenance than the initial congressional designation of $61.2 
billion. GAO identified most of the increase as going toward base 
operations.
    Which service has the greatest concentration of this movement and 
has the trend to move funds into base operations decreased or 
increased?
    Mr. Curtin. During fiscal year 1996 through 1999, of all the 
services, the Army had the greatest movement of operation and 
maintenance funds, totaling over $1.2 billion, into base operations. 
Every year during this period the Army moved funds into base 
operations. While the trend varied the Army moved the most funds into 
base operations in fiscal year 1996, about $502 million, and the least 
funds in fiscal year 1998, about $71 million. However, the Air Force 
consistently moved over $900 million to base operations during the same 
period. The Air Force moved the greatest amount into base operations in 
fiscal year 1999, over $519 million, and the least amount in fiscal 
year 1997, over $72 million.
    Mr. Bateman. BACKGROUND: GAO noted in its statement that it is not 
possible to trace the origins of all funds moved into or out of budget 
subactivities, such as unit training. However, GAO goes on to say that 
in fiscal years 1997 and 1998 the Army moved about $641 million from 
unit training to real property maintenance and base operations.
    If this movement is not traceable, how did GAO identify that $641 
million was moved from unit training to real property maintenance?
    Mr. Curtin. DOD is required to provide detailed data on budget 
movements for high-priority readiness-related budget subactivities. 
These reports describe movements of funds for some of the subactivities 
designated as high-priority by Congress and must include the total 
amounts moved into and out of these subactivities and an explanation of 
the reasons for the movement. It was through these reports that we were 
able to identify the $641 million moved from training to real property 
maintenance and base operations by the Army and $35 million moved from 
training to real property maintenance and base operations by the Air 
Force.
    Mr. Bateman. How much of the $641 million went towards real 
property maintenance and how much towards base operations?
    Mr. Curtin. Of the $641 million the Army moved, $519 million ($112 
million in fiscal year 1998, $407 million in fiscal year 1997) was for 
base operations while $122 million was for real property maintenance. 
Of the $35 million the Air Force moved, all was for real property 
maintenance.
    Mr. Bateman. BACKGROUND: The GAO conducted a survey of 517 bases 
and major commands. The survey pointed out that major commands only 
requested funding for approximately 20 percent of the know RPM needs in 
fiscal year 1997. These same commands were actually funded at a rate 
even lower than the requested 20 percent of need.
    Why did the major commands request so little of the required 
funding?
    Mr. Curtin. As we reported in September 1999, according to DOD 
headquarters facility management officials of each service, funding 
real property maintenance is not their services' first priority. An 
Army official described it as the last of four priorities. The major 
commands and bases understand that this is the culture of real property 
maintenance and have acted accordingly--as reflected in the data 
reported to us by the commands and the bases.
    Mr. Bateman. Do you expect that the same practice goes on today?
    Mr. Curtin. DOD's 1999 planning guidance does not specify any 
funding level or goals for the maintenance of property, other than 
stating that the services are to fund maintenance at a level they 
consider adequate to execute missions. DOD told us that the 1999 
language retreats from guidance provided in 1996, which directed the 
services to provide sufficient funding to reverse deterioration of 
facilities and to improve their effectiveness.
    Mr. Bateman. Does this indicate that perhaps the backlog is, in 
fact, greater than what the services or DOD now thinks it to be?
    Mr. Curtin. As of October 1999, the services were projecting 
increases in their repair backlogs because they planned to fund 
maintenance and repair below identified needs over the next several 
years. For example, the Air Force has planned no money at all for 
repair projects until fiscal year 2003 (although it plans to spend some 
funds on emergency minor repairs and other forms of what it terms 
preventive maintenance). The services rate the urgency of their 
backlogs differently, and in the absence of a single rating system, it 
is difficult to determine how urgent these needs truly are. Therefore, 
simply providing additional funding will not ensure that the most 
important deficiencies are funded first or that buildings with repair 
needs exceeding a large percentage of their replacement value are not 
demolished instead (saving money in the long run).
    Mr. Bateman. BACKGROUND: As a result of the work that GAO and 
others have done in researching RPM and the problem of the continued 
growth in the backlog in maintenance, the GAO has identified a number 
of things that could be done to manage the problem better.
    What are the top two or three things that DOD and/or the services 
could do to help get control of RPM and the continuous growth of the 
backlog?
    Mr. Curtin. As we reported in September 1999,1 DOD does 
not have a comprehensive strategy for managing its maintenance and 
repair needs. Rather, each service sets its own standards for 
maintaining infrastructure. Without standard assessment criteria, DOD 
cannot compare maintenance costs or facility conditions across the 
services. This hampers the development of a sound strategy for managing 
the upkeep of the military's infrastructure. Further, the services 
cannot ensure that their ratings of facilities' conditions are valid or 
reliable either at individual bases or within each of the services 
because facility assessors do not apply their service's criteria 
consistently. Thus, DOD's strategy should include:
---------------------------------------------------------------------------
    \1\ Military Infrastructure: Real Property Management Needs 
Improvement (GAO/NSIAD-99-1000, Sept. 7, 1999).
---------------------------------------------------------------------------
     Uniform standards that set the minimum condition in which 
military facilities are to be maintained and standardized condition 
assessment criteria;
     Standard criteria by which the services are to allocate 
space for different types of facilities, (e.g. barracks, classrooms, 
administrative buildings) and against which RPM funding allocations 
will be measured;
     Standard criteria for inventorying DOD and service 
property (except for relatively few service-unique facilities).
        Use of Training Funds to Pay for Base Operations and RPM
    Mr. Bateman. BACKGROUND: The military services' principal source of 
funding for RPM and base operations is their O&M appropriations, and 
the Services have flexibility in using those funds. Congress is 
concerned about moving funds from unit training to RPM and base ops and 
the impact on readiness.
    Who decides to use O&M funds, such as those for unit training, to 
pay for base operations or real property maintenance and what 
procedures are in place to monitor those decisions?
    Secretary Yim. Normally, the installation commander or the major 
command commander makes the decision to migrate unit training funds to 
base operations or real property maintenance (RPM) accounts, or 
conversely from base operations and RPM to unit training. These 
commanders must balance priorities and requirements during the course 
of the fiscal year to ensure continued unit readiness, thus they 
require the flexibility to transfer funds between accounts where and 
when necessary. These commanders are in the best position to maximize 
the benefit from available funding in meeting unit training and 
installation mission needs. Congress and DOD have established 
guidelines that enable any transfer of funds within readiness accounts 
to be tracked at the Service headquarters level. Proposed transfers of 
funds between budget activities in excess of $15 million are subject to 
Congressional approval. This requires written notification to the 
Congress for the cumulative value of transfers in excess of $15 million 
into or out of operating tempo subactivity groups (SAGs). A Re-
baselining Report is sent to Congress in February which identifies any 
Congressional and Service adjustments (transfers) made in conjunction 
with release of the O&M appropriation to the Service Major Commands. A 
monthly report is provided by the Defense Finance and Accounting System 
(DFAS) to Congress that shows current obligation data and any transfer 
of funding between SAGs. Reports are also provided to Congress for any 
major reprogramming actions that require approval.
Movement of Funds From Unit Training to Pay for Real Property and Base 
                               Operations
    Mr. Bateman. Who decides to use O&M funds, such as those for unit 
training, to pay for base operations or real property maintenance and 
what procedures are in place to monitor those decisions?
    General Van Antwerp. Generally the field troop unit commander, who 
is frequently also the installation commander, or the major command 
(MACOM) commander, makes the decisions on migrating O&M funds, such as 
unit training funds, to other purposes. These commanders must balance 
priorities during the course of the fiscal year to ensure continued 
unit readiness, thus they require some flexibility to transfer funds 
between accounts when necessary. These commanders are in the best 
position to maximize the benefit from available funding in meeting unit 
training needs and installation mission needs.
    Congress and DOD have established guidelines that enable any 
transfer of funds within readiness accounts to be tracked at the 
Headquarters, Department of the Army (HQDA) level. Tools used include:
     Restrictions: Proposed transfers of funds between budget 
activities in excess of $15 million are subject to Congressional 
approval. In addition, transfers in excess of $15 million into or out 
of the Operations and Maintenance, Army (OMA) appropriation Depot 
Maintenance subactivity group (SAG) are also subject to this rule. 
Written notification to Congress for the cumulative value of transfers 
in excess of $15 million into or out of operating tempo (OPTEMPO) SAGs 
is required. The conventional ammunition account has a statutory floor 
of $355 million.
     Rebaselining Report: Report sent to Congress in February 
which identifies any Congressional and HQDA adjustments (transfers) 
made in conjunction with release of the OMA appropriation to the 
MACOMs.
     1002 report: Monthly report provided by Defense Finance 
and Accounting System (DFAS) to Congress that provides current 
obligation data and shows any transfer of funding between SAGs.
     1415s Provided to Congress for the major reprogramming 
actions that require approval.
    Admiral Smith. O&M funds used for base operating support (BOS) and 
real property maintenance (RPM) are managed by Navy claimant commands 
per the guidelines of their submitted budgets and funding 
authorizations. Within a given budget activity, decisions to move funds 
between sub activity groups, including BOS and RPM, are made by the 
claimant. However, realignments between budget activities and proposed 
increases or decreases to Congressional special interest items require 
advance approval from Navy Comptroller staff, which monitors and 
controls such actions via internal Navy tracking procedures. In a few 
cases, Congressional approval is also required. As funds are moved 
between programs, Navy BOS and RPM have historically been used as a 
source to augment unit training and operational requirements, rather 
than the recipient of such transfers.
    General Robbins. The AF maintains a delicate balance between 
mission and support areas. In order to maintain this daily balance, 
commanders are required to continually evaluate funding required for 
mission sustainment and support areas. Additionally, they must be 
allowed to ultimately determine when funds budgeted for one purpose are 
used for another such as read property maintenance or support of base 
operations. Their evaluation is based upon a close and immediate 
knowledge of the competing requirements, the current availability of 
O&M funding within their units, and the impact on the accounts to be 
offset. As the data which comprised the input for the annual 
President's Budget is finalized almost a year in advance of actual 
appropriation by Congress, it is impossible to forecast with 100 
percent accuracy the actual daily requirements to which a local 
commander must react. The commander is entrusted with the 
responsibility to perform his Air Force mission and is expected to take 
actions necessary to get the job done. Given the funding constraints, 
the demands placed upon the Air Force, and the age of our equipment and 
facilities, funding flexibility in the O&M account is absolutely 
essential. Should the financial ability to react to changing 
circumstances be further curtailed by more severely constraining our 
commanders' ability to react to our ever-changing environment, the 
overall mission readiness of the Air Force will be adversely impacted.
    General Mashburn. The Marine Corps historically has not moved funds 
from unit training to real property maintenance or base operations. 
Unit training is as close as the Marine Corps gets to having an 
``untouchable program.'' Since operational readiness is the cornerstone 
of the Marine Corps' ability to be the nation's ``9-1-1 Force,'' 
operating forces funding, of which unit training falls under, is a top 
priority.
    Despite executing unit training programs as budgeted, training is 
sometimes not at the level hoped for and readiness is not at 100 
percent. The Marine Corps tracks readiness using our Status of 
Resources and Training System (SORTS) along with the Global On-line 
Marine Edit and Report System (GOMERS). These reports provide a macro-
overview of a unit's personnel manning, equipment and supply fill, 
equipment readiness and training as assessed by the unit commander. 
Readiness information is then sent to the Pentagon and is accessible at 
Headquarters Marine Corps (HQMC).
    Last, Headquarters Marine Corps trusts and empowers the fleet 
commanders to move funds from one program to another to meet the 
operational requirements of their command within threshold limits. The 
commanders at Marine Forces Atlantic, Pacific and Reserve are closer to 
problems as they arise, and they can identify organic unit trends 
before HQMC can. The Marine Corps is very attentive to the needs of its 
Operational Commanders, as that is where we interrelate with the CINCs 
and execute contingencies, exercises and operations.
    Mr. Bateman. How do the services determine what the impact on 
readiness will be if they move funds from unit training to real 
property maintenance or base operations? More specifically, who tracks 
the readiness implications of this movement?
    Secretary Yim. Realignments between budget activities and proposed 
increases or decreases to Congressional special interest items require 
advance approval from the Services' Comptroller staffs, which monitor 
and control such actions via internal tracking procedures. The impacts 
of these decisions are tracked at the Service headquarters level using 
annual readiness and execution reports.
    General Van Antwerp. Commanders assess their unit's current 
readiness level and make training and resourcing decisions based upon 
their unique situation. The commander in the field is in the best 
position with the perspective to make these decisions. At a macro 
level, readiness is monitored using the Unit Status Report (USR), which 
is submitted monthly to Headquarters, Department of the Army (HQDA). 
HQDA relies on the commanders' comments on the USR to identify any 
problems relating to training, training enablers, real property 
maintenance or base operations that would adversely affect readiness. 
HQDA works with the major commands to resolve resourcing issues that 
impact unit readiness.
    Admiral Smith. As noted in the recent March 2000, GAO Report, 
Analysis of Real Property Maintenance and Base Operations Fund 
Movements, (GAO/NSIAD-00-87, February 29, 2000) the Navy has 
consistently moved funds into unit training, increasing them by $1.9 
billion from FY94 to FY99. However, as indicated in the response to 
question 1 above, realignments between budget activities and proposed 
increases or decreases to Congressional special interest items require 
advance approval from Navy Comptroller staff, which monitors and 
controls such actions via internal Navy tracking procedures. The 
impacts of these decisions are tracked at the headquarters level using 
our annual readiness and execution reports.
    General Robbins. Commanders are required to continuously assess the 
readiness of their units, however readiness is more than just flying 
training. It encompasses a myriad of activities including maintaining 
structurally sound facilities in which to perform maintenance, training 
and other support functions. In addition, unit readiness requires 
assigned personnel to be fed, housed, paid and otherwise supported so 
they can perform their mission. Perhaps the most difficult decision 
expected of any commander is to maintain the delicate balance between 
unit training and the essential functions supporting that training and 
military readiness. The Air Force delegates the authority to move funds 
within budget activities to commanders to ensure the decision is made 
by the person closest to the problems.
    General Mashburn. The Marine Corps historically has not moved funds 
from unit training to real property maintenance or base operations. 
Unit training programs are as close the Marine Corps gets to having an 
``untouchable program.'' Since operational readiness is the cornerstone 
of the Marine Corps' ability to be the nation's ``9-1-1 Force,'' 
operating forces funding, of which unit training falls under, is a top 
priority.
    Despite executing unit training programs as budgeted, training is 
sometimes not at the level hoped for and readiness is not at 100 
percent. The Marine Corps tracks readiness using our Status of 
Resources and Training System (SORTS) along with the Global On-line 
Marine Edit and Report System (GOMERS). These reports provide a macro-
overview of a unit's personnel manning, equipment and supply fill, 
equipment readiness and training as assessed by the unit commander. 
Readiness information is then sent to the Pentagon and is accessible at 
Headquarters Marine Corps (HQMC).
    Last, Headquarters Marine Corps trusts and empowers the fleet 
commanders to move funds from one program to another to meet the 
operational requirements of their command within threshold limits. The 
commanders at Marine Forces Atlantic, Pacific and Reserve are closer to 
problems as they arise, and they can identify organic unit trends 
before HQMC can. The Marine Corps is very attentive to the needs of its 
Operational Commanders, as that is where we interrelate with the CINCs 
and execute contingencies, exercises and operations.
                 Funding for Facilities Strategic Plan
    Mr. Bateman. BACKGROUND: In a May 1997 GAO Report--Defense 
Infrastructure: Demolition of Unneeded Buildings Can Help Avoid 
Operation Cost, (GAO/NSIAD-97-125, May 13, 1997)--GAO found that DOD 
and the services did not have complete, reliable information on the 
costs associated with either maintaining their current facilities 
infrastructure or with infrastructure reduction options. Such 
information is needed to develop a department-wide strategic plan that 
considers difficult infrastructure options to meet the requirements of 
the Government Performance and Results Act (Public Law 103-62) which 
requires federal agencies to develop agency wide strategic plans. 
Further, such information is critical to meet the requirements for more 
complete disclosure of the costs, associated with facilities' deferred 
maintenance and demolition in financial statements, called for by the 
Chief Financial Officers' Act of 1990.
    To collaborate, in another GAO Report--Military Infrastructure: 
Real Property Management Needs Improvement, (GAO/NSIAD-99-100, 
September 7, 1999)--GAO again noted that DOD does not have a 
comprehensive strategy for maintaining the services' infrastructure. 
Rather, each service sets its own standards for maintaining 
infrastructure. As a result, the services differ in the way they rate 
property conditions, prioritize repairs, and allocate resources. For 
example, a barracks rated ``satisfactory'' by one service may be rated 
as ``unsatisfactory'' by another. GAO reported that although DOD funded 
development of a strategic maintenance plan in its fiscal year 1999 
budget, it shifted the funding to other priorities in early 1999.
    What were the other priorities that required the funding planned 
for the development of a strategic maintenance plan?
    Secretary Yim. The draft DOD Facilities Strategic Plan was not 
formally published due to constrained funding in the OSD studies 
program. With regard to facility maintenance, specifically, the OSD 
studies program did fund the research to support the Facilities 
Sustainment Model, which is a major element of the overall strategic 
plan.
    General Van Antwerp. The draft DOD Facilities Strategic Plan, which 
was put together by a cross-Department Working Group two years ago, has 
not been formally published due to a need to update the plan and to 
constrained funding in the OSD studies program. Before publishing the 
plan, it needs to be updated as a result of initiatives we've taken 
based on the draft plan and to incorporate recommendations from recent 
GAO reports on Real Property Management.
    Admiral Smith. The draft DOD Facilities Strategic Plan has not been 
formally published due to constrained funding in the OSD studies 
program.
    General Robbins. The draft DOD Facilities Strategic Plan has not 
been published due to constrained funding in the OSD studies program. 
However, OSD is pressing ahead with many of the initiatives developed 
by the OSD-led planning group. We fully support their efforts on the 
Plan.
    General Mashburn. The strategic plan was being developed by DOD 
with the participation of the services. The draft DOD Facilities 
Strategic Plan has not been formally published due to constrained 
funding in the OSD studies program. I defer to DOD concerning the other 
requirements.
                  Status of Facilities Strategic Plan
    Mr. Bateman. BACKGROUND: In a May 1997 GAO Report--Defense 
Infrastructure: Demolition of Unneeded Buildings Can Help Avoid 
Operation Cost, (GAO/NSIAD-97-125, May 13, 1997)--GAO found that DOD 
and the services did not have complete, reliable information on the 
costs associated with either maintaining their current facilities 
infrastructure or with infrastructure reduction options. Such 
information is needed to develop a department-wide strategic plan that 
considers difficult infrastructure options to meet the requirements of 
the Government Performance and Results Act (Public Law 103-62) which 
requires federal agencies to develop agency wide strategic plans. 
Further, such information is critical to meet the requirements for more 
complete disclosure of the costs, associated with facilities' deferred 
maintenance and demolition in financial statements, called for by the 
Chief Financial Officers' Act of 1990.
    To collaborate, in another GAO Report--Military Infrastructure: 
Real Property Management Needs Improvement, (GAO/NSIAD-99-100, 
September 7, 1999)--GAO again noted that DOD does not have a 
comprehensive strategy for maintaining the services' infrastructure. 
Rather, each service sets its own standards for maintaining 
infrastructure. As a result, the services differ in the way they rate 
property conditions, prioritize repairs, and allocate resources. For 
example, a barracks rated ``satisfactory'' by one service may be rated 
as ``unsatisfactory'' by another. GAO reported that although DOD funded 
development of a strategic maintenance plan in its fiscal year 1999 
budget, it shifted the funding to other priorities in early 1999.
    What is the current status of development of a strategic plan?
    Secretary Yim. Only formal publishing of the plan is on hold. OSD 
and the Services have been actively working over the last two years to 
implement several of the initiatives in the draft plan. For example, 
the draft plan called for an initiative to ``better define RPM 
requirements'' and to ``develop better asset management tools'' which 
lead directly to the Facilities Sustainment Model (FSM). The draft plan 
also called for things like the Facilities Aging Model, two more rounds 
of BRAC, and better utilization (e.g. joint use). While we have not 
formally published the plan, we are working to implement the high 
priority initiatives, and we have established the Installations Policy 
Board (IPB) to oversee it.
    General Van Antwerp. The current status is that formal publishing 
of the entire plan is on hold. OSD and the Services have been actively 
working over the last two years to implement several of the initiatives 
in the draft plan--for example, the draft plan called for an initiative 
to ``better define RPM requirements'' and to ``develop better asset 
management tools''--which leads directly to the Facilities Sustainment 
Model (FSM). The draft plan also called for things like the Facilities 
Aging Model, two more rounds of BRAC, and better utilization (e.g. 
joint use). While we have not formally published the plan, we are 
working to implement the high priority initiatives, and we have 
established the Installations Policy Board (IPB) to oversee it.
    Admiral Smith. The current status is that formal publishing of the 
entire plan is on hold but OSD and the Services are working to 
implement several of the plan's initiatives, including an initiative to 
improve the facilities maintenance and repair programs via the 
Facilities Sustainment Model.
    General Robbins. The current status is that formal publishing of 
the entire plan is on hold. We fully support DOD's efforts and have 
been actively supporting several initiatives in the draft plan. For 
example, we are pressing ahead on improvements to our Facilities 
Sustainment Model (FSM) and the Facilities Aging Model in support for 
the plan.
    General Mashburn. Formal publishing of the entire plan is on hold. 
However, OSD and the Services are working to implement several of the 
plan's initiatives, including one to improve facilities maintenance and 
repair programs via the Facilities Sustainment Model.
               RPM Backlog and Prioritizing RPM Spending
    Mr. Bateman. BACKGROUND: In a GAO Report, Defense Infrastructure: 
Demolition of Unneeded Buildings Can Help Avoid Operation Costs, (GAO/
NSIAD-97-125), GAO stated that with the post-cold war drawdown, DOD 
facilities worldwide, as measured by square feet of space, were reduced 
by about 10 percent through BRAC rounds. During that same period, RPM 
funding was cut by an estimated 40 percent. This led to a backlog of 
M&R projects in the Services. In another GAO Report, Military 
Infrastructure: Real Property Management Needs Improvement, (GAO/NSIAD-
99-100, Sep. 7, 1999), DOD estimated that the backlog had grown from 
about $8.9 billion in 1992 to $14.6 billion in 1998.
    What are the Services' current estimates for the real property 
maintenance backlog? How do the services prioritize spending to address 
the most pressing or urgent, real property maintenance needs?
    Secretary Yim. Backlog by itself is not a total indicator of the 
requirement for maintenance and repair funding in any one year since it 
does not address the need for annual sustainment funding. The backlog 
might be best understood as accumulated repair work (excluding non-
repair work) resulting from constrained maintenance and repair funding 
in previous years. With this caveat, the reported numbers are:

    Army: $15.4 Billion
    Navy: $2.8 Billion (critical backlog only)
    Air Force: $4.3 Billion
    Marine Corps: $717 Million

    The Services generally leave it up to their major commands to 
distribute RPM funds to their installations. Their major command and 
installation commanders are at the highest level for prioritizing RPM 
requirements because they know their facility maintenance and repair 
requirements and how best to utilize the scarce RPM funding. Generally, 
they prioritize their spending to correct deficiencies that have the 
largest impact on mission readiness and that contribute to C3 or C4 
ratings on the annual base readiness report.
    General Van Antwerp. Sir, I would just say that right now in the 
Army, we are around $3.50 psf, but that is for all the buildings. . . . 
a new building could be less. . . . based on the private sector . . . 
it is somewhere in the $5 to $6 range per square foot. It is very 
dependent on the type of building . . .
    It does cost more to maintain an older facility vice a newer one. 
Based on ``The Whitestone Building Maintenance and Repair Cost 
Reference 1999,'' it costs about 60% more to maintain an older 
facility. Using facilities sustainment costs from ``Whitestone'', a 2-
story office building that's 1-10 years old would cost an average $1.03 
per square foot to sustain (maintain) annually. This price does not 
include repairs and operating services such as washing floors and 
cutting grass. That same facility, when it is adequately sustained over 
its life, would cost an average $1.71 per square foot when it is 41-50 
years old. For a 50-room dormitory, it's $2.18 for a newer building 
vice $3.50 for an older one. Now that's a powerful argument for 
recapitalizing--that means our average 40+ year old physical plant is 
costing us 60% more to sustain than it would if we could drive the 
average age down toward 10 years or so. If we have a $5 billion RPM 
requirement now, we'd have a $3 billion requirement then.
    The services generally leave it up to their major commands to 
distribute sustainment (RPM) funds to their installations. Their major 
command and installation commanders are at the highest level for 
prioritizing RPM requirements because they know their facility 
maintenance and repair requirements and how best to utilize the scarce 
RPM funding. Generally, they prioritize their spending to correct 
deficiencies that have the largest impact on mission readiness and that 
contribute to C3 or C4 ratings on the annual base readiness report.
    Admiral Smith. The Navy's critical RPM backlog at the end of FY99 
was $2.8 billion.
    Major claimants and regional commanders prioritize their special 
projects program to correct deficiencies that have the largest impact 
on mission readiness and that contribute, to C3 or C4 ratings on the 
annual base readiness report. For deficiencies that are below special 
project scope, each installation prioritizes their unfunded critical 
deficiencies in their Maintenance Action Plan, which provides the 
execution plan for the coming fiscal year.
    General Robbins. The Air Force current total force backlog of real 
property maintenance is $4.3B (FY01), which is based on those 
requirements with the greatest mission impact (Critical and degraded) 
which remain unfunded at the end of the fiscal year. Real property 
maintenance (RPM) is funded at what we call the Preventive Maintenance 
Level (PML) to accomplish only the day-to-day maintenance required to 
sustain real property facilities and infrastructure. For affordability 
considerations the Air Force calculates its PML funding level at one 
percent of our plant replacement value. We also have a tool we call the 
Facility Investment Metric (FIM) which stratifies facility requirements 
based on mission impact. Installation and Major Command Commanders must 
make the difficult decision to fund PML work while deferring FIM 
identified projects or fund the most critical FIM projects while 
deferring maintenance work.
    General Mashburn. The projected real property maintenance backlogs 
for the years 2000, 2001 and 2002 are $685 million, $666 million, and 
$665 million respectively.
    The Marine Corps has two complementary methods for prioritizing 
real property needs. First, it provides over half of its real property 
maintenance funding directly to the base commander to use on day-to-day 
maintenance requirements. These funds pay for salaries, materials and 
contracts required to take care of recurring and emergency maintenance, 
along with small repair and minor construction contracts. The base 
commander is in the best position to select the small projects that 
need to be done to keep the base running.
    Second, those projects costing over $300,000 are field validated by 
representatives from Headquarters Marine Corps. These projects receive 
a rating score based on facility type and condition, cost savings and 
base priority. Headquarters then prioritizes projects Marine Corps wide 
and provides funding on a project by project basis to make sure the 
most urgent work is being done.
    Finally, the process can now be checked using a mission readiness 
rating system. Using this system we can evaluate if the funds are being 
applied, at the individual base level, to the areas that show the 
lowest mission readiness.
 Budget Requests for Operating and Maintaining Bases and Related Real 
                                Property
    Mr. Bateman. Why is the Army not submitting realistic budget 
requests that would fully fund the costs for operating and maintaining 
bases and related real property?
    General Van Antwerp. The Army works in a funding constrained 
environment. With each funding decision comes risk balanced against the 
benefits of funding one action over another. Headquarters, Department 
of the Army also recognizes the importance of facility condition on 
readiness and the need for more RPM funding. Therefore the Army future 
years development program (FYDP), as of President's Budget 2001, 
increases RPM over the FYDP for fiscal years 2001 through 2005 by 
ramping to 80% of requirement by fiscal year 2005. Because of the 
significance of the RPM shortfall, the Army also identified $250 
million, ranked number eight in the first band (Readiness) of unfunded 
priorities, should additional funds be made available for fiscal year 
2001.
                           Readiness Balance
    Mr. Bateman. How do Army commanders balance the increased readiness 
risk by decreasing the desired operating tempo requirements? 
Specifically, how is readiness affected by continually achieving less 
in operating tempo goals? What units are affected the most? Please be 
specific.
    General Van Antwerp. Army commanders cannot change OPTEMPO 
requirements because they are based upon the Combined Arms Training 
Strategy (CATS). However, the commander does have the flexibility to 
make the decisions on where to take risk in a limited funding 
environment. Most of the funds migrated from OPTEMPO are used for unit 
training enablers, such as ranges, base operations (BASOPS) and real 
property maintenance (RPM). There are other alternatives that 
commanders use to manage risk that do not have a short-term adverse 
affect on readiness. For example, the commander can defer maintenance 
while maintaining the unit's equipment readiness rating. In the long 
term, deferred maintenance may be reflected in a lower equipment 
readiness rate. In summary, every unit is affected by its individual 
circumstances and the commander's decisions based upon the situation 
and resources available.
          Funding Source for Real Property Maintenance in FY98
    Mr. Bateman. BACKGROUND: The Air Force reported that it moved $155 
million into its operating forces real property maintenance budget 
subactivity but did not indicate where the funds came from in the 
fiscal year 1998 high-priority readiness-related transfer report. The 
Air Force did state, however, the funds were needed for repairs to 
runways, maintenance hangers, utility systems, roofs and other real 
property assets.
    What was the funding source for the $155 million used for real 
property maintenance in fiscal year 1998?
    Depending upon the budget subactivity that was the source for this 
funding, how was affected-subactivity impacted?
    General Robbins. Funding was sourced by field commanders from 
various accounts which would suffer the least impact. Specific 
reporting systems do not track the specific movement of funds.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. ORTIZ
    Mr. Ortiz. Just one more question if nobody else has any questions. 
You know, I know that industry has a cost analysis system, more or 
less, how much it costs to maintain a square foot of building. And when 
you look at that, it may be a newer facility versus an older facility.
    Could you give me the difference, more or less, how much it would 
cost to maintain a newer facility and an older facility?
    Secretary Yim. I think that I will need to take that one for the 
record, because there will be a variety of different factors. So let me 
not just give you a cavalier attitude or answer. We will look at that 
more closely. That is what we tried to do with this costing handbook, 
is to try to get commercially benchmarked measurements on what it would 
cost to maintain both old and new facilities.
    General Van Antwerp. Based on standard, commercial cost factors, a 
properly maintained building 40-50 years old costs about 60% more to 
sustain (via maintenance and repair) than a new building 1-10 years 
old. See the table:

 ROUTINE MAINTENANCE AND REPAIR COSTS FOR NEW VERSUS OLD BUILDINGS (PER
                             SQUARE FOOT) 1
------------------------------------------------------------------------
                                    1-10 Years Old      40-50 Years Old
------------------------------------------------------------------------
Office Building (Two Stories)...  $1.03.............  $1.71
Dormitory (50 Rooms)............  $2.18.............  $3.50
------------------------------------------------------------------------
1 Analysis based on ``Whitestone Building Maintenance and Repair Cost
  Reference 1999.'' Costs are for the Washington DC area.

                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. HANSEN
                  Michael Field, Dugway Proving Ground
    Mr. Hansen. Everyone agrees Michael Field is critical and 
irreplaceable. No one stepped up to pay the costs of keeping it viable. 
If someone does not give me a better answer this year, I intend to take 
one of two actions, first transferring Michael Field to the Air Force 
and directing them to fund it, or directing the closure of Michael 
Field as a danger to anyone who might land there. Can you tell me why 
we should not take these drastic actions, and if not when the Army and 
Air Force will be solving this problem?
    General Van Antwerp. Although the Air Force is the major user of 
Michael Field, the Army recognizes the need for Michael Field as a 
critical port of entry for the delivery of agents to support tri-
service missions for DOD's Chemical and Biological Defense Program. 
NASA has also expressed interest in using the airfield. The estimated 
cost for repair of the field is $19 million.
 Preventive Maintenance Inspections, and Tracking and Prioritizing RPM 
                              Requirements
    Mr. Hansen. The Vice Chiefs testified yesterday that they would not 
allow troops to sit in buildings that leak, but instead of the roof 
being replaced only the area that leaks would be fixed. . . . we 
schedule our tactical equipment to be inspected at regular intervals, a 
preventive maintenance checks and services to be exact, that is adhered 
to without fail. This helped to identify discrepancies before any sort 
of catastrophic failure occurs. If we had this same, or similar, system 
for infrastructure, I would imagine we would have more success in 
fixing problems before they become an emergency--this ``finger in the 
dike'' method used now is going to fail . . . can you comment on that 
and what it would take to get DOD on a system that allows all services 
to track and prioritize RPM requirements?
    General Van Antwerp. The Department of Defense has already 
investigated the possibility of doing periodic detailed engineering 
inspections of facilities and concluded that it is a good idea, but 
unaffordable both in dollars and manpower. The Army implemented the 
Installation Status Report (ISR) which provides a non-technical 
facility user's inspection of the condition of a facility. This report 
provides an installation management tool from which the installation 
can develop maintenance and repair trends, potential maintenance and 
repair projects, and future RPM requirements. Only installation 
commanders can prioritize RPM requirements because only they can judge 
the severity of their RPM problems and the risks of doing one project 
over another. This is why Headquarters, Department of the Army does not 
designate or prioritize RPM projects. The ISR does provide a method at 
Army level to track the effectiveness of RPM funding by showing 
condition trends for facility types, but tracking specific maintenance 
and repair projects would be of little management value at Army 
headquarters level.
                             Michael Field
    Mr. Hansen. The Air Force on the other hand is the primary user of 
the runway which is the primary divert field for all operations on the 
southern range of the UTTR. At least once a month an F-16 emergency 
diverts to Michael Field. The Air Force contributes nothing to the 
maintenance of this critical asset.
    In addition to DOD this field is a critical NASA asset and serves 
as a Space shuttle divert field and more importantly as the test site 
of the first several flights of emerging technologies such as X-33.
    Everyone agrees Michael is critical and irreplaceable. No one has 
stepped up to pay the costs of keeping it viable. If someone does not 
give me a better answer this year, I intend to take one of two actions, 
first transferring Michael Field to the Air Force and directing them to 
fund it, or directing the closure of Michael Field as a danger to 
anyone who might land there. Can any of you tell me why we should not 
take these drastic actions, and if not when the Army and Air Force will 
be solving this problem?
    General Robbins. Michael Army Airfield (MAAF) is an Army facility 
and the Army is responsible for maintenance of this airfield. The Air 
Force does use the field as an F-16 emergency divert airfield from the 
Utah Test and Training Range (UTTR).
    The Air Force recognizes that this issue must be addressed. A 
meeting was held 18 April 2000 to further discuss options and 
responsibilities for repairs at MAAF. Attendees included 388 FW/CCM, 
Dugway Proving Ground Commander, Utah ANG Commandant and MAAF's 
Commander and airfield manager. The results are currently being staffed 
through Air Combat Command. We will provide an update no later than 30 
June 2000.
                 Track and Prioritize RPM Requirements
    Mr. Hansen. The Vice Chiefs testified yesterday that they would not 
allow troops to sit in building that leak, but instead of the roof 
being replaced only the area that leaks would be fixed . . . we 
schedule our tactical equipment to be inspected at regular intervals, a 
preventive maintenance checks and services schedule to be exact, that 
is adhered to without fail. This helps to identify discrepancies before 
any sort of catastrophic failure occurs. If we had this same, or 
similar, system for infrastructure, I would imagine we would have more 
success in fixing problems before they become an emergency--this 
``finger in the dike'' method used now is going to fail . . . can you 
comment on that and what it would take to get DOD on a system that 
allows all services to track and prioritize RPM requirements?
    General Robbins. The Air Force is able to track and prioritize its 
facility requirements adequately now. Installations are capable of 
identifying their day-to-day maintenance requirements. In addition, our 
Facility Investment Metric (FIM) is used to stratify the most critical 
facility repair and minor construction requirements in terms of mission 
impact. Funding the requirements is the challenge. Commanders must make 
the difficult decision, within available funding, whether to fund their 
day-to-day requirements and defer FIM projects or whether to fund their 
most critical FIM requirements while deferring day-to-day maintenance.
    We are working with OSD to develop a Facility Sustainment Model, 
which will allow us to better identify our facility and infrastructure 
funding requirements using current industry practices. Once the model 
is fully implemented and our requirement is determined, we will work 
the results through the Air Force corporate structure.
FISCAL YEAR 2001 NATIONAL DEFENSE AUTHORIZATION ACT--CIVILIAN PERSONNEL 
                               READINESS

                              ----------                              

        House of Representatives, Committee on Armed 
            Services, Military Readiness Subcommittee, 
            joint with the Committee on Government Reform, 
            the Civil Service Subcommittee, Washington, DC, 
            Thursday, March 9, 2000.
    The subcommittees met, pursuant to notice, at 1:05 p.m., in 
room 2118, Rayburn House Office Building, Hon. Herbert H. 
Bateman (chairman of the subcommittee on Military Readiness) 
presiding.

OPENING STATEMENT OF HON. HERBERT H. BATEMAN, A REPRESENTATIVE 
    FROM VIRGINIA, CHAIRMAN, MILITARY READINESS SUBCOMMITTEE

    Mr. Bateman. The hearing will come to order.
    Our colleagues from the Civil Service Subcommittee of the 
Government Reform Committee join us today for the first 
combined hearing of these two subcommittees, at least within my 
memory. I particularly welcome Congressman John Mica of 
Florida, who is substituting for Chairman Scarborough, in view 
of Chairman Scarborough's illness.
    I am also pleased to welcome the Ranking Member, Mr. 
Cummings, and the other members of the subcommittee as partners 
in our efforts to oversee the Department of Defense's (DOD's) 
management of its civilian personnel workforce.
    I recognize that many of the civilian personnel provisions 
we include each year in our defense authorization bill come 
within the jurisdiction of the Civil Service Subcommittee, and 
you have always been most cooperative and generous in your 
assistance to us. The joint hearing provides our witnesses a 
unique opportunity to discuss issues before both committees of 
jurisdiction.
    One of the primary reasons we scheduled this hearing is to 
discuss the effect of the civilian drawdown on the Department 
of Defense's civilian workforce and ultimately its effect on 
the readiness of our military forces.
    Few Americans understand that the Department of Defense has 
reduced its civilian workforce by more than 38 percent over the 
last 10 years, compared with a 35 percent reduction in active 
duty military forces. Many, many skilled workers across the 
country and overseas have left Department of Defense employment 
permanently.
    I am also concerned that these rather dramatic reductions 
have occurred in such a way that the department released needed 
personnel who possessed essential skills. It is time to examine 
our civilian workforce to ensure we will have the people with 
the skills we need in the future.
    In that regard, I would like our witnesses to provide the 
subcommittees an assessment of their current skills inventory 
and what additional tools they may need, if any, to properly 
align the workforce of their respective service. Additionally, 
I would like some assurances that the Department of Defense and 
the military services have planned for the future. In other 
words, do they have a template for the skills and the workers 
needed to support future operations so that younger workers can 
begin to be hired and trained now to meet those future needs?
    If you do not have a clear vision of where you need to go, 
it is difficult for this committee to intelligently address 
issues and implement solutions.
    In addition, we continue to hear concerns about the 
department's aging workforce as an increasing number of workers 
are eligible to retire. The question is will you need their 
skills when they do retire and do you have someone in the 
pipeline to fill those essential positions?
    I would expect that some very careful analysis has been 
done before you ask our two subcommittees to consider measures 
changing long established personnel policies to solve a problem 
that so far has not been demonstrated or proven.
    Finally, over the years, the department has requested and 
received authority to operate a variety of civilian personnel 
demonstration projects. I would like to hear what has been 
learned from the existing demonstrations. From the reactions we 
get back home when base closures are considered or reductions 
in force are announced, it is apparent that Federal jobs are 
still highly coveted. Therefore, it seems counterintuitive that 
we would have difficulty hiring new workers.
    That is why I would like to see some careful analysis 
behind any request for new authorities, and I would insist that 
any new authorities be carefully targeted at skills the 
department has demonstrated that it cannot hire. For example, 
the Air Force reports having difficulty hiring engineers. The 
Army has a different experience. Why is that?
    Today, the subcommittees will hear testimony from experts 
in workforce shaping issues and from the civilian personnel 
policy directors of the department. It is my belief that our 
hearing today will assist us in making the necessary decisions 
for our civilian workforce in the future.
    Before proceeding to our witnesses, let me now recognize 
the gentleman from Florida, Mr. Mica, for his opening remarks.

 STATEMENT OF HON. JOHN L. MICA, A REPRESENTATIVE FROM FLORIDA

    Mr. Mica. Thank you, Mr. Chairman. I appreciate this 
opportunity to join you and members of your subcommittee at 
this hearing this afternoon. I look forward to working with you 
and also the Civil Service Subcommittee chairman, Chairman 
Scarborough, who, unfortunately, cannot be with us today 
because of his injury.
    I am pleased to join also Ranking Members Ortiz and also 
Mr. Cummings. Mr. Cummings has also been ranking on the Civil 
Service and very active in these issues. It is particularly 
important that we have leaders like this as we address the 
issues of civilian personnel readiness.
    This is a vitally important matter, Mr. Chairman, and I 
commend you for initiating this inquiry. As the former chairman 
of the Civil Service Subcommittee, I also want to thank you for 
the cooperation my staff and I have received from you and your 
staff on civilian personnel issues in the past Congresses. I am 
confident that the close working relationship will continue, as 
evidenced today by this joint hearing.
    Today we will examine the state of readiness of the 
civilian workforce that supports our servicemen and women. This 
hearing is really the beginning of a process that will continue 
as our subcommittees work through a variety of civilian 
workforce proposals in conjunction with this defense 
authorization bill.
    I look forward to hearing the witnesses today, all of whom 
bring a great deal of expertise on these civil service issues 
and civilian defense issues.
    Mr. Chairman, there are several matters that I asked the 
Department of Defense and others to address as we consider the 
readiness issue today and throughout the remainder of this 
Congress.
    One key issue is the effect of the dramatic reduction in 
civilian personnel at the Department of Defense which you 
referred to in your opening statement and also that in all of 
our military departments. Again, putting that reduction in 
perspective, Mr. Chairman, the drop in full-time equivalent 
employment at those agencies will account for 73 percent of the 
net personnel reduction government wide by the end of fiscal 
year 2001.
    We need to know, Mr. Chairman, how this drawdown has 
affected the ability of our current workforce to support 
America's military forces now. If there are critical short-term 
problems that must be addressed now, the witnesses should 
identify them and provide us with concrete proposals for 
dealing with them.
    Mr. Chairman, we have heard a lot about the threat of a 
hollow military; and this Congress has taken steps to turn that 
problem around. America must always have the best fighting 
forces in the world. The men and women in our armed forces must 
be the best trained and the best equipped. But an inadequate 
civilian support system will degrade the performance of even 
the best military force in the world. That is why we also need 
to be concerned about a hollow support system.
    Together with the administration and everyone on both sides 
of the aisle, we must determine the optimum mix of skills and 
the optimum mix of contractors and employees needed to preserve 
our Nation's strength and security.
    As we look to the future, Mr. Chairman, it is important 
that Congress make certain the Department of Defense and the 
military departments are integrating civilian workforce 
planning with the military's strategic planning. Until we know 
what kind of military missions and forces we must plan for, 
neither the Congress nor the administration can reasonably 
begin assessing our civilian workforce needs.
    I will expect today's witnesses to demonstrate that their 
civilian personnel strategies are in fact solidly tied to 
anticipated military needs.
    I will also expect a clear explanation of why such things 
as an older workforce are considered problems and not simply 
facts or experienced personnel to deal with. And I also want to 
know what agencies are doing and plan to do to train or, where 
necessary, re-train their existing employees.
    Another key issue that I would like our witnesses to 
address is whether today's civilian benefit structure should be 
modified to attract highly qualified and motivated individuals. 
Do we need more flexible benefits and more portable retirement 
systems to help us compete for highly skilled workers, 
particularly younger workers who do not necessarily plan to 
make their careers with just one employer?
    I am pleased to see also the gentleman from Virginia here 
that I have worked with in the past in trying to bring us into 
the 21st century in that regard. I appreciate his efforts. 
Sorry to see him retiring, and you retiring and anyone else who 
is retiring that has done such a good job toward these efforts.
    So, Mr. Chairman, I look forward to receiving answers to 
these questions and working with you in this joint effort 
today.
    Mr. Bateman. Thank you very much, Mr. Mica.
    Now I would like to recognize my good friend and the 
Ranking Democratic Member of the Readiness Subcommittee, 
Solomon Ortiz of Texas.

   STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE FROM 
     TEXAS, RANKING MEMBER, MILITARY READINESS SUBCOMMITTEE

    Mr. Ortiz. Thank you, Mr. Chairman, for agreeing to hold 
this hearing today and, of course, we are happy to have our 
colleagues with us.
    This is the first civilian personnel readiness hearing we 
have conducted in quite some time. It does not mean that we 
have not been enacting legislation impacting on the matter 
during this time. It is more of a case of the absence of an 
opportunity to look at civilian personnel policies and 
practices in an integrated manner.
    I join you in welcoming all of our witnesses here today. I 
also appreciate the opportunity to explore this important issue 
with our colleagues on the Civil Service Subcommittee of the 
Government Reform Committee.
    Mr. Chairman, while there are many civilian personnel 
issues that loom before us, I am very much concerned with the 
problems and challenges associated with a dwindling and an 
aging workforce. I have also heard some of my colleagues 
express their concerns about these matters.
    During preparation for this hearing, I was reminded that 
the United States will reportedly be the last of the developed 
nations to experience the aging of its population. By 2025, 
nearly 18 percent of all Americans will be over the age of 65. 
This aging population not only affects the demands for funds 
for non-defense activities, it also impacts on the quantity and 
quality of civilian person- nel we will be able to attract and 
to retain to meet the department's technical and management 
challenges.
    I am most familiar with the situation at the Corpus Christi 
Army Depot, where today there are no employees under the age of 
30. The significance of this fact is that it is easier for a 
30-year-old to climb around an airframe in the 60 degree heat 
of summer than it is for a 50 to 60-year-old, and I can vouch 
for that.
    From my study of the Army Materiel Command civilian 
personnel status, I found that in six critical career programs, 
72 percent of the workforce is over 40 and 35 percent is above 
age 50. Today, the average is 48.7. By the year 2004, some 50 
percent of the Army Materiel Command's civilian workforce will 
be retirement eligible. I think those statistics by themselves 
tell us a lot.
    Notwithstanding the current trend toward outsourcing 
privatization of functions that have traditionally been 
performed by Department of Defense (DOD) civilians, the 
promised increased reliability of new equipment and the 
innovative maintenance and management concepts that we hear 
about, I am convinced that there will always be a need for a 
core DOD civilian workforce. I am not sure that the department 
is in the best posture at this time to prepare for the future 
while there is still time.
    It is not the same in DOD as it is in some sectors of the 
Department of Energy. In the Department of Energy, we are 
scrambling to capture the experiences of personnel who work 
nuclear weapons issues before they disappear. But the impact 
could be the same if we do not take the steps necessary to make 
sure that we have in place the right policies and programs to 
meet our future civilian workforce requirement.
    I know that we have had programs in existence for some 
years to attract, train, and retain white collar employees and 
the department tells me that those programs have been useful. 
But when I inquire about blue collar technical employees, I 
find a different story. Some of the skills needed require long 
lead times to produce these highly trained technicians we need 
to maintain the increasingly complex equipment we are 
procuring. Some of the same skills are required to maintain the 
legacy equipment that we will retain in the inventory for some 
time.
    It is my assessment that we just do not have sufficient 
programs in place to meet future requirements. It is for that 
reason I am proposing that the Department of the Army conduct a 
pilot apprentice program at Army depots that will address the 
future need for some already known hard-to-find blue collar 
technicians.
    The Army Materiel Command has provided a detailed listing 
of what skills are wanting depot by depot. The outcome of this 
program will be useful in assessing strategies designed to 
solve this problem in other places in the department.
    Mr. Chairman, there are some tasks that I am convinced must 
be accomplished sooner rather than later. We need to understand 
the potential implications of aging population on national 
security. We need to better understand what are our future 
workforce requirements so that appropriate policies and plans 
can be put in place to address the totality of the problem. 
There is a need to understand the impact of the drawdowns on 
productivity as well as our ability to attract and retain the 
quality and quantity of workers that we need.
    We need to understand the linkage between the perceived 
problem and the separate bits of legislation we have enacted 
and the department's policies and practices. We need to develop 
legislation if needed to provide the tools needed to properly 
shape the workforce. We need to understand the costs so that we 
can ensure that an integrated investment strategy is developed 
and in place to guide the implementation of rational and 
achievable civilian personnel goals.
    This is not a case of mission impossible, and I know it is 
not something that can be accomplished without considerable 
effort, but it must be done. We must make the investment or we 
will not provide for the future workforce capable of meeting 
technical and management challenges, all to the detriment of 
readiness.
    Mr. Chairman, I thank you for your insight and for your 
vision and thank you for holding this hearing today.
    Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz.
    And now I am pleased to recognize the Ranking Member of the 
Civil Service Subcommittee, Mr. Elijah Cummings of Maryland.

  STATEMENT OF HON. ELIJAH E. CUMMINGS, JR., A REPRESENTATIVE 
 FROM MARYLAND, RANKING MEMBER, THE CIVIL SERVICE SUBCOMMITTEE

    Mr. Cummings. Thank you very much, Mr. Chairman, and 
Ranking Member Ortiz of the Military Readiness Subcommittee, 
and certainly to Mr. Mica and Chairman Scarborough of our Civil 
Service Committee. I really do appreciate you scheduling this 
hearing.
    This hearing sends a message to Federal agencies that it is 
important to plan for the future and develop a strategic 
approach to manage, train, retain, develop, hire, pay and 
evaluate their most valuable assets, its employees.
    As Ranking Member of the Civil Service Subcommittee, I am 
aware of the impact of downsizing, contracting out, reductions 
in force, and an aging workforce can have on employees and the 
management of employees. Morale suffers due to limited career 
and promotion opportunities; people become insecure about their 
jobs and are forced to work longer hours to accomplish the same 
amount of work.
    When this occurs, not only do employees suffer, but the 
agency and its mission do as well. This situation is 
exacerbated in the case of the Department of Defense.
    In 1996, the General Accounting Office (GAO) reported that 
between the years of 1987 and 1995, DOD reduced its civilian 
workforce by approximately 25 percent or about 284,000 
personnel. GAO noted that by the time DOD finishes its 
downsizing plans in fiscal year 2001, DOD would have reduced 
its civilian workforce to about 728,300 personnel, almost 35 
percent below the 1987 end strength and about 16 percent below 
the 1995 end strength.
    When the GAO report was issued, DOD reported that civilian 
downsizing had not adversely affected military readiness at the 
installations visited by GAO. However, DOD did state that if 
not managed properly in the future, civilian downsizing could 
have an adverse effect on combat units.
    I look forward to hearing from DOD as to the current status 
of its downsizing efforts, its impact on civilian employees and 
its strategic plan to manage its workforce in the future. Any 
testimony the witnesses can offer to help us understand this 
issue is most appreciated.
    Thank you very much.
    Mr. Bateman. Thank you, Mr. Cummings.
    At this point, I would like to ask unanimous consent to 
have Chairman Scarborough's statement made a part of the 
record.
    [The prepared statement of Mr. Scarborough can be found in 
the Appendix on page 323.]
    Mr. Bateman. Now I would like to welcome our first panel of 
witnesses who are experts in the work shaping issues that we 
are principally concerned with today.
    The first panel consists of Mr. Frank Cipolla, Director of 
the Center for Human Resources Management of the National 
Academy of Public Administration; and Mr. Michael Brostek, 
Associate Director, Federal Management and Workforce Issues for 
the General Accounting Office, who is accompanied by Mr. Barry 
Holman, Associate Director, Defense Management Issues, of the 
General Accounting Office.
    Gentlemen, we welcome you. All of your written statements 
will be made a part of the record.
    And now, Mr. Cipolla, I will call on you to proceed as you 
may choose.

    STATEMENTS OF FRANK CIPOLLA, DIRECTOR, CENTER FOR HUMAN 
       RESOURCES MANAGEMENT, NATIONAL ACADEMY OF PUBLIC 
 ADMINISTRATION; MICHAEL BROSTEK, ASSOCIATE DIRECTOR, FEDERAL 
  MANAGEMENT AND WORKFORCE ISSUES, GENERAL ACCOUNTING OFFICE, 
   ACCOMPANIED BY BARRY HOLMAN, ASSOCIATE DIRECTOR, DEFENSE 
          MANAGEMENT ISSUES, GENERAL ACCOUNTING OFFICE

    Mr. Cipolla. Thank you, Mr. Chairman. We, as you mentioned, 
did submit a detailed statement for the record, so at this time 
I would like to just give a brief oral summary.
    We appreciate the opportunity to appear today to discuss 
civilian personnel readiness.
    The National Academy of Public Administration is an 
independent, non-profit, non-partisan organization chartered by 
the Congress to improve governance. We hope to be able to 
provide some outside DOD perspectives on this issue, which is 
of extreme importance now to most Federal agencies, including 
DOD.
    I would like to before I proceed acknowledge the presence 
today of the newly-appointed president of the National Academy, 
someone you know, I know, Mr. Robert O'Neal, who is here in the 
audience.
    Mr. Bateman. We congratulate the academy on its choice and 
I am very, very pleased to see my friend Bob O'Neal again.
    Mr. Cipolla. Thank you, sir.
    We have been putting a good deal of priority on this 
subject of workforce planning and workforce shaping and a good 
bit of our re- cent work has included a number of subjects that 
are relevant to this hearing.
    I have included a listing of several recent studies and 
reports on these subjects. I can make those available for the 
record, if you wish.
    Mr. Bateman. We would be pleased to have them.
    Mr. Cipolla. Good. We will do that.
    Some background. Civilian personnel readiness is an 
important subject, as I mentioned, not just for DOD, but 
certainly including DOD. Projecting the role and the 
composition of the civilian component of the total force is a 
continuing challenge, even more so as agencies look ahead and 
attempt to build the workforce from where downsizing and 
restructuring left it.
    There is no doubt that the task faced by DOD and its 
components to assure that the right people are in the right 
place at the right time is more daunting than ever. They are 
searching for answers to questions about what civilians will be 
doing, what is the right civilian-military mix, what are the 
competencies or skill sets that will be needed, how will the 
skills and knowledge of the current workforce be updated, what 
is the best approach to recruiting for scarce skills, and what 
needs to be done to retain senior level expertise in key 
occupations.
    Most Federal agencies are facing these or similar questions 
after spending the better part of the last decade trying to 
manage downsizing, keeping the adverse impact on people to a 
minimum and working to get maximum productivity from the 
workforce that is left, all while still adhering to merit 
principles that have been the foundation of Federal employment 
since 1883.
    Federal managers now find themselves in a war for talent, 
trying to compete in a tough market and making decisions about 
human capital investment. Government and the private sector 
alike are discovering that they cannot address these questions 
in a rational and defensible way without instituting a 
systematic process of workforce planning. Last year, the 
academy looked at 17 Federal agencies and found that most of 
them were beginning to do that.
    I would like to share some of that information along with 
primarily some key conclusions about this subject and I will 
just state those at this point and then if you have questions, 
I would be happy to comment on them. They are detailed in the 
prepared statement.
    The first of those is that workforce requirements must be 
linked to the agency's overall strategic plans. That has 
already been said in a number of ways, but we cannot over 
stress that point. Agency strategic plans must have a people 
component. That needs to be part of the process.
    The second point is that workforce planning must include 
the collection and analysis of data about the external 
environment as well as information about the current workforce. 
We have already heard some of those trends that are going to be 
shaping and are already shaping the workforce and the workplace 
over the next 5 to 10 years: skill shortages, increasing age of 
the workforce, increasing retirement eligibility, the workforce 
becoming more diverse, technology making possible alternative 
work arrangements, and the newer generations of employees 
having different values and expectations about work and the 
workplace.
    The third point is that projections of future workforce 
requirements must be expressed in terms of needed skills and 
competencies, not just numbers of full-time permanent 
employees.
    Fourth, decisions on the composition of the future 
workforce should consider the use of flexible employment 
arrangements. Increasingly, the right people for getting the 
job done in the future will be a mix of workers and a mix of 
employment arrangements.
    Fifth, managers must be given maximum flexibility in 
managing work and assigning staff to meet changing mission and 
program requirements. The civilian personnel system, to the 
extent that it is possible, must accommodate the requirement 
for that flexibility.
    The sixth point, human capital development and continuous 
learning should be viewed as an organizational investment and 
given a high strategic priority. Federal agencies need to 
transform training programs into an ongoing process of re-
skilling and re-tooling the workforce to acquire and maintain 
the competencies needed to keep up with the changes in mission 
technology and the content of work itself.
    And the seventh and final point relates to retirement 
incentives. Retirement incentives should be used selectively to 
support restructuring and to retain needed talent in scarce 
skill occupations. And we could elaborate on that, but I think 
I have completed my time.
    I'd be happy to answer any questions you have, sir.
    [The prepared statement of Mr. Cipolla can be found in the 
Appendix on page 326.]
    Mr. Bateman. Thank you very much, Mr. Cipolla.
    Now we would be very pleased to hear from Mr. Brostek.
    Mr. Brostek. Thank you, Mr. Chairman. I am pleased to be 
here to discuss why this is an opportune time to assess human 
capital management at the Department of Defense and a self-
assessment checklist that GAO has developed to help agency 
leaders focus on improving the management of their workforce.
    My observations on DOD's human capital management situation 
are based on work we have done at DOD throughout the 1990s that 
provide us some perspectives on the issues that have arisen 
during downsizing, but do not represent a comprehensive 
assessment of workforce planning at the Department of Defense.
    However, in summary, several factors suggest that this is 
an important time for DOD to assess its human capital 
practices. Public and private high performance organizations 
recognize that people are their key asset. It is through the 
talent and dedicated work of staff that missions get 
accomplished. Therefore, sound management calls for continually 
reassessing human capital management, especially in a dynamic 
environment. And surely DOD is in a dynamic environment.
    DOD's civilian workforce, as has been mentioned, is about 
36 percent smaller now than it was in 1989 and it is likely to 
get smaller. In part, due to these reductions, imbalances exist 
in the age distribution of DOD staff. The average age of 
civilian staff has been increasing while the proportion of 
younger staff who are the pipeline of future talent and 
leadership has been dropping.
    DOD reform initiatives are also changing the way the 
department does business and new business practices affect the 
competencies that employees must have. Together, these changes 
suggest that DOD faces challenges in ensuring that it will have 
the talented workforce that it needs in the next decade.
    To help agencies assess their human capital management and 
to deal with these challenges, we developed a five-part 
assessment framework that we believe can be useful in aligning 
human capital management with agencies' missions, goals and 
strategies.
    I will talk very briefly about each portion of that 
framework.
    The first part starts with strategic planning because 
decisions made today determine whether an agency will have the 
workforce that it needs in the future. A workforce cannot be 
reshaped overnight. For instance, if an agency's strategic plan 
calls for a greater reliance on information technology, there 
are implications for the competencies that the workforce will 
need.
    The actions needed to reshape the workforce such as 
training, hiring employees with requisite skills and possibly 
separating employees whose skill sets are no longer well 
matched to agency needs must be carefully designed and 
implemented.
    Next, our framework calls for aligning an agency's human 
capital policies and practices to support the agency's 
strategy. This is where detailed workforce planning is done. 
Looking at the strategies for 5 years or more into the future, 
the agency defines the knowledge, skills and abilities that 
employees will need as well as how many employees will be 
needed at that time.
    Those knowledge, skills and abilities are then assessed in 
the current workforce and projections are done of workforce 
attrition due to things like retirement and resignations and 
other factors.
    Then the gap needs to be assessed between the skills and 
abilities and size of the current workforce and the similar 
qualities of the workforce in the future.
    Once that gap measurement has been made, an agency is 
finally prepared to actually develop a plan to transition its 
current workforce to that which it is going to need in the 
future.
    The third part of our framework emphasizes that agencies 
must proactively develop their future leadership. The agency 
must begin by determining the qualities and characteristics 
that are most needed in its future leaders.
    Leaders develop over long periods of time and, therefore, 
agencies need to identify potential leaders early and provide 
them with a variety of professional development and learning 
opportunities throughout their careers.
    The fourth element of the framework focuses on ensuring 
that agencies recruit, develop and retain the employees with 
skills necessary to support mission accomplishment. In a sense, 
this is the execution of the workforce plan. The workforce plan 
identified the types and numbers of employees needed. At this 
point, agencies need to go out and identify by targeting the 
individuals that have the skills and abilities that are needed 
and hiring them and by targeting training to the current 
workforce to move their skills and abilities to those that are 
required to implement the plan that the agency has adopted for 
executing its mission.
    Finally, the framework focuses on ensuring that an agency's 
human capital practices and policies create a culture in which 
high performance is expected and supported. Human capital 
practices should enable and motivate employees to achieve high 
performance. Achieving high performance may be aided by a 
performance management system that links to the extent possible 
individual performance expectations and rewards to the success 
of the organization itself.
    In conclusion, the dynamic changes in DOD over the past 
decade and the continuing changes likely this decade underscore 
the importance of a well developed, human capital management 
strategy to DOD's future mission accomplishment. It is vitally 
important to start by looking to the future, determining what 
type of workforce will be needed for the future. When this is 
done, DOD can develop plans for creating that workforce and 
following up with the actions and investments needed so that 
when the future arrives, the right employees with the right 
skills, training, tools and performance incentives will be on 
hand to greet that future.
    That concludes my statement, and Mr. Holman and I will be 
happy to answer any questions you have.
    [The prepared statements of Mr. Brostek and Mr. Holman can 
be found in the Appendix on page 341.]
    Mr. Bateman. Thank you very much, Mr. Brostek.
    Mr. Holman, we would be glad to hear from you if you have 
anything you would like to add at this time.
    Mr. Holman. No separate, Mr. Chairman, just an observation 
that we have done a good body of work over the years, looking 
at a variety of defense business practices, outsourcing, depot 
maintenance and issues like that and we know that the issue of 
civilian personnel impacts from drawdown and readiness, aging 
workforce, are issues that are very much out there that are 
increasing concerns to people, so we are happy to participate 
in this hearing today because I think it is an important issue, 
that it does require some planning to deal with.
    Mr. Bateman. Thank you, Mr. Holman.
    Mr. Brostek, let me ask you this. You have spoken of 
workforce plans for the utilization of human capital which I 
think is very interesting terminology.
    At what levels does this take place? Is this done by 
someone in the Office of the Secretary of Defense or is it done 
there plus in each of the military departments or is it within 
systems commands or major commands within each of the services? 
Where does the workforce plan begin and end?
    Mr. Brostek. Well, I think it is going to have to occur 
throughout an organization the size of DOD. It has, as you 
know, a vast number of employees. About 40 percent of the 
Federal civilian workforce is in DOD. So I think it is 
impractical to expect that all the workforce planning could be 
done out of one central location.
    On the other hand, the important reference point for all of 
the workforce planning that needs to be done is the strategy 
that the department adopts for accomplishing its mission of 
defending the country and that is a department-wide policy that 
needs to be set and then the individual planning that needs to 
be done by the various components is in relation to that 
strategic plan that was adopted, the approach that the 
department wants to follow to carry out its mission.
    Mr. Bateman. We will be hearing from Department of Defense 
witnesses shortly, but do you have any insights as to what 
degree elements of the Department of Defense or the Office of 
the Secretary of Defense have become engaged in what you would 
call workforce planning?
    Mr. Brostek. Well, Mr. Chairman, I have to admit that we 
have not done a comprehensive assessment of the department, but 
I do have an extract from the Defense Science Board Task Force 
report that came out just this past February that suggests that 
there is a bit of a gap in workforce planning. If I can just 
quote a little piece of this, the report says that ``Today, 
there is no overarching framework within which future DOD 
workforce is being planned. An overarching strategic vision is 
needed that identifies the kind of capabilities that DOD will 
need in the future, the best way to provide those capabilities 
and the changes in human resources planning and programs that 
will be required.''
    This is a good statement of what needs to be done, and it 
is also apparently a statement that in the opinion of the 
Defense Science Board that has yet to be done.
    Mr. Bateman. What was the date of that statement?
    Mr. Brostek. February 2000.
    Mr. Bateman. Thank you.
    Mr. Cipolla, in your written statement, you made reference 
to a phenomena called telecommuting.
    Mr. Cipolla. Yes, sir.
    Mr. Bateman. Have you done any particular study as to the 
effectiveness and productivity of workers who perform by the 
telecommuting phenomena?
    Mr. Cipolla. We have and among the reports that I mentioned 
earlier there is some coverage of that. Recently, we had in one 
agency a review of telecommuting arrangements that were in fact 
negotiated with the labor union involved and we participated in 
the assessment after the arrangements had been underway for 
some time. This was an organization that was essentially an 
information technology organization, so the nature of the work 
was conducive to this sort of thing and the overall assessment 
was that it was working quite well, in the view of both the 
employees and the unions and the customers who were in receipt 
of the services of the organization. As a generalization, it 
varies. And it is an extreme culture challenge in some 
organizations and less so in others, and I guess that is the 
best way I can describe it.
    Mr. Bateman. I have two telecommuting centers in my 
district and, of course, most of the people, almost all of 
them, are Federal employees. My general understanding is that 
it is very, very highly regarded by the Federal employees. I am 
more curious to know whether or not Federal workforce managers 
are sympathetic to and anxious to have their employees 
participate in that manner, but I guess our government 
witnesses can cover that.
    Mr. Cipolla. Well, frankly, our experience has been that 
many managers find it difficult for a lot of the reasons that 
you might imagine, all associated with a loss of control in 
some form or another.
    Mr. Brostek. We did some work on that, if I can intercede 
for a minute--
    Mr. Bateman. Yes, please.
    Mr. Brostek.--about two or three years ago and we found a 
pretty similar result in the Federal Government, that there was 
a mixed bag among Federal managers. Some were quite supportive, 
but others were less supportive. It was around a control issue. 
Sometimes it was around whether or not the manager felt that 
they could really assess the performance of the individual when 
they were not in the office. If the type of work that was done 
was not something that could be measured easily, the supervisor 
was a little reluctant to let that not occur within his or her 
sight.
    Mr. Bateman. Thank you.
    Mr. Mica.
    Mr. Ortiz. I am sorry. Go ahead.
    Mr. Ortiz. No problem.
    I would like for the witnesses, maybe all of you can give 
me some input, but do you think that evidence of an aging 
workforce is a condition needing correction, particularly since 
most of the jobs eliminated in the Department of Defense were 
lower graded positions, or is more analysis needed?
    Mr. Cipolla. On the surface, that would appear to be the 
conclusion that one would reach. But at the same time, if we 
look closely at the skills that we need, which is what this 
subject is all about, in an organization now and in the future, 
an aging workforce is not necessarily an indication of 
something that needs to be corrected. In fact, retaining senior 
level expertise in some important occupational groups that are 
particularly difficult to recruit for in today's highly 
competitive market is something that needs to be included in 
strategic workforce planning. In other words, we need a 
balance.
    Mr. Brostek. I would roughly concur with what Frank has 
said. The simple fact that the workforce is aging does not in 
itself tells us that there is a major problem. What it does 
tell us is that there is a flag here, that some attention needs 
to be paid and some analysis done.
    The situation in DOD is that the proportion of the 
workforce that is below age 31 has dropped fairly dramatically 
from about 17 percent in 1989 to around 6.5 percent now. That 
may be an adequate number, but I think it is something that 
needs to be investigated to ensure that the people who are 
needed to be the future leaders and talent of the organization 
are being grown.
    We also have had some similar conclusions to what Mr. 
Cipolla was saying about the folks who are toward the end of 
their career. Sometimes it is to the advantage of the agency to 
offer various inducements to get people to stay a bit longer; 
and we do know that a thing called phased retirement is 
becoming more popular in the workforce of the country at large, 
where sometimes we offer people the opportunity to come back on 
a part-time basis 2 or 3 days a week or something like that, to 
stay in the workforce and to keep that institutional knowledge 
that was gained over a long career available to the 
organization.
    Mr. Holman. I would agree with what has been said, just 
echo, I think, the key word is balance in terms of requisite 
skills, grade, allowance for succession planning as we see the 
larger portion of the workforce seeming to be grouped in the 
40s and 50s, closer to the 50s, and nearing retirement in the 
next few years. So it is a requirement for orderly succession 
planning and balance in that workforce.
    Mr. Ortiz. And I just have one more question because I 
would like for the other Members to also ask questions.
    Mr. Cipolla, in your research, are you finding evidence of 
a general shortage of technical workers in the United States? 
If that is so, given the operation of the law of supply and 
demand, the skilled workers will be able to shift from job to 
job almost at will.
    Would it not make more sense for the Department of Defense 
to contract for these workers as needed, rather than trying to 
rewrite civil service law to provide extraordinary authorities 
likely necessary to be able to maintain a large permanent 
staff?
    Mr. Cipolla. Well, the premise that you stated, as you 
stated it, I would have to agree with. First of all, the 
shortage does exist. There is no sign that it is going to abate 
in the near future. The market is going to become even more 
competitive for scientific, technological and particularly 
people who have skills in information technology.
    What you have described is actually happening, to the point 
that if you looked at the numbers of the information technology 
workforce across government agencies, you would find that we 
have now reached the point that there are more contract 
employees than there are civil service employees.
    That in itself is not bad, but it raises all kinds of 
questions about our ability to manage that kind of a mix.
    Mr. Ortiz. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz.
    Now, Mr. Mica.
    Mr. Mica. Thank you.
    Just a follow-up to that, Mr. Cipolla. I am not in the 
military side of this, I have watched it from the civilian 
side, but you do not have to be a military analyst to see that 
we have a change in the world situation and that we are now 
doing employments in sort of peaks and valleys.
    How do you maintain a minimal civilian force and then be in 
a position to meet these peaks unless you go to contracting?
    Mr. Cipolla. Well, I am sure our colleagues from DOD are 
going to talk about the strategic sourcing process which is 
aimed at identifying that core workforce or those core sets of 
competencies that are needed. The problem is that they need to 
be continually updated and there needs to be a systematic 
process that reassesses those determinations in the light of 
what is going on in the environment.
    Mr. Mica. Well, you have not answered my question.
    With the active military, we have a Reserve force and we 
call them up. With civilians, you have a core, then what is the 
model to meet the peaks and valleys of the civilian workforce 
if it is not full-time employees or contractors? How do you 
approach this and be prepared all the time? What are the 
recommendations before we hear from the other folks.
    Mr. Cipolla. I do not know that there is a model that can 
be applied, a quantitative model that can be applied, across a 
whole agency or even a major part of it.
    What has to drive the determination about what the right 
mix is an assessment of what is needed in terms of the core 
work, what are the competencies that are required. If we cannot 
get them from internally within the department's workforce, we 
cannot compete in the market, then maybe the best response is 
to contract. But I do not know of any overriding model.
    Mike, maybe GAO--
    Mr. Brostek. I would agree that one of the likely sources 
for dealing with considerable workload fluctuations is 
contracting. It is certainly a legitimate source to turn to.
    Agencies also have the ability to do some term hiring for 
employees, bringing them in for--I believe it is up to a 3-year 
period of time, as Federal employees to work on short-term 
projects. That can also be another mechanism for dealing with a 
fluctuating workload situation and might be a situation that is 
desirable to use if you want to be creating government policy, 
doing inherently governmental functions, which you would not 
normally want to; you would not ever really want to contract 
out.
    If I could jump back for just a second to Mr. Ortiz's point 
which is relevant to your question, too, Mr. Mica, to the 
extent we do rely more and more on a contract workforce and we 
use them as the reservoir of talent for dealing with workload 
fluctuations, we have to be very careful to have reserved in 
the Federal Government sufficient oversight capacity to monitor 
the cost and the quality of the contract services that we are 
being provided because if we do not have a sufficient reservoir 
of capacity to monitor the cost and quality, we can suffer some 
pretty unfortunate consequences even through the contracting 
process.
    Mr. Mica. One more final question, if I may, Mr. Chairman.
    Mr. Bateman. Certainly.
    Mr. Mica. We spent somewhere in the neighborhood, I think, 
of $4 billion on buyouts since 1993. They came in and we did 
all kinds of buyouts and I became concerned; Mr. Cummings and I 
held hearings on this, about what was going on. Did we go 
overboard in the buyout area? Are we now suffering from going 
beyond what we should have with the buyouts or was it a 
balanced approach?
    Mr. Cipolla.
    Mr. Cipolla. That is a difficult question. Did we go 
overboard? It has to consider the requirements and the targets 
that agencies were expected to accomplish.
    Unfortunately, at least in the early stages, buyouts were 
being used to avoid restructuring, rather than to support 
restructuring. And, of course, our recommendation is that that 
whole process be turned around. To the extent that we can 
identify what the projected organization should be doing and 
structure it accordingly, if we need buyouts, to either protect 
needed skills or to eliminate those that we do not need, then 
that is a more appropriate use, but the Department of Defense 
did not have those kinds of options, especially in the early--
nor did any agency--in the early stages.
    Mr. Brostek. We did, as you know, for you, Mr. Mica, a fair 
body of work on the downsizing as it was occurring and we did 
find that early on in the downsizing period, not necessarily 
just through buyouts but through all the techniques that were 
used, that there was kind of a rush to meet the target and 
there was inadequate planning to assure that when the target 
was met that the reduced workforce, that those who were left 
had the knowledge, skills and abilities necessary to perform 
the mission of the agency well.
    Through legislation that you were involved with, as I 
recall, there was a requirement that agencies begin doing 
better workforce planning before they were able to offer any 
buyouts; and when we investigated agencies after that 
legislation passed, we did see some improvement in the 
targeting of the incentives for separations and thus a better 
balance in the workforce as the downsizing continued.
    Nevertheless, with what we saw early on in the downsizing 
period and the lack of hiring for a number of years during the 
1990s, we are likely to still have some imbalances in the 
skills and abilities of the workforce.
    Mr. Mica. Thank you.
    Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Mica.
    Now Mr. Cummings.
    Mr. Cummings. Mr. Brostek, just following up on what you 
just talked about, do you think there is enough authority now 
to be able to maintain that balance?
    In other words, if you have one area where you really need 
people, say, for example, technology and then you have this 
other area that just hypothetically is more toward the manual 
labor side and now the technology has just taken over, is there 
enough authority to be able to, for example, have a buyout 
situation for the manual labor folk and keep the other folk 
without, you know, the skilled computer folks, without running 
into problems? Because it seems like that is what you would 
almost have to do.
    Mr. Brostek. As I understand it, there is not a blanket 
authority that exists now for agencies to use buyouts to 
restructure or reshape their workforce.
    As a general practice, when agencies have buyout or early 
out authority, it is generally connected with a reduction in 
full-time equivalents (FTEs), someone leaves with a buyout and 
the agency loses one position to fill.
    There have been a number of instances in which Congress has 
granted exceptions to that, specific legislation that was 
crafted for a specific situation in which an agency was given 
the ability to offer a buyout to restructure its workforce 
along the lines of what you are talking about. Whether or not a 
blanket authority is needed, we have not really assessed that, 
but we certainly think it would be important for agencies to 
kind of make a fact-based case for why they need that, even if 
there was a blanket authority, before they started using the 
buyouts again.
    Mr. Cummings. In my district, a private company, Domino 
Sugar, I guess about 8 or 9 years ago moved to computerize 
itself. It is now about 90 percent computerized and they 
literally cut their workforce almost in half. And they are able 
now to produce sugar--when you even throw in inflation--at the 
same cost that it was in 1960. That is amazing. So the question 
becomes when they did that, though, they went through an 
intense retraining and so now you have these guys that used to 
be toting these big bags of sugar sitting up in an air 
conditioned booth hitting buttons. And, you know, it was just 
so interesting and they are making more money; they are doing 
fine; but I was just wondering, how much emphasis do we put on 
retraining of the personnel that are there?
    I think, you know, that kind of thing is good for morale, 
when people feel that they can now do something that they could 
not do before. It also bodes well for upward mobility. All of 
those kinds of things, I think, go to morale and I think that 
that is something that we all have to be concerned about with 
regard to employees in the Federal Government and I was just 
wondering where are we on those kind of things.
    Mr. Brostek. Well, I think both Mr. Cipolla and I indicated 
in our statements that training and retraining of the workforce 
as the techniques used for carrying out the mission change is a 
very important part of workforce planning and the execution of 
workforce planning.
    We do not have a very good grasp on what the training 
situation is in the executive branch. There is not any central 
reporting of training expenditures. We do have anecdotal 
evidence that during downsizing training was one of the areas 
that tended to be cut and cut fairly severely. So it is a 
possibility that this is an area in which additional 
investments will be needed.
    Mr. Cummings. Now, Mr. Cipolla, you talked about flexible 
employment arrangements. What do you mean by that?
    Mr. Cipolla. Well, anything other than the traditional 8 to 
5 or 5-day-a week, 40-hour work week; different tour 
arrangements, even different--the telecommuting that we talked 
about earlier. That term would include contracting, it would 
include the contingent or the supplemental workforce, the 
temporary people that we would add, even from an employment 
agency, to meet a current need that we would not meet over the 
long term.
    In government, in most agencies, over the years, we have 
tended to think of a full-time permanent employee as the only 
way we fill a position. We fill it the same way it was vacated, 
as opposed to looking at different options among those that I 
mentioned for getting the work done.
    Mr. Cummings. Do we have--I mean, what elements will we 
have to have, say, an agency will have to have for 
telecommuting to be effective and for you to have--apparently 
it works in certain kinds of private industry and I guess the 
question becomes just how do we make it work, say, for Federal 
Government or the various agencies within the government?
    Mr. Cipolla. It essentially has to be--at least this is our 
experience--a local matter and one in which employees and 
managers can work out to their satisfaction--if there are 
unions recognized, they should be involved, employees need to 
be involved as early as possible in any proposal involving 
telecommuting and there may even need to be training for 
managers on the advantages and disadvantages of going to a 
telecommuting arrangement. But it basically starts as a local 
process where you cannot communicate too much about what the 
intent is.
    Mr. Cummings. All right. I do not have anything else. Thank 
you.
    Mr. Bateman. Thank you, Mr. Cummings.
    Now Mr. Underwood.
    Mr. Underwood. Thank you, Mr. Chairman, and thank both of 
you for having this hearing.
    I want to ask a couple of questions, not so much in the 
framework that is offered to us here as managing human capital, 
but just more or less what happens to these human beings as a 
result of these so-called cost saving measures.
    In particular in the community I represent, A-76, which has 
just been devastating because it is not only the largest A-76 
effort, it really has altered the dynamics of Federal 
employment and all the kinds of issues that have been brought 
out here ranging from no more interest in Federal employment to 
the aging to the problems associated with priority placement, 
what you do with an isolated community in which the only other 
option that people have is to seek employment in the Federal 
system 5,000, 6,000 miles away.
    So the questions that I wanted to raise were in terms of 
the thinking behind the kinds of protections or offers that we 
give to Federal employees who are experiencing these job cuts 
and they include early retirement and the buyouts and perhaps 
some attention to mobility; the two questions I have related to 
that and then I have yet another question is what kind of 
thinking have either of you gentlemen given to what kinds of 
additional programs or protections can be provided or offered 
to the Federal employees who are experiencing this; and, 
second, has either one of you studied what has happened to 
people who exercised the right of first refusal, what 
experiences do they undergo because the people who are--this 
right of first refusal has been touted as a way to provide some 
worker protection and in this particular instance that we are 
just undergoing these 3 months, people are being offered--
people who used to make $28,000 a year are now being offered 
$17,000 a year and so. I rather doubt that, one, we have yet to 
see in the Armed Services Committee the savings that allegedly 
come from that and, second, we certainly see the cuts into the 
pay that are given to these Federal employees.
    So could you address the issue of what kind of general 
thinking is there on the issue of incentives or protections and 
also what happens to the right of first refusal?
    Mr. Holman. Mr. Underwood, we have not done any systematic 
look at the right of first refusal. We know that certainly is 
there and it is an opportunity for Federal workers who are 
affected by the A-76 process to accept employment with the 
winning contractor when the contractor wins the competition.
    Anecdotally, I can say to you I have heard stories of 
communities where the affected workers got equal if not better. 
I have also heard stories of other communities where perhaps 
workers may end up getting less benefits. But nothing overall 
that would say what the overall trend is.
    I do know of one situation that is currently underway with 
the Army's logistics modernization effort. That effort offered 
employees a pretty good package, a soft landing, to accept 
employment with the winning contractor; and I think the verdict 
is still out as to how many of those employees will, in fact, 
take that offer.
    One of the things you run into at this day and time with 
the aging of the workforce, you have so many workers within 5 
or 6 years of being eligible for retirement and while they may 
have a good safety net or a package to go to with that winning 
contractor, they are not quite willing yet to forego obtaining 
the retirement benefits they could get under civil service. So 
that is an issue that is out there that looms that affects a 
lot of people; but overall, I cannot say we have detailed 
information on acceptance or rejection of the right of first 
refusal.
    Mr. Underwood. I think that certainly suggests itself for 
potential study and certainly a more systematic inquiry.
    What about the issue of having additional incentives or 
protections? Is there any other ideas that have been generated?
    Mr. Brostek. We have not really done any investigation of 
what in addition to what is currently available might be 
needed.
    Mr. Underwood. Okay. The issue of core competencies has 
been raised, trying to identify that core workforce, and the 
term ``inherently governmental'' is used to describe which 
employees or which kinds of activities you are going to keep on 
civil service activities with civil service employees.
    Has, in your experience, the term ``inherently 
governmental'' been applied or understood evenly or have there 
been efforts to kind of make the definition elastic or contract 
whenever someone thinks that it is convenient to do so?
    Mr. Cipolla. Sir, I believe that is likely a rhetorical 
question.
    Mr. Underwood. No, I am interested--well, I am not 
interested in a rhetorical answer. Maybe you can just give me 
some facts so that I can ask another rhetorical question.
    Mr. Cipolla. Our experience from talking with people in 
agencies, not only in DOD but across government, is that it is 
difficult to reach a consistent view of what is inherently 
governmental, as well as have people articulate a consistent 
process. And I cannot add anything to that. That basically is--
    Mr. Underwood. Well, so then it is not inherent.
    Mr. Holman. Mr. Underwood, I think the work that we have 
done on the A-76 issue indicates to us that that is very much a 
subjective term. It does vary across agencies. In fact, we are 
doing some work now looking at the DOD's application of their 
DA-20 process as well as the FAIR act and I think it is safe to 
say you do see some inconsistencies between the services. I 
think it is going to be an evolutionary process as greater 
attention is given to looking at individual functions and 
trying to determine whether they do involve work that should be 
done in house or potentially subject to competition and 
contracting out. But there is very much an element of 
subjectivity involved.
    Mr. Underwood. Well, thank you for those comments and 
obviously for it to be an evolutionary process means that a lot 
of people get nicked in that process of evolution.
    More importantly, as I pointed out to you, Mr. Chairman, 
ordinance activities are not even seen as inherently 
governmental in the contracting out on this particular A-76 
study and it is not even seen as an issue of readiness; and 
this is a great source of disappointment to me and is a point 
of contention in the implementation of this particular A-76 
issue that I am referring to and I certainly would ask other 
members of the committee to help me sort this out.
    Thank you.
    Mr. Bateman. Thank you, Mr. Underwood.
    Mr. Ortiz has a question.
    Mr. Ortiz. This goes back to when you were talking about 
the necessity of having some type of balance, the contract 
workers versus the civilian portion. Let me tell you of an 
experience I had last week or even before that.
    As you well know, some of the Apaches were grounded, could 
not fly, they needed to be refurbished and that is very key to 
our readiness, Mr. Chairman.
    They went to a private company and they told them we need 
to work on 700 Apache helicopters. The answer was we can get 
started in May of this year and maybe finish by late 2001. 
Well, they went to the civil service workers. They are finished 
with the work before the other company could get started.
    I do believe very strongly that there has to be a balance. 
The gentleman went down and says when he came to me, I am 
supposed to supply these helicopters when we go to war and we 
were not in any position to do so. And he went down just to 
thank them because the company, without having to name a name 
could not do it; but the civil service workers could do it a 
year before the other company could get started. So I think 
that the balance, Mr. Chairman, is very, very important. I just 
wanted to make this point and maybe you can add something to it 
or maybe you have some experiences such as this.
    Mr. Cipolla. That is an excellent point and there are as 
many anecdotes of that sort on one side of the issue as there 
are on the other side, which points up the need for the 
validity of the process and even more importantly for having an 
objective that tries to achieve as much balance as possible.
    Mr. Bateman. All right. Anything further?
    Mr. Cummings or Mr. Ortiz.
    [No response.]
    Mr. Bateman. Gentlemen, we thank you very much for 
appearing before us today and giving us the benefit of your 
thinking on these matters and we are in your debt.
    And with that, we will excuse the first panel and ask the 
second panel if they would come up and be seated.
    Our second panel this afternoon consists of the following 
witnesses: Dr. Diane M. Disney, Deputy Assistant Secretary of 
Defense for Civilian Personnel Policy; Mr. David L. Snyder, 
Deputy Assistant Secretary of the Army for Civilian Personnel 
Policy; Ms. Betty S. Welch, Deputy Assistant Secretary of the 
Navy for Civilian Personnel; Ms. Mary Lou Keener, Deputy 
Assistant Secretary of the Air Force for Force Management and 
Personnel; and Mr. David O. Cooke, Director of Administration 
and Management, Office of the Secretary of Defense.
    Dr. Disney, we have your full statement, and it will be 
made part of the record, and now you may proceed as you choose.

 STATEMENTS OF DR. DIANE M. DISNEY, DEPUTY ASSISTANT SECRETARY 
  OF DEFENSE FOR CIVILIAN PERSONNEL POLICY; DAVID L. SNYDER, 
  DEPUTY ASSISTANT SECRETARY OF THE ARMY (CIVILIAN PERSONNEL 
POLICY); BETTY S. WELCH, DEPUTY ASSISTANT SECRETARY OF THE NAVY 
   FOR CIVILIAN PERSONNEL; MARY LOU KEENER, DEPUTY ASSISTANT 
SECRETARY OF THE AIR FORCE FOR FORCE MANAGEMENT AND PERSONNEL; 
AND DAVID O. COOKE, DIRECTOR OF ADMINISTRATION AND MANAGEMENT, 
               OFFICE OF THE SECRETARY OF DEFENSE

    Secretary Disney. Thank you, sir.
    Mr. Chairman, members of the subcommittees, I am pleased to 
be here today to discuss the matters affecting the civilian 
workforce within the Department of Defense.
    Over 10 consecutive years of downsizing have brought 
significant changes in DOD's workforce, as has already been 
pointed out. As fiscal year 1989 ended, DOD employed about 1.15 
million people. A decade later, the number had declined to some 
732,000, a drop of over 36 percent. Plans call for another 11 
percent drop from that number by the end of fiscal year 2005.
    What does all of this mean?
    First, there has been a 4-year increase in the average age. 
Further, the number of employees younger than 31 has dropped by 
76 percent. A third of current workers are aged 51 or older, as 
accessions have fallen from some 65,000 a year to about 20,000. 
This poses problems in the transfer of institutional knowledge.
    Second, we are seeing increasing levels of 
professionalization. While there has been a decline in all 
major areas, the sharpest drops have been in clerical and blue-
collar jobs. The share in professional, technical and 
administrative jobs has risen.
    Third, today's workforce is more highly educated than in 
the past and that is because today's jobs require more 
education and training than did earlier ones. Accompanying 
these changes has been an increase in typical grade level and 
in average costs.
    We clearly have a workforce that is very different from 
that of a decade ago.
    We have worked hard to minimize the trauma associated with 
the drawdown. Indeed, we have held layoffs to less than 9 
percent of total separations. Foremost among our internal 
efforts has been our Priority Placement Program. Tied closely 
to that have been the Voluntary Early Retirement Authority 
(VERA) and the Voluntary Separation Incentive Payment (VSIP) 
better known as the buyout. We are very grateful for your 
support with both of these and in related areas as well.
    We also owe credit for workforce stability to our labor/
management partnerships which have improved relationships, 
increased productivity and reduced costs.
    Unfortunate byproducts of the drawdown include the 
declining rate of promotions and certain areas of skills 
imbalance. Another challenge has been to develop leaders for a 
world of broader responsibilities, more complex missions and 
fewer resources. That is why we created the award winning 
Defense Leadership and Management Program. This systematic 
investment in potential civilian leaders will show dividends 
far into the future.
    Despite the pressures of change, defense civilians have 
continued to dedicate themselves fully to the department's 
mission. Outside pressures, though, are taking their toll. 
Because of the robust American economy, the civil service 
simply cannot match some private sectors' starting salaries.
    While we use the workforce shaping tools I mentioned 
earlier, we ask for your continuing assistance as we enter the 
serious right-sizing phase. First we are continuing to develop 
tools for force shaping. These would provide the flexibility to 
meet critical mission needs and correct skill imbalances.
    For example, some units have downsized and reengineered to 
where they have the right number of employees, but might not 
have the right mix of skills. We are looking to modifications 
of VERA and VSIP in this regard.
    We are also seeking to extend the authority for employees 
to participate voluntarily in reductions in force. Another 
request will be to restructure the restriction on degree 
training. To permit us to be more competitive in the labor 
market, the department is developing a proposal for an 
alternative hiring system.
    You have also expressed interest in our personnel system 
regionalization and systems modernization. We now have 22 
regional personnel centers. We have eliminated 10 non-
interoperable data systems. Our new data management system has 
been successfully deployed to sites in the Army, Navy and the 
Air Force. After milestone 3 approval later this month, full 
deployment begins and these efforts will save the department 
over $220 million a year.
    That concludes my remarks. Thank you again for this 
opportunity to discuss issues related to our valuable civilian 
workforce, and I will be pleased to answer your questions.
    [The prepared statement of Secretary Disney can be found in 
the Appendix on page 358.]
    Mr. Bateman. Thank you very much, Dr. Disney.
    Now we will be happy to hear from Mr. Snyder, Deputy 
Assistant Secretary of the Army for Civilian Personnel Policy.
    Mr. Snyder.
    Secretary Snyder. Thank you, Mr. Chairman. I also have more 
detailed remarks, and I will just summarize those.
    Mr. Bateman. All of the witnesses' prepared statements will 
be made a part of the record.
    Secretary Snyder. Mr. Chairman and distinguished 
subcommittee members, thank you for the opportunity to testify 
on Army civilian workforce issues and also for your commitment 
to policies and programs that maintain the high quality of the 
Federal service.
    My statement will discuss the Army's experience with the 
civilian drawdown, strength projections and related issues.
    During the 10-year period that ended 30 September 1999, the 
Army reduced its total appropriated fund strength by more than 
42 percent. When only military functions are included, our 
civilian strength declined by more than 44 percent during the 
above period. We are programmed to reach an end strength of a 
little over 209,000 by 2005. This will be a 48 percent 
reduction from the fiscal year 1989 level.
    We have experienced similar demographic changes to those of 
DOD as a whole, including a shift toward a greater proportion 
of the workforce in professional occupations and higher 
educational levels.
    The age and tenure of Army civilians has increased 
significantly during the drawdown and 30 percent of our 
professional, administrative and technical workforce will be 
eligible for optional retirement in 2003, 62 percent in 2010.
    To counter the losses we expect, it is critical that we 
significantly increase our civilian recruitment and entry 
levels, particularly in the professional, administrative and 
technical occupations. The Army has an intern program, and that 
is one of the means and methods that we use to access those who 
will become our future civilian leaders. We centrally fund our 
intern program, but it has declined steadily over the years 
during the drawdown. In 1989, we had a total of 3,800 civilian 
interns. We will have 950 in fiscal year 2001.
    We anticipate greater difficulty in filling journeymen 
level and leadership vacancies with highly qualified and well 
trained employees. Given the tight labor market, recruitment 
competition among employers is intense and the Army, as well as 
other Federal agencies, are at a competitive disadvantage 
because of certain requirements and restrictions of the Federal 
personnel system.
    We are participating with the Office of the Secretary of 
Defense (OSD) and the other components in a development of the 
DOD alternative system that Dr. Disney referred to. We also 
have been participating in regionalization and it has been a 
challenge. We have aggressively addressed the needs of our 
customers and we will continue to do so, but it has not been 
easy.
    Now, one final thing on the Army civilian workforce. It has 
been and will continue to be a major contributor to military 
readiness, performing a wide range of future functions 
essential to the Army's mission. Over 43,000 civilians of the 
Army are forward stationed around the globe. Army civilians 
have provided direct support to operations such as Desert 
Storm, Haiti and those in the Balkans. And because of this 
dedication by our Army civilians to this important work, I am 
especially pleased to have the opportunity to present the 
Army's views on matters affecting our civilian workforce.
    This concludes my remarks. I will be pleased to answer any 
questions.
    [The prepared statement of Secretary Snyder can be found in 
the Appendix on page 378.]
    Mr. Bateman. Thank you, Mr. Snyder.
    And now we will be pleased to hear from Ms. Welch, the 
Deputy Assistant Secretary of the Navy for Civilian Personnel.
    Ms. Welch.
    Secretary Welch. Thank you, Chairman.
    Members of the subcommittees, I am also pleased to be here 
today to provide testimony about the civilian workforce of the 
Department of the Navy.
    This afternoon I will talk to you about the impact of 10 
years' worth of civilian workforce downsizing, where we are now 
and some of our plans for the future.
    Today, as a result of downsizing and reduced hiring, our 
civilian workforce is 44 percent smaller than it was 10 years 
ago. We achieved this reduction and minimized the impact on our 
civilian workforce by using all of the tools available to us, 
including the DOD priority placement program, outplacement 
services and the separation incentive pay authorized by 
Congress in 1993. Before the incentive pay, 56 percent of our 
separations were involuntary. With incentive pay, that number 
dropped to 17 percent.
    Downsizing left us with a more senior workforce. Ten years 
ago, only 16 percent of our workforce was eligible for 
retirement. Today, that figure is closer to 34 percent. This 
situation is even more troubling when you realize that 47 
percent of our engineers, 55 percent of our scientists and 64 
percent of our contract specialists will be eligible for 
retirement in the next 5 years.
    The average age of our non-supervisory blue collar 
employees is 47. In the next 5 years, 53 percent of them will 
be eligible for retirement. This means we have an older 
workforce closer to retirement without an adequate number of 
replacements in the pipeline.
    To prepare for the future and to ensure we have a diverse 
and highly skilled civilian workforce, we recognize the need 
for attracting, retaining and developing employees ready to 
meet the Navy's mission. For the professional and 
administrative workforce, we are supporting our commands in 
establishing and coordinating a recruiting effort to attract 
highly qualified individuals. On the blue collar side, the 
Department of the Navy has a long and illustrious history of 
hiring and training the best deck plate workforce in the world.
    During the past 10 years, as we have closed several of our 
shipyards and aviation depots, our apprentice programs slowed 
to a trickle. Today, our systems commanders and the Atlantic 
and Pacific fleet commanders who are responsible for the 
department's depot level workforce consider the apprentice 
program a vital part of their efforts to prepare for the 
workforce of tomorrow. Thanks to the additional funding 
received in fiscal year 1999 and fiscal year 2000, our 
apprentice programs are now being revived.
    The well being and development of our current workforce is 
also an important part of our future. Our focus is in three 
areas: workforce development, quality of work life and 
workplace dispute resolution.
    First, we are committed to our workforce through programs 
such as the DOD leadership and management program, the 
Department of the Navy's civilian leadership development 
program and continuous learning initiatives for our employees.
    Second, we are continuing to encourage our commands and 
activities to use flexible work arrangements such as job 
sharing, part-time employment, alternative work schedules and 
satellite work locations suitable to local needs.
    And, finally, we are focusing on workplace dispute 
resolution, an issue of extreme importance to our employees and 
managers. In 1997, we launched a reengineering project to look 
at our equal employment opportunity program. The No. 1 problem 
cited by both managers and employees was the costly, lengthy 
divisive process used to resolve equal employment opportunity 
(EEO) complaints.
    With that in mind, we put together a pilot EEO complaint 
process that deals with these issues and provides a less 
contentious forum for resolving workplace disputes. We are 
extremely pleased with the results to date. Our employees at 
the pilot sites are choosing to take a more active role in 
early resolution of their disputes. More of the complaints are 
being resolved informally, and the processing time and costs 
have been significantly decreased. Based on our positive 
experience, we are expanding the pilots to several more 
activities this year.
    This concludes my remarks. Thank you for the opportunity to 
address you, and I would be pleased to answer any questions you 
may have for me.
    [The prepared statement of Secretary Welch can be found in 
the Appendix on page 391.]
    Mr. Bateman. Thank you, Ms. Welch. I neglected to mention 
that a part of your title is Secretary of the Navy for Civilian 
Personnel and Equal Employment Opportunity, so I can understand 
why you highlighted that.
    Now we will hear from Ms. Mary Lou Keener, Deputy Assistant 
Secretary of the Air Force for Force Management and Personnel.
    Ms. Keener.
    Secretary Keener. Mr. Chairman and members of the 
subcommittees, I am pleased to join Dr. Disney and other panel 
members in testifying on these very important issues. It is a 
privilege to represent the Air Force civilian workforce whose 
daily contributions ensure the readiness of our force.
    The Air Force cannot rely on just one element of our force 
for readiness. It takes all of our people, military, civilian, 
Guard and Reserve, their integrated contributions and the 
synergy and flexibility they create to ensure that we are the 
preeminent expeditionary aerospace force in the world.
    We appreciate the support that the Congress has provided to 
address military recruiting and retention issues. Our 
challenges in the civilian workforce are no less serious.
    My written testimony addresses these challenges in more 
detail, but I would like to spend the majority of my time this 
afternoon and focus my comments on how we in the Air Force plan 
to address these challenges.
    I would like to tell you that we do have a plan to meet 
these challenges. We have a civilian workforce shaping plan 
that we feel is specifically geared to satisfy our future Air 
Force mission requirements. And with your help, we are prepared 
to begin to execute this plan.
    In my written testimony on page 5, there is a colored bar 
graph, and this graph depicts for you where we anticipate that 
our civilian workforce needs to be by the year 2005. That graph 
also outlines for you the three major elements of our workforce 
shaping plan that will, we feel, assist us to reach our 
objectives. That plan consists of three major elements. Those 
major elements, as you can see, are first of all force renewal, 
force skills, development skills, accuracy and separation 
management.
    In the area of accession planning, force renewal is a 
priority for us and it is particularly critical in the depots. 
The depot maintenance community has experienced a decade long 
hiring restriction freeze and Base Realignment and Closure 
(BRAC) actions that have resulted in a severe imbalance in 
skills and levels of experience.
    In the next few years, we will lose more employees, 
particularly in the blue collar occupations, due to years of 
service and we need to undertake aggressive hiring efforts.
    In the area of force development, the Air Force will invest 
in training and retraining our current employees to keep them 
up to date in this rapidly changing environment, but we also 
need the ability to achieve that third prong of our plan which 
is to stimulate and manage separations in our workforce.
    The voluntary early retirement and voluntary separation 
incentive programs that you provided us with, and for which we 
are very grateful, have been very valuable tools to rapidly 
draw down the force; but we need the ability to offer targeted, 
voluntary incentives that are not tied to reduction in force 
and can be used with more precision in shaping the workforce 
that is needed to meet our mission requirements.
    In closing, the Air Force believes that it takes all 
elements of our total force working together in a seamless 
manner to sustain readiness. With your help and the tools 
necessary to execute our workforce shaping plan, we will 
sustain the best force mix and the best talent to do our job.
    We appreciate the opportunity to address these critical 
issues regarding the civilian component of our force, and I 
will be happy to answer any questions of the panel.
    [The prepared statement of Secretary Keener can be found in 
the Appendix on page 400.]
    Mr. Bateman. Thank you, Ms. Keener.
    Now we will be pleased to hear from Mr. David O. Cooke, who 
is Director of Administration and Management of the Office of 
the Secretary of Defense.
    Mr. Cooke.
    Mr. Cooke. Thank you, Mr. Chairman. I am here representing 
what we call the Fourth Estate. Perhaps I had better define 
that. The Fourth Estate is the Department of Defense which is 
not in the Departments of Army, Navy and Air Force.
    You know, it is really--
    Mr. Bateman. Mr. Cooke, if you would, pull that microphone 
a little closer to you.
    Mr. Cooke. I will indeed.
    The Fourth Estate is composed of defense agencies, defense 
field activities, and several other defense organizations, not 
as alike as peas in the pod. Some of these defense agency field 
activities are very small, some of them represent substantial 
size, Defense Logistics Agency, for example, or the Defense 
Finance and Accounting Agency.
    The problems in the Fourth Estate, though, are essentially 
those described by my colleagues, Dr. Disney and so forth. We 
appreciate the opportunity to be heard on these problems. I can 
only observe that the Fourth Estate as a group is 
overwhelmingly civilian, more so than the military departments. 
It is more heavily white collar and it is more heavily female 
in composition.
    Now, there is a tendency to think that all members of the 
Fourth Estate are alike and that is simply not true in terms of 
organization, mission, reporting assignments and so forth. For 
example, there are some, I think, misconceptions that 
Washington Headquarters Services is just OSD by another name, 
but Washington Headquarters Services is an operating function. 
It supports, for example, all administrative space, General 
Services Administration (GSA) space, in the National Capital 
Region. I have a small outfit in Washington Headquarters 
Services which is responsible for absentee voting worldwide. We 
are doing some very interesting things, by the way, and seeing 
whether we can eventually have voting by the Internet.
    The Fourth Estate has grown over the years, largely by 
taking functions which were fragmented among the military 
departments and pulling them together into a defense agency or 
a defense field activity, but nonetheless we have maintained 
our share of reductions along with the military departments. 
OSD itself, for example, has come down by 33 percent and so 
there are significant reductions.
    We certainly need the things that Dr. Disney talked about 
to shape the workforce. We support them and I am, of course, 
available to answer any questions you may have.
    Thank you.
    [The prepared statement of Mr. Cooke can be found in the 
Appendix on page 415.]
    Mr. Bateman. Thank you, Mr. Cooke, and I thank all of the 
witnesses for being here with us today and providing us with 
their testimony.
    I am intrigued as to some of the statistics. I do not 
remember them all, I did not write them all down, but we have a 
DOD wide percentage reduction in civilian personnel. We have 
different percentages for each of the services.
    Could you review for me what the percentage reduction has 
been since, say, 1989 or whatever date is more convenient so 
that we have an idea as to the relative size of the downsizing 
in each of your agencies?
    Secretary Disney. For the department as a whole, the 
reduction has been from 1.15 million to roughly 732,000, which 
is roughly 36 percent.
    Mr. Bateman. And for the Army, that figure is?
    Secretary Snyder. Mr. Chairman, the Army has gone from 
406,000 civilians at the end of September 1989 to approximately 
today about 220,000. That is roughly 42 percent.
    Mr. Bateman. And, Ms. Welch, the Navy.
    Secretary Welch. The Navy, sir, in September 1989 we were 
at about 130,000; December 1999, 184,700 or about 44 percent 
smaller.
    Mr. Bateman. And, let us see. Mr. Cooke, in your Fourth 
Estate?
    Mr. Cooke. I would like provide it for the record. You do 
not want all 14 defense agencies and seven--
    Mr. Bateman. Yes. You do not have--
    Mr. Cooke. Overall, there is a substantial reduction, but 
that number will be sort of meaningless because some of our 
larger agencies have taken much larger percentages than some of 
the smaller ones and so forth.
    Secretary Disney. Mr. Chairman, if I could?
    Mr. Bateman. Yes. Certainly.
    Secretary Disney. I would like to take this question for 
the record because even though we know the numbers, there are 
differences in whether everyone is talking about military and 
civil functions. So in order to make certain that we are giving 
you consistent numbers, I would like to be able to provide the 
data for you.
    Mr. Bateman. That would be very helpful if you would, Dr. 
Disney.
    Secretary Disney. I will do that.
    Mr. Bateman. Ms. Keener, I did not give you a chance to 
answer. Excuse me.
    Secretary Keener. Mr. Chairman, in fiscal year 1989, the 
Air Force stood at 260,000 members. At the end of fiscal year 
1999, we were at 165,000 for a decrease of about 37 percent.
    Mr. Bateman. Okay. There are further reductions in the 
civilian personnel force contemplated. What is that number?
    Secretary Disney. Yes, sir. Another 11 percent from the 
fiscal 1999 levels between now and the end of 2005.
    Mr. Bateman. Who determined that that number should be 11 
percent as opposed to 15 percent or 5 percent?
    Secretary Disney. That is part of our normal budgeting 
process, sir.
    Mr. Bateman. But it is a figure developed by the Department 
of Defense?
    Secretary Disney. A department wide effort. Yes.
    Mr. Bateman. Not something that we in the Congress said you 
shall reduce by that number?
    Secretary Disney. Well, there are some instances where the 
Congress indicates that we should take cuts of a certain 
magnitude either number or percentage, as in headquarters and 
as in the acquisition corps.
    Mr. Bateman. My colleague Mr. Hunter is very prone to be 
very outspoken on those categories of personnel.
    Secretary Disney. Yes, sir.
    Mr. Bateman. Do you have any observations you would like to 
make on that subject?
    Secretary Disney. On Mr. Hunter or on reductions? 
[Laughter.]
    Mr. Bateman. I am sure we would all praise Mr. Hunter, but 
on the question of the reductions and whether they are 
manageable.
    Secretary Disney. Yes, sir. The department would find it 
much easier to manage if there were not constraints on specific 
percentages in specific areas. That would make it perhaps 
easier to manage to meet the full competency needs for 
readiness as we have indicated earlier.
    Mr. Bateman. You have spoken in terms of the number of 
people and the dramatic increase in the number of people 
eligible for retirement. Do you contemplate a need for 
incentives for people not to retire?
    Secretary Disney. No, sir. We already have retention 
options that are available to us.
    Mr. Bateman. So you have some tools to encourage selected 
skills that are in short supply to remain in the workforce, 
even though they are eligible for retirement.
    Secretary Disney. Yes. And we find that a great many people 
who are retirement eligible do not in fact retire.
    Mr. Bateman. I have done that for a while myself.
    Secretary Disney. And we have an example right here at the 
table.
    Mr. Bateman. Okay.
    Mr. Mica.
    Mr. Mica. Thank you.
    I am wondering if you have looked at ways to create 
incentives to stay since it costs so much to train new people; 
since people are living longer and working longer, is there 
anything that you have recommended in your legislative package 
or personnel changes and procedures as incentives to stay?
    Secretary Disney. No, sir.
    Secretary Keener. I would add, Mr. Mica, that in the Air 
Force, we have recently executed a 10 percent across the board 
retention bonus for our Reserve pilots, so that is one 
initiative that we have just executed.
    Mr. Mica. Well, it seems like it would, you know, in an 
area that is highly technical if you can get these folks to 
stay on and encourage them--they are going to probably retire, 
get some retirement benefits and go do the same thing somewhere 
else, which does not make a whole lot of sense.
    Secretary Disney. Well, sir, we do have the retention 
allowances and we are making every effort to make certain that 
managers across the department are more aware of these so that 
they can, in fact, be used in areas of skills need.
    Mr. Mica. Well, that is, you know, an incentive program. 
How about has anyone broached the possibility of adding a month 
on every year in the future toward retirement, we keep them 
around a little bit longer? What is it to retire now, like 20--
well, I guess you can retire just about any time.
    Secretary Disney. You can take early retirement after 25 
years of work at any age, but there is, of course, a reduction 
in the amount that you would get.
    Mr. Mica. What about 25 years and add a month every year?
    Secretary Disney. That is a very interesting concept.
    Mr. Mica. Like we are doing with Social Security. Has 
anybody proposed any changes in what we have had?
    Secretary Disney. Yes, sir. There is one option that has 
been proposed, that has been discussed within the department 
and that is one that we call phased retirement. That stems from 
the belief that people are reluctant to retire sometimes for 
fear of loss of income or fear of loss of sanity. And we have 
tried to devise a way to address both of those concerns, which 
would allow an individual to go from full employment to 75 
percent time, but be able to draw perhaps on some of the 
retirement income so that the income loss would not be a 
problem.
    The second year it would be a 50/50 arrangement and then 
the person would leave. That would provide a rational way of an 
individual moving out but also of bringing somebody in and 
having an orderly transfer of institutional knowledge.
    Now, that is just one idea that has been discussed.
    Mr. Mica. Well, it sounds like you have a heap of people 
that are getting ready or will be eligible to retire and some 
very strategic, high cost, difficult to replace or train or 
acquire, in a job market that is becoming increasingly tight 
and smaller numbers; so I think we ought to be looking at 
something where we could retain--have some incentives. You 
know, I would love to have these people greet me at Wal-Mart; 
but I think that their talents could be better utilized in some 
of these positions.
    I am surprised that the military and civilian employment 
really has not looked at more incentives to retain good folks 
and reward them for staying or revised a schedule that was set 
up.
    Mr. Bateman is going to be around and live a long, long 
time past his retirement.
    Mr. Bateman. I think the sanity might be a problem. 
[Laughter.]
    Mr. Mica. But he will be looking for something to do.
    Of course, we have our own retirement plan that is put in 
effect by voters, too. It is a little bit different situation. 
But seriously, it seems to me that we are sort of missing the 
lick and that a lot of the civilian people are realizing this, 
that people work longer, they can contribute longer; we should 
not push them out and then bring in someone at a higher cost, 
so they have a longer productivity and make some incentives 
available.
    Secretary Disney. Yes, sir. This is an issue I agree with 
you more and more on every passing year.
    Mr. Mica. Particularly at your age, you should.
    Secretary Disney. Bless your heart. [Laughter.]
    We would be more than delighted to work with you and your 
staff on exploring options.
    Mr. Mica. You have in the past and I appreciate that. Thank 
you.
    Thank you, Mr. Chairman.
    Mr. Bateman. Mr. Ortiz.
    Mr. Ortiz. Thank you.
    For Ms. Welch, I have a question.
    How important was it for the Navy Apprenticeship Program 
funding to be outside the working capital fund earmarked? In 
other words, what would happen if the funding were to be 
rescinded?
    Secretary Welch. First, I think we need to thank you for 
giving us those funds, and it would be very important to us to 
continue to have those funds outside of the working capital 
fund. As you know, that was part of the reason for the 
degradation in the apprenticeship program to start with and so 
the continued budget support is most appreciated and is being 
used very, very well.
    Mr. Ortiz. Very good.
    And then for Mr. Snyder, what tools does the Army have in 
place to ensure that it retains the necessary technical skills 
in its industrial facility when there are across-the-board 
reductions ordered? And this is because of prior experiences 
that we had. At the Army depot, you know, what they did, we 
said we must downsize, we downsized; but we never took into 
consideration who was going to be relieved of their duties, who 
was going to be out, and then we found ourselves that some of 
the technical skills that we had were gone. So do we have 
something in place that will help us maintain those skills?
    Secretary Snyder. That is a two-part answer, Mr. Ortiz, and 
the first part is when activities downsize, they take a look 
organizationally and, as a general rule, they do not take out 
of the workforce skills that they need. That is one of the 
fundamentals of the way that we run reductions within the 
Federal Government as a whole.
    Now, on the other side, where we come around in terms of 
accessions, we have what I call--and I referred to it in my 
statement--an intern program which is for the Army career 
program's engineers and scientists, and it is basically a white 
collar program. It is basically a white collar program that 
while we have those people in that program they are insulated 
from reduction in force. In other words, they will not be 
touched by a reduction in force. We are now working with the 
Army Materiel Command to try to size, and we are working on the 
requirement to try to get to an appropriate size what an 
apprentice program should be because we just recently heard 
from General Coburn who says this is one of his largest needs 
and so we are trying to get the right size on that requirement 
even today. And we expect to have it finished some time in the 
spring.
    Mr. Ortiz. Thank you.
    Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Ortiz.
    Let me ask, if I might, if each of you could address 
whether or not in the phraseology of Mr. Brostek, the 
Department of Defense as a whole and the military components 
are in the course of or have developed a workforce plan. Do all 
of you have one or are you in the process of developing one in 
the context of the testimony of Mr. Cipolla and Mr. Brostek?
    Secretary Disney. Yes, sir. The Department of Defense 
historically has not approached the planning for the civilian 
sector as it has for the military because there are inherent 
differences between the two. The military has age restrictions, 
it has an up or out system, it has a mix of floors and ceilings 
and other kinds of things that make the planning there much 
more rigid. The civilian sector, though, has no mandatory 
retirement age and rather than up or out, it is much more of an 
up and stay kind of model.
    For the past 6 years, we have been paying a great deal of 
attention as a department and as individual components to 
workforce planning. For example, every 3 months, 3 to 4 months, 
we bring all of the components in the functional areas together 
to assess where we were on a great range of demographic 
characteristics, successions, eligibility for retirement and so 
forth in 1989 and where we are now. We look at the difference. 
We have built a micro simulation model that permits us to make 
projections of where we will be 5 years or so into the future, 
so we look at where we are likely to be if there are no changes 
in policies or programs.
    If we are not satisfied that we are headed in the right 
direction, we use those forums to develop legislative proposals 
or internal programs to change the way we operate. It is that 
process that has enabled us to come forward with our 
legislative proposals.
    Data analysis--let me talk a little bit more about that. We 
have commissioned some very special studies to help us in this 
regard. In one case, Rand Corp. is working with us and the 
Joint Staff on a study called future worker, future warrior, 
where we look at all the military and civilian positions we 
have now and compare them to all other positions. We had a 
cadre of occupational analysts from a number of areas look at 
them across five different dimensions as to how likely they 
were to change in the future and where our need was to be. What 
we wanted to do was to determine the mix of competencies 
necessary in 2010 so that we could begin changing our programs 
and influencing high schools and colleges to change theirs to 
enable us to yield the right mix from which we could select in 
the future.
    In addition, we have done any number of studies related to 
the impact of A-76 and other kinds of things, so we have built 
a body of research that enables us to meet the first important 
prong of workforce planning which is the database.
    The second thing we have done on a department wide basis is 
increase our investment in education and training. We mentioned 
the DLAMP program. We have also been working with the 
acquisition technology and logistics community to identify the 
key two dozen competencies to be needed in the future so we can 
restructure the Defense Acquisition University to yield what we 
will want in the future.
    We have been doing a similar thing with the intelligence 
community. So there are more examples, but those will suffice 
for now.
    And the third is to develop a managed approach to 
accessions and separations.
    So when we put the three of them together, we can say we 
have a strategy for the department as a whole and then this 
cascades down to specific plans with somewhat varying details 
in each of the components.
    Mr. Bateman. In light of Dr. Disney's very meaningful 
statement, does any other witness have anything they would like 
to add?
    Mr. Snyder.
    Secretary Snyder. Yes, Mr. Chairman. The Army has a system 
that is known as Total Army Analysis and I am sure Mr. Hawley 
has probably been associated with that in the past, but the 
term Total Army Analysis up until last year was not total 
because it did not include the civilian part of the workforce. 
And so what we have done in the Army, what we did in the Army 
last year was we started the process to include the whole 
civilian workforce in Total Army Analysis and the TAA process 
goes out into the out years to--I think it is to about 2010, if 
not a little bit sooner. But what we have done with that is we 
use a very sophisticated projection model on the civilian 
workforce side, which, as Dr. Disney says, will do a very good 
and accurate job of projecting where we will be absent any 
policy changes.
    We then take our functional chiefs and our career program 
managers to take a look at the 80,000 or so high level 
civilians--we have to take a look at their career fields and 
add into that what they know and believe will come as a result 
of technology changes and whatever.
    At the end of that, we end up with a much more precise 
slice of what we believe the civilian workforce will look like.
    Is it 100 percent accurate right now? No, but it is a lot 
better than what we used to use.
    Mr. Bateman. Thank you, Mr. Snyder.
    Anyone else?
    Secretary Keener. Yes, sir. I would just like to add that I 
did briefly describe our plan in my opening statement, but I 
wanted to add that last month, in February, we executed a 
civilian workforce shaping summit here in Washington. We 
brought stakeholders in from all over the country and 
encouraged them to think out of the box. That is why I was 
interested in Mr. Mica's comments earlier because these people 
were encouraged to think about the kinds of things that you 
were talking about that might aid us in our workforce shaping. 
Also, I would like to mention that the Air Force Materiel 
Command (AFMC) is our largest employer of civilians, and they 
have been engaged in an in-depth study over the last year to 
try to come up with a plan to right size the civilian force at 
AFMC and specifically look at the depot force in that command.
    Mr. Bateman. Thank you very much.
    Anyone else?
    Yes, Ms. Welch.
    Secretary Welch. The Navy, as you probably well know, is 
much more decentralized than our fellow components here. Over 
the last 2 years, we have been working with our highest ranking 
civilian executives looking at how to shape our workforce for 
the future because it is a major concern to us.
    Mr. Bateman. Thank you.
    Mr. Cooke.
    Well, apparently--are we in recess or do we have votes?
    Mr. Cummings, we will call on you as we clarify whether or 
not this is a recess of the House or whether it is votes.
    Mr. Cummings. Very well. Thank you very much, Mr. Chairman.
    What are you doing with regard to colleges? Just a little 
earlier, we talked about training and somebody on the panel 
before you all talked about how so often when the budget is cut 
a lot of times training dollars go out or are reduced and I 
just believe in training because I think any time you can give 
people an opportunity to become better and to make more money 
at what they are already doing in the field that they are 
already in, I think it is really good.
    So I was wondering, No. 1, do you all find that to be the 
case? What kind of training opportunities are there available 
as you try to restructure it and make the workforce consistent 
with your needs?
    Secretary Disney. We are making a very concerted effort 
within the Department of Defense to dedicate more dollars to 
education and training but also to use the dollars that we have 
more effectively, and that cuts across every level of education 
and training.
    Mr. Cummings. So do you use colleges? I mean, in other 
words--
    Secretary Disney. We have in our Defense Leadership and 
Management program, we are offering courses that we do in 
conjunction with institutions of higher education. We also are 
proposing some legislation this year that would eliminate the 
restriction against paying for degrees. That is a barrier to us 
in some areas because while it is perfectly legal for us to pay 
for individual courses and have those courses perhaps lead to a 
degree, that is not necessarily the same thing as enrolling 
someone in a degree program for a definite purpose. We would 
like the flexibility to be able to do the latter because that 
is better career management.
    Mr. Cummings. That legislation, would it have--I mean, what 
kind of teeth does it have, if any, to make sure that the 
person once they get the degree, you know, sticks in that job 
that we are preparing them to do? I mean, is there a certain 
period of time?
    Secretary Disney. There is a requirement for staying three 
times the length of the education or training. Yes, sir.
    Mr. Cummings. So where is that now?
    Secretary Disney. That is in our legislative package, 
working its way through the process.
    Mr. Cooke. Let me tell you a program we run in OSD that 
does very well. We have authority, as we all do, to bring in 
interns for the summer, from colleges or what not. We decided 
to bring in faculty members from the historically black 
colleges and universities for two reasons: one, they would be a 
little more mature and we might get some better contributions 
from them during the summer and, two, they would go back to 
their campuses and talk up OSD and WHS as being not bad places 
to work and it has done reasonably well over the years.
    Mr. Cummings. Very good.
    Mr. Bateman. I suspect the committee ought to recess now in 
order to go and vote, but we will return, if the witnesses will 
be patient with us, as soon as we can take care of two votes.
    [Recess.]
    Mr. Bateman. The hearing will resume and I will recognize 
Mr. Underwood for any questions he may have.
    Mr. Underwood. Thank you. Thank you very much, Mr. 
Chairman, and thank you for your testimony. I have read briefly 
through some of it and I had a conversation with you just now, 
Dr. Disney, and perhaps just for the record, I asked a question 
with the earlier panel about some thinking about how to better 
provide assistance to workers who are undergoing a dramatic 
work transition through no fault of their own and what are some 
of the ideas behind that.
    Any kind of new innovative ideas other than the current 
existing system and what about the issue of how we deal with 
the term ``inherently governmental,'' which is kind of 
certainly a sore spot because it varies from agency to agency, 
I am sure; but particularly with regards to the Department of 
Defense.
    Secretary Disney. Yes, sir. ``Inherently governmental'' is 
a term that can vary, the definition of which can vary from 
agency to agency. As we were talking, what is inherently 
governmental in the Department of Agriculture may well not be 
in the Department of Defense. And I think they're working about 
as many definitions of that as there are agencies at this 
particular moment. But we are going through a process within 
DOD to try to make certain that there is unanimity within the 
department as to what this means.
    Also with the department we have been very concerned about 
trying to manage the downsizing humanely, not just efficiently, 
and that is why we have continued to invest in our Priority 
Placement Program, which is the model placement program, I 
think, in the country. This enables someone who is about to 
lose his or her job for no personal fault at all to find new 
employment within the department.
    The individual registers, perhaps as long as 2 years in 
advance of a reduction in force, and is retained on the roster 
as long as the year after that in order to provide an 
opportunity for them to turn up a position for which the person 
is well qualified.
    The individual registers in areas of competence and then 
geographic areas of preference. And if there is a position that 
comes up, that person has that job unless it can be 
demonstrated that he or she is not qualified.
    This has served us very well. Since its founding, it has 
found new jobs within the department for 161,000 people. Since 
our drawdown began, it has found new jobs for some 75,000 
within DOD.
    At the height of BRAC, it was finding them at the rate of 
1,000 a month. Now that rate has declined because we have fewer 
positions into which to put people.
    In the situation of Guam, we know that over 200 people were 
found new jobs within priority placement and others have 
received new offers. We also instituted a special program 
called the expanded buyout program that enabled us to pay 
buyouts in other areas and then relocate someone into that 
empty position. An additional 40 have been able to continue 
their employment through that.
    So when we add the ones who have received VSIP and VERA, we 
see that about 500 of the individuals who were facing 
dislocation through no fault of their own have either found 
their way into retirement more easily than would otherwise have 
been the case or have retained their employment. The others are 
still registered, so there are options that are still 
available.
    Mr. Underwood. Okay. On the issue of ``inherently 
governmental,'' in our discussion and certainly in this 
committee we have heard it before, those activities which are 
directly related to warfighting and preparation for 
warfighting, and what strikes me as odd in the particular case 
of Guam is that we have taken ordnance handling, which I would 
assume almost anyone would readily admit is preparation for 
warfighting; it has been contracted out, has been subjected to 
outsourcing.
    It occurs to me that that is quite a stretch and also if 
the main motivation is saving money and you have a case like a 
community like Guam, which is many, many thousands of miles 
away, when you reduce the inherent and the core capacity to 
respond to military activities out there as has already been 
the case with lots of people leaving, the time in the future 
when there may be a bump up or a need to raise the level of 
activity again, it is actually going to be far more costly 
because people are going to have to be brought in; and if it is 
done by the contractor, the contractor is going to put that 
into whatever additional funding, any modification for their 
contract; or if it is going to be civil service, then obviously 
you have a case where you are going to have a lot of people who 
are ``stateside hire'' and they are going to be entitled to 
many, many more benefits.
    And it just seems to me that even though it is very 
difficult to make the case here because they are all civil 
service employees; but in this particular instance there was--
you have what is a forward deployed situation being dealt with 
as if it was another military installation, you know, with the 
usual economic environment and usual numbers of people that are 
available for various kinds of jobs.
    But on some of these jobs that are very, very specialized, 
the capacity is gone and they are now thousands of miles 
somewhere else.
    Secretary Disney. Sir, I am afraid I am not totally 
familiar with all the details of the reasoning for the 
contracting study and for that I would have to defer to Ms. 
Welch of the Navy, if she would care to comment.
    Mr. Underwood. Ms. Welch.
    Secretary Welch. I cannot comment any further either as to 
why that contracting out study was done, but I would be happy 
to find out and get that information back to you if there is 
anything further we can add.
    Mr. Bateman. If you would, supply that for the committee's 
record for the hearing. We are going to keep the record of the 
hearing open in the event there are other Members who have 
questions and have not had a chance to pose them or if staff 
might have some questions that they feel like we would be 
benefited from.
    Also, for the record, Dr. Disney, you were going to furnish 
us with the numbers on the drawdown of the various departments 
and agencies within the Department of Defense. Would it be 
unduly burdensome to also give to us the number of new contract 
employees, non-governmental employees, that are now on the 
payroll and the cost of those people?
    Secretary Disney. Well, sir, there is no requirement that 
that information be collected, so consequently there is no 
database on the employees of the contractors. The database that 
we have on contracts does not include it anywhere.
    Mr. Bateman. So you have no basis to determine how many 
people are now doing services for the U.S. Government under 
contract relative to the number of civil service employees who 
have gone away?
    Secretary Disney. That is correct.
    Mr. Bateman. Okay.
    Mr. Chambliss.
    Mr. Chambliss. Thank you, Mr. Chairman.
    Ms. Keener, as you correctly note in your written 
testimony, we are in an increased era of contracting out and 
privatization as the military and in particular the Air Force 
outsources new weapons systems.
    What impact does that have on the workforce's ability to 
sustain the systems that are assigned to the government and 
what is being done to ensure that the government retains the 
skills to ensure a ready and controlled maintenance capability?
    Secretary Keener. First, Mr. Chambliss, it is our intent to 
fully comply with the 50/50 rule, the ratio, and right now we 
are right at that level, so we do not intend to ever go beyond 
the rule and contract out to a greater degree, more than 50 
percent of that workforce, particularly in depots which I think 
you are referring to.
    On the issue--the second part of your question, what do we 
intend to do to guarantee that we have a good balance of skills 
and be able to sustain the force, in my oral statement I 
described the strategic civilian workforce shaping plan that 
the Air Force has developed and in that statement I describe 
the three-prong process that we intend to utilize to do exactly 
what you have asked.
    First of all, we are going to deal with accession planning 
and that deals with force renewal, which will be particularly 
important in the area of helping us to bring in new entry level 
employees in the blue collar area.
    The second aspect of our plan deals with training and 
retraining and that will help us to provide a better balance of 
the skill mix that we have in our force.
    And, last, we talked about the importance of separation 
management as a part of that plan; and that will assist us to 
expand our VERA/VSIP authority so that we will be able to use 
that as a real management tool, rather than just as a reduction 
in force tool, and selectively be able to narrowly focus those 
individuals that we want to offer buyouts to.
    Mr. Chambliss. The Air Force has previously testified about 
difficulty in hiring skilled personnel during surge times. Can 
you talk a little bit about what impediments they do face and 
what we are talking about doing to overcome those impediments?
    Secretary Keener. In certain areas, specifically, in high 
tech areas, information technology, those particular areas that 
we really need skilled people for, it is particularly difficult 
to find those people and to bring them into the workforce, but 
we are doing everything that we can to utilize initiatives in 
the area of force renewal to be able to attract these people to 
the Air Force. We recognize that there are severe impediments 
out there. We are dealing with a very robust economy. But some 
of the specific initiatives that are in both Dr. Disney's 
testimony and in my testimony we are targeting to help us to 
bring in a new entry level force.
    Mr. Chambliss. Well, realizing that we are in a little bit 
different economy from what we were in in 1991 and 1992, when 
we were last required to really surge, are we looking ahead to 
the potential impediments that may be there and do we feel 
confident in the event of a near-term conflict we are going to 
be able to reach out and fill that surge capacity problem?
    Secretary Keener. Yes, sir. I think we do. And the plan, as 
I described it in my statement, projects--this plan is really 
based on what we perceive to be our mission requirements in the 
year 2005. So this plan is not just a plan to try to bring in 
people that we need, this is a real plan that is geared to what 
our mission requirements will be and that will actually help us 
to achieve that state of readiness that we know we need to be 
at.
    Mr. Chambliss. Dr. Disney, I have heard complaints over the 
last several years, 6 years, from quite a number of my 
constituents who work at Robins Air Force Base about the lack 
of increases in the wage grade pay scale compared to other 
areas of the State.
    Can you explain why a worker, say an electrician, at Robins 
Air Force Base, might be paid at a certain level while a worker 
doing the same job in Atlanta, which is less than 100 miles 
away, might be paid at a higher rate or a worker doing the same 
job at another government agency in Warner Robins would be paid 
at a higher rate?
    And also why have the general schedule employees received 
pay increases equal to twice the amount of the wage grade 
people over the last 14 years?
    Secretary Disney. Yes, sir. The general schedule and the 
blue collar workers find their wages set in different ways. For 
the general schedule, the wages are set on a national level, 
with the increases set nationally; and a portion of the 
national increase is set aside for locality adjustments. A very 
small portion of that. But what it means is that the core wage 
of a GS worker in Washington, DC, is the same as that in Macon, 
is the same as that in Portland, OR.
    The Federal wage system employees, on the other hand, find 
their wages based upon prevailing wages in the geographic area 
in which they are located, generally the commuting area. These 
wage areas are determined through the work of the Federal 
Prevailing Rate Advisory Committee, which is advisory to the 
Office of Personnel Management.
    That consists of both union representatives and civil 
service agency representatives. The wage surveys are conducted 
by people in my organization in conjunction with their labor 
counterparts; and that is where the information comes from, 
from surveys of the area that get used to establish what those 
rates are.
    Mr. Chambliss. Yes, well, I understand that, but I mean, 
you have--for example, in our depot, you have specialized jobs 
that there are not many jobs like that in the area immediately 
surrounding the depot. But there are those same jobs at 
Lockheed, for example, and in Atlanta, which is, like I say, 
less than 100 miles away and certainly within--we have folks 
that commute every day back and forth to Lockheed and from 
Atlanta down to the depot, and the wage rate in the Atlanta 
area is not used at the depot. It is not in our prevailing wage 
schedule.
    Why would that be the case when there is nobody else in 
that category within the local area there?
    Secretary Disney. Well, sir, I do not have all the details 
on that, but I would be more than happy to find them out and to 
provide information for the record for you.
    Mr. Chambliss. All right. If you would, please.
    Secretary Disney. Yes, sir.
    Mr. Chambliss. Thank you, Mr. Chairman.
    Mr. Bateman. Thank you, Mr. Chambliss.
    Dr. Disney, I was just handed the conference report on the 
National Defense Authorization Act for Fiscal Year 2000 and I 
do not want you to bother with it today, but on page 60, 
section 343, it says ``Report on use of employees of non-
federal entities to provide services to the Department of 
Defense.''
    I think I know the answer, but the law calls on the 
Secretary of Defense to provide a report and give information. 
It has some caveats in it, to the extent practical. I think 
your answer is going to be it is not practical, but get us a 
formal response to why we do not have the report and why you 
cannot, if that is the case, provide the report.
    Secretary Disney. Yes, sir. We will do that.
    Mr. Bateman. Okay. Well, I believe that is certainly more 
than enough time for you all at the witness table today. We do 
appreciate your being here and your testimony. If you would be 
so kind, we may have further questions that you can submit 
answers to for the record; and we adjourn with our thanks to 
the witnesses.
    [Whereupon, at 3:22 p.m., the subcommittees were 
adjourned.]
      
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                             March 9, 2000

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 9, 2000

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


             QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD

                             March 9, 2000

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

      
                   QUESTIONS SUBMITTED BY MR. BATEMAN

    Mr. Bateman. In your research, are you finding evidence of a 
general shortage of technical workers in the U.S.? Wouldn't it make 
sense for the Department of Defense to contract for these workers as 
needed, rather than . . . maintaining a large permanent staff?
    Mr. Cipolla. There is currently a shortage of technical workers in 
many areas and it will get worse. The labor force is expected to grow 
by only 11% from 1996 to 2006, at the same time that demand increases 
by 19%. According to Watson Wyatt Worldwide, an increased demand for 
labor combined with the decline in the number of workers ages 24 to 45 
will create a 30% shortfall of workers in this group over the next 
decade.
    Many of the 20 million new jobs that will be created in the next 
five years will be hard to fill due to a shortage of workers with 
analytical and technical skills. The federal government will be 
affected more than other sectors of the economy since knowledge workers 
account for a higher proportion of its workforce. According to the 
federal Chief Information Officers Council, from now until 2006, there 
will be a need to hire 4,600 workers to fill new IT jobs and 32,315 
more to replace workers lost by attrition.
    Much of the demand for technical workers in federal agencies can be 
met by contracting. However, several important factors must be taken 
into account if contracting is to be a viable alternative. First is the 
determination whether the work to be done is inherently governmental as 
indicated by A-76 and FAIR Act reviews.
    If the work is not inherently governmental and it is determined to 
seek competitive sourcing, the challenge for agencies is to ensure that 
the private contractor selected has the capability required. Private 
companies are in the same ``war for talent'' as the federal government 
and may have difficulty hiring and retaining the required expertise in 
some areas. Companies may have to pay more for scarce talent, 
potentially increasing the cost of contracting work requiring high tech 
skills.
    Finally, decisions about whether to use contractors should be made 
on a case by case basis. Key considerations include contractor 
expertise, evaluation of the quality of work done previously, and what 
process must be used to hire a contractor. There are clear benefits to 
be derived from the competitive sourcing process itself such as formal 
work statements and performance criteria. However, there are also 
intangible factors which should be considered--the effect on morale, 
career opportunities, and mission identity for the existing workforce.
    Mr. Bateman. Is there an example of a firm or better yet, a 
government agency which is adept at workforce shaping? What model 
should DOD emulate?
    Mr. Cipolla. One of the best examples of successful workforce 
shaping is offered by the National Imagery and Mapping Agency (NIMA). 
The NIMA, formerly known as the Defense Mapping Agency, has a history 
of good workload planning and good strategic planning overall. In the 
late 1980's, NIMA's annual customer surveys showed that projected 
workloads during the next five years would be increasing. At the same 
time, NIMA was in the process of automating the map-making process to 
achieve cost savings. Since it couldn't afford to modernize all its 
production facilities, NIMA decided to close several of them. Another 
consequence of automation was that many of the skills possessed by the 
workforce became obsolete.
    In response to these developments, NIMA implemented a proactive 
workforce shaping program. Employees received extensive retraining in 
the technical areas needed to support the new technology. Targeted 
buyouts were offered to occupations or groups of jobs that would no 
longer be needed. All employees in the facilities to be closed were 
offered a similar job in another facility. As a result of adopting 
these policies, NIMA was able to keep the number of reductions-in-force 
to a minimum.
    The NIMA experience illustrates how workforce shaping can be used 
to improve an agency's ability to achieve its mission, while treating 
employees fairly and protecting their rights.
    Mr. Brostek. As we said in our statement before the Subcommittee, 
federal agencies--DOD included--can and must define the kind of 
workforce they will need in the coming years, develop plans for 
creating that workforce, and follow up with actions and investments 
needed so that when the future arrives, the right employees--with the 
right skills, training, tools, structures, and performance incentives--
will be on hand to meet it.1 We noted that during 
downsizing, DOD's approach to civilian force reductions was less 
oriented toward shaping the makeup of the workforce than was the 
approach it used to manage its military downsizing. We also noted that 
during our work on the early phases of DOD downsizing, some DOD 
officials voiced concerns about what was perceived to be a lack of 
attention to identifying and maintaining a balanced basic level of 
skills needed to maintain in-house capabilities as part of the defense 
industrial base.2
---------------------------------------------------------------------------
    \1\ Human Capital: Strategic Approach Should Guide DOD Civilian 
Workforce Management (GAO/T-GGD/NSIAD-120, Mar. 9, 2000).
    \2\ Defense Force Management: Expanded Focus in Monitoring Civilian 
Force Reductions Is Needed (GAO/T-NSIAD-92-19, Mar. 18, 1992) and 
Defense Force Management: Challenges Facing DOD as It Continues to 
Downsize Its Civilian Work Force (GAO/NSIAD-93-123, Feb. 12, 1993).
---------------------------------------------------------------------------
    Our work has not focused on identifying agencies that could be 
construed as models or provide ``best practices'' for workforce 
shaping, and so we cannot point to a specific organization that DOD 
should emulate. However, our recent report on human capital approaches 
at nine leading private-sector organizations underscored the importance 
these organizations place on strategic human capital management as 
fundamental to strategic business management.3 The ten human 
capital principles we drew from these organizations included several 
that are relevant to workforce shaping, including the need to identify 
the competencies needed to achieve high performance of missions and 
goals and to build and sustain the organization's talent pool through 
appropriate recruiting, hiring, development, and retention policies.
---------------------------------------------------------------------------
    \3\ Human Capital: Key Principles From Nine Private Sector 
Organizations (GAO/GGD-00-28, Jan. 31, 2000).
---------------------------------------------------------------------------
    Our testimony before the Subcommittee stressed the importance, not 
just for DOD, but for all federal departments and agencies, of taking a 
strategic approach to human capital management. We currently have work 
under way on the extent to which federal agencies have pursued 
workforce planning, and can say that while most of the agencies we have 
examined recognize the importance of workforce planning, their efforts 
are generally fairly recent and vary considerably. Our work at the 
Environmental Protection Agency, the Social Security Administration, 
and the National Aeronautics and Space Administration reflects some of 
the variation we have found among agencies' workforce planning efforts 
and some of the concerns we have identified.4
---------------------------------------------------------------------------
    \4\ Human Capital: Observations on EPA's Efforts to Implement a 
Workforce Planning Strategy (GAO/T-RCED-00-129, Mar. 23, 2000); SSA 
Customer Service: Broad Service Delivery Plan Needed to Address Future 
Challenges (GAO/T-HEHS/AIMD-00-75, Feb. 10, 2000); and Space Shuttle: 
Human Capital Challenges Require Management Attention (GAO/T-NSIAD-00-
133, Mar. 22, 2000).
---------------------------------------------------------------------------
    As we noted in our testimony before the Subcommittee, we have 
developed a five-part self-assessment framework we believe can be 
useful in assessing and better aligning federal agencies' human capital 
management systems with their missions, goals, and other needs and 
circumstances.5 As agencies make progress in taking a more 
strategic and businesslike approach to their human capital management, 
we will be pleased to share with you any agency experiences we 
encounter that may serve to inform DOD's human capital efforts and your 
oversight of DOD civilian workforce readiness.
---------------------------------------------------------------------------
    \5\ Human Capital: A Self-Assessment Checklist for Agency Leaders 
(GAO/GGD-99-179, Sept. 1999).
---------------------------------------------------------------------------
    Secretary Disney and Mr. Cooke. To pursue topics of special 
interest, we conduct or commission targeted studies, such as RAND 
Corporation's rigorous examination of changing occupational 
requirements. Preliminary findings from that research indicate that DOD 
must cope with the following broad themes in the future:

     Employees with an enhanced service orientation;
     Greater emphasis on the need for workers to stay current 
with emerging technologies;
     Increased need for advanced technical skills; and
     The need for better problem-solving skills among all 
workers.

    In addition, the Department gathers workforce shaping data from 
special forums (as the one on technology leadership) and analytic 
projects (such as that on the future acquisition workforce). These are 
supplemented by studies conducted by the National Academy for Public 
Administration and other research organizations.
    In general, our workforce appears well matched with the functions 
that must be performed to support military missions around the world. 
However, changes in mission and in technology inevitably alter our 
requirements for civilian personnel and create spot surpluses in some 
occupations at some sites. Looking across all occupations, we are 
concerned that the civilian drawdown has left us too few of the younger 
workers needed to maintain the vitality of the workforce and to ensure 
an orderly transition of leadership as our older workers retire. 
Therefore, we appreciate the help received from Congress in providing 
tools that allow us to manage and shape our workforce to meet today's 
demands without resorting to costly and disruptive reductions in force.
    Secretary Snyder. Army has a mechanism in place to examine its 
civilian work force requirements to support the total force out to its 
farthest planning horizon, currently about 2020. This initiative is 
called Civilian Personnel Management System XXI (CPMS XXI). CPMS XXI 
begins with an examination of future needs in terms of skills, 
experience, type of employee (e.g., permanent, temporary and 
contractor) and, where possible, numbers of employees.
    A strategic planning process is in place which guides users through 
steps beginning with mission and vision, into an environmental scan of 
the future world based on assumptions about the future gathered from 
other planning documents, eventually reaching a set of actions to move 
us to the desired future state. The functional managers of the 22 Army 
career programs, which comprise the majority of our workforce in 
professional, administrative, and technical occupations, are completing 
their first strategic plans. We are going to post the best plans on the 
internet to aid others.
    Prior to beginning their strategic planning, functional 
representatives examined the work force trends for their respective 
career programs in order to understand how the programs and policies of 
the past have shaped the force. Metrics examined included age, years of 
service, gender, race and national origin, education level, grade and 
retirement eligibility. We looked at overall strength, accessions and 
losses. While the numbers varied considerably by skill, a few trends 
were universal. Principal among these was aging--a direct result of the 
strategy of accomplishing downsizing through a combination of natural 
and assisted attrition and reduced hiring. Aging, however, is only a 
symptom. The underlying problem is the growing number of retirement-
eligible employees with limited in-house replacements.
    Another issue that surfaced during this process is the degree to 
which we must compete for skills with the private sector. In many 
cases, government does not provide a competitive salary; in others, the 
government wage structure restricts upward mobility in ways the private 
sector does not.
    Other initiatives affecting the workforce complicate CPMS XXI 
analyses. The Quadrennial Defense Review directed further downsizing. 
The Defense Reform Initiative Directive 20 (DRID 20) and the Federal 
Activities Inventory Reform (FAIR) Act designate functions for review 
for possible contracting out. Functional Area Assessments (FAA) have 
suggested military positions in the institutional Army that can be 
moved to the warfighting Army. While all of these are fine initiatives, 
they must be managed carefully to avoid breaking the civilian force in 
terms of continuity of capabilities to meet future missions.
    Concurrent with these analyses, Army is taking steps to assure the 
results are included in the Army's formal planning processes. We are 
examining the occupational relationships between the warfighting Army 
and the supporting civilian workforce. These correlations resemble the 
allocation rules familiar to the analysts who build the warfighting 
force.
    Secretary Welch. In 1998, the Department of the Navy began looking 
across our total workforce to assess future competency and skill 
requirements. A Workforce Planning Group was created and career field 
sponsors identified who would analyze current capabilities, define 
future requirements, and identify plans and strategies for acquiring, 
developing, maintaining, and leveraging the Department's future 
workforce.
    The Workforce Planning Group's efforts have been absorbed into a 
more broadly drawn corporate workforce planning initiative. Under the 
precepts of the Revolution in Business Affairs, the DON has established 
a flag-level group of military and civilian executives who are looking 
at baseline data and establishing methodologies to determine the total 
force requirements in the DON over the next several years.
    Secretary Keener. We have developed workforce policy assessment 
models to help us analyze the probable effects of changes in our force 
management practices. These projection models allow us to age the 
workforce under a variety of assumptions (such as different levels of 
grade, experience, and sources of hiring; varied retention rates; or 
diverse end strength projections) to see how the long-term shape of the 
force will react. Our career field managers use these tools to 
determine their desired force renewal and development programs. Our 
corporate succession planning efforts sit on a firm analytical 
foundation, and we apply these types of analytical tools to all aspects 
of human capital needs assessments.
    Headquarters, Air Force Materiel Command (AFMC), the largest 
employer of civilians in the Air Force, recently concluded a two-year 
study to identify the workforce they need to meet their missions in the 
future. They are responsible for designing, developing, acquiring, and 
maintaining today's (and tomorrow's) weapon systems and platforms. 
AFMC's ``2005 Force Shaping Study'' decomposed the Command into 
Business Areas, Centers, and Functional Areas and incorporated senior 
leadership's direction to identify the workforce skills, skill levels, 
and demographics desired and needed to meet their missions. Skills mix 
considered developmental, journeyman, and managerial positions and they 
also considered alternative component mixes, i.e. organic full-time in-
house, versus contract support, versus contingent employees. This was a 
very broad and complex effort, and we expect the results will be used 
to optimize of force management policies and programs to best obtain 
and sustain a skilled and proficient workforce.
    Our workforce assessment shows workforce imbalances characterized 
into two areas: experience imbalances and skills imbalances. By 
experience imbalances, we refer to the situation we see across the 
service today where we have a solid group of mid- and senior-level 
employees with a great deal of knowledge and experience, but an 
inadequate pool of developmental trainees coming through the pipeline. 
Today's trainees are tomorrow's journeymen and managers. Without the 
proper mix of experience levels, we anticipate force management 
challenges in the future as today's incumbents begin to retire. While 
their retirements may give us increasing opportunities to refresh the 
workforce, they also mean loss of a great deal of institutional 
knowledge. Our best case scenario would be significant intake of 
developmental trainees now, while we still retain our experienced 
employees who can train and mentor the new folks. This intake would 
have to take the form of end strength growth, else we are faced with 
the dilemma where we have a group of new hires with no one around to 
mentor them.
    We also project skills imbalances--i.e., if we were to remove our 
hands from the force management controls, we would expect to have ``too 
many'' of one specialty and not enough of another. This situation will 
be addressed through restructuring, targeted hiring, and some re-
skilling. This is one area where a voluntary force shaping incentive 
program, without linkage to end strength reductions and RIF, would 
help. The significant negative aspects of RIF-driven organizational 
restructuring would thereby be avoided, and allow us to develop a 
smoother transition to skills rebalancing. Authority to offer degree-
granting educational opportunities to our civilian workforce would also 
help us meet our strategic vision of the future workforce.
    Mr. Bateman. What specific plans does DOD have in place or are 
expected to be put into place to mitigate the imbalances? What 
challenges and obstacles do you face in being able to deal with the 
aging workforce issue and any related workforce imbalances?
    Secretary Disney and Mr. Cooke. DOD has a number of strategies to 
mitigate current and anticipated workforce imbalances. The first is the 
reshaping of the workforce to ensure that we have the right skills 
match and more balanced age cohorts. The current Voluntary Early 
Retirement Authority (VERA) and Voluntary Separation Incentive Payment 
(VSIP) enable us to offer these incentives to persons in positions that 
are no longer needed at specific locations, as well as to those 
eligible for retirement but needing encouragement to leave so that we 
can retain newly hired employees. However, the current authority may be 
used only in conjunction with reduction in force. Legislative relief 
could permit us to target those areas where we have skills that are 
surplus or no longer needed. Offering VERA/VSIP to those employees 
would permit us to use the resulting attrition to hire individuals with 
the needed skills.
    We are encouraging the Defense Components to renew the workforce by 
hiring interns to bring new capabilities and skills. With the added 
emphasis on interns, we hope to reverse the trend that has resulted in 
a 76 percent decrease since 1989 in DOD employees who are under 31 
years of age. Simultaneously we want to provide more comprehensive 
career paths so those talented individuals remain in the workforce. In 
addition, we have developed the Defense Leadership and Management 
Program (DLAMP) to enhance our current civilian workforce and help 
ensure that we have the right people with the right skills in our 
demanding jobs.
    Among the challenges we face in our efforts to renew the workforce 
are the difficulty of attracting top talent due to negative perceptions 
of government employment; a robust private job market that is actively 
recruiting; competition from other Federal Agencies with more flexible 
compensation plans; and the severe, continuing downsizing, which has 
drained the capability of many organizations to absorb untrained people 
and still perform their mission.
    Secretary Snyder. Under CPMS XXI, Army is continually reviewing 
programs and policies to balance the force. We recognize that differing 
parts of the force (in terms of mission role and occupational 
groupings) can be expected to behave in different ways over Army's 
planning horizon. Our intention is to identify a Civilian Objective 
Force (COF) that gives us enough information as to grade, skill, and 
geographic location to recruit and sustain the most effective 
workforce. As I stated in my previous answer, the analyses necessary to 
identify the COF are complicated by other on-going initiatives that 
will affect future Army civilian workforce requirements.
    Secretary Welch. The DON is pursuing a variety of approaches to 
reinvigorate our recruitment and development programs with the goal of 
replenishing the supply of employees in the pipeline. We are 
establishing a coordinated recruitment program through which we will 
train and support a cadre of recruiters who will represent the 
Department at job and career fairs and conduct college recruitment at 
campuses across the country.
    Beyond this identification of a need to rebuild the entry and mid-
level workforce, it would be premature for the DON to develop specific 
strategies to deal with and respond to specific workforce imbalances 
while our review of the workforce is incomplete. In general, we view 
the aging of our workforce to be reflective of the age distribution in 
the population as a whole, and therefore to be expected in the 
workplace.
    Secretary Keener. The Air Force has an approved workforce shaping 
strategy. The three key elements include force renewal, force 
development (education and training), and separation management. New 
accession strategies, such as greater investment in interns and other 
developmental trainees, will provide stability to our long-term 
sustainment efforts. A collaborative process is underway to determine 
the proper size of our force renewal programs. Also, changing local 
hiring practices will accelerate workforce re-balancing. Skills 
currency, particularly in our highly technical occupations, demands 
attention. Skills proficiency is being emphasized through professional 
continuing education, training, and retraining programs. Leadership 
development programs will ensure a cadre of senior executives with the 
breath of experience and Air Force culture needed to achieve corporate 
goals.
    The Air Force civilian workforce is out of balance due to the way 
we reduced our civilian workforce. Reductions in the civilian workforce 
were achieved through a combination of loss programs and constrained 
accessions. Loss programs included early retirements (Voluntary Early 
Retirement Authority or VERA) and incentives (Voluntary Separation 
Incentive Program or VSIP) to trim the more senior year groups and to 
minimize involuntary actions (Reduction In Force or RIF) which are so 
devastating to our force, both organizationally and individually.
    We limited the number of new hires, or constrained accessions, as 
the overall force has reduced over the last ten years. This has led to 
problems in sustaining the force of tomorrow. We will not have enough 
mid-level managers and administrators in the future from which to 
select tomorrow's Senior Executives.
[GRAPHIC] [TIFF OMITTED] T4887.258

    This chart shows a future problem in sustaining the civilian force 
and a serious future gap in Air Force civilian leadership. The chart 
compares the 1989 baseline population (dotted area in the background) 
with our objective profiles for FY05 (the solid line). The retirement 
status is depicted in the stovepipes. When considering the drawdown we 
currently have planned in the Future Years Defense Program (FYDP), we 
show a deficit of employees in the lower years of service (YOS), what 
we refer to as a ``bathtub.'' There is also a surplus in the more 
senior groups, our long-term sustainment requirements.
    The mid-career population with 8 to 24 YOS is well above the line. 
While most are not eligible for any retirement, those that are 
(approximately 30%) may be induced to accept an ``early'' retirement 
(VERA) with an incentive payment (VSIP) payment of up to $25,000. Any 
losses generated from this group would be used not to reduce the end 
strength, but will be redistributed to the more junior workforce, one 
with lower average YOS and pay steps. Additionally, we plan to provide 
professional continuing education to get and keep the workforce current 
and proficient in whatever skill set needed to perform their 
occupation.
    Mr. Bateman. Your legislative proposals include at least three 
authorities to hire scientific and engineering personnel and three 
authorities to provide college degree training. To what degree are 
these proposals integrated into your overall plan for staffing future 
DOD organizations?
    Secretary Disney and Mr. Cooke. Many of the positions DOD requires 
in the science and engineering fields are also required by the private 
sector. Given the greater compensation and benefits flexibility outside 
the Federal Government, this competition creates special problems, as 
DOD is committed to revitalizing its laboratory and acquisition 
communities. Further, in DOD as a whole, advanced technology, contract 
oversight, and a more complex mission have generated the need for more 
advanced education and technical skills.
    Our ability to compete with private industry benefit packages would 
be enhanced if DOD could more broadly offer academic degree training to 
our current and future workforce. Most high-technology firms consider 
education to be a business-essential benefit. We need to level the 
playing field, as well as to support continuous learning programs.
    Because higher-level DOD positions are filled overwhelmingly by 
people who have spent some time within the Department, it is essential 
that DOD invest in its civilian cadre. Also, the Defense Science 
Board's Task Force on Human Resource Strategy has recommended that DOD 
expand efforts to recruit and develop interns on specific occupational 
tracks and at higher levels (Presidential Management Interns). In 
addition, the Defense Science Board recommended creation of an early 
leader development program, which we are pursuing. In brief, then the 
proposals mentioned in the question are vital to meeting our future 
staffing needs.
    Secretary Snyder. We believe that legislative proposals that would 
change aspects of our civilian personnel system ought to be the product 
of a fully coordinated and integrated approach.
    Secretary Welch. The legislative proposals for recruiting and 
hiring scientific and engineering personnel and the degree training 
initiative are integral to the DON's future staffing plans. We are 
building the groundwork of a recruiting program which will rely heavily 
on increased appointment and rating/ranking flexibilities.
    Secretary Keener. The legislative proposals to hire scientific and 
engineering personnel would provide the flexibility to continually 
refresh the technical skills of the research and development workforce. 
In the ideal, the research and development function would be comprised 
of a core of civil servants to provide continuity coupled with 
collaborators--consisting of military officers, temporary and term 
government employees, academia, and industry--for agility and fresh 
ideas. We need to be able to tap private companies and academia for 
eminent scientists and engineers and be competitive in pay and 
benefits. Collaborators from academia and the private sector would work 
projects for up to six years. Legislation similar to the Defense 
Research Projects Agency (DARPA) authority (FY99 National Defense 
Authorization Act, Section 1101) and the proposed Commercial Personnel 
Transfer Program (DOD 106-014) would enable the Air Force to achieve 
this staffing model.
    With regard to college degree training, under current law, agencies 
must prove that an occupation is in shortage as a result of recruitment 
or retention problems before degrees can be funded. This law severely 
limits our ability to offer professional development to employees who 
demonstrate the potential for future advancement. By linking the 
investment in education to a deliberate program of employee 
development, we can better shape our staffing needs for the future.
    Mr. Bateman. To a large degree, agencies chafe under civil service 
procedures that are designed to enforce hiring on the basis of merit. 
All to often, those procedures take time. In your experience do you 
lose employees to the private sector because of this delay? What skills 
are those you are most likely to lose?
    Secretary Disney and Mr. Cooke. We do not have data on how many 
people we lose due to the lengthy hiring process, nor do we have data 
available on the number and types of people who decline job offers. 
However, in some cases where timely offers are critical (recent college 
graduates, unemployed personnel, shortage occupations), we know that we 
lose applicants to faster bidders. Feedback from managers in this issue 
is strongly supported by a recent report published by the Merit Systems 
Protection Board.
    Secretary Snyder. It is true that many applicants become 
discouraged or lose interest when faced with the federal hiring 
process. This is particularly true of applicants for entry level 
positions--typically recent college graduates who are pursuing a 
variety of career options. For example, a vacancy announcement 
soliciting applicants for an entry level career intern position may be 
open for 30 days. The most aggressive and highest quality candidates 
are actively ``surfing the web'' for employment opportunities and 
usually apply within a few days of the opening date of the 
announcement. By the time the announcement closes and applicants are 
rated and referred for consideration, the early applicants already may 
have accepted job offers from other employers.
    The skills that we are most likely to lose because of procedural 
delays are those skills most in demand in the private sector--
information technology, engineering, scientific, and medical. It is 
precisely because applicants with these skills are in such demand that 
their loss due to procedural delays causes us so much damage. We 
believe the Federal Government needs a modernized, streamlined hiring 
system that enables us to compete with private industry for the best 
candidates while maintaining merit principles.
    Secretary Welch. The DON fully supports adherence to merit 
principles and has not found the broad concept of merit to be an 
unnecessary or dominant constraint to hiring. And while we have no 
specific data on whether or how many potential hires we lose to the 
private sector, we continue to receive reports from our field 
activities and commands that the inability to make immediate job offers 
and the lack of competitive starting salaries causes us to lose a 
number of our first-choice candidates to the private sector. For this 
reason we strongly support DOD legislative and regulatory initiatives 
aimed at improving the hiring process to alleviate some of the more 
protracted procedures currently being used.
    Secretary Keener Hiring in the Federal Government on the basis of 
merit is a statutory requirement under civil service law (5 U.S.C. 
2301(b)). It is hard to find fault with principles that require the 
selection of employees on the basis of merit after fair and open 
competition and the equitable treatment of applicants without 
discrimination. However, it is true that the civil service regulatory 
procedures that implement these principles can complicate and lengthen 
the hiring process. Good candidates, especially in the scientific and 
technical fields, can be lost to the private sector because of their 
ability to respond more quickly.
    Due to the extremely tight labor market, we expect to continue 
experiencing recruiting difficulties for scientific and technical 
personnel (e.g., scientists, engineers, information technology, and 
acquisition). Private-sector high technology firms can make a promising 
graduate an offer and even a counteroffer on the same day. Due to the 
Federal public notice; requirements, rating and ranking procedures, and 
application of veterans' preference, it is difficult for DOD recruiters 
to be as responsive. As a fix, DOD continues to work with the Office of 
Personnel Management and other Federal agencies to seek ways to 
simplify the processes that will allow us to become more competitive 
with the private sector. The Office of Personnel Management delegation 
of examining authority to the executive agencies has streamlined the 
hiring process and improved our ability to quickly respond to 
applicants. Additionally, the DOD demonstration projects have a number 
of streamlining procedures, to include category ranking and scholastic 
achievement appointments, which are being tested for possible future 
government-wide adoption. We are also optimistic that the recently 
proposed Executive Order for the Federal Career Intern Program will 
increase our ability to compete with private industry for recent 
college graduates. We will continue to push for legislative change, as 
appropriate, to further streamline the Federal hiring process but still 
comply with merit systems principles and veterans' preference law.
    Mr. Bateman. Isn't there some danger in tossing out merit 
principles and allowing managers relatively unfettered authority to 
hire? Couldn't we be accused of allowing managers to bypass well-
established merit principles? In your experience, does new flexibility 
lead to some tension with merit principles?
    Secretary Disney and Mr. Cooke. DOD strongly supports the merit 
principles. Our effort to streamline the hiring process in no way 
represents a degradation of merit system principles. Instead, our 
initiatives reflect the new hiring patterns emerging in a vastly 
different job market and society. Selection should reflect 
consideration of merit principles, resulting in hiring the best person 
for any given position and reflecting the diversity inherent in 
American society. What we are proposing is a re-evaluation of the 
policies, procedures, and processes that surround the implementation of 
the merit principles.
    Our belief is that the complexity of Federal processes and 
procedures often complicates the selection of the best and brightest. 
We believe we can support and maintain merit principles, while making 
hiring less cumbersome and time consuming.
    Secretary Snyder. The Army strongly supports the merit system 
principles set forth in title 5, United States Code, Chapter 23 and we 
propose no changes to them. We are, however, concerned about some 
strictures of law that often prevent us from hiring the best available 
candidates. The ``rule of three'' limits selecting officials' choices 
to the top three candidates on a certificate of eligibles when we use 
examining procedures that allow us to accept applications from outside 
the workforce. In its August 1999 report ``The Role of Delegated 
Examining Units: Hiring New Employees in a Decentralized Civil 
Service,'' the Merit Systems Protection Board--MSPB--recommended that 
the rule of three be modified to allow managers to consider a greater 
number of qualified candidates. We strongly support the MSPB 
recommendation and believe that its implementation would strengthen, 
rather than weaken, the merit principles.
    The Army doesn't believe it is necessary to jettison merit 
principles in order to modernize and streamline hiring processes. We 
need to take a fresh look at what we really mean by ``merit.'' 
Selections based on real merit do not result from, and cannot be 
equated to, adherence to all the bureaucratic procedures we must comply 
with under today's ``merit system.'' It's time to throw away the old 
system, one that has become an impediment to accomplishing the agency's 
mission, and replace it with a mechanism that allows agencies to 
compete effectively with the private sector for the best and brightest 
candidates.
    The Army has pursued a number of civil service reform initiatives 
in prior years to simplify and streamline hiring processes. Our most 
recent initiative involves decreasing the number of appointment 
authorities and allowing non-competitive conversion of temporary and 
term employees to permanent status, reassignment of qualified employees 
from excepted to competitive service without competition, and similar 
actions. I forwarded this initiative to OSD in August 1999 with a 
recommendation that we continue to pursue broad legislative reform of 
appointment authorities. Again, we believe that these reforms will not 
weaken existing merit principles.
    Secretary Welch. The DON sees no conflict or tension in allowing 
agency managers to exercise judgment and to apply flexibilities aimed 
at making the hiring process more responsive. The DON Human Resources 
Management community ensures that managers are aware of the merit 
principles and their obligation to observe these principles in the 
hiring and promotion processes. The goal of a merit-based system is to 
ensure that the best-qualified candidates are hired and promoted. The 
goal of the proposed flexibilities is to ensure that the best-qualified 
candidates are hired and promoted more efficiently.
    Secretary Keener. We believe merit systems principles are 
fundamental to Federal employment. As Federal employers, we must 
provide our country's citizens an employment system that provides fair 
and open competition and equitable treatment without discrimination. 
However, in a tight labor market, it is true these requirements can 
impact our ability to effectively compete with private industry, 
especially for scientific and technical personnel. We believe there are 
means available in the current system to shorten the employment 
pipeline in order to make us more competitive. Demonstration project 
procedures are being tested to further streamline the hiring process 
and still satisfy merit systems principles. As long as the minimum 
public notice requirements are met, best-qualified candidates are 
identified, and veterans' preference applied, the basic merit systems 
principles are satisfied. We have not advocated any new flexibility 
that would eliminate these basic requirements. Consequently, we are not 
aware of any proposed flexibility that will create tension with the 
basic merit principles.
    Mr. Bateman. The Merit Systems Protection Board recently reported 
(Competing for Federal Jobs: Job Search Experiences of New Hires, Feb. 
2000) that the average age of new hires government wide was about 35 in 
1998. MSPB said this average age held steady across most occupational 
categories. Is this similar to the average age of new hires in DOD? If 
so, please explain why the average age is 35. Also, do you see mid-
thirties as a desirable age for employees?
    Secretary Disney and Mr. Cooke. Across DOD in FY 1999, the average 
age of new employees hired with permanent appointments was 36.5 years, 
somewhat less than in FY 1998 but more than the 34.2 year average in FY 
1989. The hiring of former military members, who often have unique 
skills and experience, accounts in part for the average age of DOD's 
new permanent employees being in the mid-30's. Ultimately, it is the 
nature of the jobs to be filled that determines the educational and 
experience requirements, and in some instances these can be correlated 
with age. However, DOD does not regard any age as automatically 
appropriate for all jobs. The paramount consideration is matching 
education, experience, and talent with requirements.
    Secretary Snyder. To preclude any misunderstanding, let me make it 
clear that we don't see quality as a function of age. The important 
thing is to hire talented people, regardless of how old they are. The 
average age of accessions into the Army in FY99 was 33, somewhat lower 
than the average 35 years of age reported Federal-wide by MSPB. In many 
instances we find that the Army is not the employer of choice, given 
our limited incentives to attract younger applicants. Private industry 
typically offers higher salaries and extended benefits packages for 
entry level jobs in occupations that are highly competitive in the 
labor market. In some fields within Army, the nature of the work is 
changing with the move toward contracting out government functions to 
private industry. The jobs remaining in the government are becoming 
more concerned with contractor oversight, requiring more advanced 
qualifications and extended experience not found with younger 
applicants. In this instance, the contractors are more inclined to hire 
younger, entry level employees in many of the contracted out jobs while 
the Army hires more experienced employees to oversee the contract. We 
plan to continue our efforts to develop attractive entry level 
employment packages to entice younger applicants, but must also balance 
that with the need for more experienced employees.
    Secretary Welch. The current average age of new hires in the DON is 
32. In 1989, the average age was 29. We have no specific information to 
explain the increase, but believe it could be a normal result of the 
outsourcing and downsizing of the entry and developmental level work 
over the past 10 years and the resulting increase in the grade level of 
the residual work force. Higher level work results in higher grades, 
requiring a higher level of experience usually gained by an older 
workforce. We have not determined whether mid-thirties is a desirable 
average entry age for employees.
    Secretary Keener. Within the Air Force, the average age for new 
accessions in FY99 for administrative and professional jobs at all 
grade levels was 40 and 38, respectively. The average age for other 
employment categories was slightly lower. We have seen a slight aging 
trend in all employment categories over the past ten years. During 
FY99, the average age for new accessions at the GS-07 and 09 levels was 
35 and 41, respectively. Ten years ago the average age for new 
accessions at the GS-07 and 09 levels was 31 and 38, respectively. The 
average age for our newly hired centrally managed interns at the GS-07 
level for FY99 was 32.
    There are a number of regulatory and statutory factors that affect 
the average age of new accessions. These include statutory veterans' 
preference and the regulatory priority placement programs that provide 
employment priority for employees being adversely affected by 
reduction-in-force. Further, as an open employment system, we have the 
capability to hire employees at any grade level, from trainee to full-
performance. During the past ten years, we have seen a shift toward a 
more senior force that is directly related to hiring more experienced 
resources to make up for large reductions in overall size of the 
workforce. Our workforce is out of balance and we have initiated 
corrective action. As part of our civilian workforce sustainment 
efforts, we are establishing and funding more centrally managed interns 
and also are encouraging supervisors to restructure positions to allow 
for a steady intake of developmental trainees with new ideas and state-
of-the-art skills. We do not view any particular average age (e.g., 35) 
as being desirable. Primarily, we are striving for a more balanced 
workforce that includes employees at both the trainee and full-
performance levels.
    Mr. Bateman. What proportion of job offers in DOD go to recent 
college graduates vice older workers being selected off of priority 
placement program lists, or the hiring of retired military personnel? 
Stated another way, is the hiring that is taking place today 
contributing to or helping to alleviate the aging workforce issue?
    Secretary Disney and Mr. Cooke. In FY 1999, DOD hired 23,000 new 
employees on permanent appointments. By contrast, about 4,000 existing 
employees were matched with vacancies through the Priority Placement 
Program (PPP). We anticipate that the ratio of outside hires to 
internal PPP placements will increase in the future due to two factors: 
(1) Our budget calls for a slowing of the drawdown in the coming years, 
thus allowing us to hire more new workers; (2) The imminent completion 
of the last Base Realignment and Closure round should decrease the 
number of displaced workers needing help through the PPP.
    Since our new hires are, on average, about nine years younger than 
those already in our employ, the recruiting we have been able to do has 
prevented workforce aging from progressing more than it has. About one-
third of our permanent civilian accessions in FY 1999 were 30 years of 
age or younger. By comparison, about one in eight was a military 
retiree.
    Secretary Snyder. The Department of the Army does not maintain data 
on job offers made to applicants and, therefore, I cannot say how many 
offers today are being made to recent college graduates, older workers 
on priority placement lists, or to military retirees. The data 
maintained on civilian accessions show that current Army hiring is not 
contributing to the aging workforce issue. In 1996 and 1999, for 
example, approximately 50 percent of new hires were below the age of 
35.
    If one looks at hiring data for the 1980s, one finds that the 
percentage of new hires below the age of 35 was higher than it is now. 
For example, the percentage of new hires under 35 was approximately 66 
percent in 1985 and 64 percent in 1987. The decrease in proportion of 
new hires under 35 over the last decade or so can be attributed to two 
facts; that the population as a whole is aging and that a shift in the 
composition of the Army civilian workforce has sharply reduced the 
number and proportion of clerical and lower level administrative 
support jobs, which are typically occupied by employees with a lower 
average age than other occupational categories.
    As I stated in my previous answer, the Army does not believe the 
quality of employee performance is a function of age. The aging of the 
workforce is of concern to us only in terms of whether an adequate 
number of well qualified individuals will be available to succeed the 
large numbers of employees whom we expect to retire in the near future.
    Secretary Welch. We have not made a comparison of hiring data 
against the date of college degrees, so a determination of the 
proportion of these hires is not possible at this time. However, the 
data show that approximately 26% of our new hires have at least a 4-
year degree and that the average grade at which they are hired is 9.9 
versus 7.9 in 1989.
    Secretary Keener. According to Air Force statistics, approximately 
21% of our new accessions do not have prior Federal civilian or 
military experience. We do not have data that reflects what percentage 
of these new hires are recent college graduates. Fifteen percent of our 
new accessions were employees placed from other DOD components through 
the DOD Priority Placement Program and 19% were retired military. 
Consequently, based on regulatory and statutory factors, as well as 
management decisions to select employees at the full-performance level, 
we now have a workforce that is out of balance. However, we are taking 
the appropriate action to hire a larger percentage of new employees at 
the developmental level, including recent college graduates with the 
needed state-of-the-art skills.
    Mr. Bateman. Are there certain occupational specialties or areas 
where the aging workforce issue is a greater factor than in others? If 
so, what are they, and what are your plans to deal with the issue?
    Secretary Disney and Mr. Cooke. Having a regular inflow of new 
college graduates is most obviously crucial in our science and 
engineering and information technology occupations where the body of 
knowledge is changing most rapidly. As stated earlier, DOD needs to be 
competitive with private industry benefit packages to include advanced 
academic degree training as well as expanding use of recruitment and 
retention bonuses.
    Secretary Snyder. Yes, we are more concerned about the aging 
workforce in occupational specialties in which the average age is above 
that for most of our other occupations and there are few or no external 
sources of well qualified employees. Our two career programs for 
ammunition management and many of the members of our training career 
program are examples, although the number of employees needed for the 
ammunition management function is not large. Due to the nature of 
ammunition management work, the Army has ``grown'' the individuals with 
the necessary knowledge and experience through an internal, intensively 
managed career development process. As we believe that performance of 
the ammunition management function is likely to remain mostly in-house, 
we need to develop in-house replacements for those whom we expect to 
retire soon. Similarly, because many of the employees in our training 
career program need qualifications similar to the branch qualification 
required of Army officers to perform their jobs effectively, we plan to 
continue ``growing'' replacements in-house.
    Secretary Welch. As stated in both written and oral statements 
before the Readiness Subcommittee and the Civil Service Subcommittee, 
the DON is particularly concerned about the data on aging as it applies 
to the core work of the Department. In the next five years, 47 percent 
of our engineers, 55 percent of our scientists, 70 percent of our 
computer specialists, and 64 percent of our contract specialists will 
be eligible for retirement. These data are exacerbated by the data on 
hiring over the past few years with the resulting impact on the 
availability of employees in the replacement pipeline in these career 
fields. In response to these data, the DON has initiated a renewed 
recruitment program, which will provide training, materials, and 
coordination focused on both college-level and career/job fair 
recruiting opportunities.
    Secretary Keener. While nearly all career fields are showing 
similar aging trends, we are particularly concerned with those 
specialties where skills currency is of critical importance. For 
example, our engineering, information technology, and acquisition 
occupations are susceptible to skills obsolescence due to rapidly 
changing technology.
    We have initiated legislative proposals to expand the use of early 
retirement authority and buyouts to include force shaping. 
Additionally, we have implemented the force shaping strategy and 
conducted a Civilian Workforce Shaping Summit to develop additional 
legislative and policy proposals. Our objective is to achieve a 
sustainable/competitive career civilian workforce, with the right 
balance of skills and experience to contribute to Air Force mission 
accomplishment now and in the future.
    Mr. Bateman. With the emphasis on outsourcing in DOD, to what 
extent have DOD components made an effort to identify a minimum level 
of DOD civilian employees needed to perform inherently governmental 
functions and ensure adequate institutional knowledge is retained in-
house to provide appropriate monitoring of contract awards.
    Secretary Disney and Mr. Cooke. As part of its competitive sourcing 
program, the Department conducts an annual review of its manpower to 
determine which military and civilian positions within the Department 
are inherently governmental, subject to competition under OMB Circular 
A-76, and exempt from competition. When identifying inherently 
governmental work, DOD Components assess what manpower is necessary to 
ensure that DOD decision-making officials maintain sufficient 
oversight, control, and accountability over government programs and 
operations. This includes manpower that is needed to protect public 
interests by ensuring that decision-makers play an active, informed 
role when awarding, administering, and terminating contracts, ordering 
changes in contract performance or contract quantities, taking action 
based on evaluations of contract performance, and accepting or 
rejecting contractor products or services.
    Secretary Snyder. Within the Department of the Army, the issue of 
identifying inherently Governmental functions has been viewed as a 
functional determination that is largely a separate issue from that of 
identifying the minimum level of civilian employees needed within a 
function. Accordingly, the decisions as to what functions are or are 
not inherently Governmental have been framed more with a view to the 
nature of the function itself--is this a function that can be performed 
in the private sector rather than focusing on the current way 
contractor oversight duties are delegated within the function. On the 
other hand, the very different question of identifying the minimum 
level of civilian employees needed for adequate monitoring of contracts 
within the Department is a policy matter still under review and is very 
much constrained and affected by how the Department is currently 
organized to perform any given function. Using this standard, about 95 
percent of the functions performed by civilian employees within the 
Department of the Army have been determined to be not inherently 
Governmental, and about half of these non-inherently Governmental 
functions have been exempted from private sector performance to retain 
core capabilities on National Security or other grounds (such as 
maintaining adequate oversight of contracts). The Army recently 
adjudicated 127 challenges to the Federal Activities Inventory Reform 
Act list of non-inherently Governmental functions and made the 
rationale for its decisions public at the following web site: http://
www.asamra.army.pentagon.mil/fair.
    Secretary Welch. The DON has not completed its study and analysis 
of future workforce requirements.
    Secretary Keener. All functional activities within DOD have 
conducted intense position-by-position reviews utilizing guidance 
issued under Defense Reform Initiative Directive (DRID) #20, Review of 
Inherently Governmental Functions. This review directed the components 
to determine which functions and positions are inherently governmental; 
commercial activities exempt from OMB Circular A-76 competition; and 
commercial activities that should be competed. The review was completed 
in Oct. 98 and resulted in the coding of all positions in the Air 
Force.
    The Air Force will continue to annually review its entire manpower 
inventory in an effort to properly identify inherently governmental 
functions and commercial activities. This annual review will ensure an 
iterative approach to capture any changes based on today's dynamic 
environment. Regarding retention of in-house capabilities to properly 
monitor awarded contracts, functional area staff and managers are 
retained to ensure compliance with the terms of the contract.
    In addition, the Air Force has developed a Strategic Sourcing 
gameplan as an option for use in conjunction with A-76 studies. 
Strategic Sourcing is a program that allows for a variety of options to 
achieve downsizing goals. While A-76 remains the foundation, such 
approaches as reengineering, adoption of best business practices, 
privatization, and divestitures may also be considered. While it 
appears most savings can be achieved through the competitive sourcing 
process, this initiative expands our options.
    Mr. Bateman. Among the tools available to agencies that face 
recruitment and retention challenges are recruitment bonuses and 
retention allowances. Despite the media articles indicating that 
agencies are having difficulty attracting and retaining employee, we 
understand that agencies very seldom use either of these tools. How 
extensively does DOD use these tools? If they are seldom used, please 
explain why. Also, if they are seldom used, do you believe that 
agencies should use them before seeking any additional tools from the 
congress to address recruitment and retention issues?
    Secretary Disney and Mr. Cooke. As the table below indicated, the 
Department of Defense has increased its use of recruitment bonuses, 
relocation bonuses, and retention allowances. From Fiscal Year (FY) 
1994 through FY 1999, the number of recruitment bonuses, relocation 
bonuses, and retention allowances increased 411 percent, 139 percent, 
and 463 percent, respectively. For the same period, the total value of 
these bonuses and allowances increased 201 percent, 166 percent, and 
426 percent, respectively, though the average amounts did decline for 
recruitment bonuses and retention allowances.

                                      BONUSES AND ALLOWANCES PAID TO DOD CIVILIAN EMPLOYEES FY 1994 THROUGH FY 1999
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                            Recruitment Bonuses                     Relocation Bonuses                     Retention Allowances
                                 -----------------------------------------------------------------------------------------------------------------------
                                        Number            Avg. Amount           Number            Avg. Amount           Number            Avg. Amount
--------------------------------------------------------------------------------------------------------------------------------------------------------
FY 1994.........................  114...............  $10,477...........    52..............  $10,107...........    385.............  $8,904
FY 1995.........................    89..............     9,862..........    35..............     7,712..........    486.............   9,276
FY 1996.........................    96..............   10,373...........    67..............   10,216...........    675.............   9,812
FY 1997.........................  137...............     7,132..........    73..............   11,159...........    957.............   9,570
FY 1998.........................  177...............     7,800..........    72..............     9,416..........  1180..............   9,069
FY 1999.........................  582...............     6,172..........  124...............   11,256...........  2168..............   8,315
--------------------------------------------------------------------------------------------------------------------------------------------------------

    There has been a significant increase in the number and value of 
these incentives since the General Accounting Office reviewed retention 
allowances in December 1995. The Department is making effective use of 
these tools in appropriate situations, and supports legislative changes 
that would increase agency flexibility in this area. It is important to 
note that because these bonuses and allowances are not increases to 
basic pay, they provide an effective solution only when an increase to 
basic pay is not warranted.
    Secretary Snyder. The Department of Army's database indicates the 
use of recruitment bonuses is on the rise. During FY 1998 only 94 
recruitment bonuses were authorized; however, there were 227 
recruitment bonuses authorized for FY 1999.
    Our prior limited use of recruitment bonuses is not really 
surprising. Given that the Department of Defense was still undergoing 
downsizing in FY98, extensive use of recruitment bonuses would have 
been unexpected. Now, with downsizing leveling off, the use of 
recruitment bonuses appears to be on the rise.
    Several activities have indicated that, although they authorized 25 
percent recruitment bonuses for specific positions, the candidates did 
not accept the positions. We find it regrettable that we sometimes 
cannot compete with private industry--even when offering bonuses. We 
are aware that OPM is developing a proposal to amend title 5, United 
States Code, to make certain pay flexibilities easier to use and more 
helpful in recruiting and retaining employees. One of the flexibilities 
in its proposal would allow larger recruitment bonuses based on the 
length of the new employees' service commitment. The Department of Army 
strongly endorses this proposal, as it will better enable us to compete 
with private industry.
    Currently activities interested in providing recruitment bonuses to 
eligible applicants have to pay the bonuses in lump sums. This is 
costly for the activity as the bonuses can be up to 25 percent of 
employees' salary. To provide greater flexibility on payments of 
recruitment bonuses, OPM has proposed a change to its regulations to 
allow recruitment bonuses to be paid by various methods--as an initial 
lump sum, in installments, as a final lump sum upon the completion of 
the full service period, or in a combination of the above payments. 
This proposal will offer relief as the costs can be spread across 
fiscal years. In addition, the proposal will allow greater flexibility 
in structuring payments that offer the employee greater incentive to 
complete the full service stipulated in the agreement.
    With regard to retention allowances, their usage remains low within 
the Department of the Army, with about 250 authorized for FY 1999. One 
reason for low usage may be criteria limiting eligibility. Although 
Army received several inquiries regarding retention allowance 
eligibility, it was determined the employees did not meet the DOD 
requirements. Another concern is some of our activities are competing 
with other Federal agencies for experienced personnel, such as in the 
case of Army Air Traffic Controllers at Fort Rucker, Alabama being 
hired by the Federal Aviation Administration (FAA). The FAA is no 
longer paid under title 5 which has increased their salaries 
approximately 10 to 15 percent above General Schedule rates. OPM is 
proposing a change that would allow agencies to pay a retention bonus 
to an employee who is likely to leave his or her job for another 
Federal position. This change would greatly enhance Army's ability to 
retain critical employees.
    The Department of Army heartily endorses OPM's proposals regarding 
the pay flexibilities for recruitment and retention of employees. If 
these proposals are enacted, we should see more usage of these bonuses 
and allowances. These changes would expand agency flexibility to offer 
the bonuses and could forestall the need for a request to Congress for 
additional tools to address recruitment and retention issues.
    Secretary Welch. The DON fully supports the use of recruitment 
bonuses and retention and relocation allowances as tools to meet 
current and future staffing needs. We recognize, however, that these 
authorities are not being fully utilized across the Department.
    During FY99, DON commands and activities paid 292 recruitment 
bonuses (total accessions 12,324), 57 relocation bonuses, and 262 
retention bonuses (total separations 18,994). we are currently working 
with our commands and activities to determine why the usage data are so 
low, and to identify ways in which these and other incentives and 
flexibilities can be more completely integrated into the staffing 
process. Funding is almost certainly an issue.
    Secretary Keener. Although these authorities have been used 
conservatively since their creation in the Federal Employees Pay 
Comparability Act of 1990, the Air Force has increasingly used these 
tools over the last few years, as has the rest of the Federal 
Government. In FY99, a group retention allowance of 10% was approved by 
the DOD for Air Force reserve pilots, and was being paid to nearly 600 
pilots during that fiscal year. Additionally, they have also been paid 
in the first half of FY00 to critically skilled employees in certain 
locations, such as computer specialists. In all, for the first two 
quarters of FY00, 142 retention allowances (new in FY00), 54 
recruitment bonuses, and 12 relocation bonuses have been paid.
    The most frequently heard reason for the bonuses' seldom use is 
their cost. Payment of a lump-sum bonus does incur a substantial up-
front cost, as opposed to other compensation-related tools such as 
special salary rates, which are paid out over time as part of an 
individual's basic salary. The cost of bonuses adds a potential burden 
to already overstretched budgets since they are not separately funded, 
but must be taken out of available operating budgets. If these bonuses 
are used, they must compete with civilian pay requirements and other 
essential programs for funding.
    Agencies should be authorized to use the recruitment and retention 
tools that they consider most effective in targeting individuals or 
groups, and should not be required to use the bonuses before seeking 
other tools from the Congress. For example, since the bonuses are not 
credited in computing other benefits such as retirement annuities, they 
may not be an attractive incentive to work for the Federal Government 
for some experienced, highly skilled candidates. For this reason, we 
believe that a variety of tools should be made available to federal 
managers for recruitment and retention purposes.
    Mr. Bateman. Civilian employees are often deployed with the 
military forces today. Do you have the tools you need to manage a 
deployed civilian workforce?
    Secretary Disney and Mr. Cooke. We have a number of special 
provisions that apply to our deployed civilians. Examples of 
legislative and policy initiatives that have been effected on behalf of 
these employees include the following:

     Leave restoration: Under recent legislation, there is now 
automatic restoration of excess annual leave for employees who are 
unable to schedule or use leave while in a combat zone.
     Special Danger Pay Allowance: At DOD's request, the 
Department of State (DOS) has authorized Federal civilian employees 
accompanying US military forces the same flat rate ($150 per month) as 
military personnel receive when they are authorized imminent danger 
pay. This flat rate only applies in areas where danger pay is not 
authorized elsewhere by DOS regulation.
     Medical Support: Under DOD policy, deployed civilians are 
authorized the same medical treatment as their military counterparts in 
the theater of operations.
     Casualty Assistance: Casualty assistance is provided to 
family members of civilians who become casualties during operational 
missions.
     Mail: When free mail is authorized for military, civilians 
are also entitled to free mail while in the theater of operation.
     Recognition: We recently presented the first Armed Forces 
Civilian Service Medals to civilians deployed in Bosnia and Hungary.

    During Operation DESERT SHELD/STORM, fewer than 3 percent of our 
deployed forces were civilians. Today, 7 percent to 13 percent of our 
forces deployed worldwide are civilians. Further, the increased 
reliance on civilians in support of military operations will continue 
in the downsizing environment. Therefore, we will continue to seek ways 
of addressing the unique needs of our deployed civilian personnel. To 
that end, we have created a Department-wide Working Group expressly to 
identify the needs of deployed civilians and propose necessary policy 
and legislative changes.
    Secretary Snyder. Generally speaking, we do have the tools to 
manage a deployed civilian workforce. However, as a result of Operation 
Desert Storm, Army commands expressed the need to provide certain 
benefits for deployed civilians, not only to assure fair treatment but 
also to provide added incentives for civilians to volunteer for 
deployment. The Army supports initiatives in two areas that require 
improvement.
    First, we need to provide emergency-essential Army civilians the 
opportunity to maintain adequate life insurance protection when 
assigned to a combat zone. Federal Employee Group Life Insurance 
(FEGLI) policies do not contain a ``war clause.'' Basic life insurance 
and any optional insurance coverage the employee has elected are paid 
even under wartime conditions. Participation in the FEGLI program is 
voluntary. Some employees who decline this coverage (usually offered at 
the time of hiring) may have private insurance policies that contain a 
``war clause.'' If they are later designated emergency-essential and 
deployed, their families may not have adequate life insurance 
protection. Legislation is not required for OPM to grant emergency-
essential civilians a FEGLI ``open season'' enrollment period. However, 
the Army seeks statutory language to provide the greatest possible 
assurance that employees designated emergency-essential will have the 
opportunity to enroll in FEGLI or to increase their FEGLI coverage. To 
eliminate any doubt about FEGLI coverage in wartime conditions, the 
Army supports a legislative proposal precluding any loss or reduction 
of FEGLI benefits that might arise during deployment.
    Second, we need to improve income tax and estate tax treatment for 
civilians assigned to a combat zone and extend to the survivors of such 
employees income tax and estate tax treatment equivalent to that 
afforded the survivors of service members. Specifically, Army seeks the 
following for civilians assigned to a combat zone: non-applicability of 
Federal income tax in the year in which the employee dies in a combat 
zone or from wounds, disease, or injury suffered in a combat zone; and 
exemption from certain estate taxes, consistent with the exemption for 
service members, if the employee's death is related to deployment to a 
combat zone.
    Secretary Welch. This issue is not applicable to the Navy or Marine 
Corps.
    Secretary Keener. A limited number of Air Force civilians have 
deployed to several operations, thus contributing directly to 
readiness. Over 200 civilians deployed in support of Desert Shield/
Storm and over 40 deployed to support our efforts in Kosovo. Today, we 
have civilian members deployed supporting Operations Northern and 
Southern Watch as well as Red Flag Exercises. Non-deployed civilian 
members also directly contribute to our readiness by maintaining 
operations in garrison or standing available to support our many reach-
back operations. In addition, thousands of Air Force civilians make 
major contributions to readiness through technology advances in our 
research laboratories, and force support and maintenance and repair in 
our Air Logistic Centers and depots. The synergy and flexibility 
created by all our Air Force people--our ``Total Force--is what makes 
us the world's preeminent Expeditionary Aerospace Force.
    From a practical standpoint, fiscal and operational costs limit the 
desirability of deploying civilians. Home station commanders have to 
weigh the additional cost of deploying civilians on their operating 
budgets. Overtime pay (time and a half basic pay) causes the most 
concern, since in most deployments, civilians must be paid overtime for 
hours they work over eight hours a day or forty hours a week. These 
expenses can become substantial and are paid by the commander to whom 
the civilian is permanently assigned. Also, since the majority of 
deployments utilize volunteers, the number of civilians involved is 
relatively small. From the deployed commander perspective, the non-
combatant status of deployed civilians is a limiting factor. 
Accordingly, we are evaluating ways to reduce the necessity to deploy 
noncombatants through improved systems which enhances ``reachback'' 
capability to provide services to deployed members.
    For deployed civilians, we need such tools as giving deployed 
civilians a limited open season for Federal Employee Government Life 
Insurance (FEGLI). It is a good tool to help deployed civilians like 
the one already approved in the FY00 National Defense Authorization Act 
for automatically carrying over annual leave.
    Mr. Bateman. Should deployed civilian employees enjoy the same 
Federal tax relief as those in uniform do, or should that privilege 
remain unique to the military? Has there ever been an American conflict 
in which civilian employees were provided Federal tax relief?
    Secretary Disney and Mr. Cooke. To our knowledge, civilian 
employees have never enjoyed this privilege. We are currently reviewing 
a proposal to provide limited tax relief to civilian employees in a 
combat zone, but no decision has been reached.
    Secretary Snyder. In general, no, deployed civilian employees 
should not enjoy the same federal tax relief as those in uniform. 
Although many deployed civilians share many of the same risks and 
hardships as their military counterparts, an analysis of the financial 
benefits reflects that a typical deployed civilian's compensation--even 
without a monthly tax exclusion like that afforded deployed military 
members--is currently comparable to, if not slightly higher than, the 
compensation for a typical deployed military member of comparable 
grade. In addition to the opportunity to earn a substantial amount of 
overtime pay, civilians receive, under applicable circumstances, a 
number of allowances and differentials, e.g., danger pay (up to 25% of 
base pay) and post differential (up to 25% of base pay depending on the 
country of deployment). To my knowledge, Federal civilian employees 
have never been provided tax relief as a result of being deployed.
    As I stated in my previous answer, however, the Army does support 
extending to civilian employees assigned to a combat zone the same tax 
treatment relative to survivor benefits that is afforded deployed 
military members.
    Secretary Welch. This issue is not applicable to the Navy or Marine 
Corps, however we would support an initiative on this issue.
    Secretary Keener. In comparing civilian pay, benefits, and 
allowances, deployed civilian employees' tax exemptions are comparable 
overall to their military counterparts. While deployed in a temporary 
duty status, federal civilian employees continue to receive their 
locality pay as part of their basic pay (taxable) from their permanent 
duty location in addition to being compensated for temporary duty such 
as per diem, travel, and lodging (non-taxable). Additionally, they may 
receive danger pay (upon being in a combat zone more than four hours 
which equates up to 25% of their pay) and may receive post differential 
(upon being in a combat zone beyond 42 calendar days which equates to 
up to 25% of their pay), depending on the location of the deployment, 
which are both taxable. Military members receive a smaller combat pay 
allowance, so exempting their base pay from taxes makes the situation 
more equitable in comparison to civilian employees. Further, if 
civilians are permanently moved to an overseas area on a permanent 
change of station move, they do receive additional non-taxable 
allowances such as quarters allowances and cost-of-living allowances 
(while losing their locality pay).
    There has not been an American conflict in which civilian employees 
were provided federal tax relief.
    Mr. Bateman. DOD policy limits assignments overseas to five years. 
The reason behind the policy is to encourage developmental assignments 
overseas and broaden the experience of the civilian workforce. This 
reasoning is sound, but I am not so sure that the Department is really 
operating a coherent program. We continually receive correspondence 
from high performing employees overseas being forced to return, and 
never hear from those in the US being blocked from overseas 
assignments. Why have a policy that creates discontent, uproots good 
employees, and has no apparent organized program behind it?
    Secretary Disney and Mr. Cooke. Since 1966, the Department of 
Defense (DOD) has had a policy of limiting civilian tours in foreign 
areas to five years or less. The rotation policy is broadly written to 
reflect DOD's worldwide responsibility. It intentionally grants the 
Military Departments the flexibility to implement the policy to meet 
their changing mission requirements at each foreign location. While the 
policy's rationale has remained essentially the same as when first 
issued, the emphasis has shifted somewhat over time as overseas 
activities have undergone significant changes in mission.
    The rotation policy allows for continuous assessment of civilian 
workforce requirements and promotes the efficiency of worldwide 
operations. Within the overseas workforce, there is also a continual 
change in the skills that are needed as new missions emerge. The limit 
on foreign area tours gives management the flexibility necessary to 
adjust the skills mix to meet the new requirements. In addition, a 
foreign-area assignment provides employees with desirable international 
experience that is essential to career development, particularly at the 
mid- and senior levels. Employees who return from overseas tours bring 
a healthy new perspective to their organizations in the United States. 
Creating vacancies through the five-year limitation is necessary to 
allow this rotation to continue.
    Equally as important, the employment of military spouses and family 
members on our military installations is critical to their quality of 
life in foreign areas where employment on the local economy may be 
restricted. We believe that there is a direct connection between family 
employment opportunities and retention of our career military members. 
The rotation policy also ensures a continuing supply of vacant jobs for 
our military spouses and family members.
    In sum, then, we believe that the rotation policy greatly benefits 
the Department and its overall workforce.
    Secretary Snyder. The Department of the Army (DA) recognizes that 
the current Department of Defense (DOD) policy on overseas rotation 
means that some employees will return to the United States before they 
wish to do so. We support the DOD policy. In applying it, we recognize 
the need for variations that overseas commanders must respond to, based 
on critical mission requirements in the overseas environment. Our 
policy on overseas rotation provides the overseas commanders with the 
flexibility to extend or deny extension of overseas tours in order to 
maintain a high level of expertise in the civilian workforce.
    With the continued reductions in civilian employment and closing of 
Army installations in overseas areas, the Army must retain its ability 
to limit employment in foreign areas as a means of managing overseas 
staffing levels and providing developmental opportunities for career 
employees. Our program provides Army employees return rights to the 
Army positions held prior to going overseas. We also assist employees 
who do not have return rights, with registration and placement through 
the DOD Priority Placement Program.
    Secretary Welch. The DON fully supports the 5-year overseas 
rotational policy and believes that it should be equitably applied. 
Provisions exist in the regulations for exceptions under unusual 
circumstances, and the DON has endorsed these exceptions when they were 
supported by the mission needs of the Department.
    Secretary Keener. In Mar. 97, the Office of the Assistant Secretary 
of Defense for Civilian Personnel Policy (OASD[CPP]) drafted a 
memorandum in which the five-year limitation on foreign employment 
established in Apr. 66 was reaffirmed. Since that time, the Air Force 
has taken a less permissive view on extending employees beyond the 
five-year limitation. The purpose of the overseas rotation program is 
to provide opportunities for civilians to gain overseas experience, to 
provide employment opportunities for family members, and to continue 
the influx of new ideas and skills to the foreign area. Adherence to 
the DOD rotation policy also provides for a systematic return of 
employees upon completion of their overseas tours. Essentially, it 
enables a greater number of Air Force employees to gain valuable, 
career-enhancing experience in the overseas area. Although we continue 
to believe the five-year rotation policy is fundamentally sound, there 
may be ways to improve the basic policy and its execution. At a recent 
Overseas Human Resource Management Conference, a recommendation was 
made to form a Department of Defense working group to assess the 
corporate and operational costs of managing the foreign area employment 
limitation.
    Mr. Bateman. Please discuss the overall expected attrition rate in 
the DOD civilian workforce and what level of attrition is acceptable or 
desirable. Of course, acceptable or desirable attrition rates might 
vary by occupation. In your reply, please include data you may have 
available on how DOD's attrition rate for key occupational categories 
compares to attrition in private sector competitors for talented 
employees.
    Secretary Disney and Mr. Cooke. During FY 1999, about 7.6 percent 
of DOD's civilian employees with permanent appointments left DOD 
through retirement, resignation, transfer to other Federal agencies, 
and other types of separations. This compares to a rate of 7.3 percent 
in the previous fiscal year, and 7.5 percent in FY 1997. We expect 
separation rates to rise modestly in the next few years as our older 
workers reach retirement age, but we do not project a dramatic exodus 
in any single year.
    We consider these overall rates to be in the acceptable range. As 
the drawdown of the civilian workforce slows in the next few years, 
such loss rates should, in general, create sufficient vacancies to 
allow DOD significant opportunities for workforce renewal through new 
hiring. However, as stated elsewhere, spot surpluses will continue to 
occur in certain occupations at certain sites. To deal with these, we 
have requested additional force-shaping tools.
    The table below contains loss rates for selected occupational 
groups in DOD for FY 1999. We do not have comparable data for the 
private sector, although available evidence indicates that separation 
rates are much higher outside government.

 SEPARATION RATES FOR DOD CIVILIAN EMPLOYEES WITH PERMANENT APPOINTMENTS
                 IN FY 1999 BY SELECTED OCCUPATION GROUP
------------------------------------------------------------------------
                                                       Percent
------------------------------------------------------------------------
Engineers.................................  5.3
Logistics management......................  6.9
Central management........................  7.2
Production workers........................  7.4
Miscellaneous technicians.................  8.5
Financial management......................  6.3
Data system management....................  9.7
Secretarial...............................  8.0
------------------------------------------------------------------------

    Secretary Snyder. The Army currently intensively manages 
approximately 84,000 civilian employees in 22 separate career programs. 
The overall turnover rate for these employees is about 7% to 8% per 
year, a rate that has remained essentially constant during the 
drawdown. We do not have comparable data for the private sector.
    The Army is studying the degree of turnover variation by occupation 
group in terms of the kinds of workers employed (i.e., demographic, 
skill, and educational background), economic conditions, and Army's 
future civilian workforce needs. The total turnover rate in an 
occupational group can be assessed as either acceptable or unacceptable 
only when the desired future of that group has been discerned. Once 
that is accomplished, we can forecast the number of new hires or losses 
needed to reach an identified target end strength level.
    Secretary Welch. Within the DON we find attrition rates to be 
relatively stable in the professional series. For example, during FY99, 
attrition rates for mathematicians (6.2%), Physical Scientists (6.7%), 
Engineers (5.9%) and Biologists (8.5%) were relatively low. We have no 
private sector data to use as a comparison.
    Secretary Keener. The attrition rate for our core white-collar 
specialties has grown from 6% in 1996 to nearly 8% last year. The 
government-wide attrition rate is approximately 7%. Our aging workforce 
leads us to expect higher turnover in the future as employees reach 
retirement. This is a ``good news/bad news'' situation: ``good'' in 
that it will give us greater opportunities for bringing in new, fresh 
talent; ``bad'' in that we will be losing valuable, skilled, and 
experienced employees.
    Our aggregate succession planning models show normal loss rates 
between 6% and 6-1/2% are in the range where we have a reasonable 
balance between force renewal and retention of experienced employees. 
However, we need, and are in the process of building, better 
forecasting models to help determine what the desired attrition rates 
should be for each career field.
    Mr. Bateman. Could you review for me what the percentage reduction 
in your Fourth Estate has been since, 1989 or whatever date is more 
convenient so that we have an idea as to the relative size of the 
downsizing? Could you furnish us with the numbers on the drawdown of 
the various departments and agencies within the Department of Defense.
    Secretary Disney. The ``Fourth Estate'' has been changing in size 
and scope over the past three decades. Changes in its civilian 
employment over the past decade are particularly illustrative of this 
fact. In September 1989, the Fourth Estate had 99,000 employees. It 
reached its peak in September 1994, with 155,000 employees and has 
steadily declined since, with 122,000 employees as of February 2000.
    These changes stemmed primarily from the establishment of Defense 
Agencies and DOD Field Activities as the Department revamped its 
service and support structure to improve the quality and effectiveness 
of products and service delivery. This effort effectively transferred 
people and functions from the Military Departments and across 
Components to achieve unity of effort, centralized oversight, and 
economies of scale. As illustrated by the numbers provided separately, 
this process did not generate growth in the DOD workforce. Rather, the 
consolidation itself usually recognized significant savings in 
personnel or other resources.
    Information on changes in civilian employment for all DOD is 
displayed in the table below.

                                DRAWDOWN IN CIVILIAN EMPLOYMENT IN DOD (ROUNDED)
----------------------------------------------------------------------------------------------------------------
                                    September 1989       February 2000          Change          Percent change
----------------------------------------------------------------------------------------------------------------
Military functions..............  1,117,000.........  704,000...........  413,000...........  -37
  US citizens...................     999,000........  652,000...........  347,000...........  -35
  Foreign nationals.............     118,000........   52,000...........   66,000...........  -56
Civil functions.................      31,000........   24,000...........    7,000...........  -23
  Total.........................  1,148,000.........  728,000...........  420,000...........  -37
----------------------------------------------------------------------------------------------------------------

                  AMC Proposed Apprenticeship Program
    Mr. Bateman. The Army Materiel Command has expressed some concern 
about the aging of skilled workers in the depots and has suggested that 
an apprenticeship program is necessary to train skilled workers for the 
future. What's your view? If you agree that such a program is 
necessary, please provide supporting analysis.
    Secretary Snyder. Headquarters, Department of the Army completed a 
preliminary analysis of AMC's depot maintenance job families to 
determine whether an apprenticeship program would be of value. Our 
preliminary findings and HQ AMC analysis support the need for a 
structured apprenticeship program in certain blue collar occupations. 
However, before we can arrive at a final conclusion, we need to 
determine the required endstrength for these apprenticeship occupations 
in future years so that we can accurately assess the number of 
apprentices needed to maintain a steady state and compensate for the 
impact of increased retirements. My staff is currently working with HQ 
AMC to complete the analysis.
    Mr. Bateman. What has the Navy learned from the China Lake 
demonstration project?
    Secretary Welch. Navy's China Lake project opened the doors to new 
ways of hiring, paying, and rewarding employees. It was the first 
demonstration project within the Federal Government, and it allowed 
managers and employees to discuss salaries and the employer to offer 
salaries commensurate with employee skills, at or above normal starting 
salary rates. China Lake established pay banding to permit and 
facilitate flexibility in pay setting commensurate with performance.
    As a result of the China Lake project, which is now a permanent 
Alternative Personnel System, the Department of the Navy (DON) is 
supporting a Department of Defense (DOD) strategy that will result in 
increasing flexibility in the hiring process, extending pay banding 
beyond the demonstration project sites, and empowering managers to 
reward good performance and to deal effectively with poor performance.
    While the emphasis of the China Lake project was on hiring and 
developing of scientific and technical employees, the principal lessons 
were more generic in nature. Simplified hiring and appointing processes 
through such initiatives as category ranking and reduction in the 
number of appointing authorities and contribution based performance 
rating systems can be applied across the board.
    Mr. Bateman. The Navy's shipyard apprenticeship program is 
frequently mentioned as a model. Please describe the program, why it 
was begun, and the results so far.
    Secretary Welch. The Navy's apprenticeship program is a Department 
of Labor-approved hiring and training program. It provides the tools 
and methods needed to identify candidates with potential to perform 
deck plate maintenance work, and integrates a program of formal post-
high school education with on-the-job training and mentoring to provide 
a source of fully qualified blue collar employees.
    The Navy began its apprentice program more than 80 years ago to 
respond to a need for shipbuilding and maintenance skills, which could 
not be fully or timely met by the private sector. The Navy was the 
preeminent employer of the type of skilled trades and crafts workers 
found at a shipyard, including shipfitters, welders, machinists, 
electricians, and pipefitters.
    Apprentices are hired based on their potential ability to learn and 
perform trades and crafts work. Typically, apprentices enroll in a 
community college-based program of general education including courses 
in mathematics, drafting and blueprint reading, and materials science. 
They also attend formal classes at the job site where they learn 
specific job skills they will need in their selected trade. The 
remainder of their time is spent performing work under the guidance of 
journey-level workers.
    During the last 10 years, as we closed shipyards and depots, our 
apprentice programs slowed down considerably, virtually emptying the 
pipeline for future workforce requirements. Now, thanks to increases in 
funding for FY99 and FY00, the Navy has been able to reenergize its 
apprentice programs to meet identified current and future needs. 
Apprentice programs at the shipyards in Pearl Harbor, Portsmouth, Puget 
Sound, and Norfolk are operating vigorously. During fiscal years 1999 
and 2000, 227 new apprentices were hired at Portsmouth and Pearl 
Harbor. Currently, each of the shipyards projects hiring from 100 to 
150 additional apprentices in a wide range of blue collar trades.
    Our Systems Commands and the Atlantic and Pacific Fleet Commanders, 
who are responsible for the Department's depot-level workforce, 
consider the apprentice program an integral part of their efforts to 
prepare for the workforce of tomorrow. We believe that the proven 
methods of the Navy's apprenticeship programs can be applied in any 
depot-level maintenance program.
    Mr. Bateman. Among the tools available to agencies that face 
recruitment and retention challenges are recruitment bonuses and 
retention allowances. Despite the media articles indicating that 
agencies are having difficulty attracting and retaining employees, we 
understand that agencies very seldom use either of these tools. How 
extensively does DOD use these tools? If they are seldom used, please 
explain why. Also, if they are seldom used, do you believe that 
agencies should use them before seeking any additional tools from the 
Congress to address recruitment and retention issues?
    Mr. Cooke. Recruitment, Retention, and Relocations bonuses 
(hereafter referred to as 3R's) are used within the Fourth Estate, with 
varying degrees of frequency from agency to agency. Some agencies have 
attached recruitment bonuses to intern programs as an entry-level 
employment incentive. Others have used the retention allowance as a 
tool to retain much needed corporate knowledge and technical skills. 
Other agencies regularly offer relocation bonuses in critical skill 
areas of senior management. For the most part, we are able to recruit 
the people we need within the present salary structure (base pay plus 
locality). As resources become scarcer, we expect the use of the 3R's 
provisions to increase. We do endorse the concept of using the 
provisions available to us before requesting additional legislation to 
address recruitment and retention issues--except in cases of request 
for direct hire authority. In these instances, it may not be the salary 
that hinders the recruitment of new employees, but the extensive steps 
involved in merit principles that we must apply, that prevents us from 
competing with the quick selections and job offers that private 
industry can make.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. CHAMBLISS
    Mr. Chambliss. Why is a worker at Robins Air Force Base paid at a 
certain level but a worker in Atlanta, less than 100 miles away, might 
be paid at a higher rate?
    Secretary Disney. Although the methodology for conducting wage 
surveys and developing area wage schedules is uniform throughout the 
system, no two Federal prevailing wage rate schedules are identical. 
Our experience in conducting locality wage surveys has shown that these 
differences, for the most part, are attributable to differences in the 
kind and size of private industrial employers located within each wage 
area and differences in the level of wages paid for various occupations 
by each private employer. Thus, the Federal prevailing rate schedules 
for different areas can reflect significant differences in levels of 
pay.
    Mr. Chambliss. Why might a worker doing the same job at another 
government agency at Robins AFB be paid at a higher rate?
    Secretary Disney. Federal Wage Systems (FWS) employees doing the 
same job in the same location could be paid different rates for various 
reasons. For example, the employees could be at different grades or at 
different steps in the same grade. Some employees may be being paid 
from the Wage Leader or Wage Supervisor pay scale, or be entitled to 
grade or pay retention. All Department of Defense (DOD) FWS employees 
(not leaders or supervisors) working in Warner Robins will be paid at 
the same rate if they are at the same grade and step. There may be some 
differences in rates paid to other-than-DOD FWS employees because the 
DOD rates are based on local private industry rates.
    Mr. Chambliss. Why have general schedule employees received pay 
increases equal to twice the amount of the wage grade people over the 
last 14 years?
    Secretary Disney. Answering this question requires differentiating 
the systems and then addressing the misunderstanding about pay rates.
    Pay rates for General Schedule and Federal Wage System (FWS) 
employees are based on two distinctly different systems. The General 
Schedule is a worldwide schedule with 32 locality pay schedules 
applicable to the 48 contiguous states. FWS pay schedules are based on 
local prevailing rates developed by joint labor-management surveys 
conducted in 132 local areas. Congress restricts increases in FWS 
schedules to the amount of the increase in the General Schedule plus 
locality payments.
    General Schedule employees have not received pay increases equal to 
twice the FWS increases over the last 14 years. The following table 
shows the General Schedule (including locality pay) increases versus 
FWS increases from 1986 through 1999.

   OVERALL INCREASES FOR GENERAL SCHEDULE EMPLOYEES VERSUS FEDERAL WAGE SYSTEM EMPLOYEES IN ATLANTA AND MACON,
                                   GEORGIA (INCREASES EXPRESSED AS A PERCENT)
----------------------------------------------------------------------------------------------------------------
                                      Nationwide
                                   General Schedule                                            FWS  Macon  Non-
              Year*                   (including         FWS  Atlanta       FWS  Macon DOD            DOD
                                       locality)
----------------------------------------------------------------------------------------------------------------
1986............................                  0                   0                   0                   0
1987............................                3.0                2.95                2.93                2.95
1988............................                2.0                1.95                1.95                1.95
1989............................                4.1                4.05                3.39                4.05
1990............................                3.6                3.56                3.56                3.56
1991............................                4.1                4.07                2.74               -4.28
1992............................                4.2                4.15                3.60                3.70
1993............................                3.7                3.29                3.34                3.00
1994............................                2.2                2.33                1.12                1.06
1995............................                2.6                2.95                3.04                1.39
1996............................                2.4                2.46                2.47                1.85
1997............................                3.0                2.63                3.07                3.06
1998............................                2.8                2.53                2.84                2.61
1999............................                3.6                3.40                3.62                3.62
Average.........................               2.95                2.88                2.69                2.04
----------------------------------------------------------------------------------------------------------------
* Calendar Year for GS and Fiscal Year for FWS.

    Over the last 14 years, General Schedule employees' pay increased 
an average of 2.95 percent compared to 2.88 percent for FWS employees 
in Atlanta, 2.69 percent for those in Macon working for DOD, and 2.04 
percent for those in Macon working for agencies other than DOD. Since 
1995 DOD FWS rates in Macon have been increasing faster than the Macon 
(Non-DOD) or Atlanta FWS rates.
    Mr. Chambliss. Some specialized government jobs in the Macon, 
Georgia, wage area are not found in the private sector locally but may 
be found in another area, such as Atlanta. The data in Atlanta are not 
used in the prevailing wage schedule in Macon. Why would that be the 
case when there is nobody else in that category within the local area?
    Secretary Disney. Atlanta and Macon, Georgia, are separate wage 
areas, with the local prevailing rates in each area being used to 
establish our FWS schedules. Both the General Schedule and the FWS 
schedules are applied to a wide variety of positions. Since the General 
Schedule is national in scope, jobs from across the entire nation are 
used in defining the schedule. Because the FWS schedules for Atlanta 
and Macon are each based on local wages, those occupations prevalent in 
each area are used to establish the schedule for that area. It is not 
unusual to find specialized jobs at a Federal activity where there are 
no local private sector counterparts. The FWS schedules do not address 
specific occupations but establish specific rates for each grade and 
step for all covered occupations.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. UNDERWOOD
    Mr. Underwood. How would we better provide assistance to workers 
who are undergoing a dramatic work transition through no fault of their 
own and what about the issue of how we deal with the term ``inherently 
govermental?'' Also, would you please provide your comments on the 
ordnance handing on Guam being outsourced, the A-76 study performed, 
and the problems associated with having to bring people in to perform 
the work.
    Secretary Welch. The ordnance handling function was included as 
part of the Base Operating Support (BOS) multi-function A-76 study that 
was awarded to Raytheon on April 7, 2000. Because of the success we've 
had with contractor operated functions at Naval Magazine Lualualei, 
Hawaii, we believe we will achieve similar success at Naval Magazine 
Guam. The decision to include this function was closely scrutinized to 
ensure its suitability for contracting. A contingency is included in 
the contract to handle surge requirements similar to language contained 
in the contract for Naval Magazine Lualualei, Hawaii. The contractor is 
paid based on tonnage handled, and must be able to respond to workload 
fluctuations including significant surges.
    Congressman Underwood's concern that the contractor may find it 
difficult to hire qualified, on-island workers for surge workload may 
be accurate. However, this is a performance contract and the contractor 
may have to hire employees from off-island to meet performance 
requirements. The Department of the Navy does not monitor the details 
of how or from where the contractor recruits its employees. Instead, we 
closely monitor the performance of the contracted work to ensure 
compliance with standards of operation and adequacy of results.
    Mr. Underwood. Are you able to hire the skills you need to support 
the military services?
    Mr. Cooke. The Fourth Estate is an amalgam of independent agencies, 
each with its own personnel authorities, diverse mission, function, 
reporting channels, operational requirements, culture, values, and 
workforce composition. However, within this diverse workforce, there is 
agreement that the job categories that are in high demand and that are 
difficult to recruit are in the areas of Information Technology, 
Electronics Engineering, Telecommunications, Acquisition, Accountants, 
Logistics, Personnel Management and Clerical/Administrative support 
positions.
    Of the job categories mentioned, Information Technology is the 
field where we are experiencing and will continue to have the most 
difficulty in recruiting. The demand for IT expertise is very high 
among many federal agencies and the private sector. The Fourth Estate 
has a number of different programs and options available to meet those 
highly dynamic and changing IT needs. Included in our efforts to 
maximize our recruitment of IT professionals are newly developed intern 
programs at the high school and college levels, vigorous recruitment 
efforts for IT professionals, telecommuting pilot programs, and agency 
marketing. Some of our Fourth Estate agencies are designing 
developmental career programs to develop multi-functional employees, 
allowing the current workforce to develop new skills needed to keep up 
with changing technology. Indications are that increased use of the 
3R's provisions as a recruitment and retention tool is expected. We 
anticipate that such programs will serve as an incentive to large 
numbers of new and current employees and provide an opportunity for 
them to achieve their career goals within the agencies.