[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]




 
                 RIGHT SIZING THE U.S. PRESENCE ABROAD

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

                                HEARING

                               before the

                   SUBCOMMITTEE ON NATIONAL SECURITY,
                   VETERANS AFFAIRS AND INTERNATIONAL
                               RELATIONS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 1, 2002

                               __________

                           Serial No. 107-189

                               __________

       Printed for the use of the Committee on Government Reform


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


                                 ______

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                            WASHINGTON : 2003
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                     COMMITTEE ON GOVERNMENT REFORM

                     DAN BURTON, Indiana, Chairman
BENJAMIN A. GILMAN, New York         HENRY A. WAXMAN, California
CONSTANCE A. MORELLA, Maryland       TOM LANTOS, California
CHRISTOPHER SHAYS, Connecticut       MAJOR R. OWENS, New York
ILEANA ROS-LEHTINEN, Florida         EDOLPHUS TOWNS, New York
JOHN M. McHUGH, New York             PAUL E. KANJORSKI, Pennsylvania
STEPHEN HORN, California             PATSY T. MINK, Hawaii
JOHN L. MICA, Florida                CAROLYN B. MALONEY, New York
THOMAS M. DAVIS, Virginia            ELEANOR HOLMES NORTON, Washington, 
MARK E. SOUDER, Indiana                  DC
STEVEN C. LaTOURETTE, Ohio           ELIJAH E. CUMMINGS, Maryland
BOB BARR, Georgia                    DENNIS J. KUCINICH, Ohio
DAN MILLER, Florida                  ROD R. BLAGOJEVICH, Illinois
DOUG OSE, California                 DANNY K. DAVIS, Illinois
RON LEWIS, Kentucky                  JOHN F. TIERNEY, Massachusetts
JO ANN DAVIS, Virginia               JIM TURNER, Texas
TODD RUSSELL PLATTS, Pennsylvania    THOMAS H. ALLEN, Maine
DAVE WELDON, Florida                 JANICE D. SCHAKOWSKY, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
ADAM H. PUTNAM, Florida              DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia                      ------
JOHN J. DUNCAN, Jr., Tennessee       BERNARD SANDERS, Vermont 
------ ------                            (Independent)


                      Kevin Binger, Staff Director
                 Daniel R. Moll, Deputy Staff Director
                     James C. Wilson, Chief Counsel
                     Robert A. Briggs, Chief Clerk
                 Phil Schiliro, Minority Staff Director

 Subcommittee on National Security, Veterans Affairs and International 
                               Relations

                CHRISTOPHER SHAYS, Connecticut, Chairman
ADAM H. PUTNAM, Florida              DENNIS J. KUCINICH, Ohio
BENJAMIN A. GILMAN, New York         BERNARD SANDERS, Vermont
ILEANA ROS-LEHTINEN, Florida         THOMAS H. ALLEN, Maine
JOHN M. McHUGH, New York             TOM LANTOS, California
STEVEN C. LaTOURETTE, Ohio           JOHN F. TIERNEY, Massachusetts
RON LEWIS, Kentucky                  JANICE D. SCHAKOWSKY, Illinois
TODD RUSSELL PLATTS, Pennsylvania    WM. LACY CLAY, Missouri
DAVE WELDON, Florida                 DIANE E. WATSON, California
C.L. ``BUTCH'' OTTER, Idaho          STEPHEN F. LYNCH, Massachusetts
EDWARD L. SCHROCK, Virginia

                               Ex Officio

DAN BURTON, Indiana                  HENRY A. WAXMAN, California
            Lawrence J. Halloran, Staff Director and Counsel
                Thomas Costa, Professional Staff Member
                           Jason Chung, Clerk
                    David Rapallo, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 1, 2002......................................     1
Statement of:
    Ford, Jess T., Director, International Affairs and Trade 
      Division, U.S. General Accounting Office; and Lewis B. 
      Kaden, Davis Polk & Wardwell, New York, NY, former 
      chairman, Overseas Presence Advisory Panel.................    52
    Green, Grant S., Jr., Under Secretary for Management, U.S. 
      Department of State; and Nancy P. Dorn, Deputy Director, 
      Office of Management and Budget............................     6
    Lawson, Ken, Assistant Secretary for Enforcement, Department 
      of the Treasury; Andrew Hoehn, Deputy Assistant Secretary 
      of Defense for Strategy, Department of Defense; and Robert 
      Diegelman, Acting Attorney General for Administration, 
      Justice Management Division, Department of Justice.........    86
Letters, statements, etc., submitted for the record by:
    Diegelman, Robert, Acting Attorney General for 
      Administration, Justice Management Division, Department of 
      Justice, prepared statement of.............................   120
    Dorn, Nancy P., Deputy Director, Office of Management and 
      Budget, prepared statement of..............................    35
    Ford, Jess T., Director, International Affairs and Trade 
      Division, U.S. General Accounting Office, prepared 
      statement of...............................................    56
    Green, Grant S., Jr., Under Secretary for Management, U.S. 
      Department of State, prepared statement of.................     9
    Hoehn, Andrew, Deputy Assistant Secretary of Defense for 
      Strategy, Department of Defense, prepared statement of.....   109
    Kaden, Lewis B., Davis Polk & Wardwell, New York, NY, former 
      chairman, Overseas Presence Advisory Panel, prepared 
      statement of...............................................    77
    Lawson, Ken, Assistant Secretary for Enforcement, Department 
      of the Treasury, prepared statement of.....................    89
    Shays, Hon. Christopher, a Representative in Congress from 
      the State of Connecticut, prepared statement of............     3


                 RIGHT SIZING THE U.S. PRESENCE ABROAD

                              ----------                              


                         WEDNESDAY, MAY 1, 2002

                  House of Representatives,
Subcommittee on National Security, Veterans Affairs 
                       and International Relations,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:06 a.m., in 
room 2154, Rayburn House Office Building, Hon. Christopher 
Shays (chairman of the subcommittee) presiding.
    Present: Representatives Shays, Kucinich, Lewis, Watson, 
Putnam, Tierney, and Gilman.
    Staff present: Lawrence J. Halloran, staff director and 
counsel; Thomas Costa, professional staff member; Jason M. 
Chung, clerk; David Rapallo, minority counsel; and Earley 
Green, minority assistant clerk.
    Mr. Shays. Good morning. Welcome to our hearing entitled 
Right-Sizing the U.S. Presence Abroad.
    Last year the Office of Management and Budget, OMB, 
concluded, ``The U.S. overseas presence is costly, increasingly 
complex, and a growing security concern'' with no mechanism to 
assess the overall rationale and effectiveness of where and how 
U.S. employees are deployed.
    The President called for reforms to ensure U.S. national 
security and foreign policy interests are advanced by the right 
number of people with the right expertise at the right foreign 
posts. That was by no means the first call to right-size the 
U.S. Government presence abroad.
    In the wake of the 1998 embassy bombings in Africa, the 
State Department undertook a costly program to harden U.S. 
diplomatic posts and reassess the need for large, multi-agency 
delegations in so many embassies.
    In November 1999, the State Department's Overseas Presence 
Advisory Panel recommended creation of a formal inter-agency 
process to rationalize the size and scope of U.S. Government 
activities abroad, aligning resources with overall policy goals 
and security requirements, yet today, 4 years after terrorists 
successfully targeted our embassies, no one can determine with 
any precision the total number of executive branch employees 
working in foreign posts.
    Nearly a decade after the end of the cold war there is no 
systematic way to shape the U.S. foreign presence to meet new 
U.S. goals in a more dynamic, far more dangerous world. Federal 
agencies often set overseas staffing levels and pursue missions 
that may not coincide with State Department goals. Duplicative 
administrative systems waste resources.
    Security can be compromised when too many people occupy 
already-crowded facilities to conduct activities effectively 
accomplished here at home, regionally abroad, or over the 
Internet. Presiding over this dysfunctional diplomatic family 
is the U.S. Ambassador, personally charged by the President 
with ``full responsibility for the direction, coordination, and 
supervision of all U.S. Government executive branch 
employees.'' In fact, at most posts the U.S. Ambassador is 
little more than the titular leader of two-thirds of the U.S. 
citizens assigned there. That gap between responsibility and 
authority undermines the cohesion and effectiveness of our 
Nation's mission and message abroad.
    Last year in London, then-U.S. Ambassador to the United 
Kingdom Phillip Lader described the illusory aspects of 
Ambassadorial power this way. He said--I smile every time I 
read it--``Running an embassy was like being given command of a 
great ocean liner, only to learn the wheel you're turning to 
steer the ship of statecraft is not even attached to the 
rudder.''
    In preparation for today's hearing, we were briefed by 
three Ambassadors who echoed the need to better target all U.S. 
Government resources, not just State Department personnel and 
assets abroad.
    We also received a written statement from former Ambassador 
Felix Rohatyn, who, while in Paris, led efforts to right-size 
embassy operations with an entrepreneur's disdain for hide-
bound customs and a zest for innovation.
    They persuasively stress the need for a united, efficient, 
and effective voice for U.S. policy and priorities, 
particularly in regions of the world seething with hate and 
resentment of our strengths and values.
    Our witnesses today bring experience, depth of insight, and 
breadth of knowledge to our discussion of right-sizing U.S. 
presence abroad to meet our mission as a beacon of freedom and 
economic advancement to the world. We appreciate their being 
here today and we look forward to their testimony.
    [The prepared statement of Hon. Christopher Shays follows:]

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    Mr. Shays. At this time the Chair would recognize Mr. 
Kucinich.
    Mr. Kucinich. I want to thank the Chair for this 
opportunity to make a statement and to advise you that I have 
to momentarily go to a markup, and I appreciate the chance to 
be here and join you.
    Mr. Shays. I understand.
    Mr. Kucinich. I want to thank our witnesses for appearing 
here today and to thank all of those who serve our country 
abroad through the State Department for the wonderful work that 
they do.
    Today we gather to discuss right-sizing the U.S. presence, 
particularly the State Department presence, abroad. While I am 
confident that our distinguished chairman retains an open mind 
as to what the right size of this presence really should be, 
I'm concerned that for some right-sizing means down-sizing.
    Our corps of State Department personnel overseas plays a 
critical role in our Nation's foreign policy. These men and 
women are the public face of the U.S. Government abroad. In 
countries with which the United States has a particularly 
important economic or strategic relationship or particularly 
volatile one, the individuals in the State Department are 
instrumental in advancing American interests. They are often 
instrumental in helping to defuse conflicts that might 
otherwise require military action. But the conditions in which 
these men and women work belie their importance in our foreign 
policy apparatus.
    The findings of the Overseas Presence Advisory Panel 
created by Secretary Albright after the 1998 embassy bombings 
in Africa are instructive. The panel's conclusion is stark and 
alarming. ``The condition of U.S. posts and missions abroad is 
unacceptable,'' going on to say, ``The panel fears that our 
overseas presence is perilously close to the point of system 
failure.''
    Specifically, the panel cited a lack of adequate security, 
a lack of common Internet and e-mail communications network; 
``shocking shabby and antiquated building conditions''; ``worn, 
overcrowded, and inefficient facilities''; and staffing 
shortages that lead to substandard consular services. 
Unsurprisingly, the panel also noted that, ``morale has 
suffered.''
    I think it is important for us to note the panel's approach 
to these problems. The panel also said that new resources will 
be needed for security technology and training and to upgrade 
facilities, and went on to say that in some countries where the 
bilateral relationship has become more important, additional 
posts may be needed to enhance the American presence or to meet 
new challenges.
    Now, in August the administration announced its intention 
to implement the panel's recommendations, but the 
administration's budget allocations cast doubt on its 
commitment to implementing these recommendations. International 
affairs functions will be allocated $25 billion next year. 
That's less than fiscal year 2002. Yet, I might add that 
Defense spending will be near $400 billion. Missile defense, 
alone, will receive $8 billion next year, about as much as the 
State Department's entire budget.
    In addition, the number of direct hire positions abroad 
stands at only 18,000, 4.5 percent less than in 1995 and nearly 
60 percent less than in 1966. These individuals are being 
forced to make do in substandard conditions.
    In today's complex world, U.S. personnel overseas play as 
important a role as ever. Mr. Chairman, our overseas personnel 
and our foreign policy which they are called upon to execute 
certainly deserve better attention, and I want to thank the 
Chair for providing this opportunity to see that happen, so 
thank you.
    Mr. Shays. I thank the gentleman.
    I recognize he has other activities he needs to get to.
    At this time the Chair would recognize Diane Watson. Any 
statement you would like to make?
    Ms. Watson. Not at this time, Mr. Chairman.
    Mr. Shays. Nice to have you here. Thank you.
    And then the vice chairman of the committee, Adam Putnam.
    Mr. Putnam. No statement, Mr. Chairman.
    Mr. Shays. Well, that enables me to get right to our 
witnesses. It enables the committee to get right to our 
witnesses.
    First, before swearing in, let me get rid of the business 
of the committee, just the requirement. I ask unanimous consent 
that all members of the subcommittee be permitted to place an 
opening statement in the record and the record remain open for 
3 days for that purpose. Without objection, so ordered.
    I ask further unanimous consent that all witnesses be 
permitted to include their written statement in the record. 
Without objection, so ordered.
    We have three panels today. Our first panel is the 
Honorable Grant S. Green, Jr., Under Secretary for Management, 
U.S. Department of State; and the Honorable Nancy Dorn, Deputy 
Director, Office of Management and Budget.
    We're delighted both of you are here. We will ask you, as 
we ask everyone, to stand and we'll swear you in.
    I'd just put for the record the only one who has never been 
sworn in is Senator Byrd. I chickened out.
    [Witnesses sworn.]
    Mr. Shays. Note for the record our witnesses have responded 
in the affirmative. Actually, I think being sworn in is an 
honor, frankly. We take your testimony very seriously and we 
are very grateful you are here.
    We will start with you, Mr. Green.

    STATEMENTS OF GRANT S. GREEN, JR., UNDER SECRETARY FOR 
MANAGEMENT, U.S. DEPARTMENT OF STATE; AND NANCY P. DORN, DEPUTY 
           DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Green. Thank you, sir. Mr. Chairman and members of the 
subcommittee, I am pleased to be here this morning to testify 
on the importance of ensuring that the United States has the 
right people in the right places with the right resources to 
advance America's foreign policy interests. Contrary to some 
folklore and, as Mr. Kucinich mentioned, right-sizing does not 
necessarily mean staffing reductions. In some locations, right-
sizing can, in fact, lead to a reduction in staff, but true 
right-sizing, however, may require new staffing and new 
resources at posts that currently lack both.
    As was mentioned, the number of U.S. direct hire positions 
under the authority of the chiefs of missions now stands at 
18,000. The current level is essentially at the same as in 1990 
and reflects a 4.5 decline since 1995 and is certainly smaller 
now than in 1959, when it stood at 24,000 direct hire, and at 
its peak in 1996 at 42,000. Since at least the 1950's, the 
State Department representations is a third or less of all 
overseas staffing.
    Rationalization of the U.S. Government's overseas presence 
is no easy task. Past efforts to develop an interagency 
staffing methodology have not succeeded. The Overseas Presence 
Advisory Panel, for example, did not develop a methodology, 
even though doing so was part of its original charter. And the 
followup interagency right-sizing effort in 2000 also could not 
reach agreement on a methodology. But past difficulties are no 
reason not to try. Rationalization of our overseas presence is 
one of the President's management agenda initiatives. As a 
first step, President Bush, in his May 2001, letter to chiefs 
of missions instructed them to review closely staffing at their 
individual posts to ensure that their staffing levels were 
neither excessive nor inadequate to meet mission goals.
    We are working very closely with OMB on a number of right-
sizing issues, including data collection, establishment of a 
regional center in Frankfurt, and examination of the European 
and Eurasian Bureau overseas posts and development of an 
embassy construction financing mechanism that will include cost 
sharing with other agencies.
    In addition, OMB has been working with us on right-sizing 
issues we have been addressing, including revising the mission 
performance plan process.
    In addition, the General Accounting Office has kept us 
informed of its Paris staffing review and has briefed us on the 
conceptual framework it is developing. The Department of State 
is committed to working with OMB and the GAO in the development 
and implementation of a successful right-sizing initiative.
    In a related area, let me say that we believe there is 
still no substitute for face-to-face interaction with host 
governments and publics. State continues to support the 
principle of universality under which the U.S. Government 
maintains an on-the-ground presence in virtually all nations 
where we have diplomatic relations.
    We agree with OPAP's conclusion that today a universal, on-
the-ground overseas presence is more critical than ever to the 
Nation's well-being.
    While we believe strongly in the need to maintain an on-
the-ground presence in virtually all nations with which we have 
diplomatic relations, the Department of State pursues 
regionalization initiatives where appropriate. We rely heavily 
on centralizing a variety of administrative, consular, and some 
policy functions such as labor attaches and science and 
technology officers, either overseas or in the United States.
    We currently have four U.S. regional centers: the Ft. 
Lauderdale regional center, which provides support services to 
our posts throughout the Western Hemisphere; the National Visa 
Center in Portsmouth, New Hampshire; and the Kentucky Consular 
Center in Williamsburg, Kentucky, which performs a variety of 
consular tasks traditionally carried out at individual posts 
overseas. We also have the Charleston Financial Services Center 
in Charleston, South Carolina, which already provides support 
for our Western Hemisphere post and is in the process of 
assuming financial functions for our European and African posts 
which were formerly carried out at Embassy Paris.
    In addition, the Department has also begun to shift routine 
passport production from overseas posts to U.S. domestic 
passport agencies in order to take advantage of the high 
security photo-digitization process installed here in the 
United States.
    When relocating to the United States is not feasible, U.S. 
Government agencies, including State, may use embassies and 
consulates such as Frankfurt and Hong Kong as regional 
platforms for their activities. A major regionalization effort 
currently underway is the 23-acre Creek Bed site in Frankfurt, 
Germany, which formerly housed the Department of Defense's 
469th Hospital. Creek Bed will not only become the new site for 
consulate Frankfurt, but also be the location for a regional 
support center and home to numerous personnel from other 
agencies with regional responsibilities in Europe, Eurasia, 
Africa, and portions of the Middle East.
    Another initiative which you no doubt have heard about are 
the American presence posts. These are creative and cost-
effective ways to give the United States more visibility in 
places we would otherwise not be represented. Under former 
Ambassador Felix Rohatyn's leadership, five APPs were opened in 
France. The experience of those APPs shows what can be 
accomplished with a determined chief of mission and a committed 
staff using a creative and modern approach to doing business 
and mission resources. Obviously, such posts pose security 
concerns, but we will continue to consider proposals from 
chiefs of mission for additional APPs as they arise.
    In conclusion, let me say that we are working very closely 
with the Office of Management and Budget on its right-sizing 
effort as part of the President's management agenda. We believe 
that is the appropriate mechanism for further study and 
resolution of this issue.
    Mr. Chairman, I would be happy to answer any questions you 
or other members of the subcommittee may have at this point.
    Mr. Shays. Thank you, Mr. Green.
    [The prepared statement of Mr. Green follows:]

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    Mr. Shays. Could you just clarify one point? You talked 
about the service western facilities, and then you said they 
will also serve European facilities. Are western and European 
the same?
    Mr. Green. No. Eurasian--in Frankfurt, sir?
    Mr. Shays. No. You had just made the mention--it's not a 
big deal, but I want to just clarify it. You made reference to 
one of the facilities in the United States that was presently 
servicing western facilities.
    Mr. Green. Western Hemisphere facilities, Charleston. The 
Financial Service Center in Charleston is presently serving 
Western Hemisphere posts.
    Mr. Shays. OK. And will add?
    Mr. Green. And will add additional European posts as we 
move the Paris personnel.
    Mr. Shays. Right. I understand. Thank you.
    Ms. Dorn, thank you for being here. It is nice to have you 
working for the administration in such an important role. As a 
former House employee, it is good to see you here.
    Ms. Dorn. Thank you, Mr. Chairman. It is a pleasure to be 
here. I look forward to our discussion this morning, as this is 
a matter of great interest to the President and to the Office 
of Management and Budget. We welcome to opportunity to testify 
on the important topic of right-sizing the U.S. Government's 
presence overseas.
    I want to commend the State Department and the other U.S. 
Government agencies who are appearing before the committee 
today for their serious efforts to undertake this topic and to 
address this problem, as well as the work of the General 
Accounting Office.
    The U.S. Government's presence overseas is indispensable in 
projecting our policies and values and in promoting and 
protecting our interests overseas. Having said that, I would 
also state that our presence overseas is costly, both in terms 
of dollars and in terms of risks.
    As you've pointed out, we currently have more than 60,000 
U.S. Government employees at 260 posts overseas. This includes 
not only the State Department presence, but other U.S. 
Government agencies, as well as Foreign Service hires. More 
than 50 U.S. Government agencies and entities are represented 
in overseas posts. Costs are high. The average cost of having 
one full-time direct hire American family overseas in a U.S. 
embassy is about $339,000. There's a wide disparity of cost 
among agencies who have overseas employees, ranging from a low 
of about $129,000 to a high of about $665,000. Currently, OMB 
is surveying what authority is being used to justify overseas 
presence, as well as numbers and costs. And in many places our 
embassies are not sufficiently secure.
    These considerations put a premium on getting the right 
number of people doing the right jobs at the right places, as 
Mr. Green has noted.
    The administration is committed to improvement in this 
area. Last August, the President's management agenda, including 
right-sizing America's presence abroad, is one of its key 
initiatives. This will require a long-term effort, cooperation 
and coordination with multiple agencies, and I would add we 
welcome the work of the GAO and look forward to their continued 
contributions to our knowledge of this area. It also will 
require that we work with Congress to address our needs and any 
outstanding requirements that we may have.
    OMB is engaged in this effort, and I'd like to outline just 
a few of the steps that we are undertaking.
    For the first time, starting in October of last year, OMB 
is gathering comprehensive data on the number and functions of 
staff working abroad. Beyond the State Department who people 
think of as our presence overseas, we have, as I said, over 50 
agencies who have employees overseas.
    In conjunction with State, we are working to establish the 
regional presence in Frankfurt, Germany, which the Under 
Secretary mentioned. I believe that this can serve as a model 
for right-sizing in Europe and it can serve as a model for 
handling regional functions in other parts of the world, as 
well.
    We are undertaking a pilot right-sizing project in the EUR 
Bureau, which is the largest region in terms of embassy 
presence and employees. We are also developing a proposal to 
establish a mechanism to equitably share costs among agencies 
in construction of new embassies.
    Putting more emphasis on the mission planning process--in 
fact, I think the first of the 2004 rounds of that occurred 
just yesterday in terms of sitting down with multiple agencies, 
looking at a single post--in this case I think it was Korea. 
We're looking at workload requirements by priority. We've 
reduced the number of priorities that an embassy can have from 
fifteen to five so that we can actually get down to a serious 
discussion of what their priorities are and judge what 
resources are being put against those priorities. And we are 
also asking for the Ambassador to certify the work of this 
mission planning process to ensure that the Ambassadors are, 
indeed, an active part of this.
    We are also encouraging agencies to consider the full cost 
of sending people overseas. Using the A-11 process, OMB is 
instructing agencies to articulate specifically what the cost 
and the number of their employees overseas are as we run up to 
the 2004 budget process.
    Mr. Chairman, I can say that the Office of Management and 
Budget is interested in this project more for the management 
side than for the budget side. We have requested more than $1 
billion in fiscal year 2002 for embassy construction and 
security improvements. There is no question that we will spend 
the money, and a substantial sum of it, to secure our embassies 
and to ensure that the U.S. presence abroad is sufficient. The 
question is: will the money we spend delivery a U.S. Government 
presence that is right-sized and secure? I certainly think we 
can accomplish this.
    I look forward to the discussion this morning and to 
answering any questions that you may have.
    Mr. Shays. Thank you.
    [The prepared statement of Ms. Dorn follows:]

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    Mr. Shays. The Chair would like to note that Mr. Gilman 
came in after I asked for any statements. He usually has a 
statement. I'd welcome him having a statement if he'd like to 
read it.
    Mr. Gilman. Thank you, Mr. Chairman. I just would like to 
first of all thank you for calling this important hearing. The 
International Relations Committee has also taken an active 
interest in this topic. It's regrettable Department of State 
seems to have set aside its right-sizing exercise in the light 
of increased resources for the Government more generally and 
for foreign affairs, in particular. Hopefully, this hearing 
will keep the Department focused on this subject.
    I'd also note that the security imperative to reduce the 
footprint of the United States abroad is another reason to 
continue a right-sizing initiative. Also, Ambassadors must be 
able to exercise their alleged full authority in their 
respective posts. We have in the Department of State a Foreign 
Service with as many senior Foreign Service officers--in other 
words, flag and general office rank equivalents--as the 
Department of Defense requires to run a military establishment 
of our Nation. Something is clearly lacking here.
    The Department must not confuse our interest in an active, 
vigorous, prepared State Department with one that is poorly 
managed and inappropriately deployed.
    Thank you, Mr. Chairman.
    Mr. Shays. Mr. Gilman, would you like to start with 
questions, or shall I?
    Mr. Gilman. I will be please to follow your questions.
    Mr. Shays. Thank you.
    Let me just say I get the sense that almost everyone agrees 
that we have a right-sizing problem. Would you agree with that, 
Mr. Green and Ms. Dorn?
    Mr. Green. Yes. Yes, sir, I would.
    Ms. Dorn. Yes, sir, I do.
    Mr. Shays. OK. And I think most people agree that it 
doesn't necessarily mean that we would reduce the number of 
employees. It means that we want the right size, not just in 
terms of the overall, but in terms of each responsibility and 
function. There may be a need to have more in a certain area 
and a need to have less in other areas. But ultimately we 
realize that we've got a problem.
    Mr. Green, do you hear complaints from our Ambassadors or 
chiefs of station that they do not have a handle on all the 
different Government agencies that use their resources? That's 
a pretty common concern.
    Mr. Green. Yes, sir, we do. I travel quite extensively in 
all areas, regional areas, and I have consistently heard from 
chiefs of mission in essence the difficulty that they have in 
really getting a handle on not necessarily the people they 
have, because they can count noses, but they have very little 
insight into the other agencies' budgets for their particular 
posts and have, to some degree, little control over--while, as 
Mr. Gilman says, de jure they have great authority. De facto 
they have considerably less authority. There is a process by 
which agencies request to send additional people to post. That 
is the Ambassador's decision. It is appealable if it doesn't 
comport with what a particular agency wants. But you can 
imagine the difficulty that a chief of mission would have in 
turning down a request because he doesn't always know or hasn't 
always had a good sense for what those other agencies' 
priorities may be at a particular post.
    I think the new mission performance plan process that was 
put into place this year and is much tighter will give a chief 
of mission a much greater sense of not only what his priorities 
are, but what are the priorities for the other agencies at his 
post and what his people are spending their time doing. It's a 
much more objective report than flows into our budget process.
    Mr. Shays. In many cases the number of employees working in 
an embassy, the vast majority, two-thirds to three-quarters of 
all employees tend to be nationals, not American citizens. They 
tend to have tenure that goes well beyond 3 years. They may be 
there 20 or 30 years, frankly.
    Mr. Green. Yes, sir.
    Mr. Shays. So they have tremendous institutional knowledge. 
Of the one-third or 25 percent that are left, the American 
employees, they are rotated. Of that one-third or one-quarter 
that's left, about two-thirds of them are not Foreign Service 
employees. They are agency employees.
    So you have a circumstance where an ambassador comes in or 
a chief of mission comes in and they are basically in charge of 
an organization in which they, on paper, appear to have very 
little control. Obviously, they have a lot of control over the 
nationals, but they don't have the institutional knowledge of 
the nationals.
    This has been an issue that our committee has been looking 
at for a number of years. Members of the committee have gone to 
various embassies. It just stares you in the face. What stares 
me in the face is that we really haven't done anything about it 
for literally decades. This has been a problem that has been 
festering.
    I'm sorry for such a long introduction, Ms. Dorn, but I'm 
struck with the fact that the only one who can truly bring some 
closure to this effort or begin to have real impact is OMB. And 
I'm interested to know what type of political capital the 
director and you and others are willing to use to move this 
forward.
    Ms. Dorn. Well, Mr. Chairman, we take it very seriously. 
The President has articulated this as one of his goals in the 
management agenda, which we are pursuing with vigor. The first 
step in correcting the ongoing problem--and I think you've 
outlined it pretty well--is to see what the landscape really 
looks like, how many agencies we have and how many places all 
over the world, what the underlying costs are, and how those 
costs are accounted for.
    We are in the process of doing that. We started in October, 
and I think we--I'd say we are probably 95 percent of the way 
to at least having an idea of what the ground truth is.
    The other issue that you touched upon, which is the policy 
of the U.S. Government, the priorities for the agencies do 
cross various agency jurisdictions. I mean, in terms of 
coordinating the policy priorities for the administration, it 
involves the State Department, the Treasury Department, the 
Defense Department, and a whole host of others. OMB does sort 
of sit at a central role in both the policy and budget, and I 
think that we can at least help devise a system by which these 
considerations are put on the table and decisions can be made 
by the principals.
    One of the things that has struck us in our assessment of 
the ground truth is that in many cases agencies have 
established presence overseas without, I'd say, full visibility 
of the Cabinet official. In many cases, they established a 
presence overseas some years age and that has been continued, 
you know, as administrations change and as Ambassadors change. 
It becomes a status quo thing. Well, ``We have X number of 
employees from the Treasury department because that's what we 
had last year.'' You know, that's not really the right answer 
to this question.
    So I would say that we are very serious about getting a 
full accounting of this, both from a budgetary, a management, 
and a policy sort of level, and we have actually had a good 
deal of cooperation from the other agencies, as well as from 
the State Department. I'm optimistic that in the 2004 budget 
process that we're going to be able to shed some light on this 
and make some progress.
    Mr. Shays. Thank you. What I've done is I've rolled over 
the time for the Members for 10 minutes for each question. I 
will be going to Diana Watson for 10 minutes in just a second, 
and then I will be going to--I guess, Ben, I'm going to go to 
you after Ms. Watson, and then Ron, and then, Adam, we'll go to 
you.
    Let me ask you, Mr. Green, given all the things on the 
agenda at the State Department, as important as this may appear 
to many of us, it can't really rank up all that high in the 
list of interest. I mean, there's a lot of political capital 
that would probably have to be used in the dialog with, 
frankly, a number of different Secretaries who somehow, for 
some reason, demand that they have the same numbers. Can you 
give us a sense of where this stands?
    Mr. Green. Yes, sir. As Ms. Dorn said, this is one of the 
items among very few, frankly, on the President's management 
agenda. I think the fact that it is one of a few--and I sit on 
the President's Management Council. I know the importance that 
the administration places on those agenda items. We take right-
sizing very seriously. We talk about it almost daily. We know 
it is something that people have tried to fix in the past. It's 
something that hasn't been fixed. It's something where we need 
to develop a methodology that we all can agree to. That is one 
of the reasons that we solicited the support of OMB, because 
you're very right, the political equities here in town when you 
start banging heads with another agency, we need an honest 
broker who can help us do that.
    You know, we have oversight committees that look at the 
State Department and say, ``Why haven't you right-sized?'' The 
same is not always true for those committees who look at other 
agencies. There's no pressure or hasn't been pressure for them 
to do the same thing. So we need the help from OMB. And, as Ms. 
Dorn said, we are in the final processes now of defining the 
world and identifying what we have out there, and then, through 
the new MPP process, defining what are our goals. And, Mr. 
Ambassador, what are your post priorities? And then all of that 
is rolled up by the bureaus, who establish their own internal 
priorities, and ultimately flows into how many bucks you get at 
the end of the day for people or buildings or security or 
whatever.
    Mr. Shays. I don't have another question, but I just would 
point out to the Members that the first panel is basically 
giving us a Government-wide policy position. I think the policy 
of the Government is pretty clear, but we'll want to delve into 
it a bit more. And then the second panel is giving us an 
outside view from the GAO and also from the Overseas presence 
Advisory panel, which has been referred to. And then we are 
going to hear from embassy tenants abroad. Particularly, a 
major use is Treasury, Defense, and Justice.
    Given that I seem to be putting the focus on right-sizing 
and tenants as if somehow they don't provide a valuable 
function, I just want to state for the record that I think 
their presence is absolutely essential. I believe that they 
provide a creativity that you wouldn't necessarily get in the 
State Department. The State Department has its mission and does 
it extraordinarily well, but sometimes State can talk in 
tongues and sometimes you need people who have particular 
expertise to maybe be a little more direct.
    I think the synergy between State and these outside 
tenants, so to speak, can be quite helpful, but we do want that 
right-sizing.
    Sorry for the long explanations I'm making.
    At this time I'd recognize the gentlelady from California, 
Ms. Watson, for 10 minutes.
    Ms. Watson. Thank you so much, Mr. Chairman, for holding 
this most essential hearing. I want to thank Ambassador Green 
and The Honorable Nancy Dorn for coming here and sharing with 
us your critical thinking on right-sizing.
    I don't think the APP approach ought to be based on the 
Paris model because it is unique. Maybe Paris, Rome, and London 
are unique among our missions throughout the world.
    I must applaud your statement, you written testimony, 
Ambassador Green, and just emphasize it again and again. We 
need to look at all of our missions abroad and, rather than 
putting them on a list--and I served out in Micronesia, and 
when I went back to give them a proposal in the State 
Department on the needs at my mission I was pretty much laughed 
at because they said, ``We have 80 on the list ahead of you.''
    So I simply said, ``Is a life in Paris, Rome, London more 
valuable than a life in Micronesia at the embassy? Put me on 
the list as No. 81, record me. Let them know I was here. Here's 
my package and my proposal.''
    That all boils down to this: what we have to do is look at 
our missions. And what is that mission abroad? It's right in 
here. I read your presentation. We must represent the United 
States. If we close off our embassy because it is inadequate, 
it is too small, we have nowhere to entertain, we do not 
interact with the people in the country that we serve in and 
those people that come to it in a way that is representative of 
the United States.
    There is so much that needs to be done in terms of our 
relationship with our host nation that I hope you are looking 
at, because what I found in my experience is that the embassy 
was closed off away from the people. I opened my residence for 
an all-day Thanksgiving. I was told there was no money for 
that. I said, ``Did I ask for money.'' I did it out of my own 
pocket because what I was trying to establish is a better 
relationship with the host country.
    Why were we there way hidden down in Micronesia? We were 
there because we had the exclusive denial to use those waters 
if there should be trouble popping up again in that area. 
Second World War--all of you know Saipan, Peleliu. Same area. 
So we need the mission, but at the time we established it it 
was very useful, then it became usable, and I think now it is 
useless. That's the feeling I got when I'd go to Washington. 
They would say to me, ``Well, no one can find that embassy.'' 
And I would say to them, ``The terrorist mentality is that you 
strike where you have the weakest link.'' ``Well, they'll get 
caught in customs.'' I said, ``Do you think that they will come 
through waving, `I'm here'?'' No, they're going to come through 
the mangrove on a little ship like the rest of the fishermen.
    Here's the bottom line, and I'd like some comment. Are we 
looking at our missions in terms of the relationship between 
the United States, the country and the region--and I saw the 
regionalization approach here in your statement. I want to 
thank you for that. Do we find them useful, or are they useless 
to us in this current time? If we are fighting terrorism--the 
terrorists aren't only in Afghanistan. They're all over the 
globe--should we not look at all of--and you can comment on 
this. I know it is a financial issue. But shouldn't we look at 
all of our missions and our presence wherever we are, wherever 
we send American personnel and hire locally and as to how 
useful they can be in expressing American values and 
principles? I think they are our front line in communicating 
what we believe in. In some way we fail that because I couldn't 
get additional employees. There are 607 islands, four in the 
federation, and one person in my embassy to go out and monitor 
and oversee all the moneys that we shun into there.
    So my question to both of you is: are we also, as we look 
at right-sizing, looking at the role our missions can play, 
wherever we are, in spreading and inter-relating with the 
people, regardless of the cost?
    You know, I was turned off so many times because there was 
a cost. They'd just simply say no. I'm trying to pass on to 
them what the needs really are in terms to improve our 
relationship.
    So I know we are governed by the budget, but are we 
reevaluating the missions to see how they rank on a scale in 
terms of their usefulness?
    Mr. Green. Let me try to answer that. It has----
    Ms. Watson. I know it is rough.
    Mr. Green [continuing]. A number of different facets to it. 
But let me assure you that all of our missions are important. 
Yes, we are budget constrained, but all of our posts overseas 
are regularly reassessed, and we try to redeploy resources as 
situations emerge and as new requirements are identified.
    Let me just give you one example. In the 1990's, the direct 
hire positions in the former Soviet block more than doubled 
from 760 to over 1,700 because of the change in that situation. 
I mentioned before the MPP process, the mission performance 
plan process, where Ambassadors highlight their requirements.
    Since you were there, we've modified that considerably. 
It's not nearly as painful an experience as you probably went 
through. It is much more objective.
    Our purpose--and that, of course, from all countries within 
a particular bureau, that feeds into the bureau, and then they 
assess the overall bureau needs within the resources we have. 
But that, again, is a much more direct link to the resources 
that you might need in Micronesia or anywhere else.
    We are very sensitive, very sensitive to the impact of one 
or two people in a small post as opposed to one or people in a 
large post. A couple of people in Paris doesn't make a bit of 
difference to the functioning of that embassy, but one or two 
people in a small post where you've got a half a dozen 
Americans makes a tremendous difference.
    Part of our success, I hope, in resolving some of those 
problems, certainly on the personnel side, is the tremendous 
success that we have had in recruiting since Secretary Powell 
assumed command of the State Department. We have had greater 
success than any time since the early 1980's in attracting new 
Foreign Service officers into the Department. That ability to 
fill some of those vacancies that exist overseas will partially 
help solve some of the problem that you mentioned--shortage of 
people. But also, within the MPP process and the bureau 
performance plan process, the Deputy Secretary and I--he chairs 
and I participate every year, and we will be doing it again in 
July, a review of every bureau's requirements, not only the 
regional bureaus but also the functional bureaus. The assistant 
secretary comes before us and justifies their need in both 
personnel and resources.
    Those are for the first time in people's memory--and I have 
to defer to the people who have been around the State 
Department for a lot longer than I have--it's the first time 
that we have had a rigorous process. It's not perfect, and it 
will get better this year than it was last year, but it is the 
first time we have had a rigorous process to really challenge 
and insert into the dialog some of the requirements that you 
mentioned--small posts, posts where there may be an emerging 
terrorist threat, posts that have other difficult problems, 
whether it be HIV/AIDS or drugs or terrorists or what have you. 
That's where that emphasis will go, and those decisions are 
made at the Deputy and the Secretary's level.
    Ms. Watson. I know that there are organizations where the 
Ambassadors belong and talk among themselves, but what might be 
a really important function in your department is to call 
recent Ambassadors who are no longer serving together and talk 
about our mission in light of September 11th. I think you would 
get some very helpful insights on what we could do, because 
yes, we did those plans. We put those goals that we had into 
writing, sent them back to the State Department, but we were 
not able to get responses to our request. There was always a 
budget cap, and so we were always short-handed.
    But I think it might be helpful to you to gather a group of 
us together for a day and let us give you the results of our 
experience and what we think can be done to strengthen our 
position abroad.
    I started a newspaper while I was there because we had a 
big cholera outbreak. There was no way to communicate to the 
people in the rain forest, so we got this little piece together 
and took it out to their little shanties that they had in front 
of their homes. There were ways that we could communicate some 
of the--not democratic principles, but some of the health care 
issues to the people that have no radios, televisions, no way 
to know.
    So we could be maybe helpful to our government, to the 
State Department in terms of building up a stronger and more 
relevant presence in our missions that I think will go a long 
way to counter what is going out from the Middle East around 
the globe. And it is very, very frightening, the feedback we're 
getting.
    In my District and among the various groups there, it is 
frightening what we're hearing.
    I think we could be helpful to you----
    Mr. Green. Thank you.
    Ms. Watson [continuing]. In giving you kind of a conclusion 
and summary of what we experienced.
    Mr. Green. We need all the help we can get.
    Ms. Watson. OK. Thank you.
    Mr. Green. Thank you.
    Ms. Watson. Thank you, Mr. Chairman.
    Mr. Shays. Thank you, Ambassador. I bet you were very 
effective.
    Ms. Watson. We worked at it.
    Mr. Shays. It's a great opportunity.
    Ms. Watson. Yes.
    Mr. Shays. Mr. Gilman.
    Mr. Gilman. Thank you, Mr. Chairman.
    I note that the GAO's report suggested in their summary 
that we might consider establishing a Washington-based inter-
agency body to oversee the right-sizing process and ensure 
coordination. What's your comment with regard to that?
    Ms. Dorn. Well, Mr. Chairman, I think the President has 
made this a priority and he has put his Office of Management 
and Budget on the case. We are engaged, as Under Secretary 
Green said, because we have both a budgetary and a policy and 
an inter-agency sort of overview, or that's sort of our 
perspective on this problem, so we have--we are comfortable 
with proceeding in that manner right now, and I think we will 
have some results to show probably later this year.
    Mr. Gilman. And, Ms. Dorn, let me ask you, How successful 
has OMB been in obtaining useful and complete staffing and cost 
data from agency's operating overseas?
    Ms. Dorn. I would say, Mr. Gilman, that we started in 
October with a data call to all the agencies. We have had to go 
back to some of them a number of times the clarify the data 
that they provided. Frankly, a number of the Cabinet-level 
officials were not fully aware of how many folks that they had 
in how many places and what duties they were performing. I'd 
say we're about 95 percent of the way there. We are still 
working with a couple of the law enforcement agencies and with 
the Defense Department to further clarify the data they've 
provided, but I think we are just about there.
    Mr. Gilman. How successful have you been in establishing a 
Government-wide system to review post staffing?
    Ms. Dorn. On that one I think we are still working with the 
State Department, and we are using the data provided by GAO on 
a mechanism to assess those kinds of questions. Until we get to 
that, I wouldn't say that we're going to have much success in 
this project, but I think we will have some progress to report 
to you probably later this year.
    Mr. Gilman. When do you anticipate you will be in a 
position to establish that kind of a system?
    Ms. Dorn. I think we will have the beginnings of that later 
this year.
    Mr. Gilman. Do any of the Departments fully recognize a 
budget for the cost of putting individuals abroad?
    Ms. Dorn. Agencies have varying degrees of data on how much 
it costs. Part of the problem here, though, is that if the 
Treasury Department or the Justice Department sends one of 
their officials to an embassy in Europe, they pay for certain 
costs, but other costs are borne by the State Department in 
terms of security, in terms of sort of the base platform.
    One of the things that we are looking to do in the next 
budget is to provide a method to assess these agencies more 
fully for the cost of having employees from other agencies at 
the State Department, probably perspectively in terms of new 
embassy construction.
    We are in the process of building new embassies in about--
Grant, how many would you say? About 10?
    Mr. Green. About 10 a year, 9 or 10 a year.
    Ms. Dorn. About 9 or 10 a year. As we construct new 
embassies, I think we will have kind of a clean slate to build 
from so that we can assess, you know, what agencies other than 
the State Department should be there, what their relative needs 
are, what their costs are, and have a more transparent and more 
accurate way to account for the costs that currently--some of 
which are now being borne, I think, entirely by the State 
Department.
    Mr. Gilman. Well, Secretary Green, when they have new 
agency assignments to the State Department and there are extra 
costs, how do you pick those up in a budget?
    Mr. Green. Sir, we have a system currently at post called 
``ICASS.'' It's a sharing of administrative costs, for example. 
Let's say that the State Department is in the best position to 
do all travel arrangements. Well, people will pay a certain 
amount, or administrative arrangements. Other agencies will pay 
a share of that. Very frankly, State Department ends up 
budgeting about 70 percent of it. The rest is shared among the 
agencies.
    What Ms. Dorn was referring to and which we think will be a 
great incentive, and it goes back to, very frankly, many 
agencies not having a very good handle on what it costs, how 
many people they've got overseas, and what they're doing, but 
certainly how much it costs is the cost sharing, so that when 
we build a new embassy and a particular agency says, ``I need 
15 desks, and they need to be in classified space,'' which is 
quite expensive, that agency is going to have to evaluate 
whether they can support within their budget the cost of those 
15 people and the cost of that construction, because our intent 
is to charge them for that.
    Mr. Gilman. But on occasion you have to pick up 
additional--the State Department has to pick up the additional 
cost from those agencies; is that correct?
    Mr. Green. We do now, but, as best we can, we spread the 
administrative general support costs across agencies. But what 
we're talking about with the new construction, which we have 
never done before, is actually charging an agency or department 
for their share of how much space they are going to occupy. We 
feel that will be--I don't want to say a disincentive, but it 
at least will make them think very hard about how many people 
they are going to put at that post, because we are not talking 
about a few thousand bucks for administrative costs or use of 
the motor pool or support for travel services, but we're 
talking about major construction costs.
    Mr. Gilman. So these would be some incentive to put staff 
in less expensive rather than in expensive locations?
    Mr. Green. Well, not that as much as look at the number of 
staff that you were going to put in a location. We have certain 
criteria in all of our new embassy construction which says it 
has to meet certain blast restrictions and setback restrictions 
and so on, and then, when you get into classified space, there 
are other requirements that we have to adhere to, and that's--
so if you pay $100 a square foot in unclassified space, 
classified space may cost you $200 a square foot, and you need 
``X'' number for the number of folks you want to put there, and 
so we feel that will----
    Mr. Gilman. Just one last question, Mr. Chairman.
    Embassies tend to have small working groups and sometimes 
too many managers. Does OMB have any thoughts about the proper 
ratio of managers to non-managers--in other words, span of 
control in embassies?
    Ms. Dorn. Mr. Chairman, I don't think we have fully 
evaluated that yet. We are still in the process of figuring out 
how many people we have and what they're doing in these 
embassies. And I think there is an issue here, however, and 
that is: in a specific embassy you have, you know, 25 State 
Department employees and you have 15 Treasury employees and you 
have, you know, four Justice Department employees. You know, 
we've got to both assess how those missions fit into the 
overall plan, but we've also got to figure out a management 
structure that actually works.
    I think in the past this has not been identified as a major 
priority. One of the things that OMB has suggested strongly is 
that the Ambassador, himself, be involved in approving an 
embassy structure and plan and be--that the cost of these 
things be more visible. Instead of the Treasury Department 
paying sort of the direct personnel costs but none of the 
infrastructure costs, we are trying to again elevate that so 
that it is visible and it is also more relevant to the 
embassies of today. We don't have embassies any more where the 
State Department is the only employee, nor should it be that 
way. We have embassies, as you pointed out, Mr. Chairman, that 
these other agencies have a vital role to play. It's just a 
question of the proportion and the mission and the currency of 
that, because, as priorities change and policies and as the 
world moves forward, you know, this has got to be reviewed on a 
regular basis and it has got to be kept current.
    Mr. Gilman. Thank you.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you.
    Mr. Lewis.
    Mr. Lewis. Thank you, Mr. Chairman.
    Secretary Green, how do physical security requirements 
affect your staffing levels?
    Mr. Green. Well, each post, of course, has a basic basket 
of security requirements that are necessary. It certainly, to a 
great degree, depends on where that post is and what the threat 
is.
    Adding or taking away people from a post on the margins 
doesn't significantly--doesn't affect the security requirements 
at that embassy. What does affect requirements more than 
physical security is the need for classified space. As new 
agencies--as agencies which require classified space--the law 
enforcement community, the drug enforcement community, those 
dealing with terrorism--as they increase the numbers of their 
people which do require classified space, that runs our costs 
up. But physical security--guard force, the number of regional 
security officers and assistant regional security officers and 
so on that we have at the post--will not vary greatly with 
small increases or decreases in personnel.
    Mr. Lewis. What's the most serious physical security 
challenge that you're facing today with missions around the 
world?
    Mr. Green. I would say it is location, vulnerability of 
many of our embassies, residences, office buildings where, in 
many, many places, whether it is Paris or Belgrade, we are in 
old buildings right on the street, vulnerable. I think that's 
our greatest challenge.
    As we build new embassies, we are finding, selecting 
compound areas where we have the appropriate setback, the 100-
foot setback, and we are using construction techniques that 
provide us more protection against blast, as an example. But I 
think that we are vulnerable in many of our missions.
    Mr. Lewis. Are you finding that most of the host countries 
are helpful and supportive?
    Mr. Green. Very cooperative. Yes. I can't think of a single 
country that doesn't provide adequate police, law enforcement 
protection, and even when we ask for additional if we have a 
threat, which we have dozens daily. We often will ask for 
additional protection, and it is always forthcoming.
    Mr. Lewis. OK. Thank you.
    Mr. Shays. Thank you. I just want to ask a few more 
questions just for the record and then we'll get on to our 
other two panels.
    Mr. Green, you made a reference to the fact that the 
Overseas Presence Advisory Panel did not provide the 
methodology to right-size, even though they were required to. 
It seemed like a little needle in there. I was just curious.
    Mr. Green. No.
    Mr. Shays. OK. I thought maybe you'd want to just expand.
    Mr. Green. My understanding was that the original charter 
for OPAP--and Mr. Kaden can certainly correct that--that the 
original charter did call for OPAP to make a recommendation on 
that.
    Mr. Shays. And was your point in mentioning that it is 
difficult to know what to do----
    Mr. Green. Yes. Absolutely. We've many attempts to----
    Mr. Shays. So your point is basically, even if you feel 
that was the mandate, it wasn't--you were not seeing it come. 
You're not being provided that kind of guidance, and so you all 
are still trying to sort out what kind of methodology you will 
be using?
    Mr. Green. Yes, sir. And post-OPAP, as you know, there was 
an inter-agency group that went out and visited six posts, and 
they couldn't agree on a methodology.
    Mr. Shays. Right.
    Mr. Green. So I only point that out because this is a very 
difficult problem, but we are going to fix it.
    Mr. Shays. Well, a good way to start is, obviously, the way 
you all are doing it. But, Ms. Dorn, I mean, obviously, we need 
to know--and every department should know, and agency--how many 
people they have overseas and where they are, and every 
Ambassador should know who they have in their embassy and what 
they're doing, and there needs to be a recognition that the 
President is very clear on this. He has made it very clear the 
power and responsibilities of the Ambassadors, the chiefs of 
missions, and he should, as President, expect that his 
Secretaries are going to respond to that and respect that.
    I think it will be helpful. We learned that some 
Ambassadors have shared that letter with all their employees 
and some haven't, and I think that will be a good way to begin 
that process.
    I would conclude by saying to you it seems so logical to me 
that, if you charge the full cost for whatever service is being 
provided, cost is a great way to know how to allocate 
resources. I mean, the Soviet system kind of fell apart because 
they spent money in ways they didn't and shouldn't have spent 
and under-spent in other areas. When you get cost involved, you 
begin to say, well, ``How much do you really want this.''
    So it would seem to me--I mean, business is doing this. The 
nonprofit sector is doing it. They have overhead services they 
provide, and now they tell their different units within a 
business, ``You will be able to decide whether you want to use 
these services from us or go outside. If you want the 
advertising services to be from outside, you can do that. And 
if you don't want to use the services you don't have to, but if 
you do use the service you have to pay for it.'' Great change 
has happened in that process.
    I want to know from you, Ms. Dorn, if you have any handle 
yet--it is in your statement as to why some costs per person, 
USAID, $129,000 per employee, up to State, U.S. Secret Service, 
$665,000. I mean, is there anything that you could share with 
us now as to say why it would be so different?
    Ms. Dorn. Well, I think part of it is that these agencies 
have accounted for things using different requirements. USAID, 
as you know, has people all over the world. They have pretty 
well-established sort of rules about what they pay for and may 
have, I would say, a better sort of enforcement mechanism to 
judge these costs.
    Mr. Shays. We may have a best business practices that you 
can identify and then get the other departments----
    Ms. Dorn. I think it is more of a standard operation at AID 
to put people overseas, and so they have a little bit better 
handle on how much it really costs and what costs are included 
in that. U.S. Secret Service may, to their defense, have some 
additional requirements that AID does not have.
    Mr. Shays. The difference is so significant.
    Ms. Dorn. Right.
    Mr. Shays. So significant.
    Ms. Dorn. It is extremely significant, and I would say that 
therein lies the problem.
    The other comment that I would make, Mr. Chairman, is that 
I think we are all in agreement that we have a problem and that 
we have a project underway to bring more clarity and more 
transparency to what is being done now and why, and even a 
process to start to prioritize, from a policy perspective, what 
is important at the different posts and what the composition 
should be.
    When we get to the point where we start to actually assign 
specific costs to different agencies for their presence 
overseas, I'm not prepared to say that there won't be some who 
think that is controversial. I think we've had a little 
experience with this at OMB in terms of basically making costs 
more transparent and putting them on the shoulders of those who 
should be paying for them. I'm not sure that it's going to be 
all that easy. It is also not going to be a single year kind of 
project.
    So we welcome the help of this committee and the interest 
of this committee in this endeavor.
    Mr. Shays. That's a great lead-in to just say that this 
committee--none of us can be certain whether we'll be back 
again next year, but I know that if I have any oversight over 
this issue that we would like you all to come back. We would 
like to be able to give you a sense that we are going to try to 
measure how you are doing, but we really, truly want to help 
you in any way that we can, any suggestions you have on how we 
can help this effort.
    I, for instance, think you should be working with the 
Budget Committee. They've done their budget resolution in the 
House. They have staff. They have a macro view. They look at 
the total picture, as appropriators sometimes segment it, and I 
think they could be a tremendous ally in this effort. Knowing 
the chairman of the Budget Committee, I think he would relish 
getting into this. It could be a huge difference in terms of 
efficiency and effectiveness.
    Ambassador, do you have any questions you want to ask, or 
comments?
    Ms. Watson. No. I just want to invite the two witnesses to 
come to my office. We can sit down and I will share--I'm going 
to send you a letter and make a request, but I think the input 
would be very helpful as you go about shaping your programs. I 
want to commend you. I think you are right on target and I 
think that this review is absolutely essential in the light of 
what's happening around the globe today.
    Thank you very much for your testimony. I look forward to 
meeting with you and maybe laying out a blueprint.
    Mr. Green. Thank you very much.
    Ms. Dorn. Thank you.
    Mr. Shays. Mr. Gilman, any other comment you'd like to 
make?
    Mr. Gilman. I'd thank the panelists for taking their time 
to be with us today. Thank you, Mr. Chairman.
    Mr. Shays. Thank you.
    Is there any comment that you want to make, a brief comment 
before you leave, anything that you want to put on the record 
that we should put on the record?
    [No response.]
    Mr. Shays. Thank you both for being here. Thanks so much.
    Mr. Green. Thank you.
    Ms. Dorn. Thank you.
    Mr. Shays. The second panel is comprised of: Mr. Jess T. 
Ford, Director, International Affairs and Trade Division, U.S. 
General Accounting Office; and Mr. Lewis B. Kaden, now of Davis 
Polk & Wardwell, New York, NY, former chairman, Overseas 
Presence Advisory Panel.
    Welcome to both. I'll ask you to stay standing. I'll swear 
you in while you are up, and if you have anyone else that might 
be testifying in addition to you that might respond to any 
questions.
    [Witnesses sworn.]
    Mr. Shays. Note for the record our witnesses have 
responded, for the record, in the affirmative.
    Mr. Ford, we'll start with you. And I'd like you to say 
whatever you need to say for the record, and if there's any 
comments you want to make in response to the first panel before 
we even ask them, you can do that. It might save some time in 
the process.
    Welcome both of you. Mr. Ford, you have the floor.

STATEMENTS OF JESS T. FORD, DIRECTOR, INTERNATIONAL AFFAIRS AND 
 TRADE DIVISION, U.S. GENERAL ACCOUNTING OFFICE; AND LEWIS B. 
 KADEN, DAVIS POLK & WARDWELL, NEW YORK, NY, FORMER CHAIRMAN, 
                OVERSEAS PRESENCE ADVISORY PANEL

    Mr. Ford. Thank you, Mr. Chairman and members of this 
subcommittee. I'd like to have my full statement entered for 
the record.
    I think some of the comments I'm going to make in my 
opening statement will address some of the issues that were 
raised by the earlier panel, and I will be happy to shed any 
further light, to the extent I am able to do so, on some of the 
comments that were raised regarding the methodology, since 
that's one of the main things that we are currently working on. 
We're calling it a ``framework.'' ``Methodology'' has a certain 
meaning in GAO, so we're not quite there calling it a 
methodology yet, but we are going to try to come up with some 
suggestions on how we think this process could be moved along.
    I'm pleased to be here today to talk about our ongoing work 
on right-sizing our overseas presence. As noted by OMB earlier, 
we have about 60,000 U.S.-funded employees overseas. For our 
purposes, we are defining right-sizing as ``aligning the number 
and location of staff assigned to U.S. embassies with foreign 
policy priorities, security, and other constraints.''
    This committee asked us to determine what right-sizing 
actions might be feasible to reduce costs and security 
vulnerabilities while retaining effectiveness in meeting 
foreign policy objectives. To do this, we are developing an 
analytical framework to help the decisionmakers make more 
rational staffing decisions.
    My testimony will highlight staffing issues that we 
identified based on a case study that we did at the U.S. 
embassy in Paris. In addition, I will briefly discuss some of 
the steps needed to develop a mechanism to move the right-
sizing process forward while ensuring greater transparency and 
accountability over overseas staffing decisions.
    Drawing on our prior and ongoing work, we are developing a 
framework that we believe will provide a foundation for the 
executive branch to assess staffing at embassies and to 
determine the right number and mix of staff. Our framework is 
designed to link staffing levels to three critical elements of 
overseas operations: physical security, mission priorities and 
requirements, and operational costs.
    The first element includes analyzing the security of 
embassy buildings, the use of existing secure space, and the 
vulnerabilities of staff to terrorist attacks. It is important 
to remember that an estimated 80 percent of U.S. embassies and 
consulates do not currently fully meet security standards. The 
amount of secure office space may place constraints on the 
number of staff that should be assigned.
    The second element involves analyzing the placement and 
composition of staff overseas based on U.S. foreign policy 
goals and objectives. Our framework focuses on assessing 
priorities and validating workload requirements.
    The third element involves developing and consolidating 
cost information from all agencies at a particular embassy to 
permit cost-based decisionmaking.
    We believe that after analyzing these three elements, 
decisionmakers should be then in a position to determine 
whether right-sizing actions are needed to add staff, reduce 
staff, or change the staff mix at an embassy overseas.
    We have identified some options that we think should be 
considered in this regard, including relocating some functions 
back to the United States or to regional centers and out-
sourcing certain functions to the private sector, where 
sufficient support is available.
    We believe the basic framework we are developing can be 
applied worldwide; however, additional work may be needed to 
refine the elements and to test the framework at embassies at 
various working environments.
    Our work in Paris illustrates how the framework we are 
developing could affect embassy staffing. Currently, there are 
about 700 employees from 11 major Federal agencies located at 
the Paris embassy. I might add this number is only related to 
the people assigned to the embassy proper. There are about 
another 190 people who work in other parts of France.
    In applying the framework to the embassy, we found that 
security, workload, and cost issues need to be considered, 
including the following:
    There are serious security concerns in at least one embassy 
building in Paris, which suggests a need to consider staff 
reductions unless building security can be improved. This 
building is located in the heart of a terrorist district--
excuse me, tourist district. That was a bad one. [Laughter.]
    Although it could be a terrorist District--on main streets 
with little or no protective buffer zone. Other embassy 
buildings are also vulnerable. Relocating staff could 
significantly lessen the number of people at risk.
    It is hard to say with any degree of certainty how many 
staff are needed in Paris. The embassy's goals and Washington's 
demands are not prioritized, and each agency uses separate 
criteria for placing staff in Paris. State Department staff at 
the embassy reported that non-prioritized workload demands from 
Washington result in missed opportunities for addressing 
important policy issues.
    We believe that a disciplined and transparent process 
linking priorities and staffing and a reduction in non-core 
tasks could suggest opportunities to reduce or relocate staff.
    The lack of comprehensive cost data on all agency 
operations, which we estimate is in excess of $100 million 
annually in France, and the lack of embassy-wide budget 
complicate the possibility of making sound, cost-based 
decisions. Development of these data would help determine the 
tradeoffs associated with the various alternative approaches 
for doing business. The U.S. Ambassador to France acknowledged 
that the lack of cost data is a serious cost for him.
    Our work in Paris suggests that there are alternatives that 
could reduce the number of staff needed at the embassy, 
particularly for some support functions which represent 
approximately one-third of the number of personnel assigned 
there. Among the options we've identified are relocating 
functions back to the United States--in fact, the State 
Department has recently announced it is going to send back over 
100 people to their Charleston Financial Center--relocating 
staff to some regionalized positions, posts in Europe which 
have more-secure facilities available, such as in Frankfurt, 
and also looking at the potential for out-sourcing some 
functions, mostly administrative in nature, which we think 
could be handled by the private sector.
    We believe all of these options should be closely examined. 
We also believe that setting priorities and validating workload 
requirements could lead to other staffing adjustments.
    Mr. Chairman, the development of a framework to assess 
embassy security, mission, and cost, and to consider alternate 
ways of doing business is only the first step. Providing 
greater accountability, transparency, and consistency in 
agencies' overseas staffing decisions will require much greater 
discipline within the executive branch. We believe that, for 
the President's management initiative to be fully successful, 
the executive branch will need to develop a mechanism to 
effectively implement a right-sizing framework.
    Based on our discussions with experts and agency officials, 
we have identified four possible options.
    One could be establishing a Washington-based inter-agency 
body to oversee the right-sizing process and ensure 
coordination among the various parties.
    A second option would be establishing an independent 
commission to consider whether more or fewer staff are needed 
and to make recommendations.
    A third option would be placing the responsibility for 
approving overseas staffing within the Executive Office of the 
President.
    And a fourth possibility would be requiring embassies to 
certify that staffing is commensurate with the security risks, 
embassy priorities, and requirements in cost.
    Ultimately, the executive branch must decide which options 
will help achieve the overall goal of establishing a rational 
process for assigning staff overseas.
    This concludes my comments. I would be happy to answer any 
questions.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Ford follows:]

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    Mr. Shays. Mr. Kaden, I invite you to make your testimony.
    Mr. Shays. Could you just first inform me--and I should 
know this, but for the record, how long did your commission 
work on this project? How long have you been involved in this 
issue?
    Mr. Kaden. The Overseas Presence Advisory Commission began 
its work early in 1999, around the beginning of 1999, issued 
its report at the end of that year, and was active in the early 
stages of implementation through 2000 until the end of the 
Clinton administration.
    Mr. Chairman, I have submitted my statement for the record. 
Let me make a few observations about this subject.
    First, I want to thank you, Mr. Chairman, and this 
committee for taking an interest in this subject. It is, to 
those of us who did work on the Overseas Presence Advisory 
Commission and its report, it is very gratifying to see the 
issue on the agenda of this committee. I think you can be very 
helpful.
    When I was engaged in that work during 1999 and 2000, I can 
say that I spent a great deal of time with some of your 
colleagues, and particularly on this side of the Capitol Mr. 
Gilman and his committee, Mr. Rogers and his Appropriations 
Subcommittee were enormously helpful and supportive to us, and 
those interactions were an important part of whatever effect we 
had in raising this important issue of concern.
    Let me tell you a bit of a story about why right-sizing 
became so central to OPAP's report and recommendations. When I 
began--when I undertook that work and began to talk to people 
on my panel and others at posts around the world, I was 
immediately struck by one thing. I visited with Admiral Crowe 
who had been in London and had just concluded the Commission of 
Inquiry on the East Africa bombings and was a member of my 
commission, and with Richard Holbrook, who had been in Bonn, 
and with Ambassador Rohatyn, who was then in Paris, and I said 
to each of them, ``What should I focus on as I begin this 
panel's work?'' and they each said, ``right-sizing,'' in so 
many words, because their experience in those western European 
capitals had left them with a question in their minds about why 
we need 1,200 or 1,300 people in London, 900-plus in Paris, 
large number in Bonn, when the challenges in other parts of the 
world seem so great and staffing so limited, and other 
countries doing a quite effective job in those western european 
capitals had much smaller staffs.
    The combination of mission priorities and security and cost 
effectiveness raised in the minds of those, among our most 
distinguished public servants, that question.
    I then visited with Admiral Troyer in Beijing, our then 
Ambassador in Beijing, and Governor Celeste, who was in New 
Delhi, and they made a pretty effective--and said the same 
thing, ``What should I concentrate on?'' And they said right-
sizing, but their argument, which was quit effective, was the 
that challenges in those posts were growing by the day, were 
poorly served by not only the numbers but the type of skills 
represented in their posts, and they thought a right-sizing 
process would lead to stronger staffs with a better mix of 
skills able to confront the growing challenges in those that 
the United States faced in achieving its aims in those 
countries.
    I think by the end of our work we had come to the 
conclusion that right-sizing had to be front and center, but 
that it was closely related to all the other recommendations 
about improved technology, better human resources and personnel 
practices so that you had the right skills and training, better 
facilities, both residential and for work, a better priority-
setting process--that all of those fit into the task of right-
sizing.
    Now, I think the good news is that, since the beginning of 
this administration, I, for one, have been encouraged by a 
couple of things. As I said in my statement, Secretary Powell 
met with me and Frank Carlucci on the first day in his new 
office and emphasized his determination to do something in this 
area of overseas presence reforms.
    And the President then put it on his management agenda last 
August, which I was, frankly, surprised to see and pleased to 
see.
    I think, as Ms. Dorn told you, OMB seems to be taking a 
lead and digging in to trying to make some progress in this, 
and that's extremely satisfying.
    It won't be easy. I don't really know what to make--I don't 
think it's all that important to get into it, but I don't know 
quite what to make about Mr. Green's comment about OPAP not 
putting forward a methodology, because I think our conclusion 
was quite clear that past efforts to develop numerical formulas 
about what a large post or a middle-sized post or a small post 
should look like were not serving our Nation's interests well; 
that what you had to do was have an effective inter-agency 
process with leadership from the White House, which is the only 
part of our government that can ensure the effective 
participation of all the other agencies and departments. As 
distinguished an American and as well-respected around the 
world as Secretary Powell is, the fact is that by himself, 
unless he has the President's mandate behind him, he can't 
ensure the effective participation of the Pentagon, the 
intelligence agencies, the Justice Department, the Treasury, in 
agreeing on what proper staffing ought to be in any particular 
post in the world. It's hard enough in the White House to get 
those agencies to agree on policy initiatives. That's why we 
have the process of policy coordination, it's so intricate.
    So it requires White House leadership, and that's what we 
said. It requires an inter-agency process with all the agencies 
participating, and that's what we recommended. And it requires 
the active involvement of the chief if mission, the Ambassador, 
and he or she needs to be charged with setting priorities in an 
effective way, communicating them with the relative agencies, 
interacting back with the interagency group in Washington about 
those priorities, and using those priorities together with 
security risks and cost effectiveness as the criteria for 
determining an appropriate staff, which is exactly what the GAO 
report has recommended, I think entirely consistent with the 
OPAP recommendation.
    Now, to me that's a methodology. That's a procedure. You 
then have to take it and apply it one by one to the posts. You 
can start with whatever priority post you want, and we would 
urge that they start with some of the big European posts where 
there may be gold in them hills in terms of efficiency and 
reductions, and start with some of the really challenging posts 
elsewhere in the world where probably we are going to need new 
and different and more resources. And some of those are the 
large posts like New Delhi and Bangkok and Beijing, but some 
are the smaller posts in the stands and the caucuses and areas 
of the world where the challenges, as you well know, Mr. 
Chairman, to our Nation's interests, both security and 
otherwise, are tremendous.
    So this is not an easy task. I am a bit encouraged by the 
administration's response, but they're going to need your 
oversight and your support and your encouragement to make sure 
they keep at it and keep in touch with you.
    And at the end of the day I'm not smart enough to predict 
whether we'll have fewer people in the aggregate or more, but 
we'll have different skills and we'll have different numbers in 
different places, and I think what I can safely say is that 
some of these other agencies you're going to hear from on the 
next panel are going to need increasing overseas forces. That's 
certainly true in the law enforcement community, of the 
economic community, including Treasury, and some of the 
commercial-oriented departments like Agriculture and Commerce. 
I think that will well serve our interests, because that will 
give us the added expertise and skills that we need to meet the 
current challenges. You could add to that some of the public 
health challenges, as well.
    So I was very pleased to hear that this committee was 
taking an interest in it and I commend you for this hearing. 
Although my charter is long gone and what limited function I 
had is over, I am always available to help this committee or 
any other as you pursue these goals.
    Mr. Shays. Thank you, Mr. Kaden.
    [The prepared statement of Mr. Kaden follows:]

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    Mr. Shays. Mr. Kaden, your work will result in some very 
major changes, I think, and the work of GAO. I see a tremendous 
agreement that we need to do something, and, you know, it truly 
does stare us in the face. I mean, there's not much room for 
debate, frankly, so how we do it will be the issue.
    The only group I would add in terms of that cooperation, 
having the President and OMB focused on it, having Congress 
focused on it, we do need the cooperation of the various 
departments and agencies. They've got to buy into this, and 
then they've got to have it filter down to the people that can 
make it happen.
    Mr. Gilman, I'd be happy to start with you.
    Mr. Gilman. Thank you, Mr. Chairman. I want to welcome Mr. 
Kaden. He appeared before International Relations Committee on 
several occasions. The testimony is still appropriate. As 
chairman of the Overseas Presence Advisory Board, you did some 
outstanding work.
    Mr. Kaden, what can be done to strengthen Ambassadorial 
authority without undermining the independence of other U.S. 
agencies?
    Mr. Kaden. I think there are two things. One is we 
suggested that the President clarify the executive order 
setting out the Ambassador's authority and make clear what the 
chief of mission authority meant and how much it extended to 
the full range of activities in a particular mission. I think 
that's important, as well as the tone and the message the 
President sends.
    Our Ambassadors, after all, are the President's 
representatives, the Nation's representatives. They don't work 
just for the State Department or for any other department. We 
mean it when we say they're the chief of mission and the chief 
of all the personnel in those departments.
    The other thing, which goes without saying--and this is a 
conversation, Mr. Gilman, I think you and I have had before--we 
need to find and appoint and confirm the very best chiefs of 
mission we can from both the career service and from outside 
the career service, because the one thing our panel discovered 
with great clarity as we visited so many posts is nothing makes 
as much of a difference in the quality of mission and its 
ability to achieve the priorities that are set than the quality 
of its chief. We had in those years--and I'm sure we have 
today--some terrific chiefs of mission, but we probably also 
have some that are a little weaker than they ought to be. And 
so that whole process, which is something that both Congress 
and the President are involved in, is a very important part, 
too, of improving our overseas presence.
    Mr. Gilman. Mr. Kaden, what have you found to be the major 
obstacles to a meaningful right-sizing in our Federal 
Government?
    Mr. Kaden. My own view is--and I haven't spent enough time 
in Washington to claim to really understand the processes of 
our government, but my own view is that it is more the inertia 
of dealing with complex inter-agency issues. Each of the major 
departments has a clear idea of its own agenda and its own 
priorities, and on the top level at a high altitude, the 
department heads that I've talked to have a determination to 
address these problems. But getting them all down through the 
ranks to work together on whether it's right-sizing or 
developing a common technology platform or cooperating on a 
cost allocation system or developing a better way of building 
facilities and going through that planning and design process, 
it's not easy when you have so many agencies and so many 
conflicting priorities. To me, that's why you need the 
coordinating leadership, whether it is from OMB or from some 
other part of the White House.
    Mr. Gilman. Thank you, Mr. Kaden.
    Mr. Ford, while we are undergoing an aggressive program to 
reconstruct and replace some of the embassies around the world, 
do you think that the right-sizing program can be established 
and fully in effect in time for staffing decisions to be 
perfected in the size of the new post?
    Mr. Ford. We understand the Department of State, in the new 
embassy building program, is attempting to have a more 
disciplined approach in identifying what the actual 
requirements at the new embassy will be. I think the key issue 
here is the various agencies that are going to be housed at a 
new embassy. Validating their requirements is a part of the 
process that State hasn't yet been able to undertake, and it 
may be, as Mr. Kaden just said, it may be that OMB is going to 
have to be the ultimate arbiter in identifying what those 
requirements are, because that is what is going to drive the 
size of the embassy. And it is an opportunity before the 
embassies are built to make sure that we've got the right 
number of people in these embassies and that they are all 
properly validated, so I think there is an opportunity there--
probably a better opportunity than the ones that have already 
been established. But I also think that it may be somebody like 
OMB that's going to have to be the agency that is going to 
require the validation of those requirements.
    Mr. Gilman. Realistically, do you think you can accomplish 
that?
    Mr. Ford. I think it is--yes, I do. I think it is possible 
to do it. I think some agencies have pretty good matrix on 
validating how many people they need, and I think that it is 
doable. I think it just takes--it's going to take some time and 
effort to make sure they ask the right kind of questions.
    Mr. Gilman. And, Mr. Ford, can State enforce the 
requirements that the Foreign Service officers are supposed to 
be worldwide available?
    Mr. Ford. Yes, sir. They are supposed to be worldwide 
available. The Department of State has a bidding process which 
allows employees to put a preference in where they want to be 
assigned, and the Department makes decisions based largely on 
that bidding process.
    We have found that, particularly with regard to what are 
called ``hardship posts,'' that it is difficult for the 
Department to get many of its officers to bid for these 
positions.
    Mr. Gilman. Well, Mr. Ford, if I might interrupt, how many 
then are worldwide available today?
    Mr. Ford. I believe the current staffing profile for the 
Department for U.S. direct hires is around 16,000.
    Mr. Gilman. And are all of those 16,000 worldwide 
available, or do they--are they dependent upon a choice of 
posts?
    Mr. Ford. They are worldwide available as far as the State 
Department is concerned. I mean, the State Department can 
direct someone to go to any post in the world.
    Mr. Gilman. Regardless of the choice system?
    Mr. Ford. That's correct. They have that authority.
    Mr. Gilman. And just one last question. Is State Department 
personnel office making an effort to reevaluate overseas jobs 
in light of advances in technology?
    Mr. Ford. I know that they have a number of initiatives, 
technology initiatives at the Department of State that are 
designed to find better ways of doing business. There were some 
discussions earlier about the lack of communications and things 
of that nature. We believe that those efforts could, if they 
are married up with the staffing requirement process, lead to 
assigning the right number of people to the right places.
    Mr. Gilman. Thank you. I want to thank our panelists, Mr. 
Kaden and Mr. Ford, for being with us.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you, Mr. Gilman.
    Mr. Gilman, I want the record to state that this committee 
recognizes that your committee has been very active in this 
when you were chairman of the committee, and that's one reason 
why we're pursuing it, because of this being brought to our 
attention by Mr. Gilman.
    Candidly, I don't have a lot of questions to ask either of 
you. I think your statements were pretty clear. You both are a 
tremendous resource.
    Mr. Kaden, still, even though you are not actively pursuing 
this, you will be an excellent resource for our committee. We 
appreciate that you took the time to be here.
    Mr. Ford, obviously we will be putting you to work 
continually on this.
    I just will say for the record there is going to be no 
excuse if we don't deal with this issue. It would be just 
absolutely, given our national security needs and the needs to 
use resources well, given the need to protect our employees, 
given budgetary challenges, to not use employees well and 
effectively and where they are needed just can no longer be 
tolerated. And given that the President has--and I'm just kind 
of echoing your remarks, Mr. Kaden--given this is one of his 
high priorities, the State Department only has--not only, but 
they're suggesting set five priorities and then work on them. I 
can't say it will be one of only five, but it is one of a few 
that will be our priority, and certainly, as it relates to the 
State Department, our highest priority.
    Do either of you have any kind of closing comment that you 
want to make, any question that we should have asked that we 
didn't?
    [No response.]
    Mr. Shays. Well, your testimonies both were very helpful. 
We really appreciate your being here. Thank you very much.
    Mr. Kaden. Thank you.
    Mr. Ford. Thank you.
    Mr. Shays. At this time we'll call our third panel: the 
Honorable Ken Lawson, Assistant Secretary for Enforcement, 
Department of the Treasury; the Honorable Andrew Hoehn, Deputy 
Assistant Secretary of Defense for Strategy, Department of 
Defense; and the Honorable Robert Diegelman, Acting Attorney 
General for administration, Justice Management Division, 
Department of Justice.
    I'll state, before I swear any of these gentleman in, that 
the work of all three departments is absolutely essential, and 
we appreciate their being here and appreciate what they do here 
at home and obviously overseas, as well.
    If you'll stay standing, I'll swear you in, and anyone else 
that may assist you.
    [Witnesses sworn.]
    Mr. Shays. Note for the record that all three have 
responded in the affirmative.
    Mr. Lawson, were you in the military?
    Mr. Lawson. Yes, sir, I was.
    Mr. Shays. Well, you waited for me to tell you to be 
seated. I figured that. [Laughter.]
    I'm delighted that all three of you are here. I'd ask you 
to put the microphone up, make sure it is turned on, and we'll 
start with you, Mr. Lawson, then Mr. Hoehn, and Mr. Diegelman, 
we'll end with you.
    Thank you.

STATEMENTS OF KEN LAWSON, ASSISTANT SECRETARY FOR ENFORCEMENT, 
  DEPARTMENT OF THE TREASURY; ANDREW HOEHN, DEPUTY ASSISTANT 
 SECRETARY OF DEFENSE FOR STRATEGY, DEPARTMENT OF DEFENSE; AND 
 ROBERT DIEGELMAN, ACTING ATTORNEY GENERAL FOR ADMINISTRATION, 
       JUSTICE MANAGEMENT DIVISION, DEPARTMENT OF JUSTICE

    Mr. Lawson. Thank you, sir.
    Mr. Chairman and distinguished members of the subcommittee, 
thank you for this opportunity to describe the Department of 
Treasury's strategy and procedure used to coordinate the 
placement of overseas personnel with Department of State.
    Although I have submitted a written testimony for the 
record, let me briefly describe some key points.
    The Office of Enforcement, along with the Office of 
International Affairs at main Treasury, and several key bureaus 
of the Treasury Department have had an international presence 
for more than 50 years. Each office has a direct strategic, 
supportive, or crucial enforcement role in implementing U.S. 
Government policy, yet an ongoing review of positions abroad is 
vital for security, cost, and policy reasons.
    Moreover, this is a timely subject, given our country's 
ongoing efforts to combat the global scourge of terrorism, both 
at home and abroad. The demand of our resources abroad are 
expanding and a need to coordinate the Treasury Department's 
efforts to protect our homeland with the Department of State 
and other departments and agencies is essential. Our ability to 
share information, work directly with foreign counterparts, and 
the ability to react quickly to changing trends is essential 
not only for our battle against terrorism, but for other 
critical missions such as controlling trans-national crime, 
promoting U.S. interest in foreign markets, and providing 
essential technical assistance and training to our counterparts 
overseas.
    As I have mentioned, coordination of our international 
presence is essential to ensure that the respective missions of 
the various agencies and departments, including Department of 
Treasury, are fulfilled, and that the U.S. Government is 
speaking with a unified, coordinated voice abroad.
    Treasury's goals and objectives are fully integrated into 
the U.S. strategic plan for international affairs and involve 
these national and international interests: expand exports and 
open markets; maintain global growth and stability; promote 
economic development; manage the entry of visitors and 
immigrants; safeguard the borders of the United States; combat 
international terrorism, crime, and narcotics trafficking.
    The Department of Treasury, in reaching these goals, 
reports annually to the State Department on the number of staff 
positions by Treasury components, by embassies and consulates, 
or proposed changes for the next 3 years, and Treasury follows 
the inter-agency clearance process to secure the approval of 
the U.S. Ambassador, chief of mission.
    Treasury submits detailed justification for all proposed 
overseas staffing changes, additions, or subtractions to the 
chief of mission, with a copy to Department of State. State 
officials also provide to the chief of mission and to 
Department of Treasury its views on the necessity of overseas 
staffing changes proposed by Treasury.
    The increasing demands of Treasury regarding homeland 
security through its financing and international financial 
markets require a vibrant overseas Treasury presence. It is 
important to note that this total number of Treasury employees 
include Americans posted abroad, local hires, foreign 
nationals, and personal contractors.
    Let me give you a breakdown of Treasury's personnel abroad, 
as reported by OMB as follows:
    For departmental offices, including technical assistance, 
we have a total of 112 persons, and this includes the Office of 
International Affairs and Treasury. For the Customs Service, it 
accounts for approximately over 300 persons abroad, and Customs 
is focused on cargo security and terrorist financing. The 
Secret Service has a total of 93 persons abroad, where their 
work focuses upon financial crimes and counterfeiting. The 
Bureau of Alcohol, Tobacco, and Firearms accounts for five 
persons abroad, focusing on firearm work and also diversion 
cases, tobacco and alcohol. The IRS, both civil and criminal 
divisions, have a total of 58 persons abroad, where the 
criminal division focuses upon money laundering and tax evasion 
cases.
    I must say the Treasury Department has been very flexible 
in its allocation of resources. Although we have these people, 
we recognize when there is no longer a need for a given office, 
either for enforcement or non-enforcement personnel. The 
Treasury Department has been willing to relocate those 
resources to areas where such personnel are needed.
    This plan will continue where Treasury operates, since we 
are dedicated to efficient use of resources abroad. We look 
forward to working with the State Department to ensure we do 
not have resources where the problems do not exist.
    Now, just to address the issue of regionalization that was 
raised earlier, the Department of Treasury law enforcement 
bureaus, as well as our non-enforcement offices, have 
traditionally practiced the concept of regionalization in 
varying degrees, the practice by which a region is covered by a 
personnel stationed in one overseas post. The concept has 
proved beneficial in certain locations, but we've recognized 
that we need to have a presence where the crime is, so we may 
have a regional office but we may need an office in, say, Spain 
as opposed to just a regional office in Paris. That's in place 
of Secret Service.
    I'll note, Mr. Chairman, Treasury and its law enforcement 
bureaus recognize that we must work together with all agencies 
to ensure the effective use of our foreign assets.
    This is the end of my oral testimony. I will be glad to 
answer any questions, sir.
    Mr. Shays. Thank you very much, Mr. Lawson. We will have a 
few questions. We appreciate your statement.
    [The prepared statement of Mr. Lawson follows:]

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    Mr. Shays. I would want to say for the record that when I 
have gone overseas to deal with this issue and issues dealing 
with, for instance, questions dealing on financial matters and 
how we track down people who have fled this country or dealing 
with terrorist issues, dealing with Defense issues, we have 
found all of your people very helpful, very informed, very 
talented, and I'm grateful to have been able to utilize and 
have those opportunities to meet with them and to learn so much 
from them.
    Mr. Hoehn.
    Mr. Hoehn. Thank you, Mr. Chairman, for the opportunity to 
appear before this committee on behalf of Secretary of Defense 
Rumsfeld.
    As you know, our Defense responsibilities span the globe, 
and the Secretary of Defense has developed a strategy to meet 
the many challenges we face. That strategy was outlined in the 
quadrennial Defense review report that he submitted to Congress 
last September.
    The ongoing war on terrorism is the first real test of this 
strategy, and we need your support to ensure success in this 
war. A strong and effective overseas posture is critical to 
support our Defense strategy, including the support we provide 
to U.S. diplomatic missions overseas.
    There are three basic components to our representation at 
and support to the diplomatic missions. These are: our security 
assistance offices, which operate in support of the State 
Department; our Defense attache offices; and the U.S. Marine 
Corps security details.
    Although there is no single criterion or methodology by 
which to determine our support to diplomatic missions, indeed 
most support is country-specific, as has been discussed earlier 
today. The Department of Defense has applied the discipline of 
right-sizing, as emphasized by the president's management 
agenda, to satisfy our changing requirements.
    For example, personnel assigned to our security assistance 
offices have decreased by roughly 25 percent over the past 10 
years. At the same time, on the basis of advice provided from 
our regional commanders, we have established 35 new offices to 
meet changing requirements. Our security assistance personnel 
today are capped at roughly 630 people.
    Similarly, our Defense attache personnel are capped at 
approximately 1,000 people, and have been significantly 
realigned in recent years to meet changing requirements. We 
have closed some 29 stations and reduced another 35 offices. At 
the same time, we have established 20 new attache offices and 
expanded 20 other stations. I believe this is very much in line 
with the recommendations that were offered on the prior panel.
    Finally, our most visible presence at U.S. embassies and 
posts are the 1,135 Marines with the Marine Security Guard 
Battalion. The assignment of Marine security details is under 
continuous review and is accomplished in close coordination 
with the State Department.
    I have identified more details on how we determine our 
staffing levels in order to right-size our presence overseas in 
my written statement, which I have provided for the record. I 
am available to you for your questions.
    Thank you, sir.
    Mr. Shays. Thank you very much.
    [The prepared statement of Mr. Hoehn follows:]

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    Mr. Shays. Mr. Diegelman.
    Mr. Diegelman. Thank you, Mr. Chairman. First of all, thank 
you very much for the invitation to testify, but then also 
thank you for holding a hearing on this critical topic. One of 
the benefits of going last with three panels like this is first 
of all you get an opportunity to hear everybody else's 
testimony, but also you get the opportunity to avoid some of 
the hard questions that people get to throw at you. So I'm 
going to--I have submitted a detailed statement for the record, 
but I do want to point out a couple key items that I think--I'm 
not going to repeat what you've heard, because I believe 
there's a lot of consensus among all of the witnesses, but I do 
want to point out some differences in approach and even some 
suggestions to where you can possibly go next, or where all of 
us can go next.
    First of all, in terms of the Department of Justice, we 
have a limited but growing presence abroad. If the world 
changed in 1989 with the Berlin Wall coming down, it also 
changed in 1998 with the attack on our embassies in Africa. It 
also very, very significantly changed for the Department of 
Justice and I believe for everybody else on September 11th of 
last year.
    The Department of Justice has a very limited but growing 
presence abroad. Ending with fiscal year 2001, Justice had only 
about 1,675 full-time and part-time employees and foreign 
nationals in 79 countries, which is a very, you know, very 
minimal presence, if I might say so. In 2002, with the 
appropriation for 2002 and also the counter-terrorism stuff, 
we're going to increase by an additional 75 employees, and most 
of those employees and additions will be in the FBI and the 
Criminal Division.
    Justice is a large, complex agency with almost 39-some 
agencies within it. Out of them, only five of them actually are 
represented abroad--the obvious ones, the FBI, the DEA, the 
INS, the Criminal Division, and also the Civil Division, but 
the Civil Division really has a very minor presence. It has 
only three employees in London.
    Traditionally, violations of U.S. criminal laws have been 
addressed by law enforcement and prosecution resources here 
exclusively in the United States. The last 20 years have seen a 
very dramatic impact on the globalization of crime, both with 
technology and the nature of the drug problem and the terrorism 
problem. We have ever-increasing threats to U.S. citizens, 
assets, and interests at home and abroad posed by international 
terrorism, organized crime, narcotics trafficking, money 
laundering, and all manner of trans-national criminal activity. 
It has created a very critical need to place law enforcement 
agents and attorneys, in some cases criminal prosecutors, in 
specific locations abroad.
    Since September 11th the Department of Justice has very 
actively been working more closely with law enforcement in 
countries all around the world, some 79 different countries.
    The overseas Presence Advisory Panel that Mr. Kaden 
testified was the first attempt in 1998 to look at the issue of 
right-sizing in a very considered and thoughtful way, and I 
think his testimony also reflects that. Immediately after the 
issuance of their report, the then Attorney General of the 
United States, Janet Reno, and the Secretary of State both 
agreed that they would take the law enforcement presence abroad 
and just use it as a possible test case to come up with some 
way of determining how a law enforcement presence should be 
sized in each of our locations.
    We set up an inter-agency task force involving our 
colleagues from both Treasury and also the Department of State, 
and then we did undertake a pilot study that took us to U.S. 
missions in Paris, Mexico City, and Bangkok.
    I was a member of that working group, so I know both what 
was on the ground and the considerations that all of us entered 
into, and we did produce an approach in the law enforcement 
area that I think is worthy of this panel's consideration and 
also GAO, OMB, and the Department of State.
    We spent a lot of time in Paris, a very large mission. I 
would simply say that we learned a lot by actually talking to 
the people. We stayed on the site a week. We had a panel of 
about six members.
    Let me just very quickly tell you about Justice abroad one 
more time. Really, our focus is mainly four targets: counter-
terrorism, narcotics trafficking, international crime, and 
immigration.
    We have placed our people where the problems are, where the 
issues are. Our goals and purposes in putting people abroad 
really supports the U.S. strategic plan for international 
affairs, the two major law enforcement goals.
    I'll give you an example. The Federal Bureau of 
Investigation today carries out a mandate of more than 50 
statutes which provide extra-territorial reach, many of them 
providing exclusive jurisdiction to the FBI. Over half of these 
have been passed since 1980. They address violence, 
international airports, foreign murder of U.S. nationals, 
international parental kidnapping, violence against maritime 
navigation, copyright and intellectual property fraud, 
telemarketing fraud, use of weapons of mass destruction, 
terrorism, and air piracy.
    Obviously, we have a very heavy agenda for being abroad, 
and it completely matches up with, from our perspective, the 
U.S. strategic plan for international affairs.
    Let me just very quickly recap what the working group did. 
We have been very actively involved with State and Treasury.
    We came to a simple conclusion. It's not easy to come up 
with a way to right-size, but we do think it is doable. We do 
think that there are criteria that should be taken into 
consideration, that it should not be a numerical formula, that 
in reality there ought to be a range of criteria that can be 
applied by an inter-agency team, and basically my testimony 
does tick all this off. I'll be glad to supply a little bit 
more detail for the record if you'd like it, but we see 
basically eight criteria that should be used in evaluating the 
law enforcement presence abroad:
    No. 1, the trans-national crime threat that is present at 
the site;
    No. 2, the non-crime-control policy interest for being in 
there. Very frequently the crime issue impacts in any country 
on the development of democratic institutions and a free market 
economy.
    No. 3, the host nation law enforcement capability.
    Four, the host nation's commitment. Do they want us there 
or not? And how big do they want us there?
    No. 5, the geographic regions served by the mission.
    No. 6, the role performed by U.S. law enforcement 
personnel.
    No. 7, the resource and security constraints.
    And, No. 8, the possibility of overlapping missions with 
anyone else that is presently at the site.
    I can give you a more-detailed summary of the eight 
criteria. I will point out that we applied these in three major 
large missions--Bangkok, Mexico City, and Paris. We also out-
briefed the chief of mission in each one of the sites, and the 
reaction to it was very positive and they thought usable.
    I'll make some final observations. One, we do believe that 
this is doable. Justice is more than willing to participate in 
an inter-agency effort to take the next step. We just made a 
major staff commitment the last time around, but we're willing 
to make the same type of commitment.
    The word of caution we would add is that none of us should 
be looking for silver bullets or easy answers to this. It is 
not just simply a three-factor analysis; it is a multi-varied 
analysis that you have to do. When I say that, the drivers 
should not just simply be cost and security. The driver's 
really have to focus on operational necessity and mission 
effectiveness at the missionsite.
    We believe that if you take the June 21st report that we 
issued as a working group as a starting point and build around 
it an inter-agency group, you can take it the next step.
    The key features of taking it the next step are actually 
turning those eight concepts into some operational questions 
that could be used by an assessment team. We would underscore 
that we have to avoid the one-size-fits-all approach and we 
believe that there should be an inter-agency--strong inter-
agency participation and this should be transparent. This 
should not be a situation where one group or the other just 
lays out the formula for everybody to play by. We've got to 
work it out together. We think it is workable, and I think we 
are off to a good start.
    I will be glad to answer any questions you might have, Mr. 
Chairman.
    [The prepared statement of Mr. Diegelman follows:]

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    Mr. Shays. I thank you all very much. Mr. Diegelman, I 
think you took advantage of being last and did a nice service 
to the committee in kind of summarizing some points. I 
appreciate the testimony of all three of you. It is very 
helpful.
    You, Mr. Diegelman, seemed to make it very clear that the 
Attorney General would be cooperative and the Department will 
be cooperative in this effort. I'd like to know, Mr. Hoehn and 
Mr. Lawson, what kind of cooperation we can expect from 
Treasury and Defense in this effort to right-sizing our 
missions.
    Mr. Lawson. I think there's no question, sir, that the 
Department of Defense will be cooperative in this effort. I 
think Mr. Diegelman's points are quite accurate, particularly 
on the issue of the inter-agency approach and the idea that, 
although no one-size-fits-all, we do need to work out criteria 
by which to right-size, and that this inter-agency approach 
must be transparent to all parties as we're working through it. 
There is no question that the Department of Defense will be 
committed to that.
    Mr. Shays. Thank you. Mr. Lawson.
    Mr. Lawson. I must say the same. As you know, Secretary 
O'Neill served on OPAP prior to his service as Secretary of 
Treasury, and he agrees with right-sizing, but not necessarily 
down-sizing. Due to the problems that exist with trans-national 
crime, we may need a clear presence from Secret Service that--
--
    Mr. Shays. I'm going to make it very clear that we don't 
even need to go any further in this issue. Right-sizing means 
right-sizing. It may be up, it may be down, it may be staying 
the same. We all agree on that.
    Mr. Lawson. All right, sir.
    Mr. Shays. So you don't need to be concerned that when you 
go back we'll have assumed that you said we can down size.
    Mr. Lawson. Yes, sir.
    Mr. Shays. You won't get in any trouble that way, sir.
    Mr. Shays. All right, sir. Short answer--we're willing to 
cooperate.
    Mr. Shays. Willing would be very helpful, and hopefully 
even eager.
    Let me ask you, though, what are the practical challenges? 
I mean, as I meet--when I go to every mission I sometimes meet 
with Treasury, but I almost always meet with people from the 
Justice, Department of Defense. Let me say the Defense 
Department has some of the best contacts in country with 
important nationals, and it has been a tremendous asset for me 
to have the Department of Defense introduce me to people who I 
need to meet with in my work. I appreciate that. But what are 
the practical challenges that a chief of mission has, an 
ambassador has in knowing about the work in each of your 
different departments?
    I would think, for instance, with Justice there are just 
some things that Justice doesn't even, you know, go out of its 
way. It's basically on a need-to-know basis. So tell me how we 
sort out the practical application of the chief of mission 
knowing what you all are doing.
    Do you want to start, Mr. Diegelman?
    Mr. Diegelman. Yes. I'll tell you my personal observation. 
My personal observations are that an awful lot of it really 
turns around the mission performance plan, and when I say that 
I think over the last couple of years----
    Mr. Shays. Mission of the embassy or the mission of the 
various departments?
    Mr. Diegelman. The mission, that's for the embassy.
    Mr. Shays. Right.
    Mr. Diegelman. Each embassy does produce an MPP in the 
spring, a mission performance plan. I think one of the concerns 
that we have had in the past is that very frequently it seems 
to be a chief of mission to Washington discussion and not an 
on-sight discussion.
    The mission performance plan really should involve all of 
the players that are onsite at a mission in its development and 
determination or priorities. That is a way in which the chief 
of mission or the Deputy Chief of Mission could actually reach 
out to the law enforcement presence that is there in that 
embassy or there in an annex to that embassy and actually 
involve them in the planning and the determination of 
priorities.
    No question about it, very frequently some of the work that 
we're involved in, particularly in the FBI, is basically 
undercover investigative work and we're not going to lay 
everything out on the table, but surely any chief of mission 
ought to know how many people are present in his mission, how 
many--just what they're doing, generally, and how they support 
the priorities of that mission.
    I think the answers can be found in the MPP, and also all 
the agencies, including us, playing according to national 
security directive, decision directive 38, in terms of making 
sure that the chiefs of missions know what assets we're putting 
into the mission.
    Mr. Shays. Thank you.
    Mr. Lawson.
    Mr. Lawson. Sir, I think that one thing has been helpful 
has been meetings with law enforcement bureaus at these 
embassies. These meetings are held by the Deputy Chiefs of 
Mission to ensure there is no conflict in terms of cases or 
investigations.
    I find from Treasury law enforcement bureaus and also 
working with the FBI that, by virtue of having these 
discussions on a weekly basis, this assures us no conflict and 
ensures that everyone understands what missions are to be 
accomplished and that we're working together.
    Mr. Shays. Thank you.
    Mr. Hoehn.
    Mr. Hoehn. Yes, sir. Regarding challenges, the first that I 
would observe is that, in two of our functions--that of our 
Defense attache, our attache is, in fact, the military advisor 
to the chief of mission, and so there is a very close 
relationship there in terms of the function that the attache 
performs and that of the chief of mission.
    Second, our security assistance offices are actually 
working on behalf of the State Department at the missions, and 
so again there is a very close relationship. And, as I 
mentioned, the role of the Marine security details at each of 
the missions is done in very close collaboration with the State 
Department.
    But that leaves unsaid the issue that we highlight in our 
own strategy, and that's one of uncertainty. And so when we 
look in our requirements and then when we look downstream at 
some of these requirements, it is often difficult to project 
exactly what those needs will be. None of us I think could have 
imagined even a year ago the requirements that we face now in 
central Asia and particularly in Afghanistan.
    And so, I think as we look at this right-sizing initiative 
and as we address these challenges, we will have to build 
sufficient flexibility into our approach here so that we can 
meet changing needs not just over time but sometimes in time to 
face the requirements that we confront.
    Mr. Shays. Having the right number of people in the right 
place is obviously the key objective. It is a little 
disconcerting to read such disparity in terms of per person, 
per employee, per government employees' cost. I'm wondering if 
you can shed any light on such high costs for Secret Service.
    Mr. Lawson. I'll be glad to, sir.
    Mr. Shays. OK.
    Mr. Lawson. The figure that was given to you was extremely 
high and perhaps----
    Mr. Shays. A little louder.
    Mr. Lawson. I'm sorry. The figure that was given to you was 
not correct. That figure was based on a study conducted by OMB 
where Secret Service provided a worst-case scenario, and it was 
based on having an agent in a new office in the most expensive 
foreign embassies--Hong Kong and Rome. And, by virtue of going 
on the high end, that's where we got $665,000. But trying to be 
completely candid with OMB in thinking about a worst-case 
scenario, I think that gives the wrong picture as to how much 
it costs to have a Secret Service agent.
    Mr. Shays. If I hadn't asked that question, you would have 
found a way to bring it in, wouldn't you, for the record, 
because this is an important point.
    Mr. Lawson. It is. Yes, sir, because----
    Mr. Shays. So would you have found a way?
    Mr. Lawson. At the very end when you say, ``Is there 
anything you would like to say,'' I'd have something to say, 
sir.
    Mr. Shays. OK.
    Mr. Lawson. And I also have charts to provide.
    Mr. Shays. OK.
    Mr. Lawson. All right?
    Mr. Shays. Well, they'll all be in the record.
    Mr. Lawson. All right, sir. Just bottom line, it does not 
cost that much money for a Secret Service agent to do his job 
at a foreign embassy. The correct figure, sir, is around 
$400,000, and we're looking at, say, other costs than just 
salary and benefits, sir. But for all our bureaus it does vary, 
depending on where your location is and also the mission. So to 
develop a correct figure for our bureaus we need to look at one 
location across the board--let's say Mexico City. Look at it 
for ATF, Customs, Secret Service, and then develop a number. 
But the number you heard earlier is incorrect.
    Mr. Shays. OK. The number 400,000 still is a pretty penny 
for an individual that you just mentioned, a more realistic 
cost. Just shed some light as to why it would be that number, 
that amount.
    Mr. Lawson. Well, sir, what was calculated by Secret 
Service, we're not just looking at the individual's salary.
    Mr. Shays. Right.
    Mr. Lawson. We're also looking at perhaps for equipment, 
furniture, housing costs. If this person is bringing a----
    Mr. Shays. What would be unique, though, to Secret Service 
that would be above and beyond housing--you know, I'm assuming 
the housing would be the same whatever employee we had--
Defense, the Treasury, State Department, as well. So what would 
be an additional cost for the Secret Service? They still seem 
to be at the higher end.
    Mr. Lawson. That figure, again, is based on placing a 
Secret Service agent with a family of four in, say, Rome or 
Hong Kong, a high-end location versus a low-end location. But, 
to answer your question directly, there would be no difference 
in cost for a Secret Service agent or for a Defense employee 
for just salary and benefits, sir.
    Mr. Shays. You know, let me just--my counsel has pointed 
out that the per average cost of all employees is about 339. I 
get the feeling that this number--we need to nail this number 
down a bit more, obviously, in terms of comparing the same 
requirements and so on.
    Mr. Lawson. Yes, sir.
    Mr. Shays. Is there a difference in--let me back up and say 
when you all feel there is a need to add to a mission--excuse 
me, I don't want to confuse mission and mission. When you feel 
there is a need to add employees to overseas, what process do 
each of your departments follow?
    Mr. Lawson. We comply with the NSDD 38, through State, 
coordinate for our bureaus through the Under Secretary of 
Treasury to ensure that everyone is on the same sheet of music, 
sir, and then there is an evaluation of cost and need to ensure 
that we are not placing a person in a location when there's not 
a true need.
    And let me say this for Secret Service. Secret Service has 
closed locations, such as closing its Ottawa office once it 
realized there was no longer a law enforcement need there, and 
transferred it to Ronset, where there was a need, where they 
found counterfeiting occurring and prevalent pattern as opposed 
to Ottawa, sir.
    Mr. Shays. Let me just go down the line here.
    Mr. Hoehn. Yes, sir. Similarly, we adhere to the procedures 
identified in NSDD 38. In this instance, we have an internal 
review process within the Department of Defense for the three 
different functions that I outlined, but ultimately the chief 
of mission has the approval authority for any increases or 
decreases to the size of our presence, and so we have both an 
internal review process, but then we work that very carefully 
with the chief of mission.
    Mr. Diegelman. I can just basically second what has already 
been said. We follow the NSDD approach, NSDD 38 requirements, 
but also internally we do our own internal assessment why 
there's a need in that particular site, and that particularly 
looks at either investigative leads that we have, caseloads 
that we have, contacts that we have with foreign governments.
    The FBI is mainly leading the charge on this right now, 
particularly in the wake of September 11th, where we actually 
are getting investigative leads related to terrorism, 
investigations that can only really be handled onsite. So we do 
an evaluation of how many leads, how many cases, the level of 
cooperation of law enforcement agencies before even kicking off 
the NSDD 38.
    Mr. Shays. Do overseas positions receive Ambassadorial 
approval prior to the staffing decision and before the budget 
allocations are made?
    Mr. Diegelman. My answer to that is yes for the Justice 
Department. It's supposed to be that way. Now, that doesn't 
mean that always happens, but my answer to that is yes.
    Mr. Shays. All right. I think that's probably a more 
accurate description, ``It's supposed to happen.'' I'm not sure 
it does happen.
    Mr. Hoehn.
    Mr. Hoehn. I would agree it is supposed to happen that way. 
I can't attest to you here that it always happens.
    Mr. Shays. Mr. Lawson.
    Mr. Lawson. I have to agree, too, sir.
    Mr. Shays. You know, I think this issue is pretty clear-cut 
for us. I care most about the fact that you can convey that 
there will be cooperation from your superiors, and I think 
that's going to be absolutely essential. I do recognize that 
each agency, each department has its separate missions. We want 
to have that work in tandem with the focus of the mission, but 
the bottom line is that sometimes the focus of the Ambassador 
may not be the focus of each of your mandates, and your 
mandates are clearly directed by the President, by the 
Secretaries, and also by Congress. You have certain missions to 
fulfill, certain objectives, certain things that you have to 
get done. But I think it is clear to you all, it is clear to 
the committee that there can be better coordination, there can 
be better cooperation.
    I think the thing that I find the most troubling--
``troubling'' is not the right word, but the area where I would 
find it difficult if I were an ambassador or chief of a 
mission, in general, that I have more than half my employees 
are nationals. They probably respond to the wishes of the 
embassy closely because those jobs are fairly well paid and we 
have excellent employees working for our embassies that are 
nationals. But they have long-term knowledge that supersedes 
almost any employee, American employee, because of the 
rotations that we have. That would be a challenge.
    It would also be a challenge, I think, for an ambassador to 
step in, know the resources he has available--or she--to its 
own Foreign Service employees, and then to see an agency come 
in with, you know, significant resources that are dedicated for 
carrying out the functions of that particular effort.
    I think that we've got to find a way to somehow understand 
the kinds of resources each agency and each department is 
dedicating. And I don't want to have it be--I wouldn't want it 
to be a dumbing down, like everything had to be the average, 
because somebody didn't have enough money nobody gets enough 
money. That's not what I'm suggesting. But it does represent a 
challenge for, I think, morale, I think for making sure that 
the embassy is doing what is required.
    I would love for us in this process to know the true cost. 
First of all, I'd like you all to be able to tell me, if I 
instantly asked--I might even ask you--how many employees you 
have around the world to the number. And it seems to me we 
should be able to know it. It shouldn't take days or weeks. It 
should be just something we know. That seems fairly clear.
    But it seems to me that every agency and department should 
have a clear sense of what they're spending in each mission 
around the world, and to be able to justify it, and then we 
should be able to have an open and candid conversation as to 
why does Treasury devote this much per employee versus what 
Defense would or versus what Justice would and so on.
    I don't have any additional comments.
    Is there anything you want on the record?
    Mr. Costa. Yes.
    Mr. Shays. We're going to allow the professional staff to 
ask two questions, and then I'm going to let you all close up.
    Yes, sir?
    Mr. Costa. Thank you, Mr. Chairman.
    Previous panels mentioned putting a rent charge on new 
buildings or existing buildings, and I'm wondering what your 
departments feel about the rent option, and if it were enacted 
how would that affect your operations overseas?
    Mr. Lawson. With treasury?
    Mr. Costa. We'll go down the line.
    Mr. Lawson. We'll pay our fair share, but we would like to 
have some type of notice so we include that in our base so we 
can budget for it.
    Mr. Costa. Thank you.
    Mr. Hoehn. I think it is our view that we'll work within 
the administration on this initiative of capital cost sharing, 
but I would highlight that there are some important issues that 
would need to be resolved, not least of which would be the 
congressional oversight of different agency budgets, so we 
would now see in this instance, where the capital costs for new 
construction might be spread among all of our agency budgets, 
as opposed to contained in any single agency budget, and that 
might prove to be a very difficult issue for you.
    Mr. Shays. I'm sorry. I should understand that but it's 
just going through me. Are you saying you would spread out the 
cost? Wouldn't it be better to have it be allocated per 
department? What am I missing here? Explain it to me.
    Mr. Hoehn. As I understand it, if the costs were allocated 
on a pro rata basis in terms of----
    Mr. Shays. Right.
    Mr. Hoehn. Then that would be reflected in each of our 
budgets.
    Mr. Shays. Correct.
    Mr. Hoehn. And therefore, when oversight is given here in 
Congress, you would have a number of different committees 
looking at different agency budgets that would have that pro 
rata share.
    Mr. Shays. Correct.
    Mr. Hoehn. As opposed to seeing the entire capital cost for 
the investment in the State Department's budget, which is the 
case today.
    Mr. Shays. All right. The value, though, of doing it per 
department is that you would begin to--you all would say, 
``Well, this is worth it to me and this isn't.'' You would 
begin to know how you would want to allocate your resources to 
maximize your particular mission. And so I hope I'm not 
misunderstanding you.
    I think your concern is--let me ask you to make sure I'm 
understanding. It's your concern that when you go through the 
appropriation process one committee might have one standard of 
dealing with what you should be allowed to spend overseas 
versus what another committee would have when Defense goes 
before the Defense Appropriations Subcommittee versus Treasury 
going before its subcommittee, it's your concern that there 
would be a failure to recognize differences in cost?
    Mr. Hoehn. That's correct, sir.
    Mr. Shays. Yes. I understand that. I do.
    Mr. Diegelman, did you want to----
    Mr. Diegelman. The only thing that I could add is that, you 
know, I agree with my colleagues. We will clearly pay our fair 
share. But I think real consideration has to be given to the 
comment that I made earlier in my testimony in that cost should 
not be the driving feature of whether we open or place somebody 
in a particular mission or not. In today's world, we happen to 
be a growth industry. The change in our own presence abroad 
since 1991 has been dramatic. The FBI in 1991 had 17 legal 
attaches. It now has 46. And these legal attaches are very 
small organizations, generally three people, just the assistant 
legal attache, the legal attache, the administrative officer. 
We're talking about three and four people in a mission in 
critical locations like Kabul and Abu Dhabi and Kuala Lumpur as 
we engage in the war against terrorism. We shouldn't have to 
make the decision to put three people or not three people in a 
particular site because the rent charge is too high.
    Mr. Shays. You know what? Can I say, though, if you follow 
that logic you could apply it to anything in government. I 
would like to read the answer to your question differently, and 
then I'd like you to tell me if you agree.
    Mr. Diegelman. Yes.
    Mr. Shays. That Congress has to recognize that you have a 
significant mission and should be willing to pay the cost, but 
we shouldn't disguise the cost or not know what it is costing.
    Mr. Diegelman. I agree with your statement.
    Mr. Shays. OK.
    Mr. Diegelman. It is a fair and accurate statement of what 
I said.
    Mr. Shays. OK.
    One last question?
    Mr. Costa. Actually, a question about reviewing staff 
abroad. It's a question of how often do you review positions to 
see if they're still necessary. For example, the CDC has a 
sunset provision on all of its staff overseas. What sort of 
review process do you have to gauge whether those staff are 
still needed?
    Mr. Lawson. Sure. Our bureaus--the Treasury, Secret 
Service, Customs review regularly whether or not they need 
staffing in a given office. As I said before, Secret Service 
has reviewed the Ottawa office and realized it no longer needed 
that office to accomplish its mission; therefore, it closed 
that office and it opened another office because they found 
criminal activity had transferred to Toronto. So our bureaus 
regularly review the need for an office in a given foreign 
embassy.
    Mr. Costa. How often does that occur?
    Mr. Lawson. Yearly. I cannot say that every law enforcement 
bureau does it yearly, but I can tell you that Secret Service 
does and Customs does.
    Mr. Hoehn. Similarly, our requirements are reviewed 
annually, and, as I noted in my remarks, we have made a number 
of changes over recent years. I can't say that every function 
in every post is reviewed annually, but we do have an annual 
review process that's underway in which these determinations 
are being made. And in some instances, because of some very 
rapidly developing requirements, we've had to expedite some of 
the changes that we had in place, that we had planned for 
upcoming years, and move them into this year, particularly some 
changes in central Asia that are now in place.
    Mr. Diegelman. We also have an annual review process 
basically as part of our budget formulation process, but then 
also we normally do not permanently station anybody abroad. We 
normally do it in 1 or 2-year terms, tours of duty, and then 
reexamine that at the end of that term to decide whether we're 
going to keep those people in that location.
    Mr. Costa. OK. Thank you.
    Thank you, Mr. Chairman.
    Mr. Shays. Thank you.
    Gentlemen, do you have anything that you feel needs to be 
part of the record? I'd truly welcome it, any closing comments.
    Mr. Lawson. No, sir.
    Mr. Hoehn. No, thank you, sir.
    Mr. Diegelman. Just to thank you once again for holding the 
hearing. I think it is a critical issue, and we are very 
actively interested in staying about.
    Mr. Shays. Well, thank you. I feel that OMB and the 
President has the cooperation of your departments, and that's 
appreciated, and certainly we appreciate your cooperation and 
look forward to a continued dialog.
    I'll state again for the record, the work that our 
embassies do is actually vital. It's clear it is more important 
than ever. The work that is done by both employees of the State 
Department and employees of other departments and agencies of 
our Government is absolutely vital, as well, and we just want 
to make sure that we have the right size in every case, and 
that may, in fact, mean that we have more in some and less than 
others, but we will all benefit.
    So I thank you very much. At this time the hearing is 
closed. I thank our reporter. Thank you.
    [Whereupon, at 12:34 p.m., the subcommittee was adjourned, 
to reconvene at the call of the Chair.]

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