[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                        THE AEROSPACE COMMISSION
                       REPORT AND NASA WORKFORCE

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 12, 2003

                               __________

                            Serial No. 108-7

                               __________

            Printed for the use of the Committee on Science


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


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                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
LAMAR S. SMITH, Texas                RALPH M. HALL, Texas
CURT WELDON, Pennsylvania            BART GORDON, Tennessee
DANA ROHRABACHER, California         JERRY F. COSTELLO, Illinois
JOE BARTON, Texas                    EDDIE BERNICE JOHNSON, Texas
KEN CALVERT, California              LYNN C. WOOLSEY, California
NICK SMITH, Michigan                 NICK LAMPSON, Texas
ROSCOE G. BARTLETT, Maryland         JOHN B. LARSON, Connecticut
VERNON J. EHLERS, Michigan           MARK UDALL, Colorado
GIL GUTKNECHT, Minnesota             DAVID WU, Oregon
GEORGE R. NETHERCUTT, JR.,           MICHAEL M. HONDA, California
    Washington                       CHRIS BELL, Texas
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         SHEILA JACKSON LEE, Texas
W. TODD AKIN, Missouri               ZOE LOFGREN, California
TIMOTHY V. JOHNSON, Illinois         BRAD SHERMAN, California
MELISSA A. HART, Pennsylvania        BRIAN BAIRD, Washington
JOHN SULLIVAN, Oklahoma              DENNIS MOORE, Kansas
J. RANDY FORBES, Virginia            ANTHONY D. WEINER, New York
PHIL GINGREY, Georgia                JIM MATHESON, Utah
ROB BISHOP, Utah                     DENNIS A. CARDOZA, California
MICHAEL C. BURGESS, Texas            VACANCY
JO BONNER, Alabama
TOM FEENEY, Florida
VACANCY


                            C O N T E N T S

                             March 12, 2003

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............    11
    Written Statement............................................    12

Statement by Representative Ralph M. Hall, Minority Ranking 
  Member, Committee on Science, U.S. House of Representatives....    72
    Written Statement............................................    72

Prepared Statement by Representative Nick Smith, Member, 
  Committee on Science, U.S. House of Representatives............    91

Statement by Representative Bart Gordon, Member, Committee on 
  Science, U.S. House of Representatives.........................    13

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    12

                                Panel I

The Honorable Robert S. Walker, Chairman, Commission on the 
  Future of the United States Aerospace Industry; President, 
  Wexler Walker Public Policy Associates
    Oral Statement...............................................    13
    Written Statement............................................    15

The Honorable John W. Douglass, President and Chief Executive 
  Officer, Aerospace Industries Association of America, Inc.
    Oral Statement...............................................    22
    Written Statement............................................    65
    Biography....................................................    71

The Honorable John J. Hamre, President and CEO, Center for 
  Strategic and International Studies
    Oral Statement...............................................    73
    Written Statement............................................    75

Discussion
  Role of Propulsion & Power.....................................    77
  Using Defense Technologies for Civil Applications..............    77
  Peer Review of R&D Investment..................................    78
  Financial Health of Commercial Aviation........................    78
  Air Traffic Management.........................................    80
  Future of Civil Aviation.......................................    80
  Industry R&D Spending Practices................................    82
  Airline Ticket Taxes...........................................    82
  NASA Infrastructure Investment.................................    83
  Wind Tunnels...................................................    85
  Engine Technology..............................................    86
  Future Air Traffic Management & OEP............................    87
  Trusted Traveler Program.......................................    88
  Space Imperative...............................................    89
  Space Tourism..................................................    90
  High Speed Propulsion Research.................................    90
  Science & Math Education.......................................    92
  NASA Aeronautics R&D Investment................................    94
  Aerospace Sectoral Budget......................................    95
  Improving NASA's Infrastructure................................    96
  National Aerospace Initiative..................................    98

                                Panel II

Mr. Max Stier, President, Partnership for Public Service
    Oral Statement...............................................    99
    Written Statement............................................   103
    Biography....................................................   111

Mr. Bobby L. Harnage, Sr., President, American Federation of 
  Government Employees, AFL-CIO
    Oral Statement...............................................   111
    Written Statement............................................   113

Mr. George Nesterczuk, Nesterczuk and Associates
    Oral Statement...............................................   117
    Written Statement............................................   119

Discussion
  Employee Input to Workforce Plan...............................   122
  Buyout Provisions..............................................   123
  Outsourcing....................................................   124
  Bonuses........................................................   124
  NASA Recruiting................................................   125
  Bonus Pay......................................................   125
  Funding Salaries and Bonuses...................................   126
  Need to Compare Flexibility and Financial Problems.............   126
  Pay for Scientists and Engineers...............................   127
  Importance of Continuous Learning..............................   128
  Destination and Vision for NASA................................   129
  Demonstration Project..........................................   130
  Outsourcing....................................................   130
  Demonstration Projects.........................................   131
  Need for Oversight.............................................   131
  Plans for the Workforce Authorities............................   132

             Appendix 1: Answers to Post-Hearing Questions

Robert S. Walker, Chairman, Commission on the Future of the 
  United States Aerospace Industry; President, Wexler Walker 
  Public Policy Associates.......................................   136

John W. Douglass, President and Chief Executive Officer, 
  Aerospace Industries Association of America, Inc...............   138

Max Stier, President, Partnership for Public Service.............   140

Bobby L. Harnage, Sr., President, American Federation of 
  Government Employees, AFL-CIO..................................   143

George Nesterczuk, Nesterczuk and Associates.....................   146

             Appendix 2: Additional Material for the Record

H.R. 1085, NASA Flexibility Act of 2003..........................   150

 
           THE AEROSPACE COMMISSION REPORT AND NASA WORKFORCE

                              ----------                              


                       WEDNESDAY, MARCH 12, 2003

                  House of Representatives,
                                      Committee on Science,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 2 p.m., in Room 
2318 of the Rayburn House Office Building, Hon. Sherwood L. 
Boehlert (Chairman of the Committee) presiding.



                            HEARING CHARTER

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                        The Aerospace Commission

                       Report and NASA Workforce

                       WEDNESDAY, MARCH 12, 2003
                          2:00 p.m.-4:00 p.m.
                   2318 RAYBURN HOUSE OFFICE BUILDING

Purpose of Hearing

    On Wednesday, March 12, 2003, at 2:00 p.m. in room 2318 of the 
Rayburn House Office Building, the House Science Committee will hold a 
Full Committee hearing to review The Final Report of the Commission on 
the Future of the United States Aerospace Industry and NASA Workforce 
legislation. This hearing will consist of two panels. The first panel 
will review the Aerospace Commission report issued last November to the 
President and Congress. The second panel will review proposed 
legislation, H.R. 1085, the NASA Flexibility Act of 2003. This bill 
provides additional authorities for the agency to recruit and retain a 
highly-skilled workforce which was one of the primary recommendations 
from the Aerospace Commission.

Major Issues for Congress Taken From Aerospace Commission 
                    Recommendations

 Making U.S. leadership in aviation and space a national 
imperative. The Commission urges Congress to call public attention to 
how the aerospace industrial base is in serious danger of decline, and 
to establish policies and programs to rebuild and sustain this 
nationally critical industry.

 Increasing Federal Investment in Aerospace Research. The 
Commission calls on the Federal Government to significantly increase 
its investment in basic aerospace research. One area of research the 
Commission cites is the development of a new, highly automated air 
traffic management system that is capable of handling more traffic than 
could be managed with the Federal Aviation Administration's current 
system.

 Government-wide Management Structure Changes. The Commission 
recommends a White House aerospace policy coordinating council, 
creation of an aerospace management office in OMB, and a joint 
committee in Congress to coordinate federal investment and policy 
decisions for aerospace.

 Revitalize the U.S. Aerospace Workforce. The Commission 
recommends several programs to recruit and revitalize the U.S. 
aerospace workforce for government and industry. One component, to be 
explored in the second panel, is providing additional legislative 
authority to enable NASA to recruit and retain skilled employees.

Need for the Aerospace Commission

    The Aerospace Commission was established in the Defense 
Authorization Act of 2001 (P.L. 106-398). Backers of the amendment to 
create the Commission were concerned that U.S. aerospace industry was 
at serious risk even before the tragedy of September 11, 2001. The 
industry was already losing ground in the international marketplace for 
an array of aerospace products, including commercial aircraft, space 
launch vehicles and satellites, and military aircraft.
    The aerospace industry is a powerful force in the U.S. economy, 
contributing over 15 percent to the Nation's Gross Domestic Product and 
supporting over 15 million high quality jobs. Last year, more than 600 
million passengers relied on U.S. commercial air transportation, and 
over 40 percent of the value of all U.S. freight was transported by 
air. However, a convergence of negative trends in the commercial 
aerospace market and government spending, aerospace workforce cuts and 
industry consolidation, overseas competition, and a perceived lack of 
planning led to a growing alarm and calls to investigate these complex 
issues through a statutory Commission.

Charter of the Aerospace Commission

    After enactment, the President, Senate, and House of Representative 
named twelve members to the Commission with a broad range of experience 
in government, industry, academia, Wall Street, trade associations and 
unions. The President named former Science Committee Chairman Bob 
Walker as Chair. The Commission was chartered to study the issues 
associated with the future of the U.S. aerospace industry in the global 
economy, particularly in relationship to national security, and to 
assess the future importance of the domestic aerospace industry to U.S. 
economic and national security. The scope included an examination of 
the budget and acquisition processes within the Federal Government, 
international trade and export controls, the impact of tax policies on 
international competitiveness, space launch infrastructure, and science 
and engineering education. Over the course of a year, the Commission 
held six public hearings, received testimony from over 60 witnesses, 
and met with over 50 government and industry organizations. The 
Commission presented a final report to the President and Congress last 
November. The details of the Commission's recommendations are listed in 
Appendix A, and the final report is posted on the Commission's website 
at http://www.aerospacecommission.gov.

NASA Workforce Challenges

    One of the nine recommendations from the Aerospace Commission's 
report was that government, industry, labor, and academia work together 
to develop an aerospace workforce for the 21st century. Several studies 
show an approximately 20 percent decline in the number of undergraduate 
and doctoral degrees awarded in aerospace science and engineering over 
the last ten years. As 60 percent of NASA's 18,800 civil service 
employees are scientists and engineers (S&E), the agency's workforce is 
adversely impacted by these larger national trends and the shrinking 
talent pipeline of aerospace scientists and engineers. Within NASA's 
S&E workforce, the over-60 population outnumbers its under-30 
population by nearly 3 to 1. While the average age today of NASA's S&E 
employees is 46 years old, the average age of NASA S&E employees during 
the Apollo era was 39 years old.
    These workforce trends jeopardize NASA's ability to manage its 
highly complex missions. Since 2001, the General Accounting Office has 
ranked ``strengthening human capital'' as one of NASA's top management 
challenges. The GAO reported in January 2003 (before the Columbia 
accident): ``NASA's shuttle workforce had declined significantly in 
recent years to the point of reducing NASA's ability to safely support 
the shuttle program. Many key areas were not sufficiently staffed by 
qualified workers, and the remaining workforce showed signs of overwork 
and fatigue. To the agency's credit, NASA has recognized the need to 
revitalize the shuttle's workforce. . ..'' Additionally, NASA's 
independent Aerospace Safety Advisory Panel report in 2001 made similar 
observations relating to deficiencies with the Space Shuttle workforce.

Need for NASA Workforce Reform Legislation

    In May 2002, NASA submitted a set of legislative proposals to 
augment current civil service authorities to recruit, retain, and 
restructure its workforce along with justifications for how each 
proposal would help meet the agency's workforce challenges. The Space 
and Aeronautics Subcommittee held a hearing on NASA's management and 
workforce challenges on July 18, 2002 in order to review these 
legislative proposals and their justification. Since then, some of 
these legislative proposals were enacted government-wide in the 
Homeland Security Act of 2002. The NASA Flexibility Act of 2003 (H.R. 
1085) would provide the agency with additional civil service 
authorities. The individual provisions for this legislation are 
summarized in Appendix C along with comparisons to NASA's current civil 
service authority.

Witnesses

Panel One--Aerospace Commission

        The Hon. Bob Walker, Chairman, Aerospace Commission
        President, Wexler Walker Public Policy Associates

        The Hon. John Douglass, Commissioner
        President, Aerospace Industries Association

        The Hon. John Hamre, Commissioner
        President, Center for Strategic and International Studies

Panel Two--NASA Workforce

        Mr. Max Stier, President
        Partnership for Public Service

        Mr. Bobby Harnage, President
        American Federal of Government Employees

        Mr. George Nesterczuk,
        Nesterczuk and Associates

Appendix A

                  Aerospace Commission Recommendations

1. The integral role aerospace plays in our economy, our security, our 
mobility, and our values makes global leadership in aviation and space 
a national imperative. Given the real and evolving challenges that 
confront our nation, government must commit to increased and sustained 
investment and must facilitate private investment in our national 
aerospace sector. The Commission therefore recommends that the United 
States boldly pioneer new frontiers in aerospace technology, commerce 
and exploration.

2. The Commission recommends transformation of the U.S. air 
transportation system as a national priority. This transformation 
requires:

         Rapid deployment of a new, highly automated air 
        traffic management system, beyond the Federal Aviation 
        Administration's Operational Evolution Plan, so robust that it 
        will efficiently, safely, and securely accommodate an evolving 
        variety and growing number of aerospace vehicles and civil and 
        military operations;

         Accelerated introduction of new aerospace systems by 
        shifting from product to process certification and providing 
        implementation support; and

         Streamlined new airport and runway development.

3. The Commission recommends that the United States create a space 
imperative. The DOD, NASA, and industry must partner in innovative 
aerospace technologies, especially in the areas of propulsion and 
power. These innovations will enhance our national security, provide 
major spin-offs to our economy, accelerate the exploration of the near 
and distant universe with both human and robotic missions, and open up 
new opportunities for public space travel and commercial space 
endeavors in the 21st century.

4. The Commission recommends that the Nation adopt a policy that 
invigorates and sustains the aerospace industrial base. This policy 
must include:

         Procurement policies which include prototyping, 
        spiral development, and other techniques which allow the 
        continuous exercise of design and production skills;

         Removing barriers to defense procurement of 
        commercial products and services;

         Propagating defense technology into the commercial 
        sector, particularly in communications, navigation and 
        surveillance;

         Removing barriers to international sales of defense 
        products;

         Sustaining critical technologies that are not likely 
        to be sustained by the commercial sector, e.g., space launch, 
        solid boosters, etc.; and

         Stable funding for core capabilities, without which 
        the best and brightest will not enter the defense industry.

5. The Commission recommends that the Federal Government establish a 
national aerospace policy and promote aerospace by creating a 
government-wide management structure. This would include a White House 
policy coordinating council, an aerospace management office in the OMB, 
and a joint committee in Congress. The Commission further recommends 
the use of an annual aerospace sectoral budget to establish 
presidential aerospace initiatives, assure coordinated funding for such 
initiatives, and replace vertical decision-making with horizontally 
determined decisions in both authorizations and appropriations.

6. The Commission recommends that U.S. and multilateral regulations 
and policies be reformed to enable the movement of products and capital 
across international borders on a fully-competitive basis, and 
establish a level playing field for U.S. industry in the global market 
place. U.S. export control regulations must be substantially 
overhauled, evolving from current restrictions on technologies through 
the review of transactions to controls on key capabilities enforced 
through process controls. The U.S. government should neutralize foreign 
government market intervention in areas such as subsidies, tax policy, 
export financing and standards, either through strengthening 
multilateral disciplines or providing similar support for U.S. industry 
as necessary.

7. The Commission recommends a new business model, designed to promote 
a healthy and growing U.S. aerospace industry. This model is driven by 
increased and sustained government investment and the adoption of 
innovative government and industry policies that stimulate the flow of 
capital into new and established public and private companies.

8. The Commission recommends the Nation immediately reverse the 
decline in, and promote the growth of, a scientifically and 
technologically trained U.S. aerospace workforce. In addition, the 
Nation must address the failure of the math, science and technology 
education of Americans. The breakdown of America's intellectual and 
industrial capacity is a threat to national security and our capability 
to continue as a world leader. The Administration and Congress must 
therefore:

         Create an interagency task force that develops a 
        national strategy on the aerospace workforce to attract public 
        attention to the importance and opportunities within the 
        aerospace industry;

         Establish lifelong learning and individualized 
        instruction as key elements of educational reform; and

         Make long-term investments in education and training 
        with major emphasis in math and science so that the aerospace 
        industry has access to a scientifically and technologically 
        trained workforce.

9. The Commission recommends that the Federal Government significantly 
increase its investment in basic aerospace research, which enhances 
U.S. national security, enables breakthrough capabilities, and fosters 
an efficient, secure and safe aerospace transportation system. The U.S. 
aerospace industry should take a leading role in applying research to 
product development.

Appendix B

                      Aerospace Commission Members

The Honorable Robert S. Walker, Commission Chairman; Chairman, Wexler & 
        Walker Public Policy Associates

The Honorable F. Whitten Peters, Commission Vice Chairman; Partner, 
        Williams and Connolly

Dr. Buzz Aldrin, President, Starcraft Enterprises, Sharespace, 
        Starbooster and Starcycler

Mr. Edward M. Bolen, President, General Aviation Manufacturers Assn.

Mr. R. Thomas Buffenbarger, International President, International 
        Association of Machinists and Aerospace Workers

The Honorable John W. Douglass, President and Chief Executive Officer, 
        Aerospace Industries Association

The Honorable Tillie K. Fowler, Partner, Holland and Knight

The Honorable John J. Hamre, President and Chief Executive Officer, 
        Center for Strategic and International Studies

The Honorable William Schneider, President, International Planning 
        Services

Mr. Robert J. Stevens, President and Chief Operating Officer, Lockheed 
        Martin Corporation

Dr. Neil deGrasse Tyson, Director, Hayden Planetarium

Ms. Heidi R. Wood, Executive Director, Morgan Stanley

Appendix C

                     Major Provisions of H.R. 1085,

                    ``NASA Flexibility Act of 2003''

Section 1: Title

Section 2: Compensation for Certain Excepted Personnel. This section 
provides a technical correction to update section 203(c) of the NASA 
Act of 1958 (the Space Act). The correction ties the pay scale for NASA 
Excepted (NEX) Employees to level III of the Executive Schedule 
($142,500) rather than the obsolescent pay scale of grade 18 of the 
General Schedule.

Section 3: Workforce Authorities. This section amends the National 
Aeronautics and Space Act of 1958 (NASA organic act) to provide an 
additional title, ``Title V--Workforce Authorities'' and the following 
sections would be included under that title.

Section 501. Definitions. Several terms used throughout the Act are 
defined in this section. One key definition used throughout the Act is 
the term ``critical need,'' which is a specific and important 
requirement of NASA's mission that the agency is unable to fulfill due 
to workforce limitations. Many of the authorities in the bill can be 
used only to address a ``critical need.''

Section 502: Planning, Notification, and Reporting Requirements. This 
section requires NASA to provide a Workforce Plan to Congress and NASA 
employees before using its new authorities. The Plan would specify the 
kinds of cases in which NASA would use its new personnel tools. In 
addition, six years following enactment, the Administrator is required 
to provide an evaluation of workforce actions and recommendations for 
addressing any remaining critical needs.

Section 503: Workforce Authorities. This section lists the specific 
workforce authorities provided until the time limit of October 1, 2009, 
subject to certain exceptions specified in Section 511.

Section 504: Recruitment, Redesignation, and Relocation Bonuses. This 
section authorizes the NASA Administrator to pay recruitment, 
redesignation, and relocation bonuses. The size of the recruitment and 
relocation bonuses is higher than what is allowed under current law. In 
addition, a new category of bonus, a redesignation bonus, is added, 
which could be paid to an employee who is newly appointed to a position 
in NASA from any other Federal Government position without relocating. 
The bonus allowed under the bill is up to 50 percent of an employee's 
annual salary multiplied by the agreed-upon service period (up to four 
years) if the position addresses a critical need, and 25 percent if the 
position does not address a critical need. Under current law, 
recruitment and relocation bonuses are authorized only up to 25 percent 
of annual salary without locality adjustments and without the 
multiplicative factor of service period.

Section 505: Retention Bonuses. This section authorizes the NASA 
Administrator to pay retention bonuses up to 50 percent of an 
employee's annual salary if the employee's position addresses a 
critical need and 25 percent if the position does not address a 
critical need. Current law authorizes retention bonuses only up to 25 
percent of annual salary without locality adjustments.

Section 506: Voluntary Separation Incentives. This section allows the 
NASA Administrator to pay Voluntary Separation Incentive (VSI) payments 
up to 50 percent of an employee's annual salary (current law, under the 
Homeland Security Act of 2002, only allows up to $25,000) if the 
employee is in a position that fills a critical need. NASA employees 
could not receive a VSI payment if they had received any bonus or 
allowance in the previous 12 months.

Section 507: Term Appointments. This section authorizes the NASA 
Administrator to make term appointments for up to six years. Current 
law authorizes four year appointments. This section also allows term 
appointments to be converted to permanent civil service appointments, 
which is not allowed under current law. However, the section imposes 
certain conditions on the use of this term appointment conversion 
authority.

Section 508: Pay Authority for Critical Positions. This section 
authorizes the Administrator to fix pay up to the level of the Vice 
President's pay ($198,600 per year) for up to ten employees at any 
given time.

Section 509: Assignments under the Intergovernmental Personnel Act. 
This section allows the NASA Administrator to extend the term for 
Intergovernmental Personnel Act (IPA) employees up to four years (from 
current two years).

Section 510: Enhanced Demonstration Project. This section allows NASA 
to conduct a personnel demonstration project agency-wide by exempting 
NASA from the current limitation of 5,000 individuals.

Section 511: Termination. This section specifies that the workforce 
authorities listed under section 503 terminate on October 1, 2009, but 
grandfathers in bonuses and appointments made before the termination 
date.
    Chairman Boehlert. I want to welcome everyone here this 
afternoon. I want especially to welcome Bob Walker, who I think 
everyone knows. He was the first Republican Chair of this 
committee, and he set a very high standard for all of us who 
follow. Every time I sit in this chair, Mr. Walker, I have to 
deal with Bob looking down at me from his portrait on the wall, 
and it will be a nice change today for me to be able to look 
down on you.
    We are dealing today with two very important and related 
subjects we have dealt with before. First, we will hear from 
three members of the Commission on the Future of the United 
States Aerospace industry, which Mr. Walker chaired. All three 
have distinguished records of public service. John Hamre is a 
dear and old friend, and it is always good to see him back. And 
Mr. Douglass and Mr. Walker, we are so happy to have you here 
on this panel. You have all performed great public service 
through the Commission, which has emphasized the threat the 
U.S. aerospace industry faces and the need to counter that 
threat.
    This is actually the third hearing we have had just this 
year that has featured this issue. Members on both sides of the 
aisle raised concerns about aeronautics research at our NASA 
budget hearings just two weeks ago. And last week, our Space 
Subcommittee, under the leadership of Mr. Rohrabacher, raised 
concerns at its hearing on Aerospace Research at NASA and the 
Federal Aviation Administration. So we are committed to doing 
all we can to focus attention on the aerospace industry and 
issues and to work to resolve them.
    One of the issues the aerospace community faces is 
difficulty in attracting and attaining a top-notch workforce. 
And there is no place that problem is more obvious than at 
NASA. As I noted in testimony that I gave before the Senate 
last week, within five years, a quarter of the NASA workforce 
will be eligible to retire. As a matter of fact, 15 percent of 
the scientists and engineers are eligible for immediate 
retirement. The most recent accounting office report on NASA 
issued just this past January noted, ``The agency still needs 
to deal with critical losses due to retirement in coming 
years.'' This conclusion built on numerous past GAO reports 
that concluded that NASA had to do more to address its 
workforce needs.
    I have introduced H.R. 1085 to help NASA deal with this 
enormous challenge, and our second panel will comment on that 
bill specifically. I hope we can move the bill through the 
Committee swiftly. H.R. 1085 builds on existing law. It allows 
NASA, for example, to offer larger recruitment and retention 
bonuses than are permitted currently and to offer bonuses to 
employees shifting between federal jobs without relocating. But 
the language we use parallels existing law and Office of 
Personnel Management Regulations.
    This is a targeted and limited approach. We didn't give 
NASA everything it asked for, and we have added accountability 
provisions NASA didn't request. What we are offering is a well 
thought out and effective approach that will help address 
critical needs at all levels of the agency. Will this solve all 
of NASA's problems? Of course not, but this is something we can 
do right away that will help NASA regain strength while we come 
up with additional steps to help the agency. To those who 
criticize this as a Band-Aid approach, I would say that a Band-
Aid is a pretty good alternative to continued bleeding and 
infection.
    I look forward to hearing ideas today on how we can improve 
H.R. 1085, but we do need to move ahead with this legislation. 
All of the problems we will hear about today are pressing 
matters. It is incumbent upon us to act.
    [The prepared statement of Mr. Boehlert follows:]

            Prepared Statement of Chairman Sherwood Boehlert

    I want to welcome everyone here this afternoon, and I want 
especially to welcome Bob Walker, who, I think everyone knows, was the 
first Republican chair of this committee, and he set a high standard 
for those of us who have followed. Every time I sit in this chair, I 
have to deal with Bob looking down on me from his portrait on the wall, 
and it will be a nice change today to be able to reciprocate by looking 
down on him from the dais.
    We're dealing today with two very important and related subjects 
we've dealt with before. First, we'll hear from three members of the 
Commission on the Future of the United States Aerospace Industry, which 
Bob Walker chaired. All three have distinguished records of public 
service--John Harare is also an old friend--and they have performed 
another great public service through the Commission, which has 
emphasized the threat the U.S. aerospace industry faces and the need to 
counter that threat.
    This is actually the third hearing we've had just this year that 
has featured this issue. Members on both sides of the aisle raised 
concerns about aeronautics research at our NASA budget hearing two 
weeks ago, and last week our Space Subcommittee raised concerns at its 
hearing on aerospace research at NASA and the Federal Aviation 
Administration (FAA). So we're committed to doing all we can to focus 
attention on the aerospace issues and to work to resolve them.
    One of the issues the aerospace community faces is difficulty in 
attracting and retaining a top-notch workforce. And there's no place 
that problem is more obvious than NASA.
    As I noted in testimony I gave before the Senate last week, within 
five years, a quarter of the NASA workforce will be eligible to retire. 
The most recent General Accounting Office (GAO) report on NASA, issued 
just this past January, noted, (quote), ``The agency still need[s] to 
deal with critical losses due to retirements in coming years.'' This 
conclusion built on numerous past GAO reports that concluded that NASA 
had to do more to address its workforce needs.
    I've introduced H.R. 1085 to help NASA deal with this enormous 
challenge, and our second panel will comment on the bill. I hope we can 
move the bill through the Committee swiftly.
    H.R. 1085 builds on existing law. It allows NASA, for example, to 
offer larger recruitment and retention bonuses than are permitted 
currently, and to offer bonuses to employees shifting between federal 
jobs without relocating. But the language we use parallels existing law 
and Office of Personnel Management (OPM) regulations.
    This is a targeted and limited approach--we didn't give NASA 
everything it asked for, and we've added accountability provisions NASA 
didn't request. What we're offering is a well thought out and effective 
approach that will help address critical needs at all levels of the 
agency.
    Will this solve all of NASA's problems? Of course, not. But this is 
something we can do right away that will help NASA regain strength 
while we come up with additional steps to help the agency. To those who 
criticize this as a ``band aid'' approach, I would say that a ``band 
aid'' is a pretty good alternative to continued bleeding and infection.
    I look forward to hearing ideas today on how we can improve H.R. 
1085, but we do need to move ahead with this legislation. All the 
problems we will hear about today are pressing matters. It is incumbent 
upon us to act.

         Prepared Statement of Representative Jerry F. Costello

    Good afternoon. I want to thank the witnesses for appearing before 
our committee to discuss the Aerospace Commission report issued last 
November to the President and Congress and Chairman Boehlert's proposed 
legislation, H.R. 1085, the NASA Flexibility Act of 2003.
    A strong aerospace industry will enable the United States to defend 
itself, compete in the global marketplace, maintain a highly skilled 
workforce, and provide all Americans with the ability to travel safely 
and securely anywhere in the world. The Commission has done extensive 
work in studying these issues and has made nine recommendations to 
improve the aerospace industry. I look forward to hearing more from our 
witnesses on the implementation and feasibility of these 
recommendations.
    Further, I support the Aerospace Commission's recommendation that 
government, industry, labor, and academia must work together to develop 
an aerospace workforce for the 21st century because the issue of a NASA 
workforce shortage is problematic. However, I am concerned about the 
effects the legislation would have on the NASA workforce. H.R. 1085 
includes provisions relating to recruitment, redesignation and 
relocation bonuses, retention bonuses, voluntary separation incentives, 
special pay authority for critical positions, and unlimited enhanced 
demonstration project authority. The legislation essentially exempts 
NASA from several provisions governing the Federal Civil Service. 
Recruitment and retention are significant problems throughout the 
Federal Government and I believe that to address this effectively, it 
is important to examine a comprehensive government-wide approach.
    I welcome our witnesses and look forward to their testimony.

    Chairman Boehlert. Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman. And Bob, let me add my 
welcome back to you. It is good to see you again. You certainly 
served with distinction. We may have disagreed on some areas, 
but it was never a matter of integrity. You were--you served 
with great distinction. And Mr. Wilson, thank you for coming by 
yesterday. It was a--Mr. Douglass rather. It was a very good 
conversation. I wish that we had more time, and hopefully we 
will have--can do that later.
    And to the panel at large, let me thank you for your public 
service. This is a very important issue. I know that it is 
time-consuming, but we are glad that you spent the time to do 
this.
    Mr. Hall should be coming in later. If he has some words of 
wisdom, I would hope, Mr. Chairman, that you would allow him to 
speak at that time, otherwise, I am going to yield the floor so 
we can get on and hear from the folks we need to.

                                Panel I

    Chairman Boehlert. We always welcome the words of wisdom 
from Mr. Hall. Our first panel is a very distinguished panel 
consisting of the Honorable Bob Walker, Chairman, Aerospace 
Commission. Bob is President of Wexler Walker Public Policy 
Associates, and served with great distinction as the Chairman 
of this committee; the Honorable John Douglass, Commissioner, 
President, Aerospace Industries Association; and the Honorable 
John Hamre, Commissioner, President, Center for Strategic and 
International Studies.
    Gentlemen, we would ask that you try to summarize your 
statement. We will not be arbitrary, but try to be guided by 
the five-minute rule, and then we will go right to the 
questions. You are up first, Mr. Walker.

STATEMENT OF HON. ROBERT S. WALKER, CHAIRMAN, COMMISSION ON THE 
  FUTURE OF THE UNITED STATES AEROSPACE INDUSTRY; PRESIDENT, 
             WEXLER WALKER PUBLIC POLICY ASSOCIATES

    Mr. Walker. Well, thank you very much, Mr. Chairman. And 
thank you and Mr. Gordon for your words of welcome. And I 
appreciate the reference to a portrait staring down upon you. 
The portrait that stares down upon me in my office these days 
is Mario Andretti, that great Pennsylvania philosopher. And it 
does so because I think a statement of his characterizes the 
work of this committee that I try to carry with me into the 
private sector and that is he one time said, ``If you are in 
control, you are not going fast enough.'' Well, I think that is 
the reality of the world in which we live, but anyhow, I am 
delighted to be here. And I thank you for the opportunity to 
testify and report to you on the work of the Commission on the 
Future of the United States Aerospace Industry.
    Let me begin with a few thoughts about the Commission's 
final product. First, our recommendations were unanimous. 
Despite a very diverse group of commissioners whose diversity 
brought great strength to our deliberations, we were able to 
achieve unanimity in what we ultimately recommended. There 
remained some differences in detail about some of the narrative 
within the report, but we agreed on the nature of the problem 
faced by the aerospace sector and on a series of recommended 
paths for the Nation to pursue.
    Second, our overall vision of the 21st century where 
aerospace allows anyone and anything to go anywhere at any time 
speak to the mobility that we believe international leadership 
will require. The ability to move people, goods, services, and 
munitions quickly to where they are needed and when they are 
needed to be there is a definition for both global security and 
global economic leadership.
    From here, Mr. Chairman, I--my written testimony goes into 
detailing the specific recommendations that the Commission 
made. I will not go through those right now. If there are 
questions about them, I would certainly be happy to deal with 
it, but what I wanted to deal with in the rest of my testimony 
was the questions that were raised as part of the charter for 
this hearing.
    First of all, you raised the issue about the 
Administration's budget proposals as they relate to the 
Commission's recommendations. My assessment is that the 
Administration is moving aggressively in several areas to meet 
our goals. NASA's request for funding for Project Prometheus is 
very much in line with our recommendation that they move toward 
technologies emphasizing power and propulsion. DOD and NASA are 
cooperating on the National Aerospace Initiative that was 
specifically endorsed by the Commission. NASA and FAA are 
beginning cooperative efforts in an advanced air traffic 
management system, a major focus of our report. And the 
Commission's--or--and the Administration's Hydrogen Program is 
very much in line with our recommendation for work on 
breakthrough energy capabilities.
    On the issue of foreign competition, I would make two 
points. First, the global challenge comes from nations more 
focused than we are about the importance of aerospace 
technology and who are developing long-range plans to overcome 
the United States in an area where we have strategic and 
economic superiority. Second, our export control policies are 
preventing U.S. companies from selling products into world 
markets, meaning that we are undermining the strength of our 
own aerospace supplier base. Next, we have been very concerned, 
as this committee has been, about workforce issues. The 
Commission said quite clearly the aerospace sector requires a 
scientifically and technologically competent society.
    We recommended several things in the workforce arena, which 
were covered previously in my testimony, but I would point 
particularly to the suggestion that educational reform should 
emphasize individualized instructional programs and lifelong 
learning. Finally, if there is one overriding conclusion of the 
Commission it is that we must move toward horizontal decision-
making as opposed to the vertical silo decision-making regime 
that characterizes government interaction with the aerospace 
industry.
    The aerospace mission crosscuts many different departments, 
agencies, programs, Congressional Committees, and 
Subcommittees. Decisions made inside of vertical silos are 
wasteful of taxpayers' dollars and destructive of the 
coordination needed to utilize aerospace resources to the 
fullest capacity. For example, an advanced air traffic 
management system is absolutely vital to our continued 
leadership in aerospace.
    To get the system we need, there will have to be 
significant cooperation and funding coordination between FAA, 
NASA, DOD, and NOAA. This is a very tall order, but also a very 
necessary process. No one of these agencies can do the multi-
billion dollar expenditure necessary to get the new system in 
place. But a cooperative effort with each agency doing its own 
mission for its own reasons, coordinating research and 
technology so that individual mission assets can be used 
broadly is the way to go. DOD flew GPS for its own mission 
requirements, but the technology has become even more valuable 
as a broader mission. That is the kind of example that we think 
needs to be done on a much broader basis. It is the way in 
which the market has to go in the future.
    I thank you for the opportunity to testify.
    [The prepared statement of Mr. Walker follows:]

                 Prepared Statement of Robert S. Walker

    Mr. Chairman, thank you for this opportunity to testify and report 
to you on the work of the Commission on the Future of the United States 
Aerospace Industry.
    Let me begin with a few thoughts about the Commission's final 
product.
    First, the recommendations made were unanimous. Despite a diverse 
group of Commissioners, whose diversity brought great strength to our 
deliberations, we were able to achieve unanimity in what we ultimately 
recommended. There remained some differences in detail about some of 
the narrative within the report, but we agreed on the nature of the 
problem faced by the aerospace sector and on the series of recommended 
paths for this nation to pursue.
    Second, our overall vision of a 21'' century where aerospace allows 
anyone and anything to go anywhere at anytime speaks to the mobility 
which we believe international leadership will require. The ability to 
move people, goods, services and munitions quickly to where they are 
needed when they are needed to be there is a definition for both global 
security and global economic leadership.
    Let me if I can outline the recommendations made by the Commission 
and some of the reasoning behind those recommendations.

RECOMMENDATION 1: VISION: ANYONE, ANYTHING, ANYWHERE, ANYTIME

    The integral role aerospace plays in our economy, our security, our 
mobility, and our values make global leadership in aviation and space a 
national imperative. Given the real and evolving challenges that 
confront our nation, government must commit to increased and sustained 
investment and must facilitate private investment in our national 
aerospace sector. The Commission therefore recommends that the United 
States boldly pioneer new frontiers in aerospace technology, commerce, 
and exploration.

Background
    The 20th century was America's century. Our nation thrived on 
previously unimagined advances in ground, air and space transportation, 
rapidly becoming the world leader in nearly every economic sector 
driven by the progress of science and technology.
    One hundred years ago, the slogan ``Anyone, Anything, Anywhere, 
Anytime'' would have meant leaving home with transportation permitted 
,and then allowing a week or two to travel between widely separated 
American cities. Today, New York to London is a day trip. A package of 
any size shipped today arrives tomorrow morning anywhere in the 
country.
    What could ``Anyone, Anything, Anywhere, Anytime'' mean a century 
from now? A suborbital day trip between Japan and the United States? A 
lunar vacation? A Martian hiking expedition? Whatever our future holds, 
the aerospace sector will take us there, providing our nation and the 
world with the ability to move people, goods, services, and ideas 
wherever they are needed and wherever they are wanted.
    We need a bold vision for air transportation that creates a new, 
highly automated ``Interstate Skyway System.'' The system needs to be 
safe, secure, and efficient and accommodate the large volume and 
variety of civil and military aerospace vehicles the Nation will 
require in coming years.
    We also need an audacious vision of space exploration that 
recognizes the solar system as our backyard, the Milky Way galaxy as 
our neighborhood, and the universe as our hometown. We should do this 
not simply because it's fun or thrilling, or challenging, or 
enlightening. . .but because it represents a critical investment in our 
economic strength and ultimately in our capacity to defend ourselves.
    It's America's choice.

RECOMMENDATION 2: AIR TRANSPORTATION: EXPLOIT AVIATION'S MOBILITY 
                    ADVANTAGE

    The Commission recommends transformation of the U.S. air 
transportation system as a national priority. The transformation 
requires:

         Rapid deployment of a new, highly automated Air 
        Traffic Management (ATM) system beyond FAA's Operational 
        Evolution Plan so robust that it will efficiently, safely, and 
        securely accommodate an evolving variety and growing number of 
        aerospace vehicles and civil and military operations.

         Accelerated introduction of new aerospace systems by 
        shifting from product to process certification and providing 
        implementation support.

         Streamlined new airport and runway development.

Objective
    Delivering people and goods quickly and affordably--when and where 
needed.

Background
    Our air transportation system is severely limited in its ability to 
accommodate America's growing need for mobility. The basic system 
architecture, operational rules, and certification processes developed 
decades ago don't allow today's technologies to be fully utilized and 
don't allow needed innovations to be rapidly implemented. There are 
barriers to advancing our air mobility.
    First, the U.S. air traffic management infrastructure is not 
scalable and is vulnerable. Air transportation's inherent speed 
advantage is being limited by air traffic infrastructure and operating 
concepts.
    Second, revamped certification processes, procedural regulations, 
and airborne equipage innovation is needed. The bulk of certification 
and procedural regulations and processes were developed in an era whose 
time has passed and hasn't kept pace with new technologies. 
Furthermore, aircraft operators must equip with compatible hardware and 
systems in order for a modernized air traffic network to succeed.
    Third, new runway and airport development takes too long. Meeting 
the Nation's demand for air transportation and fully exploiting its 
benefits will require a ground infrastructure that accommodates 
significant traffic increases. Many of the Nation's major airports are 
operating at capacity limits during large portions of the day.
    In addition, the economic downturn and the substantial added 
security burden since 9/11 have seriously disrupted the economic health 
of the airline industry. Well-intentioned security policies have 
resulted in billions in post-9/11 costs and lost revenue and account 
for a large majority of the projected $9 billion in airline industry 
losses in 2002.
    General aviation also has been acutely affected, manufacturers and 
suppliers are suffering significant losses in aircraft and equipment 
sales, and the overall impact is rippling through the rest of the U.S. 
economy.
    And, as the forced contraction of the industry continues, small and 
mid-size communities are being disconnected from the national air 
transportation system that is vital to their economies.
    The U.S. government must assume full cost and responsibility for 
assuring the protection of our aviation system against terrorist 
attack. At the same time it must adopt rational security measures that 
facilitate public access to the air transportation system, and thereby 
encourage air travel.

RECOMMENDATION 3: SPACE: ITS SPECIAL SIGNIFICANCE

    The Commission recommends that the United States create a space 
imperative. The Department of Defense, NASA, and industry must partner 
in innovative aerospace technologies, especially in areas of propulsion 
and power. These innovations will enhance our national security, 
provide major spin-offs to our economy, accelerate the exploration of 
the near and distant universe with both human and robotic missions, and 
open up new opportunities for public space travel and commercial space 
endeavors in the 21st century.

Objective
    The challenge we face on the space frontier is to build from dreams 
and concepts the political will to move forward to new technologies and 
destinations. For almost 20 years we have been satisfied to limit our 
dreams, rely upon proven technologies, and invest little in building 
public or political support for space initiatives. But the potential to 
do great things has never been nearer.

Background
    The Commission believes the Nation would benefit from a joint 
effort by NASA and DOD to reduce significantly the cost and time 
required to access space. Such an effort would build on the 
capabilities of both organizations and provide the ``critical mass'' of 
funding needed to create the necessary breakthroughs in propulsion.
    Investment in the development of more advanced propulsion systems 
will lead to faster transit times, improve operational flexibility, and 
reduce the radiation impact for long-duration, human exploration 
missions. Once the time to explore many parts of the solar system has 
been reduced to reasonable numbers, the political imperative to do what 
is now possible will be acted on.
    A significant limiting factor in the performance of most 
spacecraft, including the International Space Station, is the amount of 
power that can be generated from solar energy, increasing available 
power could expand opportunities in military, civil, and commercial 
space applications. Once there is sufficient power in orbit to do real 
things, investment will be more likely.
    New technologies open up opportunities for a next generation of 
satellites and launch systems for military operations, homeland 
defense, global protection, and air transportation management.
    The Commission believes the Nation needs a joint civil and military 
initiative to develop a core space infrastructure that will address 
emerging national needs.
    Our national space infrastructure is aging. For example, the 
Vehicle Assembly Building at Kennedy Space Center has a 35-year-old 
roof that requires frequent patching and other failures that have 
resulted from hurricanes and high winds. Replacement cost of 
infrastructure is $3.9 billion at the Kennedy Space Center and $3.0 
billion at Cape Canaveral Air Force Station. Clearly a new operations 
and management structure is desirable for these facilities.
    The civil and commercial aerospace sectors will look to space more 
in the future to develop new products and services and create new 
markets as they have for telecommunications and commercial remote 
sensing. The U.S. commercial space industry continues to lose access to 
markets as demand decreases and international competition increases. 
Government regulations and incentives are necessary to bolster this 
important market until there is a turn-around in demand.
    The Commission believes that the search for knowledge will not only 
answer fundamental questions but also will inspire our children and 
provide a source of future products and services. This will require 
that the U.S. government sustain its long-standing commitment to 
science and space and continue to focus on international cooperative 
efforts.

RECOMMENDATION 4: NATIONAL SECURITY: DEFEND AMERICA AND PROJECT POWER

    The Commission recommends that the Nation adopt a policy that 
invigorates and sustains the U.S. aerospace industrial base. This 
policy must include:

         Procurement policies that include prototyping, spiral 
        development, and other techniques that allow the continuous 
        exercise of design and productions skills.

         Stable funding for core capabilities without which 
        the best and brightest won't enter the defense industry.

         Removing barriers to international sales of defense 
        products.

         Removing barriers to defense procurement of 
        commercial products and services.

         Propagating defense technology into the civil sector, 
        particularly in communication, navigation, and surveillance.

         Sustaining critical technologies that aren't likely 
        to be sustained by the commercial sector, e.g., space launch 
        and solid rocket boosters.

Objective
    A healthy aerospace industry is central to maintaining a safe and 
secure world. It provides the ability to:

         Rapidly, safely; and securely send and receive 
        information;

         Move troops, equipment, and supplies to anywhere on 
        the globe or into space at anytime, and

         Prosecute effects-based warfare.

Background
    The effectiveness of American defense is a crucial determinant of 
world peace, prosperity, and stability. In the 21st century enabling 
technologies for vital military capabilities will come from the 
commercial sector as well as the defense sector. Today's military 
capabilities are at risk due to a threatened industrial base, workforce 
concerns, and the need to protect critical infrastructure.
    The Defense Department should task the Defense Science Board to 
develop a national policy that will invigorate and sustain the U.S. 
aerospace industrial base. The policy should address issues such as 
mergers and acquisitions, procurement and budgeting policies, research 
and investment, technology transition, international sales, and 
workforce development.
    The United States must continually develop new experimental systems 
in order to sustain the critical skills to conceive, develop, 
manufacture, and maintain advanced systems and provide expanded 
capabilities to warfighters.
    The Federal Government and industry must partner to enhance the 
operational readiness and capability of new and legacy military 
aerospace systems. The government should fund research and technology 
development programs to reduce total ownership costs and environmental 
impacts and create a structured, timely, and adequately funded 
technology insertion process and reform procurement practices 
accordingly.

RECOMMENDATION 5: GOVERNMENT: PRIORITIZE AND PROMOTE AEROSPACE

    The Commission recommends that the Federal Government establish a 
national aerospace policy and promote aerospace by creating a 
government-wide management structure. This would include a White House 
policy coordinating council, an aerospace management office in the 
Office of Management and Budget, and a joint committee in Congress. The 
Commission further recommends the use of an annual sectoral budget to 
establish presidential space initiatives, and replace vertical 
decision-making with horizontally determined decisions in both, 
authorizations and appropriations.
Objective
    In the rapidly changing global economy, government leadership must 
be increasingly flexible, responsive, and oriented toward decision-
making at macro levels. It must prioritize and promote aerospace within 
the government and in its interactions with the industry in order to 
realize the fullest potential of aerospace to the Nation.

Background
    The development and implementation of federal aerospace policy is 
currently spread across multiple government agencies with oversight by 
numerous congressional committees. The government isn't organized to 
define national aerospace priorities, develop federal aerospace sector 
plans and budgets, manage programs that cross multiple departments and 
agencies, or foster a healthy aerospace sector in a global economy.
    The Federal Government is organized vertically while national 
aerospace challenges are becoming more horizontal in nature. Without 
integration, national aerospace policy occurs either by default or 
piecemeal. The Commission believes that the U.S. government can only 
ensure U.S. aerospace leadership by leading itself. To do this, the 
executive and legislative branches need to be reoriented to better 
address national aerospace issues.
    Maintaining a national aerospace policy should be a function 
assigned jointly to the National Security Council and the National 
Economic Council. They should establish an Aerospace Policy 
Coordinating Council to develop and implement an integrated national 
aerospace policy. OMB should create a Bureau of Aerospace Management 
that would translate the national policy into annual planning and 
budget guidance.
    Federal departments and many agencies should establish offices of 
aerospace development to promote aerospace activities and align 
aerospace with their missions. A prudent response from Congress would 
be to organize a Joint Committee on Aerospace.
    Government processes tend to be complex, lengthy, and inefficient. 
As a result, aerospace products and services developed and used by the 
government are more costly for the taxpayers and take longer to 
acquire. Also, aerospace products and services developed by industry 
for sale in the commercial marketplace take longer and cost more 
because of extensive government barriers resulting in lost market share 
and diminished profitability.
    Government, industry, labor, and academia must work together as 
partners to transform the way they do business, allowing the Nation to 
capitalize on the best ideas available and apply them rapidly to new 
aerospace products, processes, and services.

RECOMMENDATION 6: GLOBAL MARKETS: OPEN AND FAIR

    The Commission recommends that U.S. and multilateral regulations 
and policies be reformed to enable the movement of products and capital 
across international borders on a fully competitive basis and establish 
a level playing field for U.S. industry in the global marketplace. The 
U.S. export control regulations must be substantially overhauled, 
evolving from current restrictions on technologies through the review 
of transactions to controls on key capabilities enforced through 
process controls. The U.S. government should neutralize foreign 
government market intervention in areas such as subsidies, tax policy, 
export financing, and standards either through strengthening 
multilateral disciplines or providing similar support for U.S. industry 
as necessary.

Objective
    A globally competitive U.S. aerospace industry.

Background
    Open global markets are critical to the continued economic health 
of U.S. aerospace companies and to U.S. national security. The 2001 
U.S. aerospace trade surplus was nearly $32 billion, the largest 
surplus of any U.S. manufacturing sector. However, the U.S. industry 
share of the global market has declined in key sectors over the last 20 
years. We are on the brink of ceding our position as the top producer 
of large commercial aircraft and are losing market share in civil 
helicopters and aircraft engines. Much of this decline is a direct 
result of foreign government intervention and protectionist policies.
    In order to remain global leaders, U.S. companies must remain at 
the forefront of technology innovation. They also must have access to 
global customers, suppliers, and partners.
    The defense industrial base is falling farther and farther behind 
the commercial marketplace because it has to cope with excessive 
regulation. The current export control regime provides too little 
security and is choking American companies and preventing effective 
technology collaboration with others. U.S. export controls must be 
completely overhauled, and defense procurement policies must more 
effectively balance international collaboration and maintain U.S. 
industrial capacity in critical technologies and capabilities.
    Although we are ahead of other countries in investment in military 
technology and capability, we are on the edge of dropping out of the 
race in the civil sector. Instead of continuing to invest, our 
government has increasingly pulled back from the civil aerospace market 
and left it up to U.S. companies to compete against competitors 
subsidized by their governments.

RECOMMENDATION 7: A NEW MODEL FOR THE AEROSPACE SECTOR

    The Commission recommends a new business model designed to promote 
a healthy and growing U.S. aerospace industry. This model is driven by 
increased and sustained government investment and the adoption of 
innovative government and industry policies that stimulate the flow of 
capital into new and established public and private companies.
Objective
    A strong and healthy U.S. aerospace industry that is attractive to 
investors.

Background
    The U.S. government budgeting and procurement system is 
extraordinarily complex and inefficient. Unpredictable and unstable 
government budgeting and funding creates a cycle that contributes to 
the diminished return on the government's investment in national 
security capabilities and serves as an impediment to long-term industry 
excellence.
    A stable long-term investment budget is critical to the 
modernization and transformation goals of U.S. armed forces. The 
Commission advocates increasing the government's financial flexibility 
to make funding adjustments among and within programs.
    In a call to revise program management policies, the Commission 
believes the use of multi-year contracting for both procurement and R&D 
programs will improve program stability and performance as well as 
produce needed cost savings.
    The U.S. aerospace industry extends through a network of 
purchasers, subcontractors, suppliers, and partners--sometimes referred 
to as the supply chain. Each of the participants is intrinsically tied 
to the factors affecting the industry. Encouraging a climate that is 
attractive to new entrants, while stable enough for current players, 
will promote competition and innovation, add to efficiencies, and lower 
costs.
    Certain U.S. tax and trade laws and regulations that affect a 
variety of industries weigh particularly heavily on defense and 
aerospace in competition with domestic commercial entities as well as 
in international markets.
    Government and industry should work together to develop and 
implement training and exchange programs that would educate and expose 
their respective workforces to each other's challenges and 
responsibilities.
    Government must develop and implement a policy regarding 
international cooperation in defense and aerospace that recognizes the 
global industrial base. The Commission urges a review of the policy 
regarding domestic and international business combinations.

RECOMMENDATION 8: LAUNCH THE FUTURE

    The Commission recommends that the Nation immediately reverse the 
decline in and promote the growth of a scientifically and 
technologically trained U.S. aerospace workforce. In addition, the 
Nation must address the failure of math, science, and technology 
education of Americans. The breakdown of America's intellectual and 
industrial capacity is a threat to national security and our capability 
to continue as world leader. Congress and the Administration must 
therefore:

         Create an interagency task force that develops a 
        national strategy on the aerospace workforce to attract public 
        attention to the importance and opportunities within the 
        aerospace industry.

         Establish lifelong learning and individualized 
        instruction as key elements of educational reform.

         Make long-term investments in education and training 
        with major emphasis in math and science so that the aerospace 
        industry has access to a scientifically and technologically 
        trained workforce.

Objective
    A well educated, scientifically literate, and globally competitive 
aerospace workforce.

Background
    There is a major workforce crisis in the aerospace industry. Our 
nation has lost more than 600,000 scientific and technical aerospace 
jobs in the past 13 years. Those losses began as a result of reduced 
defense spending following the end of the Cold War. But subsequent 
contraction of the industry through mergers and acquisitions and the 
events of 9/11 have made that situation worse.
    Due to these actions and events, many of the workers who have lost 
their jobs are unlikely to ever return to the industry. These losses, 
coupled with pending retirements over the next 10 years, represent a 
devastating loss of skill, experience, and intellectual capital to the 
industry. Few new young employees are in the ``pipeline'' to replace 
the aging aerospace workforce.
    The aerospace industry has historically been cyclical and strongly 
driven by defense spending. Global competition, especially in 
commercial aviation, has risen rapidly since 1989, most notably from 
Europe, and is likely to grow.
    The aerospace industry must have access to a scientifically and 
technologically trained workforce. In the long-term, the Commission 
stresses that that action must be taken to improve mathematics and 
science education from K-12 through Ph.D.
    It is likely that people entering the workforce now will hold five 
or more jobs in their lifetime, and the education system must be 
prepared to deliver training and education to meet these changing skill 
requirements and labor market needs.

RECOMMENDATION 9: ENABLE BREAKTHROUGH AEROSPACE CAPABILITIES

    The Commission recommends that the Federal Government significantly 
increase its investment in basic aerospace research, which enhances 
U.S. national security, enables breakthrough capabilities, and fosters 
an efficient, secure, and safe aerospace transportation system. The 
U.S. aerospace industry should take a leading role in applying research 
to product development.

Objective
    U.S. preeminence in aerospace research and innovation.

Background
    In the past, aerospace led the technology revolution because of 
large public investment in research directed at national security 
imperatives and goals. Today, we have no integrated national aerospace 
consensus to guide policies and programs. This has resulted in 
unfocused government and industry investments spread over a range of 
research programs and aging infrastructure.
    The lack of sufficient, sustained public funding for research, 
development, test, and evaluation infrastructure limits the Nation's 
ability to address critical national challenges and to foster 
breakthrough aerospace capabilities that could enable a new era in 
aerospace leadership for America.
    To provide focus for aerospace investments on developing 
breakthrough capabilities, the Commission suggests the government 
achieve, as a national priority, the following goals by 2010:

Air Transportation

         Demonstrate an automated and integrated air 
        transportation capability that would triple capacity by 2025.

         Reduce aviation noise and emissions by 90 percent.

         Reduce the aviation fatal accident rate by 90 
        percent.

         Reduce transit time between two points on Earth by 
        half.

Space

         Reduce cost and time to access by half.

         Reduce transit time between two points in space by 
        half.

         Demonstrate the capability to monitor and survey 
        continuously Earth, its atmosphere, and space for a wide range 
        of military, intelligence, civil, and commercial applications.

Time to Market

         Reduce the transition time from technology 
        demonstration to operational capability from years and decades 
        to weeks and months.

    Now I would like to turn to the specific questions you raised in 
your charter for this hearing.
    On the issue of the Administration's budget proposals for research 
and their relationship to Commission recommendations, my assessment is 
that the Administration is moving aggressively in several areas to meet 
our goals. NASA's request for funding of Project Prometheus is very 
much in line with our recommendation that they move technologies 
emphasizing power and propulsion. DOD and NASA are cooperating on the 
National Aerospace initiative that was specifically endorsed by the 
Commission. NASA and FAA are beginning cooperative efforts in an 
advanced air traffic management system, a major focus of our final 
report. The Administration's hydrogen program is in line with our 
recommendation for work on breakthrough energy capabilities.
    On the issue of foreign competition, I would make two points. 
First, the global challenge comes from nations more focused than we are 
about the importance of aerospace technology and who are developing 
long-range plans to overcome the United States in an arena where we 
have had strategic and economic superiority. Second, our export control 
policies are preventing U.S. companies from selling product in world 
markets meaning that we are undermining the strength of our own 
aerospace supplier base.
    Next, we are very concerned about workforce issues. The Commission 
said quite clearly that the aerospace sector requires a scientifically 
and technologically competent society. We recommended several things in 
the workforce arena, which are covered previously in my testimony, but 
I would point particularly to he suggestions that educational reform 
should emphasize individualized instructional programs and lifelong 
learning.
    Finally, if there is one overriding conclusion of the Commission, 
it is that we must move toward horizontal decision-making as opposed to 
the vertical silo decision-making regime that characterizes government 
interaction with the aerospace industry. The aerospace mission cross 
cuts many different departments, agencies, programs, Congressional 
committees, and subcommittees. Decisions made inside vertical silos are 
wasteful of taxpayers' dollars and destructive of the coordination 
needed to utilize aerospace resources to the fullest capacity.
    For example, an advanced air traffic management system is 
absolutely vital to our continued leadership in aerospace. To get the 
system we need, there will have to be significant cooperation and 
funding coordination between FAA, NASA, NOAA, and DOD. That is a very 
tall order, but a very necessary process. No one of these agencies can 
do the multi-billion dollar expenditure necessary to get the new system 
in place, but a cooperative approach with each agency doing its own 
mission for its own reasons coordinating research and technology so 
that individual mission assets can be used broadly is the way we must 
go. DOD flew GPS for its own mission requirements, but the technology 
has become even more valuable as a broader mission. That is a market 
for the future.
    Thank you for this opportunity to testify.

    Chairman Boehlert. Boy, what a skilled master you are. You 
even left some time. Mr. Douglass.

    STATEMENT OF HON. JOHN W. DOUGLASS, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, AEROSPACE INDUSTRIES ASSOCIATION OF AMERICA, 
                              INC.

    Mr. Douglass. Thank you, Mr. Chairman. I would like to 
begin by thanking you and Mr. Gordon for holding this hearing 
today, sir. This is a very crucial time for our industry, and 
your leadership in holding hearings like this is greatly 
appreciated. But I would also like to thank my two colleagues 
here for the work that they did on the Presidential Commission 
and for the continuing involvement of the time and energy that 
they both are putting into this work. And with your permission, 
sir, I would like to submit my written statement for the record 
and just briefly summarize it.
    Chairman Boehlert. Without objection, all of the statements 
will appear in the record and in their entirety.
    Mr. Douglass. I--there are really three basic points that I 
would like to make in this summary. The first is that the 
aerospace industry, in its entirety, which is that its military 
work, its civil aviation work, its space work, and its homeland 
security work, is really the cornerstone and foundation of both 
our national economy and our national security. It represents 
about 11 million jobs, 15 percent of our gross domestic 
product. And it is the single biggest positive export trade 
balance in the American economy, approximately $30 billion in 
fiscal year 2002. So it is the cornerstone of two of the most 
important parts of American life: our economy and our national 
security.
    The second point, sir, is that the industry is passing 
through a severe crisis. The American airline industry is 
nearly bankrupt. Just yesterday, my colleagues at the Air 
Transport Association, published a report called ``The Perfect 
Storm,'' and with your permission, sir, I would like to also 
enter that into the record. That outlines in detail the nature 
of the crisis that the airline community is facing.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mr. Douglass. The second part of this second point is that 
the commercial space market has almost ceased to exist. Several 
years ago, a panel not unlike the Commission that the three of 
us are on, looked forward to the first decade of this century 
and estimated that we would see about 70 commercial launches a 
year. Last year, there were two, sir. And so that part of the 
market has almost collapsed, meaning that the military market 
for space is taking up the whole load of our national 
commitment to space.
    Next, the manufacturing base is contracting at an alarming 
rate because of these events in commercial aviation and civil 
space. Despite the increases that we have seen in our defense 
program, we have lost 115,000 jobs since September the 11th, 
2001. That is approximately 15 percent of our workforce. And 
today, the workforce, which underpins this vital part of our 
economy and our national security, is at the lowest level that 
we have ever kept records for. Our records go back to 1953. And 
just by extrapolating from '53 back and discounting the war 
years, we think we are at a level approximately of where we 
were just before World War II broke out, which is the lowest 
level in well over 50 years in terms of employment.
    While all of this is going on, our international 
competition has made it--this--I am primarily now talking about 
the European aerospace industry, has set their national goals 
to supplant us as the world's leader in aerospace.
    Now my third point is, I think, the major point that was 
made by the Commission in its entirety, and that is that we can 
turn this situation around with a relatively modest investment 
if we act now. Some of the key parts of the Commission report 
that I would like to bring to your attention are first that we 
must act to create an environment where air transportation 
system is profitable. And we must be mindful of the long-term 
needs of this sector of our economy. The second one is the one 
that you introduced in your opening statement, sir, and that is 
that we have got to renew our aerospace infrastructure. And 
here, I am talking about our human capital in our facilities. 
You outlined very eloquently some of the problems in the human 
capital part of the industry.
    Our facilities at NASA today are aging to the point where 
no one wants to use them anymore. I just happened to be over 
with the Navy the day before yesterday looking at some of their 
advanced programs, and they, like industry, are thinking of 
going to Europe for future wind tunnel testing because of the 
old nature of NASA facilities.
    Sir, we have got to also maintain our ability to use and 
exploit our position as the world's leader in space technology. 
If you think about where we are today and you think about the 
dreams and vision of our leadership a generation ago, we pretty 
much achieved all of those dreams and visions of a generation 
ago in regards to what our nation can do in space. The issue 
for us today is can we maintain that vision and where do we go 
from here? And as we all know, the recent tragedy with the 
space shuttle has made this even more complicated and more 
difficult.
    Finally, sir, we must not lose sight of our long-term needs 
as we solve these current crises. There are huge, long-term 
structural needs in modernizing our air traffic control system 
here in the United States, and we have got to look to those 
needs.
    So I will just close with the good news. And the good news 
is what my colleague pointed out in his testimony, and that is 
that much of the technology that we need to solve these 
problems exists today in our Department of Defense. And 
hopefully, if we look at using this technology in a 
crosscutting way in our economy, we can resolve some of these 
problems without too much of a massive investment in new 
research.
    Thank you for the opportunity to talk, sir.
    [The prepared statement of Mr. Douglass follows:]

                 Prepared Statement of John W. Douglass

Introduction

    On behalf of the member companies of the Aerospace Industries 
Association of America, or AIA, I wish to thank Chairman Boehlert, 
Congressman Hall and the Members of the House Science Committee for the 
opportunity to testify this afternoon regarding legislative 
implementation alternatives proposed by the report of The Commission on 
the Future of the U.S. Aerospace Industry. The House Science Committee 
has worked diligently on issues affecting the vitality of our industry, 
and AIA is grateful for your efforts. We also appreciate, Mr. Chairman, 
your early and vocal support for the mandate and the recommendations of 
the Aerospace Commission.
    AIA operates as the Nation's largest trade association representing 
small, medium and large manufacturers of aerospace products. We 
currently have approximately 80 regular and 150 associate member 
companies involved in the design and manufacture of aircraft and 
spacecraft as well as related systems and subsystems. After discussing 
some of the key economic and technological indicators of the industry's 
position today, I will address the Commission's Research and 
Development (R&D), civil aviation and space recommendations of 
particular interest to the Committee and then highlight several 
military programs of importance to the long-term defense of our 
homeland as well as our allies and interests overseas.

A Snapshot of the Aerospace Industry

A Record of Industrial Innovation
    The aerospace sector of our economy, Mr. Chairman, generates 
economic activity equal to nearly 15 percent of the Nation's Gross 
Domestic Product and supports approximately 11 million American jobs. 
Our industry leads the Nation in net exports, posting a $30 billion 
surplus in 2002. Aerospace workers furthermore represent 4.5 percent of 
all manufacturing employment, and their productivity generated $148 
billion in sales last year. Of this amount, civil aircraft revenue 
totaled $43.3 billion while military and space-related sales accounted 
for $80 billion.
    Aerospace enterprises contribute directly to the economic and 
national security of the United States. Civil aviation, for example, 
enables the movement of people, resources and ideas that anchor jobs at 
home while expanding our trade and investment opportunities abroad. 
Cable and wireless technologies pioneered by the military planted the 
seeds for the Internet and mobile telecommunications. Materials and 
optical transmission research done by NASA and its contractors have 
advanced life-saving diagnostic procedures, land management techniques 
and our understanding of climate change. And in the realm of national 
defense, Mr. Chairman, precision-guided weapons and real-time 
reconnaissance systems prepare our dedicated forces to protect the 
United States from new adversaries who blur the boundaries--and the 
standards of conduct--between nations.

The Challenges Ahead
    Economic, political and demographic developments of the last 
several years, however, pose immediate challenges to the aerospace 
industry. Since the end of the Cold War, two recessions, business re-
structuring and subsidized foreign competition have caused the U.S. 
share of the global aerospace market to fall from 72 percent in 1985 to 
less than 52 percent today. ASIA forecasts that sales of civil aircraft 
alone will decline by nearly $20 billion between 2001 and the end of 
this year. Commercial space sales peaked in 1997 at six billion dollars 
but had fallen to $3.4 billion by the end of 2002. Most dramatically, 
the aerospace manufacturing segment, with 689,000 employees as of last 
December, stands at its lowest level since World War II. Just since the 
attacks of September 11th, this work force has declined by 13 percent. 
In answer to the second question of your invitation letter, Mr. 
Chairman, the near-term decline in aerospace sales and employment have 
harmed the overseas competitiveness of U.S. producers. The superiority 
of American satellite, space-based communications, military and civil 
airframe products, paired with ongoing improvements in worker 
productivity and manufacturing automation, will aid our companies in 
the search for stable international markets. But as the Aerospace 
Commission made clear, prudent investment, regulatory strategic 
policies on the part of government, which I will discuss beginning in a 
few minutes, are equally vital to the long-term health of the industry.
    I would like to address another question of interest to the 
Committee concerning the relative impact of economic conditions and 
evolving business models on aerospace profitability. Market- and 
merger-driven business model reforms, compounded by changing government 
funding cycles, have pressured the revenue streams of the industry. 
DOD's FY04 procurement request, for example, recovers barely more than 
one-half of the FY85 high point of $142 billion. Corporate mergers and 
the rise of European state-subsidized consortia have intensified the 
development of low-cost, highly-automated production lines in the civil 
transportation segment just during the last seven years. Industry 
business models, by emphasizing higher productivity per employee, 
should have a stabilizing effect on cash flow. But long-term 
profitability depends on the recovery of the civil aviation market and 
substantial increases in defense procurement. Unfortunately, the 
pending crisis in Iraq is eroding investment in each of these markets 
as civil flights continue to decline and the operational needs of our 
forces shift investment from modernization.
    Next to revenue and job losses, the industry faces a significant 
shortage of younger, technically-skilled professionals. The average age 
of the aerospace manufacturing employee is now 51; the same number,for 
engineers rises to 54. In 2008, 27 percent of aerospace workers will 
become eligible for retirement. Government agencies confront similar 
demographic trends. NASA's personnel under the age of 30, for instance, 
are one-third the number over the age of 60. As the workforce ages, 
technical professionals also migrate to other disciplines. Twenty-four 
years ago, aerospace companies employed 20 percent of the Nation's R&D 
scientists and engineers; by 2001, the level had tumbled to 2.4 
percent. At the same time, foreign nationals represent 40 percent of 
the students now earning engineering and science doctoral degrees in 
the United States. These young people often return to their native 
countries or cannot qualify for sensitive domestic defense and space 
jobs.
    By acting now, we have the opportunity, Mr. Chairman, to revitalize 
the markets and human capital of an industry so critical to our 
freedom, mobility and prosperity. As you and the Committee know, the 
Aerospace Commission report contains nine overall recommendations for 
civil aviation, space, military, acquisition, research and workforce 
reforms. In the following sections of my testimony, I will offer some 
legislative and policy proposals on aspects of the report that fall 
under the jurisdiction of the Science Committee. I will then detail a 
few items from the defense budget to complete the picture of how the 
aerospace industry makes an integrated contribution to our national 
security and socio-economic quality of life.

Aerospace Research and Development

    The first question of your invitation letter, Mr. Chairman, 
accurately noted that the Federal Government spends more on aerospace 
research than any other country. But as your question further 
anticipated, the Aerospace Commission found that the government should 
create a systematic framework to support pre-competitive basic 
aerospace research. This process would embrace the policy of fostering 
capabilities for industry to apply in advanced air transportation; 
navigation, surveillance and telecommunications products. Our foreign 
competitors not only appreciate the value of pre-competitive research, 
but also focus investment on product development. In a bold 2001 
document entitled A Vision for 2020, the European Commission (EC) 
established a multilateral goal for obtaining ``global leadership'' in 
civil aviation during the next 17 years. More importantly, the EC has 
committed $93 billion to its vision, making government entities 
responsible for the funding of 30 percent of the continent's civil 
aeronautics R&D. And as you wrote to the Secretary of Transportation on 
October 1, 2002, Mr. Chairman, the European Air Traffic Alliance has 
started to work on a next-generation Air Traffic Management system 
scheduled for activation by 2018.
    In the United States, however, the tide has moved in the opposite 
direction. Since 1998, the combined NASA and DOD investment in 
aeronautics research and technology programs has fallen by one-third. 
Federal R&D and research infrastructure investments in aerospace 
dropped 75 percent from 1987 to the year 2000 (after adjusting for 
inflation). Taking these factors into account, the Aerospace Commission 
warned that the Nation could miss several opportunities to incubate 
``breakthrough capabilities'' in high-performance computers; propulsion 
and energy systems; noise and emissions mitigation; and hydrogen-fueled 
engines.
    The President's FY04 NASA and FAA budget proposals represent a 
modest start in addressing our federal R&D resource gaps. I 
respectfully urge the Committee to support NASA's $959 million 
Aeronautics Technology and the FAA's $100 million Research, Development 
and Engineering requests. These two programs devote the majority of 
their funding to civil aircraft safety and structural improvements: As 
a complement to the President's budget, I also recommend that the 
Committee pass the Aeronautics Research and Development Revitalization 
Act of 2003 (H.R. 586), introduced on a bicameral, bipartisan basis by 
Senators George Allen, Christopher Dodd and Representative John Larson 
of this distinguished Committee. H.R. 586 gradually increases the NASA 
and FAA research budgets between now and FY08, with more than 50 
percent of the authorized funding reserved for low-noise, low-emissions 
aircraft and aviation safety programs. The passage of H.R. 586 would 
signal domestic air travelers and our competitors in Europe that the 
United States has a vision of reliability for the civil aviation realm 
to match our global superiority in the military realm. It would also 
give the FAA more flexibility to adapt military surveillance and 
communications technologies in upgrading the air traffic control 
network.
    Moreover, the Committee has an opportunity, in cooperation with the 
Ways & Means panel, to re-visit the issue of the federal R&D tax 
credit. The current 20 percent credit expires next year. Based on 
outdated defense spending trends from the 1980s, however, the aerospace 
industry qualifies only for an ``alternative credit'' of less than four 
percent. This inequity has a disproportionate impact on companies that 
invest in high-risk R&D to validate many of the aeronautics 
capabilities that I mentioned a few moments ago. Furthermore, a recent 
study by the General Accounting Office found that the R&D tax credit 
generated one-third of real economic growth in the U.S. during the late 
1990s. Congress should act this year on the conclusions of the GAO by 
making the credit permanent and gradually increasing the 
``alternative'' percentage to a level comparable with the standard 
rate.
    Finally, I recommend that the Committee consider legislation to 
streamline the research information transfer process between the 
government and the private sector. As the Aerospace Commission noted, 
technology deployment often outpaces the completion of cooperative 
agreements among federal agencies and private sector research 
organizations. The manufacturing sector, in turn, has missed 
opportunities to capitalize on government-sponsored basic research to 
develop higher-performing aerospace systems. To address these problems, 
the FY04 NASA Reauthorization bill could serve as a vehicle for 
mandating an assessment of interagency research programs and new 
guidelines to streamline proposal evaluation and contractual oversight 
procedures.
    Products and services that transform or prolong our lives always 
begin with bold ideas, as proven, among others, by the Wright brothers, 
Dr. Jonas Salk, and the information entrepreneurs who power the World 
Wide Web. I therefore ask the Committee to support basic aerospace R&D 
programs that will enable Americans to travel, trade and communicate 
with greater efficiency in the future.

Civil Aviation

    The decline in air travel and system delays following the attacks 
of September 11th is temporary. Forecasters agree that growth in demand 
for air transportation ultimately will return to much higher historic 
levels and will outpace available and currently planned capacity. Aging 
infrastructure and often insufficient capacity, coupled with high 
passenger volume, should make the cause of airport and air traffic 
management modernization an urgent national priority. U.S. airlines and 
general aviation carriers serve more than 750 million passengers per 
year, carry 27 percent of the Nation's exports and imports and pump 
nearly one billion dollars into the domestic economy. But a duplicative 
infrastructure review process delays many airport facility and runway 
projects by between 10 and 15 years. At the same time, the Aerospace 
Commission found that FAA policies and oversight practices fail to take 
advantage of new communication, navigation, surveillance and air 
traffic management (CNS/ATM) products to modernize our aging and 
cumbersome air traffic control system.
    NASA's Strategic Plan estimates that as domestic and international 
airports reach full capacity without adequate expansion, the airline 
industry could lose $20 billion in output and forfeit up to 200 billion 
passenger miles by 2015. Your October 2002 letter to the Transportation 
Secretary, Mr. Chairman, also noted that while the U.S. is ``the 
world's preeminent provider of safe and efficient air navigation 
services. . .at the federal level, no department or agency has taken on 
the task of planning for a follow-on Air Traffic Management system.''
    As a result of this crisis of economies and mobility, AIA and the 
Aerospace Commission urge the Committee to consider the following 
legislative initiatives to create an integrated federal strategy for 
air transport modernization:

         Full funding of the FAA's FY04 $3.9 billion request 
        for National Airspace System (NAS) safety, homeland security, 
        and air traffic automation programs to advance the Agency's 
        Operational Evolution Plan (OEP). The OEP anticipates the 
        expansion of national air transportation capacity by 30 percent 
        over the next nine years.

         Passage of an amendment to the FY04 NASA and/or FAA 
        Reauthorization Bills establishing a joint program office among 
        DOD, NASA, FAA and NOAA. The amendment would mandate a multi-
        year blueprint and timeline for a revitalized air traffic 
        management network that leverages capabilities and resources 
        from across the Federal Government. The integration and timely 
        dissemination of information using advanced networks will 
        enable the broad situational awareness and collaborative 
        decision-making essential to civil and military users. Beyond 
        the scope of OEP, this provision would also set general policy 
        guidelines for establishing system-level performance 
        requirements to meet long-term safety, security, capacity, 
        efficiency and environmental needs.

         Industry could make a vital contribution to the 
        mission of this proposed joint program office. Many AIA member 
        companies, for example, have invested years of work with a 
        broad group of stakeholders to develop system performance 
        requirements as well as modeling and simulation capabilities to 
        evaluate advanced concepts.

         Amending the Aviation Investment and Reform Act for 
        the 21st Century (AIR-21) to require a streamlined FAA regime 
        for airport improvements. Congress should request a detailed 
        plan for concurrent or deadline-driven permitting, licensing 
        and project approval milestones. A priority projects list 
        should also be prepared for the approval of the FAA's 
        authorizing and appropriating committees.

    AIA believes, Mr. Chairman, that legislation of this nature would 
begin to align the resources of government with the well-documented 
capacity and technology shortfalls in the civil aviation sector.

Space Exploration

    Transcending their pain and grief, the families of the Columbia 
Seven Shuttle astronauts told the world that ``the bold exploration of 
space must go on'' because our lost heroes had accepted ``risk in the 
pursuit of knowledge.'' This declaration, Mr. Chairman, defines our 
resilience as a people. And resilience, combined with curiosity about 
the galaxy beyond our skies, has propelled America into space. Drawing 
on the courage of the Columbia families and the determination of the 
Administration and this committee, the U.S. space program can emerge 
from tragedy in a stronger scientific and exploratory position.
    AIA and its member space companies will work tirelessly with NASA, 
the White House and the Gehman Board to uncover the causes of the 
Columbia tragedy and to implement the needed reforms in our space 
transportation programs. Towards this end, we commend you and the 
Committee, Mr. Chairman, for obtaining the cooperation of NASA last 
month in allowing the Board to retain independent professional analysts 
and to set its own investigative timetable.
    The Colombia disaster also requires us to sharpen our focus on the 
cost, reliability, propulsion and safety hurdles posed by the 
exploration of space over the last three decades. In the assessment of 
the Aerospace Commission, government and industry must scrutinize the 
``significant expense to get to orbit and a hostile and highly limited 
environment once on-orbit.'' To tackle this issue, Mr. Chairman, I 
respectfully urge the Committee to assess NASA's strategy for a long-
term Shuttle replacement vehicle. Before the Colombia tragedy, NASA had 
determined that the space program would rely on the existing fleet for 
at least another 15 years. This timeframe may still apply, but it 
requires the agency to design a post-Shuttle architecture as rapidly as 
possible so that human observation and experimentation can continue to 
enrich our understanding of the universe.
    Similar to the crisis in civil aviation, the challenges to the U.S. 
space program center on the need for interagency coordination guided by 
coherent policy objectives. In recognition of this fact, the FY04 NASA 
Strategic Plan, which AIA urges the Committee to support, charts an 
ambitious course for the country's space research and flight programs. 
Six Enterprises (Space Science, Earth Science, Biological and Physical 
Research, Aerospace Technology, Education and Space Flight) will 
undertake a joint effort to breach what the Agency candidly defines as 
``technological barriers'' in four areas: power, transportation, on-
orbit human capabilities and solar system communications.
    To amplify the impact of the Strategic Plan, AIA and the Aerospace 
Commission recommend the following amendments, summarized by program 
categories, to the FY04 NASA Authorization Bill. These proposals will 
also establish guidelines for reform in the relationship between NASA 
and Congress.

Next-Generation Launch Vehicles
    The Committee, in evaluating the budget justifications for the 
Expendable Launch Vehicle, Space Shuttle upgrades and the Orbital Space 
Plane concept, should consider a requirement for a separate, early 2004 
report from the Administrator, to be followed by an oversight hearing, 
on the state of research and experimentation to:

         reduce the cost to orbit;

         develop and test enabling technologies for a Reusable 
        Launch Vehicle in cooperation with DOD, a mission endorsed by 
        the Director of the National Reconnaissance Office;

         improve control center operations and security; and 
        mitigate launch, flight and recovery constraints.

    These areas, identified by the Aerospace Commission, represent the 
key financial, navigational and safety issues for the post-Shuttle 
generation of space transportation vehicles.

Power and Propulsion Systems
    A second authorization amendment should formalize NASA-DOD joint 
efforts, possibly by creating a program office or task force under the 
auspices of the National Aerospace Initiative, on propulsion research 
and power systems. NASA and the Aerospace Commission have both targeted 
propulsion and power advances as the critical ingredients for the 
sustainability of spacecraft.

Space Launch Infrastructure Upgrades
    As a result of a presentation by NASA Kennedy Space Center (KSC) 
officials, the Aerospace Commission revealed that the Current 
Replacement Value of the KSC infrastructure amounts to $3.9 billion. 
The main deficiencies include corrosion in the cable plant and the 
Vehicle Assembly Building as well as aging and under-performing Shuttle 
launch pad transporters. The Committee therefore should consider an 
amendment mandating a launch infrastructure improvement plan from NASA 
with out-year budget allocations based on the $3.9 billion estimate by 
KSC management.
    As J.F. Creedon, Associate NASA Administrator for Aerospace 
Technology, testified on February 27th before the Senate Commerce 
Subcommittee on Science, ``access to space will require interagency 
partnerships to meet common needs.'' AIA strongly believes that the 
Committee can clarify our strategic roadmap for space exploration by 
creating and directing a new series of federal partnerships.

Human Capital

    I noted at the beginning of my testimony, Mr. Chairman, the 
difficulties faced by the aerospace industry in recruiting and 
retaining skilled professionals. As the Aerospace Commission pointed 
out, the United States has lost more than 600,000 aerospace jobs in the 
last 13 years. Previewing future generations of workers, we find that 
the math and science testing performance of students in the U.S. 
relative to their European and Japanese counterparts gradually erodes 
to the 10th percentile or below by the end of high school. Yet in the 
awesome mix of platforms and technologies that characterize our 
industry, no resource is more valuable than human and intellectual 
capital.
    AIA joins the Aerospace Commission, therefore, in urging Congress 
to empanel an interagency task force, with a formally designated lead 
agency or department, to build a strategy by mid-2004 for improving and 
expanding the math, science, engineering, and technical/vocational 
education of Americans. Congress should then sub-divide and revise the 
various elements of the strategy to incorporate them as mandatory 
mission planning objectives in the appropriate budget authorization 
bills.
    NASA's strategic human capital program, the subject of the second 
panel of today's hearing, could serve as a model for an integrated 
federal workforce plan. AIA strongly supports this comprehensive 
initiative. The Education Enterprise of NASA will unite the Human 
Resources division with other critical units, such as the Technical 
Programs office, to design new scholarship and recruitment programs to 
narrow gaps in professional skills across the organization. This 
approach, by assigning responsibilities to all functional and program 
activities, makes the improvement of human capital a continuous agency 
mission.

National Security Programs

    I want to draw the Committee's attention to a few key programs from 
the FY04 defense budget that demonstrate the Pentagon's evolving Total 
Force framework to deter or defeat the unpredictable adversaries of our 
age.

Naval Force Modernization
    The oceans cover 70 percent of Earth's surface, and the majority of 
the world's population and industrial facilities reside within 250 
miles of a coastline. If only for these reasons, the Navy's surface and 
submarine fleets provide the United States with the forward military 
presence, free of dependence on foreign bases, to prevent or prevail in 
conflicts and to safeguard the global sea lanes of commerce. The Navy's 
FY04 shipbuilding request of $12 billion deserves strong congressional 
support as the Service continues to execute a full-scale modernization 
and recapitalization program. The aircraft carriers, destroyers, 
cruisers, submarines and combat support ships of the future will 
magnify the power of ground forces with deep land attack, special 
operations, theater missile defense and reconnaissance capabilities. As 
a result of this strategy, Mr. Chairman, the Navy will assume an 
increasingly important role in meeting many of our national security 
objectives from the sea and along the shore.

Armored Programs
    In their 2003 Posture Statement, Army Secretary White and Chief of 
Staff Shinseki describe their vision of an Objective Force that by 
2010, will complete training for ground dominance, cyber-warfare and 
space exploitation operations. In addition, the current Stryker Brigade 
Combat Teams and the planned Future Combat System (FCS) provide 
soldiers with mobile air-ground units to project power and subdue 
adversaries in the most austere or heavily urban environments. Armored 
forces will therefore remain vital to our unchanging need for enemy 
territorial control as the end-state of victory, and the FY04 Army 
budget contains focused R&D and acquisition proposals to keep the 
Objective Force plan on schedule. Aerospace technologies will also 
provide a number of critical networked solutions to the fully-deployed 
FCS. The current heavy armored deployments to the Persian Gulf theater 
only underscore the requirement to keep the FCS program on schedule 
since our soldiers will need state-of-the-art battle space management 
and force protection equipment over the course of several years.
    Today's Stryker industrial base reflects the successful shift from 
a single product line to a flexible manufacturing process capable of 
building multiple combat vehicles in a variety of weight classes. What 
once functioned as a Cold War tank line now supports the production of 
the Stryker family of 10 different vehicles. This armored 
transformation would not have occurred without the resources, skills, 
vendors and investment by both government and contractors. During 
Operation Desert Storm, for example, a warm production line made it 
possible to supply over 22,000 spare components and major assemblies on 
short notice. As current and future ground threats arise, the existence 
of a modernized armored industrial base will prove critical in 
supporting the Nation's military response and deterrent objectives.

Tactical and Mobility Aircraft
    Our combat experiences in Afghanistan, Southwest Asia and the 
Balkans illustrated the dramatic utility of air power as a wartime 
force multiplier. During the opening phases of conflict, precision air 
power destroyed or crippled enemy air defense, fighter-bomber and 
command-and-control networks, thereby depriving hostile forces of 
territorial defense and combat attack assets. At the same time, 
personnel and cargo transport aircraft enable the United States to 
introduce troops and firepower into a zone of conflict during a time 
when we lack fewer basing facilities overseas.
    I subsequently urge Committee Members and Congress to support FY04 
Air Force and Navy budget requests that dedicate a combined $21.3 
billion to seven tactical and mobility aircraft (the F/A-22 tactical 
fighter; the F/A-18E/F carrier-based strike fighter; Joint Strike 
Fighter development; C-17 Airlifter procurement; C-5 avionics upgrades; 
C-130 Transporter modernization; and V-22 Tiltroter procurement), 
supplemented by more than 45,000 precision-guided munitions, to expand 
the Nation's global force projection capabilities.
    In addition to promoting the modernization of U.S. air-breathing 
military forces, Congress should ensure that the appropriate DOD 
components and Services sustain, as the Aerospace Commission advised, 
critical, high-risk defense-related technologies such as combat system 
design capabilities, solid rocket boosters and radiation hardening.

Conclusion

    In closing, Mr. Chairman, I commend you, Congressman Hall, and the 
entire Committee for serving as the trustees of scientific innovation 
and programmatic accountability among your colleagues. Through this 
testimony on implementation alternatives regarding the report of the 
Aerospace Commission, I have tried to concentrate on legislative policy 
reforms to improve interagency cooperation, direct the development and 
fielding of new technologies for the civil aviation and space arenas, 
and begin the vital effort of workforce revitalization. These three 
assets--knowledge-sharing, modernization and people--will open new 
frontiers for the aerospace industry to serve our commercial and war 
fighting customers of tomorrow.

                     Biography for John W. Douglass




    John W. Douglass is President and Chief Executive Officer of the 
Aerospace Industries Association, which represents the Nation's 
manufacturers of commercial, military, and business aircraft, 
helicopters, aircraft engines, missiles, spacecraft, materiel, and 
related components and equipment. Mr. Douglass became the seventh full-
time Chief Executive of the Association in 1998. Before that he served 
for nearly three years as Assistant Secretary of the Navy for research, 
development and acquisition of defense systems for the U.S. Navy and 
U.S. Marine Corps.
    A nationally recognized expert in systems acquisition, Mr. Douglass 
has extensive acquisition experience in Congress, the Defense 
Department, and the executive branch as a policy authority, contracting 
officer, engineering officer, test and evaluation officer, program 
control officer, and research director.
    Before being named a civilian Navy executive, Mr. Douglass was with 
the Senate Armed Services Committee where he was foreign policy and 
science and technology advisor to Senator Sam Nunn and served as lead 
minority staff member for defense conversion and technology 
reinvestment programs.
    Earlier Mr. Douglass completed 28 years of U.S. Air Force service 
and retired as a brigadier general in 1992. His numerous Air Force 
assignments included service as the deputy U.S. military representative 
to NATO as well as Director of plans and policy and Director of science 
and technology in the Office of the Secretary of the Air Force. He also 
served as Special Assistant to the Under Secretary of Defense for 
Acquisition.
    Within the Executive Branch, Mr. Douglass was Director of national 
security programs for the White House, responsible for formulating 
policy on a broad range of national security issues. He served as 
President Reagan's personal representative to the Blue Ribbon 
Commission on Defense Management chaired by David Packard.
    A native of Miami, Florida, he earned a Bachelor of Science degree 
in industrial engineering from the University of Florida, a Master of 
Science degree in industrial engineering from Texas Tech University and 
a Master of Science degree in management science from Fairleigh 
Dickinson University. Mr. Douglass has done postgraduate work at the 
Cornell University Center for International Studies where he was an Air 
Force Research Fellow with the Peace Studies Program.
    Mr. Douglass is a member of the Board of Governors of the Aerospace 
Industries Association, a member of the Commission on the Future of the 
U.S. Aerospace Industry, and Chairman of the Aerospace Technology 
Policy Forum. In addition, he is Chairman of the Board of Trustees of 
the National Center for Advanced Technologies and Past Chairman of the 
International Coordinating Council of Aerospace Industries 
Associations.

AIA Positions:

Chairman, Aerospace Technology Policy Forum
Chairman, Board of Trustees, National Center for Advanced Technologies

Member:

Commission on the Future of the U.S. Aerospace Industry
National Contract Management Association
Space Day Foundation Council of Advisors

    Chairman Boehlert. Thank you very much. Dr. Hamre, before 
we go to you, we have been joined by the Ranking Minority 
Member, the distinguished gentleman from Texas, and it is a 
pleasure to recognize him for any remarks he might care to 
make.
    Mr. Hall. Mr. Chairman, thank you. And I subscribe to the 
remarks you have made. I will be very brief. Of course, I want 
to welcome all of the witnesses today. I know you have to 
prepare, and you have to get here, and you have to testify when 
you get here, and you have to get home, so you have gone to a 
lot of trouble, and we appreciate it. And you are here because 
it is obvious that we think you know a lot more than this panel 
knows, and we kind of pick your brains, especially our old 
friend, Bob Walker. Bob is a class guy, was a class guy, will 
always be a class guy. He wrote a lot of bills that made this a 
better Congress, and he improved a lot of bills that others had 
written from time to time. Sometimes when we didn't want him to 
improve them, he improved them. But Mr. Chairman, thank you for 
that time. And I will ask unanimous consent to put a very 
extraordinary speech in the--I haven't read it yet, but I know 
it is a good one.
    Chairman Boehlert. Without objection, so ordered.
    [The prepared statement of Mr. Hall follows:]

           Prepared Statement of Representative Ralph M. Hall

    Good afternoon. I would like to welcome all of our witnesses to 
today's hearing. We look forward to hearing your testimony. I'd like to 
extend a particular welcome to former Chairman Bob Walker, who once was 
an active Member and leader of the Science Committee.
    We have a great deal to cover this afternoon. Each of the topics to 
be discussed could easily merit a separate hearing. As a result, I will 
be brief in my opening comments so that we can spend as much time as 
possible hearing from our witnesses.
    Let me say just a few words about the topic to be addressed by the 
first panel, namely the report of the Aerospace Commission. The 
Commission was chartered at a time of uncertainty for the Nation's 
aerospace industry. However, the reality is that the future of the 
industry is now even more uncertain than when the Aerospace Commission 
started its work. More than 20 percent of the Nation's air carriers are 
in bankruptcy. The Nation's space program is just coming to grips with 
the loss of the Space Shuttle Columbia and its impact on a range of 
programs, including the International Space Station. We are in the 
midst of a sustained downturn in both the commercial launch market and 
the commercial satellite market. The inherent conflicts between export 
control policies and the globalization of the aerospace industry have 
been growing. This committee is looking for some wisdom from the 
Commission--not just regarding your long-term vision for aerospace, but 
also your advice on how best to deal with the multiple challenges 
facing the aerospace industry today.
    That brings me to the second topic to be addressed in this hearing: 
NASA workforce issues and Chairman Boehlert's proposed NASA workforce 
flexibility legislation. I will say up front that I welcome the 
Chairman's efforts to focus attention on the issue of how best to 
attract and retain the skilled personnel NASA will need to retain its 
vitality in the 21st century. I hope that the Committee will treat this 
issue with the seriousness that it deserves and devote the time needed 
to do thoughtful oversight. It can be tempting to some to try to 
``short circuit'' the legislative process in their zeal to achieve 
quick results, but I hope that we will resist that temptation.
    The question before this committee is not whether we want to have a 
skilled, diverse, and effective NASA workforce. I believe we would all 
say that we do. The real question is what approaches are best suited to 
deliver the desired result. That's not a simple question to answer.
    For example, when the Nation's aerospace sector has lost almost 50 
percent of its jobs since 1989, we should not be surprised to find that 
many talented students are looking elsewhere for careers. Will NASA 
recruitment bonuses or related measures have more than a marginal 
impact on reversing that broad national trend? Are there other measures 
that could be more effective?
    If NASA wants to attract and retain talent in critical skills areas 
through various incentives, does it send a mixed message to prospective 
employees when it also advertises its intent to make 50 percent of its 
remaining civil service jobs vulnerable to being contracted out within 
the next few years?
    To what extent is the aging of NASA's workforce the result of the 
protracted hiring freeze that the agency faced during the 1990s--and 
thus correctable under existing hiring rules now that the freeze has 
been lifted?
    And what are the implications of giving NASA management and OPM the 
authority to change the workplace rules of the entire agency without 
the prior approval of Congress? What changes is NASA management 
proposing to make if they are given this authority?
    The NASA workforce has been compared to a family. We need to 
remember that the NASA family has been profoundly shaken by recent 
events. Let us tread carefully and take the time to ensure that 
whatever we do is in the best interests of all of the NASA employees.
    Thank you, and I yield back the balance of my time.

    Chairman Boehlert. And now, Dr. Hamre.

STATEMENT OF HON. JOHN J. HAMRE, PRESIDENT AND CEO, CENTER FOR 
              STRATEGIC AND INTERNATIONAL STUDIES

    Dr. Hamre. Mr. Chairman, distinguished Members, thank you 
for inviting me. I am so pleased to come up here knowing that I 
am not going to get a whipping today. This is--usually I would 
come up here and Mr. Boehlert would just thrash me something 
fierce, because I give him something dumb, but thank you for 
the chance to come up anyway.
    I was asked to come up here I think largely because people 
feel I have a disagreement with my Commission and my Chairman. 
And I don't. And I would like to say for the record how pleased 
I am that Bob Walker was our Chairman. He did a splendid job. 
He brought very diverse people and perspectives to a consensus. 
I think we are all very grateful for the time and the energy he 
put into it, and I am always glad to be with my friend and 
colleague John Douglass and I learn a lot from John all of the 
time.
    Both of them have said what, in essence, I had planned to 
say, so I can be very short. I did feel at the time, and I feel 
even more strongly now, that frankly we are facing a very 
serious crisis with our aerospace industry. I mean, if you were 
to use medical analogies, we are in the ICU unit. I mean, we 
are on life support. And I depend, just as you do, every day on 
being able to get on an airplane and fly safely across this 
country in an industry that is making money, profitable 
industry that is making money. And they are not. And we have 
got to face up to that. We have got a real problem on our hands 
for the long-term viability of this industry. It is not just 
the airline industry; it is the people that make airplanes. We 
can not live in this country with an industry that can't 
manufacture state-of-the-art, modern airplanes. And that is at 
risk.
    The satellite industry, I am--I hate to say it, government 
regulation is undermining the vitality of our satellite 
industry and our launch capacity. I mean, we have excess 
capacity, and it is imploding. And so we have got a genuine 
crisis on our hands, and frankly it sits squarely with our 
government, and we have got to do something about it.
    Now I would like to focus on one specific set of issues, 
and I would ask you all to take a look at how we regulate this 
industry in terms of exports. We have got a set of policies in 
place, which have not been updated since the end of the Cold 
War. And we are creating protected markets for our foreign 
competition by our export controls. Now I frankly want strong 
export controls, but I think they are being trivialized by 
their misapplication on--and being spent all of our energy on 
trivia. We are regulating five-ton trucks and rearview mirrors 
on F-16s. And God only knows what we are doing. With 40,000 
licenses a year, and 99.6 percent of them get approved. And we 
just go through agonizing months to get an approval, and we are 
wasting lots of time and talent and resources looking at things 
that are not important. And we are not spending the time and 
the resources to look at the stuff that really is important. 
And we have got to change our focus. Let us focus on things 
that are really important.
    Thirty percent of our exports are going to the United 
Kingdom, and yet we treat them just like they are Pakistan in 
terms of the--of having to get a license. Now there has got to 
be some differentiation in the way we approach our best friends 
and our skeptical partners. There has got to be some difference 
between leading edge technology and dull edge technology. That 
is not at all recognized in the way we approach this industry, 
and we are choking and really hurting an industry.
    Let me just take the satellite industry, and I--we have 
done some work on this in my little think-tank, and I would 
commend it to you, Chairman. I will give copies to your staff. 
I don't expect Members to read it, but it outlines some 
alternative approaches that give you stronger security and more 
sensible regulation of an industry that we have to have and we 
can not live without. And it starts with the premise that these 
people do not want to violate American laws. They do not want 
to hurt American security. They want to be our partners to 
protect America. And we need to treat them like that and enter 
into a new relationship with this industry so that we honor 
that commitment that they have. And there are ways to do that, 
and it has been worked on a lot of detail and a consensus 
across the wide perspective of the community that knows a lot 
about this.
    Satellite industry, right now, we let a company develop an 
export of technology only when they can prove a foreign 
competitor can do it as well as they can. What does that tell 
you? We are in essence providing a protected market for foreign 
competition through American producers. This can't be the way 
that we want to run this industry. Now there are other 
approaches, but we have got to start thinking with an up-to-
date, modern export control system that is tailored to the kind 
of business environment we live in today. And we do not have 
that. We have an export control system that is tailored to the 
1960's, and we need to change it.
    Thank you very much for the chance to be with you, sir.
    [The prepared statement of Dr. Hamre follows:]

                  Prepared Statement of John J. Hamre

    Mr. Chairman, distinguished Members of the Committee on Science, 
thank you for inviting me to join Aerospace Commission Chairman Robert 
Walker, and my colleague and friend John Douglass, to testify before 
you today on the work of the Commission on the Future of the Untied 
States Aerospace Industry.
    Mr. Chairman, let me note that I signed the report, and I stand by 
the recommendations of the report. I would like to take this 
opportunity to thank Chairman Walker for the enormous energy he gave to 
this effort, and for the patience he had in bringing together the 
thinking of such a diverse and talented panel. I believe that it is 
best to let Chairman Walker speak on behalf of all of us to the 
recommendations of the Commission. I will deal briefly only with the 
questions you asked of me in your letter of invitation. Naturally, I 
would be delighted to answer any question you pose, and provide any 
additional information for the record that you and the Committee may 
desire from me.
    First, you asked what fundamental issues did the Final Report fail 
to appropriately examine. The Commission was chartered to examine 
fundamental factors that needed to be addressed to ensure the long-term 
viability of the aerospace industry. I believe the Final Report did 
this. My concern then--and this concern has only grown with time since 
we concluded our work--is with the deteriorating financial health of 
the aerospace industry. To use a medical analogy, the aerospace 
industry is in the intensive care unit on life supports.
    I personally depend on this industry every week. I cannot live 
without a reliable, safe, efficient and profitable commercial airline 
industry, yet since we finished our report several major carriers have 
declared bankruptcy and more are likely to follow. We cannot rely only 
on the current fleets of aircraft. Right now, the flying inventory is 
quite new because the recession in the industry has caused the airlines 
to mothball their oldest aircraft. But the replacement rate is 
uncertain, and the viability of U.S. producers is challenged. We must 
have new production aircraft on an indefinite basis.
    Mr. Chairman, I personally consider this situation to be a crisis. 
This industry is essential to America's vitality and productivity. Our 
future national economic health and security depends on a healthy and 
viable aerospace industry. And in all honesty, this industry is in 
enormous trouble. Along with commercial aviation, our satellite 
industry is imploding, with far too much capacity for the limited 
market we forecast for the next decade. The launch industry is 
similarly confounded by surplus capacity.
    Solving this problem requires immediate action. The focus of our 
Commission was on a longer-term perspective, and it is because of this 
that I don't believe we have a crisp checklist of actions that the 
Committee should take. So at this stage, I can only offer my personal 
observations.
    First, the airline industry itself has to get its own house in 
order. Unfortunately this means tackling the unbearable cost structures 
of the current business, and probably developing modified business 
models for the future. I have to defer to others to develop those 
strategies. I do believe that it has to be led by the industry itself, 
in the context of the market place.
    Second, the Federal Government has got to put more energy and 
resources into the modernization of the air traffic control system. The 
FAA's modernization plan is essential, but it is not by itself 
sufficient for the long run. While the recession currently has eased 
the pressure on the system, the modernization program will only carry 
us another decade or so. New approaches are essential. Here I think the 
Commission report provides useful direction, and I commend these 
approaches to the Committee for consideration. I especially recommend 
that the Committee devote time this year, as you prepare your 
legislative agenda, to the need for a long-term solution to air traffic 
control.
    Third, the industry is burdened by an uneven patchwork of costs and 
restrictions that have been imposed since September 11. Admiral Loy has 
done a splendid job standing up the Transportation Security 
Administration, but the overall architecture of security, and the 
burdens that are placed on the industry, need to be dispassionately 
examined. Most importantly, how should we finance the security we want 
in aviation? Do we put it on the back of the airlines? Do we provide it 
as a government service? In a post September 11 environment, how do we 
strike a balance between security and efficiency? We don't have a clear 
philosophy here, and the uneven patchwork of regulations and 
obligations needs to be rationalized, in my view.
    Fourth, we desperately need to modernize Government regulation of 
this industry. Here let me refer to the second question you posed. You 
asked for my views on export control and technology regulation. 
Frankly, our approach to export control and technology regulation is 
obsolete, stuck in a cold war mentality that fails to comprehend the 
threats of our day.
    I want stronger export controls on things that matter, not a rigid 
adherence to bureaucratic rules that buy very little security and 
merely satisfy the imperatives of a bureaucracy. The failings in this 
area are profound. We make virtually no distinction between cutting 
edge technology and old, prosaic technology. We make our best allies go 
through the same process as we do the worrisome countries. We spend an 
enormous amount of time and energy regulating trivia, which soaks up 
the talent and resources of our government regulators. They should be 
spending their time on truly important matters, and not waste their 
time on five ton trucks and portable generators. The Commission has 
outlined solid and constructive recommendations in this area, and I 
would commend them to you and to the Committee staff.
    Mr. Chairman, let me address the last question you raised in your 
letter of invitation, and that is how do we encourage greater exports 
without compromising critical technologies. Here we need reasoned 
judgment, not the blind paranoia of mid-grade government examiners. We 
have the naive idea that it is a simple matter to reverse engineer any 
product to extract critical technology. Frankly, that is just not 
correct. Reverse engineering is enormously difficult. If you ask any 
high technology producer of virtually any product, they will tell you 
it is nearly impossible to build a product, even if you give them the 
complete drawings. The manufacturing art is essential, and that is not 
compromised routinely. Indeed, our companies have an intrinsic and 
reliable incentive not to compromise that art. If the government 
approached the industry as partners, rather than as wayward mischievous 
children needing discipline, we would get stronger security.
    There are ways to do that. I would commend to the Committee work 
that we have done at my research institute, the Center for Strategic 
and International Studies (CSIS). With your permission, I would like to 
submit two CSIS reports to complement your hearing record: ``Preserving 
America's Strength in Satellite Technology,'' and ``Technology and 
Security in the Twenty-First Century: U.S. Military Export Control 
Reform.'' These reports outline a comprehensive new approach that would 
provide stronger security and impose less burdensome regulation on a 
troubled industry. Under existing regulation, we are burdening an 
industry with choking regulation that buys very little security and is 
isolating our industry from market opportunities and competitive forces 
that are critical for its long-term health. This is especially true in 
the area of satellite technology. Our current regulations are creating 
a protected market for foreign competitors, and constraining American 
producers to a market that is too small to maintain their 
profitability. Under our current approach, we have in place all the 
incentives to create the satellite manufacturing equivalent of Airbus.
    We need well-designed and sensible controls on technology. I do 
want a strong export control system. But it needs to be well designed 
and it needs to comprehend the changes that are taking place in our 
economy. Our current system is neither well-designed nor flexible to 
change.
    Mr. Chairman, distinguished Members of the Committee, thank you for 
inviting me to participate in this important hearing. I would be 
pleased to answer any questions you might have when the time for 
questioning begins.

                               Discussion

    Chairman Boehlert. I thank all of you very much. And 
Chairman Walker, you and I have served for a long time in this 
institution from our days in the '60's as staff members. And we 
have seen very distinguished Commissions, and this one is not 
an exception, very dedicated and able and committed Americans 
make very clear policy recommendations. And then the reports 
are put on the shelf and they gather dust. And so let us hope 
that this one will be an exception and not fall under the 
category of being the rule.

                       Role of Propulsion & Power

    Let me ask you this, what areas of research do you think 
are most essential for the future of the aerospace industry? 
Mr. Walker, you are first up on that.
    Mr. Walker. Well, we identified several in the report, but 
in both air and space, propulsion is a major area where 
research could produce some dramatic changes. We--if you want 
additional speed to be able to go point to point, it is one of 
the ways in which you get a commercial industry which is 
different from the direction in which the Europeans are going. 
That is propulsion in large part. If you want to do more 
exploration of the solar system, you do propulsion research at 
NASA and give yourself new options there.
    Along with propulsion in space, power also becomes an 
issue. It means that you can do far more in the way of 
scientific missions if you have additional power aboard the 
spacecraft. That also is a matter where you can put money. We 
identified, for example, a need to do the National Aerospace 
Initiative. One of the reasons why you do that is because it 
will increase speed, largely for defense missions initially, 
but also give you a platform off which you can do fully 
reusable space vehicles in the future. That will be a materials 
issue. It will also be a propulsion issue for the future.
    So my guess is that those are the places where you would 
get the biggest payoff for your research dollars at the present 
time.

           Using Defense Technologies for Civil Applications

    Chairman Boehlert. Mr. Douglass.
    Mr. Douglass. Sir, Chairman Walker has mentioned almost 
everything that I would have on my list, in terms of 
categories, I think the insight that I could add to you is the 
following thoughtful comment. If you look at our military 
today, we are two to five generations ahead of anybody else in 
the world. We are the only people with stealth fighters, 
stealth bombers, big tankers, J-stars, transport airplanes that 
can do marvelous things, precision guided munitions of all 
types, information technology, data fusion. And then you go 
over to the commercial side, and you say, ``Hey, wait a minute. 
Why is a brand new airplane approximately the same as a brand 
new Airbus?'' And part of the answer is we, as a Nation, are 
not effectively taking the technology we have already developed 
and paid for, American citizens have paid for, and moving it 
from our military side to our commercial side the way we used 
to do years ago. Part of that lies in the globalization of the 
industry, but part of it lies in the stovepipe nature of the 
way our government is structured here. And so there is a huge 
opportunity for us to help civil space and civil aviation by 
linking up what we have already paid for on the Department of 
Defense side to the commercial side.
    I think Chairman Walker mentioned that one of the good news 
is that NASA and the FAA are cooperating to share research on a 
new air traffic control system. DOD should be a part of that 
program, because much of the technology the DOD uses is in 
information warfare. For example when I was the Assistant 
Secretary of the Navy, we developed--and when John was a Deputy 
Secretary at DOD, we developed a thing called a cooperative 
engagement capability where every single ship in the fleet can 
see what every other ship's sensors see. That is a perfect 
application for air traffic control. It is developed. It is 
there. The Navy is using it. It ought to be brought over to the 
commercial side.
    Chairman Boehlert. Mr. Hamre, you have been in and out of 
the government in responsible positions. Some would say you 
have a better vantage point from which to view how things need 
to be changed within the government. What can we do?

                     Peer Review of R&D Investment

    Dr. Hamre. Well, sir, I forgot I couldn't pass high school 
physics. I am not going to tell you how to spend R&D money. I 
am personally very skeptical that the government can pick 
winners and losers in R&D. I think that--and I think that we 
really should try, and I think you honor this by trying to have 
a peer review process that provides expertise that comes in 
from the outside and say that is a winner, that is a loser. I 
think that that becomes very important. The government does 
need to provide the infrastructure for the scientific community 
that it can't afford to buy or won't because it is just out of 
scale to what an individual project can undertake. That is what 
the Genome Project is. I mean, we spent a lot of money mapping 
the genome, and now you are going to see an incredible 
explosion of the exploitation of that knowledge. That is what I 
think the Committee should be doing is focusing on the--what 
are the technologies we know that could be developed but the 
infrastructure impediments are standing in the way. That would 
be the greatest contribution we could make, and frankly, I 
think we are lagging on infrastructure investment in R&D these 
days.
    Chairman Boehlert. I see my time is expired. The gentleman 
from Texas, Mr. Hall.
    Mr. Hall. Mr. Chairman, thank you. And Mr. Douglass, good 
to see you again. I remember the day you and Tom Tate came in. 
I had the pleasure of recommending you. Dr. Hamre, thank you 
for your very good presentation. You didn't know too much about 
physics. I was a Navy cadet at TCU, Texas Christian University, 
and took celestial navigation. That gave me six hours of 
physics with an A. And it sure helped me later, and I can't 
spell physics to this good day. I asked Dan Quayle to help me, 
and he said ``F-i,''.

                Financial Health of Commercial Aviation

    Dr. Hamre, the U.S. aviation industry is going through a 
lot of tough times now. Of course, you broke into that, and 
thank you for doing that. Over 20 percent of our airlines, I am 
told, are in bankruptcy, and passenger carriers have lost 
around 18 billion over the last two years or so, it has been 
reported. How really worried are you about the potential 
collapse of our U.S. airline industry? We just can't allow that 
to happen, and I am going to ask you for some advice on that. 
What do you think ought to be done? And who should pay for it 
and how it should be paid for, a grant, loan, or what?
    Dr. Hamre. Well, I am sure going to need the wisdom of my 
colleagues to answer that question, but sir, I think we can not 
live with a collapsed industry. I mean, it is--the heartbeat of 
the--of our economy depends on this being a viable, safe, 
continuing, functioning airline industry. It is very sick. Some 
of it is self-imposed, some self-induced through decisions that 
were made by the companies, and they are going to have to sort 
their way through it. So far, the people that have been paying 
the price for whatever the mistakes are has, frankly, been 
stockholders. I mean, we have seen as the collapse of the 
values of these companies. We have not seen the fundamental 
restructuring of the costs of these companies. And there is 
going to have to be a restructuring of the costs, and that is 
frankly what bankruptcy is about. But right now, the bulk of 
the costs have been carried by stockholders, to be perfectly 
candid. Now we are going to need a more balanced view, and it 
has to be sorted out by the industry.
    Now one comment, and then I will turn to my colleagues. I 
think the government needs to figure out what is the right 
relationship it should have with the industry as for security 
and safety of operations. Right now, we tend to just put all of 
the burden on them and let them pass it through as a cost to 
the customer. That didn't work with safety. We didn't like what 
we got out of that, and I think we need to be asking ourselves 
do we have the right mix. I don't have a good formula for you, 
but that needs to be evaluated in a very dispassionate way.
    Mr. Douglass. Sir, I would tell you I think on September 
the 11th, 2001, we entered into a new era. And I think the key 
comment that John made is that we have got to determine what is 
inherently a governmental responsibility and what is inherently 
the responsibility of private industry. And some of the losses 
that the airlines have talked about today could be conservative 
if some of the worst case scenarios happen. For example, there 
have already been, I think, around the world about 20 or 30 
attempts by various terrorists to shoot down airliners with 
hand-held anti-airplane missiles. And fortunately, they have 
missed in the last few tries. We don't--we think they have got 
some hits in Africa and a few other places where we don't have 
a lot of information about what happened.
    But if this begins to take on a wider global perspective, 
just think of cost that it would be for equipping all of the 
airline fleets all around the world for a defense against that 
kind of an attack. Now who would pay for that? We couldn't turn 
to this industry that is near bankruptcy today. Is that an 
inherently governmental thing that we have to do? How do we 
regulate foreign airplanes coming into our airspace or our 
airplanes going into theirs? There are some very fundamental 
questions like this that we need to resolve in the light of 
this new and very, very difficult era that our country has now 
come into after September the 11th.
    Mr. Hall. Mr. Chairman, I am going to have a few minutes 
left. Would you like to----
    Mr. Walker. Sure. Let me just hit a couple of points. I 
agree with the points that my two colleagues have made. But one 
thing that the airline industry did identify for us in the 
Commission was the fact that they are tremendously overtaxed at 
the present time. The fact is that if you get a bargain $100 
ticket, about $46 of that goes for one tax or another. And it 
is a burden that the industry is bearing at the present time. 
It is having an impact on their ability to compete.

                         Air Traffic Management

    Let me give you one technology side of this, though, that 
provides some hope and that is that we do have emerging 
technologies that will give us the opportunity to redefine the 
airline industry in some remarkable ways. The reason why air 
traffic management has come up in both John's and my testimony 
is the fact that in order to do some of these new concepts, you 
have to have a far more robust way of managing air traffic than 
we now have. But if you get there, you can do point to point 
travel, and you can use point to point travel with relatively 
small airplanes that allow businessmen, for instance, to fly 
from one small town to another small town and do it on an air 
taxi. That is a very different kind of concept. It is a very 
different kind of airline structure for the future, but it is 
entirely possible if we develop the technologies needed to get 
there. That doesn't replace the need for the kind of airline 
industry that we have at the present time, but we do need to 
think about how you provide consumers with what they want. Why 
are businessmen going out and spending a lot of time and money 
getting into partial leases of airplanes at the present time? 
Because they don't want to fly hub to hub. They want to go 
where they want to go when they want to get there. And we need 
to think about how you do the technology that allows a 
restructuring of the industry around that model.
    Mr. Hall. Thank you. My time is up.
    Mr. Rohrabacher [presiding]. Thank you very much, Mr. Hall. 
As you can see, we have a new person holding the gavel, and I 
will be, I guess, conducting this hearing for another hour 
until the Chairman returns, and I will take the prerogative of 
having my time now.

                        Future of Civil Aviation

    I think that the points Mr. Walker was just making are very 
astute and people need to focus on. When we say that we have a 
sick aerospace industry and we--and the airlines are in 
trouble, and we have this trouble and things aren't working, we 
tend to think that what we want to do is make something that is 
configured the way it has been configured for the last 30 years 
work. Well, that is obviously not the case, is it, Mr. Walker? 
What you were just outlining for us is a totally different 
vision of an aerospace industry.
    Mr. Walker. Well, there is no doubt that there are 
opportunities ahead of us to reconfigure the industry. And if 
you look at the desirability of point to point travel, it is a 
very different model than what we have pursued in the industry 
up until now. And but it does demand probably new kinds of 
aircraft, because you can not fly very large aircraft point to 
point.
    Mr. Rohrabacher. Right. And also--well, there is some 
research going on now in San Diego. I know it may or may not be 
successful with the development of the DP-2, which is a plane 
that carries 45 people, will go up and down like a Harrier jet, 
and be able to use very small runways and be able to go from 
very secondary runways. And from what you are describing and 
also with the change in the air traffic control system where we 
take greater advantage of GPS rather than the system we had in 
the past, what would you say the odds are that we are going to 
have a totally new type of aviation industry 20 years from now?
    Mr. Walker. Well, I think you are going to see a very 
different kind of technology mix inside the industry that will 
give you a much different structure and probably a much 
different economic structure. But understand, it also 
complicates some of the problems that John Douglass mentioned. 
It allows you to use more and more airports across the country, 
but that means that in this present environment, the security 
issues that arise in utilizing vastly more airports complicate 
and add cost into the system.
    Mr. Rohrabacher. Right. And Mr. Douglass actually mentioned 
a specific technology that would have helped us develop exactly 
what I am talking about in his testimony. You mentioned, Mr. 
Walker, propulsion. Mr. Douglass mentioned a radar system, a 
shared radar system. Do we have--now Mr. Douglass, however, 
suggested in his testimony that we have the technology we need 
to have an overhaul of our aerospace industry. You suggested, 
perhaps, we need some more technology work before that is 
possible. And you focused on propulsion.
    Mr. Walker. I agree absolutely with what John Douglass said 
about air traffic management. I think that we are developing 
and have a lot of control navigation surveillance systems that 
the Defense Department has developed that would give us the 
ability to do an air traffic management system in an automated 
way that would be very important. What I am suggesting is that 
one of the things that characterizes a new technological 
approach is more speed inside the system, and there you are 
going to have to have some new propulsion. We haven't developed 
much in the way of new engines in recent years.
    Mr. Rohrabacher. The--I was just going to get to that. Now 
who do you represent, Mr. Walker?
    Mr. Walker. Who do I represent?
    Mr. Rohrabacher. Yeah, what--do you represent big 
companies?
    Mr. Walker. Sure.
    Mr. Rohrabacher. And do you represent big companies, Mr. 
Douglass?
    Mr. Douglass. Generally speaking, sir, I represent all of 
the aerospace companies.
    Mr. Rohrabacher. Okay.
    Mr. Douglass. We have about 250 members.
    Mr. Rohrabacher. Okay. And Mr. Hamre, do you represent big 
companies?
    Dr. Hamre. No, I run a think tank.
    Mr. Rohrabacher. Okay. So they listen to you?
    Dr. Hamre. Yeah, I hope so.

                    Industry R&D Spending Practices

    Mr. Rohrabacher. Well, let me put it this way. I know a 
fellow with a--incredible credentials who has come up with a 
revolutionary new engine concept. But everybody seems to be 
waiting for the government to put the money into developing the 
new engine. Is there a problem here with the industry being 
willing to invest?
    Mr. Walker. Yeah, one of the real problems with the 
industry is the fact that they haven't been making any money. 
It doesn't matter whether you are building aircraft or flying 
aircraft and so on. The profit margins inside the industry have 
been very, very poor. One of the things that our report looked 
at is what kind of investment climate can you create that will 
allow more investment money to come in so that some of these 
industries would have the money to do some R&D on their own and 
develop new products. But at the present time, they haven't 
been able to do that.
    Mr. Rohrabacher. Mr. Douglass, do you want to jump in 
there?
    Mr. Douglass. Generally speaking, the manufacturing part of 
the industry makes about $6 or $7 billion a year in profit on 
sales of around $150 billion. That is everything combined. So 
it is profitable. In other words, the manufacturing part is not 
losing money like the airlines are, but the level of 
profitability, as Chairman Walker said, is not the same level 
that you see in other parts of manufacturing.
    Mr. Rohrabacher. But will you be depending on the 
government to come up with--let us just say, hypothetically 
there is someone with great credentials who has a new engine, 
all right, which is--obviously I haven't been in contact with 
somebody like that, but who is going to develop--who is going 
to build the first prototype of that engine? Would it be 
private industry? Would they put money in? Or will you just be 
totally relying on the government to build the first prototype 
to these type of engines?
    Dr. Hamre. In engine technology, at the large engine end of 
the spectrum, the new development of new technology is 
generally shared between the government and industry. There is 
a program called HPTET. It is a long series of letters. I 
apologize for not being able to tell you exactly what it is, 
something like High Performance Engine something something, and 
that is a shared program where the Department of Defense and 
industry share in the development of new engine technologies. 
As you go down further, sir, into smaller and smaller engines, 
generally you find that industry pays for the development of 
those engines.
    Mr. Rohrabacher. All right. Well, I see my time is up. And 
Mr. Gordon from Tennessee.

                          Airline Ticket Taxes

    Mr. Gordon. Thank you, Mr. Chairman. Bob, you mentioned 
that, like, some $46 or whatever amount of a $100 ticket went 
to taxes. I assume most of that was for the trust fund or for 
the local infrastructure and things of that nature. Do you 
think we have adequate infrastructure so that we need those 
funds, or would you recommend that those dollars come out of 
public--or not public, but general funds rather than user fees?
    Mr. Walker. Well, I think we need to sort that out. I mean, 
I think that there are some things that it is entirely 
reasonable for people who utilize the system to pay for it. But 
the problem is that an awful lot of that money in recent months 
has gone into security, for example. And there really is a 
question as to whether or not the airlines and the ticket tax 
ought to be the prime vehicle for providing the security 
options for the country. And so there is a sorting out process 
that needs to be done here about which are the real obligations 
of government to fund through general revenues and which are 
the things that ought to be a part of a user fee structure? I 
think if you did that sorting out process, you might be able to 
relieve some of the burden that has been placed on the airlines 
and ultimately on their competitive position inside the 
transportation system.

                     NASA Infrastructure Investment

    Mr. Gordon. And also you mentioned some interesting new 
programs for NASA and how they are being funded in this current 
budget. My concern is do we have an adequate infrastructure to 
support these programs. I mean, I have a real concern that we 
have an aging infrastructure at NASA that we have got equipment 
facilities that need to be upgraded. And so I guess two 
questions: one, you know, how concerned are you about that and 
are--do we have adequate funding, and if not, do we need to 
have more funding there; and secondly, do you think that it 
would be a good idea for NASA to conduct a comprehensive review 
of its current and future infrastructure needs along with the 
pragmatic assumptions that would guide these requirements?
    Mr. Walker. Let me point you to the Commission report on 
that, because I think we did feel strongly that the 
infrastructure that the--inside NASA is deteriorating, is a 
major problem. We suggested a new approach to that. We 
suggested municipalization and/or privatization of a lot of 
facilities so that you could, in fact, go out and use bonding 
authority in order to put new infrastructure in place. If you 
take a look at what has happened down at Kennedy, the newest 
structures at Kennedy Space Center are, in fact, built with 
bonded money, that--the two platforms for the EELVs down there 
were actually developed by the Florida Space Authority and then 
turned over to the contractors for their use.
    It seems to me that there may be a model there for 
upgrading and building new facilities at a lot of----
    Mr. Gordon. Well, with virtually every state, except for, I 
think, Montana, on the ropes now, you know, who is going to be 
able to afford that? And I guess secondly, even if it is 
bonded, somebody has to pay the premium, so----
    Mr. Walker. Sure. But the issue is that the reason why we 
have not been able to get the money that is needed for 
infrastructure improvement is as these things have gone through 
the appropriations cycle every year, that is tended to be 
downgraded. It is not the absolute necessity right now, and so 
it is not done. This would allow----
    Mr. Gordon. But you think we need additional funding for 
infrastructure?
    Mr. Walker. Yeah. This is a way in which what you could do 
is assure that you get the infrastructure now but pay it off 
over a period of 30 years or so. And yes, that would take some 
additional money for the appropriation so that NASA could, in 
fact, afford to do the bonding. But the fact is that much of 
this, if we depend upon the actual appropriation structure to 
get all of the infrastructure we need, it is simply not going 
to happen, and we are going to continue to have a very serious 
problem.
    Mr. Gordon. But we need--you know, whether it is--we need 
more money budgeted for the infrastructure regardless of 
whether it is paying off a bond or doing it ourselves----
    Mr. Walker. Right.
    Mr. Gordon [continuing]. But one way or the other, we have 
got to have additional funds, is that correct?
    Mr. Walker. Well, again, I would suggest to you that the--
that there are many states who are prepared, because it is a 
good business opportunity for them, to go out and do some of 
this bonding that will not require huge amounts of new NASA 
money to be put in. The states will develop this because----
    Mr. Gordon. Are they going to pay off the bonds?
    Mr. Walker. No, the authorities have the ability to go out 
and bring private industry into those areas that are 
municipalized, and therefore they make the money that can be 
used to pay off the bonds. And so----
    Mr. Gordon. I thought we had a surplus in infrastructure--I 
mean, not infrastructure, but in terms of assets of depressed 
launch.
    Mr. Walker. Well, for example, if you are going to do an 
orbital space plane, as NASA has proposed, if that is going to 
be the new generation of technology, you are going to have to 
have facilities that allow you to integrate that aboard the 
EELVs or integrate it in whatever other way that you would 
utilize it. Who is going to build those facilities? Is NASA 
going to build them out of the appropriations stream or should 
you look for a more unique way of providing the facilities? We 
already have the example now that the Air Force utilized that--
a bonding authority through a federal--the Florida Space 
Authority in order to put the facilities in place which are now 
being used for EELV. We are simply suggesting that that may be 
a model that gives you the capacity to get what you need for 
the future.
    Mr. Gordon. Well, I think--I hope that would be worthwhile. 
Most states that I have been hearing say that we are passing 
too much down to them now. But let us see if the other 
panelists think that the states and private sector can afford 
to take this on or whether or not we need to have additional 
funding at the federal level and also whether or not we need to 
have that strategic resource review to determine what we have 
got and what is the situation? And what are you going to do 
with it? Mr. Douglass.
    Mr. Douglass. My input would be we probably do need some 
kind of a strategic review of NASA's infrastructure and a plan 
to modernize it. There are a number of structural problems that 
exist today with NASA that are huge bills to be paid in the 
future. One of them is the revitalization of this 
infrastructure to meet the long-term needs of the Nation. 
Another one is some substantial amount of research to help the 
FAA with its long-term air traffic control needs. And then in 
the not too distant future, we have got to figure out a way to 
replace the shuttle, and----
    Mr. Gordon. Mr. Douglass, I am sorry. I don't want to be 
imposing on these other people's time, so I guess the question 
is do you expect the private sector and the states to assume 
this or are we going to have to have additional federal dollars 
to accommodate this?
    Mr. Douglass. My guess is you will need additional federal 
dollars, sir.
    Mr. Gordon. Substantial or----
    Mr. Douglass. Substantial.
    Mr. Gordon. Mr. Hamre.
    Dr. Hamre. I can only speak very narrowly. I mean, if--
there are only three ways that you fund things when it is a 
public good that you want that the marketplace won't provide. 
It is you mandate the cost and you just impose it on the 
private sector, you have a user fee, or you do a direct 
appropriation. Each of these has a different impact on 
efficiency and on incentives. I will give you an example of 
what I don't--I think you do not want to use user fees, and you 
do not want to have a mandate, and that is air traffic control. 
I mean, I think--I remember when we were talking about having 
user fees for air traffic control. You know, all you are going 
to get is a bunch of people that won't file flight plans, 
because they are trying to avoid cost. I mean, I think you--
there are certain things that you have got to structure in your 
mind what are the incentives that come from it. I think we are 
going to have to spend more money on air traffic control.
    Clearly the OEP Program is under-funded, and it needs to be 
funded at a higher level. And we need to invest in a modern air 
traffic control beyond the OEP.
    Mr. Gordon. And do you think that NASA should have a 
strategic resource review?
    Dr. Hamre. Well, I certainly--it is always helpful. We 
certainly need it at DOD. I would recommend it, sure.
    Mr. Gordon. If I could just conclude, Mr. Chairman, by 
saying that the OMB requested that, the appropriators required 
it, NASA started it but wouldn't finish it. And so I think if 
within your spheres of influence you would suggest to NASA that 
they move forward with this strategic resource review, as was 
required by OMB and by the center appropriators, then I think 
it would be beneficial for all of us. Thank you. And thank you 
for your time.
    Mr. Rohrabacher. Mr. Gordon, we probably will have time for 
a second round, and you will be able to follow-up even more. 
Now Mr. Calvert.

                              Wind Tunnels

    Mr. Calvert. Thank you, Mr. Chairman. We--some number of 
years ago, Bob, you probably remember this, we were talking 
about wind tunnels 10 years ago. And as far as I know, we 
haven't done a lot since then. And I guess the state-of-the-art 
wind tunnel that we have in the United States, I guess, is 
Ames, and I don't know if we have really improved it 
substantially. Did you look into wind tunnel technology here in 
the United States versus what others are using throughout the 
world?
    Mr. Walker. Yeah. We did not spend a lot of time on it, but 
clearly, the United States has not invested in wind tunnel 
technology. Most of the wind tunnels we have built have been 
fairly small wind tunnels where you test models. A full-scale 
wind tunnel, I don't believe we have built one in, what, 40 
years or something like that. And much of the rest of the world 
is migrating to other places to have wind tunnel testing done, 
because they have far more modern facilities than we do and far 
more up-to-date use of information technologies within those 
wind tunnel facilities.
    Mr. Calvert. And I remember from our discussions years ago 
that you couldn't expect, say, Boeing or any particular 
aerospace industry to front the cost of a wind tunnel, because 
it just doesn't get a pay back on it. But there was some 
discussion about having a joint type of facility where the 
military, obviously who has a function, and the industry 
themselves coming together to maybe finance this type of thing. 
Is there--is that a good idea or do you think it should be a 
direct appropriation to build a state-of-the-art wind tunnel in 
the United States?
    Mr. Walker. Well, again, I would say to you that the 
clearer message that you should take out of the final report of 
the Aerospace Commission is that we need a lot more in the way 
of cooperative efforts among agencies. Now all of them, in 
fact, depend upon appropriation streams, but the fact is that 
time and time again we came up against issues where there was a 
need for civilian, commercial, and military uses of the same 
kind of resource. And our feeling is that Congress and the 
Administration needs to figure out ways to crosscut 
horizontally through the vertical silos that now exist so that 
we get a really maximum use of the resource we put into these. 
But yes, I mean, everybody in the country that is concerned 
with aeronautics and aerospace requires up-to-date wind tunnel 
technology. It should not be laid off on only NASA to provide 
that for the Nation. There ought to be a cooperative approach 
among a variety of agencies that have that need in order to see 
to it that it gets done.

                           Engine Technology

    Mr. Calvert. Another question on--we have--the Chairman 
brought up engine technology and can--and maybe, Mr. Douglass, 
you are the best person to answer this question. Can--do you 
think of any time a major engine design in the United States 
that has been put forward has not had government participation 
in some way?
    Mr. Douglass. Not in recent years, sir. We are at a level 
of technology in engines today where the primary performance 
parameters are all set by the government. And the most recent 
series of parameters that we have imposed on the industry have 
been noise parameters. We have made our commercial aviation 
engines substantially less noisy than they were 10 years ago. 
We are at what is called stage three noise reduction. We are 
looking to go towards--in a year or so, toward stage four, but 
the new thing we are also looking at are how do we reduce the 
emissions that come out of an engine. And when you talk noise 
and emissions and thrust together, you pretty much tied down 
the design of the engine.

                  Future Air Traffic Management & OEP

    Mr. Calvert. And one last question on regards to air 
traffic control. All of us fly a lot, and we are all 
frustrated. The industry is frustrated, as the public is 
frustrated. And we have been talking about fixing our air 
traffic control system here in the United States for a long, 
long time. And do you think we are going to get any closer to 
actually taking this from the idea stage to actual 
implementation of a plan that can take us to the 21st century 
with the technology that is available today?
    Mr. Douglass. First of all, Mr. Calvert, I want to--just by 
way of a disclosure, I was asked if I represent anybody, I am 
on the Board of Directors for a not-for-profit R&D corporation. 
And it is the FFRDC that supports FAA. So just by way of 
disclosure, I just delineate that I have a relationship with 
them. It is a--you know, it is a not-for-profit government 
corporation.
    The OEP is a good program. And it--and this is the program 
that is in place now. It has been designed by the FAA to 
improve the efficiency of what is there now. And it definitely 
is a crucial thing to do. It--but I will have to tell you, the 
OEP program is a treading water program. If you put in place a 
$15 billion investment, and we need to make it, 10 years from 
now, we are going to have all of the same problems with air 
traffic control that we have today. If you don't put in that 
investment, it is going to become a nightmare over the next 
several years. So you have got to make this investment in order 
to avoid a dramatically deteriorating situation once we get out 
of this recession.
    But it is not the long-term. The long-term we need to move 
to a new technology. And I think that we all have the vision of 
this new system, but it hasn't been engineered in any concrete 
way. This really does need to be--I would commend it to you, 
sir, as a focus for this committee, there needs to be some 
effort put on this. And it is going to be crucial, but it is a 
10-year out, 15-year out solution. You have to stay with the 
OEP program if you are going to see--if we are going to avoid 
terrible problems with air traffic control once the economy 
pumps up.
    Mr. Calvert. So in closing, you would say we need to do a 
two-track type of a process here. One is to attempt to fix the 
system that we have now to get through the short-term, and in 
the long-term, scrap what we have and start over again with a 
state-of-the-art system that will take us forward in the 
future?
    Mr. Walker. Well, what you are talking about is a change in 
the fundamental underpinnings of the system. I mean, the system 
that we have had for 50 years depends upon voice communication 
between controllers and pilots. If you are going to have 
substantial increases in the amount of air traffic and then you 
are going to put unmanned aircraft into the same environment as 
human-controlled aircraft, if you are going to put space 
aircraft into the same environment as air vehicles, you simply 
can not rely upon a voice communication system. You have to go 
to a far more automated system. And as we have suggested here 
earlier, the military has assets that are--that could be 
utilized for such a system.
    And so what we are suggesting is that as you develop OEP to 
enhance the voice communication derived system, you also begin 
to move to this automated system that gives you the opportunity 
then to do the complete switch at some point in the future.
    Mr. Calvert. Thank you.
    Mr. Rohrabacher. Mr. Lampson.

                        Trusted Traveler Program

    Mr. Lampson. Thank you, Mr. Chairman. Somewhat the same 
line that Mr. Calvert was just talking about, our travels 
through airports certainly has been one of the significant 
bottlenecks for the airline industry to--that has added to 
their difficulties. And we have talked from the last year or so 
about a trusted traveler program that might help significantly 
move people through those airports more quickly. What are your 
thoughts about what impact it would have, any of you, on the 
airline industry and their finances if we implemented a trusted 
traveler program? And how quickly can we do this?
    Mr. Walker. Well, it is not an issue where the Commission 
spent a good----
    Mr. Lampson. I understand.
    Mr. Walker [continuing]. Deal of time looking at it. I will 
tell you, as one of the people that travels a lot, and I think 
all of us here and so on do, I would love to see it come into 
place, because it would certainly make it more convenient for 
people who fly a lot to be able to get on and off airplanes 
easier. And I think that has economic implications for the 
airlines.
    Clearly people who have to spend long hours waiting in 
lines are not people who are going to be happy consumers. If 
you are flying in this country less than 500 miles, the average 
speed of travel is 35 miles an hour by air. So the fact is that 
that is not a system that ultimately gets you to what you want 
to do. Is that--isn't it 35 or is it 85? It may be 85, but 
anyhow, it is a very, very low speed compared to the speed of 
the aircraft, because the time is being spent in other 
pursuits. And so insofar as you can move away from those kinds 
of numbers, you will have a more profitable industry.
    Mr. Lampson. I just wanted to raise that, because I feel 
very strongly about it. And I am on the other Committee that 
hopefully can push to do something. But we have--we are holding 
this up. The technology is there, and we are not moving it. And 
somehow or other, we must.
    Mr. Walker. I want to get it in the record just right. It 
says for air travel--this is out of our Commission report. For 
air trips less than 500 miles, doorstep to destination travel 
time is now between 35 and 80 miles per hour.
    Mr. Gordon. Well, I think I will get Mario Andretti to give 
us a lift.
    Mr. Douglass. Sir, I would like to add one thought to that. 
And it also stems from what Mr. Calvert said before. Where some 
of these issues intersect is that the government can develop 
the technologies needed to do these kinds of things, and 
indeed, in many areas, the technology has already been 
developed. The issue is deploying it. And if we have an airline 
industry that is absolutely bankrupt, how are we going to 
deploy it?
    Mr. Lampson. Do you think they are waiting on us, then, to 
say, ``Do it,'' or for us to do it?
    Mr. Douglass. I believe the issue for us, all of us as 
Americans, is in the light of this new security environment 
that we are in, is where does inherently governmental 
responsibilities to protect our people end and where does 
private enterprise responsibilities begin to pick up? And I 
think we all have to think our way through that, because the 
passenger part of airline security is only the tip of the 
iceberg. I mean, I--my own personal view is given what happened 
out there in Pennsylvania, those brave Americans that rose up 
in that airplane and killed those damn hijackers, you are not 
going to see a lot of them try that any more. So what you are 
going to see are terrorist events which have to do with 
sneaking it in through the baggage or hiding out at the end of 
the runway with a missile or some other kind of thing.
    So the security environment is really now almost anywhere 
below 10,000 feet the airplane operates where, you know, 
somebody can get at them.
    Dr. Hamre. Sir, could I just ask you, the problem isn't 
with the industry. It is with our government that has old, 
obsolete, paper-based rules that it keeps wanting to impose on 
us, because that is the way they have always done it. How many 
times have you traveled internationally and filled out that I-9 
form, you know, before you land at Dulles? You know. Well, I 
don't know what they do with all of those pieces of paper. I 
can not get on an airplane without the company swiping my 
passport. They could compare that today to say that is John 
Hamre. I am just filling out that form so I can stand in an 
hour-long line out there to hand it to an inspector.
    Mr. Lampson. You could carry a smart card that has all----
    Dr. Hamre. That is exactly right.
    Mr. Lampson [continuing]. Of that data on it, and you could 
put your airline ticket and everything that happened in your 
past----
    Dr. Hamre. But you have got to change. This is not an 
industry problem. This is a government problem.

                            Space Imperative

    Mr. Lampson. I thank you very much, and I am totally 
running out of time to do what I really wanted to do. Tell me a 
little bit about the comment that was made in the report, Mr. 
Walker, about the recommendation to create a space imperative. 
It sounds like a positive step. I am a little unclear about it. 
What did the Commission mean by that phrase, ``create a space 
imperative,'' and what specifically are you recommending to be 
done to create a national space imperative?
    Mr. Walker. Most of that is based upon our belief that if 
you could cut the time of travel, for instance, to places like 
Mars and some of the places that we have dreamed about going in 
space, that you are more likely to be able to have the 
imperative to fund them, that one of the problems inside the 
political system is that when you say that it takes months or 
years to go to places, it is very hard to get people excited 
about them in a sense of actually getting them paid for inside 
the system. And so a large portion of that was our belief that 
if, in fact, you come up with new propulsion systems that cuts 
the travel from Earth to Mars to weeks rather than months, that 
it becomes far more politically viable to fund a program that 
has that kind of potential.
    Mr. Lampson. Have we funded any of the research recently, 
and we cut some of the funding that was leading toward the 
engine that would help us to----
    Mr. Walker. Yeah, well--but you--but the proposal that you 
have before you right now coming out of NASA is for Project 
Prometheus, which would fund nuclear plasma rockets that would, 
in fact, give you the ability to cut the time of travel to Mars 
to a matter of weeks.
    Mr. Lampson. My time is up. Thank you, Mr. Chairman. Thank 
you, panel.
    Mr. Rohrabacher. Thank you very much, Mr. Lampson. Mr. 
Lucas.

                             Space Tourism

    Mr. Lucas. Thank you, Mr. Chairman. Chairman Walker, there 
has been a lot of discussion in the past couple of years about 
the commercialization of space ventures and the part that 
entrepreneurial companies can play in that. Would you assess 
the role of suborbitals as we look at our national space policy 
for the next couple of years?
    Mr. Walker. Well, the problem right now in the entire 
commercial marketplace in space is the fact that it is flat on 
its back, that there is very little investor interest in 
putting money in, because in large part, the great hope of 
generations of satellite constellations that--where the 
profitability was going to be simply has never materialized. 
And so you have excess launch capacity at the present time and 
not very many people who are willing to put investment dollars 
in. Where I believe that there may be some hope for the future 
and where some small commercial companies are beginning to at 
least try to make a go of it is in space tourism and 
particularly in suborbital flight. And you have about 24 
companies that are out there right now worldwide competing for 
the X-prize. Success on the X-prize may, in fact, give you a 
generation of vehicles that would be used almost exclusively 
for commercial space tourism. And that is one of the places 
where we see, and where the report says that there is a 
potential for perhaps a profitable enterprise in the future.

                     High Speed Propulsion Research

    Mr. Lucas. Thank you. You mentioned, and your colleagues on 
the panel also mentioned the importance of engine propulsion 
work being a major initiative for NASA and the Federal 
Government. And I know over the recent decades, literally we 
and the Europeans have spent hundreds of millions of dollars on 
efforts to develop supersonic transportation propulsion 
systems. And there has been discussion even amongst those of us 
in Congress about the potential to restart some of those 
programs. Did the Commission--did you on the Commission make 
any recommendations about restarting such research? Or maybe 
the better question is what do you think of the whole concept?
    Mr. Walker. Well, if--in the report, we make a 
recommendation that endorses the National Aerospace Initiative 
that is largely being run out of the offices of DDR&E and 
Defense but is being done in cooperation with NASA. And the 
whole idea behind that is to begin with our capabilities right 
now to do about mach II, mach III, and move ahead by one mach a 
year over the next 10 years, so that at the end of that time 
you have a capacity to do something in the area of mach XII or 
mach XV. The reason why that is an important initiative is 
because it will take advantage of some new propulsion concepts 
that we have as well as take advantage of some new materials 
technology that is emerging.
    And we believe that that cooperative effort between NASA 
and DOD is in fact a very important program for this nation to 
do for two reasons. First of all, it gives the military some 
capability--some speed capabilities that it vitally needs for 
the future, but secondly, the vehicle that you develop could 
become the basis for the first stage of a two-stage, fully 
reusable, orbital vehicle in the future. And that is a 
potential that we need to recognize as we begin the--to do the 
work of developing the orbital space plane, for example.
    Mr. Lucas. Thank you. Thank you, Mr. Chairman.
    Mr. Rohrabacher. Mr. Smith.
    [The prepared statement of Mr. Smith follows:]

            Prepared Statement of Representative Nick Smith

    I want to thank Chairman Boehlert and Ranking Minority Member Hall 
for holding this hearing today to review the state of the United States 
Aerospace Industry and NASA Workforce legislation.
    The aerospace industry has impacted our nation beyond simply 
contributing to the technology of flight. It contributes to the 
efficiency and security of our air transportation system. Discoveries 
made through aerospace research and development have led to significant 
improvements in our transportation, communications, and defense 
capabilities. And perhaps most importantly, aerospace employs millions 
of Americans all across the country.
    In order to maintain our technological and competitive position in 
the world, our country needs to produce young people with the best 
science and math training. The second half of this hearing will focus 
on the difficulties that NASA is having recruiting and retaining 
quality employees. Clearly there is a great need to improve math and 
science education in this country.
    Last year, we were able to pass legislation that improved research 
and education efforts at the National Science Foundation. One section 
of this bill--known as tech talent--established a competitive grant 
program to increase the number of students pursuing and receiving 
degrees in science, math, engineering, and technology. I am pleased to 
see that the Commission's report recognizes the importance of continued 
improvement in math and science education.
    Still, it is one thing to ensure that quality educational programs 
are available to Americans, but it is another to actually motivate and 
see American students entering and completing degrees in these fields. 
Forty percent of the graduate students in engineering, mathematics, and 
computer science in this country are foreign nationals. We should be 
very concerned that we are simply educating the S&T workforces of other 
nations while more and more of our own students are ill-prepared to 
succeed in these careers.
    Personally, I think that NASA and the space program could be a 
fantastic motivator for getting kids excited about science.
    I will be interested to learn how the Commission would recommend 
how we can encourage more American students to enter into these fields 
that are so important to maintaining our economic and national security 
in the future.

    Mr. Smith. Thank you, Mr. Chairman. Gentlemen, thank you. 
Bob, good to see you again. I was trying to think of the issues 
we were talking about when you were Chairman of this committee, 
one, two, three, four, five, six, seven, eight----
    Mr. Walker. The issue was balancing the budget back then. 
That was the issue.

                        Science & Math Education

    Mr. Smith. We won't even talk about that. I guess--I Chair 
the Research Subcommittee now, and we were pretty aggressive in 
the NSF reauthorization bill to push an effort to try to 
encourage more of our American students in the science and 
math. And of course with some place between 60 and 70 percent 
of NASA's employees being engineers or scientists, what--did 
the Commission talk about this? Is there a concern that almost 
half of our graduate students in aerospace science engineering 
are now foreign students? What was the Commission's 
recommendations?
    Mr. Walker. We are very concerned about it. You will find 
in our report that one chapter of the report and one full 
recommendation is related to workforce issues. And a 
substantial portion of that relates to education. There are a 
couple of issues here. First of all, if, in fact, you are going 
to do the kinds of things we need to do in aerospace in the 
future, you have to have a scientifically and technologically 
competent society. It isn't just the people who have----
    Mr. Smith. Yeah, that is what I tried to say, but how do we 
do it?
    Mr. Walker. Well, we recommend, among other things, we 
recommended some coordinated activities between the Department 
of Labor, the Department of Education, NASA, and other agencies 
and so on to begin to define what the needs are so that the--we 
can speak, again, across agencies to meeting the need. 
Secondly, we recommended implementation of educational reforms 
that would include both individualized and structural 
curriculums and lifelong learning. We believe that there was 
a--that there is a real need in our society to refocus 
education away from the idea of the teacher as an imparter of 
information but rather a teacher as the manager of information. 
Utilize all of the information now inside the system, use 
technology so that you can tailor instructional programs to the 
needs and the interests of the individual student.
    That is entirely possible. The aerospace industry is doing 
it now. They have programs that they use to train their own 
workers that do those kinds of things. We think that it--there 
is a need to merge that into the public education system, into 
the university systems, in a way that you get a far better 
competency level.
    Mr. Smith. Yeah, I think NASA will--in 1957, after Sputnik, 
NASA was developed, and there was sort of a momentary bubble 
that excited a lot of youth. Two of my four kids went into 
physics and engineering, I think, partially because of that 
little stimulus out there and excitement. Somehow, I am not 
sure NASA still fulfills that excitement role for youth, but--
--
    Mr. Walker. One of our commissioners, Neil Tyson, said that 
it is very important to have some exciting projects that you 
are doing, because that is what does stimulate students. He 
said you won't get very many aerospace engineers who will come 
on board in order to make the next generation of engines 10 
percent quieter. The fact is that you need some real programs 
out there that really stimulate people to do exciting things. 
And that is one of the things that our Commission----
    Mr. Smith. Do you other gentleman have----
    Mr. Douglass. Yes, sir. I would like to add a couple of 
things to that. First of all, when you look at this problem, 
you immediately come to the issue that the American educational 
system is not all run by the Federal Government as primarily, 
as we know, in our states and local communities. And so one of 
the things that industry is doing, the aerospace industry is 
doing, is we are going to take the Commission recommendations 
and over the summer and fall of this year, try to create a 
national plan, which is a cooperative plan between the Federal 
Government, the states, local communities, and industry and 
academia to get at this problem, because it is not just a NASA 
problem. It is an industry problem. It is an Air Force problem. 
It is a Navy problem. It is a NOAA problem. Anywhere where 
aerospace touches our government, we are finding that our 
workforce is aging and we aren't getting the human capital we 
need to sustain the industry or the oversight part of the 
government that regulates the industry.
    Mr. Smith. Let me ask one last question, I think, and then 
maybe, if the Chairman lets me--because I think education--I 
mean, it certainly is the seed corn to our future, whether we 
are talking about aerospace or whether we are talking about 
innovations to be competitive in a world market. Give me the 
Commission's position or recommendation or evaluation on the 
current NASA, FAA trying to bring in DOD and Homeland Security 
in an effort to design how we are going to better structure new 
management and organization for the air traffic program.
    Mr. Walker. Well, from my perspective, they are just in the 
process of getting it off the ground. That in and of itself is 
a good sign. I mean, for a long time, there has been resistance 
of the agencies to work together. There has been resistance 
inside of FAA to step out on programs that would change the 
system in revolutionary ways. I think that attitude is 
changing. I have been over and briefed a number of people 
inside of Department of Transportation and FAA. They are very 
much on board with the idea of moving toward new systems. NASA 
has some very exciting things that they bring to the table on 
this. You--the question will be whether or not you can utilize 
some of these DOD assets. I mean, there--if you can't do that, 
it becomes a system, which is probably too expensive for us to 
do.
    If you can utilize some of those assets, then I think it is 
entirely possible that you could develop a system here that 
would be in the range of affordability. But that is a 
cooperative effort that----
    Mr. Smith. So you say--pretty much, is that an agreement? 
You say yes, it is a good thing.
    Mr. Walker. Yeah, it is a good thing.
    Mr. Smith. And Mr.--is it Hamre? I am sorry. I don't know 
how to pronounce your name. Any last words on education or----
    Dr. Hamre. The only thing is that you really can't have the 
educated workforce if you don't buy anything. You know, we have 
got to buy stuff. And either you can educate them, you can 
crank them out the door, but if they don't have real things to 
do when they get out, that is going to be the problem. So it is 
creating a vision and actually choosing to extend what it is we 
set as a goal for our society, what we want to do. But just 
educating the next generation of engineers without having 
things for them to work on is probably going to be 
counterproductive.
    Mr. Smith. Thank you.
    Mr. Walker. The fact is, we are graduating aerospace 
engineers. They end up working in the computer industry.
    Mr. Smith. Right. And they are being offered 40,000 right 
out of--with a bachelor's degree, and so a larger and larger 
percentage of our researchers getting our federal grants are 
foreign nationals. Thank you, Mr. Chairman.
    Mr. Rohrabacher. Thank you very much. I think that, of 
course, we all have to recognize you will be able to attract 
young people, bright young people, into engineering and 
scientific jobs if you pay them more money. Surprise, surprise. 
I mean, if you are paying--I mean, I drive down in my 
community, and I--a lot of aerospace people live in my area, 
but the people who live in the best houses are all lawyers. So 
we won't go into that. Mr. Larson, I don't know if he is a 
lawyer or not.

                    NASA Aeronautics R&D Investment

    Mr. Larson. Thankfully not. And with all due respect to the 
legal profession, I am a teacher, so I thank the Chairman, and 
I thank him for this--for the hearing. And I want to thank 
these gentlemen on the panel today, Mr. Walker, Mr. Douglass, 
and Mr. Hamre, who have been instrumental in putting together 
the Aerospace Commission's recommendations.
    My concern, and I will cut right to the chase, you know, we 
face European Vision 2020, global competition. And when we look 
to the NASA budget, and as we reminded NASA when they were in 
here the other day that part of NASA, as the second--the first 
A in NASA stands for Aeronautics, and yet we see, again, a cut 
of five percent. And actually, it is probably deeper than that 
when you take into consideration inflation and costs.
    If that cut is allowed to stand, and especially in lieu of 
your recommendations before--to the President before Congress, 
what impact will that have on research and development and our 
ability to compete into the future? We will start with Mr. 
Walker and----
    Mr. Walker. Well, I think you do have to look at the budget 
in terms of the totality of it. And that is that a large 
portion of what NASA intends to do in the aeronautical area 
does involve the National Aerospace Initiative. And there, you 
need to look at the fact that that is a program that the 
Administration is standing up for over at DOD and where they 
are cooperating with NASA. NASA will be the beneficiary of 
being able to utilize the DOD resources. And the fact is that 
some of the NASA input to this will be very important to the 
long-term of the program. So I think that it is important that, 
as a Nation, we are investing in aeronautics and in propulsion 
and in a number of things of that type. I would want to look at 
the entire resource base, however, of what is going into it and 
not just single out particular agency budgets.
    Mr. Larson. Mr. Douglass.
    Mr. Douglass. I think we have got to do a lot more in 
aeronautics. I think one of the manifestations of a lack of 
investment in this area can be seen in situations like Boeing 
when they were thinking of developing the sonic cruiser, having 
to go to Toulouse to do it in a wind tunnel, to their arch 
rival. I think there are other areas where the cutbacks in 
aeronautics have caused us to be less competitive in a very 
competitive global economy.
    If we accept the model that NASA is supposed to be the 
engine for basic research for the civil side and the DOD is 
supposed to supplement that or we glean what we can, and Bob 
pointed out the structural problem we sometimes have that DOD 
technology is very expensive because it is, in many cases, 
absolutely life or death and so on. But there are only two 
places to get the technology we need for the commercial side: 
one is from NASA, and the other is from the Department of 
Defense as far as basic research is concerned. And if we don't 
invest as a Nation, we are gradually going to lose this part of 
our economy, as sure as God made little green apples. And there 
is a cause and effect here. It is very hard to draw, you know, 
micro connections. But when you go back to the macro view and 
you see that the EU, as you mentioned, in 2020 has pledged to 
spend $95 billion over the next 10 or 15 years to displace us, 
and you look at our--what is going on in the civil aviation 
side of our economy, you see we have these huge structural 
problems that we have got to deal with.
    Mr. Larson. Mr. Hamre.
    Dr. Hamre. I--my gut instinct says that we probably need to 
be spending more, but we do need to--an awful lot of work for 
aviation in the future is really on things like materials 
technology, nanotechnology. So it may not be showing up in the 
kind of ways that in the past you would think about going into 
a NASA budget into a wind tunnel. You would have to get people 
that are more expert that are really looking into the details 
of it to know where we need to be. But you know, I think this 
is an industry right now that most people have decided it is an 
old, mature industry, and it is not very exciting. And people 
are walking away from it. And I think that is going to be a 
mistake.
    Mr. Larson. Well, it is a very alarming mistake inasmuch as 
we are shedding workforce, we are shedding expertise and 
technology. And as Mr. Douglass said, here is Europe staring us 
directly in the face and saying, ``Oh, by the way, we are 
coming after you. We are going to subsidize our industry, 
because ultimately we are going to take it away, because your 
government is no longer wed to supporting this kind of research 
and development, and ours is.'' And ultimately, without 
governmental intervention and support here in dramatic fashion, 
it is just going to be the slow attrition and the constant 
outsourcing to other nations and other industry as we lose our 
core base of aerospace industry here in the country. I mean, it 
is incredibly alarming that we would let this take place.

                       Aerospace Sectoral Budget

    Mr. Walker. Mr. Larson, I agree with you. The one thing I 
would suggest, though, that may be worth you looking at is the 
fact that one of the things that the Commission did as a part 
of our work was developed an aerospace sectoral budget. We went 
through and figured out where all of the spending was taking 
place in aerospace inside the government. What you come to a 
conclusion is--now that did not include the military, because 
the military was off, but if you take a look at all of the 
resources, you will find a tremendous amount of money that is 
being spent in aerospace. The question is whether or not it is 
being spent correctly, and whether or not it is being spent 
with any kind of rational plan behind it.
    And one of the things that really needs to be done in order 
to address the issues that you are talking about is to assure 
that we are spending that money for the things that really need 
to be done. And what the Commission tried to do was prioritize 
how that money should be spent. And we would agree with you 
that it is extremely important that we spend some money in 
these areas that are going to determine the future of the 
industry.
    Mr. Larson. Thank you very much.
    Mr. Rohrabacher. Thank you, Mr. Walker.
    Mr. Larson. Thank you, Mr. Chairman.
    Mr. Rohrabacher. And there is a difference between 
subsidies that our foreign competitors might have the advantage 
of and perhaps incentives that we could provide. And there are 
two different approaches to trying to make people competitive. 
We could--I will recognize Mr. Bart Gordon for a 1-minute 
summary. And I will give a 1-minute summary, and we will move 
on to the next panel.

                    Improving NASA's Infrastructure

    Mr. Gordon. Thank you, Mr. Chairman. And I hope that the 
Committee will follow this same brevity.
    Is it fair to say that it is the consensus of this panel 
that there needs to be infrastructure, and I would say even 
significant infrastructure improvements within NASA, that some 
portion of that may very well need to come from already 
financially strapped aviation industry and states, but also 
that there needs to be additional resources, and what I mean 
bluntly, is spending on infrastructure by the Federal 
Government within NASA? Is that a fair consensus? Does anybody 
not agree with that?
    Mr. Walker. Well, the only caveat I would put on it is that 
I would also put a part--as a part of that better utilization 
of the resources that are already being spent.
    Mr. Gordon. Okay. Well, good. That is--but the first part, 
we do need to--we are going to have to spend some more, is that 
fair? Okay. Then the second part is going to what you have 
suggested. Is it also a fair consensus that this committee 
would recommend that NASA have an inventory or strategic 
resource review of its assets and facilities, what improvements 
need to be made, what consolidations need to be made, if any, 
and any--and what expenses need to be made? Would it be fair to 
say that there should be that type of review of NASA? Does 
anybody--for the record, I think all of the----
    Mr. Walker. I don't disagree with that.
    Mr. Gordon. Okay. So we have got horizontal--or rather, 
vertical heads.
    Mr. Walker. Again, that was not included in the Commission 
report, so we can't say that that is what--where the Commission 
came from----
    Mr. Gordon. But the panelists.
    Mr. Walker [continuing]. But I am speaking for myself, 
personally----
    Mr. Gordon. Thank you.
    Mr. Walker [continuing]. I don't have a problem with that.
    Mr. Gordon. Thank you.
    Mr. Rohrabacher. Thank you, Mr. Gordon. And thank you to 
all of the panelists today. Let me just note a couple of 
things. We heard several times about the possibility that there 
is a lack of cooperation in terms of utilizing technology that 
is available. I--this--as Subcommittee Chairman, Mr. Gordon 
is--just walked out, but as Ranking Member, I am sure he would 
agree, we have--we will be having a hearing of the Subcommittee 
that is focused on that issue of whether or not there are 
technologies and how to free them up from the--especially from 
DOD over to the civilian sector. Also, part of that hearing 
will be whether or not labeling this of secrecy in our 
government, whether or not that has something to do with an 
obstacle to competitiveness where there might be some 
technologies that aren't permitted to be utilized by the 
civilian sector by, perhaps, an overaggressive use of secrecy 
now that the Cold War is over with. So we will address that in 
this Subcommittee.
    I am noting that Mr. Walker repeated numerous times the 
lack of propulsion and how we should focus on propulsion. Let 
me note that if the airline industry is losing money, if we had 
engines that would be--cost less, meaning they wouldn't have to 
be replaced after every 20,000 hours or so, or they would be a 
better use of fuel and were, perhaps, lighter, the airline 
industry may well be able to be competitive again. And I know 
there are some engines around that have not been followed up 
on, that are not--that there have been no prototypes, but there 
are engineers, who are very respected engineers, who have got 
some good ideas. And I would hope that we have an industry that 
is open to these ideas as well as having our government open to 
these ideas.
    Now with that said, thank you all very much, and Mr. Ehlers 
came in late, but because he has the Ph.D., and the guy who 
really knows all of the answers, we are going to give him a 
chance to ask whatever questions he wants. Go right ahead, Mr. 
Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. I will be very brief. 
Actually, I was here very early, but I have made a McArthur-ist 
return. Just--and I was in an Aviation Committee hearing, and I 
heard the same thing I heard here, that the industry is in 
trouble. If we can get rid of government regulation, we can 
save 10 percent. So I find it interesting that both ends, the 
production end and the consumer end, are in the same problem.
    Just a quick question, Mr. Walker, and if you have already 
covered this and it is in the record, you don't have to answer, 
but I was intrigued with your comments earlier about the 
propulsion issue. Now were you referring to space propulsion or 
to commercial aircraft propulsion?
    Mr. Walker. In the case of the space propulsion, it is in 
space propulsion largely that we are looking at and to cut the 
times for particularly exploration of the solar system. In 
terms of aircraft propulsion, we have mentioned a couple of 
times here that the National Aerospace Initiative is aimed at 
increasing the speed substantially over the next 10 years.
    Mr. Ehlers. And what do you mean by ``substantially''?

                     National Aerospace Initiative

    Mr. Walker. The National Aerospace Initiative is aimed at 
taking the present speed capacity we have of mach II to mach 
III and moving it up at one mach a year over the next 10 years, 
so that after a decade, you would have the capacity to do a XII 
to XV mach.
    Mr. Ehlers. And you are talking about this for passenger 
service or----
    Mr. Walker. Well, we are talking about having the 
capability for a number of uses. One of the uses for it would 
be to provide the air portion of a two-stage to orbit vehicle 
for space travel. Some of it would be to deliver goods. Some of 
it would be to deliver munitions. You know, there are a variety 
of uses. And you might not use all of that speed for commercial 
aviation immediately, but it does give you the capacity once 
you have developed the materials and propulsion to look at much 
higher speed aircraft for commercial passenger use.
    Mr. Ehlers. Okay. You are probably not going to use Middle 
East oil for that, either.
    Mr. Walker. We are going to use hydrogen.
    Mr. Ehlers. Somehow I am not surprised at that answer. I 
yield back, Mr. Chairman. Thank you.
    Mr. Rohrabacher. And because the Chairman gave himself an 
extra minute, we are going to give Mr. Lampson a minute.
    Mr. Lampson. Such a magnanimous individual. Thank you, Mr. 
Chairman. I just wanted to really make more of a comment than 
ask a question at--Bob, your comment about the--being a space 
imperative, and I was--I guess my thought was perhaps that we 
ought to give more credence to trying to get the cost of 
getting into lower orbit down more so that we could do more in 
space and then ultimately set bigger goals that would take us 
further on out into space with the better engines or faster 
engines that would let us move to Mars more quickly.
    Mr. Walker. Well, that is a part of our recommendation as 
well. I mean, we--if you look at the Commission report, we also 
recommended trying to come up with systems that would give us 
lower cost of transportation to orbit in the first place, and 
then particularly looked at reusable spacecraft on that. And 
that is the one reason why the National Aerospace Initiative, 
in conjunction with the orbital space plane that could provide 
both pieces of an ultimately viable, reusable vehicle are 
important here. So we would agree that reducing the cost to 
orbit is also important, but we thought that the imperative 
comes from the ability to do more things in a time frame which 
is more practical.
    Mr. Rohrabacher. All right. And let us remember that Mr. 
Hamre suggested that there are a lot of things that we are 
doing regulatory-wise that are obsolete and are causing great 
costs to our industry, and we can change that without spending 
any money. And we should. There is no excuse for us in Congress 
not doing our job and getting at those and trying to have those 
reforms. Thank you very much, panelists.

                                Panel II

                             NASA Workforce

    Mr. Rohrabacher. We have a second panel with us. And are 
you going to invite the second panel? All right. Thank you all 
very much.
    The witnesses from the previous panel certainly hit certain 
problems right on the head, and one of the major problems that 
the Aerospace Commission identified was its workforce in terms 
of aerospace workforce of the United States both in industry 
and government. Chairman Boehlert has been working with NASA 
trying to address this problem, and in fact, I have just today 
cosponsored Chairman Boehlert's legislation aimed at trying to 
deal with this problem, which is H.R. 1085, the NASA 
Flexibility Act of 2003. And hopefully, once we pass that, it 
will begin to address the agency's critical needs in terms of 
workforce.
    So NASA has a workforce that is aging. NASA scientists and 
engineers, many of them are over 60 years old, and they 
outnumber those under 30 by a ratio of 3:1. This committee will 
be considering this legislation and the problems facing NASA 
and the challenge of a workforce for the next century. And this 
panel is here to give us some insights into this major issue.
    Our first witness is Max Stier, President and CEO of the 
Partnership for Public Service. The partnership works to make 
the United States Government an employer of choice for 
talented, dedicated Americans through educational outreach, 
through legislative advocacy and hands-on partnership with 
agencies like NASA. And Mr. Stier, you may proceed. And if 
would ask again, if you could summarize down to about five 
minutes, we could get to the questions and have a little 
dialogue.

 STATEMENT OF MR. MAX STIER, PRESIDENT, PARTNERSHIP FOR PUBLIC 
                            SERVICE

    Mr. Stier. Thank you, Mr. Chairman, Members of the Science 
Committee. And it is a great pleasure to be here, particularly 
with this panel, with President Harnage, and Mr. Nesterczuk.
    I am going to focus my oral remarks, the initial remarks 
here, on three key questions: the first of which is why this 
matters; the second, why NASA now; and third, and finally, is 
what is needed.

                      NASA Workforce Demographics

    On the why this matters, the demographic chart that I have 
up there, and I think may even be on some of these screens, 
really tells the full story.



    What you see there is very much a workforce that is 
absolutely out of balance. When you look at the under 30 at 
NASA, the percentage is close to five percent of the workforce. 
Industry average on engineering, in the private sector, is 
closer to 14 percent. That is a real problem. What the--NASA 
needs to do and what it needs to do here and now is make sure 
that it keeps the cohort in the 30- to 49-year-old range. It 
has to retain the talent there, and it needs to recruit the 
under 30 to bring it up. And it is a real challenge. And why is 
it a real challenge? Because there is a war for talent, and the 
war is very difficult.

                     NASA's Competition for Talent
    
    

    So in the next chart here, you will see what NASA is up 
against. This is the competition. The competition is 
extraordinary. And obviously, you had the last panel here, 
which represented many of the industry actors here. And the 
fact of the matter is they are doing what they are supposed to 
be doing. They are going out there and getting the very best 
talent for their companies. And we need to make sure NASA can 
do the very same thing.
    I would note that these logos all come from a website, 
spacejobs.com. The web is an unbelievable place to get 
information about jobs. That is where young people, in 
particular, are looking. And we need to be able to compete in 
the government in the same way. There are no academic 
institutions on there. If you put them there, we wouldn't have 
any room on the chart, so we had to exclude them, but they are 
real competitors, too.
    So the question is well what are they doing and how is it 
that NASA can compete. Well, let me tell you an anecdote that 
comes from a report that was done for the Air Force about Ames, 
actually a NASA facility. And I will quote from that report in 
a discussion about how private companies are targeting--
actually targeting government engineers and scientists. And 
they describe one incident, ``A case in point is a Silicon 
Valley company that rented a small airplane, attached a 
recruiting banner to the tail of the aircraft, and then made 
repeated low passes over a government research facility.'' That 
was the NASA Ames facility. ``The major''--extraordinary, but 
it goes on. ``The major commuting roads into the government 
research facility are also lined with billboards placed there 
by local companies with recruiting messages directed at the 
government researchers who work there.''
    Now the bottom line is NASA doesn't need to do exactly 
this, but that is the marketplace out there. And NASA has to 
have the tools to be able to compete in that marketplace. Now 
why are the competitors doing that? The bottom line is because 
human capital counts. When you look again at private sector 
data, and that is because that is where all of the data is 
today in these issues, the fact of the matter is that is 
replete with examples of why human capital counts. When you 
look at the data, you see upwards of 40 percent plus returns on 
capital over and above the normal when you see effective human 
capital management.
    That is what the government needs to do. It needs to be 
able to effectively manage its human capital in order to see 
the returns that all of us need as a country.

                  Role of NASA Workforce Legislatiion

    Now the legislation that you are talking about here is a 
good start. I would add two things, though. First, it is just 
legislation. That is the starting point. The key question is 
going to be in implementation, and I think that the provisions 
you have in here in terms of oversight to looking at what 
happens with these different authorities is very important. I 
also think it is very important for the Committee to support 
NASA in the resources that it needs, and Congress needs to 
support it and the resources it needs in order to implement 
these flexibilities and ones that are already on the table. The 
legislation is the beginning part of the stage, but again, you 
can change that playbook as much as you want, but if you don't 
have players that have the resources and the know-how to 
execute those plays, it is not going to change.

                      Role of Employee Commitment

    The second component, and we have President Harnage here, 
which I think is quite important, is you absolutely have to 
have employee involvement and employee commitment to the 
process. And that is something that again the private sector 
data is replete with examples that it is essential to success 
and that in and of itself, employee engagement will create 
better returns.

              Need for NASA-specific Workforce Legislation

    So now a question that rises is why NASA. This is clearly a 
problem in NASA, as we have heard from the prior panel, you 
have got this problem certainly in the science and technology 
fields across government. It is also a problem government-wide 
in many other occupations.
    And I would argue that is why NASA rather than a 
government-wide piece here and now is first and foremost 
because NASA is ready. When you look at NASA, it has a 
strategic human capital plan. It is being scored in the OMB 
scorecard with a green on progress and it is one of only six 
agencies to receive a yellow. And it is ready. It has a plan to 
attack the problem, and it needs to be given the tools, too, in 
order to succeed.
    It is also true that NASA has specialized needs. It has a 
workforce that is 60 percent science and technology, science 
and engineering, and those are the most difficult professions 
here and now to recruit. Again, if you look at a recent private 
sector survey, engineering was the second hardest category to 
recruit just following the IT area.
    I notice my time is over. I would love to talk about what 
is needed. Clearly, I think this bill is a step in the right 
direction, but it is not the full story, and other things, for 
example, Scholarship for Service Program, would benefit NASA 
and, frankly, this country enormously. Thank you very much.
    [The prepared statement of Mr. Stier follows:]

                    Prepared Statement of Max Stier

    I want to thank the House Committee on Science and Chairman 
Sherwood Boehlert for the invitation to testify before you today on an 
issue that is of great interest to me and the Partnership for Public 
Service. The National Aeronautics and Space Administration (NASA) is 
confronted with a number of urgent workforce challenges and I am 
pleased to discuss our views regarding the potential for a proposed 
bill, the ``NASA Workforce Flexibility Act of 2003,'' to assist in 
meeting those challenges. The Partnership for Public Service strongly 
supports giving federal agencies meaningful workforce management tools 
to better enable them to become the high-performing organizations that 
the public justifiably demands. At the same time, we also believe those 
tools must be carefully crafted to ensure that they do not conflict 
with the public's interest in a merit-based civil service system. For 
the reasons outlined in this testimony, we support the provisions of 
the ``NASA Flexibility Act of 2003'' as a good step in the right 
direction. We also offer suggestions for additional proposals that the 
Committee may wish to consider.

Basic Principles

    The views expressed in this testimony are based on three 
fundamental principles which must be preserved in the design and 
implementation of any new federal workforce management flexibilities.
    First, as noted in the Partnership's July 31, 2002, report, 
``Homeland Security: Winning the War for Talent to Win the War on 
Terror,'' whether in the private sector or public sector, active 
employee involvement in the design and implementation of management 
improvement activities is a proven method for achieving positive 
results. Every federal demonstration project or alternative personnel 
system that has successfully tested or implemented a human resources 
management policy outside the requirements of Title 5 has first engaged 
in consultation or negotiation with employee unions or, in the absence 
of a union, direct consultation with affected employees.
    Second, effective use of any HR flexibility presupposes that 
sufficient resources are available and allocated for their use. We 
strongly encourage congressional appropriators and the Office of 
Management and Budget to take this into account during budget 
development and deliberations. We appreciate the fact that there are 
many demands placed upon the limited funds that are available for 
federal operations. However, good human resources management is an 
investment in the long range health and vitality of the federal 
workforce and the health and vitality of the government itself. We've 
seen the negative results associated with attempts to exact ``savings'' 
by short-changing constructive human resource initiatives. Workforce 
management done ``on the cheap'' will fail.
    Third, agency leadership committed to effective mission 
accomplishment and the long-term health of the public service is an 
essential ingredient for successful workforce management. Commitment 
and accountability for positive results and adherence to public service 
values must exist at all levels of agency management.

Why Are New Flexibilities Needed?

    By now, of course, it is well documented that the entire Federal 
Government is facing severe workforce challenges. Further, those 
challenges are approaching crisis proportions in at least some federal 
organizations. For example, the General Accounting Office has 
designated strategic human capital management as a government wide 
high-risk area. The President's Management Agenda contains five 
government-wide management initiatives, the first of which focuses on 
the strategic management of human capital. The challenge today is not 
one of finding additional evidence of federal workforce problems, for 
the evidence abounds. The real challenge is to develop and implement a 
viable response to those problems. In that regard, I commend the House 
Committee on Science for its initiative to seek answers and to propose 
solutions.

Background

    Before I summarize what I see as the unique workforce challenges 
confronting NASA and some of the more promising responses to those 
challenges, it might be instructive to briefly share a little 
background on the Partnership for Public Service. The very existence of 
this non-partisan, non-profit organization that I have the privilege to 
lead is itself testimony to the seriousness of the problems confronting 
NASA and the rest of government.
    The Partnership for Public Service is dedicated to helping recruit 
and retain excellence in the federal civil service. Through an 
aggressive campaign of hands-on agency partnerships, legislative 
advocacy, focused research and educational efforts, the Partnership 
encourages talented people to choose federal service for some or all of 
their careers and works with the government to help retain high-
achieving federal employees. We exist because of the vision and concern 
of our founder, Samuel J. Heyman, who was himself a federal employee in 
the 1960's. Although Mr. Heyman left government in 1968 to run the 
family business after the death of his father, he never lost his 
appreciation for the fact that the quality of life in this country is a 
direct reflection of its government and that the quality of the 
government is a direct reflection of its workforce.
    Concern over a potential decline in the quality of the federal 
workforce has been fueled in part by the knowledge that over the next 
five years well over half of the federal workforce may qualify for 
retirement, including over 70 percent of its senior executives. 
Moreover, this turnover will occur after a decade of downsizing which 
resulted in skills imbalances in a number of agencies and left some 
staffs stretched perilously thin. Additionally, interest in federal 
employment remains low among some of the most highly talented, and 
marketable, members of the national labor force. This was, and is, a 
scenario for disaster. Out of a determination to do something about 
this situation, the Partnership was established and a public launch was 
planned for September 12, 2001.
    On September 11, 2001, we were in the midst of a congressional 
breakfast being held to introduce the Partnership when word of the 
terrorist attacks reached us and the building was evacuated. If 
anything, however, the events of September 11, 2001, reminded the 
American public of the need and value of a strong and vital public 
service. Unfortunately, the renewed appreciation for the public service 
has not resulted in increased interest in federal employment. To that 
end, the Partnership has been actively engaged since its establishment 
in working with Congress, the Administration, federal employees and 
their representatives, corporate leaders, academic institutions, and 
other individuals and organizations interested in ensuring that the 
Federal Government has a high-performing workforce within a high-
performing workplace.
    While the Federal Government competes in the same arena as the 
private sector, it operates with a significant handicap in terms of a 
compensation system that is relatively inflexible and which does not 
respond to ``market-pressures'' when competing for the ``best and 
brightest,'' particularly in occupations where the demand exceeds the 
supply. Nor is the federal recruiting disadvantage simply a matter of 
pay. Even well-qualified individuals who are actively interested in 
federal employment must face what has been described as a ``civil 
service hiring labyrinth'' that in comparison to private sector hiring 
is viewed as slower, more confusing, and less fair. Finally, the 
current system also offers limited opportunities for high performing 
employees to receive monetary awards based on their performance or 
contributions.

Implications for NASA

    The problems and challenges described above apply to all agencies, 
but not equally. The predominance of positions in NASA that require 
high levels of technical and scientific expertise magnifies its 
recruitment and retention difficulties in a unique way. As noted in the 
NASA profile attached to this testimony, over 60 percent of NASA 
employees are in professional positions (positions with positive 
educational requirements at the college level). NASA's top three 
occupations in terms of the number of employees in that occupation are 
aerospace engineers, general engineers, and computer engineers--all 
skills that are in great demand in the private and academic sectors. 
NASA also faces acute short-term recruiting needs with three times as 
many employees over the age of 60 as there are under the age of 30. 
Further adding to its workforce management challenges, NASA went 
through a sustained downsizing effort starting in 1993 that lasted 
through 2000 with negative consequences for the depth of its technical 
capacity. As noted in the President's Management Agenda for FY 2002:

        Downsizing at NASA over the last decade through attrition and 
        buyouts has resulted in an imbalance in NASA's skills mix.

    Having identified a problem and having the ability to do something 
about it, however, are two different issues. Many of the positions that 
NASA will need to fill are among those for which competition with the 
private sector is particularly acute. Plus, as the overall talent pool 
shrinks, NASA will increasingly be at a disadvantage in comparison to 
private sector employers who are better able to adapt their personnel 
policies and practices to the changing labor market. As noted by the 
General Accounting Office in its January 2003 report, ``Major 
Management Challenges and Program Risks: National Aeronautics and Space 
Administration'':

        NASA is facing shortages in its workforce, which could likely 
        worsen as the workforce continues to age and the pipeline of 
        talent shrinks. This dilemma is more pronounced among areas 
        crucial to NASA's ability to perform its mission, such as 
        engineering, science, and information technology.

    Finally, we agree with the NASA Administrator, Sean O'Keefe, who 
noted in his written statement to the Senate Subcommittee on Oversight 
of Government Management, the Federal Workforce and the District of 
Columbia, Committee on Governmental Affairs, that:

        NASA's ability to fulfill its ambitious mission is dependent 
        on the quality of its workforce. An agency is only as strong as 
        its people.. . . Being ``good enough,'' will not suffice: NASA 
        needs the best and the brightest to build a world-class 
        workforce.

    Unfortunately, it's difficult to attract and retain a world-class 
workforce when the hiring system is not only convoluted and off-
putting, but the starting salaries offered are below national averages 
and, as the chart below shows, significantly below the salaries paid to 
graduates from some of the Nation's top schools. Although average 
engineering salaries in the public and private sector tend to be 
comparable, the private sector pays higher entry level rates to attract 
top candidates. This provides a significant advantage over the 
relatively inflexible federal pay system.





    Why NASA and Not All of Government?
    I know there is some concern regarding the ``Balkanization'' of the 
federal civil service system by allowing individual agencies relief 
from the requirements of Title 5 of the U.S. Code and not others. An 
alternative to the flexibilities being considered in the proposed 
``NASA Flexibility Act of 2003,'' might be to wait for government-wide 
civil service changes that would benefit all federal agencies. As 
attractive as that proposition sounds on the surface, the realities of 
the situation argue against it for three reasons. First, NASA's needs 
are too acute to await a broader legislative package. Second, we 
believe NASA has demonstrated that it is presently ready to manage the 
proposed flexibilities in a responsible and effective manner. Third, 
while we support the broader goal of comprehensive government-wide 
reforms, we see no reason to delay action on the current proposals 
until that more ambitious agenda is realized.
    Any proposed change to a provision in Title 5 should be evaluated 
within the context of the need of the agency or organization involved 
and the capacity of that agency to handle the change in a responsible, 
merit-based fashion. On the first point, and based on the information 
provided in the first part of this testimony, we must agree with 
Committee Chairman Boehlert who, in his testimony before the Senate 
Subcommittee on March 6, 2003, stated:

        LNow, NASA is not the only agency facing workforce issues, in 
        general, or issues involving its scientific and engineering 
        workforce in particular. But NASA's needs are especially 
        critical. I don't believe we have to wait for massive, 
        wholesale reform of civil service law to take care of NASA's 
        immediate problems.

    NASA does not have the luxury of waiting if it is to successfully 
meet the substantial workforce and mission challenges it faces.
    On the issue of whether NASA is ready to handle in a responsible, 
merit-based fashion the flexibilities being proposed, I would note the 
findings of the General Accounting Office in its January 2003 report on 
NASA which, while finding that NASA's human capital was still at risk, 
also found that:

        LSince our last Performance and Accountability Series report 
        issued in January 2001, NASA has been taking actions to address 
        each of its challenges. For example, NASA has hired new staff, 
        who helped address imbalances in some critical skill areas in 
        the shuttle program, and it has developed a strategic human 
        capital plan to enhance its entire workforce.

    We also note that based on the Office of Personnel Management's and 
the Office of Management and Budget's assessments of the progress being 
made in its human capital management, NASA received a ``green'' in 
human capital management progress and was one of only six agencies that 
received a ``yellow'' rather than a ``red'' in that area in the 
executive management scorecard.
    Finally, calling for government-wide reforms in lieu of agency-
specific relief ignores the fact that there are already more federal 
employees who work in federal organizations that are exempt from some 
or all of Title 5 than there are employees in organizations that are 
fully covered by Title 5. A 1998 report by the U.S. Office of Personnel 
Management, ``HRM Policies and Practices in Title 5--Exempt 
Organizations,'' found that:

        LIn the Federal Government, the trend toward flexibility has 
        manifested itself in a number of ways, including the attempt by 
        a number of agencies to move away from the specific 
        requirements of Title 5. Full or partial exemption from Title 5 
        is of course nothing new. Agencies such as the Tennessee Valley 
        Authority, and the Federal Reserve Board have been outside 
        Title 5 for decades. But the movement in that direction has 
        gained momentum, to the extent that nearly half of federal 
        civilian employees are now outside of some aspect of Title 5 
        coverage.. . .''

    Note that this report was written before the Internal Revenue 
Service was granted substantial flexibilities and before the Department 
of Homeland Security and its 180,000 employees were exempted from 
portions of Title 5 that still cover many of the remaining federal 
agencies. So an argument that all federal organizations should remain 
under Title 5 and that any changes should apply government-wide seems 
to have been lost some time ago. Given this background, the present 
legislative proposal is a welcome continuation of a long time trend 
toward limited grants of flexibilities on an agency-by-agency basis.

Why Now?

    NASA's workforce problems have also been exacerbated by significant 
changes in the aerospace industry itself. The ``Final Report of the 
Commission on the Future of the United States Aerospace Industry,'' 
which was the subject of the first panel at this hearing, found that:

        LClearly, there is a major workforce crisis in the aerospace 
        industry. Our nation has lost over 600,000 scientific and 
        technical aerospace jobs in the past 13 years.. . .most of the 
        workers who have lost their jobs are unlikely to return to the 
        industry. These losses, coupled with pending retirements, 
        represent a devastating loss of skill, experience, and 
        intellectual capital to the industry.

    That finding, along with the well documented decline in the number 
of U.S. students pursuing degrees in science, mathematics, and 
engineering, strongly suggests that any increase in interest in federal 
employment, especially among science and engineering students, is 
likely to be temporary at best. I would also note, as has been reported 
by the National Science Foundation, that 40 percent of the graduate 
students in America's engineering, mathematics, and computer science 
programs are foreign nationals. Since the Federal Government restricts 
its hiring to U.S. citizens only, this further shrinks the pipelines.
    Finally, as I previously noted, the goal for NASA should not be the 
hiring of simply qualified employees, but the development of a world-
class workforce with a world-class work environment. That talent may 
still not be readily available to NASA even now, and it seems even more 
certain that it will not be available a few years from now.

Will the ``NASA Flexibility Act of 2003'' Give NASA What It Needs?

    As I stated at the opening of this testimony, this bill is 
definitely a step in the right direction. It may not give NASA all the 
tools that it needs--there is still the question of funding along with 
the need for sustained leadership and commitment, among a few other 
necessities--but these provisions and flexibilities will be helpful. It 
is also noted that there are a number of safeguards built in, including 
development of a public ``workforce plan,'' and notification and 
periodic report requirements that also significantly diminish the 
possibility that the authorities will be abused. As detailed below, 
these proposed flexibilities promise to be of substantial assistance to 
NASA in meeting its workforce challenges:

         The ability to provide recruitment, redesignation, 
        and relocations bonuses (Sec. 504) that are substantially 
        greater than those currently authorized and that are combined 
        with a service agreement should help offset the ability of 
        other employers to substantially out-bid NASA up-front. Since 
        federal compensation comes closer to private industry averages 
        several years after initial hire, retention should also not be 
        a problem even though the bonuses are not part of base pay. 
        These flexibilities also track ``best practices'' in the 
        private sector. In a recent WorldatWork survey of private 
        sector employers, engineering was the second most-difficult 
        occupation in terms of attracting and retaining qualified 
        applicants. Further, more than three of every five employers in 
        this category (61 percent) used sign-on or hiring bonuses in 
        response to that difficulty.

         Retention bonuses (Sec. 505) at a level higher than 
        currently available will be particularly useful not only in 
        retaining crucial talent, but also for ensuring that new 
        employees have experienced staff members to train and develop 
        them.

         Voluntary separation incentive payments (Sec. 506) 
        have also proven to be useful when used conscientiously as part 
        of a workforce reshaping effort as opposed to simply promoting 
        workforce reductions. Under a reshaping effort, the employees 
        separated are typically in positions no longer essential to the 
        mission of the agency and their departure frees resources that 
        can be used to bring new employees on board who fill new 
        positions that are essential. While this provision, especially 
        at the monetary levels provided, could be quite useful, that 
        fact that it is restricted to only 10 positions a year may 
        limit its effectiveness.

         The use of Term appointments (Sec. 507) for up to six 
        years and, if the need appears to be continuing, allowing 
        conversion to a permanent appointment (under the conditions 
        specified in the bill), can provide needed flexibility in 
        dealing with the normal uncertainties of a highly scientific or 
        technical environment and shifting congressional or 
        Administration priorities.

         The authority (Sec. 508) to pay up to ten individuals 
        in critical positions at a level above the current pay caps is 
        another authority, that while subject to some debate, has been 
        used in the Internal Revenue Service and found by an 
        independent evaluator (Hal Rainey, a distinguished professor in 
        the School of Public and International Affairs, the University 
        of Georgia) to be an effective tool. It should be noted that 
        the higher rates of pay, which are certainly attractive 
        compared to the current federal pay cap, can still be 
        relatively modest compared to private sector salaries for 
        similar levels of responsibility.

         The expansion of assignments under the 
        Intergovernmental Personnel Act (Sec. 509) from a maximum of 
        two years to four years, is again a flexibility that used 
        judiciously can be quite useful, especially given the fact that 
        the nature and duration of a scientific endeavor can be 
        difficult to accurately predict in advance.

         Enhanced demonstration project authority (Sec. 510) 
        takes the existing authority in Section 4703 of Title 5 and 
        removes the 5,000 person limit. In essence, this would allow 
        NASA to propose a project that could cover all 18,000 plus 
        employees in the agency. Given that there has been 25 years 
        worth of experience under this authority without any major 
        problems, this provision breaks little new ground and seems 
        amply supported by the long history of relatively successful 
        demonstration projects.

Additional Suggestions

    As we noted at the outset, we believe the proposed flexibilities in 
the ``NASA Flexibility Act of 2003, are a step in the right direction. 
We also believe that there is one additional flexibility and one 
modification to a provision already contained in the proposed bill, 
that would also be useful. They are:

         Among a number of recommendations by NASA for 
        additional human capital legislation that have merit, a 
        proposal for a ``scholarship for service'' program stands out. 
        As the number of students in the engineering and science 
        educational pipeline shrinks, particularly students who are 
        U.S. citizens, NASA's ability to attract its fair share of the 
        ``best and brightest,'' is likely to become increasingly 
        difficult. This will be especially true when students with 
        student loans to repay are lured by higher starting salaries in 
        the private sector. A NASA supported scholarship program could 
        serve two worthy purposes: (i) encouraging students to consider 
        a course of study leading to a career in science or 
        engineering; and (ii) provide another entry point for talented 
        students to join the NASA workforce by coupling the scholarship 
        to a requirement for service.

         Section 510 of the ``NASA Flexibility Act of 2003,'' 
        provides one valuable enhancement to the current demonstration 
        project authority in Section 4703 of Title 5 by allowing more 
        than 5,000 employees to be covered. However, it would still 
        require NASA to go through the rather daunting and time 
        consuming process contained in Section 4703. Those original 
        provisions, however, were part of the 1978 Civil Service Reform 
        Act and were appropriate safeguards for an untried process. 
        Today, however, we have over 25 years experience with 
        demonstration projects and a long history of successful 
        projects and lessons learned. We would recommend that serious 
        consideration be given to a more streamlined process similar to 
        that given to the Internal Revenue Service in 1998 and codified 
        in Section 9507 of Title 5. There remains a requirement for 
        union negotiation and congressional notification of proposed 
        projects, but IRS has been able to move more rapidly than other 
        agencies. It's noteworthy that many of the successful 
        demonstration projects that have been undertaken, including the 
        very first demonstration project in 1981 at the Naval Weapons 
        Center, China Lake, California have involved employees in 
        scientific and engineering environments, since the agencies 
        involved were experiencing some of the same difficulties as 
        NASA in recruiting and retaining top talent. By providing the 
        same process flexibilities to NASA that have been given to the 
        IRS, NASA could more easily adapt some of the successful 
        practices and lessons learned in other environments.

    Mr. Chairman and Members of the Committee, I want to again thank 
you for allowing me to share with you the perspectives of the 
Partnership for Public Service on these important issues regarding the 
future of the NASA workforce. We would be happy to assist the Committee 
in any way we can as you seek to ensure that NASA has the world-class, 
highly motivated workforce that it needs for the challenges that lie 
ahead. I would be happy to answer any questions you may have.


                        Biography for Max Stier
    Max Stier is the President and CEO of the Partnership for Public 
Service. He has worked previously in all three branches of the Federal 
Government. In 1982, he served on the personal staff of Congressman Jim 
Leach. Mr. Stier clerked for Chief Judge James Oakes of the United 
States Court of Appeals for the Second Circuit in 1992 and clerked for 
Justice David Souter of the United States Supreme Court in 1994. 
Between these two positions, Mr. Stier served as Special Litigation 
Counsel to Assistant Attorney General Anne Bingaman at the Department 
of Justice. In 1995, Mr. Stier joined the law firm of Williams & 
Connolly where he practiced primarily in the area of white collar 
defense. Mr. Stier comes most recently from the Department of Housing 
and Urban Development, having served as the Deputy General Counsel for 
Litigation. Mr. Stier is also an adjunct professor of law at Georgetown 
University and is a graduate of Yale College and Stanford Law School.

    Mr. Rohrabacher. I am sure we will touch on some of those 
creative ideas during the question and answers.
    Mr. Stier. Thank you.
    Mr. Rohrabacher. Mr. Harnage, you may proceed.
    Mr. Harnage. Thank you, Mr. Chairman.
    Mr. Rohrabacher. You need to touch your microphone button.
    Mr. Harnage. Here we go.
    Mr. Rohrabacher. There you go.

  STATEMENT OF MR. BOBBY L. HARNAGE, SR., PRESIDENT, AMERICAN 
          FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO

                       NASA Workforce Downsizing

    Mr. Harnage. On behalf of more than 600,000 federal and DC 
Government employees that I represent, I want to thank you for 
the opportunity to testify here today on the Committee's draft 
proposal for sweeping civil service changes at NASA. Like the 
rest of the government, NASA will experience a wave of 
retirements over the next several years. Unfortunately, NASA 
has, for more than a decade, pursued a vigorous and ill-
conceived program of downsizing and outsourcing, which has made 
its problem even more acute than other agencies. Instead of 
careful consideration of whether its mission could be most 
effectively and economically carried out by hiring in-house 
employees, it has engaged in wholesale privatization, not 
competitive sourcing, and made reliance on contractors rule.
    Indeed, the President's fiscal year 2004 budget includes an 
evaluation of NASA's compliance with the so-called competitive 
sourcing initiative and knows that NASA has made its entire 
privatization quota without ever even having a single 
competition.

                    Correction to Written Statement

    Mr. Chairman, at this point, I want to point out in my 
written statement that I had indicated on that the 
investigation in the shuttle disaster was looking into NASA's 
relationship with the contractors making a contribution to that 
disaster. And I want to correct that. What we should have said 
is the investigating committee is looking at the potential of 
that, and we don't want to appear to have made any foregone 
conclusion, and I apologize for that. And my written statement 
has been corrected to reflect that.

                            NASA Outsourcing

    Reliance on contractors are proven to be a costly mistake 
for NASA, both in terms of taxpayer dollars and in terms of the 
agency's internal human resource infrastructure, eliminating 
federal positions and rushing to contract out as much 
government work as possible rather than building and planning 
for a transition to the next generation of NASA employees who 
are dedicated to career service with the agency has made the 
coming retirement wave challenges for NASA. NASA needs a stable 
workforce able to hold its massive and far-flung army of 
contractors honest and accountable to the government's own 
procurement rules. It also needs an adequate in-house 
technical, scientific, and engineering workforce able to bring 
contractor work back into the government and evaluate the 
quality of work that is permitted to remain in the hands of 
contractors.

                         Comments on H.R. 1085

    The authorities proposed for NASA can fairly be described 
as constituting a ``white knight'' strategy for rescuing the 
agency from its contracting failures. They addressed the 
symptoms of those failures, not their cause, and only offered 
temporary solutions. The fact is that too much contracting out 
and privatization caused NASA's workforce deficits and only a 
reversal of contracting out and privatization will resolve 
them.
    Before implementing a bonus for some and super-sized 
salaries for a few others instead of an adequate salaries for 
all approach, NASA should ask itself, ``Should employees who 
are loyal and have made a decision to dedicate their careers to 
public service be penalized financially relative to those who 
are in and out within six years? Should the federal pay system 
reward only those willing to extort a bonus from an agency by 
continually threatening to leave in the middle of an important 
project? Or should the Federal Government pay adequate, 
competitive salaries to all of its employees?'' No federal 
agency, including NASA, should have a human resource plan that 
explicitly encourages constant turnover and puts no values on 
continuity, dedication, or career development for the incumbent 
workforce, yet that is exactly the direction this draft 
legislation would take the agency.
    I ask you to strongly vote in favor of a focus on improving 
pay as a means of improving recruitment and retention of 
federal employees. However the approach contained in this 
legislation is, at best, incomplete, at worst, misplaced. 
Federal salaries are too low, not just for prospective 
employees or for employees the agency expects to employ if for 
only a short period; they are too low for everyone.
    Mr. Chairman, we are willing to work with this committee in 
developing this legislation, fine tuning this legislation, but 
we don't believe that shortchanging the federal employee is 
going to attract future employees for any long period of time. 
And that concludes my testimony. I would be glad to answer any 
questions you might have.
    [The prepared statement of Mr. Harnage follows:]
              Prepared Statement of Bobby L. Harnage, Sr.
    Mr. Chairman and Members of the Committee: My name is Bobby L. 
Harnage, and I am the National President of the American Federation of 
Government Employees, AFL-CIO (AFGE). On behalf of the more than 
600,000 federal employees our union represents, I thank you for the 
opportunity to testify here today on the Committee's draft proposals 
for sweeping civil service changes at NASA.
    My testimony will address not only the Committee's specific 
legislative proposals, but also AFGE's assessment of NASA's most 
important workforce-related challenges over the next ten years, our 
views of the most effective strategies for recruitment and retention of 
federal employees, and whether the Committee's proposals would further 
those goals, and finally, AFGE's own recommendations, and our opinion 
of the wisdom of seeking civil service changes on an agency-by-agency 
basis rather than government-wide.
    Many of the proposals contemplated in this legislation have been 
presented elsewhere as government-wide changes or earlier in the form 
of legislation prepared by NASA's political leadership, and have been 
rejected largely on the grounds that they undermine merit system 
principles, that they would exacerbate the Federal Government's ``human 
capital'' crisis, and that they would create serious conflicts of 
interests between private sector interests and the public good. In 
addition, they fail to address the root causes of NASA's (and the other 
executive branch agencies') workforce problems: inadequate salaries, 
and mindless contracting out, privatization, and downsizing.
    For these reasons and others, AFGE opposes most of the human 
resources proposals contained in this legislation. Further, it must be 
noted that the Committee on Government Reform has primary jurisdiction 
and expertise in matters involving Title 5. With all due respect, these 
proposals do not belong in the Committee on Science where the 
jurisdiction and expertise is in areas other than federal personnel. 
AFGE strongly opposes the implied policy of seeking changes to civil 
service laws on an agency-by-agency basis.
    Like the rest of the Federal Government, NASA will experience a 
wave of retirements over the next several years, as workers with 
between 25 and 35 years of federal experience reach retirement 
eligibility. Unfortunately, the policies both NASA and other federal 
agencies have been pursuing for the past decade will exacerbate the 
problems and challenges the retirement wave presents. Prior to the 
retirement wave, NASA has for more than a decade pursued a vigorous and 
ill-conceived program of downsizing and outsourcing. Instead of careful 
consideration of whether NASA's mission could be most effectively and 
economically carried out by hiring in-house employees, it has engaged 
in wholesale privatization ( NOT ``competitive sourcing''), and made 
reliance on contractors the rule. Indeed, the President's FY 2004 
Budget includes an evaluation of NASA's compliance with the so-called 
``competitive sourcing'' initiative and notes that NASA had met its 
entire privatization quota without ever having held a single 
competition!
    This has proven to be a costly mistake for NASA, both in terms of 
taxpayer dollars and in terms of the agency's internal human resource 
infrastructure, not to mention the victims of the recent shuttle 
disaster. Eliminating federal positions and rushing to contract out as 
much government work as possible, rather than building and planning for 
a transition to the next generation of NASA employees who are dedicated 
to career service with the agency has made the coming retirement-wave 
challenges truly daunting for NASA. Indeed, The New York Times reported 
on March 6, 2003 that NASA's inability and disinclination to oversee 
its contractors is being examined by the independent panel 
investigating the loss of Columbia, i.e., excessive contracting out 
without regard to the public interest has already been identified as a 
contributing factor to the disaster.
    In this context, the proposals the Committee is considering seem 
rather paradoxical. The proposals would encourage the elimination of 
even more federal positions through Voluntary Separation Incentive 
Payments (VSIPs), and thereby further undermine the agency's ability to 
assemble a new generation of career civil servants dedicated to 
carrying out NASA's mission in the most efficient and reliable way for 
taxpayers. The proposals would establish NASA as a place where people 
might take a short turn through the revolving door between the agency 
and its contractors, but not a place to build a career, not a place 
that expects loyalty from its employees or that will exhibit any in 
return.
    Almost all the new authorities the Committee is contemplating in 
its legislative proposals turn on the concept of ``critical need.'' The 
legislation proposes to define critical need as ``a specific and 
important requirement of the Administration's mission that the 
Administration is unable to fulfill because the Administration lacks 
the appropriate employees either because of the inability to fill 
positions or because employees do not possess the requisite skills.'' 
It is unfortunate that virtually none of the proposals that follow 
would help NASA with a long-term strategy of acquiring a regular, 
reliable workforce with ``requisite skills.''
    Even the Administrator implicitly acknowledges that the agency 
finds itself in a helpless state, admitting that ``it doesn't have a 
very deep bench,'' and is apparently entirely at the mercy of its 
contractors. Yet his metaphor is telling; he needs to learn that 
staffing a federal agency is not like staffing a football or basketball 
team where short service on the bench or elsewhere is all that is 
needed or expected. NASA in particular needs a stable workforce able to 
hold its massive and far-flung army of contractors honest and 
accountable to the government's own procurement rules and cost 
accounting standards. It also needs an adequate in-house technical, 
scientific, and engineering workforce able to bring contracted work 
back into the government and evaluate the quality of work that is 
permitted to remain in the hands of contractors.
    Unfortunately, the ``workforce authorities'' the Committee has 
proposed for NASA can fairly be described as constituting a ``White 
Knight'' or ``Band-Aid'' strategy for rescuing the agency from its 
contracting failures. The proposals only address the symptoms of those 
failures, not their cause. To make matters worse, all the proposed new 
authorities are aimed at temporary solutions to be followed by 
subsequent temporary solutions. The fact is that too much contracting 
out and privatization caused NASA's workforce deficits, and only a 
reversal of contracting out and privatization will solve them.
    The ``workforce authorities'' provided to NASA in the Committee's 
draft include authority to pay recruitment, ``redesignation,'' 
relocation, and retention bonuses; authority to eliminate jobs through 
voluntary separation incentive payments; authority to expand the 
definition of temporary employment at NASA to as long as six years; 
authority to fix basic rates of pay for ``critical'' jobs; and 
authority to lengthen intergovernmental personnel act assignments, and 
increases the number of people covered by NASA demonstration projects 
to 5,000. All but the last of these would be triggered by a NASA-
determined but Congressionally-approved identification of ``critical 
needs.''
    The proposals for enhanced authority to offer recruitment, 
relocation, ``redesignation'' and retention bonuses of up to 100 
percent of salary (50 percent for retention of those who are 
``critical'' and 25 percent for those who are not) over four years are 
similar to those proposed last year by NASA, and those being considered 
in the context of government-wide civil service reform legislation. 
AFGE is strongly in favor of Congressional willingness to focus on the 
importance of improving pay as a means of improving recruitment and 
retention of federal employees.
    However, we believe that the approach to financial incentives for 
recruitment and retention contained in this legislation is at best 
incomplete, at worst, misplaced. Federal salaries are too low not just 
for prospective employees, or for employees the agencies expect to 
employ only for a short period. Salaries are too low for all employees. 
There are market-driven reasons why the Federal Government should pay 
competitive salaries, and there are values-driven reasons why the 
Federal Government should pay competitive salaries. While market-driven 
reasons such as recruitment and retention may on the surface only 
appear to apply to prospective employees and ``flight risks,'' they in 
fact apply to all employees.
    AFGE does support the use of bonuses and other financial incentives 
to reward federal employees. Yet they should never be used as 
substitutes for a fully funded regular pay system. The ``human 
capital'' crisis these bonuses are ostensibly meant to alleviate is in 
part a result of the repeated failure to implement and fund the Federal 
Employees Pay Comparability Act (FEPCA), passed in 1990. FEPCA already 
provides broad authority for the payment of recruitment and retention 
bonuses. According to a comprehensive study published by OPM in 1999, 
less than one percent of eligible federal employees had received 
bonuses under FEPCA's authority. The main reason for the failure to use 
existing authority cited repeatedly by agency managers was an absence 
of funding.
    It is also important to note that the legislative proposals do not 
provide a separate, supplemental funding mechanism for either the 
payment of bonuses, or the payment of salaries equivalent to that paid 
to the Vice President of the United States for ten lucky individuals. 
Implicitly, the assumption is that the bonuses and super-salaries would 
be financed from existing salary accounts. That is, the agency would 
only be able to use the broadened authority in the draft legislation if 
it paid for them through the elimination of jobs or the denial of other 
salary adjustments for those not selected for a bonus. Again, that is 
not a good long-term strategy for rebuilding in-house capacities.
    It is foolish to pretend that, if enacted, these provisions would 
improve NASA's ability to recruit and/or retain federal employees. 
Bonus payments do not count as basic pay for purposes of retirement or 
other salary adjustments. They are a poor substitute for the provision 
of competitive salaries and regular salary increases that allow 
employees to maintain decent living standards.
    Before implementing a bonuses-for-some and super-sized salaries for 
a few others, instead of an adequate-salaries-for-all approach, NASA 
should ask itself the following: Should employees who are loyal and 
have made a decision to dedicate their careers to public service be 
penalized financially relative to those whose only loyalty is to their 
individual paycheck? Should the federal pay system reward only those 
willing to extort a bonus from an agency by continually threatening to 
leave in the middle of an important project? Or should the Federal 
Government pay adequate, competitive salaries to all its employees?
    The legislative proposals make the following scenario possible: a 
recent graduate is hired ``directly'' for a ``temporary'' position at a 
job fair, effectively beating out three other candidates who had 
applied for the position through normal competitive procedures (among 
the three were a veteran with relevant experience and the same degree 
from the same university, a disabled veteran with 10 years of federal 
employment and a similar degree, and a recent graduate from another 
university with the same type of degree but a higher GPA who mistakenly 
thought the best route to federal employment was to follow procedures 
and fill out a Standard Application Form 171). To encourage the direct 
hire person to accept the position, he is promised bonuses worth 25 
percent of salary each year for four years (indeed, he must also accept 
a service agreement wherein he agrees to work for NASA for a period 
``not to exceed four years''). During that four-year period, the agency 
would repay the employee's student loans. At the end of the four-year 
service agreement, the employee threatens to leave in the middle of a 
project. NASA wants to keep him on for at least two more years. A 
retention bonus of 50 percent of salary, for two years, is authorized 
because a ``critical need'' is identified. One year later, he is 
converted to permanent status. At the end of this period, a new 
Administration/political appointee at NASA decides it would rather do 
without him, and offers him a Voluntary Separation Incentive Payment 
(VSIP), determined not on the basis of the regular severance formula in 
Title 5, but rather equal to 50 percent of his salary, since the 
Administrator has determined that to eliminate this position is 
critical to his restructuring efforts. Over six years, the lucky 
employee has received more than eight and a half years of salary. And 
the expertise and experience he has built up over that period is lost 
to the agency. But the authorities remain, so NASA can go through this 
song and dance all over again.
    That's quite a windfall for the hypothetical employee, quite an 
expensive experiment for taxpayers, and quite an insult to the 
thousands of rank and file federal employees who are taken for granted 
and denied competitive salaries, benefits, or any form of job security. 
The question is: Is it a reasonable response to the ``human capital'' 
crisis? Will it allow the government to replace the more than 50 
percent of federal employees who will be eligible to retire within the 
next five years with a new generation of employees who exhibit the same 
level of skill, dedication, and reliability as our nation has relied 
upon in the past? What chance is there that employees in the existing 
workforce who have as good or better skills than those hired under the 
authorities being contemplated will share in the kind of ``critical 
need'' bounty to be lavished on temporary workers?
    Federal agencies, particularly science-dominated agencies like NASA 
are not fly-by-night operations or flashes-in-the pan. They are not 
here today and gone tomorrow, nor do they produce technological fads 
with only passing relevance or utility. As such, no federal agency, 
including NASA, should have a human resources plan that explicitly 
encourages constant turnover and puts no value on continuity, 
dedication, or career development for the incumbent workforce. Yet that 
is exactly the direction this draft legislation would take the agency.
    We urge NASA and other executive branch agencies to stop looking 
for short-term fixes. NASA's need for a high quality workforce and 
comprehensive in-house capacity are neither temporary nor short-term, 
and the government as well as the employees deserve to have the 
security and continuity that a workforce with regular civil service 
appointments conveys. With regular permanent appointments, the 
government obtains the expertise it needs, as well as the authority to 
supervise, manage, and control the substance and direction of that 
work. Taxpayers' interests are best served by knowing that federal 
employees, sworn to uphold the public good and work in the public 
interest, perform government work.
    The idea of treating ongoing government programs as temporary, even 
when the particular work project is estimated to last for less than six 
years, is wrong. It is just an extreme case of ``managerial 
flexibility'' that is contrary to the agency and the public interest. 
Just in order to be able to get rid of a worker without notice, or any 
due process, the agency seems willing to be staffed by a group of 
contingent workers to whom absolutely no loyalty, commitment, training, 
or career development is offered. If NASA expects to be around longer 
than six years, why does it want to treat its work and its workers, 
even those who work for the agency up to six years, as temporary?
    The authority to offer Voluntary Separation Incentive Payments 
(VSIP) described in the legislation fails to address an important 
question. In earlier drafts, the VSIP proposals for NASA required a 
one-to-one elimination of full-time-equivalent positions as the only 
means of using them. We believe that using VSIPs only for position 
elimination is ridiculous. At a minimum, there should be no connection 
between efforts to restructure and delayer and authorized agency FTE 
levels. At a time when NASA and other federal agencies are asking for 
expanded authority to pay bonuses and repay student loans in their 
efforts to hire more federal workers, why should they simultaneously be 
required to eliminate FTE's and pay employees to leave federal service? 
Couldn't the money be better spent on retraining? On improving 
salaries? On improving the Federal Employees Health Benefits Program 
(FEHBP) which this year pays only 70 percent of the premium of the plan 
that covers over half of all enrollees?
    I have saved the worst, and most damaging proposal for last. The 
Committee's draft would eliminate the 5,000 person limit on the number 
of employees covered by a demonstration project and allow NASA's 
Administrator to decide what number of employees to be included. If 
enacted, this provision would allow NASA to put every single one of its 
employees under a demonstration project of management's unilateral 
design. Only those covered by a collective bargaining agreement would 
have the opportunity to vote to decide whether to give up their rights 
under Title 5 and join the project.
    Granting this authority to the NASA administrator would be highly 
destructive of civil service standards, and in fact destroys the entire 
notion of a demonstration project as an experiment or pilot plan. If no 
substantial number of NASA employees remain in the regular Title 5 
system as a baseline or constant, then against what standard is the 
demonstration project being tested? That is the reason Congress 
required numerical limits on those covered by a particular 
demonstration project in the first place. I fear the removal of limits 
on the number of people covered by a NASA demo may just be an easy to 
impose on NASA a new personnel system that would not otherwise pass 
muster if it were proposed as a legislative change to Title 5. AFGE 
strongly opposes this section of the legislative proposal, and urges 
the Committee to reject it.
    Finally, the legislation would require annual reporting to Congress 
on the exercise of the workforce authorities it establishes, and prior 
approval of all the details of any ``Workforce Plan'' NASA might 
concoct for the exercise of the authorities in the bill. Later, NASA 
would have to come back to Congress for any reauthorization or 
enactment of legislation to make the authorities permanent. While this 
approach is far superior to other approaches that usurp the role of 
Congress altogether with respect to large scale and permanent changes 
to Title 5, it is still a unilateralist approach that is inappropriate 
for a unionized agency. Why is there no allowance for federal employees 
to have their views of any proposed ``Workforce Plan'' heard through 
the process of collective bargaining? Why exclude the wisdom, 
expertise, and experience of the front-line in-house NASA workforce 
from the formulation of proposals to improve recruitment and retention 
of the next generation of NASA scientists and engineers? NASA's 
management has certainly shown itself capable of grave miscalculation, 
and extremely poor judgment. AFGE urges the Committee to require 
collective bargaining over the terms of any recommended ``Workforce 
Plan'' that will affect bargaining unit positions.
    This concludes my testimony. I will be happy to answer any 
questions Members of the Committee may have.

    Chairman Boehlert. Well, and let me say I firmly agree with 
that statement. I don't want to shortchange the union employees 
of the Federal Government. As a matter of fact, you should know 
that one of my sons-in-law is a former president of one of your 
affiliates.
    Mr. Harnage. Oh, very good.
    Chairman Boehlert. And----
    Mr. Harnage. I will stand in one. I should know.
    Chairman Boehlert. Let me tell you, I have been blessed. 
All of my sons-in-law are outstanding. They darn well had to be 
to get my okay.
    The third witness is Mr. George Nesterczuk, a private 
consultant for human resources management and legislative 
analysis, who has worked on both Capital Hill and the Executive 
Branch for many years. And he also had the good judgment to go 
to school at Cornell in upstate New York, which is near and 
dear to my heart. And I understand his first choice was working 
for NASA as he completed his studies. Mr. Nesterczuk, we look 
forward to your testimony.

 STATEMENT OF MR. GEORGE NESTERCZUK, NESTERCZUK AND ASSOCIATES

    Mr. Nesterczuk. Thank you, Mr. Chairman. Thank you, Members 
of the Committee, for giving me the opportunity to testify on 
H.R. 1085 today.

                            NASA Recruiting

    As you noted, Mr. Chairman, I did work for NASA early on in 
my career, and I was one of those people on the bubble in the 
late '50's and the early '60's who was attracted to the space 
program and aerospace research. Back in those days, NASA was a 
very young agency, a start-up agency, on the cutting edge of 
technology, and that is what was drawing a lot of the young 
talent across the country--the notion of being involved in 
cutting edge issues. I would like to say that was true today. I 
don't think it is, and that is part of the difficulty NASA is 
facing as it looks into the future--to re-establish a mission 
and the direction to become that kind of cutting edge agency 
that it once was.

         NASA's Workforce Compared To Other Government Agencies

    The problems that NASA faces today are no different than 
those many other federal agencies face. In light of the 
cutbacks and the workforce reductions, budget reductions of the 
past 20 years, a lot of HR issues were swept under the table. 
Insufficient strategic planning in dealing with workforce 
issues basically has led a lot of federal agencies to the 
dilemma that they are facing today. NASA, as a high-tech agency 
and one requiring a specialized workforce, is akin to NIH in 
the health field, Department of Energy, Defense Department. A 
number of agencies need to gain relief from current civil 
service rules in order to attract and retain some of the people 
with specialized skills that they need in order to fulfill 
their missions.

                          Review of H.R. 1085

    I don't want to dwell too much on what has happened in the 
past and how the agencies got there since we need to be looking 
to the future to resolve these problems. And H.R. 1085, in that 
respect, I think is a very fine bill. It addresses a lot of 
short-term issues in proposing the retention bonuses, 
recruitment bonuses, the special provisions for high pay for 
people with specialized skills. I think those will address some 
of the short-term problems that NASA faces with the liabilities 
of a lot of people possibly headed into retirement.
    However, compensation alone is not going to solve NASA's 
problems. There are a lot of inherent systemic management 
systems inherent to Federal Government that make it a difficult 
place to work and a difficult place to manage.

                    Demonstration Project Provision

    Therefore, I believe that section 510, the provision in 
1085 that allows NASA to engage in an agency-wide demonstration 
project in personnel is probably the most important feature of 
the bill. So let me address some comments on that specifically. 
The key point in that provision is to lift the statutory limit 
of 5,000 employees on demonstration project. That would permit 
NASA to run an agency-wide HR program and examine changes in 
areas such as broad pay reform, reform with the classification 
system, performance management, dealing with problem employees 
and the whole question of recruitment in the intake stream.

                  Civil Service Classification System

    The classification system in particular is very 
problematic. It is a system that was implemented in the civil 
service 60 to 70 years ago. And I, frankly, welcome the 
Committee's willingness to get into some of the arcane aspects 
of personnel by proposing this bill, because that is where you 
are going to get to the root cause of some of the morale 
problems faced by NASA and its workforce. The classification 
system is a stovepipe system. It basically brings people in one 
occupational line, and they are expected to pursue a career in 
that line for the next 20, 30, 40 years. You know, that worked 
back in the '30's and '40's. Today's workforce is much more 
mobile. The skills mixes have to be much broader, and no 
allowances are made for that. So people who would like to cross 
over, perhaps having picked up additional experiences in 10 or 
15 years of government work, can't make those cross overs into 
other occupations because of the classification system. In many 
instances, that would be allowed. They would have to take a pay 
cut, a grade reduction of two or three grades, to make that 
kind of a cross over. That is just not logical. The private 
sector doesn't work that way. It is not giving proper respect 
to the human capital element of your organization. If you are 
going to rely on it, you have got to work with them, permit for 
career enhancement, and for cross training, and allow people 
more mobility in the agency.

               Demonstration Projects Is a Core Provision

    Section 510 of 1085 basically will provide that. Although I 
think some of the language is a little restrictive, it will 
need to be broadened to permit NASA to establish a demo 
authority of its own without tight supervision from OPM. So I 
would recommend rewriting some of that language, but that is 
basically a core provision in there.
    I see my time has run out, and I will leave the rest for 
questions.
    [The prepared statement of Mr. Nesterczuk follows:]
                Prepared Statement of George Nesterczuk
    Mr. Chairman and Members of the Committee, thank you for the 
opportunity to testify today on H.R. 1085, the NASA Flexibility Act of 
2003, a bill to make certain personnel authorities and enhanced 
flexibilities available to the National Aeronautics and Space 
Administration. My name is George Nesterczuk and I am President of 
Nesterczuk and Associates, a management-consulting firm located in 
Vienna, VA.

Introduction

    As a long time participant in public sector management initiatives 
I welcome the Committee's willingness to delve into some of the arcane 
aspects of civil service personnel rules. I come to these issues with a 
perspective of someone trained in the sciences that, through no fault 
of his own, became immersed in the realm of human resource management. 
I began my professional work experience as a graduate research 
assistant at the Goddard Space Flight Center. During subsequent years I 
spent a decade as a government contractor supporting NASA satellite 
tracking operations, and performing research in geodesy, atmospheric 
physics, and remote sensing.
    Later, during the Reagan years I went on to hold senior positions 
at the U.S. Office of Personnel Management, the Department of Defense, 
and the Department of Transportation. While at OPM I managed a variety 
of programs including government-wide pay and performance management 
systems and the Senior Executive Service. At the Department of 
Transportation I served as Science and Technology Advisor to the 
Secretary and was DOT's liaison with the White House Office of Science 
and Technology Policy. In 1995, I returned to federal human resource 
management issues as Staff Director of the Subcommittee on the Civil 
Service in the House of Representatives. I have now dealt with federal 
HR issues continuously for over 20 years.

Background

    The problems that confront NASA are not new nor is NASA alone in 
its predicament. Over the past twenty years a continuous stream of 
budget reduction and downsizing initiatives have taken their toll on a 
workforce previously accustomed to lifetime employment with careers 
spanning 30 to 40 years. Managers could expect to recruit a steady 
stream of young entry-level college graduates every year to replace a 
fairly predictable cohort of retirees. In recent years, however, 
reduced budgets and lower staff ceilings have resulted in hiring 
freezes and occasional reductions in force to complement the steady 
outflow of retirement eligible federal employees. In the mid-1990s a 
new tool came along--the Voluntary Separation Incentive, also known as 
the buy-out--to further accelerate retirements.
    Now federal agencies must deal with the aftermath: an aging 
workforce and a significantly reduced pool of young talent from which 
to grow the next generation of senior managers and executives. In 
addition to this aging workforce syndrome, NASA faces the challenge of 
recruiting and retaining highly skilled technical professionals against 
a highly competitive private sector. Further, NASA must also deal with 
a potential crisis in depleted expertise as an increasing proportion of 
its aging workforce achieves retirement eligibility. The agency is 
aware of these problems and has provided demographic data to the 
Committee to illustrate and quantify these problems.

General Support for H.R. 1085

    H.R. 1085 contains measures to deal with at least some of these 
issues in the short-term using financial incentives to attract and 
retain quality staff in critical functions. However, in the long-term, 
more basic systemic reforms will be needed to reestablish some balance 
in NASA's workforce and promote and maintain a high performance 
environment. Though very important, compensation alone is not 
sufficient. The quality of the work environment is an important factor 
that can attract or drive away talent.
    To that end, the enhanced demonstration authority proposed in the 
bill is perhaps the most important part of H.R. 1085. It will permit 
NASA to experiment with agency-wide reforms that can streamline 
recruitment, revamp the pay and classification systems, and reform the 
administrative appeals procedures by which the agency deals with 
problem employees.
    Broadly speaking, I support the intent of H.R. 1085 and believe its 
provisions will indeed provide NASA much needed flexibility in dealing 
with some vexing human resource issues. At the same time I have serious 
reservations about the provision extending increased voluntary 
separation incentives.

Views on Specific Provisions

    At this point in my testimony, I will provide more detailed 
provisions of H.R. 1085.
Using NASA's organic act
    The Committee has chosen to amend NASA's organic act instead of the 
civil service statutes contained in Title 5 of the U.S. Code. This is a 
sound strategy which permits you to tailor agency specific remedies for 
provide immediate relief without bearing the burden of justifying 
government-wide changes and bearing the cost and attendant 
implementation issues.
    There is ample precedent of Congress providing other federal 
agencies with flexible personnel provisions to deal with agency 
specific problems. The annual authorizing legislation for the 
Department of Defense invariably carries a handful of civil service 
provisions to deal with DOD specific matters. Federal banking 
regulators and financial institutions received broad pay exemptions 
back in the 1980s to the exclusion of all other federal agencies. In 
1995, the FAA was removed from coverage by Title 5 USC and permitted to 
establish an entirely separate system of personnel rules. More 
recently, the IRS, the Transportation Security Administration, and the 
Department of Homeland Security were all provided extensive 
flexibilities by Congress to modify existing personnel rules in order 
to function more effectively.
Limitations on authorities granted
    Sections 501 and 503 impose important limitations on the 
authorities granted. First, the financial recruitment and retention 
incentives are limited to situations of critical need. In addition the 
workforce authorities themselves expire after a period of approximately 
six years. These are important controls that place the agency on notice 
that abuses would not be tolerated. Unchecked or unlimited reliance on 
recruitment and retention bonuses would ultimately create new morale 
problems in the workforce and give rise to questions of equitable 
treatment and raised expectations.
    Placing a limit on the duration of these flexibilities will also 
put the agency on a notice of ``use it or lose it.'' It will speed up 
the implementation of needed reforms and provide Congress with a 
specific opportunity to revisit these issues after a reasonable time 
period has elapsed. Based on prior demonstration projects five years is 
sufficient time to gather data to evaluate the efficacy of the 
demonstration. This depends however on the depth and breadth of 
proposed reforms. More complicated HR changes may require a longer 
evaluation period.
    To answer the specific question posed by the Committee as to the 
adequacy of the six year time limit placed on these authorities I would 
answer yes on the critical pay, on bonuses, buy-outs, term conversions, 
and IPA assignments. As to the demonstration authority a more qualified 
response is called for. Broad and/or complex changes may require a 
longer period. Much will depend on NASA's ability to propose specific 
reforms in the first few months of this authority and what it can 
reasonably proceed to implement during the first year of the 
demonstration authority.
    Congress and the Agency will have the sixth year to decide which 
authorities to extend, which to make permanent, and which to terminate. 
At that point the demonstration authority itself could be extended if 
NASA needs additional time to tackle remaining agency-wide HR problems. 
The important thing is for all parties--NASA, its employees and 
Congress--to know that oversight over the process and its results will 
be maintained in order to promote an environment of accountability.
Notification requirements
    The planning and reporting requirements set out in Section 502 give 
the agency 90 days in which to submit to Congress a Workforce Plan 
stipulating how it will implement the workforce authorities granted 
under H.R. 1085. Employees are to be provided the Workforce Plan at 
least 60 days before any authorities are exercised. Subsequent changes 
require similar Congressional and employee notification. Both 
notifications to Congress and employees are reasonable requirements and 
should not pose an undue burden on the agency. The disclosures will 
permit the Committee to track the implementation of authorities and 
provide insight into NASA's implementation rationale.
Demonstration project authority
    Since the demonstration project authority granted in Section 510 is 
perhaps the most important authority extended to NASA I will address it 
first. The enhancement over existing demonstration project authority 
consists of lifting the limit on the size of the demonstration from 
5,000 employees to as many as the Administrator determines necessary. 
This would permit NASA to implement much needed agency-wide personnel 
rule changes in areas such recruitment and selection procedures, pay 
and classification systems, and administration procedures to deal with 
performance and conduct cases.
    It is not clear, however, that the current statutory language in 
H.R. 1085 will suffice since all other language governing demonstration 
projects remains in place in Chapter 47 of Title 5 USC. Thus, if 10 
other projects are already under way according to 4703(d)(2) NASA could 
not proceed with its own demonstration. OPM could also find grounds to 
keep NASA from implementing since it remains the controlling authority 
over demonstration projects.
    I believe more directive language will be required in the bill to 
give NASA the lead in establishing a demonstration project. OPM should 
be designated a consulting agency to NASA during the term of the 
demonstration authority, and the project could follow the remaining 
rules in 5 USC 4703. The notification requirements contained in 
4703(b)(1) however should be overridden and streamlined by language in 
H.R. 1085 since the existing notifications are extremely cumbersome and 
arguably not appropriate to the Committee's intent. The notification 
rules in section 502 of H.R. 1085 are more appropriate than those 
currently in 4703(b)(1).
Targeted financial incentives
    The provisions in Sections 504 and 505 permitting bonuses for 
recruitment and retention, and for transferring or relocating employees 
will allow NASA greater leeway in attracting and keeping certain 
employees with highly specialized skills. The critical pay authority in 
Section 508 will serve the same purpose.
    These bonuses could address the difficulty faced by many federal 
agencies in attracting mid-career employees either from other federal 
agencies or the private sector. The use of service periods to make sure 
an employee ``buys in'' to the agency for several years is a 
particularly good idea. The size of the bonuses makes them noteworthy. 
Currently they are limited to 25 percent of pay, payable in a lump sum. 
The bill proposes to increase this to 50 percent for critical jobs for 
each of two years and up to 25 percent for up to four years for non-
critical jobs. The payout can be spread out over time but in no 
instance can it exceed 100 percent of basic pay.
Buyouts
    Since the mid-1990s voluntary separation incentives have been quite 
the rage in federal HR circles. Reported data from the initial 
implementation of buyouts indicated that out of 132,000 buyouts between 
1994 and 1998, 92 percent went to retirement eligible employees. In 
other words nearly $4 billion was spent in extending a ``golden 
handshake'' to freely departing federal employees. The justification 
for the high cost was that this was a more effective means of 
downsizing than running reductions in force. While this point can be 
argued, Members of Congress were sufficiently persuaded that they 
extended buyout authority permanently and government-wide in 
legislation establishing the Department of Homeland Security.
    Existing law pegs the buyouts at $25,000 per handshake and requires 
no offsetting payment into the retirement system. The earlier buyout 
authority recognized that moving people prematurely into retirement 
shifted the cost burden from the Treasury payroll account to the 
Treasury retirement account and required that an appropriate payment be 
made into the already underfunded Civil Service Retirement and 
Disability Fund.
    Section 506 proposes to raise the ``golden handshake'' in value 
from $25,000 to 50 percent of salary--over $70,000 for a Senior 
Executive, and it too has no offsetting provision for cost to the 
retirement system. This is a highly problematic provision that sends a 
mixed message at best. How can an agency express concern about losing 
senior talent, make a special effort to pay retention bonuses and then 
turn around and spend money on separation bonuses which is all a buyout 
really is.
    H.R. 1085 proposes to limit these huge ``golden handshakes'' to 
individuals in ``critical need'' positions. How is one to understand 
this? The ``critical need'' designation makes the incumbent eligible 
for a retention bonus of up to 100 percent of salary. If instead he is 
offered $50,000 or $60,000 or maybe $70,000 to leave what does that 
tell us about his value to the agency or his performance on the job? 
And is he a better or worse performer than the one in the non-critical 
job to whom you only offer $25,000 to leave? Are you willing to pay 
more money because the incumbent in the critical job does more damage? 
Non-performing or non-productive employees should be removed or 
reassigned into jobs they are better suited for. They should not be 
rewarded with cash to get them to move on. That simply short changes 
the good performers who aren't getting performance awards for lack of 
money.
    Buyouts raise a lot of questions as to intent of purpose, 
especially if the function is not being abolished following the 
incumbent's departure. Their use sends a mixed message at best 
particularly in an organization arguing for relief because it is losing 
talent. I strongly urge the Committee to delete this provision entirely 
and leave NASA to tip toe around the existing government-wide 
authorities for buyouts at the $25,000 level. The agency will have its 
hands full making buyouts credible at the lower level without the extra 
public scrutiny of $70,000 ``golden handshakes.''
Other provisions
    Section 507 provides for the conversion to career status of 
employees serving in term appointments. This is a useful flexibility 
for the Administrator to exercise as long as the provisions are not 
abused, for the abuses would seriously undermine merit system staffing 
principles. Temporary hires are usually brought in to deal with peak or 
surge workloads. Since they are temporary the rules by which such 
positions are filled tend to be relaxed and don't necessarily comply 
with full and open competition requirements for career status in the 
civil service. If a pool of temporary employees serves as an agency 
``farm team'' entry into permanent civil service positions will over 
time become compromised.
    The flexibility in extending IPA assignments by four years as 
proposed under Section 509 is likewise a very useful provision for the 
Administrator to have. Since it is exercised after the initial two-year 
appointment expires there would have been ample opportunity to evaluate 
the individual's performance hence the provision poses no risk to the 
agency. One must nevertheless guard against the abuse of sending non-
performers out of the agency for extended periods of time. IPA 
assignments for federal employees to State and local governments have 
been known to be examples of ``turkey farms.'' The Administrator should 
implement controls to make sure this does not occur--it is a very 
costly practice.

Summary and Conclusion

    In conclusion let me express general support for H.R. 1085 and its 
intent to provide NASA with much needed HR flexibility. The bill 
provides the immediate remedy of additional compensation for specific 
purposes of retaining and attracting talented individuals for critical 
agency needs. The pay differentials paid in bonuses and the higher pay 
authorized are substantially above current authorities and therefore 
meaningful. These provisions will provide the agency with better access 
to professionals at mid career rather than at entry level. Most 
important is the enhanced demonstration project authority that will 
permit NASA to experiment with agency-wide reforms to potentially 
streamline recruitment; revamp the pay and classification systems, and 
reform the administrative appeals procedures by which the agency deals 
with problem employees.
    This concludes my testimony. I will be happy to respond to any 
questions you may have.

                               Discussion

                    Employee Input to Workforce Plan

    Chairman Boehlert. Well, thank you very much. I don't think 
it is going to surprise anyone to learn that I am going to have 
the majority of my questions for Mr. Harnage, because you have 
raised some concerns about the bill, and we want to address 
concerns.
    Let me ask you, what kind of mechanisms would you suggest 
we use to give employees more input into the workforce plan, 
which is required in 1058--1085 I mean?
    Mr. Harnage. We had a very good system that was working. It 
was slow in getting off of the ground, because it didn't have 
the full support of all of the agencies. But it was called 
partnership where we were showing that the input of the people 
doing the work did create efficiencies, and increase in 
productivity, and a lowering of cost. But for some reason, when 
this Administration came in, it desired to eliminate the 
partnership program, and it has taken us two years to begin to 
get it started back. It is beginning to come back in some 
agencies, working very well, for example right now in the Air 
Force, probably the most outstanding one we have got left 
there.
    So, I think the more involvement of the workforce in making 
these changes and what they see is working the--a better way of 
doing it, more involvement of their representative----
    Chairman Boehlert. Well, this is agency specific, and I 
think arguably, you could say, crisis driven. Do you have any 
reason to conclude that you couldn't have a good working 
relationship with NASA?
    Mr. Harnage. If there was a desire to do so.
    Chairman Boehlert. Do you sense that there is a lack of 
desire or you haven't addressed the question yet?
    Mr. Harnage. Well, I am not going to say there is a lack of 
desire. Let us say there is a lack of taking the opportunity. 
For example, on this very legislation, we weren't contacted 
until the latter part of last week. And supposedly, you know, 
for us to meet and talk about this legislation. The problem was 
the material that was supposed to be with that letter wasn't 
with that letter, and it wasn't until yesterday that my staff 
was able to meet with NASA. My calendar didn't allow that on 
that short of notice, so something as important as this, you 
would think that we would have been talking about it months 
ago.
    Chairman Boehlert. You would think that. I can acknowledge 
the merit of that statement. Well, we--maybe we can serve as an 
intermediary to----
    Mr. Harnage. I am sure you can.
    Chairman Boehlert [continuing]. Facilitate a closer working 
partnership, because I think it is essential that you be at the 
table----
    Mr. Harnage. It is essential.
    Chairman Boehlert [continuing]. And work well with the 
officials.
    Mr. Harnage. And I would like to point out, if I might, 
that----
    Chairman Boehlert. Sure.
    Mr. Harnage [continuing]. We are not resisting change. In 
fact, we are--we consider ourselves a change agent. There are a 
lot of things in the human resource area that we recognize are 
antiquated and need changes. It is that a lot of what is being 
pushed is being pushed on buzzwords and things that tend to 
work in the private sector but does not necessarily work in the 
federal sector.
    Chairman Boehlert. I think our task is going to be a little 
bit easier, because it is agency specific.
    Mr. Harnage. Right.
    Chairman Boehlert. And they all differ, so we will work 
with you and with NASA, because you want to identify with a 
solution to the problem. I think you can agree that the problem 
is very real. It is not----
    Mr. Harnage. Yes.

                           Buyout Provisions

    Chairman Boehlert [continuing]. Imagined. We didn't make it 
up. Why do you think it is going to result in the reduction of 
jobs? It--you know, our--from our point, we think it is going 
to create new opportunities for people.
    Mr. Harnage. Well, we were looking for, where you are 
offering--early out, in previous legislation, that required a 
quid pro quo for every position you had a buyout, you couldn't 
replace it. I don't know that that allows that in this 
legislation, so----
    Chairman Boehlert. That was from guys downtown, not from 
here.
    Mr. Harnage. Right.
    Chairman Boehlert. All right.
    Mr. Harnage. And so that is one of our concerns where we 
are offering a buyout. We are not necessarily indicating that 
that position then can be filled by another civil service 
employee either whether it is out of college or off the street, 
whatever the needs of the agency is, so that is one of our 
concerns.

                              Outsourcing

    The other concern is, like I said, in the outsourcing. This 
agency has--we recognize that it is always going to be 
contractor heavy. That is the nature, you know, of the mission, 
but we believe they have gone too far, and there is no 
indication of slowing down. And it is going to be very hard to 
recruit employees when you say, ``Come on and go to work for 
the government, but while you are thinking about that, we are 
studying your job for privatization.''

                                Bonuses

    Chairman Boehlert. Do you have any problem with the 
existing bonus system? And address that somewhat, if you will, 
you know, because we have provided even larger bonuses. We are 
trying to give some incentives to the agency to get the people 
they need to fill the vacancies that are going to come just 
like that. And we don't want that.
    Mr. Harnage. I don't have any problem with bonuses, per se. 
The bonuses that have been applied in the past, we do have a 
problem with, and some of these that are indicated. For 
example, when we looked in at the current FEPCA, the Federal 
Employee Pay Comparability Act, allows for bonuses, yet they--
only something like two percent of bonuses are being utilized, 
and we tried to find out why. The reason is they weren't 
funded. So when a manager made a decision to give somebody a 
bonus, he had to either not fill a position or use some salary 
in some other place in order to make that up, so there is no 
incentive for the manager to give those bonuses. So they have 
to be funded if they are going to really work. They have to be 
funded. So that would be the number one problem.
    The number two problem is offering bonuses to recruit 
someone to come on board where you pay 25 percent of their 
salary for four years. And they come on board working side-by-
side with somebody equally qualified, maybe be even better 
qualified, that has been, say, working for 10 years drawing 
less money than the new person is. There has to be some way of 
addressing the morale of the current workforce while you are 
trying to also address the need for bringing in more employees.
    Chairman Boehlert. Well, we want to work with you and with 
NASA to address a real problem that the agency is facing. And 
when the agency faces a problem, that concerns us, and it 
should concern all Americans, so we will work with you, Mr. 
Harnage.
    Mr. Harnage. I appreciate that. And one of the biggest 
things that I saw missing out of all of this is it doesn't 
involve the--you know, the workers at all. And it doesn't 
involve any collective bargaining. It seems to, you know, just 
give total flexibility without the checks and balances that the 
employees themselves can pay a real value to this process. And 
so I would like to see that that is protected.
    Chairman Boehlert. Thank you for your willingness to work 
with us. Mr. Gordon.
    Mr. Gordon. Thank you, Mr. Chairman. Let me first point out 
to Mr. Harnage, my father was a groundskeeper at the VA and--in 
my hometown of Murfreesboro, and was a member of AFGE for a 
long time. And I know firsthand how it has improved our lives. 
And let me also say that this legislation is much improved from 
what we saw last year. And I think that Chairman Boehlert very 
much wants to move forward with a good bill. And when he says 
he wants to talk to you, he means that sincerely. And so we do 
need to develop this dialogue, because I think something is 
going to happen, and let us make it happen the best that it 
can.
    I do have a concern as to what really are our problems. And 
let me go through that just quickly. The proposed NASA 
Workforce Legislation includes recruitment, retention, and 
relocation bonuses that would be higher than under existing 
law. And I would assume the justification is that the existing 
incentive levels are insufficient. Yet NASA's own national 
recruitment initiative report published in January of 2002 
states, ``NASA centers are increasing the use of hiring 
incentives to attract candidates and retain employees. These 
flexibilities, commonly referred to as the three Rs, are 
recruitment, retention, and relocation incentives, were offered 
by OPM beginning in 1991. It is important to note that the 
payment of these bonuses comes from the center's budget. There 
is no extra money for the payment of these bonuses. Most center 
managers say the budget constraints keep them from making 
greater use of these flexibilities.'' So we have got to 
determine what really is problems within the existing law and 
what--or problems with just not adequate funding.

                            NASA Recruiting

    Also NASA, as we know, has had a hiring freeze until 
recently. And I think that we need to find out better, in terms 
of the need to recruit new candidates what information we have 
since this hiring freeze has been taken off. And I would like 
to know whether any of the witnesses can provide any specific 
data on how successful NASA has been in hiring new employees 
after the hiring freeze has been removed and any data that you 
might have on what problems NASA is having in attracting and 
retaining employees.

                               Bonus Pay

    Mr. Harnage. Well, I can't answer that question, because I 
don't know how hard they have tried to hire new employees. That 
would have to be the first test, how often and how many people 
have they tried to hire, and then what was their success rate. 
But you talk about the bonuses. As I stated earlier, the 
problem with the past bonuses is they have not been funded, and 
therefore, that was a disincentive to a lot of managers to use 
those. So----
    Mr. Gordon. Well, that is what I am trying to find--you 
know, we know we have a problem, but what I am trying to 
determine is the problem not adequate funding of existing 
flexibility----
    Mr. Harnage. Right.
    Mr. Gordon [continuing]. Versus a problem of needing 
additional flexibility. So----
    Mr. Harnage. Well, in addition to that, though, it--and I 
heard one of the Congressmen state earlier, it is pay. One of 
our problems with the bonuses is they are being utilized, or 
seem to be utilized, to make up for a deficiency in the pay. 
And that is not a purpose of a bonus. To give a bonus, you are 
giving somebody what they are really worth instead of rewarding 
them. They should get what they are worth, and a bonus should 
be a reward for excellence in service.
    Mr. Gordon. This goes back to whether we have a structural 
problem or a financial problem.

                      Funding Salaries and Bonuses

    Mr. Stier. Congressman, I think that the problem is that 
there is not a problem. There are several problems, and there 
are a lot of different things that need to be done here. And I 
think you are 100 percent right. This is an issue of resourcing 
for sure. It is that a lot of these flexibilities exist. They 
can't be adequately used, because the dollars aren't there to 
actually fund them. But it is also true that NASA needs 
additional flexibilities. I think, again, if you look at that 
chart, that is what NASA is up against. NASA needs to be able 
to compete in a very, very difficult marketplace. They are 
plenty of----
    Mr. Gordon. Okay. So do you have some data that shows since 
the NASA freeze has come off that this chart you have 
demonstrates that it has--there has been a problem?
    Mr. Stier. What I have for you is data that is in my 
testimony, and I should have asked for that to be entered into 
the record. But the data shows that on, for example, entry-
level salaries, NASA is not able to compete against the private 
sector. And what I have is data that shows when you----
    Mr. Gordon. So that is not a structural problem, then that 
is a financial problem.
    Mr. Stier. That is a financial problem. What I have is data 
that shows that private sector companies, those companies, 60-
plus percent of them use consistently recruitment and retention 
bonuses in order to keep the talent that they have. What I have 
is data from--anecdotal data from NASA of the number of top-
tier scientists, engineers, etcetera, that they have wanted to 
keep that they can't keep. And I can give you specific 
examples, if you would like them. They are anecdotal rather 
than data, but it demonstrates that there is a real problem 
there.

           Need to Compare Flexibility and Financial Problems

    Mr. Gordon. Yeah, but again, we know we have a problem. We 
are trying to find out what solution and whether or not there 
is already that flexibility. And what I would--just if I could 
real quickly close, Mr. Chairman, by saying I think we need 
more data to--in an effort to try to determine structural 
versus lack of funding. And for the record, last year's 
Subcommittee hearing on NASA workforce issues, the Comptroller 
General of GAO stated that without a detailed review of NASA's 
plans, GAO was ``not in a position to assess NASA's use of 
existing authorities, the sufficiency of those authorities, and 
their relationship to this agency-wide human capital goal''. So 
again, I would hope that as we go through this process, we can 
get more data to really determine what is structural that needs 
to be changed and----
    Chairman Boehlert. And what is financial.
    Mr. Gordon. Financial that needs to be improved.
    Chairman Boehlert. Thank you very much, Mr. Gordon. Mr. 
Rohrabacher.

                    Pay for Scientists and Engineers

    Mr. Rohrabacher. Thank you very much. Mr. Stier, you stated 
earlier that 60 percent of NASA's workforce are engineers or 
scientists. What are the other 40 percent?
    Mr. Stier. Other 40 percent are, you know, a variety of 
different activities from clerical work to all of the 
activities that NASA is engaged in. It is a virtually unique 
among agencies with respect to the percentage of professional 
engineering and science staff.
    Mr. Rohrabacher. Okay. Now the 60 percent that are 
engineering and scientists----
    Mr. Stier. Yes.
    Mr. Rohrabacher [continuing]. Are they the higher-paid 50 
percent?
    Mr. Stier. By and large, they are going to be higher-paid, 
absolutely. They have positive educational requirements. They 
start out, generally speaking, at a higher level, and they will 
be higher paid.
    Mr. Rohrabacher. Okay. There is a Space News report there 
that suggests that the--NASA's workforce--that the engineers in 
NASA's workforce make around an average of $74,000 a year as 
compared to $68,000 a year in the private sector. First of all, 
do you think that that is accurate?
    Mr. Stier. It is accurate. It comes from the Bureau of 
Labor Statistics data. It reminds me of an anecdote where Bill 
Gates walks into a bar with 38 people. And everyone 
immediately, on average, becomes a billionaire. The point here 
is that that it is a median. That tells you something, but it 
doesn't give you the full story.
    Mr. Rohrabacher. I got it. Now the--but by and large, the 
employees at NASA who are not the engineers and scientists are 
making much less than this then?
    Mr. Stier. Some are, and some are going to be making 
similar. I mean, again, there are different professionals, in 
addition to scientists and engineers there, that will clearly 
be in equivalent grades.
    Mr. Rohrabacher. All right. So making--you know, when Mr. 
Gordon was mentioning about trying to differentiate between a 
structural versus pay differentiation, if indeed you could have 
fewer people being paid more money to do a job, then you could 
actually say that is structural, couldn't you?
    Mr. Stier. Well, I think that is--that I would----
    Mr. Rohrabacher. Please feel--the other panelists can feel 
free to jump in.
    Mr. Nesterczuk. Let me comment on that. The pay issue is a 
structural issue. The pay system is established in statute. It 
is rigid. You are pegged to a pay scale depending on your years 
of service and experience. On the intake stream, you don't have 
a lot of flexibility as an agency to reset the entry-level 
salary. So that is a structural issue. The financial aspect of 
it comes in the way of the bonuses. If on this pay system, you 
can overlay some flexibility with a recruitment bonus to 
attract someone to get them started into the agency, but you 
don't have the money for those bonuses, yes, that is a 
financial issue.
    Mr. Stier. If I might add----
    Mr. Nesterczuk. So the pay structure----
    Mr. Rohrabacher. So we can give the--I guess what I am 
saying is we are not necessarily talking about spending a huge 
chunk of more federal dollars----
    Mr. Nesterczuk. No.
    Mr. Rohrabacher [continuing]. In the sense that you can use 
those dollars to pay some people more money who we really need 
there as compared to some other people whose skills may not be 
as up-to-date. I mean, let me just note, I am a former 
journalist. I don't think I could go back into the field of 
journalism right now, because I have been technologically left 
behind. Journalists now have to have an incredible number of 
technical skills that I don't have. And then when you--that is 
when you see that NASA's workforce or engineers that are aging 
engineers as compared to the younger people who are 25- to 30-
year-olds. I would note that the 25- to 30-year-olds maybe have 
up-to-date skills where some of the older fellows and older 
ladies don't have those same skills. And----
    Mr. Stier. I would say first that NASA does have a 
structural issue with respect to a starting pay salary, which 
is lower than the private sector. Some of the older people you 
are talking about, I think one of the real challenges NASA 
actually has is in keeping them, because they need to be in 
NASA to train the new people that are coming through.
    Mr. Rohrabacher. Right.

                   Importance of Continuous Learning

    Mr. Stier. You heard from the prior panel about the 
importance of continuous learning. In the case of the workforce 
that NASA has, there is quite a bit of that that goes on, and 
so just because--as a young guy, I have to say this, just 
because you are old doesn't mean that you are not up to speed.
    Mr. Rohrabacher. Well, let me take that as a--let me 
suggest that that is a very wise answer to the question, 
because those of us who are here and go into politics, we don't 
always continue learning. And maybe that is not a good 
comparison then.
    Mr. Harnage. Well, if I might add, one of the reasons you 
don't continue learning, you talk about in the journalism area, 
is because that is no longer, you know, required of the job 
that you are now doing. But when we make these comparisons, I 
often like to use--I am a very proud American. I am a veteran, 
and I am proud that we have got the best-trained military in 
the world. We are now facing, with the probability of war, and 
there is no doubt in any United States citizens' mind who is 
going to come out on top on that. The only question is how many 
casualties will there be, but they are well trained, the best 
trained military in the world. And every one of them came to 
work at the entrance level. We trained them continually through 
their career, so that they kept pace, and that is what we ought 
to be doing with our civilian workforce.
    Chairman Boehlert. The gentleman's time has expired.
    Mr. Rohrabacher. If the Chairman would indulge me 30 
seconds just to say----
    Chairman Boehlert. A nanosecond.
    Mr. Rohrabacher. The Japanese have known that if you pay 
your engineers more than your lawyers, it is a very--it is 
something good for society. And perhaps we can structure it so 
in our society that the people who go to work for NASA would be 
making more money if they--especially if they have the skills 
that we need. And I thank the Chairman for his leadership in 
trying to give us a little experiment here with trying to make 
things better.
    Chairman Boehlert. Thank you. And we give some flexibility 
to NASA, and I think it is very important that there be 
constant communication with you and representing your 
membership, and you have input. But we lift the arbitrary 5,000 
cap, and it is agency-specific. Goodness knows we need a lot of 
reform in government overall, but if we wait to do it for 
everybody, we will never get it done. And this is an agency we 
have to address the urgent need right now. I don't think there 
is any disagreement on the need. The question is how best to 
address the need. And we are trying, to the best of our 
ability, to come up with a proposed solution. But we should not 
exclude anyone in the development of that demonstration 
activity and the solution. So you have got my pledge that we 
will be facilitators to make certain your voices are heard, 
your input is given the consideration it deserves.
    With that, let me turn to Mr. Hall.
    Mr. Hall. Mr. Chairman, I have not been here. I have been 
in another hearing, and I don't know what has been asked, and I 
don't want to abuse their time. I will submit questions for 
later.
    Chairman Boehlert. Okay. Thank you very much. Unless there 
is someone who has--Mr. Lampson, I'm sorry.
    Mr. Lampson. Thank you, Mr. Chairman. I don't want to be 
left out.
    Chairman Boehlert. The other gentleman from Texas.

                    Destination and Vision for NASA

    Mr. Lampson. Thank you very much. I have to agree with 
every word that you said about there is a problem. We have 
known that problem existed in NASA for a while, and there was 
concern from years back, because I have visited with people, 
particularly at the Johnson Space Center, about the loss of 
continuity form project to project. And as people were not 
being replaced and brought in to work with the older heads and 
gaining the experience of actually doing those tasks before 
they move to the next project, then it becomes lost.
    And I am one who firmly believes after--I think we had a 
hearing on this subject some time last year. I don't remember 
exactly when it was. But I remember during the course of the 
hearing, I got up and went and sat with a group of about 20 
college students in the back. And I asked them. I said, ``You 
are the potential employees for NASA. What do you want? Are you 
most interested in the dollars that can be put into your pocket 
or is there something else?'' And almost to a person, it was, 
``Where are we going? What can I do to build on my dream? What 
can I do to make me feel like I have accomplished something 
significant?'' And I think that is a huge factor that has to be 
put into this equation and make sure that we have got a 
destination for NASA and a vision, something that is going to 
challenge the people who want to come in and live a dream and 
take a shot at making a huge difference in the world, like so 
many people who have come into NASA so long ago have done, and 
hopefully will continue to do.

                         Demonstration Project

    But with that, let me ask a couple of questions so that we 
might get down to where we might make improvements in the bill. 
I wish there were someone from NASA here, but the bill seems 
that it would allow the NASA Administrator to carry out agency-
wide personnel demonstration projects. Could the 
Administrator--and any of you answer. Could the Administrator 
use that authority to eliminate the federal pay classification 
system at NASA?
    Mr. Nesterczuk. Yeah, I will take that. Yes, the 
Administrator would be allowed to change the classification 
system at NASA.
    Mr. Lampson. Could they then establish their own pay 
classification system?
    Mr. Nesterczuk. Yes, they could.
    Mr. Lampson. Could the Administrator arbitrarily eliminate 
the current Administrative appeals procedure available to NASA 
employees and replace it with something else?
    Mr. Nesterczuk. To a limited extent. The administrative 
aspect of it, which is up to the level of the Administrator 
inside the agency, that appeals process could be changed, but 
subsequent external reviews to the Merit Systems Protection 
Board and elsewhere, no.

                              Outsourcing

    Mr. Lampson. What would be the effect of that authority on 
the establishment of a diverse workforce? And would it effect--
would it increase the NASA Administrator's power to expand 
outsourcing?
    Mr. Nesterczuk. It is not related. It is not really 
related. The question of dealing with the appeals processes in 
cases of problem employees who may be subject to removal or 
some such action, how you deal with that, basically, is that 
appeals process. The question of outsourcing is something that 
OMB handles. It is beyond the scope of the demonstration 
authority.
    Mr. Lampson. Anybody want to make any comments about any of 
that before I move----
    Chairman Boehlert. Yeah, I do. I want you to know that we 
are going to be monitoring this very, very carefully. And they 
have to come to us with their plan. And so we will be working, 
and you have my pledge, as does Mr. Harnage, that we are going 
to be examining this very carefully. And we are going to 
consider all aspects. We better solve some problems, not create 
new ones.
    Mr. Lampson. Good. Thank you, Mr. Chairman, for that 
statement.

                         Demonstration Projects

    Mr. Stier. Mr. Chairman, if I might add one comment on 
that, and that is that the demo project authority includes, as 
it ought to and needs to, consultation and work with employee 
groups, union groups, where they exist. There is a long history 
here. The demo project authority actually goes back 25 years. 
One of the points that I think is quite important for the 
Committee to look at is that this has been a way for government 
to experiment. It has been experimenting for 25 years primarily 
in this arena around scientists and engineers. We have learned 
a lot. Why are we waiting 25 years to take what we have learned 
to make the government a better place? And I would say that we 
ought to be making sure that we find out what has worked and 
try to use that in places where it is really needed, like NASA. 
I think that is one of the advantages of demo projects and 
clearly something that obviously has to include employee 
involvement.

                           Need for Oversight

    Mr. Nesterczuk. Yeah, let me clarify the point. The 
Administrator can't unilaterally make changes. The 
Administrator can propose a change to the system. It then has 
to be debated, reviewed through the normal clearance processes 
in the demonstration authority and then subsequently accepted 
and implemented. But he can't unilaterally just go ahead and 
make a change.
    Mr. Harnage. Well, one thing that I would say is that I 
have asked Congress to be very cautious about giving up its 
oversight over any agency where you give them the authority. 
This wouldn't be a demonstration project, because it would be 
agency-wide. And it would be the agency's rules and 
regulations. And I am a little confused on what the appeals 
process would be when you have circumvented the classification 
process with this demonstration project. But I also want the 
Committee to understand when I was--a while ago when I said we 
are a change agent, I tried for four years to get the Clinton 
Administration to sit down with us and talk about pay reform. 
And I have tried now for two years to get the Bush 
Administration to sit down and let us talk about pay reform. We 
recognize there is a need. We recognize that it has got to be 
addressed if you are going to do anything about the recruitment 
and retention problem. But so far, neither Administration has 
been willing to sit down and start working on it. It is time we 
started working on it.
    Chairman Boehlert. The gentleman's time has expired.
    Mr. Lampson. Can I just make one ending comment?
    Chairman Boehlert. One ending comment.
    Mr. Lampson. It follows--and it is just a few words. And it 
follows sort of what your comments are. They will have to come 
back to the Committee to make a report under this bill, but 
they wouldn't have to get Congress's approval. And I would like 
to at least for us to have a dialogue on that some how or 
other.
    Chairman Boehlert. I can assure you and everyone that we 
are going to continue to have a dialogue in this. As a matter 
of fact, first of all, Congress never, never gives up its 
oversight authority and responsibility. I can guarantee you 
that. Secondly, and not surprisingly, NASA is not like--
unlike--is like any other agency; they wanted authority to do 
what they wanted to do permanently, and without any 
consultation. And we said, in essence, ``Like Hell. We are not 
going to give you that open-ended opportunity to do whatever 
you darn well please,'' although we do think they would act 
responsibly, but we are going to make sure they act 
responsibly. Until they--as Mr. Stier pointed out, consult, 
this is not a unilateral action by a select group of people 
over in a corner addressing a problem. This is a select group 
of people over in a corner identifying the problem, opening up 
to everyone saying, ``This is a real problem. We have got to 
get at it, and we are determined to get at it in a responsible 
way.'' But we are not going to yield on oversight. We are not 
going to let them do whatever they darn well please. And I 
don't want to prejudge what they might come up with their 
demonstration project. It might be just wonderful. You and I 
might be standing up applauding. But I doubt if that will be 
the case. I think it will need a little massaging, but we are 
here. We are masseurs. Thank you very much.
    Mr. Gordon. Can I close, also, please, sir?
    Chairman Boehlert. All right. You have an opportunity to 
close, Mr. Gordon.

                  Plans for the Workforce Authorities

    Mr. Gordon. Thank you. Just a couple quick points. As Mr. 
Lampson pointed out, really the only responsibility or 
obligation of NASA is to come back and report what they are 
going to do, which brings us, to some extent, into this chicken 
and the egg situation, in that they have continued to say, ``We 
want this additional authority,'' but they haven't told us what 
they want the authority for. And you know, if they would maybe 
come forth and tell us what they want to do with this and what 
they plan to do with it, I think that would be beneficial.
    The other--and the other point is this: there has been a 
lot of discussion about salary. And part of the way to enhance 
the recruitment and retention of NASA employees is to increase 
salary. And I mean, this bill doesn't talk about salary. But--
and as a practical matter, I know we are really talking about 
compensation in general. This--but this bill is more about 
compensation in general, which is bonuses and these sort of 
things. And once again, you know, under OPM, NASA has the 
ability to a lot of flexibility in terms of additional bonuses. 
But the centers' managers are afraid--not afraid, they are not 
using it, because they don't have adequate funds. So we really 
do need to know more about could they get the job done with 
adequate funding without additional legislation?
    And the final point is, I just want to once again emphasize 
that I think that we have a fair forum here with Mr. Boehlert 
in trying to--I have no doubt that he wants to do the right 
thing. And we need to get the best information before this 
committee to do that.
    Chairman Boehlert. That is closing in a really positive 
note. Thank you very much for being resources for this 
committee. We really appreciate your input, all of you. And the 
dialogue will continue.
    Mr. Nesterczuk. Thank you.
    Chairman Boehlert. Thank you so much.
    Mr. Nesterczuk. Thank you, Mr. Chairman.
    Chairman Boehlert. This hearing is adjourned.
    [Whereupon, at 4:30 p.m., the Committee was adjourned.]
                              Appendix 1:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Robert S. Walker, Chairman, Commission on the Future of 
        the United States Aerospace Industry; President, Wexler Walker 
        Public Policy Associates

Questions submitted by Representative Ralph M. Hall

Q1. LThe Aerospace Commission has made an extensive set of 
recommendations to improve the civil space and aviation sectors in the 
United States.

         How much do you estimate it would cost to implement 
        all of those recommendations?

         In light of the current state of the aerospace 
        industry, will the private sector be able to contribute much of 
        the needed funds, or will the Federal Government have to pay 
        for the major share of the cost?

A1. The Commission on the Future of the United States Aerospace 
Industry did not specifically cost out our programmatic 
recommendations. You will note that most of our recommendations would 
encompass a variety of potential programs and therefore costing out any 
one of those would not be particularly useful.
    That said, however, it is clear that tens of billions of dollars of 
new investment is needed in the aerospace sector. Our approach to 
finding the resources for that needed investment was to look at the 
aerospace expenditures now being made or contemplated, combine that 
spending into a sectoral budget, prioritize what are the real needs 
inside that budget and then suggest better horizontal management of the 
resources so that real priorities get addressed.
    Certainly additional money beyond that already committed is needed 
to return U.S. aerospace leadership, but a considerable amount can be 
achieved by Congress and the Administration organizing activities 
within the sector in such a way that programs are complimentary rather 
than competing. Our most vivid suggestion in that regard is to assure 
that space based control, navigation and surveillance assets being 
designed for military missions also include capability to be utilized 
as an integral part of a modernized air traffic management system.
    A substantial part of the investments needed for a robust aerospace 
future will have to come through government actions. The Commission 
suggested a series of business related reforms, which we believed would 
make the aerospace industry more attractive to the private investment 
community. The present situation of cyclical business and relatively 
meager profits even in the best of times does not attract much capital 
into the industry. Our belief was that policy change which results in 
making aerospace a more attractive investment arena will assure the 
finance base for additional research and development, more new products 
and a stronger ability to compete in the global economy.

Questions submitted by Representative Bart Gordon

Q1. In the Commission report, you stated [page 3-3]:

        ``The use of revolutionary reusable launch vehicles (RLV) is 
        within our grasp in this decade. Developing the next generation 
        of RLVs (in low, medium, and heavy lift configurations) could 
        dramatically improve both the affordability and reliability of 
        access to space.''

        However, NASA's latest integrated space transportation plan 
        slows down the development of a next generation RLV and assumes 
        the continued operation of the Shuttle fleet for another 
        fifteen years or so. It also seems to back away from earlier 
        cost reduction goals.

                 Why does the Commission believe that next 
                generation RLVs are achievable in this decade?

                 What would it take to develop a next 
                generation RLV on that timetable?

                 Did NASA discuss your RLV recommendations 
                with you before they issued their new integrated space 
                transportation plan?

A1. Your question made me realize that our specific wording could lead 
to misinterpretation and therefore was not as artful as it should have 
been.
    The advent of RLVs within the decade is not likely as a NASA 
program. We would hope that the Orbital Space Phase could be completed 
within the decade. Our discussions with NASA led us to believe that 
they plan to design the OSP in a way that it could ultimately be used 
as the second stage of a two-stage RLV. But, since the first stage of 
such a vehicle is most likely to emerge from the National Aerospace 
Initiative, the timeframe for such integration is probably toward the 
middle of the century's second decade. Prior to that, of course, the 
OSP would be on an EELV, a concept attractive to the Commission as a 
way of better utilizing our EELV investment.
    What our Commission statement refers to is the possibility of 
privately financed RLVs being launched within the decade. Several 
competitors for the x-prize are likely to fly such vehicles, which 
while not orbital, will be fully reusable technologies going to the 
edge of space. In addition, efforts such as those underway at Kistler 
also have the potential of creating reusable vehicles for, at least, 
small payloads.
    The Commission's hope was that the development of reusable 
technologies would lead to vehicle configurations addressing a 
multitude of space needs. Our intent was to push for the earliest 
possible timetable for such development because we believe that the 
result would be a dramatic reduction of cost to orbit.
                   Answers to Post-Hearing Questions
Responses by John W. Douglass, President and Chief Executive Officer, 
        Aerospace Industries Association of America, Inc.

Questions submitted by Representative Ralph M. Hall

Q1. LThe Aerospace Commission recommended that the Federal Government 
significantly increase its investment in basic aerospace research. 
However, NASA's budget request calls for an almost 5 percent cut 
(excluding the effects of inflation) in aeronautics R&D funding over 
the next five years. This runs counter to the Commission's 
recommendations.

         What will be the impact of continued cuts to 
        aeronautics R&D?

         Will it be possible to achieve the future air traffic 
        management system recommended by the Commission if NASA and 
        FAA's R&D budgets follow the trend laid out in the 
        Administration's budget request?

         What would you recommend be done?

A1. Long-term reductions to the aeronautics Research & Development 
(R&D) budgets of the FAA and NASA would postpone the deployment of 
leading-edge technologies to improve the speed, range, safety and 
environmental efficiency of American air and space travel. As the 
report of the Aerospace Commission warned, patterns of declining 
federal aeronautics R&D spending could result in missed opportunities 
for the Nation to take advantage of ``breakthrough capabilities'' in 
high performance computers; propulsion and energy systems; noise and 
emissions mitigation; and hydrogen-fueled engines.
    These patterns could also jeopardize the critical need for 
integrating the resources of federal aviation agencies to modernize the 
Nation's aging Air Traffic Management (ATM) system, as required by 
Title VI, Sec. 622 of The Century of Aviation Reauthorization Act of 
2003. This initiative will require sustainable multi-year funding to 
reduce the reliance of the National Airspace System (NAS) on vulnerable 
ground stations and to foster the development of advanced satellite-
based networks for both civil and military aviation communications, 
navigation and surveillance.
    Insufficient Federal Government investments in aeronautics R&D 
would also increase the challenge of recruiting sufficient numbers of 
scientists and engineers into the Nation's aerospace industrial 
workforce during a decade when nearly 30 percent of the sector's 
employees will reach retirement eligibility.
    Finally, a contraction of our commitment to aeronautics R&D at home 
will only yield aviation market leadership to our competitors abroad. 
European Union (EU) governments underwrite approximately 30 percent of 
the continent's civil aeronautics R&D, and in the realm of space, the 
EU, as well as Japan, China and Russia, have aggressively pursued new 
payload launch capabilities for at least the last five years. Our 
competitors overseas have calculated that the United States lacks 
either the will or the means to leverage its military superiority into 
world-class civil aviation and commercial space transportation systems. 
Robust programs of aeronautics R&D, however, would represent the first 
step in proving them wrong.
    To place American aeronautics R&D programs on a stable glide path 
for economic growth and innovation, the Aerospace Industries 
Association recommends the following changes in the mission planning 
cycles of NASA and the FAA.

NASA

         Restoration of the balance between the Space and 
        Aeronautics Enterprise budgets by increasing the latter to 30 
        percent of the Space Science account ($1.672B) over a five-year 
        period.

         Increased funding of Space Flight Capabilities, 
        Shuttle life extension, the Orbital Space Plane and Propulsion 
        and power technologies with the objective of deploying a new 
        manned launch vehicle by 2010.

         An aggressive recapitalization of NASA's 
        infrastructure to facilitate aeronautics and space research.

FAA

         A reversal of budgetary trends through an increase in 
        the FAA's Research, Engineering & Development top line by 30 
        percent (above the FY03 $100M level) as well as the Facilities 
        & Engineering NAS modernization program by 45 percent (above 
        the $3B FY03 level).

         The establishment of public/private partnerships to 
        accelerate the development of advanced ATM technologies, 
        propulsion and fuel capabilities, environmental efficiency and 
        rotorcraft platforms.

    These additional resources would significantly enhance NAS safety 
and capacity.
                   Answers to Post-Hearing Questions
Responses by Max Stier, President, Partnership for Public Service

Questions submitted by Chairman Sherwood Boehlert

Q1. LHow do recruitment, relocation, and retention bonuses for industry 
and academia compare to the current legal limits for Federal Government 
employees?

A1. While there is considerable variance among different industries and 
academia with regard to their use of recruitment, relocation, and 
retention bonuses, overall both sectors provide larger bonuses to 
proportionately more recruits or employees compared to the Federal 
Government. The December 1999 report by the Office of Personnel 
Management, ``The 3Rs: Lessons Learned from Recruitment, Relocation, 
and Retention Incentives,'' does a good job of outlining some of the 
major differences between the federal and non-federal environment 
regarding use of these tools. In that report, for example, OPM notes 
that ``. . .use of recruitment bonuses in the private sector is 
increasing. In a recent survey of 41 companies offering recruitment 
bonuses, over half offered bonus amounts of more than $3,500. The 
majority of all bonuses range from 6 to 15 percent of base pay.'' 
Private sector employers also frequently use finder's fees as part of 
their recruitment techniques and there is more managerial discretion 
regarding when and how recruitment incentives are used.
    Similarly, OPM found that 50 percent of non-federal public sector 
and private sector contacts said they provide relocation incentives as 
either lump sum bonuses or salary differentials. OPM also found that 
non-federal employers typically provide a variety of additional 
relocation incentives typically not available in the federal sector, 
including housing allowances and reimbursement for cost of evaluating 
school systems. Finally, OPM found that retention or ``stay for pay'' 
incentives are administered differently outside the Federal Government, 
particularly in the private sector where there are the options of using 
deferred compensation, cash on a lump sum basis, stock options and 
profit sharing.

Q2. LHow do recruitment, relocation, and retention bonuses for industry 
and academia compare to the new limits for NASA employees in H.R. 1085?

A2. The new and higher limits for recruitment, relocation, and 
retention bonuses proposed in H.R. 1085 for NASA employees would bring 
NASA closer to what industry and academia can provide when competing to 
attract or retain talented applicants or employees. Overall, the 
proposed higher limits in H.R. 1085 seem quite reasonable, particularly 
since they are contingent upon the employee entering into a service 
agreement with NASA. Of course, the ultimate utility of these 
incentives will depend to a large degree on whether NASA has sufficient 
resources to use them effectively. If they do, the incentives should be 
quite useful and, ultimately, very cost effective.

Questions submitted by Representative Ralph M. Hall

Q1. LIt is reasonable to presume that NASA and its contractors are 
competing for many of the same employees due to the specialized skills 
involved. Given that, would increased recruitment and retention bonuses 
as envisioned in H.R. 1085 have any net positive effect--or would it 
just result in higher costs for both NASA and its contractors as they 
compete in offering better incentives?

A1. NASA contractors, in our view, are unlikely to be ``open-ended'' in 
the amount of any recruitment or retention bonuses they provide. Since 
NASA is only one of several potential competitors for the sought-after 
talent, we do not think that enabling NASA to become more competitive 
by increasing the amount of the recruitment and retention bonuses they 
can provide would be canceled out by a concomitant increase by its 
contractors. The marketplace for talent, in essence, is much larger 
than that. Overall, therefore, we think the provisions of H.R. 1085 
would provide a net benefit for NASA and its mission capability by 
allowing them to become more competitive in that marketplace.

Questions submitted by Representative Bart Gordon

Q1. As part of the President's Management Agenda, 50 percent of the 
remaining NASA jobs are to be made available for potential outsourcing 
over the next few years.

        How effective are bonuses and other incentives likely to be in 
        attracting employees to NASA if they believe that their jobs 
        could be transferred to the private sector within a few years?

A1. Despite the potential for some outsourcing of NASA jobs, the 
increases in recruitment, relocation, and retention bonuses proposed in 
H.R. 1085 should still be effective in helping NASA attract highly 
capable employees. Part of our reasoning behind this conclusion is that 
the outsourcing goals of the President's Management Agenda call for 
fifty percent of jobs that are commercial in nature to be made 
available for potential outsourcing, not fifty percent of all agency 
jobs. The total number of NASA positions affected by outsourcing, 
therefore, may be much smaller than some anticipate. The Partnership 
also takes the view that work that is not inherently governmental can 
in some circumstances be appropriately competed, but great care must be 
taken to ensure that the ``not inherently governmental'' standard is 
indeed met. In addition, where jobs are appropriate for competition, 
public sector employees are often the best value. Accordingly, the 
competitive sourcing process must ensure a level playing field for 
public employees. Further, the rhetoric around this issue should not in 
any way denigrate public servants. If these conditions are met, the 
impact of outsourcing considerations on potential applicants should be 
fairly minimal. If NASA is successful in attracting the highly 
qualified applicants it needs, we think most of those applicants will 
not be deterred by possible commercial sourcing competitions since they 
will accurately see their skills as highly marketable under any 
conditions. Our bottom line is that good civil servants are essential 
to America's well-being. The core responsibilities of government should 
not be outsourced and every effort must be made to retain the talented 
federal workers the government needs to meet those responsibilities. 
The provisions of H.R. 1085 will be helpful in that regard.

Q2. Do you have any survey data or other empirical data to justify 
your view?

A2. We know that starting salaries and bonuses are important to new 
college graduates with student loans and other debts that were incurred 
while obtaining advanced degrees. The results of a recent survey co-
sponsored by the Partnership which examined the impact of law school 
debt are transferable to other occupations as well. As the report of 
that study, ``From Paper Chase to Money Chase: Law School Debt Diverts 
Road to Public Service,'' notes ``. . .many law school graduates must 
forgo the call to public service despite their interest and commitment 
to such a career. Public interest and government employers will 
increasingly lose in their efforts to recruit and retain talented and 
dedicated attorneys.'' Students graduating from schools of engineering 
or science, particularly those with advanced degrees are likely to be 
in a similar position. Recruitment bonuses or the offer of student loan 
repayments as a recruitment incentive can make a very positive 
difference. Further, there is a growing body of research on the 
expectations of new entrants to the job market and particularly new 
college graduates who are likely to anticipate and even look forward to 
several different employers throughout their careers. The possibility 
that a potential employer may outsource some positions is not likely to 
be nearly as important a consideration as initial salary levels or 
recruitment and relocation bonuses.
    With regard to the value of retention bonuses, the recently 
released results from OPM's 2002 Federal Human Capital Survey lends 
support to the proposition that retention bonuses can be an effective 
tool for retaining some needed employees. For example, while nearly 
two-thirds of all federal employees are satisfied with their retirement 
benefits (an incentive to leave) fewer than half of them are satisfied 
with the recognition they receive for doing a good job (a disincentive 
to stay). A retention bonus sends a very strong signal to an employee 
that they are valued and their contributions are recognized.

    Note: Four questions from Congressman Gordon are most appropriately 
answered by NASA and we assume that responses have been provided. Those 
questions are:

        H.R. 1085 contains retention bonuses to incentivize employees 
        to stay at NASA. Do you have any hard data on how many 
        employees NASA loses to industry and how many employees NASA 
        gains form industry on an annual basis?

        Are you aware of any exit surveys by NASA to determine the 
        specific reasons employees have left the agency and what would 
        have made them stay?

        How many employees does NASA need to carry out its missions 
        over the next ten years? Does NASA currently have too many 
        employees or not enough?

    Associated with these latter questions, however, Congressman Gordon 
asks two additional questions to which we can respond as follows:

Q3. Would such data be useful to have in determining what, if any, 
additional legislative authorities should be provided to NASA?

A3. Answers to the questions raised by Congressman Gordon are certainly 
useful in determining what, if any, additional legislative authorities 
should be provided to NASA. The Partnership for Public Service is an 
advocate of employee surveys, including exit surveys, as a useful 
method of gaining valuable information and insights regarding workforce 
management. Also, the use of hard data or employment metrics such as 
employee turnover via resignations and retirements can be very useful, 
particularly when tracked over time.

Q4. How would you recommend this committee go about determining the 
answers to those questions?

A4. Much of this information should be obtainable from NASA. Additional 
information, including some benchmark data on the experiences of other 
agencies should be available from the Office of Personnel Management 
either from the information contained in the Central Personnel Data 
File or via government-wide studies and surveys such as the ``2002 
Federal Human Capital Survey.''

                   Answers to Post-Hearing Questions

Responses by Bobby L. Harnage, Sr., President, American Federation of 
        Government Employees, AFL-CIO

Questions submitted by Chairman Sherwood Boehlert

Q1. What is the basis of the statement in your written testimony that 
H.R. 1085 ``undermines merit system principles'' when the legislation 
clearly tells NASA to plan ``the safeguards and other measures that 
will be applied to ensure that this title is carried out in a manner 
consistent with merit system principles.''

A1. AFGE believes several of the proposed changes to NASA's personnel 
system undermine merit system principles. The direct hire authority--on 
the spot hiring--undermines the principle that there should be free and 
open competition for federal jobs. The bonus authority undermines the 
principle of equal pay for substantially equal work since not everyone 
will be eligible for the bonuses, only those who threaten to leave or 
refuse to join NASA without a bonus. Those who perform equal work but 
don't threaten to leave, and don't refuse to join in the absence of a 
bonus will not receive the same pay as those who do.

Questions submitted by Representative Ralph M. Hall

Q1. Should federal workforce issues be addressed legislatively on a 
government-wide basis or only for selected agencies? For example, the 
DOE designs nuclear weapons and has similar workforce issues as NASA. 
Why should NASA be singled out, but not DOE.

A1. AFGE is strongly opposed to agency-by-agency civil service reform. 
It undermines the merit system principles of equal pay for 
substantially equal work, and raises costs for the government at large 
as agencies compete with one another for resources and employees. There 
is nothing to prevent a race to the bottom as is so often the case in 
the private sector.

Q2. If a NASA only bill is passed, what will the consequences be for 
other government agencies with significant numbers of scientists and 
engineers? Could there be an unintended brain drain from an agency with 
less generous incentives to one with more employee incentives?

A2. We believe that the NASA only approach is wrong for exactly those 
reasons. NASA has a poor record for personnel management and contract 
oversight. NASA has had difficulty in recruitment because of its 
relentless contracting out and privatization, and its failure to 
support or invest in its own workforce. Bonus authority is a Band-Aid 
for them that does not address its more profound management problems.

Q3. How appropriate is it to single out one agency's science and 
engineering workforce for special treatment?

A3. It is highly inappropriate and will further undermine morale in an 
agency that is already suffering from low morale because of its 
penchant for contracting out and privatization without giving incumbent 
federal employees the opportunity to compete. NASA's workforce will 
languish while a few temporary employees who are in favor will receive 
large bonuses under the Administrator's plan. His plan is profoundly 
unpopular with the career workforce at NASA.

Q4. Is it reasonable to presume that NASA and its contractors are 
competing for many of the same employees due to the specialized skills 
involved. Given that, would increased recruitment and retention bonuses 
as envisioned in H.R. 1085 have any net positive effect--or would it 
just result in higher costs for both NASA and contractors as they 
compete in offering better incentives?

A4. Ironically, if a scientist or engineer wants to work ``for'' NASA 
and is interested in job security and career development and good pay, 
he or she should work for NASA's contractors. NASA's record is to 
contract out everything it can, without competition. Taxpayers foot the 
bill, but the contractor gets all the institutional knowledge and the 
agency and we are at the contractors' mercy because in-house capacity 
is depleted. Contractors have exploited this situation and overcharge 
making the task of rebuilding in-house capacity ever more expensive and 
difficult.

Questions submitted by Representative Bart Gordon

Q1. Since H.R. 1085 doesn't establish separate funding for the 
proposed incentive payments, one has to assume that the funds for 
bonuses, critical pay authorities, and VSIPs would have to come out of 
NASA's general salary funds. Therefore, NASA's use of those incentives 
would reduce the funds available for raises for the rest of the 
workforce. What will be the net effect of the proposed incentives on 
employee morale and retention if the overall workforce salaries are 
being depressed to pay for bonuses and incentives for selected 
employees? Is your conclusion based upon any hard data?

A1. AFGE members at NASA tell me unequivocally that they oppose the use 
of the incentives for what is essentially a temporary workforce. NASA's 
own rationale for these authorities is that federal salaries are too 
low, but they will not be able to address the problem of low salaries 
across the board without additional funding. So necessarily some will 
benefit and others will lose in this zero-sum game. AFGE has requested 
data from the Office of Personnel Management (OPM) from demonstration 
projects throughout the government that have experimented with the 
types of authorities NASA wants so that we can find out if our 
suspicions are correct. After almost a year of repeated requests, even 
from the pay workgroups at the Department of Homeland Security, we 
still have never gotten any information from OPM on how different pay 
systems affect the distribution of salary monies.

Q2. H.R. 1085 would allow the NASA Administrator to carry out agency-
wide changes to the workforce rules under the demonstration projects 
provision. Could the Administrator use that authority to eliminate the 
federal pay classification system at NASA? Could the Administrator 
arbitrarily establish his own pay classification system? Could the 
Administrator arbitrarily eliminate the current administrative appeals 
procedures available to NASA employees and replace it with something 
else? What would be the effect of this authority on the establishment 
of a diverse workforce? Would this authority increase the NASA 
Administrator's power to expand outsourcing?

A2. The answer to the first three questions is YES. We cannot know the 
effect on diversity, but if officials exercised their discretion in a 
discriminatory way, the workforce could certainly become less diverse, 
but the burden would be on disappointed job seekers to prove that they 
were victims of discrimination. The Administrator has already expanded 
outsourcing without giving taxpayers the benefits of public-private 
competition. He could simply fill all positions he calls ``new'' with 
contractors.

Q3. As part of the President's Management Agenda, 50 percent of the 
remaining NASA jobs are to be made available for potential outsourcing 
over the next few years. How effective are bonuses and other incentives 
likely to be in attracting employees to NASA if they believe that their 
jobs could be transferred to the private sector within a few years?

A3. AFGE believes that the bonuses will simply be given to individuals 
making their way in the revolving door between NASA and its 
contractors. The current Administrator has met the President's entire 
privatization quota without any public private competition at all, 
i.e., without ever once giving NASA employees the chance to compete in 
defense of their jobs, according to the President's own FY04 Budget 
Scorecard. Since NASA has shown so little commitment to its career 
workforce--either in preventing their jobs from being arbitrarily 
outsourced without competition, or in paying them competitive salaries, 
it is highly unlikely the bonuses will help NASA with its stated 
recruitment goals.

Q4. Do you have any survey data or other empirical data to support 
your view?

A4. Agencies are not required to collect data on the government work 
that they contract out to the private sector. But NASA own submission 
to OMB as published in the President's '04 Budget shows that they 
simply contract out without competition.

Q5. H.R. 1085 contains retention bonuses to incentivize employees to 
stay at NASA. Do any of you have any hard data on how many employees 
NASA loses to industry and how many employees NASA gains from industry 
on an annual basis?

A5. No.

Q6. Are you aware of any exit surveys by NASA to determine the 
specific reasons employees have left the agency and what would have 
made them stay?

A6. AFGE's members at NASA leave because their salaries are too low and 
because their jobs have been privatized. They would have stayed if 
FEPCA would have been complied with, and if their jobs hadn't been 
contracted out.

Q7. The proposed modifications in H.R. 1085 to the existing statutes 
governing term appointments are potentially significant. It has been 
argued by employee unions that the rules governing the hiring of term 
employees are less stringent with respect to diversity, veterans 
preferences, and so forth, than regular employee hiring rules. The 
proposed legislation would make it easier to convert term appointments 
to permanent appointments. What is the rationale for such a provision, 
and how will it alter the makeup of the NASA workforce over time if it 
is implemented?

A7. It is likely to make the workforce less diverse, and the hiring of 
veterans more rare. It is an invitation to management to hire without 
the benefit of full an open competition, and will benefit insiders, but 
not taxpayers and citizens who should have an open and fair opportunity 
to compete for any federal job. It will also reduce career development 
opportunities for the existing federal workforce and allow managers to 
``wire'' promotions and hirings.

Q8. Could significant numbers of political appointees be converted to 
permanent employees if this provision were adopted? What is to prevent 
such a possibility?

A8. Yes, this authority can be abused to allow political appointees to 
``burrow in'' to permanent jobs. Nothing will prevent this.

Q9. How many employees does NASA need to carry out its missions over 
the next 10 years? Does NASA currently have too many employees or not 
enough? How would you recommend this committee go about determining the 
answers to these questions?

A9. No one knows how many employee NASA has because NASA doesn't count 
its contractor employees and doesn't have to. NASA and all agencies 
should be required to report not only how many contractor employees 
they have, but what the contractors do, how much they cost, and whether 
what they do is of an acceptable level of quality. Until those 
questions are answered, no one will be able to evaluate NASA or any 
other agency's operations fairly.

                   Answers to Post-Hearing Questions

Responses by George Nesterczuk, Nesterczuk and Associates

Questions submitted by Chairman Sherwood Boehlert

Q1. How do recruitment, relocation, and retention bonuses for industry 
and academia compare to the current legal limits for Federal Government 
employees?

A1. While there is considerable variance among different industries and 
academia with regard to their use of recruitment, relocation, and 
retention bonuses, overall both sectors provide larger bonuses to 
proportionately more recruits or employees compared to the Federal 
Government. The December 1999 report by the Office of Personnel 
Management, ``The 3Rs: Lessons Learned from Recruitment, Relocation, 
and Retention Incentives,'' does a good job of outlining some of the 
major differences between the federal and non-federal environment 
regarding use of these tools. In that report, for example, OPM notes 
that ``. . .use of recruitment bonuses in the private sector is 
increasing. In a recent survey of 41 companies offering recruitment 
bonuses, over half offered bonus amounts of more than $3,500. The 
majority of all bonuses range from 6 to 15 percent of base pay.'' 
Private sector employers also frequently use finder's fees as part of 
their recruitment techniques and there is more managerial discretion 
regarding when and how recruitment incentives are used.
    Similarly, OPM found that 50 percent of non-federal public sector 
and private sector contacts said they provide relocation incentives as 
either lump sum bonuses or salary differentials. OPM also found that 
non-federal employers typically provide a variety of additional 
relocation incentives typically not available in the federal sector, 
including housing allowances and reimbursement for cost of evaluating 
school systems. Finally, OPM found that retention or ``stay for pay'' 
incentives are administered differently outside the Federal Government, 
particularly in the private sector where there are the options of using 
deferred compensation, cash on a lump sum basis, stock options and 
profit sharing.

Q2. How do recruitment, relocation, and retention bonuses for industry 
and academia compare to the new limits for NASA employees in H.R. 1085?

A2. The new and higher limits for recruitment, relocation, and 
retention bonuses proposed in H.R. 1085 for NASA employees would bring 
NASA closer to what industry and academia can provide when competing to 
attract or retain talented applicants or employees. Overall, the 
proposed higher limits in H.R. 1085 seem quite reasonable, particularly 
since they are contingent upon the employee entering into a service 
agreement with NASA. Of course, the ultimate utility of these 
incentives will depend to a large degree on whether NASA has sufficient 
resources to use them effectively. If they do, the incentives should be 
quite useful and, ultimately, very cost effective.

Questions submitted by Representative Ralph M. Hall

Q1. It is reasonable to presume that NASA and its contractors are 
competing for many of the same employees due to the specialized skills 
involved. Given that, would increased recruitment and retention bonuses 
as envisioned in H.R. 1085 have any net positive effect--or would it 
just result in higher costs for both NASA and its contractors as they 
compete in offering better incentives?

A1. NASA contractors, in our view, are unlikely to be ``open-ended'' in 
the amount of any recruitment or retention bonuses they provide. Since 
NASA is only one of several potential competitors for the sought-after 
talent, we do not think that enabling NASA to become more competitive 
by increasing the amount of the recruitment and retention bonuses they 
can provide would be canceled out by a concomitant increase by its 
contractors. The marketplace for talent, in essence, is much larger 
than that. Overall, therefore, we think the provisions of H.R. 1085 
would provide a net benefit for NASA and its mission capability by 
allowing them to become more competitive in that marketplace.

Q2. What is the nature of your concerns with the Voluntary Separation 
Incentive provision in H.R. 1085?

A2. The VSIP as proposed is far too generous and will work at cross 
purposes. Employees approaching retirement may develop expectations of 
separating with a bonus as opposed to simply retiring when they are 
ready to do so. Employees will have an incentive to stay on until they 
are bought out thereby affecting normal retirement rates.
    Experience with VSIs in the Federal Government has shown that over 
90 percent have gone to retirement eligible employees. The notion that 
such incentives can somehow be used to ``restructure'' the federal 
workforce by eliminating skills imbalances is fictitious. Further, if 
the agency has experienced a loss of talented and experienced personnel 
then the focus ought to be on retention bonuses rather than on 
separation incentives. Finally, if the VSI is to be an inducement to 
usher a poor performer out the door then what signal does this send to 
the good performers in the agency?

Question submitted by Representative Bart Gordon

Q1. How many employees does NASA need to carry out its missions over 
the next ten years? Does NASA currently have too many employees or not 
enough? How would you recommend this committee go about determining the 
answers to those questions?

A1. The appropriate level of staff for NASA is dependent on its mission 
and the programs NASA undertakes to fulfill this mission. It is up to 
Congress in its oversight and appropriating capacities to authorize and 
fund the agency's programs. Subsequently NASA can determine what mix or 
combination of federal employees and contracted labor is most effective 
in implementing those programs. Without a thorough review of this 
aspect of NASA operations I am unable to provide a more concise 
response to the question.

                              Appendix 2:

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                   Additional Material for the Record















































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