[Senate Hearing 108-129]
[From the U.S. Government Publishing Office]



 
       MILITARY CONSTRUCTION APPROPRIATIONS FOR FISCAL YEAR 2004

                              ----------                              


                         TUESDAY, MARCH 4, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:35 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Kay Bailey Hutchison (chairman) 
presiding.
    Present: Senators Hutchison, Stevens, Feinstein, and 
Johnson.

                         DEPARTMENT OF DEFENSE

                        Office of the Secretary

STATEMENT OF HON. DOV S. ZAKHEIM, UNDER SECRETARY OF 
            DEFENSE (COMPTROLLER)
ACCOMPANIED BY RAYMOND F. DuBOIS, DEPUTY UNDER SECRETARY OF DEFENSE FOR 
            INSTALLATIONS AND ENVIRONMENT


           OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON


    Senator Hutchison. Good afternoon. I am pleased to call to 
order this hearing to review the President's fiscal year 2004 
budget for Military Construction. I welcome all of you, and 
look forward to serving this year with Senator Feinstein again. 
We have worked on the committee together. We have now gone both 
ways, and I think that we certainly work together well as a 
team, and I'm looking forward to that.
    We will hear testimony this afternoon on Military 
Construction, family housing, BRAC, and Guard and Reserve 
programs for the Department of Defense. We have two panels with 
us today. The first panel will have representatives from the 
Office of the Secretary of Defense, Dr. Zakheim, the Department 
of Defense Comptroller, and Mr. Ray DuBois, the Deputy Under 
Secretary of Defense for Installations and Environment. The 
second panel consists of the Assistant Secretaries of the Army, 
Navy, and Air Force. I am going to ask you to summarize your 
statements, although we certainly want the whole thing for the 
record.
    We have reviewed the 2004 budget request, and I note that 
the budget request is down again from the amount appropriated 
in 2003 almost 14 percent from the enacted level and 6.5 
percent from last year's budget request. This is a downward 
trend that is of concern to us, and certainly we would like to 
explore how we are going to revitalize our infrastructure, 
which has been an early goal, with this downward spiral.
    Of more concern is the amount allocated for overseas bases 
in the budget request. The overall number continues to increase 
every year. Last year, it constituted 16 percent of the 
proposed budget for military construction. For 2004 it 
comprises approximately 19 percent of the total amount 
requested, and that is $1.74 billion. Meanwhile, funding 
directed to modernize and revitalize our domestic bases is 
decreasing. We would like to talk about those two numbers.
    We understand that there are major review efforts currently 
underway to assess force structure and base infrastructure in 
Europe and Korea. It may be premature to move forward with some 
of the funding requested in the budget until those reviews are 
complete. We will take a hard look at the specific projects 
over the next several months.
    The committee is still waiting for the overseas basing 
master plan which was due to Congress last April. It has been 
almost a year, and we still do not have that report. That 
report was requested in the 2003 bill.
    So I look forward to exploring some of these issues with 
you, and looking forward to hearing from you, and now I would 
like to turn to my Ranking Member, Senator Feinstein.


                 STATEMENT OF SENATOR DIANNE FEINSTEIN


    Senator Feinstein. Senator, thank you very much. I very 
much share your comments and think you are right on. I find 
this a somewhat puzzling budget. It keeps going down when our 
military activity is going up, and this budget probably is more 
closely related to military quality of life than virtually 
anything else.
    I cannot help but note that for the active components, the 
MILCON cut is 16 percent, or $850 million, and for the reserve 
components the aggregate cut is 46 percent, or $368 million. If 
I recall, although we added back last year, it was a 45 percent 
cut last year, and the BRAC cleanup account--and I really 
think, in looking over some of the bases that need cleanup, 
that Texas and California can use the whole account itself, 
that there are so many bases that need cleanup, and this is 
down 34 percent. And family housing, which is the 
Administration's flagship MILCON program, has slipped almost 5 
percent, so I am very interested, Madam Chairman, and I hope 
that the distinguished people before us today will indicate 
what the thinking is for the continued decline of the MILCON 
account, whether we are going to see this again next year and 
the year after, because then at some point we are going to have 
real problems as to how we provide adequate housing and other 
facilities for our military, so thank you, and I look forward 
to it.
    Senator Hutchison. Thank you, Senator. Senator Stevens, any 
opening statement?
    Senator Stevens. I have no opening statement.
    [The statement follows:]

               Prepared Statement of Senator Tim Johnson

    Madame Chairwoman, I would like to thank you and Ranking Member 
Feinstein for calling today's hearing. I would also like to thank you 
for your continued leadership on this subcommittee and for your 
outstanding commitment to the men and women serving in the U.S. Armed 
Forces.
    In addition, I would like to thank today's witnesses for taking the 
time to appear before this subcommittee. Your professionalism and 
dedicated service to our Nation is greatly appreciated. As I have said 
in the past, the military construction budget does not fund flashy 
projects like the latest high-tech weapons, aircraft carriers, or 
tanks.
    The results of prudent investments in military construction are not 
always evident. However, to think that the work of this subcommittee is 
not important to the overall strength of our military is a mistake. 
This subcommittee funds the training facilities that help keep our 
service members the best-trained force in the world. This subcommittee 
funds the maintenance shops that keep our military hardware ready for 
use at a moments notice. And this subcommittee funds the construction 
of the medical facilities that care for our military personnel and 
their families. Simply put, the military construction budget is a vital 
part of maintaining our military's readiness.
    I would like to take a moment to express my personal gratitude to 
our servicemen and women for all they do to keep our Nation safe. In 
South Dakota, we are particularly proud of all those who serve our 
Nation in uniform. South Dakota is home to one active duty 
installation, Ellsworth Air Force Base. As a Lead Wing for the 
Aerospace Expeditionary Force, the 28th Bomb Wing at Ellsworth Air 
Force Base has played a leading role in the war on terrorism. In fact, 
the B-1s and their crews from Ellsworth have recently been deployed for 
possible action in the Middle East. I am very thankful for the men and 
women who are stationed at Ellsworth, and was pleased to have the 
opportunity recently to tour the facility and get a first-hand look at 
their operations and housing needs. I look forward to working with my 
colleagues to address these issues.
    I am also extremely grateful for the work of the men and women 
serving in the South Dakota National Guard, they are playing an 
increasingly important role in defending our Nation. South Dakota's 
Guard and Reserve units consistently rank in the highest percentile of 
readiness and quality of its recruits. This is demonstrated by the fact 
that 21 percent of the state's Guard and Reserve units have been called 
to active duty. The nation-wide average is only 16 percent, which 
places South Dakota as 11th in the Nation in the percentage of call-
ups. As we look to our Guard and Reserve components to supplement our 
active duty forces, we must also make corresponding investments in the 
infrastructure needed for their training and support.
    Given the strain we are putting on our military personnel--both 
active duty and reserve--and their families, I was surprised that the 
President's fiscal year 2004 budget request included a $1.5 billion cut 
for military construction activities. I am particularly concerned about 
the effect this cut will have on family housing. Madame Chairwoman, as 
a father with a son serving in the Army, I understand the importance of 
quality of life issues. All of the best weapons and all the best 
facilities in the world will be rendered useless if our military 
personnel and their families are not afforded a good quality of life.
    When asked, our military personnel consistently say good family 
housing is one the most important quality of life issues they face. 
Attempts to improve family housing are being made. For example, 
Congress is working with the Department of Defense to provide funding 
for a project to eliminate 163,000 inadequate family housing units by 
fiscal year 2007. As a part of this effort, the budget includes $16.24 
million to replace 75 family housing units at Ellsworth in fiscal year 
2004. However, improving family housing is in jeopardy if we do not 
provide the necessary funding. I was disappointed that the President's 
budget includes a $200 million cut in family housing spending. This is 
simply unacceptable. At a time in which we are asking our military to 
make even greater sacrifices, we should not be cutting funds for family 
housing.
    It is my hope that we will work together to restore this vital 
funding and recommit ourselves to ensuring quality housing for all of 
our military personnel. As we begin to work on the fiscal year 2004 
Military Construction Appropriation bill, I look forward to working 
with the members of this subcommittee to address the construction and 
infrastructure needs of our military. Once again, Madame Chairwoman, 
thank you for calling today's hearing. I look forward to working with 
you and to hearing from our witnesses.

    Senator Hutchison. If not, then I would ask Dr. Zakheim for 
his opening statement.

                    STATEMENT OF HON. DOV S. ZAKHEIM

    Dr. Zakheim. Thank you, Madam Chairwoman. First of all, I 
have a much longer statement. I would like to submit that for 
the record, please.
    Senator Hutchison. Without objection.
    Dr. Zakheim. Madam Chairwoman, Senator Feinstein, Senator 
Stevens, I am honored to present the military construction 
appropriations component of President Bush's fiscal year 2004 
defense budget request. I am joined today by my colleague, Ray 
DuBois, who will have a statement right after I make one.
    The new Department of Defense budget balances three 
competing demands; winning the war on terrorism, sustaining 
high quality people and forces, and transforming the American 
military and defense establishment. It funds the most pressing 
military construction and family housing requirements and keeps 
us on track to achieve the Department's ambitious facilities 
goals in the coming years.
    It will improve the quality of life for our military 
through better working and living conditions. It will support 
strong sustainment and modernization for existing facilities, 
fund critical new construction, replace facilities that are no 
longer economical to repair, address environmental compliance 
requirements, and continue caretaker efforts at closing bases.
    As you know, our military construction appropriations 
request totals $9 billion in budget authority, and it includes 
the funding for military construction, family housing, and base 
realignment and closure accounts. Our program funds 299 
construction projects at 195 locations. Complementing this $9 
billion request is $1 billion for restoration and modernization 
funded from the operations and maintenance, military personnel, 
and working capital funds accounts.
    The Department is also requesting $6.4 billion for 
facilities sustainment. Although we had to make some really 
difficult choices because of escalating demands resulting from 
the war on terrorism, especially within the operations and 
maintenance title, we were able to fund 94 percent of the 
Services' facilities maintenance requirements. That is slightly 
higher than our 93 percent achievement last year, and it is 
significantly higher than in fiscal year 2000, when the 
Department met only 78 percent of the Services' requirements. 
It is arguable that 94 percent is reaching up to where one 
would ideally wish to be.
    Fiscal year 2004 funding is sufficient to construct new 
facilities that are absolutely critical, most notably for new 
weapons systems being fielded. Our new construction funding and 
emphasis on sustainment, restoration, and modernization, which 
we call SRM, reflects a multiyear management plan to revitalize 
DOD facilities.
    A critical component of our plan is the congressionally 
approved 2005 BRAC round, which we hope will achieve a needed 
20 to 25 percent reduction in DOD infrastructure. With a 
successful BRAC round, our plan funding through fiscal year 
2008 should be sufficient to achieve by that date Secretary 
Rumsfeld's strong goals for facilities recapitalization. We 
remain at our objective of 67 years, on average, as that goal.
    The fiscal year 2004 request keeps the Department on track 
to eliminate inadequate family housing by 2007, except for the 
Air Force, which will not reach that goal at four stateside 
installations until 2008, and at its overseas bases until 2009. 
The Department's brightest housing story, which is not 
reflected in our raw budget numbers, is the ongoing and very 
substantial privatization of family housing units.
    As of February 2003, 18 privatization projects have been 
awarded. Last year, we estimated a DOD investment in 
privatization projects was leveraged at about 8 to 1. That is 
to say, for every dollar we spent, we would have had to spend 
$8 in order to achieve the same facility that we got through 
the privatization program. This year, based on our most recent 
analysis of awarded projects, we estimate that leverage factor 
to be 10 to 1. Applying a 10 to 1 leverage factor, this year's 
$346 million investment should yield nearly $3.5 billion in top 
quality housing.
    Let me summarize our privatization progress as projected 
through fiscal year 2004. Prior to fiscal year 2003, we 
provided 26,166 privatized units to our military families. That 
was based on an investment of $276 million. For fiscal year 
2003, we are on track to provide at least 30,200 privatized 
units, and my colleague Ray DuBois' office estimates that it 
could be more than 38,000 units, based on an investment of $240 
million.
    For fiscal year 2004, we expect to provide at a minimum an 
additional 36,262 privatized units at 22 military bases based 
on an investment of $346 million, almost all of it coming from 
prior year funding. Again, my colleagues consider this to be a 
conservative estimate. So by the end of fiscal year 2004, we 
expect to have provided at least 92,600 high quality privatized 
units based on a total investment of $862 million.
    I have to repeat that the projections I am giving you are 
conservative projections. The Office of the Deputy Under 
Secretary of Defense for Installations and Environment, namely 
Ray DuBois's office, believes--is convinced, I should say; 
believes is probably too soft a word--is convinced that the 
Department can and will do more, and my staff will certainly 
support efforts to do so.
    Looking ahead, our fiscal year 2004 budget request for 
privatization totals $174.9 million for 10 new privatization 
projects, totalling another 12,204 units. We plan to execute 
these projects in fiscal year 2004. However, if there are 
delays, we will carry the funds into our next fiscal year, when 
more privatization opportunities will become available.
    So to sum up, privatization is enabling the Department to 
multiply the benefits of its budget dollars and get more 
military families into top quality accommodations far more 
quickly than would otherwise have been the case. This is 
therefore no longer some side project, or merely an incremental 
project, as I think was originally envisaged, or somehow an 
add-on to what we were doing. This is now central to our entire 
effort.
    Let me turn next to a subject that I know all of you are 
terribly concerned about, and that is overseas construction. In 
keeping with congressional direction, new construction in 
overseas areas is being requested only where construction 
requirements are of high priority, when absolutely essential to 
U.S. overseas basing needs, and after all burden-sharing 
opportunities have been explored and found to be unworkable.
    We are currently conducting a critical review of fiscal 
year 2003 and 2004 projects in the European Command and Korea, 
and we have asked the new combatant commanders in those 
theaters to determine if projects previously requested continue 
to be supportable. At the appropriate time, we will brief you 
on the outcome of this review, and I may say that this will be 
sooner rather than later. We may request a budget amendment to 
address the fiscal year 2003 projects and reprioritize the 
fiscal year 2004 projects.
    Regarding construction for our chemical demilitarization 
program, the Department continues to make steady progress. The 
2004 budget includes $119.8 million for the construction of 
chemical demilitarization facilities. This funding is not in 
the $5 billion military construction request because the 
Department has consolidated all funding for the chemical 
demilitarization program, including construction, into a single 
account, and this is in conformity with the fiscal year 2003 
National Defense Authorization Act. The single account is 
called Chemical Agents and Munitions Destruction, Army, which 
is the DOD appropriations request under the ``Other DOD 
Programs'' title.
    In closing, I thank you for this opportunity to describe 
Department of Defense plans to sustain and revitalize its 
facilities. I thank you also for the ongoing support that we 
know we have been getting from you in the past and continue to 
get from you on some of the key and not uncontroversial issues 
that we have to face in this changing world environment.

                           PREPARED STATEMENT

    The President's fiscal year 2004 budget will enhance the 
quality of life of our Service members and our families, it 
will strongly support current requirements and missions, and it 
will enable the needed long term streamlining and 
recapitalization of DOD facilities. I urge your approval of our 
request. Our Department and I are ready to provide whatever 
details you may need to make these important decisions and 
again, I repeat, we want to work with you as we review some of 
the decisions we have already made.
    Thank you.
    [The statement follows:]

               Prepared Statement of Hon. Dov S. Zakheim

    Madam Chairwoman, Senator Feinstein, members of the committee, I am 
honored to present the Military Construction Appropriations component 
of President Bush's fiscal year 2004 defense budget request.
    The new Department of Defense (DOD) budget balances three competing 
demands: winning the war on terrorism, sustaining high quality people 
and forces, and transforming the U.S. military and defense 
establishment. It funds the most pressing military construction and 
family housing requirements and keeps us on track to achieve the 
Department's ambitious facilities goals in the coming years. It will 
improve the quality of life for our military through better working and 
living conditions. And it will support strong sustainment and 
modernization for existing facilities, fund critical new construction, 
replace facilities that are no longer economical to repair, address 
environmental compliance requirements, and continue caretaker efforts 
at closed bases.

                     FUNDING AND PROGRAM HIGHLIGHTS

    The Military Construction Appropriations request totals $9.0 
billion in budget authority and includes funding for Military 
Construction, Family Housing, and Base Realignment and Closure (BRAC) 
accounts. Our program funds 299 construction projects at 195 locations. 
The following table summarizes funding (budget authority in billions) 
in fiscal year 2003 and in our fiscal year 2004 request:

                                              [Billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                    Fiscal year
                                                  2003 requested    Fiscal year       Change        Fiscal year
                                                        \1\        2003 enacted                   2004 requested
----------------------------------------------------------------------------------------------------------------
Military Construction...........................             4.2             5.7            -1.1             4.6
BRAC............................................             0.6             0.6            -0.2             0.4
                                                 ---------------------------------------------------------------
      Subtotal..................................             4.8             6.3            -1.3             5.0
                                                 ===============================================================
Family Housing..................................             4.2             4.2            -0.2             4.0
                                                 ---------------------------------------------------------------
      Total.....................................             9.0        \2\ 10.5            -1.5            9.0
----------------------------------------------------------------------------------------------------------------
\1\ Does not include $565 million requested in the Defense Emergency Response Fund (DERF). Of this request, $540
  million was appropriated in Military Construction accounts, partly accounting for the high fiscal year 2003
  enacted total.
\2\ Includes $157.6 million for Chemical Demilitarization construction. The fiscal year 2004 request of $119.8
  million for this construction is funded in the Chemical Agents and Munitions Destruction, Army account, which
  is in the DOD Appropriations request under the Other DOD Programs title.

    Complementing this $9.0 billion request is $1.0 billion for 
restoration and modernization (R&M) funded from Operation and 
Maintenance (O&M), Military Personnel, and Working Capital Funds 
accounts. The Department is also requesting $6.4 billion for facilities 
sustainment. Although we had to make difficult choices because of 
escalating demands resulting from the war on terrorism, especially 
within the O&M title, we were able to fund 94 percent of the Military 
Services' facilities maintenance requirements. That is slightly higher 
than our 93 percent achievement last year and significantly higher than 
in fiscal year 2000, when the Department met only 78 percent of the 
Services' requirements.
    Fiscal year 2004 funding is sufficient to construct new facilities 
that are absolutely critical, most notably for new weapon systems being 
fielded. Our new construction funding--and emphasis on Sustainment, 
Restoration, and Modernization (SRM)--reflects a multiyear management 
plan to revitalize DOD facilities. A critical component of our plan is 
the congressionally approved 2005 BRAC round, which we hope will 
achieve a needed 20-25 percent reduction in DOD infrastructure. With a 
successful BRAC round, our planned funding through fiscal year 2008 
should be sufficient to achieve--by that date--Secretary Rumsfeld's 
strong goals for facilities recapitalization.
    The fiscal year 2004 request keeps the Department on track to 
eliminate inadequate family housing by 2007--except that the Air Force 
will not reach that goal at four stateside installations until 2008 and 
at its overseas bases until 2009.
    The Department's brightest housing story--not reflected in our raw 
budget numbers--is the ongoing, substantial privatization of family 
housing units. As of February 2003, 18 privatization projects have been 
awarded. Last year we estimated that DOD investment in privatization 
projects was leveraged at about eight to one. This year, based on our 
most recent analysis of awarded projects, we estimate that leverage 
factor to be ten-to-one. Applying this 10:1 leverage factor, this 
year's $346 million investment should yield nearly $3.5 billion in top-
quality housing.
    Let me summarize our privatization progress, as projected through 
fiscal year 2004:
  --Prior to fiscal year 2003, we provided 26,166 privatized units to 
        our military families--based on an investment of $276 million.
  --For fiscal year 2003, we are on track to provide at least 30,200 
        privatized units--based on an investment of $240 million--and 
        perhaps more than 38,000 units.
  --For fiscal year 2004, we expect to provide at a minimum an 
        additional 36,262 privatized units at 22 military bases--based 
        on an investment of $346 million, almost all of it from prior-
        year funding. Again, my colleagues view this as a conservative 
        estimate.
  --Thus by the end of fiscal year 2004, we expected to have provided 
        at least 92,600 high quality privatized units--based on a total 
        investment of $862 million.
    Let me repeat, these projections for fiscal year 2003 and 2004 
privatization are conservative. In fact, the office of the Deputy Under 
Secretary of Defense (Installations and Environment) believes the 
Department can do more, and my staff will support efforts to do so.
    Looking ahead, our fiscal year 2004 budget request for 
privatization totals $174.9 million for 10 new privatization projects 
totaling 12,204 units. We plan to execute these projects in fiscal year 
2004. However, if there are delays we will carry funds into the next 
fiscal year, when more privatization opportunities will become 
available.
    In sum, privatization is enabling the Department to multiply the 
benefits of its budget dollars and get more military families into top 
quality accommodations much sooner than would otherwise be possible.

                     MILITARY CONSTRUCTION ACCOUNTS

    The following are key elements of our $5.0 billion fiscal year 2004 
request for Military Construction accounts:
    Active Forces and Defense-Wide.--The $4.1 billion budgeted for 
Active Forces and Defense-Wide programs is targeted towards improving 
readiness, quality-of-life, DOD work places; restoring the most 
seriously degraded facilities; and providing facilities to support new 
weapons systems. The request includes $1.2 billion for barracks 
projects; $1.1 billion for operational and training facilities; $518.9 
million for maintenance and production facilities; $229.7 million for 
community facilities; $161.7 million for medical facilities; $99.4 
million for utility facilities; $86.2 million for supply facilities; 
$82.2 million for administrative facilities, and $73.0 million for 
research and development facilities.
    Guard and Reserve Facilities.--The $369.6 million requested in 
fiscal year 2004 for the Reserve Components is balanced both to provide 
the necessary facilities to support current and new missions and to 
replace aging facilities that are no longer economical to repair. The 
request is $318.3 million less than the fiscal year 2003 enacted level, 
but $72.3 million higher than the fiscal year 2003 request of $297.3 
million. The fiscal year 2004 program includes 53 major construction 
projects as well as planning and design work and minor construction. 
Most projects are training centers, maintenance facilities, and 
operational facilities in support of the Reserve Components' mission.
    Quality-of-Life.--A significant portion of the military 
construction program--$1.2 billion--will be for new or improved 
barracks for unaccompanied military personnel. This will fund 46 
projects to construct or modernize barracks and to provide 
approximately 13,000 new or improved living spaces. The Army, Navy and 
Air Force are continuing to build to the ``1+1'' design (one soldier to 
a room with a shared bathroom) for personnel permanently assigned to a 
base. The Marine Corps is building to the ``2+0'' design (two EI-E3s to 
a room, each room with its own bathroom) in an effort to improve living 
conditions of Marines sooner than if they followed the 1+1 design 
standard. In addition, the fiscal year 2004 program will allow the 
Department to construct or modernize six schools for dependents, seven 
physical fitness centers, one child development center, and one 
community support center.
    Overseas Construction.--In keeping with congressional direction, 
new construction in overseas areas is being requested only where 
construction requirements are of high priority, when absolutely 
essential to U.S. overseas basing needs, and after all burden-sharing 
opportunities have been explored and found to be unworkable. The fiscal 
year 2004 program provides $703.7 million for specific overseas 
projects that meet these criteria. Of the $703.7 million, $128.7 
million is for Korea, $288.1 million for Germany, $155.0 million for 
Italy, $55.6 million for other European sites, and $76.3 million for 
various locations overseas. We are currently conducting a critical 
review of fiscal year 2003 and 2004 projects in the European Command 
and Korea and have asked the new Combatant Commanders in those theaters 
to determine if projects previously requested continue to be 
supportable. At the appropriate time, we will brief you on the outcome 
of this review and may request a budget amendment to address the fiscal 
year 2003 projects and reprioritize the fiscal year 2004 projects.
    Medical Projects.--Consistent with the Department's emphasis on 
quality-of-life improvements and readiness, the fiscal year 2004 budget 
reflects the high priority placed on health care. It requests $161.7 
million for seven medical projects, including $71.6 million for the 
fifth phase of a $215 million replacement hospital at Ft. Wainwright, 
Alaska; $21.5 million for a hospital addition at the U.S. Air Force 
Academy, Colorado; $6.4 million for a dental clinic replacement in 
Connecticut; $15.7 million for a medical/dental clinic renovation in 
Washington, D.C.; $9.0 million for a hospital energy plant addition at 
Walter Reed Medical Center in Washington, D.C.; $12.6 million for a 
dental clinic addition in Grafenwohr, Germany; and $24.9 million for a 
dental clinic replacement at Anderson AFB, Guam.
    Chemical Demilitarization Construction.--The Department continues 
to make steady progress in its chemical demilitarization efforts. To 
that end, the fiscal year 2004 budget includes $119.8 million for the 
construction of chemical demilitarization facilities. This funding is 
not in the $5 billion Military Construction request because the 
Department has consolidated all funding for the chemical 
demilitarization program, including construction, into a single 
account--comforming with the fiscal year 2003 National Defense 
Authorization Act. The single account is Chemical Agents and Munitions 
Destruction, Army--which is in the DOD Appropriations request under the 
Other DOD Programs title.
    Energy Programs.--This Administration is committed to energy 
conservation. Reflecting that commitment, the budget includes 
approximately $70 million in fiscal year 2004 for projects that will 
result in energy savings and support long-standing goals to reduce 
energy demand. Last year the Congress appropriated $34.5 million.
    Minor Construction/Planning and Design.--The request contains $75.5 
million in fiscal year 2004 for minor construction, alterations, and 
modifications to existing facilities. These funds are essential to meet 
unforeseen construction requirements that can impair the health, 
safety, and readiness of our forces. In addition, we are requesting 
$386.6 million for planning and design. These funds are urgently needed 
to complete the design of fiscal year 2005 projects and initiate design 
of fiscal year 2006 projects, and we seek your support for this request 
so we can proceed with these construction requirements.

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    In the past, the BRAC process has been a major tool for reducing 
our domestic base structure. Between 1988 and 1995, four BRAC 
Commissions proposed the closure or realignment of 152 major 
installations and 235 smaller ones. Implementation of the last round of 
the four approved BRACs was completed on July 13, 2001. Once all 
funding is complete, the Department will have invested about $22.2 
billion and realized savings of about $37.7 billion for total net 
savings of about $15.5 billion (about $17 billion when inflated) over 
the implementation period from fiscal year 1990 to fiscal year 2001. 
Total annual savings after fiscal year 2002 are projected to be about 
$6 billion. For fiscal year 2003, the BRAC request was $545.1 million--
for environmental restoration and caretaker costs for bases closed 
under these previous rounds. The fiscal year 2004 request is $370.4 
million, a decrease of $173.7 million. This funding decrease indicates 
that bases continue to be cleaned efficiently to environmental 
standards, thereby speeding the transfer of property to redevelopment 
authorities.
    The fiscal year 2004 budget assumes that the additional round of 
base closures and realignment in 2005 will occur, as authorized in the 
fiscal year 2002 National Defense Authorization Act. The Department 
hopes that the round will achieve at least a 20-25 percent reduction in 
military infrastructure and savings of approximately $6.5 billion per 
year. Funds to begin implementation of the 2005 BRAC recommendations 
are currently programmed for fiscal year 2006.

                    NATO SECURITY INVESTMENT PROGRAM

    The NATO Security Investment Program (NSIP) request totals $169.3 
million in fiscal year 2004. This is the U.S. share (approximately 24.7 
percent) of the acquisition of NATO common use systems and equipment; 
construction, upgrade, and restoration of operational facilities; and 
other related programs and projects required in support of agreed NATO 
strategic concepts and military strategy. Anticipated recoupments from 
previously financed U.S. projects and available prior year funds of 
$14.4 million results in a total fiscal year 2004 program of $183.7 
million. This request is the minimum essential U.S. contribution for 
NATO's efforts. It will support both our strategic security and our 
economic interest in the European Theater.

                             FAMILY HOUSING

    Budget authority for fiscal year 2004 Family Housing totals $4.0 
billion--down from $4.2 billion requested in fiscal year 2003. This 
decrease is partly a result of our shrinking inventory of government-
owned housing due to privatization. This budget will enable us to 
construct, improve, privatize, operate, maintain, and lease family 
housing units. It will enable the Department to continue its aggressive 
effort begun last year to eliminate inadequate housing. The government-
owned units average about 35 years in age. These DOD-owned and leased 
units house approximately one-third of our military families.
    Our proposed increases in the Basic Allowance for Housing (BAH) 
will result in improved quality of housing for our personnel. Through 
BAH increases, the fiscal year 2004 budget will reduce out-of-pocket 
costs for personnel living off-base from 7.5 percent now to 3.5 percent 
in fiscal year 2004, and funding will phase out these costs completely 
by 2005. Prior to fiscal year 2001, service members had to absorb 18.8 
percent of these housing costs.
    Family Housing Construction.--The major emphasis of the Family 
Housing Construction Program is to replace units that are uneconomical 
to repair or renovate and to upgrade the remaining units. We are 
requesting $1.2 billion in fiscal year 2004 to build, replace, improve, 
or privatize 19,950 family housing units. This fiscal year 2004 request 
is $85.7 million lower than the amount enacted for fiscal year 2003, 
due to the President's initiative to privatize housing for our troops 
and families.
    Family Housing Operations.--The Department's fiscal year 2004 
family housing operation and maintenance request totals $2.3 billion, 
and the leasing request amounts to $526 million. Our family housing 
operations budget will ensure that houses in our inventory are in 
adequate condition for occupancy by our military families. The family 
housing portion of the operation and maintenance account funds a range 
of services and expenses necessary to support the DoD-owned and leased 
housing units. For example, the operation account funds items such as 
housing administration and management, basic support services, referral 
services, furnishings, and utilities, while the maintenance account 
funds routine maintenance and major repairs. The family housing leasing 
account provides housing at both domestic and foreign locations when 
the local economy cannot provide adequate support and when additional 
assets are needed to satisfy a housing shortfall.
    Family Housing Privatization.--The fiscal year 1996 National 
Defense Authorization Act provided innovative authorities that enable 
the Department to partner with the private sector to revitalize our 
housing inventory. These tools--loan and rental guarantees, direct 
loans and investments, differential lease payments, and the conveyance 
or leasing of land and facilities--have enabled the Department to tap 
private sector expertise and capital to provide quality housing more 
quickly than would be possible through traditional construction 
methods. Using the funds Congress appropriated directly into the Family 
Housing Improvement Fund (FHIF) or funds for construction projects that 
were later transferred into the FHIF, the Department is continuing its 
vigorous privatization program, as detailed earlier in this statement.

                               CONCLUSION

    In closing, I thank you for this opportunity to describe Department 
of Defense plans to sustain and revitalize its facilities. The 
President's fiscal year 2004 budget will enhance the quality of life of 
our service members and their families, strongly support current 
requirements and missions, and enable the needed long-term streamlining 
and recapitalization of DOD facilities. I urge your approval of our 
request. Our department and I are ready to provide whatever details you 
may need to make these important decisions. Thank you.

    Senator Hutchison. I am very pleased to hear you say that, 
Dr. Zakheim, because I think we need to have a more current 
assessment, and if then following a strategic plan you would be 
coming for reprogramming, I would certainly be pleased that you 
are more current for sure, so we will explore that a little 
more.
    Mr. DuBois.

                     STATEMENT OF RAYMOND F. DUBOIS

    Mr. DuBois. Thank you, Madam Chairman, Senator Feinstein, 
Senator Stevens, Senator Johnson--Madam Chairman, Senator 
Feinstein, Senator Johnson.
    I am honored to be here today again with my good friend Dov 
Zakheim to support him. He is the numbers guy. I will try to 
answer the programmatic and policy questions as best I can, and 
I will generously turn for the numbers questions to Dr. 
Zakheim.
    But the opportunity to discuss the President's 2004 budget 
in the military construction arena is extremely important to 
the two of us, as well as it is to Secretary Rumsfeld. Some of 
you have heard his testimony here on the Hill in the prior 
weeks, and he has addressed the issue of transforming our force 
structure; he has addressed the issue of transforming the way 
we do business to meet the new security challenges in the 21st 
Century.
    He also has made it clear that in order to achieve the 
transformation of both force structure and business operations 
in the Pentagon and the Department of Defense, we also have to 
pay attention to transforming our infrastructure.
    Now, similarly to the Department writ large, transforming 
the infrastructure is not an easy task. It is a very large 
portfolio, 620,000 facilities valued at over $600 billion, 
46,000 square miles of real estate, in excess of the size of 
the State of Pennsylvania, I might add. We have managed in that 
enormous real estate, over--we do manage over 300 threatened 
and endangered species, many, many important cultural 
resources, including 68 registered national historic landmarks 
and over 14,000 properties currently listed on, or eligible 
for, the National Register of Historic Places.
    Now, since Secretary Rumsfeld returned to the Pentagon 
after 25 years, he and I and others have adopted a different 
view of how we manage our portfolio, our installation and 
environment portfolio. It is, after all, more than just 
military construction, albeit--I know we are testifying in 
front of the Military Construction Subcommittee. I think it is 
important to understand the context within which we operate and 
how we try to manage this portfolio.
    Besides, of course, family housing, you have utilities and 
energy management, you have safety and occupational health 
funding, you have environmental funding, both cleanup and 
conservation and research and development. We have 
contributions from other appropriations accounts, such as the 
military personnel account, host nation support, 
nonappropriated funds, working capital fund, the operation and 
maintenance accounts and, as I mentioned, the R&D accounts.
    All of these budget requests are in support of the total 
portfolio, which is in excess of $20 billion, and if one were 
to add the base operations accounts, you are closer to $40 
billion. In short, as I suggested, one should not judge quality 
of life investments that the President is asking for solely on 
the basis of military construction requests.
    Now, the President and Secretary Rumsfeld at the outset of 
this Administration identified quite publicly military housing 
as a top priority. Sustaining that quality of life element is 
crucial, as we have found out, as has been proven time and time 
again, to recruitment and retention and the readiness of our 
military and, to that end, we are committed to providing 
quality housing. But quality housing, again, is not just 
military construction, albeit it is very important to sustain 
that particular appropriation, but one must always include how 
we are appropriating to increase our basic allowance for 
housing and also, again a MILCON-related issue, as Dr. Zakheim 
referred, how we are supporting the leverage factor in housing 
privatization.
    Now, just as a quick aside, the BAH, or basic allowance for 
housing, is an important fiscal year 2004 budget request 
because it continues to lower out of pocket expenses, out of 
pocket housing costs for members living off base from 7.5 
percent in 2003 to 3.5 percent in 2004, and by 2005, the 
typical member living in the private sector will have zero out 
of pocket housing expenses.
    Now, we believe our housing privatization efforts have 
gained traction. The calculus here, if you will, is the curve, 
the level of the curve is increasing. This is very important. 
As Dr. Zakheim implied, with the privatization awards through 
fiscal 2003 and by the end of fiscal 2004, the cumulative total 
within the Department will be in excess of 100,000 units 
privatized.
    Now, as I indicated, military construction is a critical 
tool to resolving our large inadequate housing problem, and in 
this budget we are requesting $4 billion in new budget 
authority for family housing construction and O&M. This funding 
will enable us to continue O&M and modernizing our family 
housing, helping us to meet the goal which the Secretary and 
the President moved up 3 years to 2007.
    But family housing is only one aspect of our housing 
requirement. Bachelor housing, or unaccompanied housing, also 
deserves our attention. In the 2004 budget, we have included a 
request to fund, fund to build or renovate over 12,000 what we 
call bed spaces, self-explanatory. The Services are making 
significant progress toward meeting, or have already met that 
other nasty issue pertaining to old housing in the bachelor 
environment, that was gang latrines.
    The Services in addition are currently preparing barracks 
master plans similar to the family housing master plan which 
the Congress required for managing their inventory, and I 
encourage you to ask the succeeding panel, the three Assistant 
Service Secretaries, for their views in this regard. We 
strongly, at the OSD level, the Defense Department level, 
support barracks privatization, and we are encouraging the 
Services to consider privatization as an alternative to improve 
unaccompanied housing.
    The sustainment and recapitalization accounts are also 
crucial. We have focused on improving the work environment 
through the proper sustainment of our facilities and 
recapitalizing them. We have seen through the installations 
readiness report, similar to unit readiness reports, that the 
quality of the infrastructure directly affects those units' 
readiness.
    Full or near full sustainment, as Dr. Zakheim indicated, 
improves performance and reduces life cycle cost. We must 
maximize the return on capital investments, new construction, 
and therefore repairing and replacing facilities once they have 
deteriorated becomes for us, and for you in the Congress, a 
much more expensive proposition.
    Sustainment alone, however, is not enough. Even well 
sustained facilities eventually wear out or become obsolete, 
and yes, Madam Chairman, we have a number of facilities in that 
condition, so in addition to sustainment we must restore and 
modernize. Some of this recapitalization is critical and cannot 
wait. Our request for $3.4 billion for restoration and 
modernization maintains our commitment to improving the work 
environment while weighing the requirements against other 
departmental priorities.
    In closing, I think it is important that we recognize that 
the defense facilities strategic plan and our installation 
management approach we believe provides a framework that 
enables us to focus on our overreaching goal, which is taking 
care of our folks, taking care of our facilities, and enhancing 
our business processes. Members of this subcommittee, under the 
chairmanship of both Senator Feinstein and now Senator 
Hutchison again, have been absolutely instrumental in 
refocusing attention on appropriate funding for recapitalizing 
our infrastructure and sustaining our quality of life 
improvements.

                           PREPARED STATEMENT

    Secretary Rumsfeld and Secretary Zakheim and I appreciate, 
sincerely appreciate the strong support from this Military 
Construction Subcommittee, and we look forward to working with 
you as we transform that infrastructure.
    Thank you, Madam Chairman.
    [The statement follows:]

                Prepared Statement of Raymond F. DuBois

    Mr. Chairman and distinguished members of this Subcommittee, I 
appreciate the opportunity to discuss the President's Budget request 
for fiscal year 2004 and the plan of the Department of Defense for 
improving its facilities. The Department is transforming its force 
structure to meet new security challenges and transforming the way it 
does business. In Installations and Environment, this translates into a 
renewed emphasis on taking care of our people, providing facilities to 
support the warfighter by eliminating facilities we no longer need and 
improving those that we do, and modernizing our business practices--all 
while protecting the environment and those assets for which we have 
stewardship responsibility.
    To prevail in the Global War on Terrorism and to prepare for future 
threats to American security, the Secretary of Defense has argued 
forcefully that we must transform the military. Our military 
capabilities must become more lethal, agile, and prepared for surprise. 
This transformation was under way before the attacks on September 11th. 
But, let us be clear, transformation is about more than new weapon 
systems, doctrinal innovation, and the employment of technology; it 
also is about changing our approach to the fundamental business 
practices and infrastructure of the Department of Defense.
    The Department currently manages more than 620,000 facilities, 
valued at around $600 billion, and over 46,000 square miles of real 
estate. Within that portfolio of real estate and facilities, we manage 
threatened and endangered species, diverse geological features, and 
important historical resources, including 68 registered National 
Historic Landmarks and over 14,000 properties currently listed on, or 
eligible for, the National Register of Historic Places.
    The Defense Facilities Strategic Plan is our roadmap for managing 
this portfolio and outlines our long-term plan--healthy, productive 
installations and facilities that are available when and where needed 
with capabilities to support current and future military requirements. 
In recent years, we have developed models to more accurately determine 
our requirements and a sound management plan for getting our facilities 
back on track.
    Today, I will address our accomplishments and future plans for 
restoring readiness to our facilities by taking care of our people, 
taking care of what we own, improving our business practices, and 
transforming our bases and infrastructure.

                          THE ROAD TO RECOVERY

    Military installations and facilities are an integral component of 
readiness. Installations are the ``platforms'' from which our forces 
successfully deploy to execute their diverse missions. Over many years, 
these ``platforms'' have deteriorated. For instance, each year the 
Major Commands of the Military Services rate the readiness of their 
facilities by category. In the 2001 Installations' Readiness Report 
(IRR), the Component Commanders--the force providers--collectively 
rated 68 percent of facilities categories C-3 (have serious 
deficiencies) or C-4 (do not support mission requirements), a slight 
improvement from the 69 percent rate in 2000. The 2002 IRR is roughly 
the same as 2001. Investments made since fiscal year 2002 will take 
several years before the affects are apparent. We are in the process of 
reversing the decay, but much remains to be done. From fiscal years 
2002 to 2004, we will have put over $28 billion in the sustainment and 
revitalization of our facilities, and we are beginning to see the 
results.
    The installations management approach of the Department led us to a 
different way to view our installations and environmental portfolio. 
This portfolio is more than simply military construction and family 
housing. It also includes environmental funding and other contributions 
from appropriations such as military personnel, host nation support, 
non-appropriated funds and working capital funds, in addition to 
operations and maintenance (O&M). This funding sustains our facilities 
through day-to-day maintenance and contributes to our restoration and 
modernization program. The fiscal year 2004 budget request includes 
over $19 billion in fiscal year 2004 to support our entire portfolio.
    The Facilities Sustainment program funds the normal and scheduled 
maintenance and repairs for the inventory, using operations and 
maintenance funds primarily, supplemented by other sources. Sustainment 
preserves the inventory and allows it to reach its expected service 
life. For the O&M-funded sustainment requirement, we are sustaining our 
facilities at 94 percent of commercial benchmarks, slightly over the 93 
percent requested last year. We plan to achieve full sustainment not 
later than fiscal year 2008.
    Our Facilities Restoration and Modernization program repairs or 
replaces damaged or obsolete facilities and implements new or higher 
standards where necessary. The Restoration and Modernization program 
applies both military construction and operations and maintenance 
appropriations to recapitalize our facilities and housing.
    Our fiscal year 2004 funding request allows us to achieve a 
recapitalization rate of 148 years for the Military Departments, down 
from 149 years in fiscal year 2003, meaning the Department renovates or 
replaces its facilities an average of every 148 years. We now include 
the Defense Logistics Agency, DOD Education Activity and Tricare 
Medical Activity in the calculations, resulting in a corporate rate of 
136 years for fiscal year 2004. Our goal remains a 67-year 
recapitalization rate, consistent with commercial practices, and our 
current program would achieve that level in fiscal year 2008.
    In the near term, obsolete facilities pose risks to mission 
effectiveness, safety, quality of life, productivity of the workforce, 
and cost efficiencies, but these risks are mitigated to some degree by 
eliminating facilities through Base Realignment and Closure (BRAC), 
facilities demolition programs, and an aggressive acceleration of 
recapitalization rates in the future years defense program.
    Facilities revitalization will take time. However, the indicators 
are trending in the right direction, showing that we are indeed making 
progress. With continuing attention to our Defense Facilities Strategic 
Plan and current planning guidance, we can achieve our goal.

     COMPARISON OF MILITARY CONSTRUCTION AND FAMILY HOUSING REQUESTS
      [President's budget in millions of dollars--budget authority]
------------------------------------------------------------------------
                                                   Fiscal year
                                       ---------------------------------
                                         2003 request     2004 request
------------------------------------------------------------------------
Military Construction.................          $4,054          $4,480
NATO Security Investment Program......             168             169
Base Realignment and Closure..........             545             370
Family Housing Construction/                     1,341           1,237
 Improvements.........................
Family Housing Operations &                      2,877           2,780
 Maintenance..........................
Homeowners Assistance.................               0               0
Family Housing Improvement Fund.......               2               0.3
                                       ---------------------------------
      Total...........................           8,987           9,036
------------------------------------------------------------------------

                       TAKING CARE OF OUR PEOPLE

    Our priority is to support the warfighter, ensure superior living 
and working conditions and enhance the safety of the force and quality 
of the environment. At the outset of this Administration, the President 
and Secretary Rumsfeld identified military housing as a top priority 
for the Department. Sustaining the quality of life of our people is 
crucial to recruiting, retention and readiness. To that end, the 
Department is committed to providing quality housing using the 
established three prong approach--increased basic allowance for housing 
(BAH), increased housing privatization, and sustained military 
construction for housing.
    In January 2001, the Department had about 180,000 inadequate family 
housing units. Today, through housing privatization and our military 
construction program, we have reduced that number to roughly 163,000. 
This number will continue to come down as we pursue the Secretary's 
goal of eliminating inadequate housing by 2007.
    We remain committed to reducing--and then eliminating--the out-of-
pocket housing costs for the average military member through changes in 
the basic allowance for housing, a key component of the Department's 
approach to quality housing. The fiscal year 2004 budget request 
includes necessary funding to continue lowering out-of-pocket housing 
costs for members living off-base from 7.5 percent in 2003 to 3.5 
percent in 2004. By 2005, the typical member living in the private 
sector will have zero out-of-pocket housing expenses. Eliminating out-
of-pocket expenses is good for military personnel, but also serves to 
strengthen the financial profile of the housing privatization program 
by providing members the ability to pay appropriate market rents.
    Privatizing military housing is a priority for the President and 
the Secretary and is an integral part of the Administration's 
Management Plan. Our housing privatization program is crucial to 
providing a decent quality of life for our service members.
    We believe our housing privatization efforts have gained 
``traction'' and are achieving success. As of February 2003, we have 
awarded 17 projects, which include 26,100 military family housing 
units. We also have two awards in the final stages--Marine Corps Air 
Station Beaufort/Marine Corps Recruitment Deport Parris Island, South 
Carolina; and Kirtland AFB, New Mexico--which we expect to award next 
month. We project more than 20 more privatization awards each in fiscal 
years 2003 and 2004--bringing our cumulative total to about 102,000 
units privatized.
    Projects at five installations have their renovations and 
construction completed: Naval Air Station Corpus Christi/Naval Air 
Station Kingsville, Texas, Naval Station Everett Phases I and II, 
Robins Air Force Base, Georgia, Lackland Air Force Base, Texas, and 
Dyess Air Force Base, Texas. During fiscal year 2004, we expect several 
other bases to have their renovations and construction completed or 
close to completion, including those at Fort Carson, Colorado and Naval 
Complex New Orleans, Louisiana.
    Our policy requires that privatization projects yield at least 
three times the amount of housing as traditional military construction 
for the same amount of appropriated dollars. Recent projects have 
demonstrated that leveraging is normally much higher. The 17 projects 
awarded thus far reflect an average leverage ratio of over 10 to 1. 
Tapping this demonstrated leveraging potential through housing 
privatization has permitted the Department, in partnership with the 
private sector, to provide housing for about $264 million of military 
construction funding that would otherwise have required over $2.7 
billion for those 17 projects if the traditional military construction 
approach was utilized.
    More important than the raw numbers is the reaction of uniformed 
personnel and their families to the housing developed under the 
initiative. It is overwhelmingly positive based on the high quality 
product produced by the projects.
    Military construction is another tool for resolving inadequate 
military housing. In fiscal year 2004, we are requesting $4.0 billion 
in new budget authority for family housing construction and operations 
and maintenance. This funding will enable us to continue operating and 
maintaining the Department's family housing as well as meeting the goal 
to eliminate inadequate housing by 2007--3 years earlier than 
previously planned.
    We also are improving housing for our unaccompanied service members 
through increases in bachelor housing funding. The Department's fiscal 
year 2004 budget request includes funding that would build or renovate 
over 12,000 bed spaces. The Services are making significant progress 
toward meeting, or have already met, the Department's previous goal for 
eliminating gang latrine conditions for permanent party unaccompanied 
members. Additionally, the Services are currently preparing Barracks 
Master Plans, similar to the Family Housing Master Plan, for managing 
their inventory and outlining their plans for eliminating inadequate 
permanent party barracks by 2007.
    As we gain momentum in privatizing family housing, we also are 
exploring and encouraging the possibility of privatizing barracks that 
support our unaccompanied service members. The Department strongly 
supports barracks privatization and has attempted to overcome barriers 
that impede our ability to execute a program.
    The Secretary of the Navy was authorized by the National Defense 
Authorization Act for fiscal year 2003 to execute a pilot program for 
barracks privatization that includes authority for the payment of 
partial basic allowance for housing. The Navy considers barracks 
privatization a key part of their ``Homeport Ashore Initiative''. We 
have discussed with the Navy some of their plans in this area, and we 
expect to review a pilot proposal later this year.
    We recognize that a key element in maintaining the support of the 
Congress and of the private sector is the ability to define adequately 
the housing requirement. The Department's longstanding policy is to 
rely primarily on the private sector for its housing needs. Currently, 
two-thirds of military families reside in private sector housing, and 
that number will increase as we privatize the existing inventory of 
housing units owned by the Military Departments. Only when the private 
market demonstrates that it cannot provide sufficient levels or quality 
of housing should we consider the construction, operation, and 
maintenance of government-owned housing.
    An improved housing requirements determination process, recently 
approved by the Deputy Secretary, combined with increased 
privatization, is allowing us to focus resources on maintaining the 
housing for which we have a verified need rather than wasting those 
resources duplicating private sector capabilities. The improved housing 
requirement process is being used by the Department to better determine 
the number of family housing units needed on installations to 
accommodate military families. It provides a solid basis for investing 
in housing for which there is a verified need--whether through direct 
investment with appropriated funds or through a privatization project.
    By aligning the housing requirements determination process more 
closely with the analysis utilized to determine basic allowance for 
housing rates, the Department is better positioned to make sound 
investment decisions necessary to meet the Secretary's goal to 
eliminate inadequate housing by 2007. Further, as more military 
families opt to reside in the private sector as housing out-of-pocket 
expenses decrease for the average member, the Services on-base housing 
requirement should generally also decline. This migration should permit 
the Services to better apply scarce resources to those housing units 
they truly need to retain.

                       TAKING CARE OF WHAT WE OWN

Sustaining, Restoring and Modernizing Facilities
    The Department's program for modernizing military housing is well 
underway. We are also focused upon improving the work environment 
through proper facilities sustainment and recapitalization. As we have 
seen through the Installations' Readiness Report, the quality of our 
infrastructure directly affects readiness. Our first priority is to 
fully sustain our facilities, and we have made significant progress in 
this area. Full sustainment improves performance and reduces life cycle 
costs, maximizing the return on our capital investments. Repairing and 
replacing facilities once they have deteriorated is more expensive. Our 
recent investments in sustainment and recapitalization, along with 
continued investment over time, will restore readiness, stabilize and 
reduce the average age of our physical plant, reduce operating costs 
and maximize our return on investment.
    Despite the challenges, we have preserved funding for facilities 
sustainment and restoration and modernization. The Department is 
requesting $6.4 billion in fiscal year 2004 for sustainment. The budget 
funds sustainment at 94 percent of standard benchmarks. That is not an 
average of the Military Departments--it is the floor we established for 
all the Military Departments, an improvement over last year, and we 
have a plan to achieve full sustainment by 2008.
    But sustainment alone is not enough. Even well-sustained facilities 
eventually wear out or become obsolete, and we have a lot of facilities 
in that condition now. So, in addition to sustainment, we must also 
restore and modernize facilities. Some of this recapitalization is 
critical and cannot wait. Our fiscal year 2004 funding request of $3.4 
billion for restoration and modernization maintains our commitment to 
improving the work environment while weighing the requirements against 
other Departmental priorities.
    We measure the rate of restoring and modernizing against an average 
expected service life of our inventories, which we calculate at 67 
years. The fiscal year 2004 Military Department recapitalization rate 
is about 148 years, compared with 149 years for fiscal year 2003. With 
the Defense Agencies included, our corporate rate for fiscal year 2004 
is down to 136 years, an improvement over last year's request. Our 
program funds the 67-year rate in fiscal year 2008, and between now and 
then we plan to follow a smooth glide path to that level. This past 
year, we thoroughly reviewed and standardized our Facilities 
Recapitalization Metric, so we can track and report on our progress 
toward the goal with confidence.

Improved Facilities Footprint Management
    We continue to explore methods for reducing our footprint and 
better utilizing existing facilities. Demolition is a valuable tool for 
eliminating excess and obsolete facilities. From fiscal years 1998 
through 2002, the Services demolished and disposed of over 75 million 
square feet of unnecessary, deteriorated facilities, resulting in 
significant cost avoidance in sustainment and restoration and 
modernization expenses to the Department. We expect to exceed our goal 
of demolishing 80.1 million square feet by the end of 2003, and we are 
requesting about $80 million in fiscal year 2004 to carry on this 
successful program.
    While we use demolition for excess facilities, the enhanced-use 
leasing program enables us to make better use of underutilized 
facilities. As we transform the way we do business, the Department 
remains committed to promoting enhanced-use leasing where viable. This 
type of lease activity allows us to transform underutilized buildings 
and facilities, with private sector participation, into productive 
facilities. Examples of these opportunities include, but are not 
limited to, the creation of new or joint-use opportunities for office 
space, warehouses, hotels/temporary quarters, vehicle test tracks, wind 
tunnels, energy generation plants, recreational playgrounds, and sports 
venues. Additional benefits can accrue by accepting base operating 
support or demolition services as in-kind consideration; thereby, 
reducing the appropriations needed to fund those activities. Finally, 
enhanced-use leasing provides opportunities to make better use of 
historic facilities and improve their preservation as both cash and in-
kind consideration may be used for those purposes. The Army is a leader 
in this regard, with pilot projects being discussed at Fort Sam Houston 
and Walter Reed Army Medical Center.

Improving Energy Management
    As we sustain, restore and modernize facilities, part of our focus 
is to reduce our energy consumption and associated costs. To accomplish 
this, the Department is developing a comprehensive energy strategy that 
will continue to optimize utility management by conserving energy and 
water usage, improve energy flexibility by increasing renewable energy 
usage and taking advantage of restructured energy commodity markets as 
opportunities present themselves and modernize our infrastructure by 
privatizing our deteriorated and outdated utilities infrastructure 
where economically feasible.
    With approximately 2.2 billion square feet of facilities, the 
Department is the single largest energy user in the Nation. Conserving 
energy will save the Department funds that can be better invested in 
readiness, facilities sustainment, and quality of life.
    Our efforts to conserve energy are paying off. In fiscal year 2002, 
military installations reduced consumption by 3.1 percent, resulting in 
a 6 percent decrease in the cost of energy commodities from the 
previous year. With a 25.5 percent reduction in fiscal year 2002 from a 
1985 baseline, the Department is on track to achieve the 2010 energy 
reduction goal for buildings of 35 percent per square foot.
    The Department has a balanced program for energy conservation--
installing energy savings measures using appropriated funding and 
private-sector investment--combined with using the principles of 
sustainable design to reduce the resources used in our new 
construction. Energy conservation projects make business sense, 
historically obtaining about $4 in life-cycle savings for every dollar 
invested. The fiscal year 2004 budget contains $69.5 million for the 
Energy Conservation Investment Program (ECIP) to implement energy 
saving measures at our facilities. This is a 39 percent increase from 
fiscal year 2003 budget request of $50 million.
    The Department will also continue to pursue renewable energy 
technologies such as fuel cells, geothermal, wind, solar, and purchase 
electricity from these environmentally-friendly renewable sources when 
it is life-cycle cost-effective. In fiscal year 2002, military 
installations used 4.5 trillion British Thermal Units of renewable 
energy, doubling the amount from the previous year. The pursuit of 
renewable energy technologies is critical to the Department's and 
Nation's efforts in achieving energy flexibility.
    A key part of our energy program is our utilities management 
efforts, focused on modernizing systems through utilities 
privatization. By incorporating lessons learned and industry feedback, 
the Department has strengthened efforts to take advantage of private 
sector innovations, efficiencies and financing. We have over 2,600 
systems with a plant replacement value of approximately $50 billion. 
Thirty-eight (38) systems have been privatized using the utilities 
privatization authority in current law. Another 337 systems were 
privatized using other authorities, and privatization solicitations are 
ongoing for over 850 utility systems.
    The Services plan to request privatization proposals for the 
remaining 450 systems over the next 2 years. We are on track to 
complete privatization decisions on all the available water, sewage, 
electric and gas utility systems by September 2005. Congressional 
support for this effort in fiscal year 2004 is essential to maintain 
the procurement momentum and industry interest, as well as maximize the 
benefits of modernizing the Department's utility infrastructure.
Improving Environmental Management
    The Department continues to be leaders in environmental management. 
We are proud of our environmental program at our military installations 
throughout the world, and we are committed to pursuing a comprehensive 
environmental program.

                ENVIRONMENTAL PROGRAM--SUMMARY OF REQUEST
      [President's budget in millions of dollars--budget authority]
------------------------------------------------------------------------
                                                    Fiscal year
                                         -------------------------------
                                           2003 request    2004 request
------------------------------------------------------------------------
Cleanup.................................          $1,278          $1,273
BRAC Environmental \1\..................             519             412
Compliance..............................           1,701           1,603
Pollution Prevention....................             247             173
Conservation............................             152             153
Technology..............................             205             191
                                         -------------------------------
      Total.............................           4,102           3,805
------------------------------------------------------------------------
\1\ Funding levels reflect total requirement (TOA).

    In fiscal year 2004, we are requesting $3.8 billion for 
environmental programs. This includes $1.3 billion for cleanup, $0.4 
billion for BRAC environmental, $1.6 billion for compliance; about $0.2 
billion for pollution prevention, and about $0.2 billion for 
conservation.
    By the end of fiscal year 2002, we reduced new environmental 
violations by 77 percent from the 1992 baseline. The Department 
continues to reduce the percent of enforcement actions received per 
inspection, with roughly one enforcement action per 12.5 inspections, 
down from one for every three inspections in 1994. We have also 
improved our treatment of wastewater and the provision of drinking 
water for those systems we control.
    We reduced the amount of hazardous waste we generate by over 64 
percent since 1992, and we are avoiding disposal costs by diverting 
non-hazardous solid waste from landfills by recycling and other 
approved methods. These pollution prevention techniques continue to 
save the Department needed funds as well as reduce pollution. As an 
example, the Department saved about $95 million in disposal costs in 
2001. We have increased the number of alternative fueled vehicles that 
we use in order to reduce the demand for petroleum, and we continue to 
reduce the number and amount of toxic chemicals we release through our 
industrial processes and training operations.
    The Department's commitment to its restoration program remains 
strong as we reduce risk and restore property for future generations. 
We are exploring ways to improve and accelerate cleanup with our 
regulatory and community partners. Achieving site closure and ensuring 
long-term remedies are challenges we face. Conducting environmental 
restoration activities at each site of the installations in the program 
requires accurate planning, funding, and execution of plan. The 
Department must plan its activities years in advance to ensure that 
adequate funding is available and used efficiently.
    The Defense Environmental Restoration Program goals assist the 
Components in planning their programs and achieving funding for 
activities. We achieved our goal to reduce 50 percent of high risk 
sites at active installations by the end of fiscal year 2002 and are on 
track to achieve 100 percent by the end of fiscal year 2007. At BRAC 
installations, final remedy for 90 percent of the sites was in place by 
the end of fiscal year 2001, and we anticipate completion by the end of 
fiscal year 2005.
    We also are working to mitigate unexploded ordnance (UXO) on our 
military ranges. Our operational ranges are designed to train and make 
combat-ready our Nation's warfighters and prepare them as best as we 
can for combat. UXO on ranges is a result of our military preparedness 
training activities. However, we are actively seeking ways to minimize 
the amount of UXO on our operational test and training ranges. The 
Department is developing policies on the periodic clearance of UXO for 
personnel safety and to ensure chemical constituents do not contaminate 
groundwater.
    For the areas other than operational ranges which have a UXO 
challenge--our Formerly Used Defense Sites, BRAC installations, and 
closed ranges on active installations--we are currently developing the 
reports requested by Congress in the National Defense Authorization Act 
for fiscal year 2002. We will have an inventory of our munitions 
response sites, cost estimates, a comprehensive plan, and will define 
the current technology baseline with a roadmap for future action.
    In addition, we are developing new technologies and procedures 
through the Environmental Security Technology Certification Program and 
the Strategic Environmental Research and Development Program. These, 
along with the Army and Navy's Environmental Quality Technology 
Program, have enabled us to make tremendous strides for realizing our 
goals of reducing cost, completing projects sooner and sustaining the 
safety of our communities.
    As you may know, the Defense Science Board (DSB) assessed the UXO 
issue in 1998. Last year, the Under Secretary of Defense for 
Acquisition, Technology and Logistics commissioned a new DSB Task Force 
to look at this entire issue. Their report is due for completion this 
summer, and we look forward to acting on their recommendations.
    Beyond the dollars, we have implemented a new environmental 
management systems (EMS) policy as a part of the Administration's 
emphasis that enables us to train and operate more effectively and 
efficiently, while reducing our impact on the environment. Through this 
``systematic approach,'' we can continually improve both our mission 
performance and our environmental management. We are implementing this 
across all military missions, activities and functions to modernize the 
way we manage the environment entrusted us by the American people, and 
we are on-track to achieve the EMS goal established in Executive Order 
13148. We hope to reach the level where our mission activities are so 
well managed from an environmental perspective that our environmental 
impacts would be virtually eliminated and remove our liabilities from 
long-term compliance bills. EMS is the systematic approach to achieve 
this goal and resolve the perceived conflict between mission and 
environmental stewardship.
    We also look to our stakeholders and government agencies to help us 
better identify our environmental management issues. On February 5th, 
we hosted a defense environmental forum at the National Defense 
University. At the meeting, recognized leaders from Federal, tribal, 
state and local governments, the private sector, academia, the 
scientific and research community, and other non-governmental 
organizations exchanged insights on pressing environmental issues 
facing the Department. Our objective was to identify and diagnose the 
major issues associated with the twin imperatives of military readiness 
and environmental protection. This new initiative will improve our 
communication with stakeholders and enable us to more effectively 
manage our mission and environmental challenges.
    Another significant environmental accomplishment is in the area of 
natural resources. The Department has been managing natural resources 
for a long time--we currently manage more than 25 million acres. In 
October of 2002, we issued a new policy for ``Integrated Natural 
Resource Management Plans'', or ``INRMPS'', used by the Department to 
protect natural resources on our installations. Previous guidance 
emphasized early coordination with all stakeholders, the U.S. Fish and 
Wildlife Service and appropriate state agencies to ensure that we meet 
the conservation requirements of the Sikes Act and focus on the 
preservation and maintenance of healthy and fully functional 
ecosystems. The new guidance emphasizes coordination requirements, 
reporting requirements, implementation requirements, and other 
miscellaneous requirements. The miscellaneous requirements highlight 
the need to ensure that we manage our assets in accordance with the 
INRMPs to ensure that there is no net loss in the capability of 
military installation lands to support the military mission of the 
installation, in this case test and training opportunities, as well as 
preserving the natural resources entrusted to us.
    We have completed integrated natural resource management plans at 
the vast majority of bases. We also are pursuing the completion of 
integrated cultural resource management plans at our installations to 
ensure that we identify and preserve historical treasures. This will 
allow us to test and train to maintain a ready military force without 
fear of endangering our heritage. We acknowledge there are still some 
very complex and difficult challenges, but we are making progress.

                  PRESERVING RANGES AND TRAINING AREAS

    The Department takes seriously the fact that an important part of 
our national defense mission is to defend and preserve the natural 
environment entrusted to us. Our personnel take understandable pride in 
their environmental record--a record with documented examples of 
impressive management of critical habitats and endangered species. 
However, the impacts on readiness must be considered when applying 
environmental regulations to military-unique training and testing 
activities. The ever-growing problem of ``encroachment'' on our 
military training ranges is an issue for us here at home, as well at 
our overseas training locations.
    We are addressing the effects that encroachment pose to our ability 
to ``train as we fight.'' This effort, known as the Readiness and Range 
Preservation Initiative, is the Department's broad-based effort to find 
solutions to a variety of pressures on our test and training lands.
    This past year, Congress enacted two legislative provisions that 
allow us to cooperate more effectively with local and state 
governments, as well as private entities, to plan for smart growth 
surrounding our training ranges. These provisions allow us to work 
toward preserving habitat for imperiled species and to limit 
development to land uses that are compatible with our training and 
testing activities. Congress also provided the Department a temporary 
exemption from the Migratory Bird Treaty Act for the incidental taking 
of migratory birds during military readiness activities. These were 
three of the eight provisions the Department sought approval on as part 
of our Readiness and Range Preservation Initiative in the National 
Defense Authorization Act for fiscal year 2003.
    Today, we are developing a long-term process to address 
encroachment by creating a multi-year, comprehensive program to sustain 
training and testing. This program will pursue not only legislative 
clarification but also regulatory and administrative changes, internal 
policy and procedure adjustments, and an active stakeholder engagement 
strategy.
    The Administration will seek legislative clarification where laws 
are being applied beyond their original legislative intent. We believe 
that modest legislative reforms are needed to ensure the preparedness 
of this Nation's Armed Forces, and we will continue to work with 
Congress to seek enactment of legislation to address these concerns.
    We are in the process of evaluating all of the circumstances that 
create problems for our test and training ranges. Some of these may be 
solved with administrative or regulatory changes. We are working with 
the Military Services, other Federal agencies, tribes, states and local 
communities to find ways to better balance military, community and 
environmental needs.
    The Department also is developing a suite of internal policy and 
procedure adjustments, the capstone of which is a new Department of 
Defense Directive recently signed by the Deputy Secretary to ensure 
long-range, sustainable approaches to range management. In addition, we 
intend to strengthen and empower management structures to deal with 
range issues. We also have taken a pro-active role to protect bases 
from urbanization effects by working with local planning and zoning 
organizations and other stakeholders.
    The actions taken by Congress last year will greatly assist in this 
process by allowing us to work toward preserving habitat for imperiled 
species and to limit development to land uses that are compatible with 
our training and testing activities. The Services will identify 
opportunities to utilize these new authorities. We plan to convene a 
workshop early this year with key land conservation organizations and 
representatives from state and local communities to develop an 
implementing Memorandum of Understanding and sample cooperative 
agreements that can be utilized under the new authorities.
    The Department also is planning to address the long-term 
sustainment process by reaching out to and involving other 
stakeholders. We need to improve the understanding of readiness needs 
among affected groups such as state and local governments, and non-
governmental organizations. We must establish dialogue and form 
partnerships with these groups to reach our common goals by focusing on 
areas of common interest. This will enable us to take a proactive 
stance against encroachment and protect our bases into the future.

                      IMPROVING BUSINESS PRACTICES

Adopting a Common Approach to Managing Real Property
    We are undertaking an aggressive initiative to make management of 
our real property more efficient and effective. This project is called 
the Real Property Enterprise Solution (RPES), and is part of the larger 
Financial Management Modernization Program.
    Our vision is to improve the accuracy, reliability, timeliness, and 
usefulness of real property information necessary by all levels of 
decision-making to support the Department's overall mission, resources, 
accounting, accountability and reporting requirements. We will 
accomplish our vision through development and implementation of a 
standard, Defense-wide real property enterprise architecture resulting 
in: standard business practices and processes, standard categorization, 
definitions and terminology and a standard system (or systems).
    We are teaming with the Office of the Under Secretary of Defense 
(Comptroller) to develop and update our plans. We are 80 percent 
finished with our enterprise architecture for real property. An 
enterprise architecture catalogs the current real property activities 
and leads to identification of the optimal business processes and 
technical standards, with a transition plan showing how to get from the 
current to the optimal state, recognizing any business constraints. By 
the end of this calendar year, we plan to complete the market research 
and solution assessment and expect field a pilot system or systems in 
calendar year 2005 for a significant portion of the real property 
business area.
    As part of the reform of the Department's business practices, we 
developed the Facilities Sustainment Model (FSM) and the Facilities 
Recapitalization Metric (FRM). The Facilities Sustainment Model and the 
Facilities Recapitalization Metric, based on standard commercial 
processes, improve the way we inventory and account for facilities and 
more clearly defines our facilities sustainment and recapitalization 
requirements. The Services have used FSM to define their sustainment 
requirements since fiscal year 2003, and the Defense Agencies were 
included for fiscal year 2004.
    This past summer we thoroughly reviewed and standardized the FRM, 
so we can track and report on our progress toward our recapitalization 
goals with confidence. The revised metric is now used throughout the 
Department to calibrate the rate at which we restore and modernize 
facilities and to ensure that all elements of the Department are moving 
forward toward our corporate goals. With these two new tools, we have 
finally established a common requirements generation process and a 
sound method for forecasting funding requirements.
    In developing these models, we also changed the program element 
(PE) structure for fiscal year 2002 budget execution, doing away with 
the real property maintenance PEs, and creating sustainment and 
restoration/modernization (recapitalization) PEs. These newly defined 
program elements align our financial management and accounting cost 
elements with this new, transformed management structure and permit 
tying dollars and budgets to performance.

Reducing Cycle Time
    An imperative within the acquisition community is to reduce cycle 
time while also reducing total ownership costs. In the Installations 
and Environment community, we viewed this as a challenge to improve 
business processes, enabling resources--both money and people--to be 
better used elsewhere.
    We established an integrated product team (IPT), with the Services 
and Defense Agencies, to identify alternatives to reduce cycle time for 
military construction. Facility construction typically takes about 5 to 
8 years from requirements determination to beneficial occupancy. We 
researched and adapted private sector practices, where possible, but in 
some cases we may need legislative change. We will urge your 
consideration of such proposals should they be necessary.

Focusing on Core Competencies
    As we consider approaches to better utilize our personnel, 
competitive sourcing provides a methodology for focusing on our core 
capabilities. The Department will obtain needed products or services 
from the private sector where it makes sense. We support the 
Competitive Sourcing Initiative in the President's Management Agenda. 
To meet the target initiated by the Office of Management and Budget, 
the Department has initiated six pioneer projects as alternatives to A-
76. The Army's ``Third Wave'' is an example of our new aggressive 
approach to identify the best way to do business. We will also announce 
an additional 10,000 traditional A-76 initiatives this fiscal year. The 
Services will submit their plans to meet the President's management 
initiative objectives through the use of A-76 and alternatives in their 
fiscal year 2005 Program Objectives Memoranda submissions.
    Consistent with our approach of focusing on our core competencies, 
the Department believes our security guard functions could be better 
accomplished by contractors, freeing our military and civilians to 
focus on other tasks that will enable us to fight and win wars. We 
remain supportive of repealing the restriction in 10 U.S.C. 2465 that 
prohibits the Department from contracting for security guards. The 
current provision inhibits the Department's ability to quickly increase 
or decrease the number of security guards, as threat conditions 
warrant. This provision would provide increased flexibility as the 
Department continues to enhance anti-terrorism/force protection 
measures.

                 TRANSFORMING BASES AND INFRASTRUCTURE

    One of the most effective tools we have to transform the military 
is through the BRAC process. From 1988 through 1995, approximately 387 
closure or realignment actions were approved, and the Department has 
completed each action within its respective statutory deadline. We have 
rationalized much of our infrastructure through the previous BRACs--but 
much more needs to be done. We believe the Department has anywhere from 
20 to 25 percent excess capacity in its facilities. By removing that 
excess capacity we hope to save several billion dollars annually. For 
instance, prior BRAC actions have resulted in net savings to the 
Department--to the taxpayer--of approximately $17 billion, with annual 
recurring savings of approximately $6 billion.
    Continuing to operate and maintain facilities we no longer need 
diverts scarce resources that could be better applied to higher 
priority programs--like improving readiness, modernization and quality 
of life for our Service members. We must utilize every efficiency in 
the application of available resources to ensure we maintain just what 
we need to accomplish our missions. In the wake of the attacks of 
September 11, 2001, the imperative to convert excess base capacity into 
warfighting ability is enhanced, not diminished.
    However, achieving savings is not the only reason to realign and 
close bases. The more important reason is to enable us to attain the 
right mix of bases and forces within our warfighting strategy as we 
transform the Department to meet the security challenges of the 21st 
century. Transformation requires rationalizing our base structure to 
better match the force structure for the new ways of doing business.
    Congress authorized a Base Realignment and Closure in 2005 to 
accomplish this ``base transformation''. BRAC 2005 should be the means 
by which we reconfigure our current infrastructure into one in which 
operational capacity maximizes both warfighting capability and 
efficiency. Through BRAC, we will eliminate excess capacity that drains 
our scarce resources from defense capability.
    The process will not be simply a process to reduce capacity in a 
status-quo configuration, but rather, as the foundation to 
transformation, it will allow us the opportunity to examine a wide 
range of options for stationing and supporting forces and functions to 
make transformation what it truly should be--a ``re-tooling'' of the 
base structure to advance our combat effectiveness and make efficient 
use of our resources. A primary objective of BRAC 2005 process is to 
examine and implement opportunities for greater joint activity.
    Our installations transformation is not limited to the United 
States. We also are assessing our facilities overseas to determine the 
proper size and mix. Since 1990, the Department of Defense has returned 
or reduced operations at about 1,000 overseas sites, resulting in a 60 
percent reduction in our overseas infrastructure and a 66 percent 
reduction in Europe, in particular, and we continue to review overseas 
basing requirements of the Combatant Commanders and examine 
opportunities for joint use of facilities and land by the Services, 
consolidation of infrastructure, and enhanced training.

                               CONCLUSION

    Our facilities continue to recover, and we are seeing the results 
of investments made over the last several years. The Defense Facilities 
Strategic Plan and our installations management approach has provided a 
framework that enables us to focus on our overarching goals: taking 
care of our people, taking care of our facilities and enhancing our 
business processes. We have made significant progress toward providing 
quality housing for our service members, and we are now focused on 
improving the work environment.
    BRAC 2005 is our most important initiative to help us accomplish 
this. By consolidating, realigning and reducing unneeded 
infrastructure, the Department can focus investments on maintaining and 
recapitalizing what we actually require, resulting in ready facilities 
for the warfighters while more prudently using the taxpayer's money.
    As we prepare to rationalize our base structure, we also are 
addressing encroachment issues that impact our ability to effectively 
utilize our test and training ranges. The Readiness and Range 
Preservation Initiative is identifying solutions to these challenges. 
We have developed a plan of action and are proceeding with 
implementation. A key element of the plan is our proposed legislation 
that combines military readiness with environmental stewardship.
    Our Real Property Enterprise System (RPES) efforts will result in 
much improved and standardized business practices while enhancing our 
financial stewardship. Market research and solution assessment should 
be complete by the end of this fiscal year with pilot fielding of a new 
system(s) or modification to existing systems to follow.
    In closing, Mr. Chairman, I sincerely thank you for this 
opportunity to outline our successes in military facilities and review 
our plans for the future. We appreciate your strong support of our 
military construction program, and I look forward to working with you 
as we transform our infrastructure.

    Senator Hutchison. Thank you. As noted before, our domestic 
MILCON budget is decreasing, our overseas MILCON is increasing, 
and I would particularly note that much has changed since the 
previous long range planning for our overseas basing, and in 
particular I would say the timing of the large increase in this 
budget for overseas construction in Germany and Korea is 
questionable, based on the changes just in the last 6 months in 
our strategic needs.
    In this budget you are asking for $288 million for Germany 
alone, out of a total of $532 million for Europe, and for Korea 
$173 million at the same time we are certainly in a questioning 
mode on the number of troops we would have in Korea for the 
long term, and with General Jones, the Supreme Commander of 
NATO, actually having a proposal in public that we would be 
lessening the number of troops that we would have in Germany in 
favor of some more eastern countries. So my question is, why do 
you have all of this for Germany, Europe, Korea, when we do not 
have a clear understanding of a master plan?
    Dr. Zakheim. Let me start, and then Ray can add to that.
    In the first place, we have got a situation where we are 
really--we are already modernizing in Germany and Korea. There 
are sufficient bases in Germany. There is a plan that is a 
legacy of the previous commander in Korea. We also have a 
further complication, and here this is something I personally 
was involved in. I led the negotiation with the Koreans to get 
them to contribute 50 percent of, in effect, host nation costs. 
We got a 35 percent increase in that negotiation, and it was 
very tough, I can tell you.
    So what we have, therefore, is a situation where we have 
not yet heard the details of what General Jones has outlined 
the framework of, and I think what he has done is reflect the 
Secretary's views, and the views that many of the senior 
leadership in the Department have that the changing strategic 
environment clearly calls for a changed infrastructure 
footprint in Europe. But until such time as we have got the 
plan, as we have evaluated, as we have discussed it with you, 
we do not have it yet, and we are moving ahead with 
modernization.
    Now, we have done one thing. We have put a freeze on 2003 
construction projects in Europe, other than Ramstein, because I 
think there is a consensus, and I think General Jones may have 
actually said this in one of the articles that he was quoted 
in, that Ramstein was central no matter how you sliced this 
one, given what we do there and its strategic location and so 
on. But beyond that, we have actually currently put a freeze 
until we hear back from both General Jones and General LaPorte 
and Admiral Fargo, the Pacific Commander, as to where they are 
headed. So we have, in fact, anticipated your concern. You are 
looking at 2004. We have already put freeze on for 2003.
    Senator Hutchison. That just begs the question, how would 
you feel about a freeze in 2004 so you know the long range 
commitments would be in place before we would start spending 
hundreds of millions of dollars?
    Dr. Zakheim. I would hope we would have some answers to you 
from the combatant commanders before you actually put the 
freeze on. I mean, picture it this way. Suppose you put a 
freeze on in 2004 and it turns out there are some things that 
General Jones, even in this review, General Jones, General 
LaPorte feel they do need, then we find ourselves sort of 
twisted in a new kind of knot.
    Senator Hutchison. So what is the timetable, then?
    Dr. Zakheim. Well, we have asked them in effect to come 
back to us in, I guess it was a total of 90 days, and we put 
this request out to them about one-half a month ago, so we are 
about 2\1/2\ months away, and I think Ray DuBois and I are 
committed, I know we are committed to discussing this with you 
once we have heard from them and reviewed it with the 
Secretary.
    We know that you have an appropriations timetable, and you 
have to meet your timetable. We are going to do everything we 
can to ensure that there is consistency between what you are 
trying to do and what we are trying to do, because I do not 
think there is much disagreement here.
    Senator Hutchison. Well, I have to say I am pleased that 
there seems to be a bit of a turn toward looking at what we are 
doing overseas, and also relating it to what we are going to 
need in America in 2005 so you do not close a base you are 
going to need to bring troops from overseas back home to; so it 
seems we are on a course, but I do think the timing is going to 
be important, because I do not want to mark up a bill that is 
obsolete the day we mark it up.
    Dr. Zakheim. Well, we certainly understand that, but I 
think in fairness I have to point out that I started discussing 
the need for a relook at our European facilities with then 
Secretary-designate Rumsfeld. On September 11, 2001 Ray DuBois 
and I were in Germany, having been sent there by Secretary 
Rumsfeld to examine this issue. As you can imagine, things 
changed when we were forced to come home, and a lot has gone on 
since then. But the Secretary has for quite some time prior to 
September 11 felt that there was something that needed to be 
done about our overseas footprint, and so we are acting on it. 
As I said, we will do everything we can not to leave you out on 
some limb marking something up and then discovering that it is 
OBE. I do not think that is fair to you and, frankly, it is not 
fair to us, either.
    Senator Hutchison. I think that is right. Let me add, I 
have visited bases overseas just as you have, and I hear 
constantly about the limiting effects of not being able to have 
sufficient flying space to stay in training, not having an 
artillery range to stay in training, and so I hope that is a 
consideration when you are doing the big picture, that if you 
are going to have training constraints in some of these 
countries, that would be a factor in your decision, not the 
only factor, but a factor, so that if you are going to have to 
bring people home to train--Vieques would be another example 
where we build up a base, we have an agreement with the host 
country, and then all of a sudden that blows up and we are 
going to have to find another place to train our people coming 
in sea landings.
    So I hope that is part of the discussion in the Department 
of Defense as you are going to make these recommendations both 
for BRAC in America and BRAC overseas.
    Dr. Zakheim. It is certainly a factor. I would like to ask 
Ray DuBois to add to that, although I think I have to point out 
that the host nation for Vieques is us.
    Senator Hutchison. Well, it is but it is not.
    Dr. Zakheim. Of course. Of course.
    Senator Hutchison. I mean, it is not us who is protesting.
    Dr. Zakheim. It was complex. Anyway, Ray, would you like 
to----
    Mr. DuBois. Madam Chairman, notwithstanding my remark about 
being reticent to discuss numbers, I think it is important to 
recognize relative numbers insofar as our MILCON request in 
2004 shows an increase for the U.S. MILCON and a decrease, year 
over year request, for overseas. So in a sense we are making 
certain adjustments, but I also think we have to look at the 
legacy of underfunding for our overseas facilities that we 
inherited, quite frankly, when we came on board in January of 
2001.
    The other issue that I think it is important to recognize, 
with respect in particular to your suggestion of a moratorium 
on overseas construction, and that is, the Secretary of 
Defense, as Dr. Zakheim has indicated, has asked the combatant 
commanders for their views to reprioritize and recommend where 
reprioritizations make most sense, because the 2003 
construction projects currently in the pipeline were in point 
of fact planned for 2, 2\1/2\ years ago, and may not reflect 
the realities and the requirements of today.
    In addition, we would think that if reprioritization is a 
good thing to do, based on the combatant commanders' 
recommendations, the service Secretary and Service Chiefs' 
concurrences, that reprogramming those dollars into other areas 
is very important. That would be applicable not only to 2003, 
but 2004, and therefore by placing a moratorium on 2004, you 
would prevent an appropriate reprogramming, with Congress' 
approval, to those, today's immediate requirements, vice those 
requirements that may have looked very attractive in the 
planning stages 2\1/2\ years ago.
    Senator Hutchison. Well, let me just say that certainly we 
want to work in the best possible way for our congressional 
responsibility and oversight, but we need a lot more of a 
strategic plan before we pass a 2004 budget than just to pass 
something in a big vacuum and then come in with a huge 
reprogramming request. I just do not think that is the proper 
way to go.
    And secondly I would just say, and then I am going to 
stop--I do have some more questions, but I want to give my 
colleagues a chance, but I do want to say I do not think just 
depending on the CINCs' combatant commander views is the job of 
the Department of Defense, because a CINC may be looking at 
their sphere, but they may not be looking at the big picture 
for the strategy of where our troops are going to be needed for 
the future. So I do hope that there is an overview that will be 
put forward that does not just say the commander in Korea 
believes that you need this in Korea, without thinking about 
what is needed in the Middle East, or in Turkey, or in Italy, 
or Spain, or wherever. I just hope that just talking to the 
commanders----
    Mr. DuBois. Madam Chairman, if we were to look at an area 
of operational responsibility by a combatant commander in 
isolation, that would be a mistake. The Secretary has discussed 
at some length with the combatant commanders and the Joint 
Chiefs of Staff as recently as 2\1/2\ weeks ago here in 
Washington at the Combatant Commanders Conference the 
importance of an integrated global presence and basing 
strategy, and there was considerable discussion around that, 
but there was not any disagreement that, in point of fact, 
needed to happen.
    Dr. Zakheim. Let me add to that. Let me add to that, Madam 
Chairman. First of all, as somebody who has known Jim Jones for 
about 28 years, I can tell you he is about the least narrowly 
focused person I have ever met, but his command, as you know, 
now extends into Central Asia, and it extends into Africa, and 
so this is a man whose command is global, and what we are 
talking about, of course----
    Senator Hutchison. And NATO is a little different, too.
    Dr. Zakheim. But again, he is the European Commander, and 
for instance, Israel and Lebanon are part of his command, and 
Turkey, of course, is part of his command within NATO, and so 
his concern is as someone who has to focus, as he is as we 
speak, on a massive crisis in his southeast sector. He is fully 
aware of the implications of the new States that have come out 
from under the Soviet shadow and so on, and their potential, 
and as a Marine, quite frankly, he is also aware of the 
importance of littoral capabilities.
    As to General LaPorte, I do not know him as well, but this 
man is a really creative fellow, and he has brought a very 
different look to what is needed in Korea. In addition, he is 
working with Admiral Fargo, again someone I have known for a 
couple of decades, and Admiral Fargo's scope basically touches 
up against Admiral Jones'.
    I mean, literally, when Admiral Fargo is responsible for 
India and Admiral Jones is--and Zari, and then--well, I guess 
they do not touch exactly, but Central Asia and India, they 
come pretty close, and China, actually--no, so they do. So you 
have got two combatant commanders with huge areas of 
responsibility. You therefore can understand the exact kind of 
concern you have got, and a very creative combatant commander 
in Korea.
    Now, add that to what Ray just told you, that the Secretary 
has made it very, very clear that we have to have the exact 
kind of strategic perspective you are talking about, and I 
think you can be very, very confident in their recommendations.
    Senator Hutchison. Thank you. Senator Feinstein.
    Senator Feinstein. Thank you, Madam Chairman.
    I want to follow up along the lines--let me begin with my 
bottom line. I think it really is necessary that we sit down 
and have some kind of strategic conversations on where this is 
all going, and over what period of time, and how much the cost 
is estimated to be, and I will tell you why.
    Before last year's hearing General Meigs came in and talked 
to me about Efficient Basing South, so I went to Vicenza, and 
went to Camp Ederle, and went with him and saw his plans for 
Efficient Basing South.
    Now, this year we have gotten another plan, efficient 
basing in another direction. We put $34.8 million into 
Efficient Basing South last year. You might make a note, 
because I am going to go on for a bit. I want to know 
essentially whether this Efficient Basing South plan is going 
to be continued to be carried out.
    Secondly, I guess if they are going to leave Germany we do 
not have to worry about whether we build a new commander's 
house or remodel the old house, so we might save some money 
there. We should know about that.
    The second thing is, in December, Senator Hutchison has had 
some interest, and I have had a longstanding interest in the 
Korean situation, so I was fortunate enough to spend the day 
with General LaPorte. I saw Yongsan. I saw his desire to move 
out of Yongsan. Yongsan is a strategic piece of property in the 
heart of Seoul. It was also Japanese headquarters, which makes 
it a piece of land with some distinct sensitivity to South 
Koreans, and, was there in early December, just before the 
election, and there was a great deal of anti-American sentiment 
about our military there.
    And we put substantial moneys into the budget to do some 
renewal, and I saw some of the privately contracted housing and 
the facilities that we helped fund, which was wonderful to see, 
something really coming out of what we do here.
    Now, Secretary Rumsfeld has recently expressed support for 
reducing the United States footprint in Korea, and specifically 
mentioned moving U.S. forces away from the Seoul area and the 
DMZ. Now, the total MilCon request this year for Korea, as I 
understand it, is $173 million, of which $45 million is for 
family housing at Osan.
    Now, this is $63 million less than last year's level, but 
again, Korea's outyears construction needs approach $1 billion, 
so I think that this subcommittee really needs to know what the 
long term thinking is so that we can feel that this is not 
going to change with every change of command, that there is 
going to be something that everybody has bought into and is 
going to continue to fund in the years to come.
    I must tell you, I feel very uncertain about this, 
particularly from the Efficient Basing South, and you know, 
going to Northern Italy, and meeting the people, and seeing 
what they want to do, and buying into it, so the first part of 
my question, is Efficient Basing South going to go ahead?
    Dr. Zakheim. Well, again, we have been discussing Germany 
and Efficient Basing South is far more consistent with what I 
think is the overall direction of where we are likely to head. 
I have not heard, and either Ray can kick me, alongside me, or 
my staff can kick me from behind, I have not heard anyone 
questioning what we are trying to do in Italy. In fact, it is 
highly consistent.
    Senator Feinstein. No, do not mistake, I did not say 
anybody was questioning it. I am a supporter of it. Nobody is 
questioning it. I worry that it will change next year.
    Dr. Zakheim. I have no indication of that. Look, I cannot 
speak for what General Jones is going to do. I cannot prejudge 
it, but on its face it seems to me, and I think this is why it 
was undertaken in the first place, was because it was 
consistent with this redirection and relook at where we are 
likely to be.
    Senator Feinstein. But bottom line, we do not know whether 
Efficient Basing South is going to continue.
    Dr. Zakheim. Bottom line, right now, it is continuing, and 
we cannot prejudge what General Jones is going to do, but let 
me say, I would be highly surprised if he were to question that 
particular program.
    Senator Feinstein. He is coming in, so I will have a chance 
to ask him that. I will, and perhaps we can all share.
    Dr. Zakheim. I have no indications that that is the 
direction he is going, to somehow chop and change on that one.
    Now, on Korea, you make two points that I otherwise would 
have made. One is, General LaPorte is concerned about Yongsan. 
I was there a few months before you were, and I had the same 
reaction you did, which, one reaction that I always have when I 
am there is, we are stuck in the middle of Seoul. The other 
reaction, which was a good one, was, at least we are taking 
care of the folks who are living there.
    Now, as long as there are folks living there, we have got 
to do something for them, and whatever the plan General LaPorte 
comes up with, I would be very surprised if we just uprooted 
ourselves and left immediately.
    Senator Feinstein. My understanding is that what there 
would be is a land trade.
    Dr. Zakheim. That is correct.
    Senator Feinstein. And I guess what I am asking is, could 
you give us the status of that land trade?
    Dr. Zakheim. Well, I will get you some more for the record. 
Again, General LaPorte is coming back to us, as General Jones 
is, within the next couple of months, and so we will probably 
have a much firmer answer by then, but I can get you something 
before then.
    [The information follows:]

    The Republic of Korea (ROK) desires the return of lands in Seoul 
and in 1990 signed an Agreement-In-Principle and Memorandum of 
Understanding for relocation of U.S. forces from Seoul including the 
majority of Yongsan Main and South Posts. ROK agreed to grant U.S. 
Forces, Korea (USFK) new land in the Osan-Pyongtaek area and completely 
fund the move. On June 12, 1993, ROK informed USFK that ROK had decided 
to cancel the plan to purchase real estate near Osan Air Base due to 
strong local opposition thus halting the relocation efforts. ROK is now 
showing renewed interest in the relocation.
    The relocation of U.S. forces from Seoul is currently on hold due 
to ROK opposition of the details of the relocation plan, and there is 
no anticipated Yongsan land trade in the near future, although long-
term planning for the relocation continues. USFK conducted a Yongsan 
relocation requirements survey in summer of 2002. An initial master 
plan to relocate the U.S. forces from Yongsan is under development and 
will be completed by May 2003.

    Senator Feinstein. If we are going to leave the base there 
is no sense in putting a lot into it.
    Mr. DuBois. Senator Feinstein, just to look at Korea first, 
and then I will go back to Italy, the fact that the symbolism, 
as you have pointed out, of Yongsan headquarters far exceeds 
its square footage, its footprint, if you will, has not escaped 
the Secretary of Defense in this context, and as you have 
correctly referred, he has made comments about that. The speed 
with which one could reconfigure our presence--presence equals 
end strength as well as positioning--in South Korea is not 
something you do in a year.
    The Secretary did send to Korea recently Deputy Assistant 
Secretary of Defense Richard Lawless to talk to General 
LaPorte--and I encourage you to talk to General LaPorte when he 
is here next week. He is going to see me on Monday--in this 
regard. I am interested in what he has learned, because the 
long term thinking is exactly what the Secretary of Defense has 
insisted that LaPorte and Fargo put on the table, not just 2003 
and 2004, but 10 years plus out.
    As far as Efficient Basing South is concerned, and what we 
are really talking about here, of course, is Vicenza and 
Aviano, and also Naples and the naval stations that we have 
now, and this is important to note, because it was significant 
military construction that went into Sigonella, significant 
military construction appropriated by this subcommittee that 
went into the building of that new housing area for the Navy 
near Naples, and I encourage you to visit it. If you have not, 
it is fantastic.
    In fact, when I visited, the wonderful comment made to me 
was, the assignments folks in the Pentagon who always used to 
be prevailed upon, do not assign me to Naples, now the 
assignments people want to go to Naples. This is a positive 
thing, and yes, it does reflect where I think the Secretary is 
going in the longer term.
    Now, should we or should we not repair a four star general 
officer's house in Stuttgart? I will defer that for the moment.
    Dr. Zakheim. I did not even address it.
    Senator Feinstein. We will defer it, then.
    You know, I think what the General in charge at Vicenza has 
done, and I really want to say this to you, is really quite 
remarkable. He said when 9/11 happened the carabinieri just 
automatically came and surrounded the base to offer protection, 
and this General had established such good contacts, and this 
base is right in the town, such good connections with the 
leadership, with the community, that there was just solid 
support for the base, and that really made me feel good, and 
obviously very concerned about the men and women serving at 
that base and their opportunities, and it was really a very 
heartwarming thing to see.
    Now, it was also clear to me that General LaPorte--I mean, 
I think he is a 10. He is a great human being, and I suspect a 
very good tactical commander. At the same time, the problems 
there are really problems that take some serious, I think, long 
term thinking. And because we are putting so much money into 
Korea, particularly in the outyears, I think that both of us 
really need to know what that long term thinking is and how 
what we do can best serve it, because I think everybody wants 
the same thing, to do the land trade, to get out of Central 
Seoul, to have less of a footprint, but still be available for 
any protection that might be necessary, and I would suspect 
that that might be agreeable on everybody's part.
    But how we do this I think is going to be very difficult, 
because the costs are going to be quite substantial, and so I 
am eager, and I saw Osan, and I saw some of the housing that we 
had done, the new housing and the recreational center, and I 
was really very proud.
    Mr. DuBois. Senator, I think it may be less difficult than 
we think, and I am speaking for myself now, but as Deputy Under 
Secretary for Installations and Environment, having been to 
Korea a number of times since I became Deputy Under Secretary, 
the tough negotiations that Dov Zakheim entered into and was 
successful in accomplishing with the South Korean Government 
for host nation support must be part of our calculus here, 
because we do not want to damage that relationship, especially 
in terms of their commitment to co-invest with us on behalf of 
our military forces. We want to make sure, however, as you 
pointed out, that it is done in the right place.
    Dr. Zakheim. That is exactly right. We have to be sure that 
the agreement we got--let us be honest here, the Japanese pay a 
substantial portion of host nation support. The Europeans do 
not. The Koreans were closer to the bottom of the table. We 
have moved them up to 50 percent. We do not want to lose that, 
and so that is another factor in this, and Leon LaPorte is a 
really bright guy; he's----
    Senator Hutchison. Are you talking about Korea moving up to 
50, or are you talking about Europe moving up to 50?
    Dr. Zakheim. Well, let me tell you, if I had my druthers 
Europe is going to move up to 50. It is going to be harder to 
do. Meanwhile, I have got Korea.
    Senator Feinstein. You are at 35 now, right?
    Dr. Zakheim. Not even that high. I think if you look 
closely at the European numbers, it is less than that, and that 
is a major concern. We have got to wait for the time when we 
renegotiate. How do you renegotiate until you know what your 
plan is? I mean, what is the point, for example, to go back to 
the Germans, who do not kick in anything like the Koreans do, 
and say, well, let us renegotiate, when we do not even know 
what it is going to be like in Germany.
    So we have got to be careful. We have got different 
external factors here, in addition to just the actual 
facilities.
    Senator Feinstein. I was just going to make one last point 
so I could turn it back to the chairman. Environmental 
remediation, and maybe I have a bias, because we have 30 closed 
bases, and maybe I have a bias because McClellan Air Force Base 
had a nuclear reactor on it and we have to clean it up, and I 
was really struck by the hit that environmental remediation 
took.
    At the same time, I do want to say to you that I understand 
considerable progress is being made at Bayview-Hunters Point, 
and I want to thank you for that. I think I reported at last 
year's hearing that they had a fire that burned underground for 
2 weeks before anybody knew it was burning underground, and I 
am very pleased that the Navy has done what they said they were 
going to do, and I gather things are on schedule and on target 
there. However, I have just a list from the Air Force of what 
they could use to clean up just Kelly and McClellan, and one 
other base, and it is $64 million additional dollars this year.
    The military has an obligation to remove the contamination 
from these bases.
    Dr. Zakheim. Well, let me first say that I remember your 
concern last year and I am glad that we took care of that one 
facility. That is important. Now I do want to turn it over to 
probably the guy who knows more about this than anybody else in 
the Department, Ray DuBois.
    Mr. DuBois. The environmental remediation of BRAC'd 
property from the four prior BRAC's has been and continues to 
be a challenge, but it is a challenge in several ways, Senator. 
Number 1, we still have significant BRAC'd properties yet to be 
disposed of, and those BRAC'd properties are not disposed of in 
no small measure because of competing local environmental 
interests and competing local economic interests. One side may 
want to use the property for one use, the other faction may 
want to use it for another use.
    One of the reasons that we have been unable, and have not 
asked for in many cases money for X or Y, has been--and granted 
this does not apply necessarily to McClellan and Kelly, but 
even if we had the money we could not execute it because the 
locals have not decided what the land use will be. It is just 
an aspect of it.
    We have spent, since the first BRAC in 1988 and the BRACs 
in 1991, 1993, and 1995, up to about 40 percent of all BRAC 
environmental remediation, and this is not surprising, given 
the number of bases which were impacted in the State of 
California, in the State of California. It is not as if the 
State of California has been pro rata less than other places.
    Now, we also have, I think, an issue, and you will have to 
address this specifically to the three Service Secretaries who 
will follow us, and I thank you for raising and noticing what 
the Navy has done not just in terms of disposing of property in 
California also, but also in terms of meeting their 
environmental obligations, but all three Military Departments 
recognize their environmental obligations.
    You may, either in this forum or another forum, ask the 
question, then why would we necessarily ask for less in terms 
of BRAC environmental remediation funding this year than last? 
Two factors apply. One factor is, we have less environmental 
remediation to do, because we have been able to--not in terms 
of cost to complete, but in terms of what we have accomplished 
just in the past 2 fiscal years.
    I think the other issue is, and again I encourage you to 
ask Secretary Johnson, as he is a witness today. He is also 
Acting Secretary of the Navy, so he has got a few jobs, but as 
Assistant Secretary of the Navy for Installations and 
Environment, he has been a tremendous asset to the total DOD 
disposal philosophy, because he has worked hard with local 
communities to actually auction off properties that heretofore 
have been held from disposal.
    As you may know, under the law, those dollars go into the 
so-called BRAC account, and they can only be used for 
environmental remediation, so in the case of the Navy, they 
have asked for less dollars this year than last, but they now, 
if they get the receipts that are under contract, they will 
have a considerable amount of money in that BRAC account to 
spend, and those dollars do not need to be reappropriated.
    It is an interesting kind of inside the beltway, if you 
will----
    Senator Feinstein. We will check those accounts.
    Mr. DuBois. Yes, ma'am.
    Senator Feinstein. Thank you.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you. I just have a few more 
questions. I wanted to finish on the--I had a few questions on 
the host nation support issue. I am under the impression that 
Europe pays less than 10 percent.
    Dr. Zakheim. No. The numbers are closer to the mid 20s to 
low 30s. I do not know where you get that number from.
    Senator Hutchison. I am not talking NATO. We have 25 
percent in NATO, but in Europe itself, I am told under 10 
percent. Host nation.
    [The information follows:]

    The Land Partnership Program (LPP) was signed in March 2002 and 
ratified by the Korean government in November 2002. It is now being 
executed though no land has been exchanged. However, host nation funded 
projects have been started at enduring locations associated with LPP. 
The location of U.S. Forces Korea installations in the LPP are 
currently under review based on the requirement by the Secretary of 
Defense that geographic combatant commanders prepare an integrated 
presence and basing strategy by July 1, 2003. The LPP has a provision 
to modify the installations specified if needed. THE PACOM Commander 
must also evaluate the fiscal year 2003 and 2004 Military Construction 
programs for Korea and provide the Secretary of Defense with his 
requirement by April 19, 2003.

    Dr. Zakheim. Host nations? That does not ring a bell. I 
have seen one or two countries, but actually not in Europe, 
that for a variety of reasons give, I think one gives 8 percent 
or something. That is a Middle Eastern country, and there are 
all kinds of reasons for that.
    [The information follows:]

           The Percentage Europe Pays in Host Nation Support

    For the purposes of this response, ``host nation support'' is 
defined as bilateral cost sharing contributions, in which the cost 
sharing is ``between the United States and an ally or partner nation 
that either hosts U.S. troops and/or prepositioned equipment, or plans 
to do so in a time of crisis''. According to the June 2002 ``Report on 
Allied Contributions to the Common Defense''--A Report to the United 
States Congress by the Secretary of Defense, research revealed that our 
European allies--on average--contributed over 23 percent of the costs 
associated with the stationing of U.S. forces during the year 2000 
(most recent collection of data).
    The following European countries were considered in the collection 
of bilateral cost sharing contributors (listed in order from greatest 
U.S. cost offset percentage to least): Norway (67 percent), Luxembourg 
(51 percent), Spain (50 percent), Italy (37 percent), Belgium (35 
percent), Greece (29 percent), Germany (21 percent), United Kingdom (17 
percent), Hungary (10 percent), and Turkey (3 percent). In monetary 
terms, Germany was the largest contributor ($1,211 million) and Italy 
ranked as the second largest contributor ($364 million).

    Dr. Zakheim. I would love to see those numbers, and we will 
get you an answer for the record, because my recollection 
country by country is, that it is somewhere between 25 and 35 
for each of those.
    [The information follows:]

    The information provided below represents bilateral cost sharing 
between the United States and our European allies that host U.S. troops 
and/or prepositioned equipment.
    The Department of Defense distinguishes between two different types 
of cost sharing: the direct payment of certain U.S. stationing costs by 
the host nation (i.e., on-budget host nation country expenditures), and 
indirect cost deferrals or waivers of taxes, fees, rents, and other 
charges (i.e., off-budget, forgone revenues).
    The most recent year for which data are available is 2001, which is 
also what will be reported in the 2003 Report to Congress on Allied 
Contributions to the Common Defense.

                                           [U.S. dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                                                                       A/(A(+B)
                                                                              B U.S.     A+B Total    Percentage
                                       Direct      Indirect     A Total     stationing   stationing      cost
                                                                              costs        costs       sharing
----------------------------------------------------------------------------------------------------------------
Denmark...........................         $0.0         $0.1         $0.1        $66.2        $66.3          0.1
Germany...........................          8.2        853.4        861.7      3,197.2      4,058.9         21.2
Greece............................          0.5         17.3         17.7         24.4         42.2         42.1
Italy.............................          2.9        356.4        359.3        554.1        913.4         39.3
Luxembourg........................          1.1         18.7         19.8          6.0         25.8         76.8
Norway............................         10.3          0.0         10.3          0.6         10.9         94.5
Portugal..........................          1.7          2.4          4.1         72.1         76.2          5.4
Spain.............................          0.0        119.6        119.6         99.0        218.6         54.7
Turkey............................          0.0         13.6         13.6        112.1        125.7         10.8
United Kingdom....................         20.1        113.8        133.9        733.1        867.0         15.4
                                   -----------------------------------------------------------------------------
      Total.......................         44.8      1,495.2      1,540.0      4,864.9      6,405.0        24.0
----------------------------------------------------------------------------------------------------------------
Note: Belgium has not been included as complete and accurate stationing cost information is not currently
  available. Hungary is also not included; however, it does provide support to U.S. troops temporarily stationed
  there for operations in the Balkans.


    Senator Hutchison. But you do intend to renegotiate once we 
determine what our long term strategy is?
    Dr. Zakheim. As each agreement comes up for review, 
absolutely.
    Senator Hutchison. Are they going to come up for review 
this year?
    Dr. Zakheim. I do not know if the German one comes up this 
year, but obviously once there is a decision to make any 
changes at all, then all of these issues have to be addressed, 
and this would be an opportunity for us to revisit with the 
Germans exactly who is paying for what.
    Senator Hutchison. Well, I think you and I are on the same 
wavelength here, but certainly if we are going to--I am still 
looking at the right way to approach a new strategy coming 
forward in the very near future, and I certainly think that 
would be the opportunity to see how committed a country is to 
our being there for their economy and their protection.
    Dr. Zakheim. Let me be very clear, Madam Chairman, without 
Congress's help on Korea, and Congress articulated--there was I 
believe a Sense of the Congress Resolution about how much they 
thought Korea should be paying, without that kind of pressure, 
it would have been much harder for us to get what we got, and I 
encourage you to continue to push this line. It is very 
important to us, too.
    Senator Hutchison. Thank you. We will.
    A couple of other things. It is my understanding from your 
testimony that you will come back to us for anything you think 
you are not going to need for the 2003 appropriations for 
reprogramming requests.
    Dr. Zakheim. Yes.
    Senator Hutchison. That is important, of course, to our 
committee, that we stay in the loop when we are talking about 
this.
    Dr. Zakheim. Absolutely.
    Senator Hutchison. And I applaud your looking at 2003, as 
well as our working together on 2004.
    The programming this year was less for the Guard and 
Reserve components than the amount that we enacted last year. 
My question is, with our dependence on Guard and Reserves, why 
is that the case?
    Dr. Zakheim. I am probably going to give you the same 
answer that I gave you last year when you asked a similar 
question. That is, we have to look at all our priorities, and 
we have to come up with some kind of balance. So the metric we 
have used is, ``are the moneys that we are spending on Guard 
and Reserve facilities roughly--is it roughly the same 
percentage of the overall account.'' We have been at about the 
same percentage for the last 6 years.
    Senator Hutchison. Do you feel that we are basically fully 
utilizing the facilities and upgrading them as needed for our 
bigger dependence on them?
    Dr. Zakheim. There is no doubt that we could do better. 
There is no doubt that we could do better, and there is also no 
doubt that the Reserves and the Guard are making a phenomenal 
contribution.
    You have traveled overseas. Particularly, go to the Middle 
East, and my goodness--I have friends that are out there, and I 
have got one friend around the corner from me with three 
children who just spent the year serving, and then a second 
year, so we all know how difficult it is for Guard and Reserve. 
But again, it is always a balance, and we try to come up with 
the best possible number under the circumstances and, as I say, 
we use that metric of a percentage rate.
    Ray, would you like to add to that?
    Mr. DuBois. Well, just to embellish, if I might, briefly, 
fiscal year 2003 requests--requests--$297.3 million. Fiscal 
year 2004 requests $369 million, and that is a significant jump 
in the requests, not in terms of what was enacted.
    The issue, though that I think that is important is the 
percentage issue. In terms of total milcon vice Guard and 
Reserve, we went from 3 percent total MILCON to 4 percent. Now, 
mathematically that is a 33 percent increase, quote-quote.
    Senator Hutchison. Yes. MILCON is coming down----
    Mr. DuBois. But I know what you are going to say, and I can 
understand why you are going to say it.
    Senator Hutchison. Well, just--point made. Watch out for 
the Guard and Reserves and make sure that what we are asking 
them to do is commensurate with what we are doing in the 
budget.
    A last question. This is a fine point, but the funding to 
construct the chem demil facilities has always been in the past 
in the military construction portion of the budget. However, 
this year you are asking that this go in the defense budget, 
and I would like to ask why.
    Dr. Zakheim. The reason is straightforward. The law, which 
came with the Homeland Security Act, instructed us, and I in 
fact--I can even give you the section, chapter and verse. 
Section 1511(d) of the Homeland Security Act says, upon the 
transfer of an agency to the Department of Homeland Security, 
the personnel, assets and obligations held by or available in 
connection with the agency shall be transferred to the 
Secretary for appropriate allocation.
    What basically we were told, we were told first of all to 
transfer money out, and second of all we were also told that we 
were supposed to certify that the--and the Congress told us 
this, that we were supposed to certify that the money for chem 
demil would be put in an OSD-wide account, and what we have got 
is the Army as executive agent, and it is being called chemical 
demilitarization, comma, Army, as a separate account.
    And I think I was reading off of the wrong sheet of music 
on the homeland security. I see a lot of people looking 
puzzled, but the $119 million was, we were told by the Congress 
to do that as well.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Hutchison. You were told by Congress to do that?
    Dr. Zakheim. Yes. I believe so.
    Senator Hutchison. Well, we will check into that, because 
it is our position that that should continue to be in military 
construction for the continuity of oversight.
    Dr. Zakheim. That was the fiscal year 2003 authorization 
Act.
    Senator Hutchison. Okay. We will look at that again.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

               Questions Submitted to Hon. Dov S. Zakheim

          Questions Submitted by Senator Kay Bailey Hutchison

                      FAMILY HOUSING PRIVATIZATION

    Question. I applaud your efforts with regards to family housing 
privatization. I noticed in your statement that the privatization 
leverage--that is the ratio of what we put into the deal versus what we 
get out--is 10 to 1. How did you calculate that ratio?
    Answer. The leverage is determined by dividing traditional 
construction cost by the scored cost of the privatization project. For 
example, if we were to build houses using the traditional method, it 
would cost us say $200 million. However, by privatizing those houses, 
it would cost us only $20 million. Therefore, we would get a 10 to 1 
leverage.
    Question. How many units do you plan to privatize in fiscal year 
2003 and 2004?
    Answer. We plan to privatize approximately 30,000 units in fiscal 
year 2003 and 36,000 units in fiscal year 2004. However, the Services 
are much more aggressive/optimistic in their projections. Their 
estimates show privatizing over 38,000 units in fiscal year 2003, 
compared to our more conservative estimate of 30,000. In fiscal year 
2004, our estimates are similar, about 36,000 units.

                       ADEQUACY OF BUDGET REQUEST

    Question. Two years ago you both testified that after many years of 
neglect, the department intended to start investing in infrastructure. 
Your proposed budget barely funds new mission initiatives, let alone 
replacing aging facilities. What is the DOD position on revitalizing 
facilities?
    Answer. We have three investment priorities. Our first priority is 
to sustain our existing facilities, our second priority is to 
recapitalize (both restore and modernize) our existing facilities and 
the third priority is to acquire new footprint and dispose of old 
facilities as appropriate. The fiscal year 2004 budget funds facilities 
sustainment at 94 percent of our requirement. The fiscal year 2004 
recapitalization rate was held at about the same rate as fiscal year 
2003, but is on track to meet our 67 year recapitalization goal by 
fiscal year 2008.
    Question. Why is the 2004 military construction request lower than 
the amount enacted for military construction last year?
    Answer. The fiscal year 2004 President's Budget request for 
military construction is slightly higher than the 2003 enacted amount 
when the Defense Emergency Response Fund projects and congressional 
adds are excluded.
    The 2004 request funds our highest priorities for improving quality 
of life and resolving critical readiness shortfalls. For quality of 
life, the military construction request sustains funding for family and 
bachelor housing and increases the number of housing units privatized. 
We also preserved funding for recapitalization. We increased funding 
for facilities sustainment, raising the corporate sustainment rate from 
93 to 94 percent, which will help to preserve our facilities and reduce 
the need for future, more costly revitalizations.
    Question. What is the backlog of department of defense projects for 
military construction?
    Answer. The Department of Defense does not maintain a list of 
backlog projects.
    Question. With the proposed funding in the 2004 budget for MILCON, 
how does that impact the department's overall recapitalization rate? 
How does that compare to the last 2 years?
    Answer. The fiscal year 2004 recapitalization rate is 148 years for 
the four Services and 136 years for the combination of the four 
Services and three of the Defense Agencies. This is about the same as 
the fiscal year 2003 recapitalization rate and higher than the fiscal 
year 2002 recapitalization rate. Prior to fiscal year 2002, the 
Department's requests to Congress kept the recap rates hovering around 
200 years. The Department is currently on track to meet our 67 year 
recapitalization goal by fiscal year 2008.
    Question. What is the department's strategy to reach the 
secretary's proposed recapitalization rate of 67 years? When will that 
happen?
    Answer. In the near term, it is our strategy to fund only the most 
critical restoration and modernization projects. The Department will 
achieve its goal of a 67 year recapitalization rate by fiscal year 
2008; however, through the disposition of facilities in the BRAC 2005 
process, we may achieve the 67 year target sooner.
    Question. Why have you programmed less for the Guard and Reserve 
components than the amount that was enacted last year?
    Answer. The most urgent MILCON requirements of the Department are 
included in the President's Budget without prejudice to Active nor 
Guard components. The Guard and Reserve compete equally with the Active 
Components according to their Facilities Investment Plans and overall 
Service priorities. While the MilCon amount in the President's budget 
this year is less than was enacted in fiscal year 2003, including 
congressionally added projects, the Department increased MILCON funding 
for the Army National Guard by 65.7 percent over the fiscal year 2003 
President's Budget, and it increased the Air National Guard funding by 
13.0 percent.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                                  BRAC

    Question. I understand the department is already getting organized 
to begin the BRAC process for the 2005 round. What have you done to 
date and how are you approaching this differently than past rounds of 
BRAC?
    Answer. Reducing the Department's excess capacity in a single 2005 
round will require extraordinary effort, given that the goal is true 
infrastructure rationalization rather than the simple reduction of 
excess in a status quo configuration typical of prior BRAC efforts. The 
Secretary signed out a BRAC ``kickoff'' memorandum in November 2002 
that provides the analytical construct for conducting the 2005 BRAC 
analyses. In this memorandum the Secretary established two senior 
groups to oversee and operate the BRAC 2005 process. The Infrastructure 
Executive Committee (IEC) chaired by the Deputy Secretary of Defense 
and composed of the Secretaries of the Military Departments and their 
Chiefs of Services, the Chairman of the Joints Chiefs of Staff and the 
Under Secretary of Defense (Acquisition, Technology and Logistics) is 
the policy making and oversight body for the entire BRAC 2005 process. 
The subordinate Infrastructure Steering Group (ISG), chaired by the 
USD(AT&L) and composed of the Vice Chairman of the Joint Chiefs of 
Staff, the Military Department Assistant Secretaries for installations 
and environment, the Service Vice Chiefs, and the Deputy Under 
Secretary of Defense (Installations & Environment), will oversee joint 
cross-service analyses of common business oriented functions and ensure 
the integration of that process with the Military Department and 
Defense Agency specific analyses of all other functions. The Secretary 
went on to indicate that a primary objective of BRAC 2005 is to examine 
and implement opportunities for greater joint activity. Accordingly, he 
divided the BRAC 2005 analysis into two categories of functions. Joint 
cross-service teams will analyze the common business-oriented support 
functions and report their results through the ISG to the IEC. The 
Military Departments will analyze all service unique functions and 
report their results directly to the IEC. The Military Departments are 
responsible for ensuring that their recommendations are fully 
consistent with the joint cross-service teams' recommendations.
    The BRAC process outlined in the Defense Base Closure and 
Realignment Act of 1990, Public Law 101-510, as amended, that governed 
the three previous BRAC rounds also governs the 2005 round, although 
Congress did amend that statute when it comes to the 2005 round.
    The first such amendment concerns the role of military value in the 
selection process. In previous rounds, as DOD policy, the military 
value criteria took priority over the other criteria. However, in BRAC 
2005, there is now a statutory requirement that military value be the 
primary consideration, reflecting the special emphasis military value 
should have during all analyses. Additionally, the authorizing 
legislation provides some other special considerations that the 
Department must address when developing its selection criteria.
    Congress also amended the BRAC statute to require the Secretary to 
provide Congress with a separate report prior to the Secretary's 
recommendations on closures and realignments. In this report, which is 
due to Congress along with the budget documents for fiscal year 2005 
(about February 2004), the Secretary must include, among other things, 
the 20 year force structure plan of probable threats, a comprehensive 
inventory of installations, a discussion of excess capacity categories, 
and a certification by the Secretary that a BRAC round in 2005 is 
necessary.
    In addition to statutory changes, there are BRAC process changes 
which the Secretary directed in his kickoff memorandum. As discussed 
above, rather than considering all functions on a service-centric 
basis, the Secretary directed that all common business oriented support 
functions will be analyzed by Joint Cross-Service Groups, under the 
supervision of the ISG. The ISG will recommend to the IEC the specific 
functions to receive joint analysis and the metrics for that analysis 
for the Secretary's approval. Outputs from the Joint Cross Service 
Groups, after being endorsed by the management oversight groups, will 
be considered as recommendations for review and approval by the 
Secretary. During previous BRAC rounds, Joint Cross-Service Groups 
developed ``alternatives'' for consideration by the Services.
    Question. What lesson will you learn in the next round?
    Answer. After the Department submitted its closure and realignment 
recommendations to the BRAC Commission in 1995, the General Accounting 
Office (GAO) provided a thorough review of the Department's BRAC 1995 
process. In its report, the GAO acknowledged that ``DOD's 1995 BRAC 
process was generally sound and well documented and should result in 
substantial savings.'' However, there were areas that GAO found could 
be improved upon. For instance, while the GAO found that ``OSD 
attempted to play a stronger role in BRAC 1995,'' there was ``limited 
success in Cross-Servicing.'' We agree with the GAOs assessment with 
respect to the cross-service group outcomes. The Secretary's November 
15, 2002, ``kick-off'' memorandum to the Department strengthened the 
Joint Cross-Service Groups by empowering them to develop 
recommendations for the Secretary. In BRAC 1995, these groups were only 
empowered to develop ``alternatives'' for consideration by the 
Services.
    Question. What do you estimate the cost will be to conduct BRAC 
beginning in 2006 through 2008?
    Answer. In the April 1998 ``Report of the Department of Defense on 
Base Realignment and Closure,'' the Department estimated that it has 
about 23 percent excess base capacity. That report also noted that its 
analysis was not appropriate for selecting individual bases for 
realignment or closure, and to do so, the Department would need to use 
the detailed base-by-base analyses of a BRAC process.
    The Department assumes that the historical costs and savings from 
BRAC rounds 1993 and 1995 would serve as a good baseline upon which to 
plan for BRAC 2005 costs and savings. These rounds collectively reduced 
the base infrastructure by approximately 12 percent. If BRAC 2005 is to 
approach a notional 20 percent reduction in base infrastructure, then 
the associated costs and savings over its 6 year implementation period 
can be inflated and interpolated from the BRAC 1993/1995 baseline. 
Based on this analysis, we believe that between fiscal year 2006 and 
fiscal year 2008, a reasonable estimate for implementing a BRAC round 
that eliminates approximately 20 percent excess capacity is about $19 
billion. These costs are offset by estimated savings of almost $9 
billion. Our estimates have also projected that this investment in 
reshaping our infrastructure should result in approximately $8 billion 
in annual recurring savings after 2011.

                         OVERALL MILCON BUDGET

    Question. Why does the amount allocated for overseas MILCON 
projects continue to grow every year, while the amount proposed for 
domestic bases decrease?
    Answer. We are not putting inordinate emphasis on overseas areas. 
However, the Services have been making some large investments in 
certain areas over the last several years. For instance the Navy is 
recapitalizing facilities at Naval Air Station Sigonella, Italy. The 
Navy is also building up the Navy Central Command in Bahrain, which is 
the command center for all Naval operations in the CENTCOM AOR and 
several joint force units. The Army is investing in the Efficient 
Basing East initiative, which will consolidate troops in Grafenwoehr, 
Germany. The Army is also improving family housing and barracks in 
Korea. Further, a large part of our overseas costs are must-pay family 
housing operation and maintenance bills.
    Question. What is the status of your review to look at the overseas 
bases?
    Answer. The Department is working on a global study to see if the 
Department can close/realign bases overseas. The Department has to 
provide the study to the Secretary by mid-June.
    Question. When will that information be provided to the congress?
    Answer. We will submit the study to the Secretary by mid-June. If 
he approves the study, and if he releases it, we will provide it to the 
Congress shortly thereafter.
    Question. Will it potentially change the budget request for Germany 
and Korea? What about the projects that were appropriated in 2003?
    Answer. If the Department moves projects in Germany and Korea, we 
will probably do a Budget Amendment prior to markup. For fiscal year 
2003, we will either use section 2803 of 10 U.S.C. if the projects are 
below the $30 million threshold. If they are above the $30 million 
threshold, we will request rescission of the projects in question and 
will request that the Congress reappropriate them at a different 
location.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                                 EUROPE

    Question. Given the freeze on military construction in Europe--how 
will this hold effect the Efficient-Basing South Initiative?
    Answer. It really depends on the outcome of the study but I believe 
the Efficient Basing South will not be affected.
    Question. Would your office provide the Committee with the level of 
host nation funding provided for construction projects, by country, 
over the last several years? And, could you give examples of where we 
are, and are not, getting a fair shake?
    Answer. We renegotiated the Special Measures Agreement with the 
Republic of Korea (ROK). As a result, ROK-funded construction for 
United States forces in Korea increased by over 35 percent. The 
Government of Japan provides us with about $680 million per year in 
construction under the Japanese Facility Improvement Program (JFIP).
  --The Korean Host Nation Funded Construction program is comprised of 
        2 parts:
  --The ROK Funded Construction program (ROKFC) supports quality-of-
            life and other non-readiness type construction
  --The Combined Defense Improvement Program (CDIP) constructs combat 
            readiness facilities.
  --The programs are funded on a calendar year (CY) basis as follows:

                                             [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                           Calender Year
                                                 ---------------------------------------------------------------
                                                       2001            2002            2003            2004
----------------------------------------------------------------------------------------------------------------
ROKFC...........................................            95.0           138.4           156.1           170.0
CDIP............................................            47.0            54.2            59.8            66.6
                                                 ---------------------------------------------------------------
      TOTAL.....................................           142.0           192.6           215.9           236.6
----------------------------------------------------------------------------------------------------------------

  --The Japanese Facility Improvement Program is funded at 80 billion 
        yen per year (approximately $680 million at the current 
        exchange rate of 117 yen/dollar) and constructs both readiness 
        and non-readiness facilities.
  --We also have the Land Partnership Program with the Koreans where we 
        return land and facilities at one location and they provide us 
        land where we are consolidating and provide us increased use of 
        ROK training ranges.
  --We also have a host nation support agreements with various NATO 
        countries where we turn back facilities and get either a 
        monetary return or payment in kind (PIK). For instance, we 
        received $181.6 Million in cash and $852.8 Million in PIK from 
        the Federal Republic of Germany (FRG).
  --Lastly, we have an agreement with NATO where we contribute 
        approximately 24 percent of war time facilities being 
        constructed. While this seems to be a large percentage, the 
        other countries contribute a larger portion of their GNP than 
        we do.

                                  BRAC

    Question. The fiscal year 2004 budget request for BRAC 
environmental cleanup represents a 34 percent reduction from fiscal 
year 2003. The Navy BRAC account took a 62 percent hit, and the Army 
BRAC account took a 57 percent hit. Yet the outstanding bill for 
environmental cleanup at closed or realigned bases exceeds $3.5 
billion.
    In your prepared testimony, you cite efficiencies in base clean up 
and speedier transfers of property as the reasons for the decrease in 
the BRAC budget request. But cutting the budget is not helping to 
reduce the $3.5 billion dollar backlog, and we will be able to complete 
the program if the Defense Department keeps squeezing the BRAC cleanup 
budget. What are your projections for the out years--are you planning 
increases or further decreases in the BRAC environmental remediation 
budget?
    Answer. The fiscal year 2004 budget request for the total fiscal 
year 2004 BRAC program (including environmental and caretaker costs) 
represents a 34 percent reduction from fiscal year 2003. When 
considering BRAC environmental costs only, the planned value of the 
fiscal year 2004 program ($412.0 million) represents a 24 percent 
reduction from fiscal year 2003 ($540.2 million). A significant portion 
of the difference is attributed to revenues anticipated from land sales 
of base closure properties, thus reducing the fiscal year 2004 budget 
request.
    The President's Budget includes $275.7 million to address the 
Department's known BRAC environmental requirements in fiscal year 2005. 
This level could increase as we approach the budget year and 
requirements are better defined. A substantial level of total BRAC 
environmental requirements will remain beyond the current FYDP due to 
the fact that many of the BRAC sites are still in the study phase and 
that a greater range of contaminants may be considered in the cleanup 
process leading to transfer of properties to communities. The 
Department recognizes the inherent advantages of transferring 
properties as soon as possible and fully funds cleanup of all 
properties with identified schedules for transfer.

                                 KOREA

    Question. I traveled to Korea this past December and had some good 
discussions with General LaPorte. I was impressed with the Land 
Partnership Plan, although I recognize that it is a very ambitious 
initiative that requires a great deal of support and cooperation from 
the South Korean government.
    What is the status of the Yongsan land swap?
    Answer. The Land Partnership Program (LPP) was signed in March 2002 
and ratified by the Korean government in November 2002. It is now being 
executed though no land has been exchanged. However, host nation funded 
projects have been started at locations associated with LPP. The 
location of U.S. Forces Korea installations in the LPP are currently 
under review based on the requirement by the Secretary of Defense that 
geographic combatant commanders prepare an integrated presence and 
basing strategy by July 1, 2003. The LPP has a provision to modify the 
installations specified if needed. THE PACOM Commander must also 
evaluate the fiscal year 2003 and 2004 Military Construction programs 
for Korea and provide the Secretary of Defense with his assessment.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson


                                 EUROPE

    Question. All the best weapons in the world will be rendered 
useless if our military personnel and their families are not afforded a 
good quality of life. When asked, our military personnel consistently 
say that family housing is one of the most important quality of life 
issues that they face. I understand that the Department of Defense is 
in the middle of a multi-year effort to replace 163,00 inadequate 
family housing units. If this is a top priority, why does the 
President's budget include a $200 million cut for family housing? Could 
the services use additional funds to speed-up the timeline for 
replacing inadequate housing units?
    Answer. The Department did not cut the budget for family housing. 
The family housing request decreased by $200 million because a large 
portion of family housing is being privatized. Since family housing is 
privatized, it is private housing owned by the developer and as such, 
Congress does not appropriate money into the family housing accounts. 
Instead, the Department requests, and the Congress appropriates, funds 
into the military personnel accounts.
    The Services are privatizing units as fast as they can. In answer 
to your question, I do not think the Services can use any additional 
funds to privatize units since they are on a timeline to eliminate 
inadequate housing by fiscal year 2007
    Question. The National Guard and Reserve are being asked to play an 
increasingly important role in our national security. In South Dakota, 
21 percent of our National Guard and Reserve units have been called to 
active duty in support of the war on terrorism. As we rely on these 
units more, I believe we need to provide a corresponding investment in 
their facilities and infrastructure. With this in mind, I was surprised 
that the President's budget did not include any funds for the South 
Dakota Army or Air National Guard. Why did the President's budget 
include a cut in military construction funding for the Army and Air 
National Guard? Would increased military construction funding for the 
Army and Air National Guard improve their readiness and ability to 
contribute to the war on terrorism?
    Answer. There are four Guard projects in the fiscal year 2004-
fiscal year 2009 Future Years Defense Program (FYDP) for South Dakota; 
although, the fiscal year 2004 President's Budget does not include any 
MilCon projects for the South Dakota Guard and Reserve. More than $36 
million was appropriated for South Dakota Guard and Reserve MilCon 
between fiscal year 2001 and fiscal year 2003. The most urgent MilCon 
requirements of the Department are included in the President's Budget, 
and the Guard and Reserve compete equally with the Active Components. 
While the MilCon amount in the President's budget this year is less 
than was enacted in fiscal year 2003, including congressionally added 
projects, the Department increased MilCon funding for the Army National 
Guard by 65.7 percent over the fiscal year 2003 President's Budget, and 
it increased the Air National Guard funding by 13.0 percent.
    Question. Recent reports in the media indicate the Department of 
Defense has begun to look at downsizing the U.S. military presence in 
Germany, including U.S. bases. There have also been reports that 
Secretary Rumsfeld has ordered all construction projects to be re-
examined in order to avoid making upgrades at facilities that may be 
closed. Has the Department of Defense done any analysis on the cost of 
closing U.S. bases in Germany? Has the Department of Defense done any 
analysis on the cost of moving these bases to Central or Eastern 
Europe?
    Answer. Yes. As I mentioned previously, the Department is 
conducting a study that will be completed by mid-June on moving bases 
out of Germany.
                                 ______
                                 

             Questions Submitted to Raymond F. DuBois, Jr.

          Questions Submitted by Senator Kay Bailey Hutchison

                      FAMILY HOUSING PRIVATIZATION

    Question. I applaud your efforts with regards to family housing 
privatization. I noticed in your statement that the privatization 
leverage--that is the ratio of what we put into the deal versus what we 
get out--is 10 to 1. How did you calculate that ratio?
    Answer. Our policy requires that privatization yield at least three 
times the amount of housing that would be provided using traditional 
military construction. The projects awarded thus far leverage upfront 
appropriations by a ratio of 10:1. This ratio is derived by dividing 
the estimated cumulative cost of an identical MILCON projects ($2.9 
billion) by the actual cost in appropriated dollars of the awarded 
privatization projects ($290 million). This financial calculation 
reflects the program's short-term effectiveness in fixing our 
inadequate housing. We also calculate and compare the long-term (50-
year) costs of MILCON and privatization, taking into account the 
members' housing allowances. The long-term economic analysis indicates 
that privatization is 5-10 percent less expensive than MILCON.
    Question. How many units do you plan to privatize in fiscal year 
2003 and 2004?
    Answer. Our current projections are that the Services will 
privatize over 38,000 family housing units during fiscal year 2003 and 
over 36,000 family housing units during fiscal year 2004. As of March 
2003, we have awarded 18 projects with 27,884 family housing units 
privatized. We plan to privatize about 102,000 family housing units by 
the end of fiscal year 2004. This large increase is primarily due to 
the Services gaining traction in their housing privatization efforts, 
and the Army's whole base projects planned for award in fiscal year 
2003 and fiscal year 2004.

                     ADEQUACY OF THE BUDGET REQUEST

    Question. Two years ago you both testified that after many years of 
neglect, the Department intended to start investigating the 
infrastructure. Your proposed budget barely funds new mission 
initiatives, let alone replacing aging facilities. What is the DOD 
position on revitalizing facilities?
    Answer. We have three investment priorities. Our first priority is 
to sustain our existing facilities, our second priority is to 
recapitalize (both restore and modernize) our existing facilities and 
the third priority is to acquire new footprint and dispose of old 
facilities as appropriate. The fiscal year 2004 budget funds facilities 
sustainment at 94 percent of our requirement. The fiscal year 2004 
recapitalization rate was held at about the same rate as fiscal year 
2003, but is on track to meet our 67-year recapitalization goal by 
fiscal year 2008.
    Question. Why is the 2004 military construction request lower than 
the amount enacted for military construction last year?
    Answer. The fiscal year 2004 President's Budget request for 
military construction is slightly higher than the 2003 enacted amount 
when the Defense Emergency Response Fund projects and congressional 
adds are excluded.
    The 2004 request funds our highest priorities for improving quality 
of life and resolving critical readiness shortfalls. For quality of 
life, the military construction request sustains funding for family and 
bachelor housing and increases the number of housing units privatized. 
We also preserved funding for recapitalization. We increased funding 
for facilities sustainment, raising the corporate sustainment rate from 
93 to 94 percent, which will help to preserve our facilities and reduce 
the need for future, more costly revitalizations.
    Question. What is the backlog of Department of Defense projects for 
military construction?
    Answer. The Department of Defense does not maintain a list of 
backlog projects.
    Question. With the proposed funding in the 2004 budget for MILCON, 
how does that impact the Department's overall recapitalization rate? 
How does that compare to the last 2 years?
    Answer. The fiscal year 2004 recapitalization rate is 148 years for 
the four Services and 136 years for the combination of the four 
Services and three of the Defense Agencies. This is about the same as 
the fiscal year 2003 recapitalization rate and higher than the fiscal 
year 2002 recapitalization rate. Prior to fiscal year 2002, the 
Department's requests to Congress kept the recap rates hovering around 
200 years. The Department is currently on track to meet our 67-year 
recapitalization goal by fiscal year 2008.
    Question. What is the Department's strategy to reach the 
Secretary's proposed recapitalization rate of 67 years? When will that 
happen?
    Answer. In the near term, it is our strategy to fund only the most 
critical restoration and modernization projects. The Department will 
achieve its goal of a 67-year recapitalization rate by fiscal year 
2008.
    Question. Why have you programmed less for the Guard and Reserve 
components than the amount that was enacted last year?
    Answer. The most urgent MilCon requirements of the Department are 
included in the President's Budget with prejudice to Active or Reserve 
components. The Guard and Reserve compete equally with the Active 
Components according to their Facilities Investment Plans and overall 
Service priorities. While the MilCon amount in the President's budget 
this year is less than was enacted in fiscal year 2003, including 
congressionally added projects, the Department increased MilCon funding 
for the Army National Guard by 65.7 percent over the fiscal year 2003 
President's Budget, and it increased the Air National Guard funding by 
13.0 percent.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    Question. I understand the Department is already getting organized 
to begin the BRAC process for the 2005 round. What have you done to 
date and how are you approaching this differently than the past rounds 
of BRAC?
    Answer. Reducing the Department's excess capacity in a single 2005 
round will require extraordinary effort, given that the goal is true 
infrastructure rationalization rather than the simple reduction of 
excess in a status quo configuration typical of prior BRAC efforts. The 
Secretary signed out a BRAC ``kickoff'' memorandum in November 2002 
that provides the analytical construct for conducting the 2005 BRAC 
analyses. In this memorandum the Secretary established two senior 
groups to oversee and operate the BRAC 2005 process. The Infrastructure 
Executive Committee (IEC) chaired by the Deputy Secretary of Defense 
and composed of the Secretaries of the Military Departments and their 
Chiefs of Services, the Chairman of the Joints Chiefs of Staff and the 
Under Secretary of Defense (Acquisition, Technology and Logistics) is 
the policy making and oversight body for the entire BRAC 2005 process. 
The subordinate Infrastructure Steering Group (ISG), chaired by the 
USD(AT&L) and composed of the Vice Chairman of the Joint Chiefs of 
Staff, the Military Department Assistant Secretaries for installations 
and environment, the Service Vice Chiefs, and the Deputy Under 
Secretary of Defense (Installations & Environment), will oversee joint 
cross-service analyses of common business oriented functions and ensure 
the integration of that process with the Military Department and 
Defense Agency specific analyses of all other functions. The Secretary 
went on to indicate that a primary objective of BRAC 2005 is to examine 
and implement opportunities for greater joint activity. Accordingly, he 
divided the BRAC 2005 analysis into two categories of functions. Joint 
cross-service teams will analyze the common business-oriented support 
functions and report their results through the ISG to the IEC. The 
Military Departments will analyze all service unique functions and 
report their results directly to the IEC. The Military Departments are 
responsible for ensuring that their recommendations are fully 
consistent with the joint cross-service teams' recommendations.
    The BRAC process outlined in the Defense Base Closure and 
Realignment Act of 1990, Public Law 101-510, as amended, that governed 
the three previous BRAC rounds also governs the 2005 round, although 
Congress did amend that statute when it comes to the 2005 round.
    The first such amendment concerns the role of military value in the 
selection process. In previous rounds, as DOD policy, the military 
value criteria took priority over the other criteria. However, in BRAC 
2005, there is now a statutory requirement that military value be the 
primary consideration, reflecting the special emphasis military value 
should have during all analyses. Additionally, the authorizing 
legislation provides some other special considerations that the 
Department must address when developing its selection criteria.
    Congress also amended the BRAC statute to require the Secretary to 
provide Congress with a separate report prior to the Secretary's 
recommendations on closures and realignments. In this report, which is 
due to Congress along with the budget documents for fiscal year 2005 
(about February 2004), the Secretary must include, among other things, 
the 20 year force structure plan of probable threats, a comprehensive 
inventory of installations, a discussion of excess capacity categories, 
and a certification by the Secretary that a BRAC round in 2005 is 
necessary.
    In addition to statutory changes, there are BRAC process changes 
which the Secretary directed in his kickoff memorandum. As discussed 
above, rather than considering all functions on a service-centric 
basis, the Secretary directed that all common business oriented support 
functions will be analyzed by Joint Cross-Service Groups, under the 
supervision of the ISG. The ISG will recommend to the IEC the specific 
functions to receive joint analysis and the metrics for that analysis 
for the Secretary's approval. Outputs from the Joint Cross Service 
Groups, after being endorsed by the management oversight groups, will 
be considered as recommendations for review and approval by the 
Secretary. During previous BRAC rounds, Joint Cross-Service Groups 
developed ``alternatives'' for consideration by the Services.
    Question. What lessons learned will you apply in the next round?
    Answer. After the Department submitted its closure and realignment 
recommendations to the BRAC Commission in 1995, the General Accounting 
Office (GAO) provided a thorough review of the Department's BRAC 95 
process. In its report, the GAO acknowledged that ``DOD's 1995 BRAC 
process was generally sound and well documented and should result in 
substantial savings.'' However, there were areas that GAO found could 
be improved upon. For instance, while the GAO found that ``OSD 
attempted to play a stronger role in BRAC 1995,'' there was ``limited 
success in Cross-Servicing.'' We agree with the GAO's assessment with 
respect to the cross-service group outcomes. The Secretary's November 
15, 2002, ``kick-off'' memorandum to the Department strengthened the 
Joint Cross-Service Groups by empowering them to develop 
recommendations for the Secretary. In BRAC 1995, these groups were only 
empowered to develop ``alternatives'' for consideration by the 
Services.
    Question. What do you estimate the cost to be to conduct BRAC 
beginning in 2006 through 2008?
    Answer. In the April 1998 ``Report of the Department of Defense on 
Base Realignment and Closure,'' the Department estimated that it has 
about 23 percent excess base capacity. That report also noted that its 
analysis was not appropriate for selecting individual bases for 
realignment or closure, and to do so, the Department would need to use 
the detailed base-by-base analyses of a BRAC process.
    The Department assumes that the historical costs and savings from 
BRAC rounds 1993 and 1995 would serve as a good baseline upon which to 
plan for BRAC 2005 costs and savings. These rounds collectively reduced 
the base infrastructure by approximately 12 percent. If BRAC 2005 is to 
approach a notional 20 percent reduction in base infrastructure, then 
the associated costs and savings over its 6 year implementation period 
can be inflated and interpolated from the BRAC 1993/1995 baseline. 
Based on this analysis, we believe that between fiscal year 2006 and 
fiscal year 2008, a reasonable estimate for implementing a BRAC round 
that eliminates approximately 20 percent excess capacity is about $19 
billion. These costs are offset by estimated savings of almost $9 
billion. Our estimates have also projected that this investment in 
reshaping our infrastructure should result in approximately $8 billion 
in annual recurring savings after 2011.

                         OVERALL MILCON REQUEST

    Question. Why does the amount allocated for overseas MILCON 
projects continue to grow every year, while the amount proposed for 
domestic bases decreases?
    Answer. Approximately 25 percent of our forces are stationed 
overseas. The fiscal year 2004 MilCon bill requests $754 million for 
overseas areas and $3.6 billion for U.S./territories, reflecting a 17 
percent foreign and 83 percent U.S./territories split. This is actually 
a reduction in overseas investment from fiscal year 2003, when our 
request reflected a 21 percent foreign and 79 percent U.S./territories 
split.

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    Question. What is the status of your review to look at overseas 
bases?
    Answer. The Secretary asked the Chairman of the Joint Chiefs of 
Staff to direct geographic combatant commanders to develop overseas 
basing master plans in Aug 2001. The Deputy Secretary notified Congress 
in April 2002 that additional time was needed to review/consolidate the 
Joint Staff's input with other ongoing overseas studies. He indicated 
that a response would result in early 2003. Currently, the Under 
Secretary of Defense for Policy and the Joint Staff are studying 
various aspects of overseas presence. Once these studies are complete, 
it will provide the foundation upon which we can then determine what 
infrastructure is needed (and where) to support these forces.
    Note: In his March 20, 2003, memorandum, ``Integrated global 
Presence and Basing Strategy,'' the Secretary provided additional 
direction on overseas programs. He directed the geographic Combatant 
Commanders to provide, within 30 days, their priorities regarding the 
fiscal year 2003 and fiscal year 2004 military construction programs. 
The Secretary also directed the Under Secretary of Defense for Policy 
and the Chairman, Joint Chiefs of Staff, to develop a comprehensive and 
integrated presence and basing strategy that looks out 10 years.
    Question. When will that information be provided to Congress?
    Answer. I will be working with the Under Secretary of Defense for 
Policy and Joint Staff to compile and assess these various overseas 
studies, including the overseas basing study. A comprehensive review of 
all efforts is anticipated to be completed by the end of the summer 
with a report to Congress in the fall. The Department will keep you 
informed of unforeseen obstacles that would delay this effort.
    Question. Will it potentially change the budget request for Germany 
and Korea? What abut the projects that were appropriated in 2003?
    Answer. The Department has not made any decisions regarding closing 
or relocating bases in Germany or Korea. We are still awaiting the 
results of several studies that will help us determine what forces are 
needed overseas and what infrastructure is required to support these 
forces. The Secretary asked the Combatant Commanders to evaluate 
projects that are in the fiscal year 2003 and fiscal year 2004 budget 
requests and get back to us as to which projects they need and do not 
need. For the projects that are determined unnecessary at this time, 
the funds will either be reprogrammed using the emergency authority, or 
will seek an adjustment to the authorization and appropriation bill.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                                 EUROPE

    Question. Given the freeze on military construction in Europe--how 
will this hold affect the Efficient-Basing South Initiative?
    Answer. I cannot prejudge General Jones's review. However, 
Efficient Basing South, which adds a second airborne battalion to the 
173rd Airborne Brigade in Vicenza, Italy, will provide U.S. European 
Command with enhanced forced entry capabilities and increased 
flexibility. These capabilities are not inconsistent with the precepts 
underpinning this overseas base structure review.
    The final company of the battalion, C Company, was activated on 16 
March 2003, 6 months ahead of the original timeline. In support of this 
initiative, Congress approved fiscal year 2003 military construction 
funding of $31 million for a barracks complex and $3.7 million for a 
Child Development Center.
    Question. Would your office provide the Committee with the level of 
host nation funding provided for construction projects, by country, 
over the last several years? And, could you give examples of where we 
are, and are not, getting a fair shake?
    Answer. Host nation funding is accomplished through the NATO 
Security Investment Program as well as payment-in-kind construction 
provided as compensation for U.S.-funded improvements at facilities 
being returned to the host nation.
    The NATO Security Investment Program has funded about $1.7 billion 
in projects since 1989 for runway improvements, utilities, missile 
maintenance, hanger doors, piers, ammunition facilities, roads and 
pavements, and support to the Balkans. About $532 million is being 
provided for projects currently in progress:

                         [In millions of dollars]
------------------------------------------------------------------------

------------------------------------------------------------------------
Aviano Beddown..........................................             166
Ramstein Upgrades.......................................             150
Mildenhall Upgrades.....................................              49
Spangdahlem Upgrades....................................              16
Fairford Upgrades.......................................              99
Lakenheath Upgrades.....................................              46
Patriot Site Upgrades...................................               6
------------------------------------------------------------------------

    Host nation funding is also provided through payment-in-kind 
construction, given in lieu of cash payments for U.S. capital 
investments at facilities being returned to host nations. To date, the 
United States has received payment-in-kind worth $36 million from the 
United Kingdom, $240,000 from Iceland, and about $316 million from 
Germany, which is expected to provide another $34 million in the 
future. In addition, in exchange for returning Rhein-Main Air Base to 
Germany, the German Government provided $425 million worth of 
construction projects to replicate and enhance Air Force mission 
capabilities at Ramstein and Spangdahlem Air Bases.
    We are generally satisfied with our progress in obtaining payment-
in-kind commitments from our NATO allies.
                                 ______
                                 

               Questions Submitted by Senator Tim Johnson

                                HOUSING

    Question. All the best weapons in the world will be rendered 
useless if our military personnel and their families are not afforded a 
good quality of life. When asked, our military personnel consistently 
say that family housing is one of the most important quality of life 
issues that they face. I understand that the Department of Defense is 
in the middle of a multi-year effort to replace the 163,000 inadequate 
family housing units. If this is a top priority, why does the 
President's budget include a $200 million cut for family housing? Could 
the services use additional funds to speed-up the timeline for 
replacing inadequate housing units?
    Answer. The Department remains committed to improving the living 
conditions of our military personnel and their families. As we continue 
to increase housing privatization, coupled with the increased Basic 
Allowance for Housing (BAH), the Department's requirement for on-base 
housing decreases. This, in turn, reduces the need for direct 
investment to maintain inadequate housing. Both initiatives enhance the 
Department's efforts to eliminate inadequate housing by 2007 and 
provide military families the opportunities to secure suitable and 
affordable housing in the community.

                     ADEQUACY OF THE BUDGET REQUEST

    Question. The National Guard and Reserve are being asked to play an 
increasingly important role in our national security. In South Dakota, 
21 percent of our National Guard and Reserve units have been called to 
active duty in support of the war on terrorism. As we rely on these 
units more, I believe we need to provide a corresponding investment in 
their facilities and infrastructure. With this in mind, I was surprised 
that the President's budget did not include any funds for the South 
Dakota Army or Air National Guard. Why did the President's budget 
include a cut in military construction funding for the Army and Air 
National Guard? Would increased military construction funding for the 
Army and Air National Guard improve their readiness and ability to 
contribute to the war on terrorism?
    Answer. MilCon requirements of the Department included in the 
President's Budget reflect important priorities in infrastructure 
improvements to meet current mission. The Guard and Reserve compete 
equally with the Active Components in this regard. While military 
construction funding in the President's Budget this year is less than 
was enacted by Congress for fiscal year 2003, the Department increased 
MilCon funding for the Army National Guard by 65.7 percent over the 
fiscal year 2003 President's Budget, and increased the Air National 
Guard funding by 13.0 percent.

                                 EUROPE

    Question. Recent reports in the media indicate the Department of 
Defense has begun to look at downsizing the U.S. military presence in 
Germany, including U.S. bases. There have also been reports that 
Secretary Rumsfeld has ordered all construction projects to be re-
examined in order to avoid making upgrades at facilities that may be 
closed. Has the Department of Defense done any analysis on the cost of 
closing U.S. bases in Germany? Has the Department of Defense done any 
analysis on the cost of moving these bases to Central or Eastern 
Europe?
    Answer. In August 2001, the Secretary of Defense directed all 
combatant commanders to review overseas basing requirements and examine 
opportunities for joint use of facilities and land by the Services, 
consolidation of infrastructure, and enhanced training. While that 
particular task is completed, the Department is continuing to examine 
our overseas basing and presence within the context of a global 
strategy. Specifically, combatant commanders have been asked to provide 
priorities regarding their fiscal year 2003 and fiscal year 2004 
military construction programs by April 20. To complement that effort, 
the Department is developing a comprehensive and integrated presence 
and basing strategy looking out 10 years. We anticipate that effort to 
be completed by July 1, 2003.
    While no decisions have been made on our future base structure in 
Germany, the Department is in the process of analyzing all aspects of 
potential basing changes. These would include the cost of any base 
closures as well as the cost of moving bases to other forward 
locations.
                         Department of the Navy

STATEMENT OF HON. H.T. JOHNSON, ASSISTANT SECRETARY OF 
            THE NAVY, INSTALLATIONS AND ENVIRONMENT 
            (ALSO ACTING SECRETARY OF THE NAVY)
    Senator Hutchison. Thank you very much, and we would just 
call the next panel to come forward, please. Dr. Mario Fiori, 
Assistant Secretary of the Army for Installations and 
Environment: Mr. H.T. Johnson, Acting Secretary of the Navy and 
Assistant Secretary for Installations and Environment, and Mr. 
Nelson Gibbs, Assistant Secretary of the Air Force for 
Installations, Environment, and Logistics, and I am going to 
take a 2-minute break and be right back.
    Senator Feinstein. Senator Hutchison asked if we could keep 
going, so Mr. Johnson, since you were so nice with Bayview-
Hunters Point, I will call on you first to make any remarks you 
may care to make to the subcommittee.
    Mr. Johnson. Thank you very much, and you are very 
gracious. We have a long ways to go on Hunters Point, but we 
are as committed as you are.
    I am H.T. Johnson. As you mentioned, I am appearing this 
afternoon as Assistant Secretary for Installations and 
Environment. We have some comments, if you will put those in 
the record.
    All of our services are faced with difficult financial 
decisions and a difficult environment with terrorism. We need 
very badly to keep up our readiness of our facilities and our 
ships, the acquisition accounts and everything, and we are 
trying our best to find the right balance.
    This afternoon, as we talk, you will see that some areas in 
the MILCON and the other activities are lower than we would 
like, but we are trying to find the correct balance. Housing is 
still a very high priority for us. Bachelors in the Navy and 
Marine Corps have a higher need than the family housing. We 
have been very successful with family housing, and we would 
like to take that success over to the bachelor housing.
    We have committed $269 million to bachelor quarters. We 
have been trying for the last couple of years to bring our 
sailors who are on board ships ashore when they are in their 
home port. To do that, we are building bachelor quarters at San 
Diego and also at Norfolk. We will build these at the agreed-to 
standards, one plus one, but initially we will have two sailors 
in each room. It is certainly better accommodations than they 
would have on board the ships.
    The family housing is on track. We are doing very, very 
well in family housing. The Navy has doubled its privatization 
effort, and the Marine Corps will approach 95 percent of the 
housing being public-private venture type operations.
    The basic allowance for housing increase has made it easier 
for military families to find housing in the local economy. We 
have also found in some of our early surveys that there is less 
demand for on-base housing. We are very pleased to have 
announced just last week a new PPV at Beaufort and Parris 
Island for 1,700 units. This is a very large one, second only 
to San Diego, where we had a much larger one. We now have 8,300 
homes in the public-private venture, and we plan over 17,000 at 
10 Navy and Marine Corps bases.
    We have urged the Members to focus on the goal of 
eliminating inadequate housing, and not necessarily on the 
money. I have a handout, if you would pass it to the Senators, 
that shows--it is this one. When you look at our family 
housing, you need to look at the top line. You will notice a 
difference between the dark blue and the lighter blue. The 
lighter blue is the public-private venture.
    As we go to the right, you will see that, as I mentioned 
earlier, the Marine Corps will be 95 percent public-private, so 
once we go into the public-private, we will not require 
additional military construction. That becomes a self-
fulfilling entitlement. At various times during the agreed-to 
period we will refurbish the housing, we will rebuild it at 
certain times, but all that comes from the housing allowances. 
In other words, that goes in to pay for that, so as you look 
towards the off-side there, our military construction for 
family housing will go down almost to nothing. If we were to 
privatize all of it, it would go to zero.
    In our milcon we have $1.2 billion, and we have an 
unusually large amount on bachelor housing. I talked about 
counterterrorism. We also plan to buy Blount Island down in 
Jacksonville. This has long been the home port for our Marine 
Corps prepositioning ships. We have looked at the explosive arc 
and find that we need to buy that as well as get agreements 
from the other tenants in that area.
    We are also supporting new weapons systems, the F/A-18 E&F 
outlying field, the JSF joint strike fighter test facility, and 
the test facilities for the next generation fighters. We have 
worked hard to maintain a high level of funding for our 
sustainment. Sustainment, of course, is the first line of 
taking care of our new facilities and our old.
    We have not been as successful in funding the proper levels 
for restoration and modernization. The goal is to do 67 years. 
In the Marine Corps we have decreased this year from 156 to 88. 
The Navy has actually gone up a little bit from 116 to 140 
years in the budget year. By the end of the FYDP we do get down 
to the 67. This is an area where we would like to do very much 
more, but we will manage the risk there in taking care of the 
quality of life facilities for our sailors and marines.
    We appreciate the specific interest of you and Mrs. 
Feinstein also on prior BRAC cleanups. As Ray DuBois mentioned, 
we are working very, very hard to clean up the bases and also 
to get them off of our rolls. We have had difficulty in doing 
the cleanup and passing them back to the communities. As Mr. 
DuBois mentioned, we in the Navy have been very successful in 
selling property, and those funds go into the BRAC cleanup and 
will help us accelerate. That is a very good news story for us, 
but also for the communities in which we are selling the 
property.
    The Navy is consolidating shore infrastructure management 
leadership, if you will, under one level, one leader. This will 
eliminate successive levels, where these funds often are used 
for other things. The whole purpose was to ensure that funds 
that you provide for us for facilities are in fact used for 
that purpose.
    I would also like to talk just briefly about environmental 
programs. I recognize that is not necessarily the focus of this 
hearing, but it is very much a part of all that we do. We are 
making a good effort on our environmental activities. Last 
year, the Congress gave us a Migratory Bird Treaty Act change. 
We are working with the Department of Interior to implement 
that act as you gave it to us.
    We are also this year going to come back with activities 
that we came with last year. One is the Endangered Species Act, 
using the INRMP's, integrated natural resources management 
plan, as opposed to having individual endangered specie 
considerations.
    Another area that is very important to our services is the 
Marine Mammal Protection Act, and we have gained agreement with 
Department of Commerce to come forward on the proper 
definitions, and we will bring that to you a little bit later.

                           PREPARED STATEMENT


    We always look for the proper balance, not only between 
environmental stewardship but also what is best to serve our 
sailors, soldiers, airmen, marines, and Coast Guardsmen. We are 
as dedicated to that as you are, and we thank you for your 
strong support of all of these men and women who serve our 
Nation.
    [The statement follows:]

                   Prepared Statement of H.T. Johnson

    Madam Chairman and members of the Committee, I am H.T. Johnson. 
While I have recently been designated as the Acting Secretary of the 
Navy, I am also the Assistant Secretary of the Navy (Installations and 
Environment), and it is in this latter capacity that I appear before 
you today to provide an overview of the Department of the Navy's shore 
infrastructure programs and environmental efforts.

Fiscal Year 2004 Budget Overview
    Before his recent departure to the Department of Homeland Security, 
Secretary of the Navy Gordon England articulated several overarching 
Department of Navy goals for the fiscal year 2004 budget:
  --Successfully prosecuting the global war on terrorism while 
        sustaining our current readiness;
  --Recapitalizing and transforming our Navy and Marine Corps to meet 
        the challenges of the future;
  --Fully networking our forces at sea and ashore to operate seamlessly 
        in a joint environment;
  --Continuing to invest in our Sailors and Marines; and
  --Sustaining the quality of our operational training.
    I believe the fiscal year 2004 Department of Navy's budget request 
meets all of these goals and represents a successful balance between 
funds needed to operate, recapitalize and transform our fleet assets 
with funds needed to do the same for our shore installations. Allow me 
to provide you with an overview of our budget, with further details to 
follow later in this statement.

Fiscal Year 2004 Budget Overview
    Our fiscal year 2004 Military Construction, Family Housing, and 
Sustainment, Restoration and Modernization (SRM) request of $4.2 
billion is $764 million below the fiscal year 2003 enacted amount, but 
generally on par with our fiscal year 2003 budget request. Looking at 
the individual components, the fiscal year 2004 Military Construction, 
(MCON) Navy (active + reserve) request is a very robust $1.16 billion, 
similar to the fiscal year 2003 request. I note that the fiscal year 
2003 enacted amount includes $236M in one-time combating terrorism 
projects that were part of the fiscal year 2003 Supplemental request. 
These projects met the criteria for military construction and were 
included in the fiscal year 2003 MCON appropriation.
    We have reduced our fiscal year 2004 Family Housing, Navy request 
by 17 percent compared to the fiscal year 2003 enacted amount or 16 
percent compared to our fiscal year 2003 request. However, expanded use 
of our housing privatization authorities, and increases to the Basic 
Allowance for Housing (BAH), which makes housing in the community more 
affordable, allow us to still meet the Department of Defense goal of 
eliminating inadequate homes by fiscal year 2007. Sustainment, 
Restoration and Modernization (SRM) funding \1\ is down 15 percent 
compared to the enacted level, a reflection of overall affordability 
within the Secretary's priorities. Compared to our fiscal year 2003 
request, the fiscal year 2004 request represents a 1.5 percent 
reduction.
---------------------------------------------------------------------------
    \1\ Refers only to the Operations and Maintenance portion of SRM.
---------------------------------------------------------------------------
    Our fiscal year 2004 request for environmental programs totals $1.0 
billion, a reduction of about $200 million from the fiscal year 2003 
enacted level and a 12 percent reduction from our fiscal year 2003 
request. Much of the reduction is due to the completion of cleanup on 
the island of Kaho'olawe, a former Naval bombing range in Hawaii. Title 
X required the Navy to conduct a 10-year cleanup, which will end on 11 
November 2003. We are working to transition full control of the island 
to the State of Hawaii.
    The decline in Technology investments is due to the completion of 
environmental research to retrofit non-ozone depleting equipment. This 
equipment is now being installed on ships. Our must-fund environmental 
cleanup requirements for bases closed under the Bases Realignment and 
Closure rounds in 1988, 1991, 1993, 1995, which I will refer to as 
Prior BRAC \2\, are less in fiscal year 2004 than in fiscal year 2003, 
while cleanup at active bases is unchanged from fiscal year 2003.
---------------------------------------------------------------------------
    \2\ Prior BRAC amounts shown in the graphic are only for 
environmental cost, and exclude $12 million in fiscal year 2003 and $11 
million in fiscal year 2004 for caretaker costs. These caretaker costs 
are a portion of the Prior BRAC budget request. The fiscal year 2004 
budget request includes $68 million in expected land sale revenue to be 
applied to cleanup Prior-BRAC locations.
---------------------------------------------------------------------------
    Environmental Quality (EQ) includes funds for compliance with 
existing environmental standards, pollution prevention, and 
conservation of natural and historic resources on Navy and Marine Corps 
Bases. Approximately half of these funds are for routine functions such 
as personnel salaries, environmental permits and fees, environmental 
sampling and laboratory analyses, and hazardous waste disposal costs, 
while the rest are for one-time projects. The decline in environmental 
quality funds is due to the completion of one-time pollution prevention 
projects and a reduction in equipment purchases.

                                HOUSING

    We have made a special effort in this budget to maintain progress 
on improving the quality of housing for our Sailors and Marines.

Family Housing
    Our family housing strategy consists of a prioritized triad:
    Reliance on the Private Sector.--In accordance with longstanding 
Department of Defense and DoN policy, we rely first on the local 
community to provide housing for our Sailors, Marines, and their 
families. Approximately three out of four Navy and Marine Corps 
families receive a Basic Allowance for Housing (BAH) and own or rent 
homes in the community. Our bases have housing referral offices to help 
newly arriving families find suitable homes in the community.
    Public/Private Ventures (PPVs).--With the strong support from this 
Committee and others, we have successfully used statutory PPV 
authorities enacted in 1996 to partner with the private sector and meet 
our housing needs, in part, through the use of private sector capital. 
These authorities, which I like to think of in terms of public/private 
partnerships, allow us to leverage our own resources and provide better 
housing faster to our families.
    Military Construction.--Military construction will continue to be 
used where PPV authorities don't apply (such as overseas), or where a 
business case analysis shows that a PPV project is not financially 
sound.
    The Department remains on track to eliminate the inadequate family 
housing units we own by fiscal year 2007, in large measure because we 
have increased our emphasis on privatization. We will be able to 
eliminate almost two-thirds of our inadequate inventory through the use 
of public/private ventures. As of 1 February, we have awarded eight 
projects totaling almost 6,600 units. During fiscal years 2003 and 
2004, we plan to award projects totaling over 17,000 homes at ten Navy 
and Marine Corps locations. This will allow us to improve our housing 
stock and provide more homes to Sailors, Marines and their families 
much faster than if we relied solely on traditional military 
construction.
    Another important factor is the continuing initiative to improve 
the basic allowance for housing (BAH). With higher BAH, our members are 
finding suitable, affordable housing in the private sector. This, in 
turn, reduces the need for military housing, thus allowing us to divest 
ourselves of excess, inadequate units in our inventory.

Bachelor Housing
    Our budget request of $269 million for Bachelor Quarters 
construction projects continues the emphasis on improving living 
conditions for our unaccompanied Sailors and Marines. There are three 
challenges:
    Provide Homes Ashore for our Shipboard Sailors.--There are 
approximately 18,100 Sailors worldwide who are required to live aboard 
ship even while in homeport. This requirement is less than reported 
last year because of a recent change to Navy policy allowing 
unaccompanied E4s to live off base. This new policy is tied to the 
fiscal year 2001 National Defense Authorization Act that authorized the 
payment of BAH to E4s without dependents who are assigned to sea duty. 
The Navy continues to project that it will be able to achieve its 
``homeport ashore'' initiative by fiscal year 2008 by housing two 
members per room. Our fiscal year 2004 budget includes two ``homeport 
ashore'' projects. One represents the second increment of a Norfolk, VA 
project that will provide a total of 500 spaces. The second project 
would construct 500 spaces for shipboard Sailors at San Diego, CA.
    Ensure our Barracks Meet Today's Standards for Privacy.--We are 
continuing our efforts to construct new and modernize existing barracks 
to provide increased privacy to our single Sailors and Marines. The 
Navy applies the ``1+1'' standard for permanent party barracks. Under 
this standard, each single junior Sailor has his or her own sleeping 
area and shares a bathroom and common area with another member. To 
promote unit cohesion and team building, the Marine Corps was granted a 
waiver to adopt a ``2+0'' configuration where two junior Marines share 
a room with a bath. The Navy will achieve these barracks construction 
standards by fiscal year 2013; the Marine Corps by fiscal year 2012.
    Eliminate gang heads.--The Navy and Marine Corps remain on track to 
eliminate inadequate barracks with gang heads \3\ for permanent party 
personnel. The Navy will achieve this goal by fiscal year 2007; the 
Marines by fiscal year 2005.
---------------------------------------------------------------------------
    \3\ Gang heads remain acceptable for recruits and trainees.
---------------------------------------------------------------------------
    We appreciate the support from the Congress in our efforts to 
extend the principles of privatization to our critical bachelor housing 
needs. We envision that privatization will prove to be as successful in 
accelerating improvements in living conditions for our single Sailors 
and Marines as it has been for family housing. We are developing pilot 
unaccompanied housing privatization projects for Hampton Roads, Camp 
Pendleton, and San Diego. We hope to be able to brief you on our 
concepts for these projects before the end of this fiscal year.

Military Construction Projects
    In addition to the $269 million in Bachelor Housing projects, our 
fiscal year 2004 military construction program includes $361 million in 
Operational and Training facilities such as waterfront and airfield 
projects, and $44 million in compliance projects. There is $32 million 
for counter-terrorism (CT) projects; additional CT costs are included 
as a portion of the total project where appropriate.
    This budget includes $473 million in ``new footprint'' projects, 
representing an unusually large 41 percent of the military construction 
program. While many barracks and CT projects are new-footprint, there 
are several other important projects that will support the 
transformation to new weapon systems of the future.
  --$116 million to complete the purchase of the Blount Island facility 
        and safety buffer in Jacksonville, Florida. Blount Island is 
        the maintenance site for the Marine Corps' Maritime Pre-
        positioning Force. The purchase of this site, along with a 
        surrounding safety buffer, will ensure the long-term viability 
        of this strategic national asset.
  --$28 million to support the first phase of an outlying field for 
        East-Coast basing of the F/A-18 E/F Super Hornets. Selection of 
        a specific basing of this aircraft is pending completion of an 
        Environmental Impact Statement (EIS). The EIS is scheduled for 
        completion this summer.
  --$24 million to construct a Joint Strike Fighter test facility.
  --$21 million to construct a facility to develop the next generation 
        shipboard aircraft launching system to be used on the new 
        aircraft carrier CVN21.
Facilities Sustainment, Restoration and Modernization (SRM)
    The Department of Defense uses models to calculate life cycle 
facility maintenance and repair costs. These models use industry wide 
standard costs for various types of buildings. Sustainment funds in the 
Operations and Maintenance accounts maintain shore facilities and 
infrastructure in good working order and preclude its premature 
degradation. Both the Navy and Marine Corps increased sustainment 
funding in fiscal year 2004, with the Navy improving to 93 percent of 
the full sustainment requirement, and the Marine Corps staying at or 
very near the Department of Defense goal of full sustainment.
    Restoration and Modernization provides for the major 
recapitalization of our facilities using Military Construction and 
Operations and Maintenance funds. While both the Navy and Marine Corps 
achieve the Department of Defense goal of a 67 year recapitalization 
rate by fiscal year 2008, one year later than expressed last year, the 
fiscal year 2004 recap rate increases to 140 years for Navy while 
improving to 88 years for the Marine Corps. The Navy will manage the 
near term investment in facilities recapitalization to limit 
degradation of operational and quality of life facilities.
    While additional funds would certainly improve the situation, it is 
unrealistic to believe that we will simply ``buy'' our way to attain 
these facility goals. We must seek and implement greater efficiency in 
our infrastructure

                      INFRASTRUCTURE EFFICIENCIES

Prior BRAC
    The BRAC rounds of 1988, 1991, 1993 and 1995 have been a major tool 
in reducing our domestic base structure and generating savings. The 
Department closed and must dispose a total of ninety (90) bases, and 
has achieved a steady state savings of $2.7 billion per year. All that 
remains is to complete the environmental cleanup, with an estimated 
cost of $785 million, and property disposal.
    We have completed disposal of sixty-four bases to date; eight more 
bases are planned in fiscal year 2003, five in fiscal year 2004. 
Legislation was enacted last year that will allow the Navy to transfer 
nearly all of the former Naval Air Station Adak, Alaska to the 
Department of Interior, who will in turn exchange this property for 
other wildlife refuge property owned by The Aleut Corporation. The 
United States will then retain title to wildlife refuge property 
previously designated for transfer to the Aleuts under the Alaska 
Native Claims Settlement Act. We are working the final details for the 
transfer and hope to complete the property exchange later this year. 
That transfer, along with the planned disposals this fiscal year, 
should leave us with less than 12,000 acres still to dispose.
    I am proud of the hard work and innovation that the Navy and Marine 
Corps team have displayed in working with environmental regulators to 
expedite property cleanup and support local redevelopment efforts to 
speed reuse. Congress provided the necessary legislative authority to 
allow the Navy to pursue early transfer opportunities. With the 
concurrence of environmental regulators and the State Governor, we 
transfer the deed to the property while environmental cleanup 
continues, or pass mutually agreed cleanup funds to the developer who 
becomes responsible for doing the cleanup. We have used this authority 
many times, including the transfer of 1,300 acres at Mare Island Naval 
Shipyard last year.
    The spirit of innovation continues. Taking a cue from the popular 
commercial uses of the Internet, we worked closely with General 
Services Administration (GSA) to use its web site to auction two 
hundred thirty-five (235) acres of highly desirable property at the 
former Marine Corps Air Station Tustin in California. We have deposited 
$51 million from this sale, with settlement for the balance this 
spring. Existing statutes require that all BRAC leasing and land sale 
revenue be deposited into the Prior BRAC account to meet caretaker and 
environmental cleanup needs. We will increasingly rely on BRAC land 
sale revenue to accelerate the remaining BRAC cleanup efforts. I am 
very pleased with using the GSA web site to auction real estate. It can 
attract a very wide audience of potential bidders, ensure that the 
government receives the maximum value for the property, and can help 
the community quickly resolve reuse needs. We will pursue more BRAC 
property sales using the GSA web site.

BRAC 2005
    The fiscal year 2002 National Defense Authorization Act amended the 
1990 Defense Base Closure and Realignment Act to authorize another 
round of BRAC in 2005. We will apply the BRAC process to examine and 
implement opportunities for greater joint use of facilities, thus 
eliminating excess physical capacity, and to integrate DoN 
infrastructure with defense strategy. Continuing to operate and 
maintain facilities we simply no longer need is unfair to the taxpayer 
and diverts resources that would be better applied to recapitalize the 
operating forces (ships, aircraft and equipment) for the future.
    The BRAC statute sets out a very fair process.
  --All bases are treated equally;
  --All recommendations based on 20 year force structure plan, 
        infrastructure inventory and published selection criteria;
  --Statutory selection criteria include:
    --Preserve training areas for maneuver by ground, naval, or air 
            forces;
    --Preserve military installations in the United States as staging 
            areas for the use of the Armed Forces in homeland defense 
            missions;
    --Preserve military installations throughout a diversity of climate 
            and terrain in the United States for training purposes;
    --Consider the impact on joint war fighting, training, readiness, 
            contingency, mobilization, and future total force 
            requirements at both existing and potential receiving 
            locations to support operations and training.
  --All data certified as accurate and complete and provided to the 
        Commission and Congress.
    We are working closely with the Office of the Secretary of Defense 
and the other Military Departments to develop opportunities for joint 
basing that would further eliminate excess infrastructure among the 
Services.

Commander, Navy Installation Command
    The Navy will consolidate the management of its shore establishment 
on 1 October 2003 from eight installation claimants across sixteen (16) 
regional commanders to a single Navy Installation Command. This 
consolidation will achieve economies of scale, increase efficiency, and 
reduce headquarters staffs while also standardizing policies, 
procedures, and service levels across all Navy installations, much as 
the Marine Corps now enjoys. We estimate that the benefits of this 
streamlining will save the Navy $1.6 billion over the FYDP.
    There is still much work to be done to implement this change. The 
Navy must still define the personnel impacts, finalize the reporting 
relationships, and identify the appropriate funding transfers. I 
believe this effort will result in a more focused, leaner organization 
that will improve services to the Fleet.

Utility Privatization
    We are proceeding with plans to privatize utility systems (water, 
wastewater, gas, electric) where it is economically feasible and does 
not pose a security threat. Utility privatization is an integral part 
of our efforts to improve our utility infrastructure. The Secretary of 
Defense issued new utility privatization guidance last fall that 
requires the Services to complete a source selection decision on each 
system by September 2005. We are on track to do so for the 662 Navy and 
Marine Corps systems under consideration for privatization.

Strategic Sourcing
    Strategic sourcing uses commercial business practices such as 
process re-engineering, divestiture of non-core functions, elimination 
of obsolete services, and public/private competitions under Office of 
Management and Budget A-76 guidelines to improve efficiency. We expect 
to achieve $1.6 billion in annual steady State savings in fiscal year 
2005 from strategic sourcing initiatives.
    Our fiscal year 2004 budget includes A-76 competitions for 2,000 
positions. OMB has been trying to bring about much needed process 
changes for conducting these competitions. We will incorporate these 
process changes, as well as some of our own initiatives, to speed the 
process while still ensuring a fair playing field between in-house and 
private sector interests. We are also supporting the Secretary of 
Defense's Business Investment Council efforts to identify non-core 
functions for divestiture. The Navy has identified the manufacturing of 
eyewear for military personnel as a pioneer project for divestiture.

Naval Safety Program
    Although safety is foremost a personnel program to avoid accidental 
human injury or death, the private sector has also recognized safety 
programs for their contribution to the bottom line in avoiding damage 
to expensive equipment or facilities, inadvertent loss of highly 
skilled personnel, and long-term injury compensation costs. We have 
established a senior executive in my office, the first in Department of 
Defense, to help foster a new Naval safety vision for the future. A 
Safety Task Force has been meeting to consider the relationships 
between safety staffs and funding mechanisms. We have engaged Navy and 
Marine Corps installation commanders to recognize and work to reduce 
the incidence of civilian man-hours lost due to injury even as we 
participate in a Department of Defense-sponsored Employee Work Safety 
Demonstration project at four bases. We plan to provide basic 
Operational Risk Management training to all new Sailors and Marines, 
with more advanced training to senior personnel.
    We are also pursuing safety improvements for the more visible 
aviation mishaps, for which past experience shows that 85 percent are 
in part attributable to human errors. We plan to try a new technique 
that would store critical flight performance data and allow the pilot 
to later replay a realistic animation of the flight.

                         ENVIRONMENTAL PROGRAMS

Encroachment
    The military readiness of our forces is the highest priority of the 
Department of the Navy. Unfortunately, sustaining military readiness is 
becoming increasingly difficult because over time a host of factors, 
including urban sprawl, increasing regulation, litigation, and our own 
accommodations, although reasonable when viewed in isolation, have 
cumulatively diminished the Department of the Navy's ability to train 
and test systems effectively. Military bases and ranges represent some 
of the few remaining undeveloped large tracts, and are being looked at 
more and more by Federal and State regulators as a solution for 
difficult and costly conservation efforts. For example, initial 
proposals for critical habitat designations would have included about 
56 percent of Marine Corps Base, Camp Pendleton, California. The Marine 
Corps and the U.S. Fish and Wildlife Service worked together in an 
effort to devise an approach that would satisfy the needs of both 
agencies. As a result of these efforts, the Secretary of the Interior 
determined that the speculative benefits of critical habitat 
designation were outweighed by military training needs at Camp 
Pendleton. This determination led to the designation of only 5 percent 
of Camp Pendleton's lands as critical habitat. However, a lawsuit 
challenging the U.S. Fish and Wildlife Service final rule quickly 
followed. As a result, U.S. Fish and Wildlife Service withdrew the 
designation. A new critical habitat designation is still pending.
    We--the Congress, Federal and State regulators, and the military 
services--must identify a reasonable balance between the competing 
national priorities of military readiness and environmental 
stewardship. The Department of the Navy, in conjunction with the 
Department of Defense, has begun working with some regulatory agencies 
to identify changes in regulations and agency policies that can help 
restore the appropriate balance. However, many environmental laws do 
not always lend themselves to such changes because when enacted, no one 
considered their applicability to the military readiness activities of 
today.
    The need for legislative change was demonstrated again recently 
when the use of a new defensive sensor known as SURTASS LFA, which was 
developed to deal with the threat of quiet diesel submarines now being 
deployed by potential adversaries, was recently restricted by a court 
order. The Navy had undertaken an unprecedented research program to 
ensure that marine mammals would not be injured, and worked closely 
with the National Marine Fisheries Service to develop mitigation 
measures so that marine mammals would not be injured. The Navy 
concluded that based on tests and analysis conducted by an independent 
panel of scientists, which was subjected to peer review and approved 
through a public rule making process by the National Marine Fisheries 
Service--the Federal regulatory agency tasked with protection and 
preservation of marine mammals, the system would have little impact 
upon marine mammals. Yet a Federal judge determined that the Marine 
Mammal Protection Act (MMPA) would not allow the Navy to deploy the 
defensive sensor in question in the manner the Navy had determined was 
needed. In the court's view, there were serious issues raised with 
regard to whether National Marine Fisheries Service had used a proper 
mechanism to identify the ``specified geographic region'' required 
under the MMPA to issue a ``small take'' authorization for the Navy's 
deployment of the sensors. The court ordered the Navy to confer with 
plaintiffs over possible restrictions on deployment of SURTASS LFA 
until the final hearing on the merits of the case currently scheduled 
for June 2003. Following these discussions, the court issued a 
preliminary injunction restricting the Navy's use to an area in the 
western Pacific between Japan and Guam.
    The military services have been criticized by some for seeking 
legislative relief without first using national defense exemptions or 
Presidential waivers built into environmental laws. Although many of 
the laws contain some provision for the President to waive compliance 
with a specific requirement, these waivers are of limited scope and 
duration. Some laws have no provision for an exemption or require an 
adverse decision by a court before the exemption can be pursued. For 
example, the MMPA contains no waiver provision, even for actions that 
are absolutely necessary for national defense. Many environmental laws, 
when enacted, did not consider their impact on military readiness 
activities. The exemptions or waivers that do exist were not intended 
to serve as routine management tools; they were designed to provide 
short term fixes for unanticipated or emergency situations.
    Last year, the Department of Defense recommended legislative 
changes to address specific areas of environmental laws that had the 
greatest adverse impact on sustaining military readiness. Congress 
provided some relief in one critical area--the applicability of the 
Migratory Bird Treaty Act (MBTA) to military readiness activities. We 
are working with the Department of Interior to craft a mutually 
acceptable proposed rule consistent with report language accompanying 
the fiscal year 2003 National Defense Authorization Act authorizing 
take of migratory birds for military readiness activities, and a 
Memorandum of Understanding to promote migratory bird conservation, as 
required by executive Order 13186, for non-readiness related military 
actions.
    The other five involved proposed changes to the MMPA, Endangered 
Species Act (ESA), Clean Air Act (CAA), Comprehensive Environmental 
Response, Compensation, and Liability Act (CERCLA), and the Resource 
Conservation and Recovery (RCRA) Act were not made. The Department of 
the Navy is particularly concerned with MMPA and ESA, and the need 
remains for a legislative solution. For example, the Department of Navy 
uses special management plans called Integrated Natural Resource 
Management Plans (INRMPs), pursuant to the Sikes Act, to protect 
habitat on military installations. A Federal district court in Arizona, 
however, recently decided the substitution of special management plans 
for critical habitat designation is impermissible under the ESA. In 
this case, which involved forest management plans, the court determined 
that the special management considerations could not substitute for the 
designation of critical habitat. The Department of Navy is concerned 
this reasoning could be relied upon by other Federal courts when 
reviewing INRMPs. The U.S. Fish and Wildlife Service is using other 
administrative options in an attempt to exclude installations with 
approved INRMPs from critical habitat designations, but more certainty 
would be provided by legislative actions.
    In addition to the decision concerning restricting deployment of 
the SURTASS LFA system I mentioned earlier, two other recent decisions 
by different Federal district courts stopped scientific research after 
the court determined that the National Marine Fisheries Service had 
improperly authorized harassment of marine mammals during research by 
the National Science Foundation off the coast of Mexico and a Navy 
funded project to study the effects of underwater sound on Grey Whales 
off the coast of California.
    We recognize the importance of resource preservation. We are not 
looking for wholesale suspension of environmental laws as they apply to 
military readiness. We are not attempting to avoid the issues that 
American industries and businesses face regarding environmental 
compliance. We are not abandoning the outstanding stewardship over the 
lands entrusted to us or shrinking from environmental protection 
requirements. We are merely trying to restore balance where 
environmental requirements adversely affect uniquely military 
activities--activities that are necessary to prepare Sailors and 
Marines to engage in combat and win.

Shipboard Environmental
    The U.S. Navy is a recognized world leader in environmental 
stewardship at sea. In recent years the Navy has completed installation 
of pulpers, shredders and plastic waste processors on its surface 
ships. This ensures no plastic discharge to the world's oceans and 
provides environmentally benign disposal of other solid wastes, such as 
food, paper, cardboard, metal and glass. The Navy expects to have its 
submarine fleet fully outfitted with solid waste equipment by the end 
of 2005, well in advance of the 31 December 2008 Act to Prevent 
Pollution from Ships deadline. Next year, the Navy will begin to 
upgrade the solid waste equipment in the surface fleet. These upgrades 
will mean shipboard personnel will expend less time, energy and 
resources in processing solid waste.
    The Navy continues to convert shipboard air-conditioning and 
refrigeration plants to ones that use non-ozone depleting, 
environmentally friendly refrigerants. As of today, over 75 percent of 
the fleet is CFC-free. Additionally, the Navy continues to upgrade the 
fleet's ability to safely and effectively handle hazardous materials by 
installing pollution prevention equipment on all our surface ships. We 
continue to work with the Environmental Protection Agency to set 
Uniform National Discharge Standards for all Armed Forces vessels, and 
in developing best management practices for preparing vessels for use 
as artificial reefs. These programs, along with others in the shipboard 
environmental program, reap enormous environmental and public relations 
benefits while maintaining the primary goal of allowing our ships to 
operate anywhere in the world in a manner that complies with or exceeds 
domestic and international environmental laws and agreements.

Cleanup Program at Active Bases
    For the second year in a row, the number of cleanups completed at 
active bases exceeded the planning target. While we still have work to 
do, almost seventy (70) percent of all sites now have remedies in place 
or responses complete. At the end of fiscal year 2002, 2,225 of the 
3,668 sites at active installations have responses complete. We plan to 
continue this pace. By the end of fiscal year 2004 we plan to have 
about 2,500 sites completed at active bases.

Vieques Cleanup
    On January 10, 2003, the Secretary of the Navy signed the letter of 
certification to Congress confirming that the U.S. Navy and Marine 
Corps will cease military training on the Vieques Inner Range by May 1, 
2003. The Department of the Navy has identified training alternatives 
that will collectively provide equivalent or superior training to the 
options provided on the island of Vieques. The law requires the Navy to 
transfer Vieques to the Department of Interior. We have been working 
with Interior and the Environmental Protection Agency to do so.
    We plan to conduct munitions clearance and any necessary cleanup in 
accordance with applicable laws. The clearance and cleanup will be done 
in a manner that is consistent with land use designated in the 
governing statute and where appropriate, minimizes disturbance of the 
natural environment. The designated land uses, once transferred to the 
Department of Interior, are wilderness area for the live impact area 
and a wildlife refuge for the remaining portions. We will be 
considering the need for land use controls to ensure long-term 
protectiveness as part of the remedial actions, including consideration 
of future land use plans. We have identified $2 million in fiscal year 
2004 funds from our Munitions Response Program line within the 
Environmental Restoration, Navy (ER, N) appropriation to begin 
munitions clearance efforts.

Environmental Range Management
    The Navy and Marine Corps have initiated efforts to better 
understand and manage the environmental concerns on its ranges. The 
Navy has $15.8 million in fiscal year 2004 to begin this effort at the 
Southern California, Fallon, Key West, and Gulf of Mexico range 
complexes. This environmental program addresses three major areas:
  --Conduct living marine resource assessments, including ocean surveys 
        of marine mammal population densities;
  --Assess groundwater, surface water, soils conditions, natural 
        resources and the environmental compliance status for each of 
        the complex's land-based ranges and associated airspace;
  --Integrate this information into complex-wide environmental planning 
        in accordance with the National Environmental Policy Act, which 
        will in turn drive Navy range complex management plans.

                         LEGISLATIVE PROPOSALS

    I would like to call your attention to several legislative 
proposals of particular importance to the Department of Navy.

Readiness & Range Preservation Initiative
    This legislative proposal is a top Department of Defense priority. 
It would provide legislative relief for military readiness activities 
under various environmental statutes. Of particular interest to the 
Department of the Navy are:
  --Modifications to MMPA that would clarify the MMPA's definition of 
        ``harassment'' as a biologically significant response, and 
        resolve other procedural issues related to the MMPA.
  --Modify the ESA to allow use of Integrated Natural Resources 
        Management Plans now required under the Sikes Act to provide 
        the special management considerations in lieu of the need to 
        designate critical habitat on military lands.

Property Conveyance for Housing
    We propose to extend to barracks existing authority that allows the 
transfer of land at locations closed under prior year BRAC actions for 
family housing. The Administration's request also includes a similar 
proposal that would allow the Services to transfer land at locations 
not related to BRAC for either housing, land suitable for siting 
housing, cash, or some combination of these. These proposals would 
provide additional tools that we could use to obtain housing for our 
Sailors and Marines and their families faster.

MILCON Streamlining
    We propose several initiatives to streamline the administrative 
aspects of the military construction process. It typically takes 5 to 8 
years from inception to completion for a military construction project. 
That's too long. Our proposal would increase the minor construction 
threshold to permit faster execution of smaller projects, and allow the 
use of the planning and design sub account to initiate early project 
design on design build projects. Such projects now include most of the 
design funds as part of the project cost, and thus must await line item 
authorization and appropriation of the project by the Congress to begin 
design work in earnest.

                               CONCLUSION

    In conclusion, I would ask the members of this committee to not 
judge the merits of the Department of the Navy's installations and 
environmental program solely through a single lens comparison of this 
year's budget request vs. last year's enacted level. We continue 
progress on most fronts, and the decline in funding is generally due to 
reduced requirements or less costly alternatives.
    We remain steadfast in resolving inadequate housing concerns. 
Consistent with Department of Defense and our own priorities, we will 
eliminate inadequate family housing by fiscal year 2007 through 
increased reliance on our privatization efforts and the help of BAH 
increases that it more likely for our members to find good, affordable 
housing in the community. We have maintained momentum to fix housing 
for our single Sailors and Marines, particularly with respect to 
getting our shipboard sailors a place ashore they can call home when 
their ship is in homeport. We hope to extend the benefits of family 
housing privatization to barracks with three pilot projects that are 
being developed. The very robust $1.2 billion military construction 
request will revitalize existing facilities while acquiring those to 
support future weapon systems and readiness needs. We will apply the 
proceeds from selling Prior BRAC property to accelerate cleanup of 
remaining BRAC property. Facilities sustainment, restoration and 
modernization trends are positive, with the exception of the Navy 
recapitalization rate; regrettably, affordability required that we 
defer near term progress in using Operations and Maintenance, Navy 
funds to revitalize facilities.
    We have fully funded all environmental commitments. The decline in 
environmental funds is tied to finishing the cleanup on Kaho'olawe, and 
the completion of several research and development projects and 
pollution prevention initiatives. Encroachment remains the primary 
environmental issue we must deal with. We will work with the Department 
of Interior to craft mutually acceptable solutions under MBTS. However, 
other environmental statutes, with ESA and MMPA of particular interest 
to the Department of Navy, remain to be resolved. We need to craft an 
appropriate balance between environmental stewardship and military 
readiness.
    That concludes my statement. I appreciate the support of each 
member of this committee, and will try to respond to any comments or 
concerns you may have.
                         Department of the Army

STATEMENT OF HON. MARIO P. FIORI, ASSISTANT SECRETARY 
            OF THE ARMY, INSTALLATIONS AND ENVIRONMENT
    Senator Hutchison. Thank you, Mr. Secretary.
    Mr. Fiori.
    Mr. Fiori. Madam Chairman, I am pleased to appear before 
you to review our fiscal year 2004 military construction 
program. We have provided a detailed written statement for the 
record. I would just like to briefly comment on the highlights 
of our program.
    The Army's overall budget request for fiscal year 2004 
supports the Army Vision, Transformation, Readiness, and 
People. It implements the strategic guidance to transform to a 
full spectrum force, while ensuring war-fighting readiness. It 
reflects a balanced base program that will allow the Army to 
remain trained and ready throughout fiscal 2004 while ensuring 
we fulfill our critical role in the global war on terrorism.
    Our military construction budget request is $3.2 billion, 
and will fund our highest priority facilities and family 
housing requirements. When we developed this year's budget, 
difficult decisions were made to optimize our resources in 
response to the global situation. The Army budget provides the 
best balance among all of our programs, including military 
construction.
    Transformation is one facet of the Army Vision. The Army is 
fundamentally changing the way we fight and creating a force 
more responsive to the strategic requirements of the Nation. 
Our fiscal year 2004 budget includes facilities to support both 
the Active and Reserve components in this transition.
    First, I would like to briefly tell you how we are 
transforming installation management. Recognizing the 
requirement to enhance support to the commanders and buttress 
Army transformation, the Secretary of the Army directed the 
reorganization of the Army's installation management structure. 
On October 1, 2002, the Army placed the management of Army 
installations under the Installation Management Agency. It is a 
new field operating agency reporting to the Assistant Chief of 
Staff for Installation Management, who in turn reports to me 
and to the Chief of Staff of the Army. A top down, regional 
alignment creates a corporate structure with the sole focus on 
efficient and effective management of all our installations. It 
frees up our mission commanders to concentrate on 
transformation and readiness. They will still have an influence 
on important installation decisions, but not the day-to-day 
headaches.
    Second, in support of Army transformation, our budget 
contains $329 million for 17 projects at four Active 
installations and an additional $85 million for 31 Army 
National Guard projects.
    Facilities requested cover the spectrum needed for 
effective operations and training, including ammunition supply 
point upgrades, mobilization facilities, training land 
acquisition, maintenance facilities, ranges, information system 
facilities, barracks, and family housing. The Army National 
Guard Army Division Redesign Study facilities include readiness 
centers, maintenance shops, and training fire stations.
    A second facet of the Army's Vision is Readiness. Army 
installations are our Nation's power projection platforms, and 
they provide critical support for the Army and joint 
operations. We have requested funding for key projects that 
specifically focus on readiness. These include live fire 
ranges, maintenance, test, deployment facilities, Army National 
Guard Readiness, and Army Reserve Centers. These critically 
needed projects constitute about $266 million of our budget.
    The third facet of the Army Vision is People. The Army 
continues its major campaign to modernize barracks to provide 
enlisted permanent party soldiers with quality living 
environments. The new complexes provide increased personal 
privacy and larger rooms with new furnishings. With the 
approval of our budget, 79 percent of our barracks requirements 
for permanent party soldiers will be funded. Additionally, we 
are including physical fitness centers and dining facilities to 
support soldier fitness and well being.
    According to our surveys, adequate and affordable housing 
continues to be the major concern to soldiers and their 
families. We have waiting lists at all our major posts. With 
approval of the fiscal year 2004 budget, out of pocket expenses 
for soldiers living off post will be reduced to 3\1/2\ percent, 
as was previously mentioned by Messrs. Zakheim and DuBois. And 
by 2005, average out of pocket expenses should be reduced to 
zero.
    This year's budget expands family housing privatization and 
increases improvements to existing housing to support our goal 
to provide adequate housing to all military families by 2007. 
Our privatization effort has been particularly successful. The 
current program of 28 projects will transition to privatized 
operations by the end of fiscal year 2006. These projects 
include almost 72,000 homes, more than 80 percent of our 
inventory in the United States. We have already transitioned 
four installations to developers.
    At Fort Carson, for example, 1,823 existing homes were 
privatized in November 1999, and our partner developer will 
construct 840 more. So far, we have 618 homes, new homes, and 
943 have been renovated. Families have moved into those homes, 
and the process has been very positive to date.

                           PREPARED STATEMENT

    In closing, Madam Chairman, I sincerely thank you for the 
opportunity to outline our program. As I have visited Army 
installations, I have witnessed the progress that has already 
been made, and I attribute much of this success directly to the 
longstanding support of this Committee and your staff. We look 
forward to working with you as we transform our Army 
installations.
    Thank you, ma'am.
    [The statement follows:]

                  Prepared Statement of Mario P. Fiori

    Madam Chairman and members of the subcommittee, it is a pleasure to 
appear before you to discuss the Active Army and Reserve Components' 
military construction budget request for fiscal year 2004. This request 
includes initiatives of considerable importance to The Army, as well as 
this Committee, and we appreciate the opportunity to report on them to 
you.
    Our budget provides resources in our construction and family 
housing programs essential to support The Army's role in our National 
Military Strategy and our role in the Global War on Terrorism. The 
budget supports The Army's Vision and our Transformation strategy.
    The program presented herein requests fiscal year 2004 
appropriations and authorization of appropriations of $1,536,010,000 
for Military Construction, Army (MCA); $1,399,917,000 for Army Family 
Housing (AFH); $168,298,000 for Military Construction, Army National 
Guard (MCNG); and $68,478,000 for Military Construction, Army Reserve 
(MCAR).
    The Army has begun one of the most profound periods of 
transformation in its 227-year history. In 1999, we published The Army 
Vision--People, Readiness, and Transformation--that defined how we meet 
the Nation's military requirements today and into the future. After 3 
years, we are on the road to implement the self-transformation that 
will allow us to continue to dominate conventional battlefields, but 
also provide the ability to deter and defeat adversaries who rely on 
surprise, deception and asymmetric warfare to achieve their objectives.
    The attacks against our Nation and the ongoing Global War on 
Terrorism validated The Army's Vision and our Transformation. To meet 
the challenges of Army Transformation and to carry out today's missions 
at home and abroad, The Army must sustain a force of high quality, 
well-trained people; acquire and maintain the right mix of weapons and 
equipment; and maintain effective infrastructure and power projection 
platforms to generate the capabilities necessary to meet our missions. 
Taking care of soldiers and families is a readiness issue and will 
ensure that a trained and qualified soldier and civilian force will be 
in place to support the Objective Force and the transformed Army.
    Installations are a key component in all three tenets of The Army 
Vision. They are the operational and service support centers where our 
soldiers and civilians work, live, and train; and from which we deploy, 
launch, and accomplish our missions. Our worldwide installations 
structure is inextricably linked to the Transformation of The Army and 
the successful fielding of the Objective Force.
    Army installations, both Active and Reserve Component, must fully 
support our war fighting needs, while at the same time provide soldiers 
and their families with a quality of life that equals that of their 
peers in civilian communities. The Army Vision begins and ends talking 
about the well-being of people. Our installations are the hometowns to 
many of our people. To improve our installations, we realized we had to 
transform installation management to improve the way we operate and 
manage this important resource.
    In support of the Transformation of Army installations, on October 
1, 2002, The Army activated the Installation Management Agency (IMA). 
This activation symbolized a radical transformation in how The Army 
manages installations. Through the IMA, The Army has created a 
corporate structure for managing its installations. By shifting that 
responsibility from the 14 formerly land-holding major commands, the 
IMA seeks to enhance effectiveness in installation management, achieve 
regional efficiencies, eliminate the migration of installation support 
dollars, and provide consistent and equitable services and support.
    Major Commanders can now focus solely on their primary missions. 
Though the major commands no longer have a primary responsibility for 
installation management, the support they receive from installations is 
a paramount mission of the IMA. The IMA exists to support and enable 
mission commanders. The senior mission commander on each installation 
is part of the rating chain for the garrison commander of that 
installation. The most senior commanders of the major commands, as well 
as the Director of the Army National Guard and the Chief of the Army 
Reserve, also sit on an Installation Management Board of Directors, 
providing oversight and guidance to the operations of the IMA.
    The Army's transformation of installation management represents a 
significant paradigm shift in the way The Army manages installations. 
It represents a new commitment to installation management as a key 
component of Army Transformation. Mission readiness no longer competes 
with installation management tasks; and the soldier's well-being and 
quality of life on the installations does not compete with the mission. 
It will allow us to provide for our soldiers and their families and to 
permit us to implement our facilities strategy.

                          FACILITIES STRATEGY

    The Army's Facilities Strategy (AFS) is the centerpiece of our 
efforts to fix the current state of Army facilities over 20 years. It 
addresses our long-term need to sustain and modernize Army-funded 
facilities in both Active and Reserve Components by framing our 
requirements for sustainment, restoration and modernization (SRM) using 
operations and maintenance (O&M) and military construction (MILCON) 
funding. The AFS addresses sustainment, recapitalization, quality, and 
quantity improvements so that The Army will have adequate facilities to 
support Transformation and our 21st Century missions.
    The first objective of the strategy requires us to halt further 
deterioration of our facilities. Our sustainment funding, which comes 
from the Operation and Maintenance (O&M) SRM accounts, has improved. 
Our budget request funds 93 percent of our requirements in fiscal year 
2004. This level of funding may be sufficient to slow further 
deterioration of Army facilities. We use the Installation Status Report 
(ISR) to rate the condition of our facilities. A C-1 quality rating 
indicates facilities support mission accomplishment; a C-2 quality 
rating indicates facilities support the majority of assigned missions; 
a C-3 quality rating indicates facilities impair mission performance; 
and a C-4 rating indicates facilities that significantly impair mission 
performance. Currently, The Army's overall quality rating is C-3 
(impairs mission performance). We must have sufficient O&M SRM 
resources to sustain our facilities and prevent facilities from 
deteriorating further, or we put our MILCON investments at risk.
    The second objective of our strategy addresses improving 
recapitalization of our facilities to a 67-year cycle. This will ensure 
we have adequate facilities to keep pace with future force structure 
changes and weapons modernization programs. The focus is on The Army's 
most obsolete infrastructure, such as vehicle maintenance facilities, 
Army National Guard Readiness Centers, and Army Reserve Centers. 
Unfortunately, our budget resources limit our recapitalization rate to 
144 years for fiscal year 2004.
    The third objective is to raise The Army facilities from the 
current C-3 quality rating (impairs mission performance) to an overall 
C-2 quality rating (supports majority of assigned missions) by the end 
of 2010. This will be accomplished by bringing a focused set of 
facilities to C-1 (supports mission performance) during that timeframe. 
Since we cannot afford a quick fix to buy down the SRM backlog, we will 
centrally manage resources towards focused investments. This capital 
investment requirement will primarily require MILCON funding, 
supplemented by O&M SRM project funding.
    The fourth objective is to reduce facility shortfalls where they 
exist over the entire 20-year strategy. These shortfalls are a result 
of facilities modernization not keeping pace with our weapons 
modernization and supporting force structure. Ranges and training 
facilities are an example.
    Modest MILCON investment will be made in fiscal year 2004 for these 
objectives. These four objectives will enable us to improve the health 
of Army real property and the ability to successfully support our 
worldwide missions and our soldiers. This year, our highest priority 
went to sustainment to achieve a 93 percent funding level.
    In addition to implementing our facilities strategy, we continue 
our policy of eliminating excess facilities throughout the entire Army 
to allow us to use our limited resources where they have the most 
impact. During fiscal years 1988-2003, our footprint reduction program, 
along with the base realignment and closure process (including overseas 
reductions), resulted in the disposal of over 400 million square feet 
worldwide from our fiscal year 1990 peak of 1,157,700,000 square feet. 
In fiscal year 2004, we plan to reduce an additional 2.7 million square 
feet. We continue our policy of demolishing at least one square foot 
for every square foot constructed.

                   MILITARY CONSTRUCTION, ARMY (MCA)

    This year's MCA program focuses on The Army's Vision and four major 
categories of projects: people, readiness, transformation, and other 
worldwide support. I will explain each category in turn.

                                 PEOPLE

    Fifty percent of our MCA budget is dedicated to providing for the 
well-being of our soldiers, their families, and civilians. We are 
requesting 23 barracks (plus an additional one for transformation), a 
dining facility and 2 physical fitness centers. These projects will 
improve not only the well-being of our soldiers and families, but also 
the readiness of The Army. We are requesting $776.2 million for these 
projects.
    Whole Barracks Renewal Program.--The Army continues its major 
campaign to modernize barracks to provide enlisted permanent party 
soldiers with quality living environments. The new complexes provide 
increased personal privacy, larger rooms, closets, new furnishings, 
adequate parking, and landscaping. In addition, administrative offices 
are separated from the barracks. With the approval of our budget, 
$737.9 million, as requested, 79 percent of our barracks requirement 
(including the transformation barracks), will be funded at the new 
standard for our permanent party soldiers. Between fiscal years 2005 
and 2009, we plan to invest an additional $3.5 billion in MCA and host 
nation funds. While we are making considerable progress at 
installations in the United States, we will request increased funding 
for Germany and Korea in future budgets to compensate for the fact that 
these areas have been historically funded at lower levels than 
installations in the United States. A large portion of the remaining 
modernization effort--37 percent--is in overseas areas.
    In fiscal year 2004, we are planning 23 barracks projects as part 
of our barracks modernization program, including 7 projects in Europe 
(one of which supports our Efficient Basing East initiative) and 3 
projects in Korea. This will provide new or improved housing for at 
least 5,500 soldiers. The installations with the largest investment are 
Fort Bragg, North Carolina, with $102 million (3 projects), and 
Schofield Barracks, Hawaii, with $98 million (2 projects). At these 
installations, large soldier populations and inadequate barracks 
require sustained high investment to provide quality housing. Barracks 
projects are also requested for Fort Hood, Texas; Fort Riley, Kansas; 
Fort Campbell, Kentucky; Fort Lewis, Washington; Fort Richardson, 
Alaska; Fort Drum, New York; and Fort Stewart, Georgia. A barracks 
project supporting Transformation is also requested at Fort Wainwright, 
Alaska. Although we are requesting authorization for all phases of a 
multi-phase barracks complex at Fort Drum and Fort Bragg, we are only 
requesting the appropriation needed for the fiscal year 2004 phase. Our 
plan is to award each complex, subject to subsequent appropriations, as 
a single contract to gain cost efficiencies, expedite construction, and 
provide uniformity in building systems.
    Community Facilities.--Our budget request includes a dining 
facility at Fort Meade, Maryland, for $9.6 million. Also included are 
two physical fitness centers at Hohenfels, Germany ($13.2 million) and 
Fort Stewart, Georgia ($15.5 million) to improve soldier fitness and 
community wellness. The physical fitness center at Fort Stewart has 
been selected as a pilot project for the demonstration program for the 
reduction of long-term facility maintenance costs. We believe this 
demonstration program will decrease our maintenance expenses and 
increase the quality of our facilities. This project is one of three 
included in fiscal year 2004. An Army Reserve and a National Guard 
demonstration project are also included in the budget.

                               READINESS

    In fiscal year 2004, there are 11 projects, $153 million, to ensure 
The Army is deployable, trained, and ready to respond to meet its 
national security mission. The projects provide enhanced training and 
readiness via live fire ranges and simulators, maintenance and test 
facilities, and a deployment facility.
    To improve soldier training, we are requesting $45.8 million to 
construct five training and readiness projects. Our request includes 
Modified Record Fire Ranges at Schweinfurt, Germany; Fort Knox, 
Kentucky; and Fort Sill, Oklahoma; an instrumented Multipurpose 
Training Range Complex at Fort Benning, Georgia; and a live fire urban 
operations Shoot House at Fort Lewis, Washington. All five ranges will 
provide our soldiers with realistic, state-of-the-art live fire 
training.
    A project to construct troop support facilities, including a 
physical fitness center and dining facility, and to renovate a 
headquarters facility and a postal facility at a cost of $46 million 
will support the Efficient Basing, East, initiative at Grafenwoehr, 
Germany.
    We are requesting three maintenance facilities for $41 million to 
support Army missions.
    Our request also includes $5.5 million for a Vibration Dynamic Test 
facility at Redstone Arsenal, Alabama. This facility will enable The 
Army to test small rocket systems and components for reliability to 
ensure that equipment can withstand the rigors of military operations.
    To support deployment of an airborne battalion ready task force, 
our request includes $15.5 million for a Joint Deployment Facility in 
Aviano, Italy. This facility will be constructed on an Air Force Base 
and will provide support for deployments of the 173rd Airborne Brigade 
stationed in Vicenza, Italy. In addition, the facility will support 
other United States and NATO forces deploying through Aviano Air Base.

                             TRANSFORMATION

    Our budget contains $285.3 million for 16 projects at 4 
installations that will support the deployment, training, unit 
operations, and equipment maintenance for Army Transformation. The 
projects include one barracks, one multi-purpose training range 
complex, one live fire urban operations Shoot House, upgrades to an 
existing Military Operations in Urban Terrain (MOUT) facility, two 
Mission Support Training Facilities (and the acquisition of additional 
lands in Hawaii to ensure our forces are properly trained), two Alert 
Holding Areas, expansion of a Deployment Staging Facility, an upgrade 
to an existing Ammunition Supply Point, a Pallet Processing Facility, 
an Information Systems Facility, Arms Storage, and an Aircraft 
Maintenance Hangar. The proposed projects in Hawaii will support the 
legacy force requirements that are currently not being met and future 
combat systems.
    Following the Persian Gulf War, Congress charged the Department of 
Defense to determine strategic mobility requirements to support the 
revised national strategy of greater reliance on CONUS-based 
contingency forces and power projection capabilities. The Army 
established the Army Strategic Mobility Program (ASMP) in fiscal year 
1994 that centered on the capability to deploy a five division 
contingency force with its associated support structure anywhere in the 
world within 75 days. We will successfully complete funding the program 
in fiscal year 2003. Over the 10-year period we funded approximately 
$800 million in projects to support our strategic mobility.
    The Army has reviewed the lessons learned from the successful ASMP 
and has analyzed current and future strategic environment; multiple, 
astute, and dynamic adversaries; and identified the need to deploy a 
brigade combat team anywhere in the world in 96 hours after liftoff, a 
division on the ground in 120 hours, and five divisions in theater in 
30 days. To meet these goals, The Army has developed The Army Power 
Projection Program (AP3) beginning in fiscal year 2004. Five of the 
Transformation projects listed above support our new deployment 
requirements for a transformed Army and initiate the start of the AP3 
program.

                    OTHER WORLDWIDE SUPPORT PROGRAMS

    The fiscal year 2004 MCA budget includes $100.7 million for 
planning and design (P&D). The fiscal year 2004 P&D request is a 
function of the construction programs for two fiscal years: 2005 and 
2006. The requested amount will be used to complete design of fiscal 
year 2005 projects and initiate design of fiscal year 2006 projects. 
Without this level of funding, our ability to design future year 
projects will be impaired and this will ultimately impact delivery of 
critically needed facilities to our soldiers.
    Host Nation Support (HNS) P&D: The Army, as Executive Agent, 
provides HNS P&D for oversight of host nation funded design and 
construction projects. The U.S. Army Corps of Engineers oversees design 
and construction to ensure facilities meet The Army's requirements and 
standards. Lack of oversight may result in an increase in design errors 
and construction deficiencies that might require United States dollars 
to rectify. Maintaining the funding level for this mission results in a 
payback where $1 of United States funding gains $44 worth of host 
nation construction. The fiscal year 2004 budget request for $22 
million will provide oversight for over $950 million of construction in 
Japan, Korea, and Europe.
    The fiscal year 2004 budget also contains $20 million for 
unspecified minor construction. This funding level will allow us to 
address unforeseen, critical needs that cannot wait for the normal 
programming cycle.

                          ARMY FAMILY HOUSING

    According to the Military Family Housing Standards Study done in 
April 2001, adequate and affordable housing continues to be a major 
concern to soldiers and their families. We have waiting lists at all of 
our major posts. Out-of-pocket expenses for soldiers living off post, 
though less than in prior years due to increases in Basic Allowance for 
Housing, will be reduced to 3.5 percent of the total cost of their 
housing with the approval of the Army fiscal year 2004 budget. By 
fiscal year 2005, we will meet our OSD goal to reduce our out-of-pocket 
expenses to zero. Maintaining and sustaining safe, attractive, and 
convenient housing for our soldiers and families is one of our 
continuing challenges. This year's budget expands privatization and 
increases improvements to existing housing. It supports the Secretary 
of Defense's goal to provide adequate housing to all military families 
by 2007.
    Our fiscal year 2004 request for Army Family Housing is 
$1,399,917,000. Table 1 summarizes each of the categories of the Army 
Family Housing program.

             TABLE 1.--ARMY FAMILY HOUSING--FISCAL YEAR 2004
------------------------------------------------------------------------
                 Facility Category                   Dollars    Percent
------------------------------------------------------------------------
New Construction..................................   $126,600          9
Post Acquisition Construction.....................    197,803         14
Planning and Design...............................     32,488          2
Operations........................................    179,031         13
Utilities.........................................    167,332         12
Maintenance.......................................    432,605         31
Leasing...........................................    234,471         17
Privatization.....................................     29,587          2
                                                   ---------------------
      Total.......................................  1,399,917        100
------------------------------------------------------------------------

                      FAMILY HOUSING PRIVATIZATION

    The Army continues to implement the Residential Communities 
Initiative (RCI) to create modern residential communities in the United 
States, using the military housing privatization authorities granted by 
the Congress. We are leveraging appropriated funds and government 
assets by entering into long-term partnerships with private sector real 
estate development and management firms to obtain financing and 
management expertise to construct, repair, maintain, and operate family 
housing communities.
    The current program of 28 projects will transition to privatized 
operations by the end of fiscal year 2006. These projects include over 
71,000 homes, more than 80 percent of our family housing inventory in 
the United States. We already have transitioned 4 installations to 
privatized operations: Forts Carson, Hood, Lewis and Meade. These 
projects include over 15,700 housing units. Families have moved into 
new and renovated housing at those locations and our experience to date 
has been very positive.
    We have selected development partners and are currently negotiating 
Community Development and Management Plans (50-year construction, 
operations, and financing plan) at 8 additional locations with over 
23,000 units. Five of these projects (Fort Bragg, Fort Campbell, 
Presidio of Monterey, Fort Irwin/Moffett Army Airfield/Camp Parks, and 
Fort Hamilton) will transition to privatized operations in fiscal year 
2003 and the remaining three (Fort Belvoir, Forts Eustis/Story/Monroe 
and Fort Stewart) will transition in fiscal year 2004. In addition to 
these projects, four other projects are in various stages of the 
procurement process (Walter Reed Army Medical Center, Fort Shafter/
Schofield Barracks, Fort Polk and Fort Detrick). Twelve more projects 
are scheduled for the future (Fort Leonard Wood, Fort Sam Houston, Fort 
Bliss, Fort Drum, Fort Benning, Fort Rucker, Fort Gordon, Fort Knox, 
Fort Leonard Wood, Picatinny Arsenal, Carlisle Barracks, and Redstone 
Arsenal).
    Our development partners expertise, experience, and resources are 
resulting in significant improvements in our family housing 
communities. The fiscal year 2004 budget request is necessary to 
support continued implementation of this quality of life program.

                      FAMILY HOUSING CONSTRUCTION

    The total fiscal year 2004 request for construction is $356.9 
million. It continues the Whole Neighborhood Revitalization initiative 
approved by Congress in fiscal year 1992, and supported consistently 
since that time, and our Residential Communities Initiative program. 
These projects are based on life-cycle economic analyses and support 
the Department of Defense's goal funding the elimination of inadequate 
housing by 2007.
    New Construction.--The fiscal year 2004 new construction program 
provides Whole Neighborhood Revitalization projects at 4 locations, 496 
units for $126.6 million. Replacement construction provides adequate 
facilities, built to local standards, where there is a continuing 
requirement for the housing and it is not economical to renovate the 
current housing. New (deficit elimination) construction provides 
additional housing to meet requirements. All of these projects are 
supported by housing surveys, which show that adequate and affordable 
units are not available in the local community.
    Construction Improvements.--The Construction Improvements Program 
is an integral part of our housing revitalization program. In fiscal 
year 2004, we are requesting $197.8 million for improvements to 6,883 
existing units at 6 locations in the United States and 5 locations in 
Europe. Included within the scope of these projects are efforts to 
improve supporting infrastructure and energy conservation.

               FAMILY HOUSING OPERATIONS AND MAINTENANCE

    The operations, utilities, maintenance, and leasing programs 
comprise the majority of the fiscal year 2004 request. The requested 
amount of $1.043 billion for fiscal year 2004 is approximately 74 
percent of the total family housing budget. This budget provides for 
annual operations, municipal-type services, furnishings, maintenance 
and repair, utilities, leased family housing, demolition of surplus/
uneconomical housing and funds supporting management of the Military 
Housing Privatization Initiative.

                         FAMILY HOUSING LEASING

    The leasing program provides another way of adequately housing our 
military families. We are requesting $234.5 million in fiscal year 2004 
to fund over 14,300 housing units including existing Section 2835 
(formerly known as 801 leases) project requirements, temporary domestic 
leases in the United States, and approximately 7,800 units overseas.

           MILITARY CONSTRUCTION, ARMY NATIONAL GUARD (MCNG)

    Focused on The Army's Vision, the Army National Guard's military 
construction program for fiscal year 2004 is giving special attention 
to People, Readiness and Transformation. The fiscal year 2004 Army 
National Guard program supports these elements.

                             TRANSFORMATION

    This year we have concentrated on Army Division Redesign Study 
(ADRS) projects. ADRS addresses a long-standing Army problem of lack of 
Combat Support and Combat Service Support Force. The Army National 
Guard, in support of the National Military Strategy and wartime 
requirement shortfalls, is reorganizing selected units toward this end, 
i.e., Chemical, Medical, and Military Police units.
    We are requesting $84.9 million for 31 ADRS projects. These funds 
will support the construction of Readiness Centers, Organizational 
Maintenance Shops, Training Fire Stations, an Armed Forces Reserve 
Center, and a Working Animal Building.
    The ADRS transformation, which began in fiscal year 2001, is 
scheduled to be completed by fiscal year 2009.
    Readiness Centers/Armed Forces Reserve Center.--To accommodate the 
force structure change, the Army National Guard will make additions or 
alterations to 14 readiness centers in Alabama, Indiana, Kansas, 
Kentucky, Nebraska, New Mexico, New York and North Dakota. Six new 
Readiness Centers are planned for California, Kentucky, Michigan, 
Missouri, Nebraska and North Carolina.
    We will also construct an Armed Forces Reserve Center in Mobile, 
Alabama. This facility will house all elements of a Support Group, 
Chemical Company, Medical Battalion, and Special Forces Detachment, as 
well as the Marine Reserves Reconnaissance Company, Intelligence 
Company, and the Marine Corps Inspector and Instructor staff.
    Training Fire Stations.--Six training fire stations are scheduled 
for Alabama, Connecticut, Kentucky, North Carolina (2), and Nebraska. 
These training fire stations will provide the necessary administrative, 
training, maintenance and storage areas required for the units to 
achieve proficiency in their required training tasks.
    Organizational Maintenance Shops.--The Army National Guard has 
three Organizational Maintenance Shops requested in fiscal year 2004. 
These facilities require additional space and upgrades to support the 
ADRS initiative. They are located in Montana (two) and New York.
    Working Animal Building.--As a result of ADRS, there will be two 
Military Police Working Dog Teams assigned to the Connecticut Army 
Nation Guard. These facilities will provide for all phases of dog 
training for patrol and protection.

                                MISSION

    In fiscal year 2004, the Army National Guard has requested $55.3 
million for the revitalization of four mission projects. They include a 
Readiness Center, a Consolidated Maintenance Facility (Phase I), an 
Army Aviation Support Facility and a Military Education Facility (Phase 
III)
    Readiness.--A new Readiness Center at Lenoir, North Carolina, will 
replace the current 48-year old facility that was built in a flood 
plain. The State will provide 41 acres of State land to relocate the 
new Readiness Center. This project has been selected as the Army 
National Guard fiscal year 2004 candidate for the demonstration program 
for the reduction of long-term facility maintenance cost.
    Maintenance.--The Consolidated Maintenance Facility at Pineville, 
Louisiana, will consist of a Combined Support Maintenance Facility, a 
Maneuver and Training Equipment Site, and two Organizational 
Maintenance Shops. These facilities will provide direct support, 
general support, and limited depot maintenance for all vehicles and 
equipment in Louisiana and full-time organizational maintenance support 
to selected units. This facility will permit Army National Guard 
personnel to work in a safe and efficient environment.
    An Army Aviation Support Facility in South Burlington, Vermont, 
will replace the current facility that was built in 1954. The new 
facility will provide the additional 80,650 square feet required to 
support three aviation units with 18 aircraft.
    Training.--The Military Education Facility (Phase III) at Camp 
Shelby, Mississippi, is the last and final phase of this Regional 
School Project. This Regional Training Center, a Category A Training 
Site, supports units from Mississippi, Alabama, Arkansas, Kentucky, 
Louisiana, Oklahoma, Tennessee, and Texas. The school conducts 
leadership training, maintenance training, and armor crewman training.

                     WORLDWIDE UNSPECIFIED FUNDING

    The Army National Guard's fiscal year 2004 budget request contains 
$26.6 million for planning and design of future projects and $1.5 
million in unspecified minor construction to address unplanned health 
or safety issues that may arise during fiscal year 2004.

               MILITARY CONSTRUCTION, ARMY RESERVE (MCAR)

    This year's MCAR program focuses on the Army Reserve's highest 
priority--Readiness. Army Reserve Centers are the key component to the 
readiness of units and provide support to soldiers and their families. 
In fiscal year 2004, the Army Reserve has requested $57.9 million to 
construct three Army Reserve Centers and a Maintenance and Storage 
facility.

                           MISSION FACILITIES

    Army Reserve Centers.--Three Army Reserve Centers will be built in 
Fort Meade, Maryland; Cleveland, Ohio; and Nashville, Tennessee. The 
Fort Meade Army Reserve Center will replace 50 World War II wood 
buildings, which will be returned to the installation for demolition. 
This project has been selected as the Army Reserve fiscal year 2004 
candidate for the demonstration program for the reduction of long-term 
facility maintenance cost. The Cleveland Army Reserve Center will 
replace two 1950s era facilities and three leased facilities. The 
Nashville Army Reserve Center will replace a high-cost leased facility.
    Maintenance.--An Organizational Maintenance Shop/Direct Support 
Maintenance Shop and Storage facility will be built on Fort Gillem, 
Georgia.

           PLANNING AND DESIGN/UNSPECIFIED MINOR CONSTRUCTION

    The fiscal year 2004 MCAR budget includes $7.712 million for 
planning and design (P&D), which provides essential planning and design 
capability in order to properly execute the MCAR program. The fiscal 
year 2004 budget also contains $2.886 million for unspecified minor 
construction to satisfy critical and emergent mission requirements.

            SUSTAINMENT, RESTORATION AND MODERNIZATION (SRM)

     In addition to MCA and AFH, the third area in the facilities arena 
is the O&M portion of the Sustainment, Restoration and Modernization 
(SRM) program. Sustainment is the primary account in installation base 
support funding responsible to maintain the infrastructure to achieve a 
successful readiness posture for The Army's fighting force. 
Installation facilities are the power projection platforms of America's 
Army and must be properly maintained to be ready to support current 
Army missions and any future deployments.
    O&M SRM consists of two major functional areas: (1) facilities 
sustainment of real property and (2) restoration and modernization. 
Facilities sustainment provides resources for maintenance costs and 
contracts necessary to keep an inventory of facilities in good working 
order. It also includes major repairs or replacement of facility 
components, usually accomplished by contract, that are expected to 
occur periodically throughout the life cycle of facilities. Restoration 
includes repair and restoration of facilities damaged by inadequate 
sustainment, excessive age, natural disaster, fire, accident or other 
causes. Modernization includes alteration or modernization of 
facilities solely to implement new or higher standards, including 
regulatory changes, to accommodate new functions, or to replace 
building components that typically last more than 50 years, such as 
foundations and structural members. The Active Army's OMA Sustainment 
funding request in fiscal year 2004 is $1.8 billion. The Army National 
Guard is requesting $380 million and the Army Reserve is requesting 
$182 million.
    In fiscal year 2004, The Army's top O&M priority in SRM is to fully 
sustain its facilities. This prevents further deterioration of the 
facilities we own and allows the facilities to support The Army's 
mission. The basic maintenance and repair of all Army facilities is 
funded at 93 percent of the OMA requirement. At the current funding 
levels, facilities will be properly maintained and deterioration will 
be minimal. Restoration and modernization initiatives supplement MILCON 
funding and meet recapitalization requirements. The Army has used the 
O&M R&M for barracks, strategic mobility, and other needs. The Army's 
demolition program will eliminate unneeded facilities. In fiscal year 
2004, we plan to eliminate approximately 2.7 million square feet of 
facilities worldwide.
    The Army's privatization or outsourcing of utilities is the first 
part of our Long Range Utilities Strategy within the SRM program to 
provide reliable and efficient utility services at our installations. 
All Army-owned electrical, natural gas, water, and waste water systems 
are being evaluated to determine the feasibility of privatization. When 
privatization appears economical, we use competitive contracting 
procedures as much as possible. The Army is on track and continues to 
seek ways to privatize as many systems as possible by September 30, 
2003. OMA restoration and modernization resources will be programmed 
for systems we are not able to privatize so that all systems are 
brought to a C2 (quality) status by 2010. To date, 18 percent (64 of 
351 systems) of all CONUS systems and 23 percent (250 of 1,068) of 
systems worldwide have been privatized. During fiscal year 2003, the 
negotiation and evaluation process for an additional 103 CONUS systems 
will be completed. Recent successes include privatization of the 
natural gas system at Fort Campbell, Presidio of Monterey and Fort 
Benning; electrical systems at Fort AP Hill, Picatinny Arsenal, 
Presidio of Monterey, Red River Army Depot, and Fort Bliss; and water 
and waste water systems at Red River Army Depot and Presidio of 
Monterey.

                  BASE REALIGNMENT AND CLOSURE (BRAC)

    Our facilities strategy strives to meet the needs of today's 
soldiers while also focusing on the changes required to support The 
Army of the 21st Century. For BRAC in fiscal year 2004, we are 
requesting $67 million. This budget represents the Army's requirement 
to continue unexploded ordnance (UXO) removal, environmental 
restoration, and property management of those facilities not yet 
disposed from the first four rounds of BRAC. In fiscal year 2001, The 
Army began saving $924 million annually upon completion of the first 
four rounds of BRAC. Although these savings are substantial, we need to 
achieve even more, and bring our infrastructure assets in line with 
projected needs. The Army supports the need to close and realign 
additional facilities and we appreciate the Congress' authority to have 
an additional round in fiscal year 2005.
    The Army is now in the second year of exclusively caretaking and 
completing the remaining environmental restoration activities at BRAC 
installations. We request $67,067,000 in fiscal year 2004 to continue 
this important work. These funds allow us to properly caretake these 
properties and to continue environmental and ordnance removal efforts 
that will facilitate economic revitalization and will render these 
properties safe. This budget includes the resources required to support 
projected reuse in the near term and to continue with current projects 
to protect human health and the environment. The Army implemented 
innovative approaches to environmental restoration at BRAC sites in 
fiscal year 2002, which supported the early transfer of several 
properties. The Army will continue to support early property transfers 
in fiscal year 2003 and beyond.
    Although the extensive overseas closures do not receive the same 
level of public attention as those in the United States, they represent 
the fundamental shift from a forward-deployed force to one relying upon 
overseas presence and power projection. Without the need for a 
Commission, we are continuing to reduce the number of installations 
overseas. The total number of Army overseas sites announced for closure 
or partial closure since January 1990 is 685. Additional announcements 
and efficient basing initiatives will occur until the base structure 
matches the force identified to meet U.S. commitments.
    The significant challenges posed by the removal of unexploded 
ordnance, the remediation of groundwater, and the interface of a 
variety of regulatory authorities continue to hinder the disposal of 
property. A number of innovative approaches for environmental 
restoration were recently developed in an effort by The Army to 
expedite the transfer of property, while ensuring the protection of 
human health and the environment. Two innovative mechanisms are being 
utilized to complete environmental restoration efforts: Guaranteed/
Fixed Price Remediation (G/FPR) Contracts and Environmental Services 
Cooperative Agreements (ESCA). A G/FPR Contract obligates BRAC funds 
necessary for regulatory closure of specified restoration activities. 
The Army retains responsibility for completion of the environmental 
restoration, overseeing the contractor and ensuring that regulatory 
closure of the property is obtained. An ESCA is a different mechanism, 
authorized under the environmental restoration program that obligates 
Army BRAC funds and apportions some amount of liability to a 
governmental entity representing the reuse interests of the particular 
BRAC installation, in exchange for specific environmental restoration 
services outlined in the ESCA.
    The Army used a G/FPR to accelerate regulatory closure from 2003 to 
2002 at Fort Pickett, Virginia, at a cost that will not escalate over 
the course of the work. We estimate that this $2.9 million contract 
saved us $0.8 million based on our initial estimates. An ESCA allows 
The Army to transfer property and associated cleanup responsibilities 
to a local reuse authority or developer. This allows the developer to 
integrate cleanup with their redevelopment plans. An ESCA completed in 
2001 was used in conjunction with early transfer authority at Military 
Ocean Terminal, Bayonne, New Jersey, saving The Army an estimated $5 
million. An ESCA will facilitate the early transfer in fiscal year 2003 
of property at Oakland Army Base, California. The benefits of the G/FPR 
and ESCA initiatives are that they limit Army environmental remediation 
cost growth liability and facilitate property disposal.
    We remain committed to promoting economic redevelopment at our BRAC 
installations. We are supporting early reuse of properties through 
economic development conveyances, as well as the early transfer of 
properties along with cooperative agreements to accelerate the 
completion of remaining environmental remediation. The Army is also 
making use of leasing options approved by Congress and awarding 
guaranteed fixed price remediation contracts to complete environmental 
cleanup and make properties available earlier. Real property assets are 
being conveyed to local communities, permitting them to quickly enter 
into business arrangements with the private sector. Local communities, 
with The Army's support and encouragement, are working to develop 
business opportunities that result in jobs and tax revenues. The 
successful conversion of former Army installations to productive use in 
the private sector benefits The Army and ultimately the local 
community.
                                SUMMARY

    Madam Chairman, our fiscal year 2004 budget is a balanced program 
that permits us to execute our essential construction programs; 
provides for the military construction required to improve our 
readiness posture; provides for family housing leasing, operations and 
maintenance of the non-privatized inventory; and initiates 
privatization at four additional installations. This request is part of 
the total Army budget request that is strategically balanced to support 
the current war effort, the readiness of the force and the well-being 
of our personnel.
    Over the past few years with your support, we have successfully 
improved our infrastructure posture and postured ourselves for further 
improvements as The Army moves to the Objective force and The Army of 
the future. We implemented a revolutionary management system with the 
establishment of the Installation Management Agency. We have reduced 
our infrastructure by a third. In addition, we have initiated efforts 
to privatize family housing and utilities systems where it makes 
economic sense and supports our military mission. We have the resources 
to improve the living conditions of 106,000 single soldiers and will be 
79 percent complete with approval of this budget. We have expedited the 
process to turn over closed facilities and save the taxpayers money.
    Our long-term strategy can only be accomplished through sustained, 
balanced funding, divestiture of excess capacity, and improvements in 
management and technology. With your support, we will continue to 
streamline, consolidate, and establish community partnerships that 
generate effective relationships and resources for infrastructure 
improvement, continuance of services, and improved quality of life for 
soldiers, their families, and the local communities of which we are a 
part.
    The fiscal year 2004 request for the Active Army is for 
appropriations and authorization of appropriations of $2,935,927,000 
for Military Construction, Army, and Army Family Housing.
    The request for appropriations and authorization of appropriations 
is $168,298,000 for Military Construction, Army National Guard, and 
$68,478,000 for the Military Construction, Army Reserve.
    Madam Chairman, this concludes my statement. Thank you.
                      Department of the Air Force

STATEMENT OF HON. NELSON GIBBS, ASSISTANT SECRETARY OF 
            THE AIR FORCE, INSTALLATIONS, ENVIRONMENT 
            AND LOGISTICS
    Senator Hutchison. Thank you, Mr. Secretary.
    Secretary Gibbs.
    Mr. Gibbs. Madam Chairman, thank you very much. I 
appreciate the opportunity to appear before you today to 
discuss the Department of the Air Force fiscal year 2004 budget 
request for military construction, military family housing, and 
dormitories. I have submitted a statement for the record, and I 
would like to summarize it now.
    The Air Force total military construction and military 
family housing programs play a vital role supporting Air Force 
operational needs, workplace productivity, and the quality of 
life. This committee's support for those programs has remained 
steadfast over the years. The Secretary of Defense has made a 
commitment to transform the Department of Defense--this 
includes installations and facilities--into those that are 
required for our 21st Century military. Given the ever-present 
competing priorities, the Air Force has developed an executable 
and fiscally responsible plan for getting its facilities on a 
path to recovery.
    The Air Force top priority within this year's President's 
budget are to sustain the facilities that already exist, 
enhance the quality of life by improving housing for both 
single and married members, complying with existing 
environmental statutes and supporting new missions and weapons 
systems.

                AIR FORCE FACILITIES AND INFRASTRUCTURE

    For fiscal year 2004, the Air Force is requesting over $4.4 
billion to invest in Air Force facilities and infrastructure, 
an increase of approximately $200 million over its request for 
fiscal year 2003. This includes nearly $2 billion for 
sustainment, restoration, and modernization to maintain our 
existing infrastructure and facilities, up slightly from our 
fiscal year 2003 request.
    This budget request also reflects the Air Force's 
continuing commitment to taking care of its people and their 
families. Their welfare is a critical factor to overall Air 
Force combat readiness, and the family housing program, 
dormitory program, and other quality of life initiatives 
reflect a commitment by the Air Force to provide its people 
with the facilities that they deserve. The Air Force is 
requesting $1.5 billion for military family housing, 
approximately the same as it requested last year.

                            QUALITY OF LIFE

    To improve the quality of life for the Air Force unmarried 
junior enlisted members, the Air Force is requesting $200 
million for its fiscal year 2004 dormitory program, which 
consists of 10 enlisted dormitories in stateside bases and two 
at overseas bases.
    Our fiscal year 2004 request also includes over $750 
million for active force military construction, $60 million to 
the Air National Guard, and $40 million for the Air Force 
Reserves, all a slight increase over the request for 2003.

                        MILITARY FAMILY HOUSING

    In conclusion, I want to thank the committee for its 
continuing strong support of Air Force military construction, 
military family housing, and dormitory programs. With the 
committee's assistance and support, the Air Force will meet the 
most urgent need of commanders in the field, while providing 
quality facilities for the men and women who serve in and are 
the backbone of the most respected Air and Space Force in the 
world.
    Thank you very much, Madam Chairman.
    [The statement follows:]

                 Prepared Statement of Nelson F. Gibbs

                              INTRODUCTION

    Madam Chairman and members of the committee, good afternoon. I 
appreciate the opportunity to appear before you and present the 
Department of the Air Force fiscal year 2004 military construction 
program. Today, I will present to the committee the Air Force 
investment strategies for facilities, housing, and environmental 
programs.

                                OVERVIEW

    Our Total Force military construction and military family housing 
programs (MFH) play vital roles supporting Air Force operational needs, 
work place productivity, and quality of life. Today, when our Nation 
needs its Air Force more than ever before, our installations are the 
platforms from which we project the global air and space power so 
important to combat operations overseas. During Operation ENDURING 
FREEDOM, we flew the longest bomber combat mission in history . . . 44 
hours traveling more than 16,000 miles . . . from Whiteman Air Force 
Base, Missouri, against targets in Afghanistan. Our military 
construction program is a direct enabler of this kind of dominant 
combat capability. In that same vein, as we send tens of thousands of 
airmen overseas to prepare for possible conflict with Iraq, the peace-
of-mind they enjoy, knowing their families are safe and secure, living 
in adequate housing with state-of-the-art quality of life facilities, 
has direct impact on their ability to focus on the task at hand.
    While the Air Force has always acknowledged the importance of 
robust funding for facility sustainment and recapitalization, in the 
past we have found that higher competing priorities have not permitted 
us to address all the problems we face with our aging infrastructure. 
We turned a corner with our fiscal year 2002 and 2003 military 
construction and family housing budget requests, both well in excess of 
$2 billion. You supported those requests and increased them to nearly 
$3 billion, making the last 2 years' infrastructure investment programs 
the two largest in more than a decade. We sincerely appreciate your 
support.
    We're continuing this positive trend in fiscal year 2004 . . . we 
are requesting more than $2.4 billion for Total Force military 
construction and Military Family Housing, a $160 million increase over 
last year's request. The request includes more than $770 million for 
Active military construction, $60 million for Air National Guard 
military construction, more than $40 million for Air Force Reserve 
military construction, and more than $1.5 billion for Military Family 
Housing. In addition, we have maintained our focus on Operations and 
Maintenance (O&M) sustainment, restoration, and modernization (SRM) 
funding. Last year's O&M SRM request was nearly $400 million more than 
in fiscal year 2002. This year, we protected and actually increased 
that program growth. With the fiscal year 2004 budget request, we will 
invest more than $2 billion in critical infrastructure maintenance and 
repair through our O&M program.
    When one considers our level of effort across the entire 
infrastructure spectrum (military construction, MFH, and O&M SRM), we 
plan to invest more than $4.4 billion in fiscal year 2004.
    These Air Force programs were developed using a facility investment 
strategy with the following objectives:
  --Accommodate new missions
  --Invest in quality of life improvements
  --Continue environmental leadership
  --Sustain, restore, and modernize our infrastructure
  --Optimize use of public and private resources
  --Continue demolition of excess, uneconomical-to-maintain facilities, 
        and
  --Base realignment and closure
    Madam Chairman, Air Force missions and people around the world 
clearly depend upon this committee's understanding of and support for 
our infrastructure programs. That support has never wavered, and for 
that we are most grateful.
    With this background, I will discuss in more detail our military 
construction budget request for fiscal year 2004.

                        ACCOMMODATE NEW MISSIONS

    New weapon systems will provide the rapid, precise, global 
capability that enables our combat commanders to respond quickly to 
conflicts in support of national security objectives. Our fiscal year 
2004 Total Force new mission military construction program consists of 
43 projects, totaling more than $273 million. These projects support a 
number of weapons system beddowns; two of special significance are the 
F/A-22 Raptor and the C-17 Globemaster III.
    The F/A-22 Raptor is the Air Force's next generation air 
superiority fighter. Tyndall Air Force Base, Florida, will house the F/
A-22 flying training program. Nellis Air Force Base, Nevada, will be 
the location for F/A-22 Follow-on Operational Test and Evaluation. 
Langley Air Force Base, Virginia, will be home for the first 
operational squadrons. The fiscal year 2004 military construction 
request includes one F/A-22 project at Tyndall for $6 million, and 
three F/A-22 projects at Langley totaling $25 million.
    The C-17 Globemaster III aircraft is replacing our fleet of C-141 
Starlifters. The C-17 provides rapid global mobility by combining the 
C-141 speed and long-range transport capabilities; the C-5 capability 
to carry outsized cargo; and the C-130 capability to land on short, 
forward-located airstrips. We are planning to bed down C-17s at 
Elmendorf Air Force Base, Alaska; Travis Air Force Base and March Air 
Reserve Base in California; Dover Air Force Base, Delaware; Hickam Air 
Force Base, Hawaii; Jackson Air National Guard Base, Mississippi; 
McGuire Air Force Base, New Jersey; Altus Air Force Base, Oklahoma; 
Charleston Air Force Base, South Carolina; and McChord Air Force Base, 
Washington. Thanks to your support, construction requirements for 
Charleston and McChord were all funded in prior-year military 
construction programs. Our request for fiscal year 2004 includes a $1 
million facility project at Altus, an $8 million assault runway at Camp 
Shelby (near Jackson, Mississippi), two facility projects for $12 
million at McGuire, and six facility projects for $63 million at 
Hickam. Other new mission requirements in fiscal year 2004 include the 
Global Hawk beddown at Beale Air Force Base, California; Combat Search 
and Rescue aircraft beddown at Davis-Monthan Air Force Base, Arizona; 
C-130J beddown at Pope Air Force Base, North Carolina, and Little Rock 
Air Force Base, Arkansas; and Joint Strike Fighter facilities at 
Edwards Air Force Base, California.

                 INVEST IN QUALITY OF LIFE IMPROVEMENTS

    The Air Force is committed to taking care of our people and their 
families. Quality of life initiatives acknowledge the increasing 
sacrifices our airmen make in support of the Nation and are pivotal to 
recruiting and retaining our best. When our members deploy, they want 
to know that their families are stable, safe, and secure. Their welfare 
is a critical factor to our overall combat readiness. Our family 
housing and dormitory programs, and other quality of life initiatives 
reflect our commitment to provide facilities they deserve.
Family Housing
    Our Air Force Family Housing Master Plan provides the road map for 
our Housing military construction, O&M, and privatization efforts, to 
meet the goal of providing safe, affordable, and adequate housing for 
our members. Our fiscal year 2003 budget request reflected an increase 
of more than $140 million over the prior year--we have built on that 
increase with our fiscal year 2004 request and in the programmed 
budgets for the next 3 years. With the exception of four northern-tier 
locations, we will eliminate our inadequate housing units in the United 
States by 2007. The inadequate units at those four northern-tier 
locations will be eliminated by 2008, and the inadequate units at our 
overseas installations will be eliminated by 2009.
    For fiscal year 2004, the $700 million we have requested for 
housing investment constructs nearly 2,100 units at 18 bases, improves 
more than 1,500 units at eight bases, and supports privatization of 
nearly 7,000 units at seven bases. I'll discuss our housing 
privatization program in more detail later. Our fiscal year 2004 
housing operations and maintenance program totals nearly $835 million.
Dormitories
    Just as we are committed to provide adequate housing for families, 
we have an ambitious program to house our unaccompanied junior enlisted 
personnel. The Air Force Dormitory Master Plan is a comprehensive, 
requirements-based plan, which identifies and prioritizes our dormitory 
military construction requirements. The plan includes a three-phased 
dormitory investment strategy. The three phases are: (1) fund the 
replacement or conversion of all permanent party central latrine 
dormitories; (2) construct new facilities to eliminate the deficit of 
dormitory rooms; and (3) convert or replace existing dormitories at the 
end of their useful life using a new, Air Force-designed private room 
standard to improve airman quality of life. Phase 1 is complete, and we 
are now concentrating on the final two phases of the investment 
strategy.
    Our total requirement is 79,400 Air Force dormitory rooms. We 
currently have a deficit of 11,400 rooms, and the existing inventory 
includes 3,700 inadequate rooms. It will cost approximately $1 billion 
to execute the Air Force Dormitory Master Plan and achieve Office of 
the Secretary of Defense's (OSD) fiscal year 2007 goal to replace all 
of our inadequate dormitory rooms. This fiscal year 2004 budget request 
moves us closer to that goal.
    The fiscal year 2004 dormitory program consists of 12 dormitory 
projects at nine U.S. bases and two overseas bases, for a total of $203 
million. On behalf of all the airmen affected by this important quality 
of life initiative, I want to thank the committee. We could never have 
made it this far without your tremendous support.
Fitness Centers
    Other traditional quality of life investments include community 
facilities, such as fitness centers, vital in our efforts to attract 
and retain high-quality people and their families. A strong sense of 
community is an important element of the Air Force way of life, and 
these facilities are important to that sense of community as well as to 
the physical and psychological well being of our airmen. The fiscal 
year 2004 military construction program includes fitness centers at 
Lajes Air Base, Azores; Mountain Home Air Force Base, Idaho; 
Spangdahlem and Ramstein Air Bases, Germany; and Royal Air Force Bases 
Lakenheath and Mildendall in the United Kingdom.

                   CONTINUE ENVIRONMENTAL LEADERSHIP

    The Air Force continues to ensure operational readiness and sustain 
the public trust through prudent environmental stewardship. We are 
meeting our environmental cleanup commitments and Department of Defense 
goals through effective outreach and partnering with Federal and State 
regulators and team building with stakeholders and communities. Meeting 
our legal obligations remains a primary objective of the Air Force 
environmental quality program. Our record of environmental stewardship 
illustrates our environmental ethic, both here in the United States and 
overseas.
    In addition to ensuring our operations comply with all 
environmental regulations and laws, we are dedicated to enhancing our 
already open relationships with both the regulatory community and the 
neighborhoods around our installations. We continue to seek 
partnerships with local regulatory and commercial sector counterparts 
to share ideas and create an atmosphere of better understanding and 
trust. By focusing on our principles of ensuring operational readiness, 
partnering with stakeholders, and protecting human health and the 
environment, we remain leaders in environmental compliance, cleanup, 
conservation, and pollution prevention. We have reduced our open 
enforcement actions from 263 in 1992 to just 22 at the end of 2002.
    We have one project ($7 million) in our fiscal year 2004 
environmental compliance military construction program. With it, we 
will install arsenic treatment systems on water wells at Kirtland Air 
Force Base, New Mexico, to ensure the base is in full compliance with 
the U.S. Environmental Protection Agency's (EPA) new standard for 
maximum arsenic levels allowed in drinking water. Failure to install 
these treatment systems could result in fines from the EPA, shutdown of 
water wells at Kirtland, and the increased cost of purchasing and 
distributing potable water on the base.

           SUSTAIN, RESTORE, AND MODERNIZE OUR INFRASTRUCTURE

Overseas Military Construction
    The quality of our installations overseas continues to be a 
priority to us. Even though the majority of our Air Force personnel are 
assigned in the United States, 16 percent of our forces are permanently 
assigned overseas, including 29,000 Air Force families. The Air Force 
overseas base structure has stabilized after years of closures and 
force structure realignments. At this level, our overseas 
infrastructure still represents 11 percent of our Air Force physical 
plant. Now, old and progressively deteriorating infrastructure at these 
bases requires increased investment. Our fiscal year 2004 military 
construction request for European and Pacific installations is $171 
million totaling 22 projects. The program consists of infrastructure 
and quality of life projects in the United Kingdom, Germany, the 
Azores, Italy, Turkey, and Korea, as well as critical facilities on 
Wake Island. We ask for your support of these operational and quality 
of life projects.

Planning and Design/Unspecified Minor Construction
    We are also requesting planning and design and unspecified minor 
construction funding. Our request for fiscal year 2004 planning and 
design is $102 million. These funds are required to complete design of 
the fiscal year 2005 construction program, and to start design of our 
fiscal year 2006 projects. We have requested $23 million in fiscal year 
2004 for our total force unspecified minor construction program, which 
is our primary means of funding small, unforeseen projects that cannot 
wait for the normal military construction process.

Operations and Maintenance Investment
    To sustain, restore, and modernize what we own, we must achieve a 
balance between our military construction and O&M programs. Military 
construction allows us to restore and recapitalize our facilities. O&M 
funding allows us to perform facility sustainment activities necessary 
to prevent facilities from failing prematurely. Without proper 
sustainment, facilities and infrastructure wear out sooner. We also 
rely on O&M funding to directly address many of our critical 
restoration and less-expensive recapitalization needs. These funds 
enable commanders in the field to address the facility requirements 
that impact their near-term readiness.
    Since the early nineties, constrained defense budgets resulted in 
reduced military construction funding. For a few years, adequate O&M 
funding partially offset this military construction decline. However, 
between fiscal year 1997 and fiscal year 2001, competing priorities 
forced the Air Force to cut sharply into both military construction and 
O&M funding. Our effort to sustain and operate what we own was strained 
by minimally funded O&M, which forced us to defer much-needed 
sustainment and restoration requirements. Thankfully, along with the 
robust military construction programs provided in the last two years, 
we have been able to restore our O&M balance for the second year in a 
row. In fiscal year 2004, our sustainment, restoration, and 
modernization share of the Air Force O&M funding is more than $2 
billion--allowing us to properly invest in facility sustainment (to 
keep our good facilities good) and invest some O&M funding in 
restoration and modernization work compared to fiscal year 2003. Our 
known restoration and modernization O&M backlog has grown to nearly $8 
billion, so it will be important for us to continue this precedent of 
higher O&M facility investment in the future.

              OPTIMIZE USE OF PUBLIC AND PRIVATE RESOURCES

    In order for the Air Force to accelerate the rate at which we 
revitalize our inadequate housing inventory, we have taken a measured 
approach to housing privatization. We started with a few select 
projects, looking for some successes and ``lessons learned'' to guide 
our follow-on initiatives. We awarded our first housing privatization 
project at Lackland Air Force Base, Texas, in August of 1998, and all 
420 of those housing units were constructed and are occupied by 
military families. Since then, we have completed two more projects (at 
Robins Air Force Base, Georgia, and Dyess Air Force Base, Texas) and 
have two more under construction (at Elmendorf Air Force Base, Alaska, 
and Wright-Patterson Air Force Base, Ohio). Once these two projects are 
complete, our privatized unit total will exceed 3,800. We are on-track 
to award another eight projects in the next 12 months. Looking at 2005 
and beyond, we are targeting an end-state of privatizing 60 percent of 
the U.S.-based housing inventory. Our fiscal year 2004 budget request 
includes $44 million to support the privatization of nearly 7,000 units 
at seven bases: Luke Air Force Base, Arizona; Altus and Tinker Air 
Force Bases in Oklahoma; Shaw Air Force Base, South Carolina; Sheppard 
Air Force Base, Texas; McChord Air Force Base, Washington; and F.E. 
Warren Air Force Base, Wyoming.
    We continue to pursue privatization of utility systems at Air Force 
installations. Our goal is to privatize utility systems where it makes 
economic sense and does not negatively impact national security. The 
Air Force has identified 420 of our 650 systems as potential 
privatization candidates. We expect to release approximately 190 
requests for proposal over the next 24 months.

   CONTINUE DEMOLITION OF EXCESS, UNECONOMICAL-TO-MAINTAIN FACILITIES

    For the past 7 years, we have pursued an aggressive effort to 
demolish or dispose of facilities that are not economical to sustain or 
restore. From fiscal year 1998 through fiscal year 2002, we demolished 
more than 12 million square feet of non-housing building space. We 
expect to demolish an additional 2 million square feet in fiscal year 
2003, for a total reduction of 14 million square feet. This is 
equivalent to demolishing six Air Force bases equal to the combined 
square footage of Whiteman, Goodfellow, Moody, Brooks, Vance, and Pope 
Air Force Bases. Looking at fiscal year 2004 and beyond, we will 
continue to identify opportunities for Air Force demolition through 
facility consolidation. In general, we consider our facility demolition 
program a success story enabling us to reduce the strain on our 
infrastructure funding by getting rid of facilities we don't need and 
can't afford to maintain.

                      BASE REALIGNMENT AND CLOSURE

    The Air Force views the fiscal year 2005 Base Realignment and 
Closure (BRAC) process as a unique opportunity to reshape our 
infrastructure to optimize military readiness and to ensure we are most 
efficiently postured to meet new security challenges. In January of 
this year, we created a Basing and Infrastructure Analysis group within 
Headquarters Air Force. This office will serve as the Air Force focal 
point for the fiscal year 2005 BRAC process. Our major commands are 
following suit with creating their own analysis structures to support 
the BRAC process. As in previous rounds of base closures, we are 
establishing a Base Closure Executive Group (BCEG) composed of general 
officers and senior civilians representing a variety of functional 
areas, including those with range and airspace operational expertise. 
We continue to participate in joint BRAC forums with our sister 
services and the Office of the Secretary of Defense to meet the 
Secretary of Defense guidance and develop the required processes and 
procedures.
    The Air Force leadership is committed to meeting the BRAC fiscal 
year 2005 statutory deadlines and ensuring our analytical processes are 
unbiased and defensible.
    The Air Force continues to work with the local reuse authority at 
each base closed under previous rounds of BRAC to minimize the impact 
on the local community from the closure. This effort has led to the 
creation of over 48,000 jobs with 86 percent of the property 
transitioned for reuse.
    While these facilities are being returned to their respective 
communities, the Air Force has a continuing responsibility for 
environmental cleanup from past industrial activities. The Air Force 
approaches this responsibility at our BRAC bases with the same prudent 
environmental stewardship as at our active bases. We have spent $2.2 
billion since fiscal year 1991 in environmental cleanup at closing 
bases, and for fiscal year 2004, the Air Force is requesting $176 
million to continue the cleanup.

                               CONCLUSION

    In conclusion, Madam Chairman, I thank the committee for its strong 
support of Air Force military construction and family housing. With 
your help, we will ensure we meet the most urgent needs of commanders 
in the field while providing quality facilities for the men and women 
who serve in and are the backbone of the most respected aerospace force 
in the world. I will be happy to address any questions.

    Senator Hutchison. I want to thank all three of you, and 
say I appreciate all that you are doing, and I want to ask a 
couple of general questions. The issue of environmental cleanup 
has come up in our committee since I have been on it, and I 
would ask two questions of each of you.

                         ENVIRONMENTAL CLEANUP

    Number 1, the numbers are staggering in these environmental 
cleanups. Has anyone actually assessed these costs to know that 
they are absolutely efficient and necessary? Are we doing this 
in the best possible way to get the result that we want, or are 
we just throwing these huge numbers out there and accepting it 
at face value?
    Then secondly, I would like to just go ahead and have the 
second question for each of you as well, and that is, when you 
are looking at the bases that you are going to put on the BRAC 
list for 2005, are you going to put environmental cleanup on 
the list of factors, which does not seem to have been done in 
the past, although obviously, Mr. Johnson, you are the expert 
here, and maybe you did consider these things. But it 
certainly--let me say that the costs that we are now dealing 
with were not the costs that were brought up when these bases 
were closed, so with that, let me start with you.
    Mr. Johnson. Yes, ma'am. Two questions. Obviously, we look 
and try to find the most efficient way to clean up bases. There 
are many factors that affect it. Number 1 is the intended use, 
and the receiving agency often will use an intended use for 
cleanup purposes that requires more than if you used a 
different use, so some of it is driven by the receiving agency, 
normally the community.
    And the techniques are evolving. We look very carefully to 
use the most efficient ones, but quite frankly, environmental 
cleanup techniques each year get a little better, or a little 
different. We have our challenges with the local regulatory 
organizations, as well as the national EPA, but our services 
have worked very closely with them and have a good 
relationship.
    The second question came up when in another life I was on a 
BRAC, and I understand what you are saying, that we should 
consider the environmental cleanup. The thought in those days 
and my continuing thoughts are that the property should be 
cleaned whether it is kept in the active inventory or 
transferred, so environmental aspects should not be a decision 
in any BRAC decisions. That is my personal view.
    We have not considered any bases for BRAC, and we intend 
to, in our service anyway, not to select any bases until we 
look at all of the functions across the bases and then, if you 
have too many functions, a base will be selected, but we will 
start from what we need as opposed to looking at individual 
bases.
    Senator Hutchison. I hear what you are saying. It is just, 
I think, a difference when you are closing a base than when the 
base is ongoing in its usage. I am not sure you could clean up 
a base that was ongoing in certain respects.
    Mr. Johnson. We can certainly do a better job of estimating 
what the costs are to clean bases, but we really do not know 
until you go through the process, and also go through the 
intended use.
    Senator Hutchison. It just seems to me that it should be a 
factor to be considered when that comes up in 2005.
    Mr. Gibbs.
    Mr. Gibbs. I would agree with my colleague, generally just 
a couple of points to add to his. The first question, are we 
doing it in the most effective manner, we believe we are as we 
go along, and I will split it into two pieces, those that are 
closed bases, and those that are continuing ones.
    We do have significant activities and costs for cleanup on 
our existing bases, and we pursue those in a manner that is a 
little more straightforward and a little easier to do because 
we know the intended use when we start out, and we can be more 
consistent over time.
    For the bases that have been closed, in some cases it takes 
quite a while to find out exactly how the community wants to 
use the land that they are going to get back, so we are a 
little hesitant in proceeding on the cleanup activities. In 
other cases, it changes over time, so we may have to change 
from one level of cleanup to another.
    As I said, I agree with Secretary Johnson, the costs should 
be the same whether we are going to stay or whether we are 
going to leave. It is just the time period over which the costs 
are going to be incurred. At the final date, whenever that is, 
all of the facilities, continually owned or returned to the 
local communities, will be put back in the state that they were 
when the Air Force received them, so it is a method of timing.

                      BASE REALIGNMENT AND CLOSURE

    In terms of the determination for consideration for BRAC, I 
basically believe the only determination there would be on the 
speed with which it is going to be done, and if an economic 
analysis is placed on that, the net present value of the cost 
should be the same whether we do it sooner or later, so it 
really should not, in my view, make a substantive difference in 
terms of the utilization of the facilities.
    Senator Hutchison. Dr. Fiori.
    Mr. Fiori. I certainly agree with you, Madam Chairman, that 
the costs are staggering when we look at all of our 
environmental mortgage. That goes just beyond the BRAC 
mortgage. We have our UXO, unexploded ordnance throughout the 
country, and that is not funded very high, so we are estimating 
100 years to clean it up. So to solve that problem and to get 
the speed, to bring it in a little closer than 100 years from 
now, we have to look at various technologies that are 
transportable that we could bring to the scene to explode this 
ordnance, we have to find the ordnance, so there is a good 
technology program available to try to speed up the UXO issues 
that are both on BRAC and off BRAC, so that is one way.
    We are also looking at more innovative business ways of the 
BRAC properties, in transferring them and sharing the 
responsibility, or again the end use is key to the whole thing. 
If I have to make it pristine clean, it is going to cost us a 
fortune. If we are going to use it forever as a habitat, I may 
not have to do much of anything to it. It just depends.
    As my counterparts have said, a lot has to do with the 
local regulatory issues, and some could be extreme. In one case 
I note that I am going to take 14 years at least to clean up 
7,000 acres. It almost by definition is going to take that 
long, and that is a regulatory local issue that you have to 
resolve.
    These issues are different throughout the country, but by 
business and by technology we can assist this. It is still 
going to be very expensive.
    Our bases to BRAC, of course, we have not put any bases 
online. Our process is to examine all our bases, and that is 
what we are going to do, and I cannot really add much to what 
my counterparts have said, because we work very closely 
together on the BRAC issues.
    We need and we will have some new tools to get rid of the 
property faster. I still have 140,000 acres I am getting from 
the first four BRAC's that I am trying to eliminate, and it is 
a slow process. Even when the recipient is anxious and you are 
anxious to give and he is to take, and we agree on the price 
and everything else, the regulatory issues can really bog you 
down.
    Senator Hutchison. I agree with you. I do think there is a 
difference, by the way, on environmental cleanup for an ongoing 
use versus turning it over for a different use. I think you 
have to make those assessments, and it should be a factor in a 
BRAC, in my opinion.
    But secondly, all of the savings that BRACs are supposed to 
bring would, I think, be curtailed by the fact that so many of 
these bases are not yet completely turned back, and I just hope 
these factors are considered in the next BRAC. I mean, 
certainly we should have learned from these past BRACs what the 
problems are, and I would hope it would be factored in what the 
environmental cleanup costs would be, and what the problems in 
turning it back would be, as well as all the other factors that 
would be relevant. And so I am hoping that we are going to 
learn from past mistakes and past problems that have arisen 
that were not expected.

                     OVERSEAS MILITARY CONSTRUCTION

    Along that line, I assume that you heard what we were 
talking about in the previous panel. Are you dealing with the 
new strategies, are you keeping in mind that things are 
changing in Europe and perhaps in other places, and are you 
taking that into consideration as you begin to spend the 2003 
dollars, and also as you are coming to us with your 2004 
requests?
    Once again I say, we have got $288 million now being 
requested for MILCON in Germany at a time when our own 
commander in Europe is saying that there will be a significant 
drawdown from Germany, and then $173 million or so in South 
Korea. Are you taking these things, all of these issues into 
consideration before you even spend the dollars that have been 
allocated in the 2003 cycle, and is it going to be a part of 
what we are going to be looking at in 2004?
    Mr. Fiori. Perhaps I should answer, since most of it is 
mine.
    Senator Hutchison. A lot of it is yours, right. There is 
some Air Force, of course.
    Mr. Fiori. The Secretary of Defense has asked our major 
commanders to review everything in 2003 and to see if there is 
any flexibility to either not build or do it somewhere else, or 
do it smarter, whichever, so we have halted all the 
construction, and it must be reviewed by either General LaPorte 
or General Jones prior to our starting construction in the 2003 
time frame.
    For the 2004 budgets, we are supporting the Army program 
pretty much as it is, and I really cannot add much to what Mr. 
DuBois and Dr. Zakheim said. We have put the program together 
clearly looking at the facilities that we will probably need in 
most cases, and we will obviously do a review as soon as these 
policy decisions are made.
    We had to submit a budget to you, and I did hear the 
comment made that it would be nice to get it done before the 
budgeting process, but the way the timing is of these things, 
sometimes a reprogramming might be the only alternative we have 
to make sense of this, and all these things, we do not do them 
overnight. I think that was the point made, and I would 
certainly agree to it.
    A lot of these facilities we will be using for 2, 3 years, 
particularly in the housing area, which I am concerned with 
overseas quite a bit. We will still have our soldiers there for 
quite a while, so it is going to have to be a balance, ma'am.
    Senator Hutchison. Mr. Gibbs.

                                GERMANY

    Mr. Gibbs. Being second in line for the amount, as you 
heard Dr. Zakheim say, the hold that is occurring in Germany 
has excluded Ramstein, the major Air Force facility in Germany, 
actually one of only two that we are going to end up with. The 
reason for that is, we have an agreement with the German 
Government to vacate the Rhein-Main facility, which has been 
heretofore the major transshipment point from the United States 
through Europe and into points east from there.
    Various levels of the German Government, from the Federal 
Government and on down through the local governments, have 
committed in excess of $400 million to facilitate that move 
that is going on out there. They are paying the bulk of the 
cost. However, there are some aspects of it that we are 
responsible for, and we are continuing with that program, so it 
should remain intact both in 2003 and in the request for 2004.
    There has been, I believe, a determination that we will 
need a major transshipment hub through Europe, and that is the 
only place that it basically can be, so Ramstein is pretty much 
different than the other ones.

                                 KOREA

    In the case of Korea, we are in need, dire need of some of 
the housing facilities, and we have a request in to General 
LaPorte to review those specifically, because if we lose the 
window on a dormitory for the people then we lose it for a 
year, so he has I believe agreed to take a look at those and 
see whether they should go on an individual basis or not.

                             PRIVATIZATION

    Senator Hutchison. My last question is--in fact, we have 
several questions that we may submit to you in writing that are 
on the details. But one is the issue of privatizing military 
barracks and dorms. We have all seen the privatized housing for 
married families, but the issue of privatizing barracks and 
dorms, to what extent do you think this could work, and do you 
think you can save money doing it, and do you think you can 
protect the troops with that type of privatization?
    Mr. Johnson. I think we have the most in the Department of 
the Navy. We plan and have submitted three pilots. One is at 
San Diego, one at Norfolk, and one at Camp Pendleton. When we 
do that, we have to look at things a little bit differently if 
we are going to privatize a dormitory, and when you privatize 
things you have to have alternative uses. In other words, if 
the military moved out, it has to be in a location that other 
people can use, so we will be building those more on the edge 
of bases rather than in the middle.
    We believe we worked out all of the concerns. We believe 
that we can get three times the number of sailors and marines 
housed for the same amount of money, and overall it is much 
cheaper, but it is something that we are working with your 
staff very carefully to make sure we do it just right, and we 
do the pilots.
    Fortunately, San Diego and Norfolk work very, very well. 
Pendleton will work well, but it is not quite as severable. In 
other words, you cannot build it quite on the edge of the base, 
but we are confident we can, number 1, assure our private 
partners that it will be filled, and number 2, that it will 
really serve our Nation much better, and number 3, and perhaps 
it should be number 1, is that we provide much better quarters 
for our bachelors, and it becomes a self-sustaining 
entitlement.
    In other words, the private partnership will continue to 
upgrade the dormitories and rebuild them at certain cycles so 
we think that we can take the same lessons we have learned from 
the family housing and transform it into barracks, but there 
are new issues which we are working very carefully with your 
staff.
    Senator Hutchison. Okay, thank you very much. We may have a 
few more submissions. I am sorry, were you going to comment on 
this? Do you have this in the works as well?

                        ELMENDORF AIR FORCE BASE

    Mr. Gibbs. Yes, we do. The Air Force fortunately has been 
working on its dormitory program for a number of years, and it 
is in relatively good shape. All of the gang type latrines were 
eliminated about 2 years ago, but we still have requirements, 
and we are always looking for ways to make the most effective 
use of the resources we have. So we have a pilot program that 
we are trying to work through up at Elmendorf to do the 
privatization of one of the dormitories there. We think that we 
may be successful there, and to the extent that we learn from 
that, then we may be able to move it on out to other locations.
    Mr. Fiori. I would like to comment, ma'am.
    As I pointed out, we have about 79 percent of our permanent 
party barracks that we have rehabilitated in one way or another 
to meet the standards of today, but we are still looking at, 
and we have two for permanent party barracks in the Presidio 
and Fort Lewis, but I have a massive amount of training 
barracks that are really in less than good shape--that would be 
a charitable statement to make--so we are looking at ways to 
consider privatizing them because they serve much more like a 
hotel, with transients coming and going on a constant basis.
    So we are looking at several places, but there are some 
serious issues, not the least of which is scoring, funding. If 
I am going to get scored the same amount as military 
construction I might as well build it, because we have done 
such a detailed job. And execution with deployments is an issue 
that we have not yet totally resolved.
    So we are looking at it, but we are not charging off 
massively to do it. I have a request to do defense logistics--
excuse me, the language school in California, in Monterey, and 
that might be--you know, it is one of these hotels you have to 
stay for 4 or 5 months type thing, and we are looking at seeing 
how we could transfer that into private industry.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Hutchison. All right. Unless there is anything 
else--yes, Mr. Johnson.
    Mr. Johnson. Ma'am, I would like to take the opportunity to 
tell you and your committee what great staff you have. It is a 
great pleasure to work with Sid Ashworth and Alycia Farrell, 
Christina Evans, I think, just left, and also B.G. Wright. You 
and we are well served by this strong team of professionals.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

                  Questions Submitted to H.T. Johnson

          Questions Submitted by Senator Kay Bailey Hutchision

                          BARRACKS/DORMITORIES

    Question. I understand that all three services are working toward 
the elimination of inadequate permanent party barracks by 2007. The 
success of that program will be largely dependent on significant 
funding increases that the Army, Navy and Air Force have programmed for 
military construction beginning in 2005 and into the future. Past 
experience has shown that those increases in the out years seem to 
disappear, as it gets closer to the submission of the budget.
    Is the DOD goal of 2007 realistic and achievable?
    Answer. Yes. In developing the fiscal year 2004 program to meet the 
DOD goal, the Department of the Navy defined inadequate permanent party 
barracks as those barracks containing gang heads. Using O&M and MILCON-
funded projects, the Navy will eliminate their inadequate barracks by 
fiscal year 2007; the Marine Corps will eliminate their inadequate 
barracks by fiscal year 2005.
    Question. Would you also comment on the likelihood of realizing 
future funding increases for MILCON?
    Answer. The Department of the Navy is pursuing the use of 
privatization authorities to house our bachelors. This will determine 
the amount of traditional military construction necessary to achieve 
our goals.
    Question. Several of you are assessing the issue of privatizing 
military barracks and dormitories.
    Have you worked out the financial issues associated with this 
proposal and how would the Office of Management and Budget (OMB) score 
these proposals?
    Answer. We are currently developing concepts for pilot projects at 
Hampton Roads, Camp Pendleton (Del Mar), and San Diego. Financial 
issues, including OMB scoring, will be resolved as these concepts are 
finalized.
    Question. Has the OSD provided the services guidance on 
privatization?
    Answer. OSD has provided general guidance to the Services on family 
housing privatization. Some of the guidance is likely to be applicable 
to bachelor housing as well. OSD has not provided specific guidance to 
the Services on bachelor housing privatization. The Department of the 
Navy will work with OSD during the development of the bachelor housing 
privatization pilot projects to document proposed guidance for future 
projects.
    Question. What are the major cost concerns that will potentially 
impact this initiative?
    Answer. Major factors that will impact the costs of barracks 
privatization include: (1) the private sector's assessment of financial 
risk (i.e. no assignment of sailors, impact of deployment, secondary 
market, etc.); (2) the project concept (i.e. number and type of units); 
(3) income stream (i.e. intended demographics, rent set at full vs. 
partial BAH); (4) available assets (Government investment, inclusion of 
existing units and land availability); and, (5) construction 
requirement (supporting facilities requirement, applicability of 
Antiterrorism/Force Protection modifications, site costs and/or land 
cost, etc.). These issues are being addressed as the bachelor housing 
privatization pilot project concepts are being developed.

                         RECAPITALIZATION RATE

    Question. With the funding proposed in the 2004 budget for MILCON, 
how does that impact your recapitalization rate?
    Answer. Based upon the funding budgeted in fiscal year 2004 for 
those appropriations used for restoration and modernization projects, 
the facility recapitalization rate in fiscal year 2004 is 140 years for 
the Navy and 88 years for the Marine Corps.
    Question. How does that compare to last year's rate?
    Answer. The recapitalization rate for the President's fiscal year 
2003 budget submission was 116 years for the Navy and 156 years for the 
Marine Corps.
    Question. Gentlemen, there have been a lot of promises made over 
the past 2 years regarding revitalizing our defense facilities. Are we 
back to business as usual neglecting our facilities?
    Answer. The Department of Defense has established two specific 
installation infrastructure performance goals and associated metrics to 
improve readiness over the long term: (1) fully sustain facilities; and 
(2) recapitalize the existing infrastructure at a 67 year rate by 
fiscal year 2008. These metrics provide important credibility and 
visibility to facility funding levels that did not exist in the past.
    Question. What are your long-term plans to reach the Department's 
proposed recapitalization rate of 67 years?
    Answer. The Navy and Marine Corps plan to reach the 67 year 
recapitalization rate through a combination of (1) restoration and 
modernization funding, (2) reduction in excess infrastructure, and (3) 
efficiencies in managing and maintaining our infrastructure.
    Question. When will that happen?
    Answer. The fiscal year 2004 President's FYDP indicates that both 
the Navy and the Marine Corps will achieve the 67-year rate 
recapitalization goal in fiscal year 2008.
    Question. I worry about the message we send our young soldiers, 
airmen, and sailors as well as their families, about the condition of 
the facilities in which they live, work and train, especially as we try 
to retain them. How does the condition of your infrastructure relate to 
the services' goal of recruitment and retention?
    Answer. The Navy and Marine Corps are meeting its recruitment goals 
and currently finds no correlation between recruitment and facilities 
condition. However, facilities condition is very important to 
retention. It is critical that we provide adequate, comfortable housing 
for our families and bachelors as well as safe, modern working 
facilities for our highly trained military and civilian workforce.

                         INSTALLATION READINESS

    Question. I understand that all three services rate the readiness 
of their infrastructure on a scale of C-1 to C-4. It appears that C-1 
indicates only minor deficiencies with negligible impact on capability 
to support missions. I was disturbed to find out that such a large 
percentage of your overall facilities are rated C-3 or worse.
    How does that impact mission readiness?
    Answer. The readiness ratings of our installations are based on 
condition assessments of the individual facilities at the base. These 
ratings are then aggregated into eight major facility types for our 
four major commands. The inspection-based ratings are verified and 
adjusted by our force commanders to ensure they match the readiness 
condition. The way facility conditions affect readiness is both direct 
and indirect. The direct affect, for example, might be where we have to 
close a runway because of pavement issues. These problems are rare and 
are quickly corrected. The most common readiness issue is indirect, 
caused by years of underfunding, that impact on the quality of life of 
installation tenants, or causes temporary interruptions of daily 
operations.
    Question. What would be the bill to bring all of your C-3 and C-4 
facilities to at least C-2?
    Answer. The total unfunded bill to bring all current facilities in 
fiscal year 2004 to at least C-2 is $17.7B for the Navy and $4.1B for 
the Marine Corps. This amount includes those funds to satisfy both 
quality and quantity deficiencies.
    Question. What is the associated timeline?
    Answer. The Department of Defense goal is to improve our existing 
facilities to C-2 by fiscal year 2010. Current funding levels indicate 
that the Navy will not attain that goal until fiscal year 2021 and the 
Marine Corps by fiscal year 2013.
    Question. I note that the services have goals to improve your 
facilities to C-1 by the end of the decade. Is that realistic based on 
current funding projections?
    Answer. Simply adding more money cannot realistically solve this 
problem. We need to resolve C-3/C-4 deficiencies through a combination 
of (1) funding, (2) reduction in excess infrastructure, and (3) 
efficiencies in managing and maintaining our infrastructure.

                      FAMILY HOUSING PRIVATIZATION

    Question. I want to compliment the military departments for 
improving military family housing for our service members. Through 
buying down the military member's out-of-pocket expenses for housing 
costs as well as eliminating inadequate housing units through military 
construction and privatization-you are making great progress. I am 
particularly proud of the fact that our state is leading the way with 
more housing privatization projects awarded at Texas military 
installations than any other state with six private-public partnerships 
(NAS Corpus Christi, Lackland Air Force Base, Dyess Air Force Base, NAS 
Kingsville, Fort Hood and NC South Texas) or 33 percent of the total 
projects awarded within the Department of Defense.
    While housing revitalization is a good news story for our military 
families, I am concerned with the message being sent to our service 
members with the budget proposal to cut impact aid funding for the 
education of soldier's, sailors', airmen and marines' children, and 
I've spoken to the administration about my concerns. A total of 1,300 
school districts across the nation receive impact aid funding to pay 
the salaries of teachers, purchase textbooks and computers and pay for 
advanced placement classes among other things. Cutting this funding 
sends a negative message at a time when we are promoting quality 
education for all children and sending their mothers and fathers into 
harm's way in the Persian Gulf region and around the world.
    With regards to privatization, I understand that some of these 
contracts are for 50 years and beyond. What happens when one of our 
family housing contractors goes out-of-business or does not fulfill its 
commitments?
    Answer. The business agreements the Department of the Navy enters 
into for housing privatization are crafted to preserve the financial 
viability of the company and protect the interests of the government. 
In the event of a default by our managing partner the Department of the 
Navy may remove the partner and designate a new partner to manage the 
company or cause the sale of the managing partner's interest in the 
company and admit the transferee to the company as the new managing 
partner.
    Question. There seems to be a growing emphasis on privatizing more 
housing in a shorter period of time. Are there concerns that moving too 
quickly on such major procurement contracts could lead to future 
problems?
    Answer. No. The Department of the Navy carefully considered the 
variables and possible uncertainties, over the long term, in crafting 
its approach to housing privatization. The Department has structured 
its business agreements to include provisions that protect the 
Government's interests while providing flexibility to adapt to future 
changes. Lessons learned on the first nine privatization efforts, and 
the use of document templates allow the Department to pursue family 
housing privatization efficiently without compromising the integrity of 
the process.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                                  NAVY

    Question. The fiscal year 2004 Navy request for BRAC cleanup is 
$101.9 million, a 62 percent decrease from the fiscal year 2003 enacted 
level. How much money above the budget request could the Navy execute 
in fiscal year 2004 to expedite its BRAC cleanup programs?
    Answer. The Navy's fiscal year 2004 budget consists of an 
appropriation request for $101.9 million plus a conservative estimate 
of $68 million from land sales and a $10.7 million adjustment from the 
DOD Comptroller providing a total of $180.6 million in spending 
authority. The Navy has substantial contract execution capacity in 
place and could readily obligate as much as about $500 million in 
fiscal year 2004 for BRAC cleanup under normal BRAC outlay rates. Other 
factors that impact expediting BRAC cleanup programs include regulator 
support for additional workload, timing when funds become available, 
and making sure that we get real cleanup and property disposal progress 
for the investment.
    Question. Did you request a higher level of funding from the 
Defense Department?
    Answer. No. The fiscal year 2004 BRAC budget request fully funds 
all legally enforceable agreements with environmental regulators and 
other must-fund agreements with communities. The Navy believes that the 
budget request and land sales receipts will be sufficient to meet BRAC 
cleanup requirements in fiscal year 2004.
    Question. Also, please provide a list of those BRAC properties that 
were sold publicly and give an analysis of where those dollars were 
directed within the BRAC accounts.
    Answer. Below is the list of Navy BRAC property that has been sold 
by public sale, negotiated sale, or where reimbursement was received 
under a public benefit conveyance through 13 March 2003. Total sales 
are $257.6 million, of which $208.5 million is from the recent sale of 
three parcels totaling 235 acres at the former Marine Corps Air Station 
Tustin, CA. The other $49.1M, which spans nearly 13 years since 
implementation of BRAC 1988, were previously spent on BRAC 
environmental and caretaker needs. The Department of the Navy has 
complied with the law, which requires that all land sale revenue from 
BRAC actions be used for environmental cleanup and caretaker costs at 
BRAC locations. An analysis of where those dollars were directed within 
the BRAC accounts is not available, as all BRAC land sale revenue is 
commingled with appropriated funds, recovery of prior year unobligated 
or unexpended funds, and additional BRAC funding allocations 
occasionally provided by the DOD comptroller. With the normal execution 
vagaries of some cleanup projects cost more, some cost less, some must 
be delayed due to regulator or other concerns, while others must be 
advanced for similar reasons, it is impracticable and would serve 
little purpose to maintain an audit trail of where any particular 
dollar is applied.

                           [In dollar amount]
------------------------------------------------------------------------
             Property                    Cost           Type of sale
------------------------------------------------------------------------
NAS Chase Field, TX...............        $168,000  Economic Development
                                                     Conveyance
NTC Orlando, FL...................       1,850,000  Economic Development
                                                     Conveyance
NAS Chase Field, TX...............         623,000  Negotiated Sale
                                                     (GSA)
NTC Orlando, FL...................         235,000  Negotiated Sale
                                                     (GSA)
NTC Orlando, FL...................          10,300  Negotiated Sale
                                                     (GSA)
NTC Orlando, FL...................         158,000  Negotiated Sale
                                                     (GSA)
NTC Orlando, FL...................           9,300  Negotiated Sale
                                                     (GSA)
NTC San Diego, CA.................          80,000  Negotiated Sale
                                                     (GSA)
NAS Moffett Field, CA.............       6,250,000  Negotiated Sale
                                                     (GSA)
NCBC Davisville, RI...............          62,500  Negotiated Sale
                                                     (GSA)
NTB Salton Sea, CA................          13,617  Negotiated Sale
                                                     (GSA)
NAWC Trenton, NJ..................         651,622  Public Sale (GSA)
DOD Fam Hsg Niagara, NY...........       1,125,000  Public Sale (GSA)
NAWC Warminster, PA...............          62,500  50 percent PBC
NTC Orlando, FL...................       3,849,000  Economic Development
                                                     Conveyance
NS Philadelphia, PA...............       2,000,000  Economic Development
                                                     Conveyance
NAS Cecil Field, FL...............          48,000  Negotiated Sale
                                                     (GSA)
NAS Dallas, TX....................           1,500  Negotiated Sale
                                                     (GSA)
NRL Orlando, FL...................           2,500  Negotiated Sale
                                                     (GSA)
NH Philadelphia, PA...............              25  Negotiated Sale
                                                     (GSA)
NRL Orlando, FL...................          79,000  Public Sale (GSA)
NRC Coconut Grove, FL.............       7,134,173  Public Sale (GSA)
NRC Pittsfield, MA................          52,000  Public Sale (GSA)
NS Staten Island, NY..............         601,842  Public Sale (GSA)
NRC Jamestown, NY.................          53,280  Public Sale (GSA)
NH Long Beach, CA.................      10,968,409  Economic Development
                                                     Conveyance
PWC SanFranBay (Novato), CA.......       8,130,000  Negotiated Sale
                                                     (GSA)
NRC Perth Amboy, NJ...............       1,000,000  Negotiated Sale
                                                     (GSA)
PWC SanFranBay (Novato), CA.......       1,300,000  Public Sale (GSA)
NTC Orlando, FL...................         415,000  Public Sale (GSA)
NAS Key West, FL..................         600,000  Fed-to-Fed (DOI)
NH Oakland, CA....................         453,500  Negotiated Sale
                                                     (GSA)
NAWC Trenton, NJ..................       1,160,000  Public Sale (GSA)
MCAS Tustin, CA...................     157,500,000  Public Sale (GSA)
MCAS Tustin, CA...................      51,000,000  Public Sale (GSA)
------------------------------------------------------------------------

    Question. Does the 2004 request include anticipated revenue from 
sales? If so, how much, and from where?
    Answer. The fiscal year 2004 budget request includes anticipated 
revenue in the amount of $68 million from property sales at 4 locations 
Naval Hospital Long Beach, CA; Naval Hospital Oakland, CA; Marine Corps 
Air Station Tustin, CA; Marine Corps Air Station El Toro, CA. This 
differs from the $208 million received from the recent sale of Tustin 
because the Department of the Navy used very conservative estimates, 
including the expectation that in some cases, the actual receipt of 
funds would be spread across several fiscal years. While Tustin sold 
for far more than expected, the sale of Naval Hospital Oakland was 
terminated after the winner bidder defaulted and litigation ensued, and 
the sale of El Toro is still in the formative stage. We did not want to 
unduly raise community expectations for environmental cleanup if the 
revenue proved to be less than expected, or that funds arrived later 
than initially expected. The law requires that all BRAC land sale 
revenue be deposited into the BRAC account and be used only for 
environmental cleanup and caretaker costs at BRAC locations. To the 
extent that actual revenue exceeds budgeted estimates, the Department 
of the Navy will use the additional land sale revenue to further 
accelerated cleanup and property disposals at BRAC locations.

                ALAMEDA POINT NAVAL AIR STATION FUNDING

    Question. I am aware that the former Alameda Point Naval Air 
Station is currently being considered as a candidate for early transfer 
based on the recent agreement between the Navy and the community of 
Alameda for reuse, development, and preservation of the property. Early 
transfer of this land and associated facilities would serve as a model 
for all the military services of base conversion in an urban 
environment.
    It is critical for the community that this early transfer be 
completed by October 2004 for cleanup and redevelopment to occur in 
line with community plans. As I understand it, the Navy is full 
supportive of that goal and intends to meet the October 2004 deadline. 
Is that correct?
    Answer. Yes. The Navy is in full support of the requested Early 
Transfer at the Former NAS Alameda and has been working closely with 
the Local Redevelopment Agency to expedite the proposed Early Transfer 
of approximately 1,000 acres. Our most notable challenge will be 
obtaining regulator concurrence from both the Environmental Protection 
Agency (EPA) and California's Department of Toxic Substances Control 
(DTSC). Both agencies have presented requirements that pose a challenge 
to the 2004 anticipated conveyance.

                      HUNTERS POINT NAVAL SHIPYARD

    Question. What is the Navy's estimated cost to complete the cleanup 
of Hunters Point Shipyard? What is the budget for the current fiscal 
year and each of the next 2 fiscal years?
    Answer. Cost to complete for fiscal year 2004 and out is $103.9 
million. Budgets for current and next 2 fiscal years are $40.2 million 
in fiscal year 2003, $21.6 million in fiscal year 2004, and $1.9 
million in fiscal year 2005. Budget estimates for fiscal year 2004 and 
fiscal year 2005 assume the receipt of land sale revenue to finance 
cleanup costs.
    Question. Given the Navy's recent discovery of more than 100 boxes 
of previously unknown Shipyard radiological documents, will the new 
radiological review and survey work come at the expense of other 
important, and budgeted, cleanup activities or will the Navy find other 
funds to pay for it?
    Answer. Funding to pay for the expanded Historical Radiological 
Assessment (HRA) will not be taken from funds budgeted for cleanup at 
Hunters Point.
    Question. Does the Navy see any remaining hurdles to moving forward 
with the Conveyance Agreement in the next 1-2 months?
    Answer. The Navy is working diligently with the City of San 
Francisco to reach agreement on the Hunters Point Conveyance Agreement. 
The Navy's goal is to achieve a mutually agreeable solution to the 
remaining two significant issues (utilities transition plan and 
finalization of the deeds) within the next 1 or 2 months.

                                  NATO

    Question. Last year, at the request of the Navy, the Committee 
approved a $6.6 million barracks quarter's complex in Larissa, Greece, 
to support a NATO headquarters. With the proposed headquarters 
structure changes in NATO Allied Command Operation, Larissa is on a 
list to be dropped as a headquarters site. With this change, is the 
barracks complex still needed for U.S. troops?
     Answer. If NATO determines that Larissa will no longer be required 
as a headquarters site as a result of their ongoing military structure 
review, scheduled to be completed during the summer of 2003, and that 
U.S. troops will not be needed at Larissa, it is a reasonable 
assumption that the barracks complex for U.S. troops would no longer be 
required.
    Question. Would each of you provide the committee with a copy of 
your service's current FYDP and unfunded priorities by March 31?
    Answer. Attached are (1) MCON FYDP, (2) MCNR FYDP, and (3) CNO & 
CMC unfunded priorities.

                  MCON POM04 FYDP CONGRESSIONAL SUBMIT
                              [In dollars]
------------------------------------------------------------------------
 ST         ACTIVITY           PNO             TITLE           PRG COST
------------------------------------------------------------------------
           PY 2004
 AZ YUMA AZ MCAS                442  A/C MAINTENANCE           $14,250
                                      HANGAR.
 AZ YUMA AZ MCAS                484  STATION ORDNANCE            7,980
                                      AREA.
 CA CAMP PENDLETON CA            02  TERTIARY SWG TRTMNT        24,960
     MCB                              (INCI).
 CA CAMP PENDLETON CA           98B  BACHELOR ENLISTED          22,930
     MCB                              QUARTERS.
 CA CHINA LAKE CA               521  AIRFIELD PAVEMENT          12,890
     NAWCWPNSDIV                      UPGRADE.
 CA LEMOORE CA NAS              217  MAINT HANGAR--O/H          24,610
                                      SPACE.
 CA LEMOORE CA NAS              271  OPERATIONAL TRAINER.        9,900
 CA MIRAMAR CA MCAS              95  A/C FIRE/RESCUE             4,740
                                      STATION.
 CA MONTEREY CA NPGS            198  BACHELOR OFFICER           35,550
                                      QTRS REPL.
 CA SAN CLEMENTE IL CA          493  OPERATIONAL ACCESS--       18,940
     NAF                              SHOBA.
 CA SAN DIEGO CA NAS            748  TAXIWAY/TOWER.......       13,650
     NORTH IS
 CA SAN DIEGO CA NAS            751  SQUADRON OPERATIONS        35,590
     NORTH IS                         FAC.
 CA SAN DIEGO CA NAVSTA         501  BEQ HOMEPORT ASHORE.       42,710
 CA SAN NICOLAS ISLAND          268  BACH ENL QTRS--TRANS        6,150
     CA                               E1/E4.
 CA TWENTYNINE PALMS CA         426  EXPLOSIVE ORDNANCE          2,290
     MAGCC                            OPS.
 CA TWENTYNINE PALMS CA         605  BACHELOR ENLISTED          26,100
     MAGCC                            QUARTERS.
 DC WASH DC MCBKS               901  MOTOR TRANSPORT FAC         1,550
                                      ADDN.
 FL JACKSONVILLE FL NAS         268  AIRFLD PERIM SECURTY        3,190
                                      ENHAN.
 FL JAX FL BLOUNT ISLAND         01  LAND ACQUISITION....      115,711
 FL PANAMA CITY FL              376  LITTORAL WARFARE            9,550
     NSWCCSTSYS                       RESRH CPL.
 FL WHITING FLD FL NAS          243  CLEAR ZONE ACQ (OLF         4,830
                                      BARIN).
 GA KINGS BAY GA SWFLANT        588  RIFLE RANGE.........        8,170
 GA KINGS BAY GA SWFLANT        589  SFF ADDN & HMMWV            3,340
                                      GARAGE.
 HI LUALUALEI HI NM             172  ORDNANCE HOLDING            6,320
                                      AREAS.
 HI PEARL HARBOR HI FISC        193  WATERFRONT                 32,180
                                      IMPROVEMENTS.
 HI PEARL HARBOR HI NSY         905  PERIMETER/SECURITY          7,010
                                      LIGHTNG.
 IL GREAT LAKES IL NTC          736  RECRUIT BARRACKS....       31,600
 IL GREAT LAKES IL NTC          737  RECRUIT BARRACKS....       34,130
 IL GREAT LAKES IL NTC          745  BATTLE STA TRNG FAC        13,200
                                      INC I.
 MD INDIAN HEAD MD              160  WATER SYSTEM               14,850
     NSWCTRDIV                        IMPROVEMENTS.
 MD PATUXENT RIVER MD           129  JSF TEST FACILITY...       24,370
     AWCACDV
 MS MERIDIAN MS NAS             295  FIRE & RESCUE               4,570
                                      STATION.
 NJ EARLE NJ NWS                 32  GENL PURP/BERTHING         26,740
                                      PIER.
 NJ LAKEHURST NJ NAWC           252  EMALS FACILITY......       20,681
     ACFTDIV
 NC CAMP LEJEUNE NC MCB        1093  US JOINT MARITIME           6,300
                                      INST FAC.
 NC CAMP LEJEUNE NC MCB        1094  JOINT MARITIME OPS &       12,880
                                      TRNG.
 NC CAMP LEJEUNE NC MCB         227  CONSOLIDATED ARMORY.       10,270
 NC NEW RIVER NC MCAS           647  WATER TREATMENT             6,240
                                      FACILITY.
 RI NEWPORT RI NS               454  BEQ REPLACMENT             16,140
                                      (NAPS).
 RI NEWPORT RI NUSWCTR           11  UNDERWATER WEAPON          10,890
     DIV                              SYS LAB.
 VA ARLINGTON VA HQMC           01A  PHYSICAL FITNESS            1,970
                                      CENTER.
 VA DAHLGREN VA                 292  NAVAL NETWORKS OPS         20,520
     NAVSPACECOM                      CTR ADN.
 VA LITTLE CREEK VA             535  GATE 1 IMPROVEMENTS.        3,810
     NAVPHIBSE
 VA NORFOLK VA NS                94  PIER 11 REPLACEMENT        27,610
                                      INC I.
 VA NORFOLK VA NS              293A  BEQ HOMEPORT ASHORE        46,730
                                      INCII.
 VA NORFOLK VA NS               526  A/C MAINTENANCE            36,460
                                      HANGARS.
 VA PORTSMOUTH VA               514  CRANE/WGHT HNDLG EQP       17,770
     NORFOLK NSY                      SHOP.
 VA QUANTICO VA                 549  WTBN LOAD & TEST            3,700
     MCCOMBDEV CMD                    FACILITY.
 WA BANGOR WA NAVSUBASE         395  SVC PIER UPGD/MOD          33,820
                                      BLD 7111.
 WA BANGOR WA NAVSUBASE         971  WTRFRNT SECURITY            6,530
                                      FORCE FAC.
 WA INDIAN ISLAND WA            334  ORDNANCE TRANSFER           2,240
     NAVMAG                           FAC.
 BA NAVSUPPACT BAHRAIN          927  OPS CONTROL CENTER..       18,030
 IT LAMADDALENA IT NSO          995  CONSOL SANTO STEFANO       39,020
                                      FACS.
 IT SIGONELLA ITALY NAS         635  BASE OPS SUPPORT I..       34,070
 UK ST MAWGAN                   115  BACHELOR ENLISTED           7,070
                                      QUARTERS.
VAR X/MCON DESIGN FUNDS         204  MCON DESIGN FUNDS          55,558
                                      (N4).
VAR X/MCON DESIGN FUNDS         504  MCON DSGN FNDS--           10,054
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         204  UNSPECIFIED MINOR          12,334
     CONST                            CONSTR.
VAR Z/VARLOCS MILCON            689  OLF FACS (INC I)....       27,610
                                                          --------------
          FISCAL 2004     .........  ....................    1,132,858
           TOTAL
                                                          ==============
           PY 2005
 AZ YUMA AZ MCAS                440  BACHELOR ENLISTED          25,636
                                      QUARTERS.
 AZ YUMA AZ MCAS                485  STATION ORDNANCE            6,518
                                      AREA.
 CA CAMP PENDLETON CA            32  CONSOL OPERATIONS           5,454
     MCAS                             CENTER.
 CA CAMP PENDLETON CA            38  WEIGHT HANDLING SHOP        7,177
     MCAS
 CA CAMP PENDLETON CA           02A  TERTIARY SWG TRTMNT        24,843
     MCB                              (INCII).
 CA CAMP PENDLETON CA            13  ASSAULT BREACHER VEH        4,256
     MCB                              FAC.
 CA CAMP PENDLETON CA            14  BACHELOR ENLISTED          19,293
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA           608  PHYSICAL FITNESS            7,070
     MCB                              CENTER.
 CA CAMP PENDLETON CA           613  CLOSE COMBAT PISTOL         1,951
     MCB                              COURSE.
 CA CHINA LAKE CA              453D  PROPELLANT/EXP LAB         13,609
     NAWCWPNSDIV                      (03 ADD).
 CA EL CENTRO CA NAF            201  BEQ TRANSIENT.......       25,085
 CA EL CENTRO CA NAF            207  APRON & HANGAR RECAP       45,249
 CA SAN DIEGO CA NAVSTA         404  BEQ--SHIPBOARD             52,840
                                      ASHORE.
 CA SEAL BEACH CA               222  LAND PURCHASE.......          754
     NAVWPNSTA
 CT NEW LONDON CT NSB           463  RBUILD PIER 6.......       27,464
 DC WASHINGTON DC NRL            10  ADVANCED COMPUTING         12,862
                                      FAC.
 FL MAYPORT FL NS               185  EXPAND FLIGHT               1,393
                                      TRAINER.
 GA KINGS BAY GA SWFLANT        586  LA UTILITIES & SITE         1,896
                                      IMPVS.
 GA KINGS BAY GA SWFLANT        590  MISSILE MAGAZINE....       90,021
 HI KANEOHE BAY HI MCB          801  RUNWAY PERIMETER            2,060
                                      ROAD.
 HI LUALUALEI HI NM             177  PASS OFC & SECURITY         3,877
                                      UPGRD.
 HI PEARL HARBOR HI NS          616  PERIMETER/SECURITY          1,508
                                      LIGHTNG.
 HI PEARL HARBOR HI NS          624  SECURTY/PERIMTR             8,330
                                      FENCE/WALL.
 IL GREAT LAKES IL NTC          738  RTC BARRACKS........       35,859
 IL GREAT LAKES IL NTC         745A  BATTLE STATIONS TRNG       45,548
                                      FAC.
 IL GREAT LAKES IL NTC          748  RTC INFRASTRUCTURE          6,614
                                      UPGRADE.
 ME BRUNSWICK ME NAS            191  RELOCATE BASE               7,301
                                      ENTRANCE.
 ME KITTERY ME                  280  GATE 2 IMPROVEMENTS.        2,275
     PORTSMOUTH NSY
 MS GULFPORT MS                 800  PASS RD AT/FP               2,325
     NAVCONSTRACEN                    SECURITY IMP.
 NJ EARLE NJ NWS                32A  UPGRADE PIER CMPLX         47,579
                                      (INC II).
 NJ EARLE NJ NWS                 34  SECURTY/PERIMTR             4,465
                                      FENCE/WALL.
 NC CAMP LEJEUNE NC MCB        1025  ASSUALT BREACHER VEH        3,665
                                      FAC.
 NC CAMP LEJEUNE NC MCB        1041  ARMORY CAMP GEIGER..        3,375
 NC CHERRY POINT NC MCAS        122  UAV OPERATIONS/             9,752
                                      MAINTENANCE.
 NC CHERRY POINT NC MCAS        124  AICUZ LAND                  2,931
                                      ACQUISITION.
 NC NEW RIVER NC MCAS           617  ADD TO SIMULATOR            2,804
                                      BUILDING.
 NC NEW RIVER NC MCAS           630  BACHELOR ENLISTED          18,253
                                      QUARTERS.
 NC NEW RIVER NC MCAS           648  CONSTRUCT FREST             7,281
                                      FACILITY.
 PA MECHANICSBURG               573  OXFORD GATE SECRTY          3,926
     NAVSUPPACT                       IMPROVS.
 PA MECHANICSBURG               575  SECURTY/PERIMTR             2,669
     NAVSUPPACT                       FENCE/WALL.
 RI NEWPORT RI NAVSTA           457  SECURTY/PERIMTR             2,364
                                      FENCE/WALL.
 SC BEAUFORT SC MCAS            428  EXPLOSIVE ORDNANCE          1,238
                                      FAC.
 SC CHASN NAVAL WPN              76  SOUTH ANNEX GATE 4..        2,275
     STATION
 VA CAMP ELMORE VA MCCD         820  COMMAND OPERATIONS         10,464
                                      FAC.
 VA DAHLGREN VA NSWCTR          287  MISSILE SUPPORT FAC        14,870
     DIV                              REPL.
 VA LITTLE CREEK VA             376  PERIMETER SECURITY          2,611
     NAVPHIBSE                        FENCE.
 VA NORFOLK VA                  830  CLF/TYCOM HDQTRS FAC       59,051
     LANTFLTHQSPACT                   INC I.
 VA NORFOLK VA NS               94A  PIER 11 REPLACEMENT        45,065
                                      INC II.
 VA NORFOLK VA NS               295  BEQ--SHIPBOARD             28,363
                                      ASHORE INC I.
 VA NORFOLK VA NS               463  SUSPECT CARGO               1,422
                                      HANDLING FAC.
 VA NORFOLK VA NS               994  TRUCK INSPECTION FAC        3,781
 VA OCEANA VA NAS               467  SUSPECT CARGO HOLDNG        1,422
                                      FAC.
 VA QUANTICO VA MCAF            449  GREEN SIDE HANGAR          11,779
                                      COMPLEX.
 VA QUANTICO VA MCAF            495  AIRCRAFT PARKING            9,981
                                      APRON.
 VA QUANTICO VA                 152  H&S BN HEADQUARTERS,        3,791
     MCCOMBDEV CMD                    TBS.
 VA QUANTICO VA                 531  BACHELOR ENLISTED          11,789
     MCCOMBDEV CMD                    QUARTERS.
 VA QUANTICO VA                 539  TBS ARMORY..........        4,217
     MCCOMBDEV CMD
 VA QUANTICO VA                 667  HERITAGE CENTER ROAD          947
     MCCOMBDEV CMD                    IMPVS.
 VA YORKTOWN VA                 617  MAIN GATE SECURITY          2,529
                                      IMPROVS.
 VA YORKTOWN VA NWS             518  ORD HNDLNG VEH MAINT        7,002
                                      SHOP.
 VA YORKTOWN VA NWS             534  EXPLOSIVES TRUCK            1,769
                                      HOLDG YD.
 WA BANGOR WA SWF PAC           968  LA U&SI EMERG               1,896
                                      GENERATOR.
 WA PUGET SOUND WA              346  CVN MAINTENANCE            17,590
     NAVSHIPYD                        COMPLEX.
 CU GUANTANAMO BAY CUBA         502  BASEWIDE WSTWTR             6,179
     NS                               TRTNT FAC.
 GU GUAM MI                     451  KILO WHARF                 11,906
     COMNAVMARIANAS                   IMPROVEMENTS.
 IC KEFLAVIK ICELAND NAS        832  SEWER CONNECTION            3,782
                                      CHARGE.
 IT NAPLES ITALY NSA            211  BEQ HOMEPORT ASHORE.       27,320
VAR X/MCON DESIGN FUNDS         205  MCON DESIGN FUNDS          96,876
                                      (N4).
VAR X/MCON DESIGN FUNDS         505  MCON DSGN FNDS--           11,913
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         205  UNSPECIFIED MINOR          12,842
     CONST                            CONSTR.
VAR Z/VARLOCS MILCON           689A  OLF FACS (INC II)...       27,803
                                                          --------------
          FISCAL YEAR     .........  ....................    1,040,605
           2005 TOTAL
                                                          ==============
           PY 2006
 AZ YUMA AZ MCAS                364  PHYSICAL FITNESS CTR        3,706
                                      ADD.
 CA CAMP PENDLETON CA            15  BACHELOR ENLISTED          22,003
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            73  BACHELOR ENLISTED          21,110
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA           330  PHYSICAL FITNESS CTR        9,681
     MCB                              HORNO.
 CA CAMP PENDLETON CA           725  REG MAINT SUPPORT           9,789
     MCB                              COMPLEX.
 CA CHINA LAKE CA               513  ELECTRONIC WAR TRNG        17,405
     NAWCWPNSDIV                      RANGE.
 CA CHINA LAKE CA               515  COMBINED BOS               17,220
     NAWCWPNSDIV                      FACILITY.
 CA CHINA LAKE CA               529  BACHELOR QUARTERS...       14,455
     NAWCWPNSDIV
 CA LEMOORE CA NAS               59  CORROSION CNTL             13,125
                                      HANGAR.
 CA LEMOORE CA NAS              216  EXPAND AIR TRAFFIC          2,473
                                      CTL TWR.
 CA LEMOORE CA NAS              242  GALLEY REPLACEMENT..        1,572
 CA PORT HUENEME CA CBC         491  OPER VEH MAINT FAC..       15,978
 CA PORT HUENEME CA              13  COMBAT SYS/BATTLEGRP       15,250
     NSWCDIV                          INTGR.
 CA SAN DIEGO CA                740  BACHELOR ENLISTED          15,978
     AUXLNDFLD                        QUARTERS.
 CA SAN DIEGO CA NAS            731  BEQ--SHIPBOARD             38,146
     NORTH IS                         ASHORE.
 CA SAN DIEGO CA                 07  BACHELOR ENLISTED          25,399
     NAVMEDCEN                        QUARTERS.
 CA SAN DIEGO CA NAVSTA         406  BEQ--SHIPBOARD             43,473
                                      ASHORE.
 CA SAN DIEGO CA NSB            118  PIER 5002 SUB FNDR          7,916
                                      INSTALL.
 CA SAN DIEGO CA NSB            119  TACTICAL TRNG FAC          14,601
                                      ADDN.
 CA SEAL BEACH CA               221  REPLACE FIRE STATION        1,892
     NAVWPNSTA
 CA SEAL BEACH CA               223  VLS MISSILE MAGAZINE        8,160
     NAVWPNSTA
 CA TWENTYNINE PALMS CA         556  ENLISTED DINING FAC.       10,934
     MAGCC
 CA TWENTYNINE PALMS CA         617  WASTE HNDLNG &              5,132
     MAGCC                            RECOVRY FAC.
 DC WASHINGTON DC                50  ATOMIC CLOCK VAULT..        3,425
     NAVOBSY
 FL CAPE CANAVERAL FL           988  ENGINEERING SERVICES       23,526
     NOTU                             BLDG.
 FL JACKSONVILLE FL             246  AIRCRAFT PARTS STGNG        1,330
     NADEP                            FAC.
 FL JACKSONVILLE FL NAS         204  CONSOLIDATED OPER          11,574
                                      SUPT FAC.
 FL JACKSONVILLE FL NAS         265  AIRCRAFT PARKING           11,535
                                      APRON.
 FL KEY WEST FL NAF             678  STRUCT ACFT FIRE &          6,830
                                      RESCUE.
 FL MAYPORT FL NS               189  AIRFIELD CONTROL            4,822
                                      TOWER.
 FL MAYPORT FL NS               253  SHIP MAINTENANCE            4,531
                                      CONSOL.
 FL MAYPORT FL NS               774  SECURITY BLDG.......        1,717
 FL ORLANDO FL NAWCTSD           03  FORCE PROTECTION            2,280
                                      IMPVS.
 FL PANAMA CITY FL              315  JNT AQUATIC CMBT DVR        6,743
     DIVSALTRAC                       TRNG.
 FL PENSACOLA FL NAS            711  BEQ A SCHOOL (NATTC)       17,511
 FL WHITING FLD FL NAS          245  INSTL/RELOCATE PERIM        2,949
                                      FENCE.
 HI CAMP HM SMITH HI            113  PACIFIC WARFIGHTING        27,872
     CINCPAC                          CENTER.
 HI LUALUALEI HI NM             166  SECURITY LIGHTING...        5,095
 HI PEARL HARBOR HI FISC        194  SECURITY FENCING....        1,901
 HI PEARL HARBOR HI NB           02  SEC UPGRADES ADMIN/        11,317
                                      OPS FAC.
 HI PEARL HARBOR HI NS          132  RECONSTRUCT WHARF          29,202
                                      S20.
 HI PEARL HARBOR HI NS          137  WHARF RECONSTRUCTION       27,775
 HI PEARL HARBOR HI NS         400A  OILY WASTE COLL            11,894
                                      TRTMT FAC.
 HI PEARL HARBOR HI NS          619  SEC UPGRADES ADMIN/        34,436
                                      OPS FAC.
 HI PEARL HARBOR HI NS          634  GENL PURP/BERTHING         24,728
                                      WHARF.
 HI PEARL HARBOR HI NSY         266  SHORE POWER IMPVS           3,803
                                      DD4.
 IL GREAT LAKES IL NTC          667  RTC DRILL HALL RPL..       12,913
 IL GREAT LAKES IL NTC          739  RTC BARRACKS........       36,827
 IL GREAT LAKES IL NTC          740  RTC BARRACKS........       36,827
 IL GREAT LAKES IL NTC          741  RTC BARRACKS........       39,038
 IL GREAT LAKES IL NTC          771  REPLACE PERIMETER           3,521
                                      FENCE.
 MD BETHESDA MD                 188  ENGR MNGMT &               12,370
     NSWCCARDEROCK                    LOGISTICS FAC.
 MD INDIAN HEAD MD              161  AGILE CHEMICAL             11,894
     NSWCTRDIV                        FACILITY.
 MD PATUXENT RIVER MD           558  AIRCRAFT PROTOTYPE         34,556
     AWCACDV                          FAC.
 MD PATUXENT RIVER MD           560  MARITIME T&E SUPPORT       11,166
     AWCACDV                          LAB.
 MD PATUXENT RIVER MD           977  LANDING SYS TEST FAC        5,152
     AWCACDV                          ADDN.
 MS GULFPORT MS                 781  STLWRKRS APPLIED            8,683
     NAVCONSTRACEN                    INST FAC.
 NV FALLON NV NAS               342  WEAPONS MAGAZINE....        3,813
 NV FALLON NV NAS               361  RANGE IMPROVEMENTS          8,168
                                      TGTB-20.
 NJ EARLE NJ NWS                32B  UPGRADE PIER               32,704
                                      CMPLX(IN III).
 NC CAMP LEJEUNE NC MCB        1011  BACHELOR ENLISTED          20,471
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB        1092  US JOINT MARITIME          16,608
                                      BEQ.
 NC CHERRY POINT NC MCAS        720  ORDNANCE MAGAZINES..        4,221
 NC CHERRY POINT NC             973  HAZ WASTE STOR/XFER         5,491
     NADEP                            FAC.
 NC CHERRY POINT NC             974  ENGNR PROD SUP FAC..        8,207
     NADEP
 PA MECHANICSBURG                10  NAVSUPSYSCOM HQ FACS       32,383
     NAVSUPPACT                       INC I.
 SC BEAUFORT SC MCAS            420  PHYSICAL FITNESS            9,789
                                      CENTER.
 SC PARRIS ISLAND SC            350  INDOOR PISTOL RANGE.        1,165
     MCRD
 TX CORPUS CHRISTI TX           356  RUNWAY EXTENSION....        4,657
     NAS
 TX INGLESIDE TX NS              73  MINE WARFARE COMMAND        5,666
                                      HQTRS.
 TX KINGSVILLE TX NAS           271  AIRFIELD LIGHTING           5,035
                                      (NALFOG).
 VA DAHLGREN VA NSWCTR          281  WEAPONS DYNAMICS            3,231
     DIV                              RDT&E CTR.
 VA LITTLE CREEK VA             283  REPLACE PIERS &            44,119
     NAVPHIBSE                        QUAYWALL.
 VA LITTLE CREEK VA             406  POLICE & SEC OPRS           4,754
     NAVPHIBSE                        FAC.
 VA NORFOLK VA                 830A  CLF/TYCOM HDQTRS FAC       47,565
     LANTFLTHQSPACT                   (INII).
 VA NORFOLK VA NS               94B  PIER 11 REPLACEMENT        40,116
                                      INC III.
 VA NORFOLK VA NS              295A  BEQ SHIPBOARD ASHORE       31,510
                                      INCII.
 VA NORFOLK VA NS               395  OPERATIONAL STORAGE        13,320
                                      (MISC).
 VA OCEANA VA NAS               714  BEQ.................       22,168
 VA PORTSMOUTH VA               239  BEQ TRANSIENT INC I.       28,541
     NORFOLK NSY
 VA PORTSMOUTH VA               515  SHIP SVCS SHOP             16,764
     NORFOLK NSY                      CONSOLID.
 VA QUANTICO VA                 519  SNCO ACADEMIC               8,265
     MCCOMBDEV CMD                    FACILITY.
 VA QUANTICO VA                 552  NETWORK OPERATIONS         13,677
     MCCOMBDEV CMD                    CENTER.
 VA YORKTOWN VA NWS             211  RECAP IGLOO                 7,711
                                      MAGAZINES.
 VA YORKTOWN VA NWS             387  NORTH TRESTLE&PIER         38,048
                                      REPL I.
 WA BANGOR WA NAVSUBASE        124A  SMALL ARMS TRN CTR         14,184
                                      (O3 ADD).
 WA BANGOR WA SWF PAC           964  EXPLOSIVES SHIP/TRAN        2,823
                                      DEP.
 WA BANGOR WA SWF PAC           969  MSL TRANSPORTER             5,664
                                      SAFEHAVENS.
 WA INDIAN ISLAND WA            333  MISSILE MAGAZINES...       11,516
     NAVMAG
 WA KEYPORT WA NUWC DIV        381B  USW SYSTEMS CTR (03         2,685
                                      ADD).
 WA KEYPORT WA NUWC DIV         386  U/S VEH MAINT & ENGR       12,370
                                      CTR.
 WA PUGET SOUND WA              359  SHIP REPAIR PIER 3         10,468
     NAVSHIPYD                        IMPVS.
 WA PUGET SOUND WA              372  DRYDOCK #4 CAISSON         11,321
     NAVSHIPYD                        REPLACE.
 WA PUGET SOUND WA              373  DRYDOCK #5 CAISSON          9,129
     NAVSHIPYD                        REPLACE.
 WA WHIDBEY IS WA NAS            41  STRUC ACFT/FIRE STA         3,328
                                      ADDN.
 WA WHIDBEY IS WA NAS           164  ADMINISTRATIVE             16,687
                                      OFFICE.
 BA NAVSUPPACT BAHRAIN          908  OPERATIONS & SUPPORT       25,953
                                      FACS.
 BF ANDROS IS BF NUWC           200  BACHELOR ENLISTED          19,278
     DET                              QUARTERS.
 CU GUANTANAMO BAY CUBA         343  FIRE STATIONS.......        5,084
     NS
 CU GUANTANAMO BAY CUBA         503  PERIMETER ROAD              1,427
     NS                               LIGHTING.
 DG DIEGO GARCIA                146  SANITARY/CUT FIL            6,956
     NAVSUPPFAC                       DISP AREA.
 GU GUAM MI                     431  GENL PURP/BERTHING          5,045
     COMNAVMARIANAS                   PIER.
 GU GUAM MI                     432  DELTA/ECHO WHARVES          4,754
     COMNAVMARIANAS                   IMPVS.
 GU GUAM MI                     433  ROMEO/SIERRA WHARVES        5,423
     COMNAVMARIANAS                   IMPVS.
 GU GUAM MI                     439  VICTOR WHARF                9,129
     COMNAVMARIANAS                   IMPROVEMENT.
 GU GUAM MI                     440  VICTOR WHARF FENDER         3,997
     COMNAVMARIANAS                   SYSTEM.
 GU GUAM MI                     457  SINGLE SAILOR SUPT/         7,334
     COMNAVMARIANAS                   GALLEY.
 GU GUAM PWC                    256  WATER TREATMENT PLT        12,010
                                      UPG.
 IT LAMADDALENA IT NSO          991  BEQ HOMEPORT ASHORE.       21,822
 IT LAMADDALENA IT NSO          999  ADMINISTRATIVE             52,721
                                      OFFICE.
 IT NAPLES ITALY NSA            213  BEQ/NEX LAGO PATRIA.       13,243
 IT NAPLES ITALY NSA            921  AFSOUTH NATIONAL            7,730
                                      ELEM FAC.
 IT SIGONELLA ITALY NAS         640  BASE OPERATIONS            38,505
                                      SUPPORT II.
VAR X/MCON DESIGN FUNDS         206  MCON DESIGN FUNDS         118,176
                                      (N4).
VAR X/MCON DESIGN FUNDS         506  MCON DSGN FNDS--           12,915
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         206  UNSPECIFIED MINOR          13,771
     CONST                            CONSTR.
VAR Z/VARLOCS MILCON            998  WHARF UPGRADE.......       38,048
                                                          --------------
          FISCAL YEAR     .........  ....................    1,487,981
           2006 TOTAL
                                                          ==============
           PY 2007
 CA CAMP PENDLETON CA            41  AVTB/DEL MAR BOAT           3,177
     MCB                              BASN FAC.
 CA CAMP PENDLETON CA            42  AAAV MAINTENANCE           10,647
     MCB                              FACILITY.
 CA CAMP PENDLETON CA            51  BACHELOR ENLISTED          19,071
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            52  BACHELOR ENLISTED          19,466
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            97  BACHELOR ENLISTED          18,967
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA           112  WASTEWATER                 20,547
     MCB                              CONVEYANCE (PH3).
 CA CAMP PENDLETON CA           563  FIRE STATION DEL MAR        2,227
     MCB
 CA CAMP PENDLETON CA           780  FSSG HQ CHAPPO......       13,684
     MCB
 CA CAMP PENDLETON CA           991  BACHELOR ENLISTED          13,684
     MCB                              QUARTERS.
 CA CHINA LAKE CA               527  MISSILE MAGAZINES...        3,032
     NAWCWPNSDIV
 CA CHINA LAKE CA               528  RANGE RESIDUE               2,685
     NAWCWPNSDIV                      FACILITY.
 CA CORONADO CA                 739  WATERFRONT CMD/CTL         14,064
     NAVPHIBASE                       FAC.
 CA CORONADO CA                 742  BEQ--SHIPBOARD             16,345
     NAVPHIBASE                       ASHORE.
 CA EL CENTRO CA NAF             04  COMBINED FIRE/RESCUE        4,669
                                      STA.
 CA EL CENTRO CA NAF            206  ORDNANCE LOAD PADS..        9,741
 CA EL CENTRO CA NAF            244  APRON & HANGAR RECAP       12,645
 CA LEMOORE CA NAS              215  AVIATION WAREHOUSE..        1,024
 CA LEMOORE CA NAS              233  COLLEGE CAMPUS......        3,789
 CA LEMOORE CA NAS              234  BEQ TRANSIENT.......        5,345
 CA MONTEREY CA NPGS            188  EDUCATIONAL FAC REPL        8,894
                                      I.
 CA NAS PT MUGU CA              276  TACTICAL SUPPORT            6,443
     NAVAIRWARC                       CENTER.
 CA POINT MUGU CA               773  READY MISSILE               3,041
     NAVBASE                          MAGAZINE.
 CA PORT HUENEME CA CBC         537  APPLIED INSTRUCTION         3,789
                                      BLDG.
 CA PORT HUENEME CA CBC         543  OPER BATTALION              5,289
                                      FACILITY.
 CA PORT HUENEME CA              14  CMBT SYS/BATTLEGRP         10,990
     NSWCDIV                          INT FAC.
 CA SAN DIEGO CA MCRD           293  RECRUIT SUPPORT            14,271
                                      BARRACKS.
 CA SAN DIEGO CA NAS            503  CHILD DEVELOP CTR           9,023
     NORTH IS                         CONSOL.
 CA SAN DIEGO CA NAS            835  ORDNANCE HANDLING           2,388
     NORTH IS                         PAD.
 CA SAN DIEGO CA NAS            840  BEQ--SHIPBOARD             31,296
     NORTH IS                         ASHORE.
 CA SAN DIEGO CA NAVSTA         327  REPLACE BERTHING           66,331
                                      PIER.
 CA SAN DIEGO CA                 96  C4I SYSTEM                 10,507
     SPAWARSYSCEN                     INTEGRATION.
 CA SEAL BEACH CA               224  AMMO WHARF & TURNING       54,528
     NAVWPNSTA                        BASIN.
 CA TWENTYNINE PALMS CA         604  STUDENT INDEPENDENT         2,331
     MAGCC                            STUDY.
 CA TWENTYNINE PALMS CA         614  OPERATIONAL TRAINING       11,729
     MAGCC                            CTR.
 CT NEW LONDON CT               462  MK-10 SUB ESCAPE           13,386
     NAVSUBSCH                        TRNG FAC.
 CT NEW LONDON CT NSB           465  PIER 2 REPLACEMENT..       18,176
 CT NEW LONDON CT               430  TOMAHAWK MISSILE            2,331
     SUBSUPPFAC                       MAGAZINE.
 FL JACKSONVILLE FL             244  PRODUCT SUPPORT BLDG        3,677
     NADEP
 FL JACKSONVILLE FL             245  WAREHOUSE                   3,362
     NADEP                            REPLACEMENT.
 FL JACKSONVILLE FL             250  ORDNANCE OPERATIONS         2,846
     NADEP                            FAC.
 FL MAYPORT FL NS               773  BEQ--SHIPBOARD             27,659
                                      ASHORE INC I.
 FL PANAMA CITY FL              380  BACHELOR QTRS               6,419
     NSWCCSTSYS                       TRANSIENT.
 FL PENSACOLA FL NAS            721  PIER 302                    8,137
                                      RECAPITALIZATION.
 HI KANEOHE BAY HI MCB           06  PHYSICAL FITNESS            8,725
                                      CENTER.
 HI KANEOHE BAY HI MCB          604  HANGAR 102 FIRE             3,709
                                      PROTECTION.
 HI KANEOHE BAY HI MCB          751  BACHELOR ENLISTED          17,987
                                      QUARTERS.
 HI KANEOHE BAY HI MCB          809  PARKING STRUCTURE...       11,770
 HI PEARL HARBOR HI NS          582  ADMINISTRATIVE              6,008
                                      OFFICE.
 HI PEARL HARBOR HI NS          587  DEPERMING PIER SEE         24,498
                                      159-30.
 HI PEARL HARBOR HI NS          621  BRAVO DOCK                  7,902
                                      IMPROVEMENTS.
 HI PEARL HARBOR HI NS          625  BQ/CMD BLDGS               13,829
                                      SECURITY SYS.
 HI PEARL HARBOR HI NS          629  RECONSTRUCT WHARF          31,610
                                      (FI).
 HI PEARL HARBOR HI PWC         704  RELIEF SEWER LINE           4,113
                                      SO. AVE.
 ID BAYVIEW ID                  207  PIER & BOATHOUSES...        3,515
     NSURFWARCENDET
 IL GREAT LAKES IL NTC          664  EXTEND RECRUIT              2,854
                                      SUPPORT CTR.
 IL GREAT LAKES IL NTC          742  RTC BARRACKS........       32,433
 IL GREAT LAKES IL NTC          743  RTC BARRACKS........       34,166
 IL GREAT LAKES IL NTC          744  RTC BARRACKS........       33,441
 IN CRANE IN                    310  PROD ASSURANCE MGMT         9,798
     NAVSURFWARCENDIV                 FAC.
 IN CRANE IN                    318  ORDNANCE T&E COMPLEX        9,136
     NAVSURFWARCENDIV
 IN CRANE IN                    321  WATER DIST SYS REPL.        5,927
     NAVSURFWARCENDIV
 IN CRANE IN                    322  SEWER SYSTEM                1,072
     NAVSURFWARCENDIV                 REPLACEMENT.
 IN CRANE IN                    327  JOINT ORD ENG&LOG           9,838
     NAVSURFWARCENDIV                 MGMT FAC.
 ME KITTERY ME                  264  ENGINEERING MGMT            1,064
     PORTSMOUTH NSY                   BLDG IMPV.
 ME KITTERY ME                  266  STRUCTURAL SHOP            14,224
     PORTSMOUTH NSY                   CONSOL.
 ME KITTERY ME                  267  TRANSDUCER TEST &           7,507
     PORTSMOUTH NSY                   CALB FAC.
 ME KITTERY ME                  269  EMERGENCY RESPONSE          4,580
     PORTSMOUTH NSY                   FAC.
 MD BETHESDA MD                 102  SHIP PROTECT                8,693
     NSWCCARDEROCK                    DYNAMICS LAB.
 MD INDIAN HEAD MD              120  JOINT CAD/PAD TEST         14,305
     NSWCTRDIV                        FAC.
 MD INDIAN HEAD MD              144  CONFINED BURN              16,200
     NSWCTRDIV                        FACILITY.
 MD PATUXENT RIVER MD           536  AIRCRAFT SYS LAB            3,362
     AWCACDV                          ADDN.
 MD PATUXENT RIVER MD           729  ATC & LS INTEGRATION        5,846
     AWCACDV                          LAB.
 MD PATUXENT RIVER MD           966  AIR OPS CONTROL             5,855
     AWCACDV                          TOWER.
 MD PATUXENT RIVER MD           978  ID SYSTEM                  16,483
     AWCACDV                          ENGINEERING LAB.
 MS MERIDIAN MS NAS             293  STUDENT UN/SNGL             3,435
                                      SAILOR FAC.
 MS PASCAGOULA MS NS           120A  BEQ--SHIPBD ASHR (03        9,117
                                      ADD).
 MS PASCAGOULA MS NS            122  WEAPONS WHARF.......       10,273
 NV FALLON NV NAS               362  RANGE IMPROVEMENTS          3,081
                                      TGTB-20.
 NC CAMP LEJEUNE NC MCB        1030  ENLISTED DINING             9,410
                                      FACILITY.
 NC CAMP LEJEUNE NC MCB        1047  BACHELOR ENLISTED          14,781
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB        1086  4TH MEB COMMAND             7,345
                                      CENTER.
 NC CAMP LEJEUNE NC MCB        1089  4TH MEB OPERATIONS         13,039
                                      COMPLEX.
 NC CAMP LEJEUNE NC MCB         882  ENLISTED DINING             9,483
                                      FACILITY.
 NC CAMP LEJEUNE NC MCB         945  EOD OPERATIONAL             4,060
                                      FACILITY.
 NC CHERRY POINT NC             985  V22 GEAR BX REP &           9,064
     NADEP                            TEST FAC.
 NC CHERRY POINT NC             986  V22 ROTOR BLADE REPL        3,895
     NADEP                            FAC.
 PA MECHANICSBURG               10A  NAVSUPSYSCOMHQ FACS        16,886
     NAVSUPPACT                       INC II.
 PA NSY NORFOLK DET             610  INSIDE MACHINE SHOP        13,668
     PHILA PA                         IMPVS.
 PA PHILADELPHIA PA             205  FS ELECTRIC DRIVE           9,879
     NSWCSSES                         TEST FAC.
 RI NEWPORT RI NAVSTA           452  CBQ.................       31,756
 RI NEWPORT RI NAVWARCOL         10  NATIONAL SECURITY          35,142
                                      RES CTR.
 RI NEWPORT RI NS               451  BEQ REPLACMENT             22,659
                                      (BOOST).
 RI NEWPORT RI NS              454A  BEQ REPLACMENT              4,435
                                      (NAPS).
 SC BEAUFORT SC MCAS            414  F/A-18 SUPPORT FAC          6,604
                                      (PH II).
 SC BEAUFORT SC MCAS            425  CONSOLIDATED COMM           6,322
                                      FACILITY.
 SC BEAUFORT SC MCAS            427  GROUND SUPPORT EQUIP        3,378
                                      SHOP.
 SP ROTA SP NCB CB              690  BACHELOR ENLISTED          15,202
     CPMITCHELL                       QUARTERS.
 TN MILLINGTON TN               357  BLDG 750 ALT/EMPRIS/        4,266
     SUPPACT                          DPRIS.
 VA DAHLGREN VA NSWCTR          274  FITNESS CENTER              3,766
     DIV                              ADDITION.
 VA LITTLE CREEK VA             203  PIER 18 & 19               21,498
     NAVPHIBSE                        REPLACEMENT.
 VA LITTLE CREEK VA             223  REPLACE PIERS 58 &         19,756
     NAVPHIBSE                        59.
 VA LITTLE CREEK VA             386  MOB DIVING SALVGE           4,781
     NAVPHIBSE                        UNT OPS.
 VA NORFOLK VA                 830B  CLF/TYCOM HQ FACS          35,562
     LANTFLTHQSPACT                   INC III.
 VA NORFOLK VA NS               154  STRENGTHEN ACFT             3,952
                                      PARKG APRN.
 VA NORFOLK VA NS               155  RECONSTRUCT TAXIWAY         4,741
                                      D.
 VA NORFOLK VA NS               297  BEQ--SHIPBOARD             28,449
                                      ASHORE INC I.
 VA NORFOLK VA NS               303  BEQ--SHIPBOARD             28,449
                                      ASHORE INC I.
 VA NORFOLK VA NS               399  CARGO TERMINAL FAC         33,191
                                      INC I.
 VA NORFOLK VA NS               495  CHAMBERS FIELD              4,234
                                      MAGAZINE.
 VA NORFOLK VA NS               527  BEQ HOMEPORT ASHORE        31,627
                                      INC I.
 VA NORFOLK VA NS               701  FIRE STATION........        3,491
 VA PORTSMOUTH VA              239A  BEQ TRANSIENT INC II       24,530
     NORFOLK NSY
 VA PORTSMOUTH VA               382  DRYDOCK #8 EXTENSION       21,982
     NORFOLK NSY
 VA PORTSMOUTH VA               391  SHIP REPAIR PIER           13,668
     NORFOLK NSY                      REPL.
 VA YORKTOWN VA                  34  CONSOL CARGO                3,871
                                      HANDLING AREA.
 VA YORKTOWN VA NWS             215  RECAP IGLOO                 6,008
                                      MAGAZINES.
 VA YORKTOWN VA NWS            387A  NORTH TRES&PIER REPL       14,443
                                      (II).
 VA YORKTOWN VA NWS             397  FAMILY SERVICES             1,580
                                      CENTER.
 WA BANGOR WA NAVSUBASE         379  ELEC DIST UPGRADES..        2,532
 WA BANGOR WA NAVSUBASE         380  STEAM DIST                  4,959
                                      MODERNIZATION.
 WA BANGOR WA SWF PAC           813  SPECIAL WEAPONS             2,451
                                      MAGAZINES.
 WA BREMERTON WA NS             305  BEQ HOMPORT ASHORE         19,595
                                      PH I.
 WA BREMERTON WA NS             307  BEQ--SHIPBOARD             20,224
                                      ASHORE.
 WA BREMERTON WA NS             311  CONSOLIDATE FUEL            4,266
                                      FACILITY.
 WA EVERETT WA NAVSTA           155  BEQ HOMEPORT ASHORE        28,224
                                      (PH I).
 WA KEYPORT WA NUWC DIV         382  UNDERSEA VEH SHIP/          5,451
                                      RCV FAC.
 WA PUGET SOUND WA              347  PRODUCTION SHOP            22,127
     NAVSHIPYD                        CNSLDTN.
 WA PUGET SOUND WA              356  CVN MAINT PIER             60,799
     NAVSHIPYD                        REPLACEMENT.
 WA PUGET SOUND WA              360  ADMINISTRATIVE             10,693
     NAVSHIPYD                        OFFICE.
 WA PUGET SOUND WA              367  SEISMIC IMPROVEMENTS        7,669
     NAVSHIPYD
 WA WHIDBEY IS WA NAS           129  JP-8 TRUCK LOADING          2,307
                                      FAC.
 WA WHIDBEY IS WA NAS           155  CORROSION CONTROL          11,378
                                      HANGAR.
 WA WHIDBEY IS WA NAS           156  COMBAT A/C LOADING         16,758
                                      AREA.
 WA WHIDBEY IS WA NAS           159  ACADEMIC INSTR                669
                                      BUILDING.
 WA WHIDBEY IS WA NAS           160  WASHRACK (INDOOR)...        7,194
 BA NAVSUPPACT BAHRAIN          906  AVIATION FACILITIES.       33,254
 DG DIEGO GARCIA                113  HAZARDOUS WASTE               629
     NAVSUPPFAC                       FACILITY.
 DG DIEGO GARCIA                124  WATER SYSTEM                7,902
     NAVSUPPFAC                       IMPROVES.
 GR SOUDA BAY CRETE             744  QOL UPGRADES........       11,736
     NAVSUPACT
 GU GUAM MI                     436  DRDGING ROMEO/SIERRA/      15,572
     COMNAVMARIANAS                   BRAVO.
 IT LAMADDALENA IT NSO          992  BEQ HOMEPORT ASHORE.       18,968
 IT SIGONELLA ITALY NAS         641  ADMINISTRATIVE             20,517
                                      OFFICE.
 UK LONDON UK NAVACTS           701  HQ MODERNIZATION I..       11,935
VAR X/MCON DESIGN FUNDS         217  MCON DESIGN FUNDS         111,710
                                      (N4).
VAR X/MCON DESIGN FUNDS         507  MCON DSGN FNDS--           17,831
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         207  UNSPECIFIED MINOR          13,164
     CONST                            CONSTR.
                                                          --------------
          FISCAL YEAR     .........  ....................    1,959,375
           2007 TOTAL
                                                          ==============
           PY 2008
 AZ YUMA AZ MCAS                520  FIXED WING FUELING          4,042
                                      APRON.
 CA BARSTOW CA MCLB             608  BUILDING                   25,368
                                      MODERNIZATION.
 CA BARSTOW CA MCLB             930  FLD MAINT SHOP......        9,264
 CA CAMP PENDLETON CA            09  ISR CAMP INTEL             11,312
     MCB                              BATTALION.
 CA CAMP PENDLETON CA            43  BACHELOR ENLISTED          22,608
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            90  BACHELOR ENLISTED          11,183
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA           110  RECL FOR MARG BASIN        17,115
     MCB                              (PH4).
 CA CHINA LAKE CA                61  SURFACE TARGETS DEV         4,649
     NAWCWPNDIV                       LAB.
 CA CHINA LAKE CA               102  SHIPS/MAR SYS               6,966
     NAWCWPNDIV                       INTERGR LAB.
 CA CHINA LAKE CA               126  WAREHOUSE (SNI).....        7,378
     NAWCWPNDIV
 CA CHINA LAKE CA               253  MULTI-PURPOSE REC          14,310
     NAWCWPNDIV                       CEN SNI.
 CA CHINA LAKE CA               104  CONSOLID A/F ADMIN         11,002
     NAWCWPNSDIV                      FAC.
 CA CHINA LAKE CA               105  RECONSTRUCT RUNWAY/         6,887
     NAWCWPNSDIV                      TAXIWAY.
 CA CHINA LAKE CA               359  AIR TRAFFIC CONTROL         2,273
     NAWCWPNSDIV                      TOWER.
 CA CORONA CA                    08  GUIDED MISSILE LAB..       10,623
     NAVSURFWARCENDI
 CA CORONADO CA                 142  OPERATIONS FACILITY.        4,434
     NAVPHIBASE
 CA MIRAMAR CA MCAS             110  INSTALL HVAC TO BLDG        3,289
                                      9277.
 CA MONTEREY CA NPGS           188A  EDUCATIONAL FAC REPL       33,119
                                      II.
 CA NORTH ISL CA                729  SUPPORT EQUIP MAT           2,393
     NAVAIRDEPOT                      STAGING.
 CA POINT MUGU CA                85  JET ENGINE TEST CELL        8,610
     NAVBASE
 CA PORT HUENEME CA CBC         479  FITNESS CENTER REPL.        7,722
 CA PORT HUENEME CA CBC         542  MILITRY READINESS           6,044
                                      TRNG FAC.
 CA SAN DIEGO CA NAS            180  ENVIRONMENTAL               2,583
     NORTH IS                         LABORATORY.
 CA SAN DIEGO CA NAS            657  REPLACE TAXIWAY.....        9,479
     NORTH IS
 CA SAN DIEGO CA NAS            745  APPLIED INSTRUCTION        12,062
     NORTH IS                         BLDG.
 CA SAN DIEGO CA NAS            767  REPLACE MWR COMPLEX.       12,483
     NORTH IS
 CA SAN DIEGO CA NAS            841  BEQ--SHIPBOARD             33,413
     NORTH IS                         ASHORE.
 CA SAN DIEGO CA NAS            842  BEQ--SHIPBOARD             33,413
     NORTH IS                         ASHORE.
 CA SAN DIEGO CA NAS            864  AUTO VEHICLE MAINT          8,747
     NORTH IS                         SHOP.
 CA SAN DIEGO CA NAVSTA         407  BEQ HOMEPORT ASHORE.       38,562
 CA SAN DIEGO CA NAVSTA         410  LEGAL SERVICES              7,128
                                      FACILITY.
 CA SAN DIEGO CA NSB            144  FIRE PROTECTION.....        2,066
 CA TWENTYNINE PALMS CA         175  FIRE STA/PROVOST            4,563
     MAGCC                            MARSHALL.
 CA TWENTYNINE PALMS CA         686  BACHELOR ENLISTED          21,514
     MAGCC                            QUARTERS.
 CA TWENTYNINE PALMS CA         906  BEQ & POV PARKING          25,368
     MAGCC                            STRUCT.
 CA TWENTYNINE PALMS CA         908  BACHELOR ENLISTED          17,046
     MAGCC                            QUARTERS.
 CT NEW LONDON CT NSB           404  SWIMMING POOL               6,715
                                      REPLACEMENT.
 CT NEW LONDON CT NSB           464  PIER 31 REPLACEMENT.       20,421
 DC WASHINGTON DC                22  CONVERT BUILDING W-         6,793
     COMNAVDIST                       101.
 DC WASHINGTON DC               351  REG INTRUSION DETECT        4,555
     COMNAVDIST                       SYS.
 DC WASHINGTON DC               357  PERIMETER WALL--            3,711
     COMNAVDIST                       ANACOS/BELV.
 FL JACKSONVILLE FL NAS         269  LAND PURCHASE.......        1,790
 FL KEY WEST FL NAF             579  POST OFFICE.........        3,038
 FL KEY WEST FL NAF             901  AT/FP...............        1,790
 FL KEY WEST FL NAF             903  CVQ & GALLEY AT/FP          4,279
                                      UPGRADE.
 FL MAYPORT FL NS               192  ACADEMIC INSTRUCTION        1,024
                                      BLDG.
 FL MAYPORT FL NS              773A  BEQ--SHIPBOARD             22,040
                                      ASHORE INCII.
 FL MAYPORT FL NS               888  UPGRADE WHARF B.....       21,851
 FL PENSACOLA FL NAS            720  CARRIER DREDGING....       50,821
 GA ATHENS GA NSCS              998  POUND HALL                  6,182
                                      RENOVATIONS.
 GA KINGS BAY GA SWFLANT        587  MSL TRNSPORTER              3,797
                                      SAFEHAVENS.
 HI BARKING SANDS HI            410  CONSOL RANGE CTL           13,500
     PMRF                             CENTER.
 HI BARKING SANDS HI            413  SECURTY/PERIMTR             6,749
     PMRF                             FENCE/WALL.
 HI LUALUALEI HI NM             167  SECURITY LIGHTING...        4,890
 HI PEARL HARBOR HI FISC        156  CONSOL AUTOMATED           19,491
                                      WAREHOUSE.
 HI PEARL HARBOR HI FISC        189  SHORE PWR IMPVS            20,250
                                      HOTEL/KILO.
 HI PEARL HARBOR HI FISC        195  SECURTY/PERIMTR             8,858
                                      FENCE/WALL.
 HI PEARL HARBOR HI NS          124  RECONSTRUCT WHARF S-       33,499
                                      1.
 HI PEARL HARBOR HI NS          150  BERTHING WHARF             15,694
                                      IMPROV.
 HI PEARL HARBOR HI NS          596  CONSOLIDATE TRNG           27,248
                                      CAMPUS.
 HI PEARL HARBOR HI NS          620  SECURITY UPGRADE           10,124
                                      (MAKALAPA).
 HI PEARL HARBOR HI NS          622  MIKE IMPROVEMENTS...        4,218
 HI PEARL HARBOR HI NSY          98  CONSOLIDATE CRANE           5,063
                                      DEPT.
 HI PEARL HARBOR HI NSY         315  DRYDOCK.............       10,297
 HI PEARL HARBOR HI PWC         706  UTILITIES SECURITY          3,797
                                      IMPVS.
 HI PEARL HARBOR HI PWC         709  CONSOL/SECTY IMPVS         16,874
                                      (INCR I).
 IL GREAT LAKES IL NTC          485  HVAC UPGRADE BLDG I.        7,232
 IL GREAT LAKES IL NTC          629  RTC PASS/SECURITY           1,102
                                      BUILDING.
 IL GREAT LAKES IL NTC          713  BEQ A SCHOOL               29,392
                                      REPLACEMENT.
 IL GREAT LAKES IL NTC          714  BEQ A SCHOOL               29,943
                                      REPLACEMENT.
 IL GREAT LAKES IL NTC          773  RELOCATE SECURITY           3,737
                                      FACILITY.
 IL GREAT LAKES IL PWC          533  PUBLIC WORKS SHOPS..       11,915
 IL GREAT LAKES IL PWC          753  WASTEWATER TREATMENT        5,192
                                      FAC.
 IN CRANE IN                    906  ANTITERR/FORCE PROT         9,995
     NAVSURFWARCENDIV                 IMPV.
 ME BRUNSWICK ME NAS            175  WEAPONS MAGAZINES           3,185
                                      REPL.
 ME KITTERY ME                  268  WATERFRONT SUPPORT         16,789
     PORTSMOUTH NSY                   FAC.
 MD ANNAPOLIS MD NAVACAD       165A  CENTRAL CHILLER SYS         5,183
                                      UPGRD.
 MD BETHESDA MD                 901  SECURITY FACILITY...        4,890
     NSWCCARDEROCK
 MD INDIAN HEAD MD              154  JOINT CAD/PAD               7,263
     NSWCTRDIV                        TRANSFER FAC.
 MD INDIAN HEAD MD              166  WEAPONS ENGINEERING         8,377
     NSWCTRDIV                        FAC.
 MD INDIAN HEAD MD              167  RESEARCH LAB COMPLEX       13,629
     NSWCTRDIV
 MD INDIAN HEAD MD              171  FORCE PROTECTION           11,812
     NSWCTRDIV                        IMPVS.
 MD PATUXENT RIVER MD           103  RDT&E COMMAND OPS          11,984
     AWCACDV                          CENTER.
 MD PATUXENT RIVER MD           107  ROTARY WING TEST            6,208
     AWCACDV                          SUPT FAC.
 MD PATUXENT RIVER MD           110  CONSOL A/C INTER           17,796
     AWCACDV                          MAINT FAC.
 MD PATUXENT RIVER MD           115  FINGER PIER REPL,           3,349
     AWCACDV                          KEY WEST.
 MD PATUXENT RIVER MD           123  SECURE MAIL FACILITY        1,722
     AWCACDV
 MD PATUXENT RIVER MD           128  BATTLE FORCE SUPPORT       29,401
     AWCACDV
 MD PATUXENT RIVER MD           960  ACFT APRON EXPAN &          8,815
     AWCACDV                          IMPR.
 MD PATUXENT RIVER MD           961  ROTARY WING TEST            6,346
     AWCACDV                          FACILITY.
 MD PATUXENT RIVER MD           981  HIGH EXPLOSIVE              3,591
     AWCACDV                          MAGAZINES.
 MD PATUXENT RIVER MD           986  FORCE PROT IMPV            11,303
     AWCACDV                          GUARD HSE.
 MD PATUXENT RIVER MD           987  RANGE THEODOLITE            3,340
     AWCACDV                          TRACK STN.
 MS GULFPORT MS                 782  BUILDERS APPLIED            6,500
     NAVCONSTRACEN                    INST FAC.
 MS GULFPORT MS                 784  CONSOLIDATED DRT            3,883
     NAVCONSTRACEN                    FACILITY.
 MS MERIDIAN MS NAS             296  RENOVATE BUILDING           1,636
                                      100.
 MS MERIDIAN MS NAS             299  PUBLIC SAFETY               1,541
                                      FACILITY.
 MS MERIDIAN MS NAS             310  AIRFIELD PERIMETER          4,727
                                      FENCING.
 NJ LAKEHURST NJ NAWC           999  PERIM & IS SECURITY         3,641
     ACFTDIV                          IMPVS.
 NC CAMP LEJEUNE NC MCB        1017  BACHELOR ENLISTED          15,247
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB        1033  CONSOL ACADEMIC BLDG       12,406
                                      (PH2).
 NC CAMP LEJEUNE NC MCB        1042  ARMORIES (2D MEF)...        4,063
 NC CAMP LEJEUNE NC MCB        1372  BACHELOR ENLISTED          15,247
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB        1381  BACHELOR ENLISTED          17,718
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB         920  MAINT SHOP/UTIL             3,953
                                      PLATOON.
 NC CHERRY POINT NC MCAS        130  MOTOR TRANSPORT &           7,806
                                      COM SHOP.
 NC CHERRY POINT NC             981  CENTRAL COMP AIR            6,939
     NADEP                            FACILITY.
 NC NEW RIVER NC MCAS           526  AIRCRAFT HANGAR.....       11,915
 PA MECHANICSBURG               10B  NAVSUP HQ FACS INCR        21,773
     NAVSUPPACT                       III.
 PA NSY NORFOLK DET             611  PRODUCTION SHOP             7,844
     PHILA PA                         MODERN.
 PA PHILADELPHIA PA             106  VIRT INTEG SHIP             6,122
     NSWCSSES                         TSTNGFAC.
 RI NEWPORT RI NAVSTA           370  TRAINING POOL               3,331
                                      REPLACEMENT.
 RI NEWPORT RI NAVSTA           453  REPL FUEL OIL STOR          2,859
                                      TANKS.
 RI NEWPORT RI NAVSTA           455  NAVAL JUSTICE SCHOOL        5,622
                                      ALTS.
 RI NEWPORT RI NUSWCTR           75  SUB PAYLOADS/INTEGR         8,385
     DIV                              LAB.
 RI NEWPORT RI NUSWCTR           76  U/S LAUNCHER/MISLE          8,351
     DIV                              SYS LAB.
 SC BEAUFORT SC MCAS            424  AICUZ LAND                 13,611
                                      ACQUISITION.
 SC CHASN NAVAL WPN              53  ENGINEERNG FUNCTION         4,149
     STATION                          CONSOL.
 SC PARRIS ISLAND SC            336  SUPT BN BARRACKS &          4,218
     MCRD                             OPS CTR.
 TN MILLINGTON TN               352  ACADEMIC INSTRUCTION        3,340
     SUPPACT                          BLDG.
 TN MILLINGTON TN               359  HAZARDOUS WASTE STRG          757
     SUPPACT                          FAC.
 TX CORPUS CHRISTI TX           353  AVIATION TRAINER            5,838
     NAS                              FACILITY.
 TX CORPUS CHRISTI TX           435  CONTROL TOWER.......        8,438
     NAS
 TX INGLESIDE TX NS              72  COMMUNITY SUPPORT           5,209
                                      FACILITY.
 TX KINGSVILLE TX NAS           192  CRASH STRIP RUNWAY..       16,995
 VA DAHLGREN VA                  17  PHYS SECTY ENHANCE          6,233
     NAVSPACECOM                      (CENT).
 VA DAHLGREN VA NSWCTR          295  MARITIME DIRECTED          11,812
     DIV                              ENGY CTR.
 VA DAHLGREN VA NSWCTR          300  EMERGENCY OPERATIONS        4,218
     DIV                              CTR.
 VA DAHLGREN VA NSWCTR          305  INFRAST ASSURANCE           5,399
     DIV                              FAC ADDN.
 VA LITTLE CREEK VA             205  SWDG SUPPORT                1,937
     NAVPHIBSE                        FACILITY.
 VA LITTLE CREEK VA             227  REP/UPGR PIER &            17,546
     NAVPHIBSE                        QUAYWALL.
 VA LITTLE CREEK VA             257  PIERS 14 & 15              19,741
     NAVPHIBSE                        REPLACEMENT.
 VA LITTLE CREEK VA             261  BOAT REPAIR FACILITY        3,547
     NAVPHIBSE
 VA NORFOLK VA                 830C  CLT/TYCOM HQ FAC           32,836
     LANTFLTHQSPACT                   (INCR IV).
 VA NORFOLK VA NS                49  PIER 3 REPLACEMENT..       41,996
 VA NORFOLK VA NS                51  PIER 10 REPLACEMENT.       38,725
 VA NORFOLK VA NS              297A  BEQ--SHIPBOARD             25,311
                                      ASHORE INCII.
 VA NORFOLK VA NS              303A  BEQ--SHIPBOARD             25,311
                                      ASHORE INCII.
 VA NORFOLK VA NS               311  BEQ HOMEPORT ASHORE        28,410
                                      INC I.
 VA NORFOLK VA NS               391  PIER 15 INCR I......       33,748
 VA NORFOLK VA NS              527A  BEQ--SHIPBOARD             25,311
                                      ASHORE INCII.
 VA NORFOLK VA NS               668  FLEET OPERATIONS           30,881
                                      CENTER.
 VA NORFOLK VA NS               765  POLICE STATION......        2,531
 VA NORFOLK VA NS               977  BRIG RENOVATIONS....        4,132
 VA OCEANA VA NAS               401  HANGAR 200 UPGRADE..        1,265
 VA OCEANA VA NAS               936  MAGAZINE REPLACEMENT        1,076
 VA PORTSMOUTH VA               353  FIRE DEPARTMENT             5,063
     NORFOLK NSY                      BUILDING.
 VA PORTSMOUTH VA               377  PWC SUPPORT FACILITY        3,125
     NORFOLK NSY                      ALTS.
 VA PORTSMOUTH VA               383  CONTROLLED                 32,208
     NORFOLK NSY                      INDUSTRIAL FAC.
 VA PORTSMOUTH VA               513  WTRFRNT PROD SUPPORT       18,562
     NORFOLK NSY                      FAC.
 VA QUANTICO VA                 479  INFRASTRUCTURE              8,158
     MCCOMBDEV CMD                    RUSSELL RD.
 VA YORKTOWN VA                 389  TRESTLE & PIER REPL        29,530
                                      INC I.
 VA YORKTOWN VA NWS             213  RECAP IGLOO                 6,500
                                      MAGAZINES.
 VA YORKTOWN VA NWS             381  FELGATES CREEK              1,145
                                      BRIDGE REPL.
 VA YORKTOWN VA NWS             385  CHILD DEVELOPMENT           8,438
                                      CENTER.
 WA BANGOR WA SWF PAC           311  UTIL & SITE IMPVS           2,850
                                      (PH IV).
 WA BANGOR WA SWF PAC           973  LA PROCESSING & STG        45,560
                                      CMPLX.
 WA BANGOR WA SWF PAC           974  HARDENED MISSILE           71,716
                                      MAGAZINE.
 WA EVERETT WA NAVSTA           151  AEGIS TRAINING              4,391
                                      FACILITY.
 WA EVERETT WA NAVSTA          155A  BEQ HOMEPORT ASHORE        30,132
                                      (PH II).
 WA INDIAN ISLAND WA            335  MISSILE MAGAZINES...        8,902
     NAVMAG
 WA INDIAN ISLAND WA            336  MISSILE MAGAZINES...        7,929
     NAVMAG
 WA KEYPORT WA NUWC DIV         392  EMERGENCY COMMAND           6,413
                                      CENTER.
 WA PUGET SOUND WA              366  PLANNING YARD&SHOP          8,858
     NAVSHIPYD                        STG FAC.
 WA PUGET SOUND WA              368  WELDER/SHOPFITTER          18,312
     NAVSHIPYD                        SHOP IMP.
 WA PUGET SOUND WA              374  DRYDOCK #6 CAISSON         12,002
     NAVSHIPYD                        REPLMNT.
 WA WHIDBEY IS WA NAS           119  YOUTH CENTER........        3,814
 DG DIEGO GARCIA                135  THEATER.............        7,258
     NAVSUPPFAC
 GU GUAM MI                     425  HIGH PERFORMANCE           22,532
     COMNAVMARIANAS                   MAGS.
 GU GUAM MI                     446  GYMNASIUM...........        9,109
     COMNAVMARIANAS
 GU GUAM MI                     462  BEQ RENOVATIONS.....        8,351
     COMNAVMARIANAS
 IC KEFLAVIK ICELAND NAS        565  BASE PERIMETER SECTY        2,502
                                      FENCE.
 IT NAPLES ITALY NSA            218  COMMUNITY FACILITIES       15,261
                                      GAETA.
 IT SIGONELLA ITALY NAS         650  BASE OPERATIONS            16,119
                                      SUPPORT IV.
 PR ROOSEVELT RDS PR NS         143  CESE WAREHOUSE......        4,089
 PR ROOSEVELT RDS PR NS         526  CONCRETE BARRIER/           1,265
                                      BOXER DR.
 PR ROOSEVELT RDS PR NS         620  TACTICAL SUPPORT            7,844
                                      CENTER.
 SP ROTA SPAIN NS               648  PUBLIC WORKS COMPLEX       18,497
 SP ROTA SPAIN NS               662  AIR OPERATIONS              4,625
                                      UPGRADES.
 UK LONDON UK NAVACTS           702  HQ MODERNIZATION II.        7,823
 UK LONDON UK NAVACTS           703  UXBRIDGE RELOCATION        19,942
                                      I.
 UK LONDON UK NAVACTS           704  UXBRIDGE RELOCATION        20,574
                                      II.
VAR X/MCON DESIGN FUNDS         218  MCON DESIGN.........      125,174
VAR X/MCON DESIGN FUNDS         508  MCON DSGN FNDS--           28,641
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         208  UNSPECIFIED MINOR          15,797
     CONST                            CONSTR.
VAR Z/VARLOCS MILCON            251  EARS LAND BASED SITE       10,969
                                                          --------------
        FISCAL YEAR 2008  .........  ....................    2,377,878
         TOTAL
                                                          ==============
           PY 2009
 AZ YUMA AZ MCAS                378  SECURITY OPS               10,762
                                      FACILITY.
 CA BARSTOW CA MCLB             167  BACHELOR ENLISTED          10,228
                                      QUARTERS.
 CA BARSTOW CA MCLB             203  INDOOR PHYSICAL FIT         6,496
                                      CTR.
 CA BARSTOW CA MCLB             403  CONSOLIDATED SEC FAC        1,454
 CA BARSTOW CA MCLB             935  HQ BLDG FOR FLEET           2,889
                                      SUPT CTR.
 CA BARSTOW CA MCLB             939  ENGINE DYNAMOMETER          3,761
                                      FAC.
 CA CAMP PENDLETON CA            78  TACTICAL VAN PAD            2,734
     MCAS                             EXPANSION.
 CA CAMP PENDLETON CA            06  DEMO STP SOUTH SYS          5,507
     MCB                              (PH 5).
 CA CAMP PENDLETON CA            25  BACHELOR ENLISTED          14,921
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            28  BACHELOR ENLISTED          12,449
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA            32  MARDIV COMMAND              5,507
     MCB                              HEADQUARTER.
 CA CAMP PENDLETON CA            65  MESS HALL, DEL MAR..       15,135
     MCB
 CA CAMP PENDLETON CA            79  5 MILLION GALLON            7,523
     MCB                              RESERVOIR.
 CA CAMP PENDLETON CA            94  BACHELOR ENLISTED          24,229
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA          101A  BACHELOR ENLISTED          16,152
     MCB                              QUARTERS.
 CA CAMP PENDLETON CA           113  WATER/WW TDS RED FAC       30,685
     MCB                              (B-PH3.
 CA CAMP PENDLETON CA          569A  FIRE STATION, PULGAS        2,561
     MCB
 CA CAMP PENDLETON CA           604  CHILD DEVELOPMENT           7,825
     MCB                              CENTER.
 CA CHINA LAKE CA               106  CONSOLIDATE AIRFIELD        7,611
     NAWCWPNDIV                       FAC.
 CA CHINA LAKE CA               111  PUBLIC WORKS               15,580
     NAWCWPNDIV                       COMPOUND.
 CA CHINA LAKE CA               356  CHILD DEVELOPMENT           4,178
     NAWCWPNDIV                       CENTER.
 CA CHINA LAKE CA               133  BACHELOR QUARTERS...       16,841
     NAWCWPNSDIV
 CA CORONADO CA                 148  MISSILE COMPT SLING         6,767
     NAVPHIBASE                       TESTER.
 CA CORONADO CA                 765  LIBRARY/COMMUNITY           5,623
     NAVPHIBASE                       BLDG.
 CA EL CENTRO CA NAF            232  AVIATION EASEMENTS..       10,180
 CA EL CENTRO CA NAF            242  SURVEILLANCE RADAR          1,182
                                      INSTALL.
 CA LEMOORE CA NAS              218  AIR COMBAT TRNG             3,781
                                      FACILITY.
 CA MIRAMAR CA MCAS              67  CONSTR RUNWAY 6L           15,580
                                      OVERRUN.
 CA MIRAMAR CA MCAS             124  GROUND COMBAT TRNG          3,335
                                      RANGE.
 CA MIRAMAR CA MCAS             126  POLICE STATION......        3,335
 CA NAS PT MUGU CA              255  LAND ACQ IN ESQD ARC        1,901
     NAVAIRWARC
 CA POINT MUGU CA               281  AIRCRAFT TEST STAND           689
     NAVBASE                          PAD.
 CA POINT MUGU CA               505  GENERAL WAREHOUSE,          9,046
     NAVBASE                          NAVY.
 CA SAN DIEGO CA FASWTC         387  GYMNASIUM...........        4,082
     PAC
 CA SAN DIEGO CA NAS            749  S-3/C-2 HANGAR......       33,750
     NORTH IS
 CA SAN DIEGO CA NAS            759  THIRD ST EXTENSION/        17,956
     NORTH IS                         GATE.
 CA SAN DIEGO CA NAS            844  HANGAR MODERNIZATION       22,522
     NORTH IS
 CA SAN DIEGO CA NAVSTA         105  BUILDING 12                20,932
                                      CONVERSION.
 CA SAN DIEGO CA NAVSTA         300  BRIDGE REPLACEMENT..        1,648
 CA SAN DIEGO CA NAVSTA         331  UPGRADE PIER 6......       22,804
 CA SAN DIEGO CA NAVSTA         415  BEQ TRANSIENT.......       43,426
 CA SAN DIEGO CA NSB            138  BEQ UPGRADE.........        4,750
 CA TWENTYNINE PALMS CA         904  BACHELOR ENLISTED          21,446
     MAGCC                            QUARTERS.
 CT NEW LONDON CT NSB            80  VEHICLE MAINTENANCE         1,901
                                      FAC.
 CT NEW LONDON CT NSB           392  SUBMARINE BERTHING          7,223
                                      IMPRVS.
 CT NEW LONDON CT NSB           466  REPLACE PIER 12.....       26,604
 CT NEW LONDON CT NSB           467  REPLACE PIER 10.....       23,753
 CT NEW LONDON CT NSB           469  REPLACE PIER 33.....       25,654
 DC WASHINGTON DC               332  ANACOSTIA SWIMMING          4,750
     COMNAVDIST                       POOL.
 FL JACKSONVILLE FL NAS         216  COMBINE NCF OPS             6,748
                                      FACILITY.
 FL JACKSONVILLE FL NAS         267  WHITEHOUSE OLF GUARD        4,750
                                      HOUSE.
 FL JACKSONVILLE FL             175  INDUSTRIAL MATRL            2,850
     SUPSHIP                          COMPLEX.
 FL KEY WEST FL NAF             677  HQS CONSOLIDATED FAC        8,930
 FL MAYPORT FL NS               999  UPGRADE WHARF E.....       10,830
 FL PENSACOLA FL NAS            727  HANGAR 1853                19,197
                                      RECAPITALZTN.
 FL PENSACOLA FL NAS            728  HANGAR 1854                22,804
                                      RECAPITALZTN.
 HI BANGOR WA SWF PAC           312  UTIL & SITE IMPVS           3,500
                                      (PH V).
 HI BARKING SANDS HI            407  CONSOL OPS ADMIN           13,496
     PMRF                             CENTER.
 HI BARKING SANDS HI            408  CONSOLIDATED SUPPLY         7,223
     PMRF                             COMPLX.
 HI KANEOHE BAY HI MCB          703  HAZ MATL/WASTE              5,419
                                      CONSOL FAC.
 HI KANEOHE BAY HI MCB          749  BACHELOR ENLISTED          24,151
                                      QUARTERS.
 HI KANEOHE BAY HI MCB          750  BACHELOR ENLISTED          22,047
                                      QUARTERS.
 HI KANEOHE BAY HI MCB          758  BACHELOR ENLISTED          21,514
                                      QUARTERS.
 HI KANEOHE BAY HI MCB          770  BACHELOR ENLISTED          22,154
                                      QUARTERS.
 HI KANEOHE BAY HI MCB          774  PTA STORAGE                 4,712
                                      FACILITIES.
 HI LUALUALEI HI NM             138  FIRE STATION........        2,375
 HI PEARL HARBOR HI FISC        185  SECONDARY SUPPLY            9,879
                                      WAREHOUSE.
 HI PEARL HARBOR HI FISC        196  RECAP HOTEL 1-4.....       28,504
 HI PEARL HARBOR HI NS          516  CONSTRUCT CVN HARBOR       35,727
                                      DEPTH.
 HI PEARL HARBOR HI NS          578  PHYS READINESS TRNG        20,903
                                      CTR.
 HI PEARL HARBOR HI NS          579  REGIONAL BEQ........       28,699
 HI PEARL HARBOR HI NS          586  BEQ MODERNIZATION...        3,994
 HI PEARL HARBOR HI NS          590  BACH ENLISTED QTRS         20,330
                                      MODERN.
 HI PEARL HARBOR HI NS          600  APPLIED INSTRUCTION        27,554
                                      BLDG.
 HI PEARL HARBOR HI NS          605  DREDGE MAIN CHANNEL        40,856
                                      (PH I).
 HI PEARL HARBOR HI NS          611  BEQ MODERNIZATION...       24,704
 HI PEARL HARBOR HI NS          612  BEQ MODERNIZATION...        3,326
 HI PEARL HARBOR HI NS          613  DREDGE NORTH CHANNEL       67,460
 HI PEARL HARBOR HI NS          633  JICPAC RELOCATION          48,457
                                      (INCR I).
 HI PEARL HARBOR HI NSB         119  PIER & WATERFRONT          38,005
                                      UTIL.
 HI PEARL HARBOR HI NSY         210  STRUCTURAL SHOP            11,402
                                      CONSOL.
 HI PEARL HARBOR HI NSY         270  DD2 AFT WATERFRONT          6,651
                                      FAC.
 HI PEARL HARBOR HI NSY         271  DD1 WATERFRONT              6,651
                                      FACILTY.
 HI PEARL HARBOR HI PAC         461  FIELD ENGINEERING          28,504
     NFEC                             OPS CTR.
 HI PEARL HARBOR HI PWC         442  ELEC DISTRIB SYSTEM        15,203
                                      IMPRS.
 HI PEARL HARBOR HI PWC         477  ELEC SYS UPGRADE....        9,724
 HI PEARL HARBOR HI PWC         488  ELEC DIST SYS IMPV         23,753
                                      (PUULUA).
 HI PEARL HARBOR HI PWC         492  HALAWA WATERLINE            2,095
                                      REPL.
 HI PEARL HARBOR HI PWC         493  WTR DISTRIB LINE           10,451
                                      (WAIAWA).
 HI PEARL HARBOR HI PWC         705  UTIL DIST SYS (FD          20,428
                                      IS) INC I.
 IL GREAT LAKES IL NTC          507  CBU TRAINING                5,323
                                      BUILDING.
 IL GREAT LAKES IL NTC          715  BEQ A SCHOOL               34,390
                                      REPLACEMENT.
 IL GREAT LAKES IL NTC          716  BEQ A SCHOOL               35,475
                                      REPLACEMENT.
 IL GREAT LAKES IL NTC          717  BEQ A SCHOOL               35,475
                                      REPLACEMENT.
 IL GREAT LAKES IL NTC          751  PHYSICAL TRAINING           5,875
                                      FACILITY.
 IL GREAT LAKES IL NTC          755  BEQ (NAVAL HOSPITAL)       12,942
 IL GREAT LAKES IL NTC          767  RECRUIT PROCESSING         11,460
                                      FAC ADD.
 IL GREAT LAKES IL NTC          768  BEQ TPU.............       23,307
 IL GREAT LAKES IL PWC          564  WATER PLANT UPGRADE.        6,651
 IL GREAT LAKES IL PWC          565  AUTO VEHICLE MAINT          7,611
                                      SHOP.
 IL GREAT LAKES IL PWC          675  MODERNIZE 2.4KV SYS.       12,207
 ME BRUNSWICK ME NAS            197  FIRE PROT SYS              10,200
                                      UPGRADES.
 ME KITTERY ME                  217  PAINT AND BLASTING         15,299
     PORTSMOUTH NSY                   SHOP.
 MD ANNAPOLIS MD NAVACAD        208  SUPPLY WAREHOUSE....        3,045
 MD ANNAPOLIS MD NAVACAD        309  BOAT SHOP RENOV B/          1,901
                                      234.
 MD ANNAPOLIS MD NAVACAD        312  MULTI-PURPOSE BLDG..        1,997
 MD ANNAPOLIS MD NAVACAD        316  PUBLIC WORKS SHOP...        1,522
 MD ANNAPOLIS MD NAVACAD        320  APPLIED INSTRUCTION        32,809
                                      BLDG.
 MD ANNAPOLIS MD NAVACAD        334  FIELD HOUSE @ TURNER       30,724
                                      FIELD.
 MD BETHESDA MD                 304  SHIP VIRTUAL               13,020
     NSWCCARDEROCK                    PROTOTPNG LAB.
 MD INDIAN HEAD MD              170  JOINT INTEROP CERT          7,194
     NSWCTRDIV                        FAC.
 MD PATUXENT RIVER MD           120  MARINE OPS FACILITY.        6,787
     AWCACDV
 MD PATUXENT RIVER MD           127  AIRCRAFT EM T&E            21,145
     AWCACDV                          CATAPULT.
 MD PATUXENT RIVER MD           130  AIRCRAFT DEVELOP           27,137
     AWCACDV                          SUPPT FAC.
 MD PATUXENT RIVER MD           976  BOQ REPLACEMENT.....       11,188
     AWCACDV
 MS GULFPORT MS NCBC            791  REGMT/GROUP HQ              2,211
                                      (MARCOR).
 MS PASCAGOULA MS NS            101  ELEC DISTRIB LINES          4,266
                                      REPL.
 MS PASCAGOULA MS NS            128  HAZ/FLAM/CHRMP                747
                                      WAREHOUSE.
 MS STENNIS SPC CTR MS           10  OCEAN SCIENCE LAB...       19,313
     NAVOCO
 NV FALLON NV NAS               289  AIR NAVIGATION              3,704
                                      BUILDING.
 NJ LAKEHURST NJ NAWC           112  ENGINEERING SUPPORT        17,432
     ACFTDIV                          FAC.
 NC CAMP LEJEUNE NC MCB        1016  BACHELOR ENLISTED          23,240
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB        1034  INTEL OPERATIONS           12,246
                                      CENTER.
 NC CAMP LEJEUNE NC MCB        1035  MATERIAL                   11,402
                                      DISTRIBUTION CTR.
 NC CAMP LEJEUNE NC MCB        1088  BACHELOR ENLISTED          33,352
                                      QUARTERS.
 NC CAMP LEJEUNE NC MCB         126  ASP UPGRADES PH II..        5,506
 NC CAMP LEJEUNE NC MCB         417  ORGANIZATIONAL EQUIP        4,159
                                      STRG.
 NC CAMP LEJEUNE NC MCB         919  MAINT SHOP/BULK FUEL        7,300
                                      CO.
 NC CAMP LEJEUNE NC MCB         963  BEQ.................       17,102
 NC CHERRY POINT NC MCAS        658  PHYSICAL FITNESS            6,834
                                      CENTER.
 NC CHERRY POINT NC             987  PROT A/C MAINT             11,092
     NADEP                            STORAGE FAC.
 NC NEW RIVER NC MCAS           632  BACHELOR ENLISTED          17,102
                                      QUARTERS.
 PA PHILADELPHIA PA             105  STEAM GENERATION           13,399
     NSWCSSES                         FACILITY.
 PA PHILADELPHIA PA             404  TANK FARM...........        7,795
     NSWCSSES
 RI NEWPORT RI NS               450  CBQ REPLACEMENT.....       20,263
 SC BEAUFORT SC MCAS            419  ENLISTED DINING            10,451
                                      FACILITY.
 SC BEAUFORT SC NH              515  BACHELOR ENLISTED           6,961
                                      QUARTERS.
 SC CHASN NAVAL WPN              24  ENGINEERING MGMNT          23,753
     STATION                          CENTER.
 SC CHASN NAVAL WPN              56  SPAWAR CONSOLIDATION       15,203
     STATION
 SC PARRIS ISLAND SC            337  BACHELOR ENLISTED          15,057
     MCRD                             QUARTERS.
 SC PARRIS ISLAND SC            338  COMM CTR ADDN.......        5,284
     MCRD
 SC PARRIS ISLAND SC            351  BACHELOR ENLISTED          16,637
     MCRD                             QUARTERS.
 TN MILLINGTON TN               281  CENTRAL WAREHOUSE...        2,230
     SUPPACT
 TN MILLINGTON TN               358  PW TRANSPORT MAINT          4,159
     SUPPACT                          FAC.
 TN MILLINGTON TN               360  IMPV GATE/PERIMTR           5,895
     SUPPACT                          SECURITY.
 TX KINGSVILLE TX NAS           193  NALFOG CRASH STRIP         10,394
                                      RUNWAY.
 VA DAHLGREN VA NSWCTR          294  COLLAB MULTIWRFRE          11,402
     DIV                              ENG CPLX.
 VA LITTLE CREEK VA             209  PIERS 12 & 13              27,554
     NAVPHIBSE                        REPLACEMENT.
 VA LITTLE CREEK VA             219  UPGRADE ELECTRICAL          7,931
     NAVPHIBSE                        DISTRIB.
 VA LITTLE CREEK VA             221  PIER 56 & 57               23,753
     NAVPHIBSE                        REPLACEMENT.
 VA LITTLE CREEK VA             354  EOD GRU2 FACILITY...        6,176
     NAVPHIBSE
 VA NORFOLK VA NS                48  PIER 1 REPLACEMENT..       35,727
 VA NORFOLK VA NS                52  PIER 9 REPLACEMENT..       36,009
 VA NORFOLK VA NS                95  PIER 4 REPLACEMENT..       51,307
 VA NORFOLK VA NS                96  PIER 5 REPLACEMENT..       53,208
 VA NORFOLK VA NS               253  RECONSTRUCT TAXIWAY.       11,402
 VA NORFOLK VA NS              311A  BEQ HOMEPORT ASHORE        29,086
                                      INC II.
 VA NORFOLK VA NS               336  INDOOR PHYSICAL FIT         9,502
                                      FAC.
 VA NORFOLK VA NS              391A  PIER 15 INCR II.....       37,434
 VA NORFOLK VA PWC               02  HEATING PLANT               5,149
                                      BUILDING.
 VA OCEANA VA NAS               263  AIR WARRIOR SQUAD          13,457
                                      SPT FAC.
 VA OCEANA VA NAS               697  ROAD IMPROVEMENTS...       11,692
 VA OCEANA VA NAS               722  CHILD DEV CENTER....        7,407
 VA OCEANA VA NAS               906  ROAD IMPROVEMENTS...        2,636
 VA PORTSMOUTH VA               333  CHILD DEVELOPMENT           6,196
     NORFOLK NSY                      CENTER.
 VA PORTSMOUTH VA               337  ADMIN SUPT FAC             19,003
     NORFOLK NSY                      RESTORATION.
 VA PORTSMOUTH VA               373  AUTO VEHICLE MAINT         34,205
     NORFOLK NSY                      NONCOMB.
 VA PORTSMOUTH VA               520  DRYDOCK #2 CAISSON          8,551
     NORFOLK NSY                      REPLACE.
 VA PORTSMOUTH VA               522  DRYDOCK #4 CAISSON         10,171
     NORFOLK NSY                      REPLACE.
 VA PORTSMOUTH VA               532  ROAD IMPROVEMENTS...        2,375
     NORFOLK NSY
 VA QUANTICO VA MCAF            448  WHITE SIDE COMPLEX..       27,777
 VA QUANTICO VA MCAF            517  CONSTRUCT TYPE II          12,091
                                      HANGAR.
 VA QUANTICO VA                 489  RELIGIOUS/FAMILY            3,316
     MCCOMBDEV CMD                    SVCS CTR.
 VA YORKTOWN VA                389A  TRESTLE & PIER REPL        24,888
                                      INC II.
 VA YORKTOWN VA NWS             235  HVAC MAKE UP AIR....        2,636
 VA YORKTOWN VA NWS             416  TOMAHAWK MAGAZINE...        3,161
 VA YORKTOWN VA NWS             436  AMRAAM MAGAZINE.....        1,231
 WA BANGOR WA SWF PAC           960  UTIL & SITE IMPVS             640
                                      (PH III).
 WA BREMERTON WA NS             304  INDUSTRIAL OPS              7,980
                                      SUPPORT FAC.
 WA BREMERTON WA NS             313  FLEET RECREATION            3,132
                                      COMPLEX.
 WA BREMERTON WA NS             315  PUBLIC WORKS                7,980
                                      FACILITY.
 WA BREMERTON WA NS             319  TRANSPORTATION              4,557
                                      FACILITY.
 WA INDIAN ISLAND WA            325  AMMUNITION WHARF           60,809
     NAVMAG                           IMPRS.
 WA KEYPORT WA NUWC DIV         390  MINE & U/S WARFARE         13,680
                                      SPT FAC.
 WA PUGET SOUND WA              355  POLLUTION PRVNT            14,727
     NAVSHIPYD                        EQUIP FAC.
 WA WHIDBEY IS WA NAS            68  DATA PROCESSING/SYS         4,072
                                      MGMT.
 WA WHIDBEY IS WA NAS           149  PERSONNEL SUPPORT           2,095
                                      FACILITY.
 WA WHIDBEY IS WA NAS           158  ACADEMIC INST BLDG..        1,047
 WA WHIDBEY IS WA NAS           169  VAQ HANGAR RECAP....       50,105
 BA NAVSUPPACT BAHRAIN          920  WARTIME PREPOS EQP         13,415
                                      STG FAC.
 GU GUAM MI                     434  SUPPLY WHARF........        3,433
     COMNAVMARIANAS
 GU GUAM MI                     445  AMPHIB LAND TIPALAO         6,457
     COMNAVMARIANAS                   BEACH.
 GU GUAM MI                     450  BEQ RENOVATIONS.....        8,745
     COMNAVMARIANAS
 GU GUAM NCTAMS WESTPAC         236  SEISMIC MODS (VAR           4,178
                                      BLDGS).
 GU GUAM PWC                    815  UNDERGRND PWR DIST            804
                                      LNS.
 DG DIEGO GARCIA                 71  PW MAINT STORAGE            5,130
     NAVSUPPFAC                       FACILITY.
 DG DIEGO GARCIA                107  VEHICLE WASH STATION          476
     NAVSUPPFAC
 DG DIEGO GARCIA                139  AMMUNITION WHARF....       58,908
     NAVSUPPFAC
 IC KEFLAVIK ICELAND NAS         08  HAZARDOUS/FLAMMABLE         4,105
                                      STRHSE.
 IT NAPLES ITALY NSA            215  ADMINISTRATIVE             18,171
                                      OFFICE.
 IT NAPLES ITALY NSA            217  CHILD DEVELOPMENT           2,461
                                      CENTER.
 PR ROOSEVELT RDS PR NS         611  CB BUILDING                 5,603
                                      HEADQUARTERS.
 PR ROOSEVELT RDS PR NS         754  BEQ REPLACEMENT.....       15,880
 SP ROTA SP NCB CB              613  UPGRADE MAINTENANCE        10,263
     CPMITCHELL                       FAC.
 SP ROTA SPAIN NS               645  COMMAND OPS                18,474
                                      CONSOLIDATION.
 UK LONDON UK NAVACTS          704A  UXBRIDGE RELOCATION         1,857
                                      II.
VAR X/MCON DESIGN FUNDS         219  MCON DESIGN FUNDS...      143,845
VAR X/MCON DESIGN FUNDS         509  MCON DSGN FNDS-            32,595
                                      MARCORPS.
VAR X/UNSPECIFIED MINOR         209  UNSPECIFIED MINOR          19,371
     CONST                            CONSTR.
VAR Z/VARLOCS MILCON            604  PUBLIC WORKS COMPLEX        2,753
                                                          --------------
          FISCAL YEAR     .........  ....................    3,118,962
           2009 TOTAL
------------------------------------------------------------------------



                                      MCNR POM04 FYDP CONGRESSIONAL SUBMIT
                                                  [In dollars]
----------------------------------------------------------------------------------------------------------------
 ST            IMC                       ACTIVITY               PNO                 TITLE               PRG COST
----------------------------------------------------------------------------------------------------------------
            PY 2004
 CA NVRESFOR                SAN DIEGO CA NAVAIRES........        737  C-40 HANGAR..................    $15,973
 VA MARCORPS                QUANTICO VA I&I STAFF........        518  RESERVE CENTER...............      9,497
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        504  MCNR DESIGN FUNDS (N4).......      1,700
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        224  USMC MCNR DESIGN FUNDS.......        862
                                                                                                    ------------
          FISCAL YEAR 2004  .............................  .........  .............................     28,032
           TOTAL
                                                                                                    ============
            PY 2005
 FL MARCORPS                JACKSONVILLE FL I&I STAFF....        532  RESERVE TRAINING CENTER......      8,312
 PA NVRESFOR                WILLOW GROVE PA NAS..........        237  FITNESS CENTER...............      7,141
 VA MARCORPS                NORFOLK VA NMCRC.............         41  VEHICLE MAINTENANCE FAC......      4,447
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        225  USMC MCNR DESIGN FUNDS.......        820
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        505  MCNR DESIGN FUNDS (N4).......      2,650
                                                                                                    ------------
          FISCAL YEAR 2005  .............................  .........  .............................     23,370
           TOTAL
                                                                                                    ============
            PY 2006
 AL MARCORPS                MOBILE AL 4TH MARINE DIV.....         32  RES TRNG CTR&VEH MAINT FAC...      7,158
 FL MARCORPS                TALLAHASSEE FL NMCRC.........         13  RESERVE TRAINING CENTER......      8,018
 LA NVRESFOR                NEW ORLEANS LA NSA...........        122  OVERHEAD U/G HI-VOLT SYS.....      9,576
 NY NVRESFOR                ALBANY NY NMCRC..............        598  RESERVE CENTER...............     10,736
 NC NVRESFOR                ASHEVILLE NC NRC.............        596  RESERVE CENTER...............      3,289
 PA NVRESFOR                LEHIGH VALLEY PA NRC.........        565  RESERVE CENTER ADDITION......      4,256
 TN NVRESFOR                NASHVILLE TN NRC.............        388  RESERVE CENTER...............      7,448
 TX NVRESFOR                FT WORTH TX NAS JRB..........        28D  AIMD PWR PLNT SHOP (03 ADD)..      8,589
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        226  USMC MCNR DESIGN FUNDS.......        826
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        506  MCNR DESIGN FUNDS (N4).......      2,900
                                                                                                    ------------
          FISCAL YEAR 2006  .............................  .........  .............................     62,796
           TOTAL
                                                                                                    ============
            PY 2007
 GA NVRESFOR                AUGUSTA GA NMCRC.............        382  RESERVE CENTER WITH LAND.....      6,702
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        353  SMALL ARMS RANGE--INDOOR.....      3,001
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        456  JOINT RESERVE HQ BLDG........      6,897
 MI MARCORPS                DETROIT MI HQ & SERV CO 1ST           44  RESERVE TRAINING CENTER......      6,799
                             BN.
 MS MARCORPS                GULFPORT MS MCRESCEN.........         18  VEHICLE MAINT FACILITY.......      2,914
 NC MARCORPS                WILMINGTON NC MCRC...........         45  RESERVE TRAINING CENTER......      7,489
 OK NVRESFOR                TULSA OK NMCRC...............         76  RESCEN ADDN..................      3,594
 PA NVRESFOR                WILLOW GROVE PA NAS..........        232  DEICING FACILITY.............      1,457
 PA NVRESFOR                AVOCA PA NRTC................        598  RESERVE CENTER...............      7,509
 SC MARCORPS                FORT JACKSON SC I&I..........         21  RESERVE VEHICLE MAINT FAC....      3,497
 TX NVRESFOR                FT WORTH TX NAS JRB..........         26  COMBINED RATCC/PASS TERM.....      2,574
 TX NVRESFOR                FT WORTH TX NAS JRB..........         27  ADMINISTRATIVE OFFICE........      9,519
 VA NVRESFOR                NORFOLK VA NAVAIRES..........        491  C-40 HANGAR MODS.............      5,828
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        227  USMC MCNR DESIGN FUNDS.......      1,211
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        507  MCNR DESIGN FUNDS (N4).......      3,530
                                                                                                    ------------
          FISCAL YEAR 2007  .............................  .........  .............................     72,521
           TOTAL
                                                                                                    ============
            PY 2008
 DE NVRESFOR                WILMINGTON DE NMCRC..........        602  RESERVE CENTER...............      9,758
 GA NVRESFOR                ATLANTA GA NAS...............        349  PUBLIC WORKS COMPLEX.........      4,879
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        405  RUNWAY TAXIWAY 14/32 EXT.....      6,245
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        408  RELIGIOUS EDUCATION BLDG.....      3,903
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......       461D  AFRC (PHASE III)(03 ADD).....      9,758
 MD MARCORPS                BALTIMORE MD MCRTC...........         40  RES TRNG CTR&VEH MAINT FAC...      9,250
 ME MARCORPS                TOPSHAM ME MCRESCEN..........         24  RESERVE TRAINING CENTER......      2,927
 NE NVRESFOR                OMAHA NE NMCRC...............         85  RELOCATE RESCEN TO OFFUTT....      1,854
 NJ NVRESFOR                KEARNY NJ NAVRESCEN..........        601  RESERVE CTR RELOC--FT DIX....      4,450
 OH MARCORPS                DAYTON OH AFRC...............         09  RES TRNG CTR&VEH MAINT FAC...      8,001
 OR NVRESFOR                EUGENE OR NMCRC..............        172  RESCEN W/LAND................      9,270
 TN MARCORPS                MEMPHIS TN MCRESCEN..........         30  RESERVE TRAINING CENTER......      6,830
 TX NVRESFOR                EL PASO TX NMCRC.............        380  RESERVE CENTER ADDITION......      3,415
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        228  USMC MCNR DESIGN FUNDS.......      1,354
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        508  MCNR DESIGN FUNDS (N4).......      3,980
                                                                                                    ------------
          FISCAL YEAR 2008  .............................  .........  .............................     85,874
           TOTAL
                                                                                                    ============
            PY 2009
 AR NVRESFOR                LITTLE ROCK AR NMCRC.........        362  RESCEN ADDN..................      1,696
 DC NVRESFOR                WASH DC NAF ANDREWS AFB......         43  HANGAR 13 ADDITION (C-130)...      3,041
 FL MARCORPS                TAMPA FL MCRTC...............         19  VEHICLE MAINTENANCE FAC......      7,520
 GA NVRESFOR                ATLANTA GA NAS...............        367  C-40 HANGAR ALTERATIONS......      4,845
 KY NVRESFOR                LEXINGTON KY NMCRC...........        353  RESERVE CENTER ADDITION......      4,167
 LA MARCORPS                NEW ORLEANS LA MCARTC........         20  RES TRNG CTR&VEH MAINT FAC...      7,752
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        441  CORROSION CONTROL HANGAR.....      6,299
 LA NVRESFOR                NEW ORLEANS LA NAS JRB.......        464  AIRFRAME ASSEMBLY PLANT......      1,260
 MD MARCORPS                FORT DETRICK MD I & I STF....        547  LAV MAINTENANCE FACILITY.....      6,783
 MS NVRESFOR                PASCAGOULA MS NS.............        390  LITTORAL SURV SYS FAC........      5,136
 NM NVRESFOR                ALBUQUERQUE NM NMCRC.........        378  RESERVE CENTER ADDITION......      2,907
 PA NVRESFOR                WILLOW GROVE PA NAS..........        217  WAREHOUSE....................        581
 PA NVRESFOR                WILLOW GROVE PA NAS..........        233  PW SUPPORT EQUIP SHED........        678
 PA NVRESFOR                WILLOW GROVE PA NAS..........        246  HANGAR 80 MODS FOR C-40......      3,004
 RI NVRESFOR                NEWPORT RI NAVRESREDCOM......        600  RESERVE & REDCOM.............      4,554
 TX NVRESFOR                FT WORTH TX NAS JRB..........         19  POST OFFICE..................      1,045
 TX NVRESFOR                FT WORTH TX NAS JRB..........         25  COMBINED AIMD FAC............     24,225
 VA NVRESFOR                ROANOKE VA NMCRC.............        325  RESERVE CENTER ADDITION......      3,488
 WA NVRESFOR                WHIDBEY IS WA NAVAIRES.......        167  C-40 HANGAR MODS.............      4,845
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        229  USMC MCNR DESIGN FUNDS.......      1,354
VAR A&E SERV                X/MCNR DESIGN FUNDS..........        509  MCNR DESIGN FUNDS (N4).......      3,980
                                                                                                    ------------
          FISCAL YEAR 2009  .............................  .........  .............................     99,160
           TOTAL
----------------------------------------------------------------------------------------------------------------

                                 ______
                                 

               Questions Submitted to Dr. Mario P. Fiori

          Questions Submitted by Senator Kay Bailey Hutchison

                          BARRACKS/DORMITORIES

    Question. I understand that all three services are working toward 
the elimination of inadequate permanent party barracks by 2007. The 
success of that program will be largely dependent on significant 
funding increases that the Army, Navy and Air Force have programmed for 
military construction beginning in 2005 and into the future. Past 
experience has shown that those increases in the out years seem to 
disappear as it gets closer to the submission of the budget. Is the DOD 
goal of 2007 realistic and achievable?
    Answer. Although current funding levels do not permit us to achieve 
DOD's goal of 2007, we still foresee continuing with an extremely 
robust military construction program each year until our barracks 
modernization campaign is complete. Programmed outyear levels provide 
funding for 91 percent of all barracks by fiscal year 2007 and 98 
percent by fiscal year 2008.
    Question. Would you also comment on the likelihood of realizing 
future funding increases for MILCON?
    Answer. The Army anticipates MILCON funding at the increasing 
levels shown in the Future Years Defense Program.
    Question. Several of you are assessing the issue of privatizing 
military barracks and dormitories. Have you worked out the financial 
issues associated with this proposal and how would the office of 
management and budget (OMB) score these proposals?
    Answer. The Army is currently studying the privatization of troop 
barracks at a couple of locations. DOD has not yet worked out the 
financial issues and we await a decision by OMB on whether mandatory 
assignment to barracks is a ``scorable'' event.
    Question. Has the OSD provided the services guidance on 
privatization?
    Answer. The authorities of the Military Housing Privatization 
Initiative (MHPI) permit the inclusion of unaccompanied housing in the 
Residential Communities Initiative (RCI) for The Army. As a result, we 
have asked OSD to develop a Departmental position, coordinated with 
OMB, for interpretation as to whether or not this mandatory assignment 
policy is a ``scorable'' event. We are awaiting final guidance from OSD 
on this issue.
    Question. What are the major cost concerns that will potentially 
impact this initiative?
    Answer. In view of the substantial investment the Army has made in 
modernizing barracks, the major concerns that impact this initiative 
are securing adequate funding for the Basic Allowance for Housing/Basic 
Allowance for Subsistence (BAH/BAS), potential scoring requirements, 
and continuing with RCI without diverting attention from our family 
housing effort.

                         RECAPITALIZATION RATE

    Question. With the funding proposal in the 2004 budget for MILCON 
how does that impact your recapitalization rate? How does that compare 
to last year's rate?
    Answer. The funding proposed in the 2004 budget provides a 
recapitalization rate of 144 years. Last year's rate was 123 years. Our 
fiscal year fiscal year 2004 recapitalization rate is higher than last 
year, and is the best we could do given competing requirements.
    Question. Gentlemen, there have been a lot of promises made over 
the past 2 years regarding revitalizing our defense facilities. Are we 
back to business as usual neglecting our facilities?
    Answer. No. The Army was not able to meet all its objectives for 
facilities in the fiscal year 2004 Budget. We will continue to 
emphasize sustainment funding to halt the deterioration of our 
facilities and to fund our facilities strategy in the fiscal year 2005 
Budget. Additionally, we are exploring and implementing alternatives to 
traditional funding, such as Residential Communities Initiative (RCI) 
and the Army Reserve Real Property Exchange (RPX) program.
    Question. What are your long-term plans to reach the department's 
proposed recapitalization rate of 67 years? When will that happen? I 
worry about the message we send our young soldiers, airmen, and sailors 
as well as their families, about the condition of the facilities in 
which they live, work and train--especially as we try to retain them. 
How does the condition of your infrastructure relate to the services' 
goal of recruitment and retention?
    Answer. At current funding levels, we achieve 70 years in 2008. 
Soldiers and families see the Army's commitment to barracks and family 
housing improvements. The overall condition of our facilities is a C-3 
quality rating, impairing mission performance. The potential impact of 
infrastructure condition on our soldiers and their families has been 
recognized and is included in the on-going development of the Army 
Well-being Status Report to be completed September 2004.

                         INSTALLATION READINESS

    Question. I understand that all three services rate the readiness 
of their infrastructure on a scale of C-1 to C-4. It appears that C-1 
indicates only minor deficiencies with negligible impact on capability 
to support missions. I was disturbed to find out that such a large 
percentage of your overall facilities are rated C-3 or worse. How does 
that impact on mission readiness?
    Answer. An installation and its facilities exist to support 
training, power projection, and to provide community support to 
soldiers, civilians and their families. Low quality and quantity of 
facilities adversely impact the accomplishment of these missions.
    The overall condition rating of C-3 for Army facilities worldwide 
indicates significant facility deficiencies that prevent performing 
some missions in the manner they should be executed. The Army will 
complete its missions with facility workarounds, which result in 
degraded operations and increased costs.
    For example: Our motor pools have not kept pace with our equipment. 
At many locations, maintenance on vehicles is performed outside in the 
rain, mud and cold weather. Clearly, there are days where maintenance 
cannot be performed. Overhead cranes are not available and another 
tactical vehicle is used to hoist engines out of a vehicle under 
maintenance.
    Question. What would be the bill to bring all of your C-3 and C-4 
facilities to at least C-2? What is the associated timeline?
    Answer. The cost to bring all C-3 and C-4 facilities to an overall 
C-2 condition across the Army is $10.2 billion. Realistically, it is 
achievable in 2023.
    Question. I note that the services have goals to improve your 
facilities to C-1 by the end of the decade. Is this realistic based on 
current funding projections?
    Answer. The Army, under the Focused Facility Strategy (FFS), plans 
to bring a focused group of facility types to a C-1 quality rating. By 
focusing on selected facilities, we concentrate our efforts on the 
worst facilities with the highest overall cost and impact on soldiers. 
The focused facility types are: Vehicle Maintenance Shops and 
Supporting Hardstand; Trainee Barracks and Complexes; Physical Fitness 
Facilities; General Instruction Classrooms; National Guard Readiness 
Centers; Army Reserve Centers; and Chapels. By raising these facilities 
to a C-1 rating, the overall average rating across the Army would be C-
2. Realistically, it is achievable in 2023.

                      FAMILY HOUSING PRIVATIZATION

    Question. With regards to privatization, I understand that some of 
these contracts are for 50 years and beyond. What happens when one of 
our family housing contractors goes out-of-business or does not fulfill 
its commitments?
    Answer. Either the failure to fulfill contractual commitments or 
bankruptcy by an entity that has contracted with the Army housing 
privatization partnership is an event of default under the respective 
agreements. One of the available remedies after default is the right to 
terminate the agreement. Once terminated, the partnership can freely 
contract for the services from another party. As to the developer 
partner itself, insolvency triggers an option by the Army, and other 
partners if any, to buy out the insolvent managing member's partnership 
interest. There are also provisions for the Army to remove the managing 
member for cause.
    Question. There seems to be a growing emphasis on privatizing more 
housing in a shorter period of time. Are there concerns that moving too 
quickly on such major procurement contracts could lead to future 
problems?
    Answer. The Army's housing privatization process is designed to 
partner with nationally recognized property development/management and 
financial firms with the experience and capability to build, renovate, 
maintain, and operate family housing, while minimizing the probability 
of future problems. Additionally, the business agreements negotiated 
with the private sector firms provide a framework for resolving issues 
and problems, and are structured in a manner to protect the interests 
of the government. The Army also is designing and implementing a 
portfolio and asset management process that will ensure oversight of 
the agreement to monitor operational compliance and financial health of 
the partnership.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                             TRANSFORMATION

    Question. I understand that The Army is moving forward with the 
fielding of the Stryker brigades. I also understand that there are 
significant MILCON requirements associated with each of the six 
brigades. Are all of those requirements funded or programmed for the 
first four brigades?
    Answer. Yes. When the fiscal year 2004 budget was developed, all 
validated critical Stryker Brigade Combat Team (SBCT) requirements were 
funded. Since that time, we have continued to refine military 
construction requirements and are presently reviewing emerging 
requirements that are in the validation process.
    Question. What about the MILCON requirements for the Hawaii and 
Pennsylvania brigades?
    Answer. The proposed projects in Hawaii and Pennsylvania are 
required to support both the legacy force requirements that are 
currently not being met and transformation.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein


              ANTITERRORISM/FORCE PROTECTION FUNDING PLAN

    Question. It is my understanding that funding previously approved 
by the Committee for Antiterrorism/Force Protection (ATFP) is not 
finding its way to the reserve components. Could you provide the 
Committee with your funding plan for ATFP?
    Answer. As it pertains to military construction force protection 
projects, the Army National Guard has validated requirements of $1.952 
million in fiscal year 2004 for planning and design of future year 
construction of antiterrorism/force protection related projects. In 
addition, each military construction project routinely incorporates all 
necessary antiterrorism/force protection features. These requirements 
are funded as part of the military construction project. The Army 
National Guard continues to work with the active Army to further 
validate their increased force protection requirements.
    The Army Reserve has not identified any requirement for military 
construction projects that are exclusively for antiterrorism/force 
protection. However, each military construction project incorporates 
all necessary antiterrorism/force protection features. The Army Reserve 
antiterrorism/force protection projects at existing facilities will be 
funded with Operations and Maintenance, Army Reserve appropriations.

                          BRAC CLEANUP PROGRAM

    Question. The Army's fiscal year 2004 BRAC budget request is $66.4 
million, a 56 percent reduction from fiscal year 2003. I will ask you 
the same question I have asked your colleagues. How much money above 
the budget request could the Army execute in fiscal year 2004 to 
expedite its BRAC cleanup program?
    Answer. The fiscal year 2004 budget request of $66.4 million ($57.3 
million for environmental cleanup) allows us to achieve our restoration 
and disposal goals, within Army priorities, and in support of community 
reuse of the remaining BRAC installations.
    Question. Did you request a higher level of funding from the 
Defense Department?
    Answer. No. The Department of Defense supported the Army's. request 
for BRAC funding in fiscal year 2004.
                                 ______
                                 

                Questions Submitted to Mr. Nelson Gibbs

          Questions Submitted by Senator Kay Bailey Hutchison

                          BARRACKS/DORMITORIES

    Question. I understand that all three services are working toward 
the elimination of inadequate permanent party barracks by 2007. The 
success of that program will be largely dependent on significant 
funding increases that the Army, Navy and Air Force have programmed for 
military construction beginning in 2005 and into the future. Past 
experience has shown that those increases in the out years seem to 
disappear as it gets closer to the submission of the budget. Is the DOD 
goal of 2007 realistic and achievable? Would you also comment on the 
likelihood of realizing future funding increases for MILCON?
    Answer. With the Military Construction (MILCON) funding we have 
programmed for 2006 and 2007, our plan to eliminate inadequate 
permanent party dormitories by 2007 is a realistic and achievable goal. 
This funding is subject to change, however, depending on overall Air 
Force total obligation authority in those program years, balanced with 
other, emerging Air Force requirements. The Air Force MILCON future 
years defense plan shows funding streams currently anticipated for 
facility restoration and modernization. In each budget cycle the Air 
Force will use available MILCON dollars to fund the most urgent 
requirements.
    Of significant note, the military construction portions of the 
budgets we submitted in fiscal years 2003 and 2004 were larger than 
what we had programmed in prior-year forecasts. In the last 2 years, we 
have done a good job protecting and building upon our projected MILCON 
budgets. We are hoping to continue this trend as we build our programs 
for fiscal years 2005, 2006, and beyond.
    Question. Several of you are assessing the issue of privatizing 
military barracks and dormitories. Have you worked out the financial 
issues associated with this proposal and how would the Office of 
Management and Budget (OMB) score these proposals? Has the OSD provided 
the services guidance on privatization?
    Answer. The Air Force is still identifying and reviewing the 
different financial issues involved with privatizing military 
dormitories. We have identified key areas we feel will require an 
Office of Management and Budget (OMB) ruling, to ensure the projects 
remain feasible as privatization projects. These key areas include 
assignment of members to quarters, provision of basic allowance for 
housing directly from the Air Force to the developer on behalf of the 
member, and signing of individual leases (whether or not they are 
necessary, and how the project would score if they are not required). 
The Navy has already broached some of these questions to OSD for an OMB 
ruling. The Air Force is waiting for this information back and will 
frame new questions if required. OSD has not provided specific 
dormitory privatization guidance at this time.
    Question. What are the major cost concerns that will potentially 
impact this initiative?
    Answer. The Air Force has some cost concerns that could potentially 
impact the initiative.
    The full value of basic allowance for housing applied from all 
dormitory tenants could bring too much cash flow to the project, making 
it financially unattractive for the government. The Air Force is 
looking into ways to counter this concern, possibly through payment of 
only a partial amount of the occupants' basic allowance for housing, or 
by drawing off excess funds from the project via the ground lease.
    We are also concerned about the ability to obtain reasonable 
financing, due to the potential risk inherent in dormitory 
privatization projects. These risks include allowing access to 
installations' interiors to non-military dorm residents, a limited list 
of other eligible tenants, and a lack of strong secondary market for 
these types of units.

                         RECAPITALIZATION RATE

    Question. With the funding proposed in the 2004 budget for MILCON 
how does that impact your recapitalization rate? How does that compare 
to last year's rate?
    Answer. MILCON funding levels in the fiscal year 2004 President's 
Budget Request support a 180-year recapitalization rate. The fiscal 
year 2003 recapitalization rate was 284 years, based on the fiscal year 
2003 President's Budget Request, and 195 years based on the fiscal year 
2003 enacted budget.
    Question. Gentlemen, there have been a lot of promises made over 
the past 2 years regarding revitalizing our defense facilities. Are we 
back to business as usual neglecting our facilities?
    Answer. We are not neglecting our facilities. The portion of the 
Air Force fiscal year 2004 budget request dedicated to facility 
investment (MILCON; Operations and Maintenance (O&M) facility 
sustainment, restoration, and modernization; and military family 
housing construction, improvement, and O&M) is the largest in more than 
a decade.
    We still have much work to do. Reaching our 67-year 
recapitalization rate goal and eliminating our critical restoration and 
modernization backlog (developed over years of underfunding) will 
require us to continue and increase this level of investment in the 
future. We are doing that with the funding we have programmed in the 
future years defense plan.
    Question. What are your long-term plans to reach the department's 
proposed recapitalization rate of 67 years? When will that happen?
    Answer. The Air Force continues to program funding to meet the 
Department's 67-year recapitalization rate goal. Over the long term, 
the Air Force targets recapitalization of facilities and infrastructure 
in the Military Construction and Operations & Maintenance (Restoration 
& Modernization) programs. The Air Force fiscal year 2004-2009 future 
years defense plan puts us on a trajectory to meet the 67-year 
recapitalization rate goal by fiscal year 2008.
    Question. I worry about the message we send our young soldiers, 
airmen, and sailors as well as their families, about the condition of 
the facilities in which they live, work train--especially as we try to 
retain them. How does the condition of your infrastructure relate to 
the services' goal of recruitment and retention?
    Answer. The quality of our facilities, infrastructure, and 
communities sends a direct signal to our men and women regarding the 
value we place on their service. Quality of life initiatives 
acknowledge the increasing sacrifices our airmen make in support of the 
Nation and are pivotal to recruiting and retaining our best. When our 
members deploy, they want to know that their families are stable, safe, 
and secure. Their welfare is a critical factor to our overall combat 
readiness, and our family housing program, dormitory program, and other 
quality of life initiatives reflect our commitment to provide them the 
facilities they deserve.

                         INSTALLATION READINESS

    Question. I understand that all three services rate the readiness 
of their infrastructure on a scale of C-1 to C-4. It appears that C-1 
indicates only minor deficiencies with negligible impact on capability 
to support missions. I was disturbed to find out that such a large 
percentage of your overall facilities are rated C-3 or worse. How does 
that impact mission readiness?
    Answer. Installations' Readiness Report ratings indicate how well 
facilities are supporting the mission. C-3 and C-4 ratings can coincide 
with the preclusion or shutdown of a mission, but are more of an 
indicator of increased risk and potential for adverse mission impact.
    For example, in our Operations and Training facility class, 
degraded airfield pavements pose risk of aircraft engine and structural 
damage from loose pavement pieces, impacting everything from basic 
airfield operations to day-to-day aircraft maintenance. Inoperative 
fuel hydrant systems force us to refuel by truck, increasing the 
workload for maintenance and supply personnel. Other examples of 
deficiencies that impact mission readiness include obsolete airfield 
lighting systems, inadequate training facilities, and deteriorated/
inadequate drainage systems.
    Question. What would be the bill to bring all of your C-3 and C-4 
facilities to at least C-2? What is the associated timeline?
    Answer. The cost to bring our facility classes to a C-2 status is 
approximately $24 billion. This amount is comprised of $13 billion in 
Military Construction requirements, $5 billion in military family 
housing requirements, $3 billion in operations and maintenance 
requirements, and $3 billion in requirements funded from other sources 
(i.e., host nation funds, non-appropriated funds, Defense Logistics 
Agency funds). Based on current funding projections we would eliminate 
all C-3s and C-4s by 2014.
    Question. I note that the services have goals to improve your 
facilities to C-1 by the end of the decade. Is that realistic based on 
current funding projections?
    Answer. Our goal (based on the fiscal year 2004 Defense Planning 
Guidance) is to restore the readiness of existing facilities to at 
least C-2 status, on average, by the end of fiscal year 2010. Based on 
current funding projections, it is realistic that we will meet this 
goal.
    We are concurrently targeting our investment to eliminate all C-3 
and C-4 rated facility classes. Based on current funding projects (and 
extending them beyond fiscal year 2009 . . . our farthest-reaching 
funding projection), we expect to eliminate all C-3 and C-4 rated 
facility classes by 2014.

                      FAMILY HOUSING PRIVATIZATION

    I want to compliment the military departments for improving 
military family housing for our service members. Through buying down 
the military member's out-of-pocket expenses for housing costs as well 
as eliminating inadequate housing units through military construction 
and privatization--you are making great progress. I am particularly 
proud of the fact that our state is leading the way with more housing 
privatization projects awarded at Texas military installations than any 
other state with six private-public partnerships (Nas Corpus Christi, 
Lackland Air Force Base, Dyess Air Force Base, Nas Kingsville, Fort 
Hood and NC South Texas) or 33 percent of the total projects awarded 
within the Department of Defense.
    While housing revitalization is a good news story for our military 
families, I am concerned with the message being sent to our service 
members with the budget proposal to cut impact aid funding for the 
education of soldiers', sailors', airmen and marines' children and I've 
spoken to the administration about my concerns. A total of 1,300 school 
districts across the nation receive impact aid funding to pay the 
salaries of teachers, purchase textbooks and computers and pay for 
advanced placement classes among other things. Cutting this funding 
sends a negative message at a time when we are promoting quality 
education for all children and sending their mothers and fathers into 
harm's way in the Persian Gulf region and around the world.
    Question. With regards to privatization, I understand that some of 
these contracts are for 50 years and beyond. What happens when one of 
our family housing contractors goes out-of-business or does not fulfill 
its commitments?
    Answer. We exercise tight control over the project through 
portfolio management after award, wherein we closely monitor the 
financial health of the project throughout the 50 years. Any necessary 
adjustments to factors, such as occupancy and debt coverage ratio, can 
be made on a routine basis. In the event the developer defaults on the 
project despite these controls, the lease and lockbox account 
agreements will protect the government interest.
    None of the project income goes directly to the developer, but is 
collected in lockbox accounts controlled by a lockbox agent over whom 
the Secretary has significant control. These monies are protected and 
will be used to operate, maintain, and repair the property until 
another lessee can be brought in to manage the property or the 
government takes control over the project. The construction and 
permanent lenders also exercise a great deal of control over the 
project to ensure the success of the project and to protect their 
investment.
    I want to compliment the military departments for improving 
military family housing for our service members. Through buying down 
the military member's out-of-pocket expenses for housing costs as well 
as eliminating inadequate housing units through military construction 
and privatization--you are making great progress. I am particularly 
proud of the fact that our state is leading the way with more housing 
privatization projects awarded at Texas military installations than any 
other state with six private-public partnerships (Nas Corpus Christi, 
Lackland Air Force Base, Dyess Air Force Base, Nas Kingsville, Fort 
Hood and NC South Texas) or 33 percent of the total projects awarded 
within the Department of Defense.
    While housing revitalization is a good news story for our military 
families, I am concerned with the message being sent to our service 
members with the budget proposal to cut impact aid funding for the 
education of soldiers', sailors', airmen and marines' children and I've 
spoken to the administration about my concerns. A total of 1,300 school 
districts across the Nation receive impact aid funding to pay the 
salaries of teachers, purchase textbooks and computers and pay for 
advanced placement classes among other things. Cutting this funding 
sends a negative message at a time when we are promoting quality 
education for all children and sending their mothers and fathers into 
harm's way in the Persian Gulf region and around the world.
    Question. There seems to be a growing emphasis on privatizing more 
housing in a shorter period of time. Are there concerns that moving too 
quickly on such major procurement contracts could lead to future 
problems?
    Answer. We have developed a rigorous privatization project 
schedule. Based on the lessons learned from the five projects we have 
closed to date and the well-defined and well-refined process we have 
developed, we are confident we are not moving too quickly.
    The 27 privatization projects we have planned through fiscal year 
2004 include six that are in active solicitation. We maintain 
centralized control through our execution agent, the Air Force Center 
for Environmental Excellence, and decentralized execution of the 
projects through six major commands and their five privatization 
support contractors. Our resources include a proven generic request for 
proposals, well-defined source selection process, experienced 
privatization support contractors, and definitive known housing 
requirements, which will ensure success of our process.
                                 ______
                                 

               Questions Submitted by Senator Ted Stevens

                   C-17 AIRCRAFT IN ALASKA AND HAWAII

    Question. I understand that the Air Force is proceeding with their 
mobility force structure plan which will station C-17s in Alaska and 
Hawaii. Are all of the required military construction requirements in 
either the budget or the Air Force's future year defense plan?
    Answer. The Air Force is still reviewing and validating all future 
Military Construction requirements to beddown C-17s at Elmendorf AFB, 
Alaska, and Hickam AFB, Hawaii. Our fiscal year 2004 budget request 
includes $63 million for C-17 beddown at Hickam AFB. The future years 
defense plan includes $310 million in fiscal years 2005-2009 targeted 
for C-17 beddown at several locations, including Elmendorf AFB and 
Hickam AFB.
    We have approximately $120 million in requirements not included in 
the future years defense plan. Until our construction requirements 
review is complete and we program specific projects in the future years 
defense plan, we will not know what portion of the unfunded requirement 
is for Hickam and Elmendorf. We expect to have our review complete 
later this year.
    Question. What is the timeline to field those aircraft in Alaska 
and Hawaii?
    Answer. C-17s will arrive at Elmendorf AFB, AK, beginning in the 
3rd quarter of fiscal year 2007 and ending in the 4th quarter of fiscal 
year 2007. Aircraft will arrive at Hickam AFB, HI, beginning in the 1st 
quarter of fiscal year 2006 and ending in the 3rd quarter of fiscal 
year 2006.
                                 ______
                                 

            Questions Submitted by Senator Dianne Feinstein

                          CORPORATE ADJUSTMENT

    Question. The Air Force uses a ``Corporate Adjustment'' model for 
the allocation of the military construction funds. First, could you 
briefly explain what ``Corporate Adjustment'' is and whether, in your 
opinion, this model adequately meets the needs of the Air National 
Guard and the Air Force Reserve?
    Answer. The Air Force corporately prioritizes its Military 
Construction (MILCON) requirements. We do this by integrating the 
results of our MILCON scoring model (which includes Major Command 
priorities) with must-pay requirements (i.e., environmental compliance 
requirements and planning and design funds), projects necessary to 
beddown new weapon systems, and crosscutting corporate priorities 
(called ``Corporate Adjustments'' . . . e.g., dormitories and fitness 
centers).
    This results in a final integrated priority list (IPL) that 
balances the Air Force's overall construction needs with available 
resources to best meet overall Air Force needs (as well as the needs of 
the Major Commands, the Air National Guard, and the Air Force Reserve).
    Question. Do you believe that the fiscal year 2004 request for the 
Guard and Reserve, which represents respectively a 70 percent and a 34 
percent decline from the enacted fiscal year 2003 level, adequately 
funds the Air Force Guard and Reserve?
    Answer. We believe the fiscal year 2004 request properly balances 
construction requirements with available resources.
    When compared to the fiscal year 2003 President's Budget request, 
the Air Force Reserve fiscal year 2004 request of $44.3 million is 13 
percent greater than the fiscal year 2003 request of $39.1 million. 
Similarly, the Air National Guard fiscal year 2004 request of $60.4 
million is 11 percent greater than the fiscal year 2003 request of 
$54.2 million. Comparing the fiscal year 2004 President's Budget 
Request to the fiscal year 2003 enacted budget skews the comparison to 
something of an apples-to-oranges comparison. Congressional inserts 
make the fiscal year 2004 request less than the fiscal year 2003 
enacted amounts.

                          CORPORATE ADJUSTMENT

    Question. And for the record, could you give us a breakout, by 
number of projects and by total cost, of what each MAJOR COMMAND 
received as a ``corporate adjustment?
    Answer. The following table shows the number of ``corporate 
adjustment'' projects, and total cost, each Major Command would receive 
in fiscal year 2004.

                          [Dollars in millions]
------------------------------------------------------------------------
                                             Number of
              Major Command                  Projects      Project Cost
------------------------------------------------------------------------
11th Wing (Bolling AFB).................               1            $9.3
Air Combat Command (ACC)................               6            26.2
Air Education and Training Command                     5           104.8
 (AETC).................................
Air Force Materiel Command (AFMC).......               3            55.3
Air Force Reserve Command (AFRC)........               3            10.3
Air Force Special Operations Command                   0             0.0
 (AFSOC)................................
Air Force Space Command (AFSPC).........               1             7.0
Air Mobility Command (AMC)..............               2            10.8
Air National Guard (ANG)................               2            13.0
Pacific Air Forces (PACAF)..............               6            83.7
United States Air Forces Europe (USAFE).              16           102.2
------------------------------------------------------------------------

                      milcon recapitalization rate
    Question. Based on the fiscal year 2004 budget only, and ignoring 
for now the outyear funds which may or may not be there, what is the 
MILCON recapitalization rate for the Active Duty Air Force, the Air 
National Guard and the Air Force Reserves for fiscal year 2004?
    Answer. The Air Force recapitalization rates based on the fiscal 
year 2004 budget request are:

------------------------------------------------------------------------
                                                               Years
------------------------------------------------------------------------
Active..................................................             183
Air National Guard......................................             170
Air Force Reserve.......................................             141
                                                         ---------------
      Total Force.......................................             180
------------------------------------------------------------------------

                                  BRAC

    Question. Over the past 2 years, this committee has significantly 
added to the amount requested by the services for environmental clean 
up from the previous four rounds of BRAC. Now, we are faced with 
another upcoming BRAC initiative, yet we still fail to fully address 
the previous cleanup necessary. This year the Air Force request for 
BRAC environmental remediation and caretaker costs is $198.7 million.
    Answer. The fiscal year 2004 Air Force BRAC environmental 
remediation and caretaker cost is $200.7 million; the budget authority 
request is $198.7 million and $2 million is from fiscal year 2002 
inflation savings. The Air Force appreciates the subcommittee's support 
to fund the environmental cleanup program.
    Question. Did you seek a higher level of funding for BRAC 
environmental remediation in your budget submission to the Office of 
Secretary of Defense?
    Answer. No. The Office of Secretary of Defense supported full 
funding of our fiscal year 2004 budget submission for BRAC 
environmental remediation.
    Question. Would additional funding help to expedite the Air Force 
BRAC environmental clean up program?
    Answer. While the fiscal year 2004 request reflects our 
requirements additional funding would allow us the opportunity to 
expedite cleanup requirements currently planned for future years.

                             MC CLELLAN AFB

    Question. As you are aware, the former McClellan Air Force Base in 
Sacramento, CA, continues to be a high priority environmental 
remediation activity for the Air Force. However, persistent funding 
shortfalls have dramatically impacted the Air Force's own cleanup 
schedule and scope of activities. I understand that the required 
McClellan funding for fiscal year 2004 is nearly $42.0 million and that 
the Air Force has communicated to the community a commitment of $30.0 
to $40.0 million per year to be spent on remediation at McClellan over 
the next 5 years. Is that, in fact, correct?
    Answer. The Air Force's fiscal year 2004 budget request includes 
$38.1 million for McClellan. Our current plans include approximately 
$200 million for McClellan over the next 5 years.
    Question. In addition to the larger cleanup effort, I am 
particularly concerned with the dilapidated condition of the sewer line 
at McClellan that continues to significantly impede economic 
redevelopment at the base. As you know, the Comprehensive Environmental 
Response, Compensation and Liability Act of 1980 (CERCLA) prohibits 
transfer of the sewer line and adjacent property from the Air Force to 
the McClellan site developer until the contamination is evaluated and 
remediated by the Air Force. The estimated cost of that effort is $20.0 
million over 3 years. Currently, the community and developer are 
investing $20.0 million of their own funds to install a new sewer line. 
I understand that concurrent remediation and sewer installation 
projects could reduce costs to both the Air Force and the site 
developer. I would encourage the Air Force's support for a concurrent 
effort and would request the Air Force's estimate of the funding needed 
for the project in fiscal year 2004.
    Answer. We understand the County's desire to replace the sewer 
system in order to support redevelopment. This accelerates the need for 
the Air Force to address contaminated soils that will be removed as 
part of the project. We are currently working with the County to 
establish a cooperative agreement for the Air Force cost share that 
pertains to the handling and disposing of contaminated soils. The 
County estimates the Air Force share for fiscal year 2004 is $7 
million. Funds for the Air Force's share will come from those already 
budgeted for McClellan's environmental cleanup unless additional funds 
are provided for this effort.

                    AIR FORCE BRAC ENVIRONMENTAL FYDP
------------------------------------------------------------------------
                       Fiscal year                            Dollars
------------------------------------------------------------------------
2004....................................................           175.6
2005....................................................           127.7
2006....................................................           116.4
2007....................................................           112.5
2008....................................................           119.1
2009....................................................           114.4
------------------------------------------------------------------------

    While the Air Force is fully funded in fiscal year 2004, we have 
requirements identified in fiscal year 2003 that currently would be 
addressed in fiscal year 2005/2006. The Air Force could execute an 
additional $65 million in fiscal year 2004.

                      FYDP AND UNFUNDED PRIORITIES

    Question. Would each of you provide the committee with a copy of 
your service's current FYDP and unfunded priorities by March 31?
    Answer. The Air Force's fiscal year 2004 unfunded priority list and 
fiscal year 2004 MILCON unfunded priority list were provided to the SAC 
MILCON Subcommittee staff on March 13, 2003. The Air Force's MILCON and 
MFH FYDP lists were provided to the SAC MILCON Subcommittee staffs on 
April 8, 2003.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. I agree with you, and of course Senator 
Feinstein and I work so well together, and we all work with 
Senator Stevens and Senator Inouye, and we have wonderful 
staff, so I thank you for pointing that out.
    Thank you.
    [Whereupon, at 4:25 p.m., Tuesday, March 4, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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