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




 
       DEPARTMENT OF DEFENSE APPROPRIATIONS FOR FISCAL YEAR 2005

                              ----------                              


                         MONDAY, MARCH 1, 2004

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 10:31 a.m., in room SD-192, Dirksen 
Senate Office Building, Hon. Ted Stevens (chairman) presiding.
    Present: Senators Stevens, Burns, Inouye, and Byrd.

                         DEPARTMENT OF DEFENSE

STATEMENT OF HON. DOV S. ZAKHEIM, Ph.D., UNDER 
            SECRETARY OF DEFENSE (COMPTROLLER)
ACCOMPANIED BY LIEUTENANT GENERAL JAMES E. CARTWRIGHT, U.S. MARINE 
            CORPS, J-8, JOINT CHIEFS OF STAFF


                opening statement of senator ted stevens


    Senator Stevens. Good morning, Mr. Secretary. I take it we 
can assume from your presence that it was a friendlier dog than 
originally thought. Happy to have you back with us.
    Dr. Zakheim. Thank you, Mr. Chairman.
    Senator Stevens. As we meet today, our servicemen and women 
remain engaged in critical missions in Iraq, Afghanistan, and 
around the globe. They are the ones that are fighting and 
winning this global war, the war on terrorism. Since this time 
last year, we have removed a dangerous, brutal tyrant in Iraq. 
Sadly, more than 500 members of our armed services have lost 
their lives in this struggle. The families of those lost should 
know that their loved ones have changed history for the good, 
have liberated a nation of 25 million people, and made our 
Nation more secure.
    This is the first of 10 hearings this subcommittee will 
hold to review the Defense Department's budget request. We 
thank you for agreeing to change the date. We had a conflict 
before. The President's request includes $401.7 billion for the 
Department of Defense (DOD), a 7 percent increase over fiscal 
year 2004. That request reflects the President's commitment to 
prosecute the global war on terrorism. It balances the 
military's long-term needs for transformation and modernization 
with the need to conduct the current operations around the 
globe. The budget emphasizes readiness and training and 
provides for quality of life for our troops.
    The request continues several years of solid increases in 
the Defense Department budget. The cumulative growth in the 
Defense Department's budget over the last 3 years has been 33 
percent.
    Some say that this budget should include the fiscal year 
2005 contingency costs for terrorism because those costs are 
not known today. Another word for ``contingency'' is 
``unpredictable.'' The situation is too dynamic, too 
unpredictable to build a reliable budget 18 months in advance. 
I will have some questions about that as we go forward, Dr. 
Zakheim.
    Before you make your full statement, which is a part of the 
committee's record automatically now, I would turn to my 
colleague and co-chairman from Hawaii for his opening remarks.


                 statement of senator daniel k. inouye


    Senator Inouye. Thank you very much.
    This morning I want to join my chairman in welcoming you, 
Dr. Zakheim, as the first witness before the committee. It is a 
pleasure to join my colleague and friend Chairman Stevens as we 
begin this review.
    Incidentally, this is the 24th year that our chairman has 
presided over this subcommittee, and he and I have been 
together throughout this time and I for one think it has been a 
great partnership.
    As we turn our attention to the request of fiscal year 
2005, we see a regular defense appropriation request that will 
exceed $400 billion. Mr. Chairman, I probably do not need to 
remind you of this, but in your first year as chairman 
President Ronald Reagan offered a request for $200 billion to 
this subcommittee. So here we are almost 25 years later and the 
defense budget has just about doubled.
    Of course, this request that we are considering today does 
not include funding for our overseas commitments in Afghanistan 
and in Iraq, so unavoidably the total defense will exceed much 
more than $400 billion before the end of the fiscal year.
    Dr. Zakheim, since this administration established itself 
the defense appropriations request has increased by more than 
$100 billion or 35 percent, and that does not include the cost 
of terrorism. As a result, many of our colleagues wonder 
whether this year's increase of $25.5 billion on top of the 
estimated $50 billion supplemental that will likely be required 
to support our forces in Iraq is really necessary. I hope in 
your testimony today you can explain why the increase you are 
requesting is essential.
    In addition, my colleagues want to know how the 
administration intends to proceed with the many new benefit 
programs that have been established over the past few years, 
particularly health care for our Reserve families.
    Finally, I have been asked by my colleagues if we will be 
able to afford all the conventional weapon systems that are in 
development. They question this because your budget reserves 
most of the increases in investment programs for space and 
missile defense. So, Dr. Zakheim, I hope you will be able to 
address these issues today before the committee.
    Mr. Chairman, it is good to be back here with you again, 
sir.
    Senator Stevens. Thank you.
    Senator Byrd, do you have a statement, sir.


                  statement of senator robert c. byrd


    Senator Byrd. Thank you, Mr. Chairman. I will not have a 
statement at this time except to welcome Dr. Zakheim and I look 
forward to his testimony. Thank you.
    Senator Stevens. General Cartwright, we are happy to have 
you also with us.
    Mr. Secretary, do you have a statement for us?
    Dr. Zakheim. Yes, I do, Mr. Chairman.
    Senator Stevens. Would you pull that mike up a little bit, 
please.
    Dr. Zakheim. Is that better, sir?
    Senator Stevens. Thank you.
    Dr. Zakheim. Mr. Chairman, Senator Inouye, Senator Byrd: 
First I want to apologize for sounding like sandpaper. I do 
have some kind of flu and maybe it is better that we are 
sitting as far apart as we are. Poor General Cartwright here is 
a little closer to me, but I hope he will not catch anything.
    I want to thank you for the opportunity to discuss 
President Bush's fiscal year 2005 Department of Defense budget 
with you. Because the committee and its staff have received 
considerable information in support of the budget request, I am 
going to limit my statement to key issues that are related to 
my direct responsibilities as Under Secretary of Defense, 
Comptroller.
    Last week, actually the week before, I visited Afghanistan 
and Iraq and I would like to report that our troops there 
continue to perform magnificently. They appreciate the 
steadfast support that is given to them by the Congress, and we 
continue to witness progress in both of those countries. We 
also enjoy the full cooperation of our allies and partners as 
we work with Iraqis and Afghans to provide for their security, 
stability, and prosperity.
    I especially want to note the success of our Provincial 
Reconstruction Teams, the so-called PRT's, in Afghanistan and 
the contribution of our allies to PRT's. I visited the North 
Atlantic Treaty Organization (NATO) German PRT in Kunduz. The 
German forces are doing a marvelous job and are well liked by 
the local townspeople. In Iraq, I visited the lead elements of 
the Japanese contingent in As-Samawah, the Spanish brigade in 
Ad-Diwaniyah, and the Polish multinational division 
headquarters in Al-Hillah.
    These units are having a major, positive impact on the 
local populace and are demonstrating that the international 
community shares America's desire to help Iraq emerge from 30 
years of dictatorial darkness.
    For the current fiscal year, our fiscal year 2004 
supplemental appropriations provided sufficient resources to 
enable the Department to finance its incremental costs for 
operations in Iraq, Afghanistan, and the global war on terror 
through the end of September. We will continue to provide 
service support and transportation for our allies who are 
contributing forces to coalition operations in Iraq, but who 
nevertheless need some financial assistance.
    We cannot yet determine the scope of the United States 
(U.S.) operations in Afghanistan and Iraq in fiscal year 2005. 
The President's request therefore does not reflect possible 
incremental costs of those operations. It is extremely 
difficult to estimate what demands we might have to meet later 
this year and next year, particularly after the election in 
Afghanistan and after sovereignty is transferred to the Iraqi 
people, roughly in the June-July timeframe. Depending on the 
circumstances, we could face the need for either more or fewer 
troops and more or less intensive operations.
    I should also note that there is a 3-month lag in the 
availability of our data for actual costs in Afghanistan and 
Iraq. As of today, we only have figures for the costs of 
operations in November. Thus we will not know until the fall 
what our actual costs were for the summer, when sovereignty 
will have reverted to the Iraqi people.
    The Department does not anticipate a further request for 
DOD supplemental appropriations during the rest of calendar 
year 2004. Therefore, for several months into fiscal year 2005 
the Department will need to cover its incremental costs by 
drawing down appropriated funds that were budgeted for 
expenditure later in that fiscal year. We have done that in the 
previous two fiscal years and we can do so again in fiscal year 
2005 as long as the Congress moves quickly to approve a 
supplemental early in the next calendar year.
    One of the most important ways in which the Congress can 
support the global war on terrorism is to support three special 
authorities we have requested. The first one is for $500 
million to train and equip military and security forces in 
Iraq, Afghanistan, and friendly nearby regional nations, to 
enhance their capability to combat terrorism and support U.S. 
operations in Iraq and Afghanistan. It is critical that this 
authority include security forces because the terrorism threat 
in Iraq is inside its borders. Security forces, not the New 
Iraqi Army, play the primary role in confronting this threat.
    The second authority is the Commander's Emergency Response 
Program (CERP) for $300 million to enable military leaders in 
Iraq and Afghanistan to respond to urgent humanitarian relief 
and reconstruction needs. This has been a remarkably successful 
program. With quick turnaround projects averaging about $7,000 
each, commanders not only help people in their operations area, 
but also gain their support in defeating terrorists and 
building themselves a better future. As we have already done in 
fiscal year 2004, we propose to expand the CERP to Afghanistan, 
as well as to continue the program in Iraq.
    Finally, we are requesting authorities for increased 
drawdown, $200 million, under the Afghan Freedom Support Act, 
which would provide additional help for the Afghan National 
Army (ANA). In the current pivotal year, this authority is 
critical for advancing democracy and stability in Afghanistan. 
During my visit there, everyone I met gave very high marks to 
the professionalism and competence of the ANA.
    The President's fiscal year 2005 budget does not request 
specific appropriations for these three authorities and 
therefore the Department would need to reprogram funding to use 
them. This underscores the importance of Congress increasing 
the Department's general transfer authority to $4 billion, 
which would still represent just 1 percent of total DOD 
funding.
    Higher general transfer authority would also give us a 
greater ability to shift funds from less pressing needs to fund 
must-pay bills and emerging requirements. As we have seen in 
the past 3 years, such requirements have become a constant 
feature of our military programs. And as was mentioned just 
before, it is not all that long ago that our budget was in the 
vicinity of $200 billion, and the general transfer authority 
that we now have essentially relates to that timeframe. So that 
if we are asked to be more responsible, and rightly asked to be 
more responsible, about managing our cash, we need to have the 
ability to do so in a reasonable way.
    One other authority would be especially helpful, given the 
uncertainty we face in the global war on terrorism. We need to 
convert operations and maintenance to a 2-year appropriation 
account. This would preclude wasteful end-of-fiscal-year 
scrambling, help us cover emerging requirements, and enhance 
our ability to derive the very best value from every 
appropriated dollar.
    The President's fiscal year 2005 budget reflects the 
administration's continuing commitment to our military men and 
women and their families. It requests a 3.5 percent base pay 
raise and completes the elimination of average out of pocket 
housing costs for military personnel living in private housing. 
Prior to fiscal year 2001, the average service member had to 
absorb over 18 percent of these housing costs.
    The budget also sustains the excellent health care benefits 
available to military members, retirees, and their families and 
keeps us on track to eliminate nearly all inadequate military 
family housing units by fiscal year 2007, with complete 
elimination in fiscal year 2009. Privatization is enabling the 
Department to multiply the benefits of its housing budgets and 
get more military families into top-quality accommodations much 
sooner than would otherwise be possible. As of February 2004, 
27 privatization projects have been awarded for a total of 
55,000 units. We hope to get up to 136,000 by the end of fiscal 
year 2005.
    Taking good care of the Department's people, both military 
and civilian, includes providing them quality facilities in 
which to work. To that end, the fiscal year 2005 request funds 
95 percent of the services' facilities sustainment requirements 
and continues to improve our facilities recapitalization rate. 
For the first time, the percentage that is being allotted 
toward sustainment applies equally to all services across the 
board.
    Providing our people quality facilities requires that we 
not expend money on redundant facilities and that our basing 
structure be geared closely to our global strategy and 
commitments. We need the 2005 Base Realignment and Closure 
Commission to decide how best to streamline and restructure DOD 
facilities so that we can make the most out of funding and 
optimally support our global strategy.
    The fiscal year 2005 request strongly supports force 
protection. Although we are on track to meet most Central 
Command requirements during the current fiscal year, I want to 
give you some highlights of our ongoing force protection 
program.
    Interceptor body armor. U.S. Central Command (CENTCOM) 
plans to have 175,000 of these body armor sets in theater by 
the end of March, the end of this month, which will fully 
support its requirements. But in addition, the 2005 budget 
requests $40 million to sustain production of body armor sets 
at 25,000 sets per month until the full Army requirement is 
met.
    We are also ramping up our up-armored high mobility 
multipurpose wheeled vehicle (HMMWV's). Production is going up 
to 220 per month by May. Production plus redistribution of 
these up-armored HMMWV's that are on hand will meet CENTCOM 
requirements by December, and we are asking for an additional 
$156 million in fiscal year 2005 to procure another 818 of 
these.
    There are various detection and jamming devices in theater 
already. Others will begin arriving in theater in March 2004, 
and these are to deal with improvised explosive devices (IED). 
Our fiscal year 2005 budget supports increased production and 
accelerated research and development of other means and the 
same means to deal with the IED's.
    Then there are the vehicle ballistic protection kits. The 
Army's plan for add-on armor kits is on track to meet CENTCOM 
requirements for HMMWV's by October of this year and for other 
critical vehicles by December 2004. We expect some 6,300 HMMWV 
add-on armor kits to be delivered by July of this year.
    I also want to highlight how the Department is transforming 
the way in which it conducts its business. Our primary 
initiative in this regard is the Business Management 
Modernization Program. This is a massive undertaking involving 
virtually all management functions and it will take several 
more years to complete. We are in the process of transitioning 
from more than 2,000 mostly incompatible management information 
systems to a much smaller number of fully compatible systems 
that will provide leaders everything needed for informed 
decisionmaking. We will streamline processes and integrate 
systems to enable DOD decisionmakers to get timely and accurate 
information to optimize the allocation of defense resources and 
people. The fiscal year 2005 budget requests about $100 million 
to continue the evolution and extension of our business 
enterprise architecture, which is guiding the overhaul. We 
still anticipate that the architecture will lead to a 
functional accounting system by fiscal year 2007. We have been 
making progress for a couple of years, and we still believe we 
are on track.
    Another initiative I want to highlight is military to 
civilian conversion. The Department has identified over 50,000 
positions currently filled by military personnel for conversion 
to positions supported by DOD civilians or contractors. The 
services have begun to convert 10,000 positions in this fiscal 
year. The fiscal year 2005 budget includes $572 million to 
achieve the conversion of another 10,070 positions.
    I would like to note that the Defense Finance and 
Accounting Service (DFAS), which is part of my organization, 
has already converted several hundred positions previously 
filled by Air Force personnel. The airmen are now available to 
the Air Force, which can retrain them to fulfil its 
requirements.
    In a similar vein, the Army has been retraining the 
soldiers formerly assigned to DFAS. Again, we are talking about 
several hundred personnel. In particular, many of these people 
are being retrained at Fort Leavenworth to serve as military 
police, a specialty which currently is in especially great 
demand. At the same time, DFAS, the Financing and Accounting 
Service, Finance and Accounting Service, does not need to hire 
as many civilians to replace their uniformed predecessors. So 
DFAS will be more efficient as well.


                           PREPARED STATEMENT


    These are a few of the highlights of the fiscal year 2005 
budget and related DOD activities. Together with General 
Cartwright, who is the head of the J-8, which is the Joint 
Staff's Programming and Analysis Division--and it is a much 
longer formal title, but I think that sums it up--we would be 
happy to address your questions on these or any other defense 
budget matters. Thank you.
    [The statement follows:]

           Prepared Statement of the Honorable Dov S. Zakheim

    Mr. Chairman, members of the Committee, thank you for this 
opportunity to discuss President Bush's fiscal year 2005 Department of 
Defense (DOD) budget. Because the Committee has received considerable 
information in support of the budget request, I will limit my statement 
to key issues that are related to my responsibilities as Under 
Secretary of Defense (Comptroller).

                  FUNDING THE GLOBAL WAR ON TERRORISM

    Two weeks ago I visited Afghanistan and Iraq, and so I will begin 
by reporting that our troops there continue to perform magnificently. 
They appreciate the steadfast support given them by this Congress. We 
continue to witness progress in both countries, and enjoy the full 
cooperation of our allies and partners as we work with Iraqis and 
Afghans to provide security, stability and prosperity to their 
respective countries. I especially want to note the success of our 
Provincial Reconstruction Teams (PRTs) in Afghanistan, and the 
contribution of our allies to PRTs. I visited the NATO/German PRT in 
Kunduz. They are doing a marvelous job and are well-liked by the local 
townspeople.
    In Iraq, I visited the lead elements of the Japanese contingent in 
As-Samawah, the Spanish brigade in Ad-Diwaniyah, and the Polish multi-
national division headquarters in Al-Hillah. These units are having a 
major, positive impact on the local populace, and are demonstrating 
that the international community shares America's desire to help Iraq 
emerge from thirty years of dictatorial darkness.
    For the current fiscal year, our fiscal year 2004 supplemental 
appropriations provide sufficient resources to enable the Department to 
finance its incremental costs for operations in Iraq, Afghanistan, and 
the global war on terrorism through the end of September. We will 
continue to provide service support and transportation for allies who 
are contributing forces to coalition operations in Iraq, but who 
nevertheless need some financial assistance.
    We cannot yet determine the scope of U.S. operations in Afghanistan 
and Iraq in fiscal year 2005. The President's request therefore does 
not reflect possible incremental costs for those operations. It is 
extremely difficult to estimate what demands we might have to meet 
later this year and next year--particularly after the election in 
Afghanistan and after sovereignty is transferred to the Iraqi people. 
Depending on the circumstances, we could face the need for either more 
or fewer troops--and more or less intensive operations.
    I should note that there is a three-month lag in the availability 
of our data for actual costs in Afghanistan and Iraq. As of today, we 
only have figures for the costs of operations in November. Thus we will 
not know until the fall what our actual costs were for the summer, when 
sovereignty will have reverted to the Iraqi people.
    The Department does not anticipate a further request for DOD 
supplemental appropriations during the rest of calendar year 2004. 
Therefore, for several months into fiscal year 2005, the Department 
will need to cover its incremental costs by drawing down appropriated 
funds that were budgeted for expenditure later in that fiscal year. We 
have done this in the previous two fiscal years, and can do so again in 
fiscal year 2005, as long as the Congress moves quickly to approve a 
supplemental early in the next calendar year.

                      NEEDED ENHANCED AUTHORITIES

    One of the most important ways in which Congress can support the 
global war on terrorism is to support three special authorities we have 
requested:
    (1) $500 million to train and equip military and security forces in 
Iraq, Afghanistan, and friendly nearby regional nations to enhance 
their capability to combat terrorism and support U.S. operations in 
Iraq and Afghanistan. It is critical that this authority include 
security forces because the terrorism threat in Iraq is inside its 
borders. Security forces--not the New Iraqi Army--play the primary role 
in confronting this threat.
    (2) The Commanders Emergency Response Program ($300 million) to 
enable military leaders in Iraq and Afghanistan to respond to urgent 
humanitarian relief and reconstruction needs. This has been a 
remarkably successful program. With quick turnaround projects averaging 
about $7,000 each, commanders not only help people in their operations 
area, but also gain their support in defeating terrorists and building 
themselves a better future. As we have already done in fiscal year 
2004, we propose to expand CERP to Afghanistan, as well as to continue 
the program in Iraq.
    (3) Increased drawdown authority ($200 million) under the 
Afghanistan Freedom Support Act, to provide additional help for the 
Afghan National Army. During this pivotal year, this authority is 
critical for advancing democracy and stability in Afghanistan. During 
my visit to Afghanistan, everyone I met gave very high marks to the 
professionalism and competence of the ANA.
    The President's fiscal year 2005 budget does not request specific 
appropriations for these three authorities, and therefore the 
Department would need to reprogram funding to use them. This 
underscores the importance of Congress increasing the Department's 
General Transfer Authority (GTA) to $4 billion--which would still 
represent just one percent of total DOD funding. Higher GTA also would 
give us a greater ability to shift funds from less pressing needs to 
fund must-pay bills and emerging requirements. As we have seen in the 
past three years, such requirements have become a constant feature of 
our military programs.
    One other authority would be especially helpful, given the 
uncertainty we face in the global war on terrorism: we need to convert 
Operation and Maintenance (O&M) to a two-year appropriation account. 
This would preclude wasteful end-of-fiscal-year scrambling, help us 
cover emerging requirements, and enhance our ability to derive the very 
best value from every appropriated dollar.

                       DOING RIGHT BY OUR PEOPLE

    The President's fiscal year 2005 budget reflects the 
Administration's continuing commitment to our military men and women 
and their families. It requests a 3.5 percent base pay raise and 
completes the elimination of average out-of-pocket housing costs for 
military personnel living in private housing. Prior to fiscal year 2001 
the average service member had to absorb over 18 percent of these 
housing costs. The budget also sustains the excellent health care 
benefits available to military members, retirees and their families. 
And it keeps us on track to eliminate nearly all its inadequate 
military family housing units by fiscal year 2007, with complete 
elimination in fiscal year 2009.
    Taking good care of the Department's people, both military and 
civilian, includes providing them quality facilities in which to work. 
To that end, the fiscal year 2005 request funds 95 percent of the 
Services' facilities sustainment requirements and continues to improve 
our facilities recapitalization rate. For the first time, this 
percentage applies equally to all Services.
    Providing our people quality facilities requires that we not waste 
money on redundant facilities and that our basing structure be geared 
closely to our global strategy and commitments. We need the 2005 Base 
Realignment and Closure (BRAC) Commission to decide how best to 
streamline and restructure DOD facilities so that we can make the most 
out of our funding and optimally support our global strategy.

                            FORCE PROTECTION

    The fiscal year 2005 request strongly supports force protection, 
although we are on track to meet most Central Command (CENTCOM) 
requirements during the current fiscal year. Following are the 
highlights of our force protection program:
  --Interceptor Body Armor (IBA).--CENTCOM plans to have 175,000 IBA 
        sets in theater by the end of March, which will fully support 
        its requirements. The fiscal year 2005 budget requests $40 
        million to sustain production of IBA at 25,000 sets per month 
        until the full Army requirement is met.
  --Up armored HMMWV (UAHs).--Production will ramp up to 220 per month 
        by May. Production, plus redistribution of UAHs on hand will 
        meet CENTCOM requirements by December. The fiscal year 2005 
        request is $156 million to procure 818 UAHs.
  --Improvised explosive device (IED) jamming/change detection 
        technology.--Various detection/jamming devices are in theater. 
        Others will begin arriving in theater in March 2004. Our fiscal 
        year 2005 budget supports increased production and accelerated 
        research and development.
  --Vehicle ballistic protection kits.--The Army's plan for add-on 
        armor kits is on track to meet CENTCOM requirements for HMMWV 
        by October 2004, and for other critical vehicles by December 
        2004. Some 6,310 HMMWV add-on armor kits are expected to be 
        delivered by July 2004.

                   TRANSFORMING HOW DOD DOES BUSINESS

    I also wish to highlight how the Department is transforming the way 
in which it conducts its business.
    Our primary initiative in this regard is the Business Management 
Modernization Program (BMMP). This is a massive undertaking involving 
virtually all DOD management functions, and it will take several more 
years to complete. We are in the process of transitioning from more 
than 2,000 mostly incompatible management information systems to a much 
smaller number of fully compatible systems that will provide leaders 
everything needed for informed decision-making. We will streamline 
processes and integrate systems to enable DOD decision-makers to get 
timely and accurate information to optimize the allocation of defense 
resources and people. The fiscal year 2005 budget requests about $122 
million to continue the evolution and extension of our Business 
Enterprise Architecture, which is guiding our overhaul. We anticipate 
that the architecture will lead to a functional accounting system by 
fiscal year 2007.
    Another initiative I want to highlight is military-to-civilian 
conversion. The Department has identified over 50,000 positions 
currently filled by military personnel for conversion to positions 
supported by DOD civilians or contractors. The Services have begun to 
convert 10,000 positions in fiscal year 2004. The fiscal year 2005 
budget includes $572 million to achieve the conversion of another 
10,070 positions. I should note that the Defense Finance and Accounting 
Service (DFAS), which is part of the Comptroller organization, has 
already converted several hundred positions previously filled by Air 
Force personnel. The airmen now are available to the Air Force, which 
can retrain them to fulfill its requirements. Similarly, the Army has 
been retraining the soldiers formerly assigned to DFAS. In particular, 
many of these personnel are being retrained at Fort Leavenworth to 
serve as military police, a specialty which currently is in especially 
great demand. At the same time, DFAS does not need to hire as many 
civilians to replace their uniformed predecessors. As a result, DFAS 
will be more efficient as well.

                                CLOSING

    These, then, are a few highlights of President Bush's fiscal year 
2005 defense budget and related Department of Defense activities. I 
would be happy to address your questions on these or any other defense 
budget matters. Thank you.

    Senator Stevens. Thank you very much, doctor.
    Since there are only four of us here, would it be 
acceptable if we put a limit of 10 minutes on each one of us? I 
expect two more members. Is there any objection to a 10-minute 
limitation?
    [No response.]
    Senator Stevens. Dr. Zakheim, you have indicated a great 
many things concerning the current conflicts in Iraq and 
Afghanistan. As you have said, we will expect a supplemental 
some time after the beginning of the next calendar year, which 
means that the armed services will have to complete their work 
during this fiscal year, through the end of September, and 
beginning of October start using the funds that are in fiscal 
year 2005.
    I take it that it is your feeling that if there is a surge 
in expenditures in the first quarter of the next fiscal year 
you will use the food and forage concept and proceed with the 
idea that we will not be able to get a supplemental through to 
you probably until this time, some time around March 2005. Is 
that your plan?
    Dr. Zakheim. Obviously if there is a jump in expenditures 
we have to revisit what we would do. Right now it could go any 
of three ways. If things go wonderfully and more foreign troops 
are sent in, along the lines of the Japanese and the Koreans 
and so on--and with regard to those two countries in 
particular, I do not think anyone would have anticipated 8 or 9 
months ago that they would be in Iraq--then we could probably 
reduce our presence.
    If things go along the lines that we are talking about now, 
our presence will reduce marginally, by about 10,000 troops. If 
things go to hell in a handbasket--and there are those who 
predict that, though I do not think that is the case, certainly 
not what I have seen out there and certainly not in light of 
the constitution coming out the way it did, which clearly shows 
that the Iraqis themselves are determined to have a peaceful 
transition. Nevertheless, if things went bad, then there would 
be some kind of sharp increase and we would have to reevaluate.
    As things stand now, we can draw upon the experience of the 
last 2 years. As you know, we forward financed in excess of $30 
billion before we came for a supplemental last spring. That 
probably cut matters very close. The previous year we forward 
financed in the region of $13 billion. So if we were to come to 
you in January and request a supplemental then and the Congress 
turned it around, as it can do, within 1 month or so, I do not 
think we would face any difficulties.

                                 HMMWV

    Senator Stevens. I would like to shift over to the HMMWV's 
if we can. This has been a very, very serious issue for us on 
this committee. I have an equipment schedule here that shows 
that the HMMWV's, developed in the early 70's, began 
procurement in 1985. There are three models, I am told--no, 
four: A0 through A3; and that most of those that were deployed 
were the A0 and A1's.
    Now, some of them are less capable of supporting the 
armored packages. What are the ones that are being armored now? 
The up-armor, what models are being up-armored?
    Dr. Zakheim. I believe all of them are being up-armored. I 
have not heard that there is a difference between them. General 
Cartwright, do you have a different sense of that?
    General Cartwright. They can use any of the models to 
upgrade, but what essentially they do in the upgrade is they 
increase the engine and the transmission in order to take the 
additional weight. That is the key, so that when they go back 
and put the up-armor kit on it takes a larger engine and it 
also takes a transmission change. Which model they use does not 
matter.
    Senator Stevens. That was going to be my next question. Are 
you selecting any particular model for up-armoring or just what 
we can get a hold of? Are you bringing them back to up-armor 
them? Where are they being up-armored?
    General Cartwright. Some are new procurements, some are 
upgrade kits that are being done in the field, some are upgrade 
kits that are being done here in the United States. We are 
going to the quickest place that we can to create the 
capability out in the field. In some cases we have sent teams 
out to do it in the field to the extent that we can. But again, 
you are changing an engine and a transmission, which they can 
do in the field. Some of them we are building new at the 
factory.
    Senator Stevens. These are basically built in Indiana and 
Ohio?
    Dr. Zakheim. I believe that is correct.
    General Cartwright. I think that is right. Indiana is the 
key place that I recall.
    Senator Stevens. Are we procuring any new jeeps that are 
not up-armored?
    Dr. Zakheim. Not to my knowledge.
    General Cartwright. Not right now.
    Senator Stevens. We also heard that for the first time an 
Abrams tank was destroyed by artillery shells that were wired 
together and put into a road and set off, actually, by a cell 
phone. How prevalent is that now, General?
    General Cartwright. The enemy is certainly in using these 
explosive devices becoming more and more creative, and to the 
extent that they understand how to attack a particular target, 
whether it be a vehicle or a convoy, and how to inflict the 
damage, we have seen a steady progression in their 
sophistication of being able to do that.
    This often becomes an effort where our ability to armor or 
protect is then offset by a different capability on the part of 
the enemy, and we continually try to stay ahead of that game.
    Dr. Zakheim. Without getting into too much detail in an 
open forum, I think it is safe to say that basically there are 
two approaches to this, active measures and passive measures. 
We are pushing both and we have seen some success in both 
cases.
    Senator Stevens. What about this problem about 
predictability in terms of the costs of Iraq and Pakistan? 
Could you discuss that?
    Dr. Zakheim. Sure.
    Senator Stevens. My staff tells me that the situation is 
incredibly fluid and because of the difficulty to really 
predict what the costs will be over the next, what, 18 months, 
it is hard for us to conceive right now what the supplemental 
will look like. Is that correct?
    Dr. Zakheim. Yes, I think your staff is right on target 
there. Just to give you a concrete example, in November our 
monthly cost was something under $4 billion. In October I 
believe--I think it was October--the monthly cost was in the 
region of $7 billion.
    Senator Byrd. Monthly cost for what, please?
    Dr. Zakheim. For operating in Iraq. Excuse me, Senator.
    Senator Byrd. In Iraq?
    Dr. Zakheim. Yes, sir. Actually, I think it was September. 
There was a fluctuation. Now, we are still trying to understand 
the spike, but the basic point is that we do get spikes. Again, 
given that, and given the political uncertainties--and I think 
this is what your staff was getting at and they are absolutely 
right--given the political uncertainties, it is very, very 
difficult to predict, even with respect to Afghanistan, which 
has been fundamentally more stable, what exactly the costs will 
be. If we are talking about a supplemental, we are in March now 
and we are talking about moneys that would be expended 
initially about 8 months from now through about 20 months from 
now.
    That really is the key to our desire to wait a little 
longer and have a much better feel to the extent we can before 
we come in with a supplemental request.

                      TEMPORARY STRENGTH INCREASES

    Senator Stevens. Let me ask a related question. It is my 
understanding that the costs associated with the temporary 
strength increases are not in the fiscal year 2005 budget 
either. Now, these are people that have been taken on now and 
they have the additional cost of housing and various support 
costs. Why did the budget not include the amount for those that 
have already been brought on in temporary strength increases?
    Dr. Zakheim. Because those increases are under the 
emergency authorities and emergency authorities are funded by 
the supplemental. The fiscal year 2004 supplemental therefore 
funds those increases for fiscal year 2004. Again, when there 
is a fiscal year 2005 supplemental it will fund those 
increases. These are the emergency authorities over and above 
the authorized end strength.
    Senator Stevens. Well, there is an inconvenient gap there 
between October 1 and March 1 of next year. How are you going 
to fund them?
    Dr. Zakheim. Again, we will fund it the same way we would 
fund operations, that is to say forward financing. The issue is 
not really our ability to fund forward. The issue is how long 
we can continue to do it. Clearly, if it were to stretch on 
into the late part of the second quarter of the next fiscal 
year, we would have problems.
    Senator Stevens. What does ``temporary'' mean with regard 
to these employees?
    Dr. Zakheim. Essentially ``temporary'' simply means that 
you are going above the end strength, the authorized end 
strength, and it is part of the emergency authorities and so 
you do that until such time as you no longer have the 
emergency. That is my understanding of it. General, is yours 
different?
    General Cartwright. The same.
    Senator Stevens. Senator Inouye.
    Senator Inouye. I am glad you asked that question, Mr. 
Chairman, because there are many of us who would like to know 
what we have in mind when we say ``temporary.''
    Dr. Zakheim. Senator, as you know, the Secretary of Defense 
has said over and over again we do not want to stay in either 
Afghanistan or Iraq one day longer than is necessary. I think 
the general view is that we will be able to ramp down our 
forces over time. The question is what are the political 
circumstances that would permit such a ramp down. Those involve 
not just the internal situation in Iraq, but the degree to 
which Iraqi forces are able to pick up the burden--as you know, 
they actually are the largest force under arms in Iraq right 
now--and second, what the international contribution would be.
    There are a number of countries, as you know, that have sat 
on the fence for some time waiting to see developments, waiting 
to see a transfer of authority. So it is not at all 
inconceivable that once July comes around you will see far more 
contributions of forces than we have seen today.

                                 HAITI

    Senator Inouye. Dr. Zakheim, can I ask a few questions on 
Haiti? Yesterday the United Nations announced an international 
force will be going in, but apparently American forces would be 
the major unit. What is happening now?
    Dr. Zakheim. I do not know if the General has more insight 
than I do. But as far as I understand, we are sending some 
relatively small units out there. We are not going to be 
working on our own. And then there will be a handover to the 
United Nations (U.N.) peacekeeping force some months down the 
road.
    Clearly, one has to see. This is the day after President 
Aristide decided to catch the next plane to Africa, and how the 
situation persists at this stage, whether it quiets down, 
whether there is rioting or not, is something that at least I 
am not in a position to predict. But I do understand--and I 
would like General Cartwright to jump in here--that we are 
sending some small number of marines for at least 1 month or 
so, until the United Nations feels it is ready to send in the 
blue helmets.
    General Cartwright. I think that is exactly right. The 
unknowns in this situation are still pretty large. We are 
trying to understand what the situation is on the ground. We 
are trying to understand what it will take to be part of a 
national--or an international coalition if that is what is put 
together by the United Nations and what our role would be in 
it. These initial moves are just meant to establish our 
position there, first and foremost to protect our interests at 
the Embassy.

                     TRICARE FOR GUARD AND RESERVES

    Senator Inouye. Dr. Zakheim, last fiscal year we increased 
several personnel benefits. Among these was TRICARE for Guard 
and Reserves. But your fiscal year 2005 budget request provides 
for ending this at the end of the calendar year. What is your 
plan for the program?
    Dr. Zakheim. The law told us to carry it through to the end 
of the calendar year and we did, as you know, and we are asking 
$300 million for that. And yes, we have not funded beyond that.
    We are looking at how to deal with an issue that in our 
view is a little more complicated than simply providing TRICARE 
for Reserves. When the Reserves are on active duty they are 
already covered by TRICARE and for a brief time thereafter. 
Therefore the question is if someone is in the Reserves and not 
on active duty and has access to other health care as well, 
what do we do about that, since every dollar, quite honestly, 
that is spent in that direction could well come at the expense 
of other programs?
    You noted, Senator, somewhat earlier that the defense 
budget has increased significantly over the last few years. 
Well, $27 billion of that is purely health-related: $17 billion 
in the defense health program, $10 billion more in the accrual 
account for medical retirees. That is a lot of money, and these 
accounts grow of their own. We do not have any real control 
over them. They are nominally discretionary. In fact, they are 
entitlements.
    This one would likewise be, in practice, an entitlement. So 
we have to look very, very carefully before we extend these 
kinds of benefits beyond where they already are. The law told 
us this was to be in force until the end of the calendar year 
and so we funded it to the end of the calendar year.
    Senator Inouye. With all this, would you find that an 
active duty soldier fighting together with a Reserve soldier 
side by side, one getting full benefits, the other question 
mark, is not quite fair?
    Dr. Zakheim. It would not be fair if the Reserve were not 
entitled to TRICARE while the Reserve were fighting as an 
active. But in fact they are both entitled to the same benefits 
while they are both functioning in the same way. The real issue 
is as I see it--and maybe the General wants to expand--what do 
we talk about when we have someone who is on active service on 
the one hand and someone who is working at their regular job 
not in the military on the other?
    One could make the case that the unfairness, such as it is, 
would be against the active service person, who would find that 
they are still on the front lines somewhere, whereas the 
Reserve, who was going about their daily life with their family 
and their normal job in their normal town, is collecting the 
same benefit. Then one could say, is that particularly fair?
    General, do you want to add to that?
    General Cartwright. I think that hits the heart of the 
issue. We do not want to disadvantage the Reserve component 
when they are on active duty or in their transition to and from 
active duty. Clearly we want to take care of them, and I think 
that the measures that have been put forward do that. The 
question then becomes how long when they are not on active duty 
and to what extent this benefit extends, and I think we want to 
discuss that.

                               EXIT PLAN

    Senator Inouye. The following two words are ones that we 
hear quite often in the political arena: ``exit plan.'' Now, we 
have planned for a temporary increase in troops. Does the 
administration have any exit plan for a time when we might be 
reducing these temporary forces?
    Dr. Zakheim. As I mentioned, Senator, the current plan 
envisions a reduction of about 10,000 this year alone. I am not 
in the policy chain, at least not this time around in my 
career, so it is probably a little bit out of bounds for me to 
discuss this, other than to say that naturally the 
circumstances will dictate our exit.
    The one thing that I think we can all agree on is we do not 
want a premature exit. Given the nature of the situation in 
Iraq or in Afghanistan, for that matter, a premature exit would 
create circumstances that probably could be so bad as to force 
us to come in, to come back in, within stronger numbers. That 
is what we all want to avoid.
    But it will be the circumstances on the ground that dictate 
just exactly when we go and at what pace.
    General, do you want to add?
    General Cartwright. Maybe I misunderstood the question. I 
thought you were focused more on when will the temporary end 
strength be drawn down versus when we will exit the conflict. 
Is that correct?
    In the thought process of the temporary end strength, 
clearly the forces, the services, are taking advantage of the 
opportunity to align themselves as quickly as they can to a 
configuration that allows them to both meet the threats that we 
have today and we envision having in the future and to get 
themselves to a position where they can sustain presence at the 
level that is necessary.
    The thought process right now with the Army, who has 
probably undertaken the greatest transformation of all the 
services, is that it will probably take them somewhere in the 
neighborhood of out through 2007 to accomplish this. They can 
meter the rate out. If the temporary authorities are reduced, 
they can stretch that out and stretch their transformation out. 
While they have the temporary authorities, they can accelerate 
that transformation, and that probably is to our benefit and 
theirs, to be able to get into a configuration that is more 
sustainable.
    So the thought process is that right now if they stay at 
the rate at which they are going that out in the 2007, 2008 
timeframe they will be reconfigured in a way that allows them 
to go back to that original strength level.
    Dr. Zakheim. Sorry I misunderstood, Senator, but the way 
the General outlined it is my understanding. We are talking 
about getting down in approximately 3 to 4 years.
    Senator Inouye. I have 30 seconds, sir. In my opening 
remarks I mentioned that we have increases in space and 
missiles, but decreases in the usual things like tanks, ships, 
and planes.

                              SHIPBUILDING

    Dr. Zakheim. Senator, I do not think that is entirely the 
case. Yes, there are increases in space and yes, there are 
increases in missiles and missile defense. But let me give you 
one example of where the numbers might be a little misleading, 
and that is in shipbuilding. What we did this year was to 
finance the research and development portions of two ships, as 
opposed to fully finance those ships. That at least is what we 
are submitting to the Congress for approval, and we worked that 
out with the Office of Management and Budget (OMB).
    The impact of that is that had we fully financed those two, 
one being a DDX, the other the Littoral Combat Ship, the 
shipbuilding budget would be up about $2 billion. In practice, 
it has no differential impact on the work force on the ground 
and what goes on in the shipyards, but the numbers look a 
little bit different. As you well know, in shipbuilding in 
particular we only lay out about 4.5 to 5 percent of the total 
cost of a program in the first year.
    I think the same would apply to some of our other programs. 
It is true that we do not have a tank being funded, but we have 
not funded a tank in a number of years; and I would draw your 
attention to the Stryker program, which is moving along quite 
well.
    In terms of aircraft, we continue to fund the F-22, we are 
funding the F/A-18. Those have been our programs and they are 
moving on a steady pace. The research and development for the 
F-35, the Joint Strike Fighter, is moving ahead as well.
    Senator Inouye. Thank you very much.
    Thank you, Mr. Chairman.
    Senator Stevens. Senator Byrd, you are recognized for 10 
minutes, sir.
    Senator Byrd. Thank you, Mr. Chairman.

                           FUNDING CONFLICTS

    Dr. Zakheim, why is the Department of Defense breaking with 
the modern tradition of how the United States has funded large-
scale ongoing wars by absolutely refusing to include any costs 
of the war in its regular appropriations request?
    Dr. Zakheim. I do not know that it is a break with 
tradition. As I understand it, we funded 2 or 3 years of the 
Vietnam war in the baseline. I believe it was 1967 to 1970, 
fiscal years 1967 to 1970. It turned out that the estimates 
were way off and we went back to funding conflicts with 
supplementals.
    So we now have approximately 35 years of doing it this way. 
When this administration took office, we made clear that we did 
not want to use supplementals to fund shortfalls in operations 
and maintenance, for example, and we worked on changing the 
culture of the Pentagon so that we would not do that, so that 
people would not deliberately underfund budget requests and 
then come back to the Congress and say the sky was falling.
    What we did do was say to that in the event of a conflict--
and of course, in early 2001 we did not know that 9/11 would 
come around--we said in the event of a conflict that would be 
different. That is what we have done. It is consistent with 
what has been done, as I say, Senator, I believe since 1970.
    Senator Byrd. At least until--since when?
    Dr. Zakheim. 1970, sir.
    Senator Byrd. Well, in 1970 the moneys for combat 
operations in Vietnam were included in the regular 
appropriation bill.
    Dr. Zakheim. That was the last time, I believe.
    Senator Byrd. No, not the last time. In 1971, the funds for 
combat operations in Vietnam were included in the regular bill, 
and that was not the last year. 1972, 1973. So that is not 
accurate, Dr. Zakheim, what you said.
    Dr. Zakheim. I may have made a mistake between 1967 and 
1970, as opposed to 1970 and 1973. But I believe that it was 3 
years only and then we did not fund combat operations after 
that.
    Senator Byrd. You funded 1967 the Vietnam war, regular 
bill, 1967. 1966, combat operations, at least partially, in the 
regular bill.
    Dr. Zakheim. Partially, yes.
    Senator Byrd. Well, now, wait a minute. You know, what 
years you said earlier does not square with the facts. So I 
just want you to know I have got a whole table of all of these 
dates and these wars and how they were funded. So that is the 
basis for my question: Why is the Department of Defense 
breaking the modern tradition of how the United States has 
funded large-scale ongoing wars by absolutely refusing to 
include any costs of war in its regular appropriations request?
    Now, we have seen that this administration does not fund 
operations in its regular bills in this war. There are two wars 
going on here: one in Afghanistan, under which we were 
attacked; and one in Iraq, in which we were the attackers. How 
can the American people ever be prepared to support running 
enormous deficits while spending scores of billions for a long-
term occupation mission halfway around the world if the 
administration will not be open about its estimates for how 
much the war will cost, how long our troops will be sent 
abroad, or even what its exit strategy is for Iraq?
    How much are we spending per month in Afghanistan? How much 
are we spending per month in Iraq?
    Dr. Zakheim. We are spending on the average $4.2 billion a 
month in Iraq and on the average approximately $800 million a 
month in Afghanistan. The total cost of Enduring Freedom which 
exceeds just operations in Afghanistan is in excess of about--
it is about $1 billion a month, or at least that is what we saw 
last year. It was about $12 billion for 12 months.
    On the dates, I apologize, but you have got the numbers in 
front of you, I do not. You have a better sense of history than 
I do, Senator.
    Senator Byrd. Well, thank you, Dr. Zakheim. You better 
answer these questions when you come before the people's 
representatives in the Department that controls the purse 
strings. We are going to be watching these figures closely.
    You and I have had good relations and we have worked 
together on things before. These questions may sound like there 
is a great deal of animus between you and me. There is none. 
That is not my purpose here. I thank you for the good work you 
do.
    But it is increasingly clear that the Bush administration 
has no idea of when to start to bring American soldiers home 
from Iraq. It is increasingly clear that the Bush 
administration intends to keep soldiers in Iraq for many, many 
months. But does the administration include costs for this 
mission in its budget? The answer is no, right?
    Dr. Zakheim. That is correct, sir.

                      COSTS OF OCCUPATION OF IRAQ

    Senator Byrd. Does the administration give the American 
people an understanding of the costs of this prolonged 
occupation of Iraq? The answer is no, right?
    Dr. Zakheim. That one I am not sure I can fully agree with 
you on, Senator.
    Senator Byrd. Well, let us have it, then.
    Dr. Zakheim. Well, as I said, certainly the American people 
know that the costs have been large. If we are talking about 
$4.2 billion a month, they can do their sums up to now and see 
that we have been talking about significant amounts of money. 
The difficulty for us, Senator, is that predicting the future, 
as I indicated, is much more dicey. We can certainly come up 
with the numbers that we have spent and no one is under any 
illusions that these are not large expenditures. But the 
prediction of the future is a completely different matter, and 
that is why we have been very reluctant to make any statements.

                         ESTIMATED COSTS OF WAR

    Secretary Rumsfeld has noted in a number of hearings that 
we had originally requested in the case of Afghanistan a $10 
billion estimate and the Congress decided not to go with that. 
I know there is a lot of discussion about why the Congress did 
not and so on. It turned out that estimate was reasonably 
accurate for the first year.
    Senator Byrd. Well, Dr. Zakheim, why does not the 
administration send up in its budget the estimated cost of the 
war in Afghanistan, the estimated cost of the war in Iraq, in 
its regular budget? That is the question.
    Dr. Zakheim. The answer is because we simply cannot predict 
them at this stage, sir.
    Senator Byrd. The White House plays hide and seek with the 
costs of the war, hiding them from the American public until 
after the November election. The country deserves an honest up-
front approach from the President. Instead, we get gimmicks and 
games.
    I offered an amendment to the fiscal year 2004 defense 
appropriations bill that stated the sense of the Senate that 
the President should include in his fiscal year 2005 budget a 
request for ongoing military operations, including Iraq and 
Afghanistan. This amendment was passed with an overwhelming 81 
votes. But the costs of the war on terrorism and the war in 
Iraq are not included in this budget, the estimated costs. Of 
course, you cannot be absolutely sure down to the final dollar, 
but certainly this administration must have some estimates.
    Surely, the administration must talk about these things 
within the administration. I certainly would be totally 
surprised and shocked, astonished, if the truth were that the 
administration does not have any estimates of the costs of the 
wars, the two wars that are going on, the one in which we were 
attacked, the other in which we were the attacker. There must 
be some estimates.
    The American people are entitled to know what these 
estimates are, and that is what we are asking.
    On February 10, the military services told the Armed 
Services Committee that delaying a supplemental until next year 
would cause them real budgetary problems when they run out of 
money in early to mid-September. So, I remind you that the 
administration sent its request for $87 billion to Congress on 
September 17, 2003, and it was passed by Congress and signed 
into law by the President within 1\1/2\ months. If the 
Department can estimate the fiscal year 2004 costs of the war 
by September 2003, why can it not estimate the fiscal year 2005 
costs of the war by September 2004?
    Dr. Zakheim. Senator, again, yes, we have estimated the 
costs of 2004, but that is an estimate, it is true, and that is 
what we think we will spend through September 30 of this year. 
But we are reaching two watershed situations, both in Iraq and 
Afghanistan. That is to say, the transfer of authority in Iraq 
and the presidential election in Afghanistan. Both of those 
could be, will be, significant factors in what is the American 
military presence, posture, force level in fiscal year 2005.
    Senator Byrd. Dr. Zakheim, we are also approaching an 
election in this country, in November. The American people are 
entitled to know before the election, not after the election, 
what at least the estimated costs of these continuing wars are 
to the American people in dollars as well as in lives, as well 
as with regard to the length of the occupation.
    Mr. Chairman, I hope I have not overrun my time.
    Senator Stevens. Slightly, Senator.
    Senator Byrd. All right, I will wait until the next round. 
Thank you.
    Thank you, Dr. Zakheim.
    Dr. Zakheim. Thank you, Senator.
    Senator Stevens. Senator Burns. Ten minutes, Senator.

               PREPARED STATEMENT OF SENATOR CONRAD BURNS

    Senator Burns. Thank you, Mr. Chairman. I have a statement 
I would like to submit for the record, with the consent of the 
committee.
    Senator Stevens. It will be printed in the record.
    [The statement follows:]

               Prepared Statement of Senator Conrad Burns

    Thank you, Mr. Chairman. Mr. Zakheim, I would like to thank you for 
being here today to discuss the President's fiscal year 2005 Budget 
request for the Department of Defense (DOD). I have just a very short 
statement before we get going this morning.
    The President has proposed a $401.7 billion fiscal year 2005 budget 
for the Department of Defense. This number represents a seven percent 
increase over the fiscal year 2004 budget of $375.3 billion.
    I would like to start off by saying that for the most part, I think 
you have presented us with a good budget, one that funds core needs to 
allow troops currently engaged, to do so safely and to the best of 
their ability. This budget also prepares our military forces for future 
engagements, where battlefields will look much different than they have 
in years past. We must ensure our military transforms in such a way as 
to have the right military capabilities for any future engagement. An 
overall Research and Development (R&D) request of $68.9 billion and 
investment in Science and Technology, which has been included in this 
fiscal year 2005 budget at $10.5 billion, helps get us there.
    As you know, the men and women of our active, Guard and Reserve 
components have seen an increased operations tempo (OPTEMPO) over the 
past few years in particular. In my State of Montana, we'll soon see 40 
percent of the Guard's total force mobilized, including the 495th 
Transportation Battalion out of Kalispell, the 143rd Military Police 
Detachment out of Bozeman and the 1022nd Medical Company. While I know 
these men and women love what they do and love serving their country, 
this increased OPTEMPO does not, however, come without costs. I am 
pleased to see that the budget addresses this issue and looks at ways 
to rebalance our forces and reduce the need for involuntary reserve 
mobilization. I do think it is important to look at ways to add folks 
to areas where we currently have a shortage, such as military police, 
transportation and civilian affairs.
    Increased operations also wear and tear on much of our already 
aging equipment. This year's budget proposes $140.6 billion for the 
Operation and Maintenance (O&M) account, up from $127.6 billion in 
fiscal year 2004. The procurement account has been proposed at $74.9 
billion, down from the fiscal year 2004 level of $75.3 billion.
    The United States military would not be the best fighting force in 
the world without the great people who wear the uniform. It is 
important that we take care of our military men and women and ensure 
their quality of life is good. The Military Personnel account is funded 
at $104.8 billion in fiscal year 2005, while the Military Construction 
and Family Housing accounts request is a total of only $9.5 billion.
    Our military has performed nobly in their latest missions--
especially in Afghanistan and continuing in Iraq. This country's 
fighting force is extremely skilled and capable. The United States 
military responds to various missions across this nation and across the 
world at a moment's notice, as we have recently witnessed in Haiti. We 
must ensure our brave military men and women have the tools and 
equipment needed to do their job and return home to their loved ones 
safely and as quickly as possible.
    I pledge to do what I can to make sure that our military has the 
support they need to get the job done.
    Again, thanks for coming before our subcommittee today. I look 
forward to the discussion this morning. Thank you.

    Senator Burns. We are all spending a lot of time at home 
now, so thank you for coming this morning. I have a couple of 
things I would like to ask.
    With regard to the Senator from West Virginia's questions, 
you know, I realize we are finally into a political season. I 
had this all confused. I did not know that. But I want to point 
out the Clinton administration never did provide advance 
estimate costs for Haiti, Southwest Asia, or Kosovo. I would 
just like to clear that for the record.
    Senator Byrd. That is an old herring, going back to the 
Clinton administration. What has that got to do with today?
    Senator Burns. Well, you know there is a lot of truth in 
that.
    Senator Byrd. Well, there may be and there may not be. But 
we have got to do the funding. That is our business, and we 
need estimates upon which to proceed.
    Senator Burns. That is exactly right. If it was an accepted 
practice then, those practices will usually be carried forward 
in Government, and you know how that is.

                          RETENTION OF TROOPS

    I want to use an old Marine term here. As I talk to the 
families of Guard and Reservists in the State, scuttlebutt has 
it that our retention of those troops once they come home--they 
have been deployed no less than 6 months, in some cases over 1 
year--retention is going to be a problem. We have not heard 
that because there are no figures for it yet.
    Has this been discussed at the highest levels of the 
Pentagon? Because, as you know, over 50 percent of our force 
structure has been moved into Guard and Reserves. Has this been 
discussed and is it a concern of the Pentagon?
    Dr. Zakheim. Well, the answer is yes and yes, sir. My 
colleague David Chu, the Under Secretary for Personnel, is 
fully on top of this issue. As I understand it, right now we 
are retaining Reserves at a historically high rate, about 5 to 
6 percent higher than is normally the case.
    There are some indicators that that retention rate will go 
down some, and it might just level off at the historical rate. 
Right now, like you, all we have are anecdotal pieces of 
evidence. It really depends almost on which Reserve you speak 
to. I have spoken to some who have voiced the concerns you just 
did. I have spoken to others who say that the families are 
supportive, the townspeople are supportive, they are all very 
proud that they are out there, and they have absolutely every 
intention of re-upping.
    So until we actually see the numbers we do not know. But 
yes, this is something that we are very cognizant of. I guess 
we are fortunate that going into this potential situation we 
actually have higher retention rates than is historically the 
norm.
    General, do you want to add to that?
    General Cartwright. I think the retention rates are 
something that is a quick look; you can kind of get a sense of 
how many people are coming in. The longer term, which does not 
come right away, certainly revolves around the satisfaction 
that the individual soldier, sailor, airman, marine feels for 
the duty that he is performing.
    Even longer term and more problematic and one that we are 
keeping a very close eye on is the satisfaction of the family. 
This is a hard stress on a family and over time the question is 
have we focused and provided the right incentives to keep the 
families engaged and do they feel like the contribution is 
meaningful.
    Dr. Chu has certainly undertaken a broad program that goes 
out and looks at the benefits that we associate both with the 
individual service member and the benefits associated with the 
family, making sure that we describe service when a Reservist 
comes on duty that equates to the service that we actually 
demand of them. This gets at the idea of if there is a certain 
amount of readiness that we associate with a particular 
soldier, let us say, in the Reserve or the Guard, i.e., that we 
expect him to be up and available for 1 year out of every 5 or 
6 years, or whether we expect him to come on service at a short 
notice, that that is understood right up front and that that is 
what they sign up for.
    So we are looking at a broad range of things that get at 
the issue of the continuum of service, not just at the 
recruiting piece, because you have got to look broader than 
just the recruiting piece.

                            FORCE STRUCTURE

    Senator Burns. Well, Senator Inouye brought up a very valid 
point, and correctly so, on benefits and this type thing. A lot 
of us, every Senator sitting here at this table, when the trend 
started of bringing down our force structure of people on 
active duty, our regular forces, and when those numbers were 
dropped and then more emphasis was put on our Reserve and Guard 
forces, we all went to work and started to redevelop, to take a 
look at the infrastructure under which those Guard and Reserves 
are trained, that they have to have facilities and a training 
procedure that makes them as good as those who train every day.
    I think most of us who did that under the leadership of 
this committee and the Armed Services Committee, understood 
that. I just wonder, because we have integrated forces. The Red 
Horse Brigade out of Mount Storm Air Force Base is integrated 
Reserve and active duty forces. In fact, their first commander 
was a Reservist. That will work pretty well as long as we 
integrate those troops along with communication and training 
that is at least equal to our citizen soldiers, sailors, and 
marines.
    I think we have to discuss that, because it becomes a vital 
part of our force structure.

                             CACHES OF ARMS

    I was in Iraq last October and we were in the northern 
part, Mosul, where they were finding tremendously large caches 
of conventional arms that Saddam had stored and stashed away. I 
cannot help but think, as we see these bombs, these roadside 
bombs, that within those caches that we have found and those 
that we have not found is a supply of explosives that is much 
deadlier when used in a very creative way.
    Are we continuing to search for those caches and to destroy 
the ones that we have found?
    Dr. Zakheim. Please, let me start and I will then turn it 
over to the General.
    The answer is yes. We are also using Iraqis to do a lot of 
that. There are really two parts to this. One is to search for 
them; the other then is to guard them. Iraqis are providing a 
lot of the guard units for that. We do continue to search, and 
the more intelligence we get--and we are getting more 
intelligence, and the best sources are the Iraqis themselves--
the more we are able to quickly find these ammunition storage 
facilities and to guard them and dispose of them.
    General?
    General Cartwright. Clearly, a very aggressive effort, both 
in Afghanistan and Iraq, to go after these caches, find them, 
dry up that source as quickly as we can. The good news is that 
both in Afghanistan and in Iraq, as the forces, the local 
indigenous forces, stand up, as we use the tools available to 
us to create a conduit of information back and forth between 
locals, that has become our richest source of finding these 
caches.
    So in the case of Iraq, it is the Iraqis who are actually 
helping us go find those, get them, get them into a safe place, 
get them destroyed or disposed of otherwise. But the key here 
is programs like--and we talked about it earlier--the CERP 
fund, where we establish a relationship in the community and 
then the information starts to flow, are so critical to the 
soldiers as they try to do this.
    Senator Burns. Mr. Chairman, it says ``stop'' here. You 
never say ``whoa'' in a horse race. Oh, we are doing okay yet?
    Senator Stevens. You still are.
    Senator Burns. Well, this thing makes funny noises and has 
funny colors to it.
    Along that same line, there are some technologies supplied 
by or are being developed in some of our colleges and 
universities, also in small businesses, and especially in my 
State, that would help us to find both weapons and personnel 
underground. Have we seen any acceleration of taking a look at 
these technologies and obtaining those technologies and then 
deploying them?
    Dr. Zakheim. The answer is yes. DARPA, our Defense Advanced 
Research Projects Agency, in fact has--and I cannot get into 
detail in an open forum, but they in fact have been 
accelerating a number of these technologies, precisely for the 
reasons you gave, in order to get them on the ground quickly. 
We have got some on the ground quickly, and we are certainly 
prepared to brief you in private as to what we have done.
    Generally speaking, I think DARPA is open to ideas and 
suggestions. Anything that will particularly help the forces is 
welcome.
    Senator Burns. Well, we established a program called the 
Experimental Program to Stimulate Competitive Research (EPSCoR) 
many years ago when I first came to this body and that allowed 
consortias of smaller colleges and universities to do research 
and development (R&D) on many projects. Montana State 
University, I think you probably know, have made significant 
improvements to laser technology and have developed a lot of 
the technology that you are working with now.
    But I hear that it is hard to get into the good old boy 
network every now and again, and we have got to watch that 
because there are some creative people outside the norm, 
because EPSCoR has allowed these people to do a lot of R&D work 
in areas where it traditionally had not been found. I would 
like to see a little more notice taken of some of the advances 
that have been made.
    Mr. Chairman, thank you very much.
    Dr. Zakheim. Senator, if you contact me about this I will 
forward whatever information you have to Ron Sega, who heads up 
that area in our Department. I do know that there is no old boy 
network functioning with regard to force protection. They are 
trying to get at whatever is out there.
    Senator Burns. That is good, but it is still alive up here.
    Thank you very much.
    Dr. Zakheim. Mr. Chairman, just to correct for the record a 
couple of things. First, Senator Byrd got it absolutely right. 
I had flipped my history. I told you, Senator, you have a 
better sense of history than I do. We used supplementals for 
Vietnam in the first several years, 1965, 1966, and then we 
went over to baseline budgets in the years you mentioned. Of 
course, by that time we had a better sense of where we were 
headed with that, I believe. But in any event, I had gotten the 
years completely reversed.
    I also had a question earlier about buying HMMWV's that 
were not up-armored and I am told by the Army that in fact we 
are buying some number that are not in 2005. We are buying a 
total of 2,431 HMMWV's; 818 of those are up-armored, the rest 
are not. So I wanted to be clear for the record on that, sir.
    Senator Stevens. Thank you very much.
    I assume you are marking those so they are not going to be 
sent over to a war zone accidentally?
    Dr. Zakheim. The intention is that everything that goes 
over there is up-armored.
    Senator Stevens. That is not what I asked. The ones we are 
procuring new that are not up-armored, are they clearly marked 
so they cannot be sent into war zones?
    Dr. Zakheim. That is my understanding, but I will look into 
it for the record.
    [The information follows:]

    Both standard and Up-Armored High Mobility Multipurpose 
Wheeled Vehicles (HMMWV) are being procured in fiscal year 
2005. HMMWVs which are not Up-Armored are visually 
identifiable. New, non-up-armored HMMWVs coming out of 
production are programmed to fill unit shortages according to 
Army priorities. Both standard and Up-Armored HMMWVs will 
continue to be available in the theater of operation for use as 
appropriate by the Combatant Commander. Production of Up-
Armored HMMWVs is a Department priority and production is being 
increased to meet CENTCOM requirements.

    Senator Stevens. Thank you.
    I understand the Senator from West Virginia's point. I 
distinctly remember raising the question several times during 
Bosnia, Kosovo, all of those, even with the first President 
Bush in Somalia. We did not get budget estimates. We ran those 
wars on supplementals. That is not something this committee 
really believes in, but it has become a practice, whether we 
like it or not. But the Senator made about the same speech I 
did, as a matter of fact, in 1999 as we approached an election.
    But let me shift to something else. I am worried about this 
budget because I have before me your chart--I wish you had 
brought it in a big chart so everyone could see it. 1969, 8.9 
percent of our gross national product was dedicated to defense. 
And if you look at 1969, that was 43.4 percent of the national 
budget. Now we are looking at a budget that is 3.6 percent of 
the gross national product. In the year 2000 the budget request 
was 2.9 percent. We are looking at, instead of 43 percent of 
the Federal budget, we are looking at 17.9 percent of the 
Federal budget being committed to defense.
    As I look at our projections, there will be an increase 
over the next 5 years, not near enough to move us back up to 
the point where we traveled for the 10 years of the 1980's, 
somewhere in the vicinity of 20 percent of the Federal budget 
and in the vicinity of 6 percent of the gross domestic product.

                                OUTLAYS

    Now, I want to ask this. These outlays, do they include the 
costs of the war?
    Dr. Zakheim. The outlays in the charts for 2004 do, yes, 
sir. Obviously, not for 2005. But they do include the costs of 
the war. Anything that is an actual outlay is included, sir.
    Senator Stevens. I am worried about the trend in terms of 
being able to maintain the kind of a military we need if we are 
going to not restore the concept of committing a sufficient 
amount to our defense. I remember traveling the world with 
Senator Jackson where we urged our allies to commit at least 3 
percent, and we in those days were between 6 and 8 percent of 
the gross national product.
    What are our allies doing now? How much are they committing 
to defense, do you know?
    Dr. Zakheim. Off the top of my head, sir, I believe that 
many of the allies that we tried to get to reach 3 percent in 
those days are still not at 3 percent today. In our case, of 
course, our gross national product is in the trillions and so 
3.6 percent of such a large amount of money is still very, very 
significant.
    But nevertheless, I think it is fair to say that in most 
cases our allies are not at the 3 percent of their gross 
domestic products, and I can get you the answer for the record.
    [The information follows:]

    Please see the attached information on allied defense 
spending from the 2003 Responsibility Sharing Report.



                                 BUDGET

    Senator Stevens. Well, I asked that other question that you 
have just implied of the staff. We have not gotten the answer 
back yet. But I think that the amount of your budget now, which 
is roughly, what, 400----
    Dr. Zakheim. 401 and change, yes.
    Senator Stevens [continuing]. As compared to the $200 
billion in 1981, the first budget that Senator Inouye and I 
handled in defense, I think it is less than it was in terms of 
real dollars, than it was in 1981.
    Dr. Zakheim. I do not believe it is less than in 1981. 
Certainly it is less than the 1985 real dollar number, which 
was the peak of President Reagan's years, and I was part of 
that administration. But you are absolutely right, you cannot 
just take the $400 billion and compare it to the $200 billion 
because there is an inflation factor and there are also much 
increased benefits that did not exist in 1981.
    Senator Stevens. Well, I am told in constant dollars what 
you have is an increase from $257 billion to $393 billion 
between 1981 and 2005.
    Dr. Zakheim. I thought it was a little higher, sir, yes.
    Senator Stevens. That to me is not an increase that 
recognizes our global responsibilities now as compared to then. 
I wonder how you can maintain a global war against terrorism 
without some additional modernization.

                       ARMY AVIATION PROCUREMENT

    Let me switch over to that if I may. We have not seen some 
of the details on the Comanche termination and what is going to 
happen there. Is our understanding correct that the money from 
the Comanche termination, the net will be shifted over to the 
Army aviation procurement accounts?
    Dr. Zakheim. That is correct. Basically there is really a 
change in the whole approach to Army aviation. What is 
happening to Comanche is only a part of it. I can give you some 
detail. We are going to modernize 1,400 aircraft and, because 
of the funds available from Comanche, an additional 284 Apache 
Block 3's and 19 Chinooks. We are going to acquire almost 800 
new aircraft, both for the active and for the Reserve, and that 
is more Chinooks, more Blackhawks, and a light utility 
helicopter.
    Senator Stevens. When will we see those modifications in 
the budget?
    Dr. Zakheim. We are going to be sending up an amendment 
very quickly, sir, and that will address both sides of the 
equation. That is to say, moving the money out of Comanche and 
moving the money into many of the programs that I have 
mentioned.
    Senator Stevens. Will that change in any way the requests 
that are before us for the Army for 2005?
    Dr. Zakheim. I would have to check on that. I think that 
basically it is pretty much in balance, but I would have to get 
you that for the record. I do not think it will be significant, 
no, sir.
    [The information follows:]

    The Army 2005 budget request does not change in total but 
there has been realignment of resources between accounts. Army 
Research and Development is reduced by nearly $1.2 billion. A 
majority of the resources, $828 million, will be reapplied to 
support Aircraft Procurement, acquiring high priority 
helicopter equipment and additional CH-47, UH-60 and TH-67 
aircraft. Another $155 million is reapplied to Procurement of 
Ammunition, principally to support acquisition of additional 
Hydra rockets, and Missile Procurement has been increased by 
$93 million for the purchase of additional Hellfire missiles. 
Smaller adjustments have been made in several other accounts 
and the precise details of all adjustments are included in the 
fiscal year 2005 Amended Budget Submission that the Department 
has forwarded.

    Senator Stevens. It is basically a shift from R&D to 
procurement?
    Dr. Zakheim. Yes, sir.
    Senator Stevens. We have, I understand, a 2004 shortfall on 
the global war against terrorism of $700 million, is that 
right?
    Dr. Zakheim. I would have to look at that, the basis for 
that number. I do not recognize that figure, sir.
    Senator Stevens. Well, we are talking about the defense 
health program. Is there a shortfall there?
    Dr. Zakheim. In the defense health program? I would have to 
look at that.
    Senator Stevens. Attributable to the global war on 
terrorism?
    Dr. Zakheim. I am told that in fact there is that shortfall 
and we are going to reprogram money to cover it. So we will be 
sending you a reprogramming action for that.

                                  IFF

    Senator Stevens. All right. Why are they not, those 
shortfalls, not being funded from the Iraqi Freedom Fund (IFF)?
    Dr. Zakheim. I have to look at where the sources will come 
from. We will clearly fund the shortfall from the most 
acceptable source, and of course we have to send those sources 
up to you.
    Senator Stevens. Well, can you answer me this. Is the Iraqi 
Freedom Fund, which we created for the fiscal year 2003 
budget--it was the supplemental really--has that been 
exhausted?
    Dr. Zakheim. Not entirely exhausted. We are still 
reprogramming money out of the IFF. We are coming close to 
exhausting it, yes.
    Senator Byrd. Mr. Chairman, how much money does remain in 
that fund?
    Senator Stevens. Well, I was just going to get to that. I 
do not like to see any of these funds left, have us get 
supplementals when there is money in technical funds we created 
in the past that is not being charged. Are you doing that, Mr. 
Zakheim?
    Dr. Zakheim. No, I do not think that is the case at all. We 
anticipate using it all up. Actually we are almost there. I am 
trying to get the numbers for you and I hope before this 
hearing is over I will be able to tell you exactly where we are 
with what remains of the IFF. But I do not think it is a 
situation of asking for more money over and above what we have 
because we have more money in the kitty. That is not the case 
at all.
    Senator Stevens. Well, you are the Comptroller. Do we have 
existing funds over there? These are 2003 funds now we are 
talking about.
    Dr. Zakheim. That is correct.
    Senator Stevens. I do not understand why those funds were 
not used.
    Dr. Zakheim. Out of the $1.9 billion IFF, the Iraqi Freedom 
Fund, we have already committed over $1.5 billion. So we are 
down to about $400 million in the Iraqi Freedom Fund. For 
example, that in and of itself would not cover the DHP, the 
defense health program. But in any event, the health program is 
not directly war related, so we would have to fund it out of 
something else. The IFF is for what is directly war related.
    As I said, we are down to $400 million, or less than 25 
percent, of the original IFF and that will be expended pretty 
soon.
    Senator Stevens. I would hope there would be a policy of 
charging some of those funds like that, these reprogrammings, 
so that we do not create additional demands.
    Dr. Zakheim. It is in fact the policy to do that, but we 
can only reprogram for things that are directly war related. So 
in the case of the DHP we could not do that.
    Senator Stevens. I am not going to comment on that. We have 
seen it done before, let us put it that way.
    Gentlemen, I am going to have to leave here in a minute. We 
have got a 10-minute rule here, so I presume each member would 
want another 10 minutes. I will leave the gavel with the co-
chairman and thank you very much, Mr. Zakheim.
    Dr. Zakheim. Before you go, sir, I was passed a note 
without the right numbers. IFF is completely committed for 
2003, which is what you were asking me about. The $400 million 
that is left is in the IFF of 2004. So here we are in the 
second quarter of 2004, we have committed $1.5 billion out of 
$1.9 billion, and the 2003 is completely committed.
    Senator Stevens. Senator Inouye.
    Senator Inouye [presiding]. Thank you.
    I am glad that the chairman brought up the matter of 
shortfalls in military medicine and health care because in all 
the studies that we have looked at men and women in uniform are 
more concerned about health care than pay.
    That being the case, I have been also monitoring some of 
the assignments we have made of military personnel in medicine. 
I note, for example, that from Walter Reed we have been sending 
doctors to Iraq who are specialists. One just sent there is a 
specialist in knee replacements, which is a highly specialized 
area.
    Senator Stevens. Senator, would you yield to me just 1 
minute? I apologize.
    Senator Inouye. Certainly.
    Senator Stevens. When the subcommittee closes out today, 
our next hearing will be at 10 a.m. in this room for a hearing 
on the Army's fiscal year 2005 budget request.
    Thank you, Senator.
    Senator Inouye. Thank you.
    As I was saying this doctor is being sent to Iraq for 6 
months. He wants to go there to do his part, but in 6 months he 
is not going to do one knee replacement, he is not going to do 
any one of those highly skilled specialties, and when he gets 
back he will have to go back to school again.
    Why do you not have a policy that would, say, limit these 
people to 3 months?
    Dr. Zakheim. I would have to refer that to Dr. Winkenwerder 
and Dr. Chu.
    Senator Inouye. I am not a doctor, but it just does not 
make sense. You send someone out there and you are going to 
lose all his skills.
    Dr. Zakheim. On its face the question is an excellent one. 
I am sure there is an answer and a response. I do not know if 
General Cartwright is into that, but I claim no particular 
expertise. I would have to get you an answer for the record 
based on what Dr. Chu and Dr. Winkenwerder were to tell me.
    General Cartwright. We need to go back and look at the case 
for you, Senator.
    Senator Inouye. I would appreciate that, sir.
    [The information follows:]

    Surgeons are chosen for deployment based on the skill 
qualifications requested by the combatant commander.
    Once a requirement for a certain specialty is validated (in 
this case, orthopedics), the skill set requirement is matched 
to the skill level of the surgeons available to meet the 
requirement. Each Service has a system for coordinating these 
requests, utilizing its specialty consultants, medical manpower 
experts, and others familiar with the necessary skill 
qualifications. While orthopedists may have a subspecialty (in 
this case joint replacement) they are trained in (and typically 
treat) the full range of cases that may present. Indeed, well-
trained orthopedists are critical to caring for the wounds 
occurring in Iraq.
    Moreover, this rotation will help maintain excellence in 
the Military Health System's graduate medical education 
programs. Even the most highly trained subspecialists need 
operational/deployment military medicine expertise in order to 
be fully competent and credible role models and teachers for 
military physicians in training.
    This six-month period for the rotation balances the needs 
for the combatant commander with prudent use of highly trained 
medical staff.

    Senator Inouye. Senator Byrd.

                           ROTATION OF FORCES

    Senator Byrd. Thank you, Mr. Chairman, my esteemed friend.
    References have been made to a rotation of forces. The 
administration is in the midst of a massive rotation of forces 
in Iraq. Is the cost of rotating these forces reflected in the 
average monthly cost of $4.2 billion for operations in Iraq?
    Dr. Zakheim. To the extent--remember, Senator, that the 
monthly costs we have up to now only reflect what we have up to 
November. But the answer is yes, sir, those rotation costs will 
be reflected in the monthly costs. So that here we are in 
March; I do not expect to see any actuals until probably the 
June timeframe.
    Senator Byrd. Recent news reports indicate that the 
Pentagon and the Central Intelligence Agency (CIA) are stepping 
up the intensity of the hunt for Osama bin Laden. Is that 
increased effort requiring any corresponding increase in the 
average monthly cost of operations in Afghanistan or in the 
number of military personnel in Afghanistan?
    Dr. Zakheim. At this stage I simply do not know. Should 
there be an increase, it will be reflected. But again, that is 
not something I will be able to address in any detail for the 
next couple of months.
    Senator Byrd. Do you have any idea, any indications as to 
whether or not the effort is requiring any corresponding 
increase in the average monthly cost of operations in 
Afghanistan?
    Dr. Zakheim. General, do you want to?
    General Cartwright. The only thing I would say, Senator--
and it would be reflected--is that as the weather gets better 
the opportunity to do more will be there and we will try to 
take advantage of that. To the extent that that is a delta 
between what we are doing in the winter versus what we are 
doing in the spring and the summer would be the difference.
    Senator Byrd. General, does the Department anticipate any 
substantial drawdown of U.S. forces from Afghanistan at any 
point in the near future, keeping in mind the increase, the 
stepping up of the intensity of the hunt for bin Laden?
    General Cartwright. The program for 2004 is laid out and is 
relatively stable and includes the efforts that we have to 
chase after various targets. The longer range look, as I said 
earlier, our intent is to move out of there as quickly as the 
country is ready to take over. So that remains a little bit 
cloudy and ambiguous right now.
    Senator Byrd. Is there anything you can tell us about this 
hunt for Osama bin Laden? We have been reading a good bit about 
it. There are some reports that he has already been caught--I 
heard that report 2 or 3 days ago--and that the administration 
is waiting, waiting until a more opportune time to make the 
announcement. I did not give a great deal of credence to that, 
but I am not surprised at anything these days.
    Dr. Zakheim. Senator, you are right not to give much 
credence to that, particularly, as you know, the Middle East is 
a place where rumors start circulating and grow with the 
passage of days and hours.
    Senator Byrd. Just in the Middle East?
    Dr. Zakheim. That is the area we were addressing just now, 
sir.
    Senator Byrd. But you are making a rather broad statement 
when you say that in the Middle East rumors----
    Dr. Zakheim. There have been a lot of studies to that 
effect, about the impact of rumors on perceptions in the Middle 
East. That is why I referred to that one, sir.
    Senator Byrd. All right. Let me get back to my earlier 
subject of contention perhaps. The Department of Defense has 
adopted an all or nothing approach, sending Congress an 
ultimatum: Either give the Pentagon a blank check for $10 
billion, as was requested 2 years ago, or the administration 
will wait until untold billions have already been spent before 
asking for a supplemental appropriations bill. And we have done 
both. We have advanced that slush fund, as you might call it, 
of $10 billion, a blank check, and then at the same time we are 
still depending upon supplemental appropriations bills.
    This is an unnecessarily confrontational and shortsighted 
posture. So I have to continue to express my disappointment in 
this method of approach. Now, you can go back to preceding 
administrations, if you can find it to be a fact in each case, 
and talk about the war in Vietnam, the war on Bosnia, the war 
in Korea, or whatever. We are here to appropriate moneys today 
and we need to know, we are entitled to know, what the facts 
are.
    The American people, and we are here to represent them, are 
entitled to know what the costs of this war are and what the 
estimate of the future costs are going to be. There is an 
election coming up and there is a pretty well-founded 
suspicion, it appears, that these figures are going to be 
withheld from the people's elected representatives in Congress 
before the election, but that after the election, then the 
costs will be sprung upon us.
    I think it is a poor way to legislate. I am in my 46th year 
here on this committee and my 51st year on the Hill, in 
Congress. And we have not seen it done like that before, and 
this administration continues, it seems, to proceed in this 
manner.

                      IRAQ RECONSTRUCTION FUNDING

    Now, let us talk about the supplemental Iraq reconstruction 
funding. The OMB Director, Josh Bolten, stated that he 
estimates that the administration's supplemental appropriation 
request, whenever it may be submitted, could be in the 
neighborhood of $50 billion. Dr. Zakheim, does that estimate 
include any additional funds for reconstruction projects in 
Iraq?
    Dr. Zakheim. To my knowledge it does not.
    Senator Byrd. Can you give a ballpark estimate of what 
additional reconstruction funds the administration might 
request for Iraq on top of the $18.4 billion that was 
appropriated last fall?
    Dr. Zakheim. I cannot, and permit me to explain why I 
cannot. The $18.4 billion was not really a 1-year request. It 
was a request for essentially front-loading what would be an 
international effort to reconstruct Iraq. I was personally 
involved in organizing the Madrid conference. There we got 
commitments of up to $17 billion for reconstruction from the 
international community. Just this past weekend there was a 
meeting in Abu Dhabi where the United Nations and the World 
Bank trust funds announced they were open for business and 
countries started to commit money to those trust funds.
    In addition, there are the revenues that are coming from 
Iraqi oil. If you add all of those--our commitment, Iraqi oil, 
other revenues that are still coming in from frozen assets and 
Oil for Food contracts that were not implemented, as well as 
the international contributions--you are in the vicinity of 
about $50 billion.
    So that it is not at all clear at this stage just how much 
more we as the United States might have to contribute. I think 
the general sense is that, should we feel there is a further 
need for reconstruction funds, it would not be packaged as a 
supplemental, but instead be part of our total foreign 
assistance budget and sent up to the Congress that way.
    Senator Byrd. Just before the White House sent Congress its 
draft of an Iraq war resolution in September 2002, some 
proponents of confrontation with Iraq said that Members of 
Congress should explain to the American people their position 
on Iraq before the midterm elections. Now the administration 
wants to delay until after the upcoming Presidential election 
sending Congress the bill for keeping our troops in Iraq for 
another year.
    Dr. Zakheim, since the administration was so keen on 
getting the authority to go to war right before an election, 
does not the administration have the responsibility to let the 
American people know how much this war will cost? We are almost 
on the verge of getting into another election, and I think the 
American people are entitled to know this. What do you think?
    Dr. Zakheim. Well, sir, I certainly agree with you that 
there is another election coming. I think people can disagree 
about this. As we see it, we do not really have a good 
estimate. And I would not share your characterization of this 
as a slush fund. I want to make that clear. That is not how I 
would look at it. We do provide to the Congress monthly reports 
on our obligations. We do not have immediate monthly reports. 
We always run 3 months late.
    I believe, just as an analyst that to estimate the costs of 
fiscal year 2005 prior to the changes that are going to take 
place in Iraq and Afghanistan is probably to misestimate those 
costs, probably to put the wrong dollars in the wrong accounts, 
and therefore create problems thereafter.
    Senator Byrd. Why can you not say, though, doctor: this is 
the way we see it today. Now, there may be changes. Perhaps 
this will happen, perhaps that will happen, something else may 
happen. But, Members of Congress, this is the way we see it 
today; and on this basis, we would estimate thus and so.
    Now, if the administration would be up front like that, 
then we would have confidence in the administration, what it 
says. The American people would have some idea, knowing that it 
is not the final figure, of course, have some idea of what they 
are going to be asked to pay and over what period, how long a 
period. This would be, it seems to me, the fair way of 
proceeding, rather than do as the administration is doing: 
spend the money, present the Congress then with an ultimatum, 
give us the check, and Congress in the meantime has had no 
opportunity to conduct oversight as it is its responsibility, 
constitutional responsibility, to do.
    I see my time is up. Mr. Chairman, may the witness answer 
my question first?
    Senator Inouye. Yes.
    Senator Byrd. Thank you.
    Dr. Zakheim. Certainly, Senator. First of all, as you know, 
we do have expenditures that will be going out to September 30. 
So that is already spoken for and we will have to justify those 
and we will report those. The real issue is what do we do about 
the period between October 1 and roughly January-February 
timeframe, whenever the next supplemental would be available.
    Clearly, it is very difficult to estimate those costs at 
this time, for the reason I have given you. I do not think this 
is a deliberate effort to mislead. After all is said and done 
we know what the monthly costs are right now, $4.2 billion. We 
anticipate what the monthly costs will be through the end of 
September. But beyond that, I do not want to sound like a 
broken record, but beyond that we just do not know what the 
impact of this summer's events is going to be like.
    The Congress clearly will not have any kind of ultimatum, 
for the simple reason that if we go to the Congress next 
January with a request for the entire fiscal year, the entire 
fiscal year will not have happened by then and the Congress can 
choose how much and to what degree it wishes to support that 
supplemental.
    Senator Byrd. Mr. Chairman, I do not want to prolong this, 
but this makes it impossible for the Congress to conduct its 
constitutional oversight. The money is already spent, then we 
get the bill. In the meantime, we have no opportunity to delve 
into the facts which justify x number of dollars. That is 
number one.
    Number two, the President can go before the American people 
and say that he is going to cut, reduce the budget deficit by 
half, in 5 years, and he presents the Congress and the people 
with a budget for this year, and that is what we are working 
on. That is what these hearings are about. But in the meantime, 
these moneys that we will be spending in Iraq and Afghanistan 
do not show. Those are hidden figures.
    So the administration has the advantage, the political 
advantage, of saying, well, this is our budget for this year. 
The administration is not counting the costs of the wars in 
Iraq and in Afghanistan. These costs are on the side, you see. 
This is a gimmick that this administration is using, I must 
say, and the American people are being kept in the dark.
    This is what I am complaining about, and I hope that we 
will continue to press the administration to shed some light on 
this budget. The American people are entitled to have that 
light because they are footing the bill, and Congress is 
entitled to have that light. I have never seen it done like 
this. It is a practice here, it is a pattern, and it is 
calculated. Everybody ought to be able to see that.
    Mr. Chairman, thank you for your patience. Thank you, Dr. 
Zakheim. You have got a tough job to do. You have a hard job. I 
know you have to pursue the company line, as we used to say 
back in the coal mining camps in southern West Virginia, the 
company line. You have to do that, I know that. Thank you.
    Senator Inouye. Thank you very much.
    Senator Burns.

                    PROVINCIAL RECONSTRUCTION TEAMS

    Senator Burns. I think I have only one more question and 
that will wrap it up for me. We met with some of the folks over 
in Iraq, and in your statement you referred to it this morning 
on the PRT's. Would you elaborate on the plan to expand those 
Provincial Reconstruction Teams in Afghanistan and the cost? 
Have you got an estimated cost for that?
    I know we have one German-led PRT there currently. Are the 
Germans contributing to the cost of those PRT's? Would you sort 
of give us some sort of an idea of what is going on?
    Dr. Zakheim. Sure. The cost, because that is an answer I 
cannot give you offhand, I will get you for the record. We had 
eight. We are up to, I believe, 12 PRT's, of which one is a 
NATO/German one. That is the one in Kunduz. That is the one I 
was at. The British are running one in Mazar-e Sharif. The New 
Zealanders are running another one.
    [The information follows:]

    There are currently 17 PRTs. 14 are coalition-run (13 by 
United States and 1 by New Zealand) and 3 are NATO-run, 1 by 
Germany and 2 by the United Kingdom.
    Each PRT was estimated to cost $5 million to setup. The 
cost of supporting a PRT has been roughly estimated at $39,000 
to $98,000 per month. However, the size and composition of each 
PRT varies. Some have more military personnel, some have more 
USAID staff. In addition, frequent troop rotations from the 
U.S. military units supporting the PRTs lead to cost 
fluctuations. U.S. military units are supporting PRTs are 
funded with O&M funds.
    DOD has provided just under $30 million in Overseas 
Humanitarian Disaster and Civic Aid funds for PRT and civil 
affairs assistance projects combined in Afghanistan to date.

    Senator Burns. I think we ran into ours at Kandahar.
    Dr. Zakheim. We have a bunch of them now.
    There is a push for NATO--and not just NATO; for instance, 
the Swedes are going to be contributing and they are not in 
NATO--to start four more. In fact, your question about footing 
the bill goes to the heart of our position regarding these 
four. We are telling NATO that of course we support four more. 
We think it is a great idea. We think PRT's work. But NATO 
needs to provide the support.
    The Germans are contributing, although some of the support, 
the helicopter support, is what we are providing. We have made 
it clear that was a once-only exception. We are not going to do 
that. If countries want to contribute to PRT's, and we 
encourage them to, then they need to cover the costs.
    So we hope that eventually a significant number of these 
PRT's will be supported by the international community. There 
is talk of a Nordic one. There is talk of a second British one, 
and so on. There is a lot of interest around the world to 
contributing to them, because of what they do--and you have 
seen them. They are unique. There is a mix of troops, of 
civilians, of representatives of the central Afghan government. 
They work very well with international nongovernmental 
organizations. Actually, it is fascinating to see the 
evolution.
    A lot of these organizations were very suspicious of the 
military and therefore thought PRT's were just a stalking horse 
for the military. Now it is quite different, and you see people 
from institutions that you would not dream of having anything 
to do with the military speaking positively about it. It really 
is a terrific development, because what it does is enable the 
central government to demonstrate its reach throughout the 
country.
    Still, if countries want to be involved, they have got to 
foot the bill.

                          OPERATIONAL SUPPORT

    Senator Burns. Also, I ask about--and I think whenever we 
talk about technology, and this thing, I will just throw this 
as a question out there that I would like an answer to and we 
can do that in a private conversation also. We had four very 
good friends during the Afghanistan operation: Pakistan, 
Kazakhistan, Kyrgistan, and Jordan. I am wondering, are we 
doing anything in those countries to relieve some of the 
financial pressure off of those four countries?
    Dr. Zakheim. The answer is yes. Congress allowed us, 
actually with this committee's help, to reimburse a number of 
countries for the operational support they provide, and 
Pakistan is by far the biggest recipient. That continues. We 
are reimbursing Jordan as well. In fact, those two countries 
were specified in the legislation. But we are reimbursing 
others, too.
    Senator Burns. Well, we had tremendous support under the 
circumstances from Kazakhistan and Kyrgistan. I am going to 
Kazakhistan. I want to be met on friendly terms there when I 
get there.
    Dr. Zakheim. I think you will be.
    Senator Burns. Also, I made a couple trips out at Walter 
Reed to see some of the troops from Montana that were out 
there, which is a very rewarding situation. You know, we have 
got one young man out there who is afraid that they are not 
going to let him stay in the Guard and he wants to stay. He 
took quite a beating over there.
    With regard to that, I am told by--you know, the American 
people I do not think understand really fully, in the medical 
communities like Walter Reed and our research people on 
diseases we run into different kinds of challenges whenever we 
send our troops to foreign soil. I noticed a little bit in this 
last one that you cut back a little bit on R&D as far as 
research on the different kind of diseases. You know, we are 
going through a severe acute respiratory syndrome (SARS) thing 
now on the Pacific Rim and in China. These people are exposed 
to these things.
    I would question cutting back on your research because I 
think it is vitally important that the research moves forward 
in our medical communities, such as Walter Reed, Bethesda, the 
naval hospital, and that this work continue.
    Dr. Zakheim. Well, I will get for the record a breakdown of 
what has been, to the extent it has been reduced. I think Dr. 
Chu and Dr. Winkenwerder would be best in a position to give 
you that answer. I can say, however, that the level of research 
is still significantly high and it is precisely for the reasons 
you gave. When we send our troops to different parts of the 
world, they encounter diseases that have either been eradicated 
here or never existed here at all.
    I know there is a lot of research, not just within the Army 
medical community; the Army Medical Command manages research in 
universities, including international universities. Very often 
you will find that universities in the regions in which these 
diseases are found have a comparative advantage in terms of 
dealing with those diseases. That funding continues.
    But I will get you for the record details of that.
    [The information follows:]

    The military infectious disease research program continues 
to address countermeasures against the same number of different 
kinds of infectious diseases of military importance. Diseases 
such as malaria, bacterial diseases responsible for diarrhea, 
viral diseases (e.g. dengue fever and hanta virus), meningitis, 
viral encephalitis, scrubtyphus, leishmaniasis, hemorrhagic 
fever, and HIV are all part of the military infectious disease 
research program. This research is funded with core dollars out 
of the Medical Research and Materiel Command's budget. This 
means that the funds are programmed and budgeted for through 
the President's Budget process. From fiscal year 2002 to fiscal 
year 2004, there have been shifts in programs and changes in 
accounting for indirect laboratory costs. Overall there was a 
4.6 percent reduction in the core program between fiscal year 
2003 and fiscal year 2004 as priorities changed and other 
programs emerged in importance.

    Senator Burns. It is a different kind of research than we 
find in our traditional National Institutes of Health (NIH) or 
anything else, on infectious diseases.
    Dr. Zakheim. Absolutely, that is right.
    Senator Burns. And that has concerned most of us.
    Thank you, Mr. Chairman. That is all that I have.
    Senator Inouye. Thank you very much.
    Pursuant to the direction of Chairman Stevens----
    Senator Byrd. Mr. Chairman, might I ask another question?
    Senator Inouye. Please do.
    Senator Byrd. Thank you, Mr. Chairman. Thank you. I thank 
the acting chairman, and I thank you, Dr. Zakheim, and you, 
General Cartwright.

                   OPERATIONAL POST-HANDOVER NUMBERS

    Let me repeat my question earlier. The President sent his 
$87 billion fiscal year 2004 supplemental to Congress on 
September 17, 2003. Roughly 6 weeks later, that request was 
enacted and signed into law. Now, if the supplemental could be 
submitted in September in that instance, why can it not be 
presented in September this year, rather than wait until, was 
it January I believe you said?
    Dr. Zakheim. It is a function of the fact that in the first 
place we are, unlike September of that year where we were not 
funded at all, we are funded through the end of September, so 
that we have operations that will be covered.
    Second, we do not feel that it would pose particular 
difficulties for us to cash flow for about 3 months. Again, as 
I mentioned earlier, the Congress has its discretion, as you 
well know, Senator; it can choose whatever it wants to do for 
the remaining part of fiscal year 2005 in a supplemental or 
indeed how it wants to treat what we have requested for that 
first part of fiscal year 2005 in a supplemental.
    So the discretion is clearly there. We believe we can 
effectively cash flow those funds for the first few months. As 
I said, by September we will not have as yet a sense of the 
costs after the handover. If the handover is in the beginning 
of July, we will not have any numbers, any operational post-
handover numbers, with which to work in September. It is as 
simple as that.
    We simply cannot come with any credible number. I mean, 
there will be such a massive----
    Senator Byrd. The way you are operating, it is not 
credible. It is not credible at all. What is the magic about 
January?
    Dr. Zakheim. Again, Senator, as I said, we need a couple of 
months experience subsequent to the handover in Iraq. That 
brings us to November-December timeframe. We need a month to 
put a supplemental together and that brings us to January.
    Senator Byrd. Mr. Chairman, just this final. At Secretary 
Rumsfeld's confirmation hearing, I asked what he was going to 
do about the Pentagon's broken accounting systems. Three years 
later, the Department of Defense is still nowhere close to 
passing an audit of its books. Congress has appropriated more 
than $200 million to develop a blueprint for a new computerized 
accounting system, but work on that plan, which was supposed to 
be completed in April 2003, is still not yet done.
    Meanwhile, DOD will spend $19 billion this year on those 
computers, on top of the $18 billion spent in 2003 on those 
faulty systems. You, Dr. Zakheim, and Secretary Rumsfeld have 
recognized the seriousness of these accounting problems. But 
how can you justify spending tens of billions of dollars on 
these computerized accounting systems when you do not even know 
how to fix what is wrong with those systems that we are pouring 
money into?
    How much more time and money is it going to take before the 
Pentagon can pass an audit of its books?
    Dr. Zakheim. Senator, as I have said for the last 2 years 
and as you and I have discussed, there are a number of steps 
necessary if we are going to get this right. We did in fact 
complete the enterprise architecture to which you refer on time 
and under budget in April 2003. We still have to test it with 
various pilot programs.
    The game plan was always to try to get a clean audit by 
2007. Now, we are not just waiting for the next 4 years to make 
that happen. Huge amounts of assets and liabilities have been 
added to--and are now showing on our books. Our fund balance 
with the Treasury has improved significantly. We have cut back 
on problem disbursements by, I believe, approximately two-
thirds. I can get you all those numbers for the record.
    [The information follows:]

    In January 2001, the Department's problem disbursements stood at 
$4.163 billion. As of January 2004, we have reduced those problem 
disbursements by 65 percent to $1.437 billion.

    Dr. Zakheim. Frankly, I thank you for your encouragement in 
this regard. It has made a difference. We are trying to change 
the culture and the culture is changing. We review, I 
personally review, financial statements four times a year 
together with OMB, the Inspector General, and the General 
Accounting Office, sitting in my office reviewing these 
statements.
    We have cleaned those up. We have improved the footnotes, 
which nobody ever used to bother to read.
    Senator Byrd. I hope you are getting overtime pay.
    Dr. Zakheim. Well, I have not gotten it yet, sir.
    But I guess my long answer to your good question is we are 
on schedule to have clean audits by 2007. We are doing a lot of 
different things, and I will get you a fuller answer for the 
record.
    [The information follows:]

    But I guess that my long answer to your good question is we 
are on schedule to have clean audits by 2007. We are doing two 
major things in this unprecedented effort. First, I have 
directed fund holders within Defense to develop financial 
improvement plans which detail how the fund holder will 
overcome its deficiencies which prevent it from obtaining an 
unqualified audit opinion. Plans identify deficiencies, 
corrective actions by financial statement line item, and 
prepare the entity for audit. Lastly, I have established an 
executive steering committee (ESC) to oversee execution of the 
initiative. Committee members include the Deputy Chief 
Financial Officer, the Deputy Comptroller, Program/Budget, the 
Director of the Defense Finance and Accounting Service, and the 
Inspector General, DOD. In accordance with Section 1008, the 
ESC reviews the plans and prioritizes assessments and audits of 
entities when they assert audit readiness.

    Senator Inouye. If there are any additional committee 
questions, they will be submitted to you for your response.

                          SUBCOMMITTEE RECESS

    Senator Byrd. Thank you. Thank you, Dr. Zakheim.
    Thank you, Senator.
    Senator Inouye. Thank you very much.
    Pursuant to the direction of Chairman Stevens, the hearing 
is recessed.
    [Whereupon, at 12:20 p.m., Monday, March 1, the 
subcommittee was recessed, to reconvene at 10 a.m., Wednesday, 
March 3.]
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