- DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 2005

[Senate Hearing 108-440]
[From the U.S. Government Publishing Office]

S. Hrg. 108-440, Pt. 3

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

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

HEARINGS

before the

COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

S. 2400

TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2005 FOR MILITARY
ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
OTHER PURPOSES

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PART 3

READINESS AND MANAGEMENT SUPPORT

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MARCH 9, 23; APRIL 1; MAY 13, 2004

Printed for the use of the Committee on Armed Services
DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005--Part 3

READINESS AND MANAGEMENT SUPPORT

______

2005

S. Hrg. 108-440, Pt. 3

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

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

HEARINGS

before the

COMMITTEE ON ARMED SERVICES
UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

S. 2400

__________

PART 3

READINESS AND MANAGEMENT SUPPORT

__________

MARCH 9, 23; APRIL 1; MAY 13, 2004

Printed for the use of the Committee on Armed Services

U.S. GOVERNMENT PRINTING OFFICE
93-573 PDF WASHINGTON DC: 2005
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COMMITTEE ON ARMED SERVICES

JOHN WARNER, Virginia, Chairman

JOHN McCAIN, Arizona CARL LEVIN, Michigan
JAMES M. INHOFE, Oklahoma EDWARD M. KENNEDY, Massachusetts
PAT ROBERTS, Kansas ROBERT C. BYRD, West Virginia
WAYNE ALLARD, Colorado JOSEPH I. LIEBERMAN, Connecticut
JEFF SESSIONS, Alabama JACK REED, Rhode Island
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
JOHN ENSIGN, Nevada BILL NELSON, Florida
JAMES M. TALENT, Missouri E. BENJAMIN NELSON, Nebraska
SAXBY CHAMBLISS, Georgia MARK DAYTON, Minnesota
LINDSEY O. GRAHAM, South Carolina EVAN BAYH, Indiana
ELIZABETH DOLE, North Carolina HILLARY RODHAM CLINTON, New York
JOHN CORNYN, Texas MARK PRYOR, Arkansas

Judith A. Ansley, Staff Director

Richard D. DeBobes, Democratic Staff Director

______

Subcommittee on Readiness and Management Support

JOHN ENSIGN, Nevada, Chairman

JOHN McCAIN, Arizona DANIEL K. AKAKA, Hawaii
JAMES M. INHOFE, Oklahoma ROBERT C. BYRD, West Virginia
PAT ROBERTS, Kansas BILL NELSON, Florida
WAYNE ALLARD, Colorado E. BENJAMIN NELSON, Nebraska
JEFF SESSIONS, Alabama MARK DAYTON, Minnesota
JAMES M. TALENT, Missouri EVAN BAYH, Indiana
SAXBY CHAMBLISS, Georgia HILLARY RODHAM CLINTON, New York
JOHN CORNYN, Texas MARK PRYOR, Arkansas

(ii)
?

C O N T E N T S

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CHRONOLOGICAL LIST OF WITNESSES
Military Readiness Programs
march 9, 2004

Page

Casey, GEN George W., Jr., USA, Vice Chief of Staff, United
States Army.................................................... 5
Mullen, ADM Michael G., USN, Vice Chief of Naval Operations,
United States Navy............................................. 10
Moseley, Gen. T. Michael, USAF, Vice Chief of Staff, United
States Air Force............................................... 24
Huly, Lt. Gen. Jan C., USMC, Deputy Commandant of the Marine
Corps Plans, Policies, and Operations, United States Marine
Corps.......................................................... 38

Department of Defense Financial Management
march 23, 2004

Walker, Hon. David M., Comptroller General of the United States
General Accounting Office (GAO)................................ 127
Zakheim, Hon. Dov S., Under Secretary of Defense (Comptroller)... 143

Military Installation Programs
april 1, 2004

DuBois, Raymond F., Jr., Deputy Under Secretary of Defense for
Installations and Environment.................................. 190
Lust, MG Larry J., USA, Assistant Chief of Staff for Installation
Management, United States Army................................. 203
Weaver, RADM Christopher E., USN, Commander, U.S. Navy
Installations Command.......................................... 218
Williams, Brig. Gen. Willie E., USMC, Assistant Deputy
Commandant, Installations and Logistics [Facilities],
Commandant of the Marine Corps................................. 231
Fox, Maj. Gen. Dean, USAF, The Air Force Civil Engineer and
Deputy Chief of Staff, Installations and Logistics, USAF....... 238

Acquisition Policy Issues
may 13, 2004

Wynne, Hon. Michael W., Acting Under Secretary of Defense for
Acquisition, Technology, and Logistics......................... 336
Ballard, Tina, Deputy Assistant Secretary of the Army for Policy
and Procurement................................................ 353
Strock, MG Carl, USA, Director of Civil Works, U.S. Army Corps of
Engineers...................................................... 356
McManus, MG Wade H., Jr., USA, Commanding General, U.S. Army
Field Support Command.......................................... 361

(iii)

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

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TUESDAY, MARCH 9, 2004

U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.

MILITARY READINESS PROGRAMS

The subcommittee met, pursuant to notice, at 2:30 p.m. in
room SR-232A, Russell Senate Office Building, Senator John
Ensign (chairman of the subcommittee) presiding.
Committee members present: Senators Ensign, McCain, Inhofe,
Cornyn, Akaka, E. Benjamin Nelson, and Pryor.
Committee staff member present: Leah C. Brewer, nominations
and hearings clerk.
Majority staff members present: L. David Cherington,
counsel, William C. Greenwalt, professional staff member;
Gregory T. Kiley, professional staff member; Lucian L.
Niemeyer, professional staff member; and Joseph T. Sixeas,
professional staff member.
Minority staff members present: Maren R. Leed, professional
staff member; Peter K. Levine, minority counsel; and Michael J.
McCord, professional staff member.
Staff assistants present: Andrew W. Florell and Sara R.
Mareno.
Committee members' assistants present: Christopher J. Paul
and Dan Twining, assistants to Senator McCain; John A. Bonsell,
assistant to Senator Inhofe; D'Arcy Grisier, assistant to
Senator Ensign; William K. Sutey, assistant to Senator Bill
Nelson; Andrew Shapiro, assistant to Senator Clinton; and Terri
Glaze, assistant to Senator Pryor.

OPENING STATEMENT OF SENATOR JOHN ENSIGN, CHAIRMAN

Senator Ensign. Good afternoon, everyone, and welcome.
The Subcommittee on Readiness and Management Support meets
today to begin our hearings for the fiscal year 2005 Defense
Authorization Request. Before we begin--and Senator Akaka will
be with us in just a moment--I'd like to thank him. We worked
together and had a great team last year, worked across party
lines, and put the Armed Services and the defense of our
country first and foremost before any political considerations,
and I just want to say thank you to him and to his staff
publicly today.
This subcommittee enjoys a broad charter, the result of
oversight responsibility in areas that are as diverse as they
are plentiful. Over the next 5 weeks, the subcommittee will be
examining a number of issues relevant to ensuring the readiness
of the Armed Forces and the effective management of the
Department of Defense and the four Services. In addition to
today's discussion on military readiness programs, the
subcommittee's agenda for this session includes: on March 23, a
hearing on Defense Department financial management policies and
practice; on April 1, a hearing on issues related to military
installation and the Department's budget request for military
construction; and on April 6, a hearing to examine Defense
Department acquisition policies. We have a great deal of work
ahead in this session, and I am looking forward to getting
started.
Our focus this afternoon will be to discuss key military
readiness programs of the Services. These include programs that
support operation and maintenance of ships, aircraft, tanks,
and related systems; train personnel; provide for logistics;
and maintain base facilities. I'm looking forward to candid
assessment from each of the witnesses on the current status of
these programs and their assessment on how these programs are
supporting the overall readiness of the Services today.
The President has proposed a $102.6 billion request for the
readiness programs of the active and Reserve components for
fiscal year 2005. This is a 5.1 percent real increase over
current spending plan for fiscal year 2004. While we have
received the Services' lists of requirements for fiscal year
2005 that were not included in the budget request, I am
particularly encouraged to see that the President was able to
meet over 96 percent of the funding requirements for the coming
fiscal year for each of the Services with his budget proposal.
Given the challenges facing the military today to maintain a
fully ready force while defending the homeland, fighting the
war a terrorism, and supporting the transitions to peaceful
democracies in Iraq and Afghanistan, I believe this request is
right on the mark.
We will be specifically interested to learn from the
witnesses today their assessment of how the President's budget
request for fiscal year 2005 will support readiness programs
and what the potential implications would be of any reduction
in the President's request. In addition to your thoughts on the
budget for readiness programs, we will also be interested in
learning about the progress that each of your services has made
in resetting units that have returned to their home stations
from deployments in support of Operation Iraqi Freedom and
Operation Enduring Freedom. Finally, we look forward to hearing
your views on any long-term readiness issues that could develop
as a result of the sustained deployment of military units for
contingency operations.
I am convinced that we must support the Department's
manpower enhancement initiatives. With active component/Reserve
component rebalancing and the military-to-civilian conversion
initiatives, we can fully maximize the talents and skills of at
least 70,000 service members that are resident today within the
active, Reserve, and National Guard. We simply cannot afford to
have today's service men and women serving in billets and
occupational specialities that are not essential for 21st
century challenges.
Further, I believe that time is of the essence. The costs
of not implementing these initiatives are simply too high.
Every day, someone decides either to continue in the service or
to seek relevance in the growing civilian economy. We have such
a tremendously capable group of men and women in uniform, and I
don't want to lose them.
The Defense Department's initiatives will greatly increase
the readiness, responsibility, and flexibility of the force.
For me, this is the bottom line. I look forward to each of the
witnesses taking a moment to share their views on these
initiatives.
We are privileged to have testifying before us a panel
representing each of the Services. All are exceptionally
qualified officers joining us today: General George W. Casey,
Jr., Vice Chief of Staff, United States Army; Admiral Michael
G. Mullen, Vice Chief of Naval Operations, United States Navy;
General T. Michael Moseley, Vice Chief of Staff, United States
Air Force; and Lieutenant General Jan C. Huly, Deputy
Commandant of the Marine Corps for Plans, Policies, and
Operations, United States Marine Corps. Many thanks to each of
you for joining us today.
Now I turn to the distinguished ranking member, who I said
some nice things about before you got here. Welcome, Senator
Akaka.

STATEMENT OF SENATOR DANIEL K. AKAKA

Senator Akaka. Thank you very much, Mr. Chairman.
Senator Ensign. As a matter of fact, it was a brilliant,
glowing statement. [Laughter.]
Senator Akaka. Thank you. I'll look at the record.
[Laughter.]
I'm delighted to be here with you and working with you, Mr.
Chairman.
I want to begin by saying how much we appreciate what the
brave men and women of the Army, Navy, Air Force, and Marine
Corps, who are putting their lives on the line for America, are
doing for our country. We're proud of them and all of the
leadership of the military. Our men and women in uniform around
the world are in our thoughts and prayers, and you and your
soldiers, sailors, airmen, and marines all have our sincere
gratitude.
I want to also welcome our panelists here this afternoon,
and thank you for sharing your insights with us on readiness
today. We appreciate your being here. I want to welcome you,
individually, General Casey and Admiral Mullen, General
Moseley, and I understand Jenny is here--oh, yes, welcome--and
also General Huly.
Each year when we conduct this hearing, I think we have
reached the peak of strain on our forces; but each year, the
stress on our forces gets worse. I sincerely hope that this
year does represent the peak, as the level of engagement of our
forces right now is very high and is a significant strain. I
also hope that the efforts each of your Services are making to
reduce their strain are effective. So even if our military is
faced with the same level of operational commitments in the
future, the burden on our personnel and their families will be
lessened.
While I have every confidence in our Armed Forces and their
ability to excel at whatever we might ask of them, I want to
ensure that we continue to provide the support that they need
as we go forward. We have had a lot of testimony already this
year about possible shortfalls in supplemental funding for the
remainder of this year, and the timing of any supplemental
funding for next year, both of which will have a significant
impact on the services' ability to reconstitute their forces
and reset their future operations. Between now and then, we
will consider the fiscal year 2005 budget request, which we
will get more into today.
I must add that, for our part, as we consider that request,
I hope that Congress does not compound the challenges facing
the services by making deep cuts in operation and maintenance
accounts.
That said, and as was the case last year, we find ourselves
considering a budget request that seems disconnected from
current reality because it assumes ongoing operations in Iraq
and Afghanistan will stop by September 30. I hope that the
Senate will be able to remedy that disconnect in our upcoming
budget resolution, at least to a certain extent; but, in the
meantime, we find ourselves examining a so-called peacetime
budget when we know that at least some of our forces will
continue to be deployed in Iraq and Afghanistan at the
beginning of next fiscal year.
Despite these artificialities, our challenge is to provide
the strongest possible foundation for the readiness of our
forces in this year's authorization act. As I have reviewed
your requests, I have some concerns about certain readiness
areas. I am particularly concerned about apparent shortfalls in
depot maintenance, which most of you have funded at 84 percent,
or lower, of your known peacetime requirements. I am also
worried about funding for base operating support and the
possible sources of funds you will decrement to pay mandatory
bills in this area as the fiscal year proceeds.
Hopefully, your testimony and our discussions today will
shed light on some of the considerations behind the decisions
reflected in this budget. I also hope to gain a deeper
appreciation for your short- and long-term readiness concerns,
and any help that we may be able to provide.
Again, I welcome our witnesses and look forward to your
testimony.
Thank you very much, Mr. Chairman.
Senator Ensign. Thank you.
Before proceeding, I want to note that we will only be
discussing topics today at the unclassified level. I remind
each of you to keep that in mind. Also, without objection, your
full statements will be made part of the record. We look
forward to your personal presentations here, and then we'll
have a period of questions and answers.
We have a vote that's going to start about 2:45, and
Senator Akaka's going to go to the floor and vote, and then
come back, and then I'll go--so we won't keep you any longer
today than is absolutely necessary.
So, General Casey, we'll just start with you, and work down
the table.

STATEMENT OF GEN GEORGE W. CASEY, JR., USA, VICE CHIEF OF
STAFF, UNITED STATES ARMY

General Casey. Great, thank you, Mr. Chairman.
I appreciate the opportunity to appear today to discuss the
Army's readiness and our plans to meet current worldwide
commitments while we simultaneously transform to a more
versatile, agile joint and expeditionary force.
I thank the members of the committee for their continued
support to the men and women in uniform that make up our great
Army.
For us, with over 320,000 soldiers deployed in 120
countries worldwide, the Army is clearly remaining actively
engaged in support of our Nation's operational requirements.
Approximately 165,000 of our soldiers are overseas on 12-month
unaccompanied tours, and the vast majority of these troops are
engaged in combat operations in the U.S. Central Command area
of operations.
Currently, the equivalent of eight Army divisions are
either deploying to or redeploying from overseas missions. This
constitutes the largest movement of U.S. forces since World War
II. Couple that with the mobilization of more than 150,000
combat-ready National Guard and Army Reserve soldiers, and you
can see this is an unprecedented moment in the Army's history.
Today, Senators, it is not business as usual for your United
States Army.
Our commitments have highlighted stressors, as Senator
Akaka mentioned, and the Army has embarked on a series of
initiatives to reduce these stresses, to improve our
capabilities, and to transform ourselves to a more joint and
expeditionary force in this decade.
First, we are rebalancing capabilities between our active
and Reserve component forces to improve our strategic
flexibility. We removed more than 100,000 positions to relieve
the burden on low-density, high-demand units; for example,
military policemen (MPs).
Second, we are reorganizing our combat formations into
modular, brigade-sized formation to make them more self-
sufficient and more readily available for force packaging. We
intend to increase the number of active brigades from 33 to 43
by fiscal year 2007, and also to convert our 34 National Guard
brigades to modular formations. This process has already begun
at Fort Stewart, Georgia, with the 3rd Infantry Division. As I
mentioned to you yesterday, to accomplish building these 10
brigades, the President and the Secretary of Defense have
approved our request to grow the Army by 30,000 beyond its
statutory end strength under the authorities of title 10,
section 123(a). We ask for your support on this. It will enable
us to significantly improve our capabilities, about a 30-
percent increase in our combat power.
Third, we are initiating a force-stabilization program to
increase unit readiness, reduce personnel turbulence, and make
life more predictable for our soldiers, units, and families.
Under this program, units will form, train, and stay together
for roughly 36 months, enhancing unit cohesion and, thereby,
unit effectiveness. Soldiers will remain assigned to
installations for 6 to 7 years, as opposed to the 3-year tour
that we normally have folks on now. This will improve
predictability again, and allow their families to grow some
roots in the community. These efforts, taken together, will
yield an Army that has the right capabilities to respond
rapidly and decisively to future challenges that our country
might face.
While moving forward on these initiatives, the Army must
also address continuing areas of interest affecting our people
and our infrastructure. This includes providing our forces with
the right equipment for the missions in the global war on
terrorism; reconstituting our equipment returning from
Operation Iraqi Freedom (OIF) and Operation Enduring Freedom
(OEF) to a rigorous long-range plan we call Setting the Force;
third, ensuring that our modernization efforts continue to bear
fruit, as with the recent fielding of our Stryker Brigade that
went from concept to Iraq in 4 years--this is a significant
accomplishment; fourth, providing our uniformed and civilian
members the quality of life that is the equivalent of the
society they defend; and, lastly, improving the quality of our
installations.
Our commitment to improve current and future readiness is
steadfast, even when this entails making tough choices, such as
canceling the Comanche aircraft program. Now, we can talk about
it in the questions and answers, but we need the committee's
support to retain the Comanche resources to fix Army aviation.
The 2005 President's budget will enable our Army to provide
our combatant commanders with the requisite land-power
capabilities for the global war on terrorism, homeland defense,
and other worldwide commitments. It covers our baseline
operations, the 15 critical systems in our recapitalization
program, and our transformation program. It does not address
the ongoing missions in Iraq and Afghanistan, and the recovery
from those missions.
Your support of this budget and war-related costs of our
ongoing operations is critical if our units are to continue
their remarkable performance and remain ready for future
contingencies.
We appreciate your dedication to your military and to
America's sons and daughters, who are operating selflessly
around the world defending this great country.
Thank you, Senator, for the opportunity. I look forward to
taking your questions.
[The prepared statement of General Casey follows:]

Prepared Statement by GEN George W. Casey, Jr., USA

INTRODUCTION

Chairman Ensign, Senator Akaka, members of the committee--I
appreciate the opportunity to appear before you to discuss the Army's
readiness and our plans to meet current worldwide commitments, while we
simultaneously transform to a more flexible, capable, joint, and
expeditionary force.
I thank the members of the committee for their continued
outstanding support to the men and women in uniform, who make up our
great Army. Your concern, resolute action, and deep commitment to
America's sons and daughters are widely recognized throughout the ranks
of our Service.

CURRENT POSTURE

With over 320,000 soldiers deployed in 120 countries worldwide, the
Army remains actively engaged in support of the Nation's operational
requirements. Approximately 165,000 of our soldiers are overseas on 12-
month, unaccompanied tours, and the vast majority of these troops are
engaged in combat operations in the U.S. Central Command Area of
Operations. Currently, the equivalent of eight Army divisions is either
deploying to or redeploying from our overseas missions, including
Operations Iraqi Freedom and Enduring Freedom in Southwest Asia, the
Stabilization Force and Kosovo Force in the Balkans, and the
Multinational Force and Observers mission in the Sinai. This
constitutes the largest movement of U.S. forces since World War II.
Couple that with the mobilization of more than 150,000 combat-ready
National Guard and Army Reserve soldiers, and you can see that this is
an unprecedented moment in the Army's history.
The Army is the dominant land campaign force for our combatant
commanders. Our centerpiece is the American soldier. Today, these great
soldiers are performing extraordinarily well in tough combat and
stability operations around the world. They understand their missions
and willingly undertake their roles with pride and determination. They
make a difference every day.

READINESS AND TRAINING

While the situations these forces face are challenging, I am struck
by how well our combat training centers and institutional education
programs have prepared our leaders and soldiers for their missions and
for the rigors of combat operations.
Our combat formations headed to Operation Iraqi Freedom have
received a full-spectrum train-up, either at the National Training
Center at Fort Irwin, California, the Joint Readiness Training Center
at Fort Polk, Louisiana, or the Combat Maneuver Training Center at
Hoenfels, Germany. This realistic preparation is based upon the lessons
we gleaned from our combat operations and our ongoing security
operations in Iraq and Afghanistan.
The Army's training programs have also been, and will continue to
be, the cultural drivers for the future. Leaders will not learn what to
think, but instead how to think--jointly, strategically, and within the
context of an expeditionary mindset. We will continue to invest in
cutting edge facilities and technology and constantly modify our
curricula to reflect current and expected threats, and incorporate the
lessons of actual operations, as we already are doing with the
experience gained in Afghanistan and Iraq.

THE ONE ARMY CONCEPT

Side by side, the active component, Army National Guard, and Army
Reserve have proven that they are a combat-capable and ready team. Our
Reserve components have shared a substantial portion of the Army's
mission since September 11, 2001. Our successes would not have been
possible without our Reserve component soldiers.
Currently, we are in the process of deploying three more enhanced
Separate Brigades: the 39th Infantry Brigade from the Arkansas National
Guard with the 1st Cavalry Division; the 30th Infantry Brigade from the
North Carolina National Guard with the 1st Infantry Division; and the
81st Infantry Brigade from the Washington National Guard to CJTF-7, and
large numbers of combat support and combat service support soldiers
from across the country. These units are well-equipped, well-trained,
and well-prepared for their missions.

MITIGATING STRATEGIC RISK THROUGH INCREASED LAND-POWER CAPABILITY

Our Nation and Army are at war. Our extensive commitments have
highlighted stresses to our forces, which have existed for some time.
To mitigate risk, our Army has embarked on a series of initiatives
including the implementation of the human resources and competitive
sourcing initiatives in the President's Management Agenda (PMA). I
would like to address several of these initiatives today, because it is
important to understand how the Army is transforming itself as we
provide trained and ready forces to combatant commanders.
First, we are rebalancing capabilities between our active and
Reserve component forces to improve our strategic flexibility. Second,
we are reorganizing our combat formations into modular, brigade-based
formations to make them more self-sufficient and to facilitate force
packaging. Third, we are initiating a force stabilization program to
increase unit readiness, reduce personnel turbulence, and make life
more predictable for our soldiers, units, and families.
These efforts will yield an Army that has the right capabilities to
respond rapidly and decisively to future challenges.

REBALANCING OUR ARMY

Being an Army at war provides focus and insights as we rebalance to
meet the challenges of the emerging operational environment. We
recognize that we must provide our Nation with full-spectrum, ground
combat and support capabilities that can defeat adaptive enemies
anywhere in the world.
Our challenge is not necessarily that we have too few soldiers.
Instead, it stems from the fact that our formations, designed for the
Cold War, must now meet the requirements of the global war on terrorism
and other operations, which will persist for years to come. To meet the
challenges of the future, we are rebalancing more than 100,000 spaces
in our active and Reserve components--converting them to relieve the
burden on the low density/high demand units, e.g., military police. We
also are converting military billets now doing commercial activities to
either civilian employees or contracts, which will assist in meeting
the Department of Defense's Business Initiative Council's goals and
provide us more warfighter/core staffing.
We accelerated this process after September 11, 2001, to alleviate
the stress placed on our most-needed units. In compliance with
Secretary of Defense's guidance to minimize involuntary mobilizations
within the first 30 days of a contingency, we made further progress in
2003. We expect Army rebalancing measures to continue with the same
momentum in 2004, 2005, and beyond. Our National Guard and Army Reserve
have been, and will continue to be, integral to the planning and
decisionmaking process for this effort.

MODULARITY

In addition to rebalancing our forces, we are creating a brigade-
based, modular Army to enhance responsiveness and to increase our joint
and expeditionary capabilities. Webster's defines modularity as
``composed of standardized units for easy construction or flexible
arrangements.'' Although this may seem to be an oversimplification of
what the Army is doing, it is precisely our concept.
The basic maneuver element in the modular Army will be the unit of
action, similar to today's brigade. Units of action will be flexible,
self-contained, and capable across the entire operational spectrum.
The Army intends to increase the number of active component
brigades from 33 to 43 by fiscal year 2007; at that time, we will
decide whether to continue the process to achieve 48 brigades. During
the same time period, Army National Guard Brigades will reorganize into
34 brigade-size units using the same modular design as the active
component.
The Chief of Staff has approved the initial modular design of the
3rd Infantry Division and its transformation is under way. Following
rigorous training, to include rotations through our combat training
centers at Fort Polk, Louisiana, and Fort Irwin, California, the
division will be reset for potential deployment anywhere in the world
as early as the first quarter of fiscal year 2005.

FORCE STABILIZATION

The challenges associated with current operational requirements
place significant stress on our existing force structure, both active
and Reserve. The approval of a temporary end-strength increase affords
us the opportunity to implement permanent initiatives aimed at
mitigating that stress to the force which is consistent with our PMA
human capital initiative.
The force stabilization initiative consists of two complementary
policies: unit-focused stability and home basing. Under home basing,
soldiers will remain at their initial installation for 6 to 7 years--
well beyond the current 3-year average. Unit-focused stability will
allow soldiers to arrive, train, and serve together for roughly 36
months, enhancing unit cohesion, training effectiveness and readiness.
During the unit's operational cycle, soldiers can expect to complete an
operational deployment rotation of 6 to 12 months. Overall, with force
stabilization, units will have more reliable training and deployment
schedules, and soldiers and families will get a greater sense of
predictability.

INSTALLATIONS

Installations are essential to maintaining the Army; they serve as
our flagships. Our short-term installation plans center on three
essential tasks: posturing installations as deployment platforms with
robust, reach-back capabilities; adjusting installation support to meet
the needs of an Army at war and transforming; and supporting the well-
being of all soldiers and their families.
Many of our installations require restoration and modernization to
enable Army transformation and the rotation-based system of global
engagement. In the past, the Army has repeatedly accepted risk in
infrastructure and installation services in order to maintain
warfighting capabilities and readiness; as a result, facility
conditions have deteriorated. We are in the process of reversing the
decay, but much remains to be done on installations that will continue
after the forthcoming base realignment and closure (BRAC) round. Our
overall goal is to achieve C-2 quality (minimal impact on mission
accomplishment) by 2010, with specific facility types achieving C-1
ratings. In fiscal year 2005, the President's budget has programmed
$2.5 billion for sustainment, restoration and modernization (SRM) to
stop deterioration and to improve our facilities; within that sum,
sustainment dollars will cover 95 percent of requirements. We also have
increased base operations support funding in fiscal year 2005.

QUALITY OF LIFE

The Army strives to provide its members, uniformed and civilian, a
quality of life equivalent to the society they defend. They deserve
nothing less. To help fulfill this obligation, we have increased
soldier compensation and decreased out-of-pocket housing expenses. In
fiscal year 2004, out-of-pocket housing costs will drop from 7.5
percent to 3.5 percent; we are on a glide path to cutting those
expenses to zero in fiscal year 2005.
Our Army also is improving the housing itself. Through the
Residential Communities Initiative and the Army Family Housing program,
17,000 of our 100,000 sets of quarters will be renovated by the end of
2005.
In addition, this year we inaugurated a program with the private
sector to increase employment opportunities for our Army spouses. Our
objective in fiscal year 2005 is for 55 percent of spouses seeking
employment to obtain positions through these corporate sponsorships.

EQUIPPING THE FORCE

Providing our forces with the right equipment for the missions in
Iraq and Afghanistan and the global war on terrorism is an imperative.
To this end, we are adapting and improving our acquisition and fielding
processes to better support our warfighter. Thanks to congressional
support in the fiscal years 2003 and 2004 emergency supplemental
appropriations, our Army has been able to obtain and field solutions to
$4.4 billion of operational requirements. For example, in fiscal year
2003 we implemented our Rapid Fielding Initiative (RFI) to ensure that
all of our troops deploy with the latest available equipment. We
substantially compressed the procurement and fielding cycle and revised
schedules to support unit rotation plans.
Our fiscal year 2004 goal for RFI is to upgrade a minimum of 16
brigade combat teams, to include three Reserve Component Enhanced
Separate Brigades, serving in Operation Iraqi Freedom and Operation
Enduring Freedom. More than $100 million have been programmed to
continue RFI in fiscal year 2005.
Additionally, the Army has established a Rapid Equipping Force
(REF) that works directly with operational commanders to find solutions
to operational requirements. These solutions may be off-the-shelf or
near-term developmental items that can be made quickly available. We
also created a task force to safeguard our soldiers from improvised
explosive devices (IEDs). Its work is saving lives in the Operation
Iraqi Freedom and Operation Enduring Freedom areas of operation. In
fiscal year 2004, the IED initiative was funded solely through existing
Army programs, at a cost of $21 million. In light of its success, our
Army has decided to make the task force a permanent organization.
Our modernization efforts continue and are bearing fruit, as
evidenced by the recent fielding and deployment to Iraq of our first
Stryker Brigade Combat Team (SBCT). Our second SBCT will become
operational this spring, and the third in 2005. Three more SBCTs will
be fielded through 2008.
Our commitment to improve current and future readiness is
steadfast, even when that entails making tough choices, such as
canceling the Comanche program. Though it was a difficult decision, we
believe it was unquestionably the right one. By reallocating funds
originally intended for Comanche the Army can buy almost 800 new
aircraft, upgrade or modernize an additional 1,400 aircraft--
modernization for almost 70 percent of our fleet--and outfit our
aircraft with the survivability equipment they need. In fiscal year
2005 alone, the Army will convert 19 Apaches to the Longbow
configuration, upgrade 5 Black Hawks to the UH-60M configuration,
purchase 27 new UH-60Ls; buy four new CH-47Fs; convert 16 existing CH-
47s into F and G models; and procure 160 new, higher-power CH-47
engines. In addition, our Army will start a Lightweight Utility
Helicopter program, under which we will acquire 10 new, off-the-shelf
aircraft in fiscal year 2005. We need your support to use the Comanche
resources to fix Army aviation.

SETTING THE FORCE

We are in the process of reconstituting our equipment returning
from Operations Iraqi Freedom and Enduring Freedom through a rigorous,
long-range plan known as ``Setting the Force.'' This program, which is
designed to restore our units and equipment stocks to predeployment
levels of readiness so they are rapidly ready for follow on missions.
The goal is for all returning active and Army Reserve units to achieve
this level of combat readiness within 6 months after their arrival at
home station. For National Guard units, the target is one year.
The Army's Reset Task Force has determined the repair requirements
for all Operation Iraqi Freedom 1 units. The workload consists of
approximately 1,000 aviation systems, 12,467,000 communications and
electronics systems, 5,700 combat/tracked vehicles, 45,700 wheeled
vehicles, 1,400 missile systems, 9 Patriot battalions, and
approximately 232,200 various other systems. The basic reset plan
incorporates the use of domestic and overseas depot, installation and
commercial repair facilities.
As part of setting the force, our Army also will have to replace
those weapons and systems destroyed on the battlefield or too badly
damaged to be repaired economically. The procurement requirements
established through our Reset Task Force cover only known losses at
this point and we expect that they will grow as operations continue. We
also predict that, as we inspect and repair equipment, the number of
items catalogued as uneconomically repairable will increase.

CONCLUSION

In closing, the fiscal year 2005 budget will enable our Army to
provide our combatant commanders the requisite land-power capabilities
for the global war on terrorism, homeland defense and other worldwide
commitments. It will enable us to provide our soldiers with the best
available technology and materiel, and to properly train them to handle
any situation or challenge they encounter. The fiscal year 2005 request
covers our baseline operations, the 15 critical systems in our
recapitalization program and our transformation program. It does not
address the ongoing missions in Iraq and Afghanistan.
Our soldiers continue to perform magnificently around the globe.
Simultaneously executing the global war on terrorism, implementing our
modularity and transformation initiatives and setting the force will be
a challenge that is consistent with fulfilling the President's
Management Agenda. However, it is also an opportunity to reshape
ourselves for the future that we cannot pass up.
Your support of this budget and for our ongoing operations,
specifically in Iraq and Afghanistan, is critical if our units are to
continue their remarkable performance and to be ready for future
contingencies.
We appreciate your dedication to your military and to America's
sons and daughters, who are serving selflessly throughout the world to
make America safe and free. Thank you again for the opportunity to
discuss our Army and I look forward to answering any questions you may
have.

Senator Ensign. Thank you, General Casey.
Admiral Mullen.

STATEMENT OF ADM MICHAEL G. MULLEN, USN, VICE CHIEF OF NAVAL
OPERATIONS, UNITED STATES NAVY

Admiral Mullen. Good afternoon, Mr. Chairman.
I, too, greatly appreciate the opportunity to appear before
you, along with my joint-service counterparts, to discuss one
of the most important topics to our military and the security
of our Nation, the state of the current and future readiness of
your Navy.
I would, first, like to report that the fiscal year 2004
supplemental funding that you provided last year has gone
precisely where we said it was needed most. I'm very grateful
for that. Most shortfalls we had are being filled, and the
readiness gaps are, in large part, solved. The Navy could, in
the very near future, rapidly surge up to six carrier strike
groups within 30 days, and two more soon thereafter, what we
call ``Six Plus Two,'' as well as similar quantities of
amphibious forces, providing options and significant combat
capability for the President, just like that provided at the
height of OIF, just 1 year ago. This is the return on your
readiness investment.
The Navy has some unplanned expenditures tied to the
current movement of forces into Iraq for OIF 2. I expect the
Department of Defense to cover as much of these costs as
possible from resources managed centrally by the Comptroller,
such as the Iraqi Freedom Fund. While we continue to be
forward-deployed in support of OIF and OEF, the most joint
operations ever, our new employment initiatives have provided a
more flexible, sustainable rotational force. That newly-
organized force is still forward-deployed, but now is coupled
with a significant surgable combat-ready element in home
waters.
My written testimony goes into some detail about our Fleet
Response Plan (FRP), but the bottom line is that we have
stabilized the force; and our new employment construct would
allow us to repeat what we did a year ago, later this year. We
are producing the best readiness levels I have seen in my
career.
We have also instituted other organizational changes to
increase our current readiness and accelerate our advantages.
Validating a new force-packaging concept, Expeditionary Strike
Group 1 returns today from its first operational deployment.
Expeditionary strike groups (ESG) combine Navy deep strike and
Marine forcible entry capabilities, portending new concepts of
operations for ship-to-objective strikes deep inland and the
potential for significant near covert operations executed from
sea bases offshore. ESGs provide new, powerful, and flexible
options.
Commander Navy Installations Command was stood up and was
established to centrally manage all of our shore installations,
promote best-practices development, and increase efficiencies,
saving approximately $1.2 billion across the Future Years
Defense Plan (FYDP). This is partially in response to a
conversation we had the other day. We're taking significant
steps forward to manage the Department more efficiently, to
look for resources from within.
For recapitalization and future readiness, we have
identified $12.4 billion in cost savings and requirements
mitigation over the next 5 years to further our Seapower 21
vision. Multi-year procurement contracts and economic order-
quantity purchases are already generating savings. The F-18E/F
multi-year procurement contract is expected to save us in
excess of $1 billion across the FYDP, for example.
This past year also validates the strategic value of sea-
basing. During the opening hours of OIF, sea-basing enabled a
three-axis attack on Iraq. More recently, the Navy's military
sealift command has moved over 9.8 million square feet of
joint-force cargo over the last 6 months in support of the
largest force rotation since World War II.
We will continue to budget the resources to make this a
true national capability. Our vision is to support as much of
the joint fighting force as required when facing an anti-access
environment, or host-nation support is unavailable or overly
restrictive.
Admiral Clark and I are confident that the Navy's fiscal
year 2005 budget submission will provide the right readiness at
the right cost for the right force as we continue to fight the
global war on terrorism. Units are now maintaining extended
periods of combat readiness to meet our Nation's needs, known
and unknown. We have, however, taken some well-considered risk
in this budget proposal as we balanced our efforts between
current readiness, future readiness, and the overall health of
the Navy. There is no fat in the readiness accounts.
I would like to draw your attention to some potential
challenges. There is little to no excess capacity in the public
ship-repair industrial base. It's at full capacity, and working
overtime, in most cases. Our fiscal year 2004 planned
maintenance requirements modestly exceeded our full capacity,
causing us, again, to defer some work to fiscal year 2005.
There is some risk associated with this lack of excess
capacity, and the ship industrial base must be very carefully
managed if we are to sustain our ability to surge; and we are
doing that. The FRP and our continuous maintenance philosophy
are also mitigating some of this risk.
Stockpiles of precision-guided munitions (PGM) are slightly
below current requirements. The Navy has, however, programmed
and funded PGM production, and we will see our stocks
replenished by the end of this budget period.
Finally, I believe that encroachment of our training areas
will not abate. Encroachment directly impacts current, and
certainly future readiness, and the risk rises each time our
forces enter combat with less than realistic training. I would
ask for your continued leadership and support in resolving this
challenge, challenge for the long-term health of the military
services.
On the whole, you should be confident that we have provided
the best budget possible based on what we know today. Readiness
at any cost is also unacceptable. We have striven to reasonably
spend the taxpayers' dollar to provide for a ready Navy. We
believe that our readiness accounts are properly balanced and,
outside of unforeseen changes in our obligations, on solid
financial footing.
Mr. Chairman, Senator Akaka, in closing, I, again, would
like to express my great appreciation for your enduring and
exceptional support. The Navy was, is, and always will be a
rotationally deployed force providing joint combatant
commanders with persistent combat-credible naval power. The
Navy is now providing a significant surge capability, as well.
The nation's investment in the United States Navy is providing
solid returns in the form of combat-ready forces. These are
dollars well spent.
I thank you for your time here today, and look forward to
taking your questions.
[The prepared statement of Admiral Mullen follows:]

Prepared Statement by ADM Michael G. Mullen, USN

Chairman Ensign, Senator Akaka, and distinguished members of this
subcommittee, I am extremely pleased to testify before you, along with
my Service counterparts, on the readiness of our military forces.
Current readiness continues to be one of the Chief of Naval Operation's
(CNO) top priorities and, with your enduring and generous support, we
have built and organized a Navy that is truly ready, in every regard;
more so today than ever before. Forward deployed with a significant
surge capability poised to go, our forces are able to take credible,
persistent combat power to the far corners of the Earth.
In the fall, I testified before Congress that the CNO's goal for
2004 was to constitute and ``reset the force.'' Later this year, the
U.S. Navy will be fully ready to do it again. We will be able to
provide combat forces on par with the OIF effort. A combat power that
is ready around the world, around the clock; enabled by surge naval
forces if called. This gives our President options. The exceptional
support of this committee and Congress has enabled the Navy to wisely
invest the taxpayer dollar; an unprecedented level of readiness now is
the return on that important investment in the Navy. Before I go into
more detail on current readiness and our fiscal year 2005 budget
request to support continued readiness of naval forces, I will review
the remarkable events and circumstances of the past year.

LAST YEAR IN REVIEW

At this time last year, 168 Navy ships and over 77,000 sailors were
deployed around the world supporting the global war on terrorism and in
position to execute Operation Iraqi Freedom. In total, 221 of our then
306 ships--representing 73 percent of our force--were underway,
including 7 of 12 carrier strike groups, 9 of 12 expeditionary strike
groups, and 33 of 54 attack submarines. The Navy and Marine Corps alone
had nearly 600 aircraft forward deployed in support of these
operations. SEALs, construction battalions (SEABEES), Explosive
Ordnance Disposal (EOD) teams, port operations support units, maritime
patrol squadrons, medical teams, and naval coastal warfare units were
also deployed overseas, all well-trained and ready for real world
combat operations. Twenty-one combat logistics and 76 sealift ships
provided the movement and sustainment for this fighting force. It was a
tremendous and superbly executed effort that projected decisive combat
power across the globe in concert with our joint partners.
Naval forces were integrated into joint and coalition operations in
support of Operation Enduring Freedom (OEF) and Operation Iraqi Freedom
(OIF). In the case of OIF, our forces provided the joint force
commander a capability to strike deep inland from the sovereign
operational sea bases provided by our aircraft carriers and other naval
combatants. OEF and OIF were the most joint operations in our history,
providing valuable lessons learned that will enhance our power
projection (Sea Strike), our defensive protection (Sea Shield) and the
operational independence afforded by the freedom to maneuver on the sea
(Sea Basing). The lessons learned thus far reaffirm that the
capabilities-based investment strategy, new warfighting concepts and
enabling technologies we are now pursuing in the Sea Power 21 vision
are right on course. Just a few examples of our warfighting investments
in light of these lessons include:

Purchasing precision guided munitions at the maximum
rate currently possible;
Enhancing the proven capability of Tomahawk cruise
missiles;
Accelerating science and technology (S&T) programs
that proved effective in mine clearance; and
Instituting new employment concepts to better utilize
our existing forces.

The capabilities-based transformation of our individual platforms
and new operating concepts for the force continue to accelerate our
advantages as the appropriations provided by this Congress become
reality in the fleet. We must stay ready as well as invest in the
future.
Our Navy achieved many successes the past year, including some new
high water marks in our priority areas:
Sea Strike
Sea Strike was an important contributor to successful combat
operations during OIF, particularly during the crucial opening hours
and days. In 2003, Navy flew nearly 9,000 sorties, fired over 800
Tomahawk missiles and delivered over 15,000 marines to the fight in
support of the joint force. The Navy delivered combat power where it
was needed, when it was needed; providing tactical surprise,
persistence and deep reach to the combatant commander from flexible
naval forces under his command. The Navy strongly demonstrated its
ability to conduct strike operations deep inland in concert with ground
forces--whether Marine Corps, Special Operations or Army--to contribute
to the decisive defeat of an armed adversary. We are also enhancing our
power projection capabilities as we transform, providing flexible
strike forces that are ready and immediately employable to the
President.
This past year we deployed the Navy and Marine Corps' first
Expeditionary Strike Group (ESG 1), pairing the deep striking power of
U.S.S. Port Royal (CG 72), U.S.S. Decatur (DDG 73), and the submarine
U.S.S. Greenville (SSN 772) to the traditional forcible entry
capabilities of our marines enabled by U.S.S. Peleliu (LHA 5), U.S.S.
Ogden (LPD 5), and U.S.S. Germantown (LSD 42). This ESG provides
increased capability to the joint combatant commander that is
persistent and sovereign. The future addition of destroyer-experimental
(DD(X)) and Joint Strike Fighter (JSF) short take-off/vertical landing
variant (STOVL) to ESGs will greatly enhance these already tremendous
combat forces. We also benefited this past year from the first fleet
operations of the F/A-18E/F and over the next few years are fielding
two new SEAL Teams and four nuclear-powered cruise missile attack
submarines (SSGNs); which add unique capabilities to our portfolio of
naval power.
Sea Shield
We continue improving the deterrent value and the warfighting power
of our Navy through new sea shield capabilities, including: homeland
defense, sea and littoral control, and theater air and missile defense.
The ESG is also evidence of the shift in operational emphasis to
providing the necessary sea shield capability required to operate in an
anti-access environment.

This year U.S.S. Higgins (DDG 76) provided early warning
and tracking to joint forces in Kuwait and southern Iraq during the war
to help defend against the theater ballistic missile attacks. This
capability demonstrated the initial potential of extending Sea Shield
defenses to the joint force, effectively projecting defensive power
over the land battlespace.
Three months ago, we advanced our theater missile defense
capability with another successful flight test of our developmental
sea-based defense against short-to-medium range ballistic missiles.
U.S.S. Lake Erie (CG 70) and U.S.S. Russell (DDG 59) combined to
acquire, track, and hit a ballistic test target in space with an SM-3
missile in support of the Ballistic Missile Defense program. An
effective theater ballistic missile defense (TBMD) system is essential
in the future to protect air and sea ports of debarkation in theater,
enabling the flow of military power for successful Joint operations
ashore.
Our OIF mine warfare efforts cleared 913 nautical miles of
water in the Khor Abd Allah and Umm Qasr waterways, opening 21 berths
in the Umm Qasr port and clearing the way for the first coalition
humanitarian aid shipments into Iraq onboard RFA Sir Galahad, a British
logistics ship. Other operations in the littoral areas of the Northern
Arabian Gulf prevented sea mines from being deployed and secured active
oil platforms, assuring maritime access to Iraq, freedom of navigation
in the entire Arabian Gulf and preventing a potential environmental
disaster.
Antiterrorism/Force Protection (AT/FP): Significant
progress was made in security, and investments in AT/FP continue as our
personnel and bases remain potential terrorist targets. We
significantly increased AT/FP resources: expanding our military police
forces, delivering AT/FP equipment to the end users and formalizing
fleet training and certification requirements. We also tested new
systems as well as existing systems in an AT/FP role with good success
and aligned counter-terrorism functions into the Naval Criminal
Investigative Service.
Sea Basing
We are pursuing Sea Basing as an integral part of the Navy-Marine
Corps team's transformation, encompassing and integrating powerful
extensions to current Joint capabilities. The inherent mobility,
security, and flexibility of naval forces provide an effective counter
to emerging military and political limitations to overseas access.
Supporting OEF and OIF in 2003, an element of our emerging Sea Basing
concept is exemplified by the Military Sealift Command, which delivered
over 32 million square feet of combat cargo, over 34,000 tons of combat
and support cargo, and more than one billion gallons of fuel to the
Nation's warfighters in OIF. Thus, within the Sea Basing construct, we
were able to sustain the strategic and operational flexibility
necessary to generate a three-axis attack in Iraq from our dispersed
sea bases of aircraft carriers, surface combatants and submarines in
the Red Sea, the Mediterranean Sea and the Arabian Gulf. This effort
continues today in support of OIF II with 153 MSC-controlled ships
activated on full operational status, 85 of them forward deployed
economically and securely delivering over 350,000 tons of cargo in
support of joint operations and the largest troop movement since World
War II.
As we continue to develop and field additional elements of Joint
Sea Basing with the U.S. Marine Corps and our other sister services, we
will ``accelerate our advantages'' to assure access for joint
operations wherever it is required. Sea Basing provides the dynamic
access, speed of response, flexibility and persistent sustainment
capabilities necessary to execute combat operations ashore, exploiting
the maneuver space provided by the sea to enable and conduct joint
operations at a time and place of our choosing.
Sea Warrior
The human resource investment through our Sea Warrior program
remains one of our top priorities as we execute the CNO's Guidance to
``expedite Sea Warrior'' and ``streamline and align the total manpower
structure.'' Retention has never been better; for the third straight
year we've seen record retention levels. In 2003 we retained 60.8
percent of our first term sailors, a full four points above goal while
attrition was driven down to 8.2 percent, three points lower than goal.
Our officer corps chose to continue their naval careers in record
numbers; our officer loss rate has decreased from 9.5 percent in 2000
to 7.1 percent in 2003. This great retention allowed us to lower our
accession goal to just over 41,000, down from 56,700 in 2000, while
dramatically improving the quality of people we brought into the Navy.
More than 94 percent of our recruits held high school diplomas and some
3,200 of them had completed at least 12 semester hours of college
credits. This success stands as testament to our commitment . . . with
your support . . . to improve the quality of service in the Navy.
Sea Trial and Experimentation
We kept our commitment to testing and experimentation by both
formalizing the process into the Sea Trial program as well as
conducting tests in support of real-world operations where it made
sense. These operations supporting OIF included the use of the High
Speed Vessel X1 (Joint Venture), Navy patrol craft and six unmanned,
autonomous underwater vehicles (AUV) directly from our science and
technology (S&T) program. These successful field tests supported
special operations and mine clearance in the littoral as well as
delivering important insights into our vision for future littoral and
mine warfare concepts and capabilities.

WHERE WE ARE TODAY

When I addressed Congress last October, I indicated that the Navy
had begun constituting the force. If called now, the Navy could rapidly
surge six carrier strike groups within 30 days and two more soon
after--what we call ``Six plus Two''--as well as significant amphibious
forces, providing flexible options and significant combat capability to
the President and Secretary of Defense. We reached this point by
instituting organizational changes; and in this case, an innovative new
operational employment concept called Fleet Response Plan (FRP). I will
go into some detail on this transformational concept later, but
briefly, FRP fundamentally changes our approach to readiness at the
unit level and provides maximum return for the taxpayers' dollar, and
is in place now. FRP ensures that fleet units achieve combat readiness
sooner after completing a deployment and associated maintenance period.
Units also maintain that high level of readiness longer than before.
The net result is a period of extended readiness for a large portion of
the force, a force that is ready to continue rotationally deploying or,
if called, ready to surge quickly for combat or other operations. I
urge your strong support of the readiness accounts in the President's
budget request for fiscal year 2005 which will allow me to execute this
vital new and better way to fund readiness.
Today, the Navy remains underway and forward deployed to all
corners of the world. As I provide this testimony to you, 86 ships
including two carrier strike groups, two expeditionary strike groups
and one surface strike group are forward deployed. These forces are or
have been operating in support of OEF, OIF and other operations
worldwide, enhancing their coordination and value in joint operations.
In addition to this forward deployed posture, there are 66 ships and
submarines underway conducting homeland security missions, counterdrug
patrols, goodwill visits, multi-national exercises and pre-deployment
training. Units not deployed overseas are achieving combat readiness
earlier under FRP, ensuring that forces are available when called.
Also, in my fall statement to Congress, I made reference to several
of the largest challenges to reset the force. In that testimony, I
discussed spares, depot maintenance, precision-guided munitions, EA-6B
wing panels and F/A-18 ancillary equipment. Fiscal year 2004
supplemental funding met our immediate needs for these critical
capabilities and our fiscal year 2005 budget request keeps us on track
for the future--we have used your support to achieve, and crafted our
fiscal year 2005 budget request to now maintain the Navy's force
constitution. We thank you for approving the supplemental last fall.

THE FLEET RESPONSE PLAN

In the CNO's guidance for 2004, one of his major action items was
to ``deliver the right readiness.'' It was clear in responding to OIF
that the Navy could not best meet the long-term global war on terror
force requirements using its traditional employment methods. As a
result and to meet the challenges I mentioned, we undertook, and are
well underway, in the Navy's organizational transformation. Foremost
among these changes is the way we employ our forces. I have made the
point of using the term ``constitution'' vice ``re-constitution'' to
place emphasis on the fact that we are truly involved in a
transformation in the way we develop ready forces.
The Fleet Response Plan (FRP) is among the most important of those
transformations, and as discussed above, is the real reason we can
provide such an immediate surge capability close on the heels of major
combat operations. The Navy has been, is now, and will always be a
rotationally deployed force. The FRP fundamentally changes the way we
get the fleet ready. While continuing to rotationally deploy forces
overseas, FRP institutionalizes a higher level of force employability
and provides the surge capability necessitated by the global security
environment. At the same time, we respond more flexibly by deploying
for a purpose and add to the security of our forces by becoming less
predictable to those that would do us harm.
The ramp-up to support OIF, permitting the extended arrival window
of five Carrier Strike Groups at the outset, was impressive but we
cannot count on a passive competitor in the future. The 21st century
presents our Nation with varied and deadly new threats, including
regional adversaries armed with growing anti-access capabilities and
international terrorist and criminal organizations. Countering such
enemies and consistent with guidance espoused within our National
Security Strategy, Navy reviewed the best way to transform its Fleet
employment policy. Last May, the Chief of Naval Operations approved the
Fleet Response Plan (FRP), redefining our readiness process, and in
doing so, provided a more responsive force to meet our defense and
military strategies, and presenting the President with more force
employment options. A premium is placed on ready, flexible forces able
to pulse rapidly either to augment forward-deployed forces or respond
to crises in remote and widely separated locations.
FRP not only directly meets our defense strategy requirements but
also provides the combatant commander with the tailored capabilities
that will best meet their needs. Tailored packages beyond Carrier and
Expeditionary Strike Groups include Surface Strike Groups or SSGNs in
the near future. For example, the Navy is responding quickly to Haiti.
The recent unplanned deployment and employment of U.S.S. Boxer (LHD 4)
and U.S.S. Bataan (LHD 5) supporting the current OIF II rotation is
another example of providing tailored packages to meet the mission
needs of the combatant commander. In these cases, full ESG capability
was not required--the right force at the right time was ready and is
performing with characteristic excellence. By refining our maintenance,
training and manning schedules, we have institutionalized the
capability to provide six Carrier Strike Groups (CSG) within 30-days
and an additional two Carrier Strike Groups within 90-days, more
commonly known as ``Six plus Two.''
I discussed CSGs because they are the most complex components to
prepare for deployment, but FRP applies to the entire fleet. With the
implementation of FRP, half of Navy forces could be ready to provide
homeland defense and be either forward deployed or ready to surge
forward with overwhelming and decisive combat power.
We are now focusing our readiness efforts on achieving rapid
deployability once a strike group has emerged from an extended
maintenance period. This is a significant mind-shift change from the
old way of achieving deployment readiness on the verge of the scheduled
deployment date. The result is a period of extended readiness that
nearly doubles former readiness windows. Though the time that platforms
are available for employment will increase, the total time sailors are
deployed will not. The framework of FRP will allow enough structure for
sailors and their families to plan their lives, while also keeping our
adversaries off balance.
The Fleet Response Plan presents the Navy the opportunity to
outline an operating pattern that is irregular to our adversaries,
keeping them off guard by disrupting their calculus and ability to plan
their hostile actions. While flexibility has advantages, FRP must also
provide combatant commanders and allies the level of predictability
needed to plan U.S. Navy participation in exercises, engagement with
overseas partners and re-enforce assurances of our Nation's commitment
to the security of friends and allies.
Finally, during the additional months of readiness for surge, FRP
will not increase the burden on our sailors by keeping them in a
constant alert status, uncertain when, if, and for how long they will
be summoned to respond. Of course, for any major national crisis, the
Navy will surge all the ships and aircraft with which we need to
respond. Our sailors understand that when the Nation is threatened,
their duty is to answer the call, as they have over the last 3 years.
However, for those increasingly frequent situations that deserve a
response, but do not imminently threaten the U.S. or its interests, a
new employment concept is required.
The Navy developed the Flexible Deployment Concept (FDC) as a
complement to FRP to ensure a proper balance between readiness to surge
versus the practical need to place responsible limits on the
operational tempo (OPTEMPO) of our sailors. To provide safeguards for
our people, FDC proposes the establishment of two windows when ready
ships could be available for employment, either on routine presence
deployments in support of combatant commander objectives, or on shorter
``pulse'' employment periods in response to emerging requirements.
These windows provide predictability. Sailors will know when they might
be expected to deploy, and combatant commanders will know which forces
are ready to respond to emergent needs.
FRP and FDC provide ready forces able to defend the homeland,
respond quickly to deter crises, defeat the intentions of an adversary,
or win decisively against a major enemy. This is what we now call
``Presence with a Purpose.'' Together they implement the type of force
employment transformation envisioned by national and military leaders
and are the most significant change in the Navy's operational construct
in decades.
Of significance to this committee, FRP/FDC implementation will be
accomplished within resources already planned. We will achieve resource
efficiencies in maintenance and training. When considering the
increased force availability gained through this transformational
change, the taxpayer gets a larger return on investment with our
current force structure.

OUR FISCAL YEAR 2005 BUDGET REQUEST

The CNO is intent on ``delivering the right readiness at the right
cost,'' as stated in his guidance for 2004, while we accelerate our
advantages to meet the challenges of an uncertain world. Readiness is
much more than a count of our end strength, our ordnance and spares and
the number of hours and days spent training. It is the product of our
ability, through all of these pieces, to deliver the required effects
needed to accomplish the mission. We know, too, that readiness at any
cost is unacceptable; as leaders we must achieve and deliver the right
readiness at the right cost. We have taken significant steps forward in
order to assess our readiness.
The Integrated Readiness Capability Assessment (IRCA) was developed
for the fiscal year 2005 budget and beyond to more carefully examine
our readiness processes. Starting with our new FRP operating construct,
we took a hard look at everything that we needed to have on hand and
what we needed to do to deliver the required combat readiness for the
Nation's needs.
The IRCA process helped us better understand the collective
contributions of all the components of readiness, accurately define the
requirements, align the proper funding and provide a balanced
investment to the right accounts. It improved our visibility into the
true requirements and it gave us a methodology to assess and understand
both acceptable and unacceptable risks to our current readiness
investments. Specific highlights from our fiscal year 2005 budget
request are as follows:

Ship and Aircraft Operations: We have requested funds
for ship operations OPTEMPO of 51.0 days per quarter (down from
54.0 days per quarter) for our deployed forces and 24 days per
quarter for our non-deployed forces (down from 28 days per
quarter). Through a realignment of existing resources, we have
properly funded the flying hour account to support the
appropriate levels of readiness and longer employability
requirements of the FRP. This level of steaming and flying
hours, though lower than previous years in the aggregate, will
enable our ships and air wings to achieve the required
readiness over the longer periods and, as a result, will
improve our ability to surge in crisis and sustain readiness
during deployment.

[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Year
------------------------------------------------------------ Totals
2005 2006 2007 2008 2009
----------------------------------------------------------------------------------------------------------------
Ship Operations
Presbud-04............................ 2,512 2,487 2,647 2,609 2,659 12,914
Presbud-05............................ 2,605 2,694 2,798 2,916 2,943 13,956
Aircraft Operations
Presbud-04............................ 4,103 4,187 4,061 4,165 4,084 20,600
Presbud-05............................ 4,069 3,937 3,806 3,822 3,881 19,515
----------------------------------------------------------------------------------------------------------------

Ship and Aircraft Maintenance: We have made
significant improvements these last few years by reducing major
ship depot maintenance backlogs and aircraft depot-level repair
back orders; improving aircraft engine spares; ramping up
ordnance and spare parts production; maintaining steady
``mission capable'' rates in deployed aircraft; fully funding
aviation initial outfitting; and investing in reliability
improvements. Our fiscal year 2005 request continues to improve
the availability of non-deployed aircraft and meets our 100
percent deployed airframe goals. We have also included funding
to continue the procurement of EA-6B outer wing panels, for
which you specifically provided much needed funding last fall.
The EA-6B will continue to be a maintenance challenge as it is
an old airframe--and my most expensive to operate--and in need
of replacement as soon as possible.
Our ship maintenance request continues to `buy-down' the
annual deferred maintenance backlog and sustains our overall
ship maintenance requirement. We are making great strides in
improving the visibility and cost effectiveness of our ship
depot maintenance program, reducing the number of changes in
work package planning and using our continuous maintenance
practices when changes must be made. We are very carefully
managing and balancing the maintenance and FRP employment of
our units in order to ensure that the Navy can surge with
greater flexibility.

[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Year
------------------------------------------------------------ Totals
2005 2006 2007 2008 2009
----------------------------------------------------------------------------------------------------------------
Ship Maintenance
Presbud-04............................ 3,706 3,522 3,415 3,397 3,488 17,527
Presbud-05............................ 3,917 3,323 3,421 2,760 3,788 17,208
Aircraft Maintenance
Presbud-04............................ 940 866 805 986 974 4,571
Presbud-05............................ 996 967 919 938 1,005 4,825
----------------------------------------------------------------------------------------------------------------

Shore Installations: Our facilities Sustainment,
Restoration, and Modernization (SRM) program remains focused on
improving readiness and quality of service for our sailors.
While our fiscal year 2005 Military Construction and
Sustainment program reflects difficult but necessary trade-offs
between shore infrastructure and fleet recapitalization, the
majority of the SRM trends are very good. Facilities
sustainment has increased in fiscal year 2005. Our budget
request keeps us on a course to achieve the DOD goal of a 67-
year recapitalization rate by fiscal year 2008, achieve DON
goals to eliminate inadequate family and bachelor housing by
fiscal year 2007 and provides Homeport Ashore Bachelor Housing
by fiscal year 2008. We are exploring innovative solutions to
provide safe, efficient installations for our service members,
including design-build improvements, and BRAC land sales via
the GSA Internet. Additionally, with the establishment of
Commander, Navy Installations (CNI) this past year, we have
improved our capability to manage our dispersed facility
operations, conserve valuable resources, establish enterprise-
wide standards and continue to improve our facility
infrastructure.

[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Year
------------------------------------------------------------ Totals
2005 2006 2007 2008 2009
----------------------------------------------------------------------------------------------------------------
SRM
Presbud-04............................ 1,446 1,449 1,425 1,928 2,085 8,333
Presbud-05............................ 1,536 1,403 1,441 1,405 1,611 7,396
----------------------------------------------------------------------------------------------------------------

Precision-Guided Munitions receive continued
investment in our fiscal year 2005 request with emphasis on
increasing the Joint Stand-Off Weapon (JSOW) baseline variant,
Joint Direct Attack Munition (JDAM), Tactical Tomahawk
(TACTOM), and Laser-Guided Bomb (LGB) inventory levels, while
the JSOW penetrator variant enters full-rate production. We
also continue to invest in the Joint Common Missile program
with the U.S. Army to replace the aging inventory of TOW,
Maverick and Hellfire missiles. Joint partnerships with the Air
Force and Army in several of our munitions programs continue to
help us optimize both our inventories and precious research and
development investments and will remain a focus for us in the
future.

[Procurement Quantities--Each]
----------------------------------------------------------------------------------------------------------------
Fiscal Year
------------------------------------------------------------ Totals
2005 2006 2007 2008 2009
----------------------------------------------------------------------------------------------------------------
JSOW.................................... 389 412 380 422 444 2,047
AIM-9X.................................. 157 170 226 211 181 945
JDAM.................................... 6,620 4,250 3,430 2,850 4,380 21,530
AMRAAM.................................. 46 101 150 140 150 587
JASSM................................... 0 0 0 28 106 134
Common Missile.......................... 0 0 0 22 88 110
-----------------------------------------------------------------------
Total................................. 7,212 4,933 4,186 3,673 5,349 25,353
----------------------------------------------------------------------------------------------------------------

Training Readiness: We continue to make significant
strides in this critical area. In fiscal year 2004, Congress
supported two important programs to advance our training
readiness. First, you endorsed the Training Resource Strategy
(TRS), to provide more complex threat scenarios and to improve
the overall realism and value of our training. Additionally,
you funded the Tactical Training Theater Assessment and
Planning Program to provide for a comprehensive training range
sustainment plan. Our fiscal year 2005 budget continues this
work. We are working to make the Joint National Training
Capability a reality. We have established a single office to
direct policy and management oversight for all Navy ranges as
well as serve as the resource sponsor for all training ranges,
target development and procurement, and the Navy portion of the
Major Range Test Facility Base.
Environmental Readiness: We remain committed to good
stewardship of the environment and have the resources and
policies in place to do so. Congress has provided significant
and reasonable legislative relief from many of the elements
that impact readiness. These reasonable amendments help to
balance nurturing the environment with the realistic military
training required to keep forces ready. We will continue to
focus the use of our ranges on military training, and remain
committed to our environmental obligations through integrated
natural resource management plans. We have procedures in place
and will continue to exert every effort to protect marine
mammals while ensuring our sailors are properly trained and our
transformational systems are properly tested. Encroachment
impacts readiness and is an area of particular concern,
inseparable from the readiness of our naval forces and, I
believe, our military forces in general. As we continue
addressing complex environmental issues from a balanced
perspective with fact-based analysis, the Navy is committed to
maintaining our ongoing environmental stewardship.

In the end, we have a carefully balanced and well-defined readiness
requirement. We have identified areas where we can streamline or cease
activities that do not add to readiness, and we have requested the
funds our commanders need to create the right readiness for fiscal year
2005. I ask for your support of this year's current readiness request
as we've redefined many of these processes and already taken acceptable
risks. We will deliver the right readiness at the right cost to the
Nation. Any significant reduction in my readiness accounts poses high
risk to my combat capability.
We have taken some risk as it is imperative that we accelerate our
investment in our Sea Power 21 vision. We must recapitalize and
transform our force to reduce the burden on our operating accounts and
improve our ability to operate as an effective component of the joint
warfighting team. To this end, our Navy budget request for fiscal year
2005 and the future also includes:

Nine new construction ships in fiscal year 2005,
including construction of the first transformational destroyer
(DD(X)) and the Littoral Combat Ship (LCS), the acceleration of
a San Antonio Class Amphibious Transport Dock Class ship from
fiscal year 2006 to fiscal year 2005, and one Ballistic Missile
Submarine (SSBN) conversion and refueling. Our request this
year includes the following ships:

Three Arleigh Burke Class Guided Missile
Destroyers (DDG)
One Virginia class submarine (SSN)
One San Antonio class Amphibious Transport
Dock (LPD)
Two Lewis and Clark Class Dry Cargo and
Ammunition ships (T-AKE)
One 21st century destroyer (DD(X))
One Littoral Combat Ship (LCS)
One SSBN conversion/refueling
Three Maritime Prepositioned Force (Future)
(MPF (F)) ships and advanced procurement for an MPF (F)
aviation variant.

We are shifting focus to the next generation surface combatants and
sea basing capabilities. We have also assessed the risks and divested
several assets that have high operating costs and limited technological
growth capacity for our transformational future; this includes
decommissioning two coastal mine hunter ships, and the accelerated
decommissioning of the remaining Spruance-class destroyers, Sacramento
Class Fast Combat Store Ships and the first five Ticonderoga-class
guided missile cruisers in the future year's plan.

Procurement of 104 new aircraft in fiscal year 2005,
including the F/A-18E/F Super Hornet, the MH-60 R/S Seahawk and
Knighthawk Multi-mission Combat Helicopter, the T-45 Goshawk
training aircraft and the Marine Corps MV-22 Osprey among
others. We continue to maximize the return on procurement
dollars through the use of multi-year procurement (MYP)
contracts for established aircraft programs like the Super
Hornet. We have increased our research and development
investment this year in the Joint Strike Fighter (JSF), the EA-
18G Airborne Electronic Attack (AEA) aircraft and the broad
area antisubmarine, antisurface, maritime and littoral
intelligence, surveillance and reconnaissance (ISR) capable
Multi-mission Maritime Aircraft (MMA).

Investment in transformational unmanned underwater
vehicles (UUV) like the Long-Term Mine Reconnaissance System,
and unmanned aviation vehicles (UAV) such as the Broad Area
Maritime Surveillance UAV and the Joint--Unmanned Combat Air
System. The budget also requests funding for experimental hull
forms like the X-Craft, and other advanced technologies
including the Joint Aerial Common Sensor (JACS).

WHERE WE'RE HEADED . . . SEA ENTERPRISE

As I've already testified above, your Navy today is the most
capable and most ready Navy in our history--in the world's history--and
clearly thanks to the support of this Congress and of the American
people. But, I believe that we can still do better--that, in fact, we
must do better--as stewards of the public trust in determining not just
how much we should spend on programs, but how those defense dollars are
spent. This is especially true today because of the strategic
challenges posed by the ongoing global war on terrorism, because of our
need to recapitalize aging infrastructure and capability, and because
of the burgeoning technological and operational changes that will
dramatically alter the way we fight. Revolutionizing the way in which
our defense dollars are spent presents further opportunities to
increase our effectiveness, both now and in the future. Our Sea
Enterprise initiative is focusing headquarters leadership on outputs
and execution, and is creating ideas that will improve our productivity
and reduce our overhead costs. Its key objectives are to:

Leverage technology to improve performance and
minimize manpower costs,
Promote competition and reward innovation and
efficiency,
Challenge institutional encumbrances that impede
creativity and boldness in innovation,
Aggressively divest non-core, underperforming or
unnecessary products, services, and production capacity,
Merge redundant efforts,
Minimize acquisition and life-cycle costs,
Maximize in-service capital equipment utilization,
Challenge every assumption, cost, and requirement.

Senior Navy leaders, civilian and uniformed, are actively engaged,
as a board of directors, in tracking the execution of ongoing Sea
Enterprise initiatives totaling approximately $40 billion, and
identifying $12.4 billion in cost savings and requirements mitigation
across the Future Years Defense Program (FYDP). We are committed to
efficiency and productivity improvements that will generate the savings
necessary to augment our investment stream and implement our Sea Power
21 vision of delivering the right force, with the right readiness, at
the right cost. Specific highlights of these fiscal transformation
initiatives to date include:

Right Readiness. Along with the FRP, we have also
initiated processes ashore that will generate a more effective
force. As just one example introduced previously above, we have
established a single shore installation management
organization, Commander, Navy Installations (CNI), to globally
manage all shore installations, promote ``best practices''
development, and provide economies of scale, increased
efficiency, standardization of polices, and improved budgeting
and funding execution. The CNI alone is anticipated to harvest
approximately $1.2 billion across the FYDP.
Right Cost. We've taken a hard look at our ``level of
effort'' programs to maximize return on taxpayer investment,
these programs lack performance-based metrics in force
structure, readiness or cost benefit. This year's effort
reduced the requirements for these accounts by nearly $2
billion across the FYDP, allowing us to reallocate these funds
toward higher Navy priorities. In addition, we focused on
streamlining our organizations and processes as a means to
further improve efficiencies and control costs. Innovative
programs like Shipmain and the Naval Aviation Readiness
Integrated Improvement Program are aiding in developing and
sharing best practices, streamlining maintenance planning and
improving performance goals in shipyards, aviation depots, and
intermediate maintenance activities. We also reorganized the
Navy Supply Systems Command, including the establishment of the
Naval Operational Logistics Support Center to consolidate
transportation, ammunition and petroleum management. We will
continue to look for additional opportunities in this area
while leveraging the gains already made.
Right Force. We believe transformation to our future
force must include improving our buying power. To improve upon
our force structure, we're divesting non-core, redundant,
underperforming, and outdated products and services. We are
using multi-year procurement contracts and focusing where
possible on economic order quantity purchase practices to
optimize our investments. An excellent example lies in the F/A-
18E/F multi-year procurement contract that anticipates
procurement of 210 aircraft while saving us in excess of $1.1
billion across the FYDP. We also recognize the need to
transform our single greatest asymmetric advantage, our people.
The upcoming year will focus on ensuring we not only have the
right number, but the right mix of military, civilian, and
contractor personnel to accomplish the mission at the lowest
possible cost. You've given us a tremendous tool to enhance our
flexibility in this area, the National Security Personnel
System, and we plan to take full advantage of it.

In 2005, the Navy will continue to pursue product and process
efficiencies and the opportunities to be more effective while improving
our warfighting capability. Harvesting the savings for recapitalization
is a vital part of that effort, and we will continue to balance the
benefits of new productivity initiatives against operational risks. Our
intent is to foster a culture of continuous process improvement, reduce
overhead, and deliver the right force structure both now and in the
future. I want you to be confident that the budget you write into law
is the best estimate possible of what the Navy needs to be ready to
serve America both now and in the future.

WHERE WE'RE HEADED . . . SEA WARRIOR

It is important to note that the improvements to our operational
availability of forces and our demand for increased efficiency in
maintaining readiness will not be made on the backs of our people. We
have a smart, talented force of professionals who have chosen a
lifestyle of service. Our ability to challenge them with meaningful,
satisfying work that lets them make a difference is part of our
covenant with them as leaders.
A new operating concept like the Fleet Response Plan could not be
implemented if we still had the kind of manpower-intensive mindset to
problem solving that we had just 5 years ago. But today, thanks to your
sustained investment in science and technology among others, we have
already realized some of the advancements in information technology,
simulators, human system integration, enterprise resource planning,
web-enabled technical assistance and ship and aircraft maintenance
practices that can reduce the amount of labor intensive functions, the
training and the technical work required to ensure our readiness. More
output . . . at reduced cost.
As our Navy becomes more high tech, so must our workforce. Our
people will be a more educated and experienced group of professionals
in the coming years, and we must properly employ their talents. We will
spend what is necessary to equip and enable these outstanding young
Americans, but we do not want to spend one extra penny for manpower
that we do not need. As part of that effort, we continue to pursue the
kind of new technologies and competitive personnel policies that will
streamline both combat and non-combat personnel positions, improve the
two-way integration of active and Reserve missions, and reduce the
Navy's total manpower structure. To that end, we are proposing a fiscal
year 2005 Navy end strength reduction of 7,900 personnel.
We will use existing authorities and our Perform to Serve program
to preserve the specialties, skill sets, and expertise needed to
continue properly balancing the force. We intend to build on the
positive growth and momentum of retention and attrition metrics
achieved over the last 3 recordbreaking years. We are fully committed
to ensuring every sailor has the opportunity and resources available to
succeed. Our goal remains attracting, developing, and retaining the
most highly skilled and educated workforce of warriors we have ever had
to lead the 21st century Navy. Sea Warrior is designed to enhance the
assessment, assignment, training, and educating of our sailors. Our
fiscal year 2005 budget request includes the following tools that we
require to enhance mission accomplishment and provide professional
growth within our Sea Warrior program.

Optimal Manning: Optimal manning is one of the
innovative personnel employment practices being implemented
throughout the fleet. Experiments in U.S.S. Boxer (LHD 4),
U.S.S. Milius (DDG 69), and U.S.S. Mobile Bay (CG 53) produced
revolutionary shipboard watch standing practices, while
reducing overall manning requirements and allowing sailors to
focus on their core responsibilities. The fleet is implementing
best practices from these experiments to change ship manning
documents in their respective classes. Optimal manning means
optimal employment of our sailors.
Sea Swap: We have our fourth crew aboard U.S.S.
Fletcher (DD 992) and our third crew aboard U.S.S. Higgins (DDG
76) in our ongoing Sea Swap initiative. This has saved millions
of dollars in transit fuel costs and increased our forward
presence without lengthening deployment times for our sailors.
Fletcher and Higgins will return to San Diego later this year
after a period of forward deployed operations of 22 months and
17 months respectively. We will continue to assess their
condition and deep maintenance needs to develop and apply
lessons learned to future Sea Swap initiatives.
Selective Reenlistment Bonus (SRB): Targeted bonuses
such as SRB are critical to our ability to compete for highly
trained and talented workforce both within the Navy and with
employers across the Nation. Proper funding, adequate room for
growth and flexible authority needed to target the right skills
against the right market forces are important to accurately
shape the workforce. This program specifically targets
retention bonuses against the most critical skills we need for
our future. We ask for your continued support and full funding
of this program.
Perform to Serve (PTS): Last year, we introduced PTS
to align our Navy personnel inventory and skill sets through a
centrally managed reenlistment program and instill competition
in the retention process. The pilot program has proven so
successful in steering sailors in overmanned ratings into skill
areas where they are most needed that the program has been
expanded. More than 2,400 sailors have been steered to
undermanned ratings and approved for reenlistment since the
program began last February and we will continue this effort in
2005.
Assignment Incentive Pay (AIP) is a financial
incentive designed to attract qualified sailors to a select
group of difficult to fill duty stations. AIP allows sailors to
bid for additional monetary compensation in return for service
in these locations. An integral part of our Sea Warrior effort,
AIP will enhance combat readiness by permitting market forces
to efficiently distribute sailors where they are most needed.
Since the pilot program began last June, more than 1,100 AIP
bids have been processed resulting in 238 sailors receiving
bonuses for duty in these demanding billets that previously
were difficult to keep fully manned with the highest quality
sailors. We ask for continued support of this unique
initiative.
Professional Military Education (PME): We are taking a
more comprehensive approach to the continuing education of our
people than we have in the past. We are in the process of
developing a PME continuum that integrates general education,
traditional Navy-specific Professional Military Education
(NPME), and Joint Professional Military Education (JPME)
curricula. This will allow us to develop a program that fully
incorporates all aspects of our professional and personal
growth and improve individual readiness through providing a
complete set of training needs. Advances thus far include
establishing networks with civilian educational institutions,
developing new degree programs, and establishing partnerships
with other services' institutions. We are also expanding
opportunity through distance learning and the Internet.
Specifically, the Naval Postgraduate School in Monterey has
embraced partnerships and developed distance learning programs
that more than doubled its enrollment to nearly 10,000 degree
and short course students throughout the world, including the
first national homeland security curriculum, expansion of
enrollment to include enlisted personnel, as well as advanced
education opportunities in nearly 140 countries. This is just
one example of how we are committed to broadening the
professional and intellectual horizons of both our officers and
our enlisted men and women to prepare them to operate
tomorrow's fleet and assume key naval and Joint leadership
roles.
Human Performance Center (HPC) has been established to
apply Human Performance and Human System Integration principles
in the research, development, and acquisition processes. In
short, the HPC will help us understand the science of learning.
The center will ensure training is driven by fleet requirements
and they will focus requirements on the performance needed to
carry out our missions. This will eliminate potential
performance and training deficiencies, save money and help us
improve our readiness.
The Integrated Learning Environment (ILE) is at the
heart of our Revolution in Training. ILE is a family of systems
that, when linked, will provide our sailors with the ability to
develop their own learning plans, diagnose their strengths and
weaknesses, and tailor their education to support both personal
and professional growth. They will manage their career
requirements, training, and education records. It will match
content to career requirements so training is delivered at the
right time. Most importantly, these services will be provided
anytime, anywhere via the Internet and the Navy-Marine Corps
Intranet (NMCI).

We are taking advantage of every opportunity to accelerate
incorporating the best tools available to develop the 21st century
workforce. The improvements and pilot programs that this Congress has
supported--including bonuses, pay table adjustments, retirement
reforms, better medical benefits, and our Sea Warrior initiatives--are
having the desired impact.
Your support of our fiscal year 2005 request for a 3.5 percent
basic pay raise, for our efforts to transform our manpower structure in
some fundamental ways, and for a reduction in average out-of-pocket
housing costs from 3.5 percent to 0 will have a direct effect on our
ability to properly size and shape the 21st century workforce that is
our future.

CONCLUSION

I would like to express my deep appreciation to the members of this
committee for your lasting support in sustaining this Nation's Navy. It
is today the most capable Navy we have ever put to sea, maintaining
persistent, flexible forces forward and the ability to surge
significant combat power quickly, wherever required. It needs to be
given the uncertainty of the future. We firmly believe that we made the
right choices for fiscal year 2005, choices that will allow the Navy to
control the world's oceans--and hence, our global economic and
political interests--and deliver credible, persistent combat power from
the sovereign expanse of the sea around the globe.
Again, I wish to thank the committee for this opportunity to appear
before you today. I am very happy to answer any questions you may have.

Senator Ensign. Thank you.
General Moseley.

STATEMENT OF GEN. T. MICHAEL MOSELEY, USAF, VICE CHIEF OF
STAFF, UNITED STATES AIR FORCE

General Moseley. Chairman Ensign, Senator Akaka, thank you,
again, for this opportunity to appear alongside my joint
colleagues to present this year's state of readiness.
As the Air Force's Vice Chief of Staff, it's my privilege
to report on our key programs. On behalf of airmen stationed
around the globe, I want to thank the committee again for the
continued focus on readiness and the challenges facing our
airmen today.
Whether operating here at home or simultaneously supporting
joint-force commanders across the globe, our mission success
has been a testament to the dedication and professionalism of
our people and your continued help. Renewed emphasis on
programs like spare parts, depot maintenance, and munitions
stockpiles is welcomed and has laid the foundation for
readiness in increasing mission-capable rates.
In addition to equipment, your committee's increases to our
flying-hour training and general operations and maintenance
(O&M) funding made it possible for our force to remain the most
efficient air force in the world. In my written testimony, I
detail the truly monumental accomplishments of our airmen last
year. In fact, almost 1 year ago, I was privileged to command
the air component forces for OIF, as well as for OEF. Today,
the global war on terrorism imposes on our airmen the
requirement to be ready for tomorrow's challenges while
adapting to the new steady state of operations in Operations
Noble Eagle, Enduring Freedom, and Iraqi Freedom. Your airmen
will meet these demands.
High above our Nation, airmen protect our skies and cities
through Operation Noble Eagle, or ONE. Every day, the total
force team, comprised of active duty, Air National Guard, and
Air Force Reserve airmen, have more than 50 dedicated to ONE.
Conducting airborne early warning, air refueling, and combat
air patrols costs the Air Force approximately $150 million per
month. Since September 11, we've flown over 34,000 sorties.
This is our new steady state, and we are totally dedicated to
this homeland defense mission.
Around the world in Afghanistan, remnants of Taliban forces
continue to attack U.S., North Atlantic Treaty Organization
(NATO), coalition troops, and others involved in the
reconstruction. To defeat this threat, aid coalition stability,
and support our ongoing operations, the Air Force flew more
than 70 missions yesterday alone. Having already flown more
than 90,000 sorties, the Air Force continues to perform
intelligence, surveillance, reconnaissance, close air support,
aerial refueling, and airlift missions in support of operations
in Afghanistan. Currently, we're spending approximately $200
million a month on this operation, and are committed to seeing
it through.
Ten days from now marks the 1-year anniversary of Operation
Iraqi Freedom. That date marked the end of 12 years of
continual air pressure in Southwest Asia for Operation Northern
Watch and Operation Southern Watch, flown by a joint team--U.S.
Air Force, U.S. Navy, Royal Air Force, and some others--
signaled the beginning of America's most successful joint
operation.
Patrolling the no-fly zones in Northern and Southern Iraq
had cost us roughly $67 million per month. Now we spend six
times that amount for Operation Iraqi Freedom. We fly
approximately 150 sorties per day in Iraq, and maintain more
than 210 aircraft, crews, maintainers, and support personnel to
fill joint-force requirements. Every day, we conduct close air
support, use the intelligence, surveillance and reconnaissance
sorties to monitor the porous borders of Iraq and provide
situational awareness for our land component patrols and
operations. Additionally, through our forward bases, air
mobility forces, and air refueling assets, the Air Force
provides a lifeline of supplies to all forces. We expect this
mission and the redeployment of forces between Iraq and the
U.S. to continue for some time. The bottom line, Mr. Chairman,
all Air Force airmen are ready and committed to the successful
accomplishments of this mission in Iraq.
Preparing and maintaining a force that can adapt to the
realities of the new security environment requires the Air
Force to focus on three main areas: resetting and
reconstituting capabilities, recapitalizing and modernizing our
equipment, maintaining the readiness of our number-one weapons
systems, our airmen. In resetting and reconstituting our
capabilities, it is important to understand the Air Force must
reconstitute some of our capabilities that were successful, not
necessarily the same equipment. For the Air Force, we view
capabilities as much more than just commodities. Beyond just
equipment, our warfighting capabilities depend on training and
a sustainable battle rhythm for the entire force. Synchronizing
these aspects, eliminating duplicated capabilities, and
capitalizing on technological advances will all ensure
efficiency and, most importantly, combat readiness.
Last fall, I testified, on behalf of the Air Force, that we
planned to return to pre-OIF rotational cycles by March 2004.
Unfortunately, we've only been able to return 90 percent of our
forces to a sustainable battle rhythm. But with approximately a
third of our combat forces deployed, we now project the Air
Expeditionary Force, including the low-density, high-demand
assets, will not be fully reset for at least another 10 to 12
months. These low-density, high-demand capabilities--our
expeditionary combat support, intelligence, surveillance,
reconnaissance, security forces--will not meet the goal due to
sustained combat operations and training backlogs.
Restoring and replenishing our war Reserve stocks is also
proving to take longer than expected, due to ongoing
operations. This year, we estimate our total cost to replenish
all war reserve materiel (WRM) requirements at $1.96 billion.
The requested funding levels allow us to fully reconstitute our
fuels, equipment, and vehicles within the next 24 months, and
our base expeditionary airfield resources throughout the FYDP
out to fiscal year 2007. Over the past 2 years, we've received
a tremendous amount of support from this committee on this
issue.
While we have 41 percent of our expeditionary combat
support capability ready for deployment, we still have sets
serving on numerous new bases. Almost 18,000 personnel from all
services are housed in Air Force tents. Other aspects of our
expeditionary combat support and base operating support, like
tactical vehicles, theater-deployable communications, weapons
of mass destruction (WMD) response equipment, and force-
protection equipment are, likewise, used by all services. For
all of these base operating functions, base communications,
environmental and quality-of-life missions, the Air Force has
requested real property and day-to-day facility support at 95
percent of the requirement.
A $27.1 billion readiness request ensures that we remain
ready to perform our wide-ranging global missions, from space
support to global strike to global mobility and homeland
defense. Our fully-funded flying-hour program pays for
consumables, spare parts, fuels, and 1.7 million flying hours
to maintain combat readiness and support joint operations and
the worldwide mobility to ensure joint and coalition forces
have the equipment and forces that they need.
Our airmen have done some tremendous work, in terms of
readiness. During the conflict last year, we enjoyed our
highest active overall mission-capable rates in 6 years.
Fourteen of 20 major weapons systems saw improved mission
capable (MC) rates. At the time, we were flying more hours.
Thanks to hard work by our airmen, proper funding, fleet
consolidations, and transformation initiatives, we've hit many
readiness milestones last year. Our aggregate MC rates for
fiscal year 2003 were 75.9 percent. Our fighter fleet is up
almost 2 percent since fiscal year 2001. Our B-1s produced the
best MC rates and supply rates in history, spare-parts
shortages were reduced to the lowest levels recorded across the
entire fleet, our lowest aggregate cannibalization rates since
1995, and a reduction in the number of aircraft in depot for
maintenance--or even better said, over 25 percent more aircraft
on the ramp for the warfighter--than in the year 2000. A
portion of these successes can be attributed to our world-class
depots. For fiscal year 2005, we've increased depot-purchased
equipment-maintenance funding to $3.7 billion. While we've
maintained the appropriate level of depot maintenance to ensure
our aging fleet stands ready to deploy, fly, and fight
anywhere, anytime, we also can count on our depots to surge
repair operations and realign capacity during contingencies, as
we've seen for Operation Enduring Freedom and Iraqi Freedom.
Our depots can only do so much. Although MC rates were up
during OIF, aging-aircraft issues continue to present us with
the problem of fewer assets being available at ever-increasing
costs. If we want to ensure air and space dominance in future
engagements, we must recapitalize and modernize our assets.
Today, our average fleet is approximately 23 years in service.
Some, like our KC-135s, average as much as 43 years in service,
with the oldest aircraft still flying being the KC-135 that was
delivered on 28 October 1957.
These types of challenges obviously require innovative
solutions and our continued emphasis. Last year, we stood up
the Aging Aircraft Program Office and the first-ever Fleet
Viability Board to methodically focus our efforts even more.
Mr. Chairman, our aging aircraft fleets are vulnerable to a
myriad of problems, including technical surprises, vanishing
vendors, and increased operational costs. These assets are
invaluable in every service and joint operations, and, in the
case of the tankers, since we tank the world, it is a vital air
commander's asset, as well as a key enabler for our Navy,
Marine, and coalition partners. In January alone, 36 percent of
the KC-135 fleet was unavailable. These included both those in
depot and those that were unit-possessed, but not mission-
capable.
The bottom line, Mr. Chairman, is the Air Force is
dedicated to finding solutions on how we keep filling joint-
force requirements for global strike and power projection. We
are committed to an analysis of alternatives on future tankers,
as we are to the recapitalization of our aging tanker fleet, in
order to provide the necessary capabilities to the joint
warfighting team. This process may begin through the normal
procurement process for a KC-X replacement, or, depending on
the outcome of the current reviews directed by the Secretary of
Defense, through the lease-purchase program that was signed
into law last year. In any case, the analysis of alternatives
authorized in the same law will be critical in shaping
decisions for the long-term recapitalization of the fleet.
In addition to the air and space platforms, we must address
our foundational support systems and growing deficiencies in
infrastructure, such as deteriorated airfields, hangars, water
lines, and electrical networks. Our investment strategy focuses
on three simultaneous steps: one, disposing of excess
facilities; two, fully sustaining our current facilities and
systems through their expected life; and, three, establishing a
steady and sustainable investment program to restore and
modernize critical facilities and infrastructure systems.
On another front, we have accelerated our housing
investment, leading to the improvements of more than 3,600----
Senator McCain [presiding]. General, I would like for you
to summarize, since we usually have 5-minute opening
statements. The remainder of your full statement will be made
part of the record.
General Moseley. Mr. Chairman, Senator Akaka, thank you for
your support, and I welcome the opportunity to answer any
questions you may have.
[The prepared statement of General Moseley follows:]

Prepared Statement by Gen. T. Michael Moseley, USAF

Chairman Ensign, Senator Akaka, committee members, thank you for
this opportunity to once again appear along side my distinguished
colleagues to present the readiness status of the world's greatest Air
Force. As the Air Force's Vice Chief of Staff, it is my privilege to
report on the our key programs and on behalf of airmen stationed around
the globe and those flying right now, I want to thank this committee
for your continued focus on readiness and the challenges facing our
airmen today. We are a ready force--expeditionary in nature--and global
in execution. Whether operating here at home or supporting the
simultaneous joint force commanders across the globe, our mission
success has been a testament to our current state of readiness and your
dedication. In terms of Air Force readiness, congressional attention,
particularly from this committee, has paved the way for the substantive
increases we saw in our ability to prosecute this Nation's National
Security Strategy over the past few years. The renewed emphasis on such
programs as spare parts, depot maintenance, and munitions stockpiles
laid the foundation for readiness and mission capable rates that our
Air Force has not seen in some time. At the same time, your committee's
increases to our flying hour, training, and general operations and
maintenance (O&M) funding made it possible for our force to remain the
most proficient Air Force in the world. In short, because of the
improvements that Congress supported over the past few years, enemies
like the Baathist regime of Saddam Hussein could not have picked a
worse possible time to confront the United States. They met a joint
force composed of the best airmen, soldiers, sailors, and marines with
the best equipment the world had ever seen. With this continued level
of support we can reset the force, recapitalize our vital air and space
capabilities, and bring technology to the warfighter--all while
providing air and space power, one of this Nation's most lethal and
responsive capabilities to the fight.

LOOKING BACK AT 2003

The year 2003 marked another historic milestone for the U.S. and
the Air Force in the global war on terrorism. Since September 11, 2001,
air and space power has proven indispensable to securing American
skies, defeating the Taliban, denying sanctuary to al Qaeda and other
terrorist organizations, and most recently, removing a brutal and
oppressive dictator in Iraq. This global war on terrorism imposes on
airmen a new steady state of accelerated operations and personnel tempo
(PERSTEMPO), as well as a demand for unprecedented speed, agility, and
innovation in defeating unconventional and unexpected threats, all
while bringing stability and freedom to Afghanistan and Iraq. The Air
Force and its airmen will meet these demands.
Operation Noble Eagle
High above our Nation, airmen protect our skies and cities through
air defense operations known as Operation Noble Eagle (ONE). The total
force team, comprised of active duty, Air National Guard, and Air Force
Reserve airmen, conducts airborne early warning, air refueling, and
combat air patrol operations in order to protect sensitive sites,
metropolitan areas, and critical infrastructure.
This constant ``top cover'' demands significant Air Force assets
above the pre-September 11 tempo. Since 2001, the Air Force has flown
over 34,000 fighter, tanker, and airborne early warning sorties. Last
year alone the Air Force scrambled nearly 1,000 aircraft, responding to
800 incidents. Eight active duty, 8 Air Force Reserve, and 18 Air
National Guard units provided 1,300 tanker sorties offloading more than
32 million pounds of fuel for these missions. Last year, over 2,400
airmen stood vigilant at air defense sector operations centers and
other radar sites. Additionally, in 2003, we continued to
institutionalize changes to our homeland defense mission through joint,
combined, and interagency training and planning. Participating in the
initial validation exercise Determined Promise-03, the Air Force
illustrated how its air defense, air mobility, and command and control
capabilities work seamlessly with other agencies supporting NORTHCOM
and Department of Homeland Security objectives. The integration and
readiness that comes from careful planning and rigorous training will
ensure the continued security of America's skies.
Operation Enduring Freedom
Operation Enduring Freedom (OEF)--Afghanistan is ongoing. Remnants
of Taliban forces continue to attack U.S., NATO, coalition troops,
humanitarian aid workers, and others involved in the reconstruction of
Afghanistan. To defeat this threat, aid coalition stability, and
support operations, the Air Force has maintained a presence of nearly
24,000 airmen in and around the region. Having already flown more than
90,000 sorties (over 72 percent of all OEF missions flown), the Air
Force team of active, Guard, and Reserve airmen continue to perform
ISR, close air support (CAS), aerial refueling, and tactical and
strategic airlift.
While fully engaged in ONE and OIF, the men and women of the Air
Force provided full spectrum air and space support, orchestrating
assets from every Service and 10 different nations. Of these, Air Force
strike aircraft flying from 9 bases flew more than two-thirds of the
combat missions, dropped more than 66,000 munitions (9,650 tons) and
damaged or destroyed approximately three-quarters of planned targets.
In 2003 alone, Air Force assets provided more than 3,000 sorties of on-
call CAS, responding to calls from joint and/or coalition forces on the
ground.
Last year, the Air Force brought personnel and materiel into this
distant, land-locked nation via 7,410 sorties. Over 4,100 passengers
and 487 tons of cargo were moved by airmen operating at various tanker
airlift control elements in and around Afghanistan. To support these
airlift and combat sorties and the numerous air assets of the coalition
with aerial refueling, the Air Force deployed over 50 tankers. In their
primary role, these late 1950s-era and early 1960s-era KC-135 tankers
flew more than 3,900 refueling missions. In their secondary airlift
role, they delivered 3,620 passengers and 405 tons of cargo. Without
versatile tankers, our Armed Forces would need greater access to
foreign bases, more aircraft to accomplish the same mission, more
airlift assets, and generate more sorties to maintain the required
duration on-station.
Operations in Afghanistan also highlight U.S. and coalition
reliance on U.S. space capabilities. This spanned accurate global
weather, precise navigation, communications, as well as persistent
worldwide missile warning and surveillance. For example, OEF relied on
precision navigation provided by the Air Force's global positioning
satellite (GPS) constellation, over-the-horizon satellite
communications (SATCOM), and timely observations of weather, geodesy,
and enemy activity. To accomplish this, space professionals performed
thousands of precise satellite contacts and hundreds of station keeping
adjustments to provide transparent space capability to the warfighter.
These vital space capabilities and joint enablers directly leveraged
our ability to pursue U.S. objectives in OEF.
Operations Northern Watch and Southern Watch
During the past 12 years, the Air Force flew over 391,000 sorties
enforcing the northern and southern no-fly zones over Iraq. With the
preponderance of forces, the Air Force, along with the Navy and Marine
Corps, worked alongside the Royal Air Force in Operations Northern
Watch (ONW) and Southern Watch (OSW). Manning radar outposts and
established command and control (C2) centers, conducting intelligence,
surveillance, and reconnaissance (ISR) along Iraq's borders, responding
to almost daily acts of Iraqi aggression, and maintaining the required
airlift and air refueling missions taxed Air Force assets since the end
of Operation Desert Storm. Yet, these successful air operations had
three main effects: they halted air attacks on the ethnic minority
populations under the no-fly zones; they deterred a repeat of Iraqi
aggression against its neighbors; and they leveraged enforcement of
United Nations Security Council resolutions. Throughout this period,
our airmen honed their warfighting skills, gained familiarity with the
region, and were able to establish favorable conditions for OIF. For
more than a decade, American airmen rose to one of our Nation's most
important challenges, containing Saddam Hussein.
Operation Iraqi Freedom
On 19 March 2003, our airmen, alongside fellow soldiers, sailors,
marines, and coalition teammates, were called upon to remove the
dangerous and oppressive Iraqi regime--this date marked the end of ONW/
OSW and the beginning of OIF. OIF crystallized the meaning of jointness
and the synergies of combined arms and persistent battlefield
awareness.
In the first minutes of OIF, airmen of our Combat Air Forces (USAF,
USN, USMC, and Coalition) were flying over Baghdad. As major land
forces crossed the line of departure, Air Force assets pounded Iraqi
command and control facilities and key leadership targets, decapitating
the decisionmakers from their fielded forces. Remaining Iraqi leaders
operated with outdated information about ground forces that had already
moved miles beyond their reach. As the land component raced toward
Baghdad, coalition strike aircraft were simultaneously attacking Iraqi
fielded forces, communications and command and control centers,
surface-to-surface missile launch sites, and were supporting Special
Operations Forces, and ensuring complete air and space dominance in the
skies over Iraq. Due to these actions and those during the previous 12
years, none of the 19 Iraqi missile launches were successful in
disrupting coalition operations, and not a single Iraqi combat sortie
flew during this conflict. Twenty-one days after major combat
operations began, the first U.S. land forces reached Baghdad. Five days
later, the last major city in Iraq capitulated.
The Air Force provided over 7,000 CAS sorties to aid land forces in
the quickest ground force movement in history. Lieutenant General
William S. Wallace, Commander of the U.S. Army V Corps said, ``none of
my commanders complained about the availability, responsiveness, or
effectiveness of CAS--it was unprecedented!'' As Iraqi forces attempted
to stand against the integrated air and ground offensive, they found a
joint and coalition team that was better equipped, better trained, and
better led than ever brought to the field of battle.
Training, leadership, and innovation coupled with the Air Force's
recent investment in air mobility allowed U.S. forces to open a second
major front in the Iraqi campaign. Constrained from access by land, Air
Force C-17s airdropped over 1,000 paratroopers from the 173rd Airborne
Brigade into northern Iraq. This successful mission opened Bashur
airfield and ensured U.S. forces could be resupplied.
Before 2003, the Air Force invested heavily in the lessons learned
from OEF. Shortening the ``kill chain,'' or the time it took to find,
fix, track, target, engage, and assess was one of our top priorities.
This investment was worthwhile, as 156 time-sensitive targets were
engaged within minutes, most with precision weapons. The flexibility of
centralized control and decentralized execution of air and space power
enabled direct support to JFC objectives throughout Iraq. Coalition and
joint airpower shaped the battlefield ahead of ground forces, provided
intelligence and security to the flanks and rear of the rapidly
advancing coalition, and served as a force multiplier for Special
Operations Forces. This synergy between Special Operations and the Air
Force allowed small specialized teams to have a major effect throughout
the northern and western portions of Iraq by magnifying their inherent
lethality, guaranteeing rapid tactical mobility, reducing their
footprint through aerial resupply, and providing them the advantage of
``knowing what was over the next hill'' through air and space-borne
ISR.
The Air Force's C2ISR assets enabled the joint force in Afghanistan
as well. This invaluable fleet includes the RC-135 Rivet Joint, E-8
JSTARS, and the E-3 AWACS. This ``Iron Triad'' of intelligence sensors
and C2 capabilities illustrates the Air Force vision of horizontal
integration in terms of persistent battlefield awareness. Combined with
the Global Hawk unmanned aerial vehicle and Predator remotely piloted
aircraft, spaced-based systems, U-2, and Compass Call, these invaluable
systems provided all-weather, multi-source intelligence to commanders
from all Services throughout the area of responsibility.
OIF was the Predator's first ``networked'' operation. Four
simultaneous Predator orbits were flown over Iraq and an additional
orbit operated over Afghanistan, with three of those orbits controlled
via remote operations in the U.S. This combined reachback enabled
dynamic support to numerous OIF missions. Predator also contributed to
our operational flexibility, accomplishing hunter-killer missions,
tactical ballistic missile search, force protection, focused
intelligence collection, air strike control, and special operations
support. A Hellfire equipped Predator also conducted numerous precision
strikes against Iraqi targets, and flew armed escort missions with U.S.
Army helicopters.
Space power provided precise, all-weather navigation, global
communications, missile warning, and surveillance. The ability to adapt
to adverse weather conditions, including sandstorms, allowed air, land,
and maritime forces to confound the Iraqi military and denied safe
haven anywhere in their own country. As the Iraqis attempted to use
ground-based GPS jammers, Air Force strike assets destroyed them, in
some cases, using the very munitions the jammers attempted to defeat.
As Defense Secretary Donald Rumsfeld noted, this new era was
illustrated by the coalition's ``unprecedented combination of power,
precision, speed, and flexibility.''
During the height of OIF, the Air Force deployed 54,955 airmen.
Ambassador Paul Bremer, Chief of the Coalition Provisional Authority,
pronounced, ``In roughly 3 weeks [we] liberated a country larger than
Germany and Italy combined, and [we] did so with forces smaller than
the Army of the Potomac.'' Led by the finest officers and
noncommissioned officers, our airmen flew more than 79,000 sorties
since March 2003. Ten thousand strike sorties dropped 37,065 munitions.
The coalition flew over 55,000 airlift sorties moved 469,093 passengers
and more than 165,060 tons of cargo. In addition, over 10,000 aerial
refueling missions supported aircraft from all Services, and 1,600 ISR
missions provided battlespace awareness regardless of uniform, service,
or coalition nationality. This was a blistering campaign that demanded
a joint and combined effort to maximize effects in the battlespace.
Today, Air Force airmen continue to contribute to the joint and
coalition team engaged in Iraq. At the end of the year, 6,723 airmen
from the active duty, Reserve, and Air National Guard conducted a wide
range of missions from locations overseas, flying approximately 150
sorties per day including CAS for ground forces tracking down regime
loyalists, foreign fighters, and terrorists. On a daily basis, U-2 and
RC-135 aircraft flew ISR sorties monitoring the porous borders of Iraq
and providing situational awareness and route planning for Army patrols
in stability and support operations. Providing everything from base
security for 27 new bases opened by the coalition to the lifeline of
supplies that air mobility and air refueling assets bring to all joint
forces, Air Force airmen are committed to the successful accomplishment
of the U.S. mission in Iraq.
Other Contingency Operations
In 2003, the Air Force remained engaged in America's war on drugs
and provided support to NATO ground forces in the Balkans. Since
December 1989, Air Force airmen have been an irreplaceable part of the
interagency fight against illegal drug and narcotics trafficking.
Deployed along the southern U.S., in the Caribbean, and Central and
South America, airmen perform this round-the-clock mission, manning 9
ground-based radar sites, operating 10 aerostats, and flying
counterdrug surveillance missions. The Air Force detected, monitored,
and provided intercepts on over 275 targets attempting to infiltrate
our airspace without clearance. Along with our interagency partners,
these operations resulted in 221 arrests and stopped hundreds of tons
of contraband from being smuggled into our country.
In the Balkans, airmen are fully committed to completing the
mission that they started in the 1990s. Today, Air Force airmen have
flown over 26,000 sorties supporting Operations Joint Guardian and
Joint Forge. These NATO-led operations combine joint and allied forces
to implement the Dayton Peace Accords in Bosnia-Herzegovina and enforce
the Military Technical Agreement in Kosovo. At the end of 2003,
approximately 800 airmen were supporting NATO's goal of achieving a
secure environment and promoting stability in the region.
Additionally, the Air Force engaged in deterrence and humanitarian
relief in other regions. While the world's attention was focused on the
Middle East in the spring of 2003, our Nation remained vigilant against
potential adversaries in Asia. The Air Force deployed a bomber wing--24
B-52s and B-1s--to the American territory of Guam to deter North Korea.
At the height of OIF, our Air Force demonstrated our country's resolve
and ability to defend the Republic of Korea and Japan by surging bomber
operations to over 100 sorties in less than 3 days. This deterrent
operation complemented our permanent engagement in Northeast Asia. The
8,300 airmen who are stationed alongside the soldiers, sailors,
marines, and our Korean allies maintained the United Nations armistice,
marking 50 years of peace on the peninsula.
Our strength in deterring aggression was matched by our strength in
humanitarian action. In response to President Bush's directive to help
stop the worsening crisis in Liberia, we deployed a non-combat medical
and logistics force to create a lifeline to the American Embassy and
provide hope to the Liberian people. An Expeditionary Group of airmen
provided airlift support, aeromedical evacuation, force protection, and
theater of communications support. Flying more than 200 sorties, we
transported and evacuated civilians and members of the Joint Task Force
(JTF) from bases in Sierra Leone and Senegal. The 300 airmen deployed
in support of JTF-Liberia reopened the main airport in Monrovia, and
ensured the security for U.S. military and civilian aircraft providing
relief aid.
Strategic Deterrence
The ability of U.S. conventional forces to operate and project
decisive force is built on the foundation of our strategic deterrent
force; one that consists of our nuclear-capable aircraft and
Intercontinental Ballistic Missile forces, working with the U.S. Navy's
Fleet Ballistic Missile Submarines. In 2003, these forces as well as,
persistent overhead missile warning sensors and supporting ground-based
radars, provided uninterrupted global vigilance deterring a nuclear
missile strike against the U.S. or our allies. The dedicated airmen who
operate these systems provide the force capability that yields our
deterrent umbrella. Should that deterrence fail, they stand ready to
provide a prompt, scalable response.

RESETTING THE FORCE

Preparing and maintaining a force that can adapt to the realities
of the new security environment requires the Air Force to reset and
reconstitute the capabilities that brought us such outstanding
successes in 2003. It is important to restate, the Air Force must
reconstitute similar capabilities that were successful, not necessarily
the same equipment. For the Air Force we view capabilities as more than
just commodities. Beyond just equipment, Air Force warfighting
capabilities depend on training and a sustainable battle rhythm for the
entire force. Synchronizing these aspects, eliminating duplicative
capabilities, and capitalizing on technological advances will all
ensure efficiency and most importantly combat readiness. To frame our
reset and reconstitution plans we must continue to look at three
factors.
First, we are still engaged with very dangerous enemies throughout
the globe. We must replenish our stocks, our people, and our ability to
project power around the world. Being prepared to deliver precise
effects anywhere at anytime as part of a joint and/or coalition force
is a top priority. Second, we must rapidly incorporate our lessons
learned and implement those changes to maintain our combat edge. As we
remain engaged, our current opponents, as well as would-be adversaries,
are watching and learning from the new America way of war. The Air
Force must ensure that we capitalize on our successes and our lessons
from these recent conflicts. Third, stabilization operations and our
ability to capitalize on our successes in OEF and OIF require
significant assets and a robust American presence. After opening 38 new
or expanded bases in support of OEF and OIF and shifting our focus and
forces, we must ensure that our enduring presence is equipped to meet
the challenges of their new environments.
Air and Space Expeditionary Force
Last year, I testified on behalf of the Air Force that we planned
to return to pre-OIF rotational cycles by March 2004. Unfortunately, we
now project the air expeditionary force (AEF)--including its integral
low-density/high-demand (LD/HD) assets will not be fully reset until
March 2005. Continued surge operations of several enabling capability-
sets is creating new challenges for reconstitution efforts and
extending the time to fully restore the readiness of AEF operations by
more than 12 months. The previous plan to recover the AEF to
sustainable operations (2.0 AEFs on 90-day rotations) have been
complicated by growing global combatant commander requirements across
the board. The AEF continues to be operating in higher than normal
sustained pace, approaching four AEF's worth of capability in some
stressed career fields which are committed at any given moment. The AEF
has sustained an operational pace higher than planned to meet increased
operational expeditionary air bases requirements in theater and
especially the need for additional expeditionary support to meet other
Service needs.
Training
I also testified that even with our aggressive efforts to reset
certain LD/HD capabilities, our Expeditionary Combat Support,
Intelligence Surveillance, and Reconnaissance assets, and security
forces, will not meet the March 2004 goal. Due to sustained combat
operations and training backlogs, this remains the case. Manpower and
equipment shortages due to combat requirements have affected the
training pipelines at most of our formal training units. Particularly
harsh, training delays in our LD/HD assets have increased by several
months. In some cases, training backlogs for major weapons systems have
grown to over 200 days, with ``get well'' dates not until the fall of
2005. In addition to manpower and equipment shortages, aging aircraft
and scheduled fleet upgrades have also reduced available training
assets, further aggravating training delays. Lastly, flying hours for
training have been limited due to high deployment schedules for most
weapons systems. One illustration of this problem can be found in the
C-130 fleet. While they flew only 43 percent of the programmed training
hours in fiscal year 2003; their high tempo of operations (OPTEMPO) in
support of ONE, OEF, and OIF resulted in the C-130 fleet flying 218
percent of their programmed ``customer-support'' hours.
War Reserve Stocks
Air Force war reserve stocks are comprised of consumables,
vehicles, ammunition, and Basic Expeditionary Airfield Resources
(BEAR). We estimate our total cost to replenish all war reserve
material (WRM) requirements at $1.96 billion [wartime consumables ($131
million); vehicles ($711 million for 4,700 vehicles; support equipment
($82 million); and BEAR ($1.035 billion including $331 million in the
fiscal year 2003 supplemental)]. Fiscal year 2005 funding allows
reconstitution of our fuels equipment and vehicles in approximately 24
months. We plan for full reconstitution of our BEAR kits by fiscal year
2007 and our four afloat preposition ships with ammunition aboard are
all on station.
With combat operations still ongoing, we fill requirements for
significant expeditionary combat support and base operating support for
all our joint forces and in some cases coalition partners. These
systems are critical to our continued force projection capability. We
are aggressively reconstituting our BEAR sets, which are used to
provide basic infrastructure needed to beddown personnel and aircraft
at austere locations anywhere in the world. Currently 41 percent of
BEAR capability is ready for deployment (63/152 BEAR Sets). Over the
next 24 months, readiness will continue to improve as BEAR sets
deployed to OIF are reconstituted and new assets are delivered into the
inventory due to the supplemental funding received.

MAINTAINING READINESS DURING WARTIME

Our $27.1 billion readiness request ensures that the Air Force
remains ready to perform our wide-ranging global missions, from space
support to global strike to global mobility and homeland defense. Our
fully funded Flying Hour Program funds consumables, spare parts, and
fuels needed to sustain aircrew combat readiness. It requests funding
for 1.7 million flying hours to maintain combat readiness and support
joint operations around the world. It funds worldwide mobility to
ensure joint and coalition forces have the forces and equipment they
need. Our budget funds facility sustainment at 95 percent and meets the
Defense Department's goal.
A success story for Air Force readiness during wartime has been our
aircraft availability. In fiscal year 2003, we enjoyed our highest
active overall mission capable rates in 6 years--the largest
improvements since the mid-1980s. Mission capable (MC) rates are
perhaps the best-known yardstick for measuring the readiness of Air
Force aircraft. MC rates reflect the percentage of aircraft by fleet
that are capable of performing at least one of their assigned missions.
Fourteen of 20 major weapon systems saw improved mission capable rates
in fiscal year 2003, at a time when all of our systems were flying more
hours.
The fiscal year 2003 aggregate MC rate of 75.9 percent was the
highest rate achieved since fiscal year 1997. Categorized by fleet, the
current MC rate for our fighter fleet is 75.7 percent; well into the
third year of increased MC rates and surmounting the fiscal year 2001
low of 73.9 percent. The current fiscal year 2004 bomber fleet rate
stands at 71.4 percent, and the tanker fleet rate at 77.8 percent, a
drop from the fiscal year 2003 rate of 79.3 percent. Between January
1999 and June 2003, we saw a dramatic 60 percent reduction in aircraft
grounding parts-backorders. These gains were due to robust spares
funding initiatives, fleet consolidation, and transformation
initiatives across the entire fleet. Another measure, cannibalization
(CANN) rates reflect the number of cannibalization actions that occur
per 100 sorties for a particular weapon system. The aggregate CANN rate
for fiscal year 2003 dropped 15 percent from the fiscal year 2002 rate
of 9.4 actions per 100 sorties. The fiscal year 2003 rate of 8 CANNs
per 100 sorties represents the lowest CANN rate since fiscal year 1995.
Our engine availability rates reflected impressive gains as recent
investments continued to pay dividends throughout fiscal year 2002. Our
U-2s sustained their mission capable rate while flying their most hours
since the Gulf War, 35 percent higher than fiscal year 2001. Our
Predator fleet posted its best mission capable rates ever while
averaging almost 200 hours per month. Our C-5s posted their best
mission capable rates since fiscal year 1996 while flying the most
hours since the Gulf War. The B-1 consolidation is paying dividends, as
our B-1s posted dramatic gains in mission capable rates, with current
rates at historical highs. All of our fighters are experiencing a
steady decline in cannibalization. We have made great strides in
reducing the number of aircraft in depot for maintenance, putting over
25 percent more aircraft on the ramps for the warfighter since 2000.
Fourteen of 20 aircraft major design systems improved their mission
capable rates over the previous year, with Predator remotely operated
aircraft improving by 11 percent and B-1 bombers achieving the best
mission capable and supply rates in the history of the aircraft. Thanks
to proper funding, fleet consolidation, and transformation initiatives,
spare parts shortages were reduced to the lowest levels recorded across
the entire fleet. We are providing the right tools and resources to our
airmen.
The Air Force continues to place emphasis on a solid depot
maintenance program for DOD's weapon systems. For fiscal year 2005,
we've increased Depot Purchased Equipment Maintenance (DPEM) funding
over the previous budget position to ensure the proper level of support
to the warfighter. Aging aircraft issues continue to make depot
maintenance both expensive and challenging, and thus we are looking for
innovative ways to guarantee the right mix of aircraft is available to
the combatant commander at any given time.
Within our depots, we continue to look for ways to transform,
reduce depot costs, and meet the needs of the warfighter by ensuring
that the depots have the capacity to accomplish the required workload.
An extremely important facet of the depots is that during wartime or
contingencies, the Air Force can surge repair operations and realign
capacity to support the warfighter's immediate needs. We will maintain
the appropriate level of depot maintenance to ensure our aging fleet
stands ready to deploy, fly, and fight anywhere, anytime.
Our depots have put some of these initiatives into place with
exceptional results. In fiscal year 2003 our depot maintenance teams
were more productive than planned, exceeding aircraft, engine, and
commodity production goals and reducing flow days in nearly all areas.
Implementation of ``lean'' production processes, optimized use of the
existing workforce, and appropriate funding all contributed to this
good news story. In addition, our spares support to the warfighter is
at record high numbers. In 2003, supply rates and cannibalization rates
achieved their best performance since fiscal year 1994 and fiscal year
1995 respectively.
Again, the fiscal year 2005 budget requests an increase in the
operations/maintenance readiness funds from $25.4 billion to $27.1
billion. This readiness funding includes increases for Space
Operations, Mission Support and Flying Hours, and includes a fully
funded Flying Hour Program and Depot Maintenance funded to preferred
readiness levels. Where funding does affect readiness, we have budgeted
for and are committed to provide the necessary resources to our airmen.
In spite of continued funding increases in recent years, readiness
indicators for the overall Air Force and the major operational units
have continued to slowly decline, primarily due to higher OPTEMPO of an
aging fleet since the global war on terrorism began--as we continue to
reset and focus more on managing OPTEMPO, we expect readiness
indicators to improve. As of 15 February 2004, overall readiness rates
for major operational units (309) were at 63 percent. This figure
represents a 7-percent decrease compared to readiness rates at the same
time last year (prior to the start of Operation Iraqi Freedom). Overall
readiness rates for major operational units dropped to their lowest
point on 15 December 2003 (61 percent) but are now showing improvement
during the last two months due to ongoing reconstitution efforts. Below
is a snapshot of current readiness rates as of 15 February 2004 for
each major operational community and the associated changes since
February 2003. The arrow (trend) by each community represents recent
readiness trends since December 2003.

ISR--0 percent (down 9 LD/HD
percent).
Special ops--24 percent (down LD/HD
24 percent).
C2--30 percent (down 8
percent).
Bomber--33 percent (down 29 in transition
percent).
Rescue--45 percent (down 1
percent).
Airlift--66 percent (down 11
percent).
Fighter--69 percent (down 7
percent).
Tanker--86 percent (down 2 in transition
percent).
Space and missile--100
percent (up 7 percent).

RECAPITALIZING THE CAPABILITY

With spreading technology and increasing parity of foreign nations,
the mere maintenance of our aging aircraft and space systems will not
suffice. Simply stated, our current fleet of legacy systems cannot
ensure air and space dominance in future engagements. It is these risks
and concerns that underpin our persistent advocacy of program stability
in our modernization and investment accounts. Our capability-based
planning and budgeting process is the foundation to accelerate
modernization while maintaining gains in readiness and people. We are
investing short-term and long-term across all of our task force
capabilities, balancing modifications of existing systems with the
development of new systems. Air Force modernization efforts are
supporting our transformation goals while continuing to develop and
field needed systems, with nearly half of our investment in research,
development, test, and evaluation (RDT&E).
The aging fleet presents the Air Force with the challenge of
providing the joint force commanders assets from an ever-shrinking pool
of available platforms that cost more and more to maintain. To counter
this trend, we are pursuing a wide range of strategies that accelerates
our modernization and recapitalization efforts. We are using an
integrated and systematic risk assessment system, shorter acquisition
cycle times, and improved program oversight. Our goal is to integrate
our combat, information, electronic warfare and support systems to
create a portfolio of air and space advantages.
As the Air Force has testified, our average fleet age has
approximately 23 years in service. With some manufactured as early as
1955, our KC-135 fleet averages 44 years in service. We have never
dealt with a force this old. Our aging aircraft are vulnerable to
myriad problems, including technical surprises, vanishing vendors, and
increased operational costs. Thanks to this committee, we have recently
enjoyed a down payment on our recapitalization but require sustained
funding to maintain the force capable of supporting the National
Security Strategy and JV2020. Eventually, new acquisitions will have to
replace these legacy systems. In the interim, we are finding innovative
means to keep current systems operational in the near term and are
taking advantage of new opportunities to employ old systems in new
ways.

Dealing With Aging Aircraft Issues
This new OPTEMPO has demanded more of our entire fleet.
Specifically, corrosion, high-cycle fatigue, and aging composites
affect the Air Force's mission effectiveness and availability due to
flight restrictions. Examples that epitomize the exact problem are
found in a variety of fleets including the F-15Cs, A-10s, and KC-135s.
Averaging 20 years old, our premier legacy air dominance platform,
the F-15C, suffered approximately 30 incidents of partial wing,
horizontal and vertical stabilizer loss and wiring bundle fires that
have resulted in many operational restrictions. Additionally, their
maintenance man-hours are up 150 percent in the past 12 years. With an
average fleet age of 22 years, our A-10s, which provided invaluable
close air support to the joint force commander, has recently undergone
inspections for wing cracks that affected 247 aircraft. Both of these
cases illustrate that these problems are across the fleets versus
aircraft tail number specific.
None of our aging aircraft fleets needs recapitalizing more than
our tanker fleet. Previous Air Force testimony has continually stressed
the importance of this fleet to the Air Force and to the Nation in
terms of the global war on terror. The crux of our challenge is how the
Air Force will continue to provide these irreplaceable assets to the
joint warfighter considering their limited availability at ever
increasing costs. At the beginning of January 2004, 36 percent of the
KC-135 fleet was unavailable including those in depot and those unit
possessed but not mission capable. Of those that are available, mission
capable rates continue trending downward. In addition to the unknown
technical ``surprises'' which the fleet may encounter, known severe
corrosion of this Eisenhower-era asset continues to concern us. Organic
programmed depot maintenance (PDM) and contract PDM prices to maintain
the KC-135 continue to rise.
As many of you know, the Air Force has been very active on this
front in an attempt to continue to fill the joint force commander's
requirements for power projection. The Air Force fully supports the
latest decision by Secretary Rumsfeld to suspend the 767 Tanker Lease
Program until all reviews are complete. We continue to work
cooperatively with the DOD Inspector General to reach a speedy and
definitive conclusion to their assessment.
In testimony last week, I reemphasized the Air Force's requirement
to recapitalize the tanker fleet and discussed the operational
capabilities needed for a new tanker. The Air Force believes that
whether this is accomplished through the normal procurement process for
which over $4 billion of funding is already programmed across the FYDP
for a KC-X replacement aircraft, or through the lease program, which,
as authorized in the National Defense Authorization Act (NDAA) for
Fiscal Year 2004, will accelerate the recapitalization process, will
provide this Nation a vital capability. In accordance with the 2004
NDAA, the Air Force will conduct the Analysis of Alternatives using a
federally funded research and development center or other entity
independent of the Department of Defense. This AOA is important in
shaping decisions for future recapitalization, and we expect it to be
complete in fiscal year 2005.
Another important tool in shaping our decisions was implemented
last May. The new Air Force Fleet Viability Board establishes a
continuous, repeatable process for fleet assessment much like current
Navy boards. Currently, the board is reviewing the C-5A. This ongoing
assessment will likely report on or around 31 March 2004. Candidates
for future boards will be reviewed annually to consider new concerns
and should produce a comprehensive standardized approach to examining
entire fleets of aircraft.

Aging Infrastructure
In addition to air and space platforms, we must address our growing
deficiencies in infrastructure. Improvements we secure for our air and
space systems will be limited without addressing our foundational
support systems. Deteriorated airfields, hangars, waterlines,
electrical networks are just some of the infrastructure elements
warranting immediate attention. Our investment strategy, to enable and
modernize our installation capabilities and provide quality working and
living environments, focuses on three simultaneous steps. First, we
must dispose of excess facilities. Second, we must fully sustain our
facilities and systems so they remain effective through their expected
life. Third, we must establish a steady investment program to restore
and modernize our critical facilities and infrastructure systems, while
continually advancing our ability to protect our people and resources
from the growing threat of terrorism.
We have accelerated our housing investment and expanded our
privatization program. We have programmed projects to eliminate
inadequate housing at all continental United States (CONUS) bases by
2007, except at four northern-tier locations where it will be completed
by 2008. We will improve more than 3,600 units at 26 bases and support
privatization of 7,000 units at 7 bases. Committed to sustained
improvements, the Air Force has increased this year's MILCON request by
10 percent. The Air Force has embarked on a strategy for three world-
class depots and has increased funding for essential depot facilities
upgrades and equipment modernization as part of our ``Depot Maintenance
Strategy and Master Plan.'' When you consider our level of effort
across the entire infrastructure spectrum, we plan to invest more than
$4.8 billion in fiscal year 2005.

A READY FORCE OF AIRMEN

A ready force is founded on its people. The 700,000 men and women
that comprise our Total Air Force--active duty, Guard and Reserve, and
our civilians--are the best America has to offer. They are officers,
enlisted, civilians, and contractors from every corner of the country
and every walk of life. These world-class airmen are the key
ingredients to sustaining our record of success. Without exception we
have been and will always be dedicated to recruiting, training, and
retaining professional airmen and wholeheartedly believe that the Air
Force can make no greater investment and have no greater resource than
in our people. They are our #1 weapon system.
The bottomline on personnel readiness is that our people are ready.
We are sustaining our personnel readiness rates in the face of higher
OPTEMPO, manning shortages, and reduced training opportunities. ONE
alerts and OEF/OIF deployments have left our operational units with
less capability and opportunity to train. The Air Force fully funded
the flying program in fiscal year 2004 and will continue to fly 100
percent of the flying program. For the past 3 years, the Air Force has
executed its budgeted O&M flying hours without requesting additional
funding for contingency flying hours. Our airmen are gaining real-world
experience you cannot create in a training environment. Today, over 70
percent of our rated aircrew is combat experienced.
However, many of our aircrew instructors have been pulled to
fulfill priority operational requirements, making it difficult to train
new aircrew to relieve the combat stress. This is especially true of
our LD/HD assets which have been working at ``surge'' capacity. We
recognize that some of the most significant detractors to unit
readiness are lengthy, frequent deployments. Once airmen return from
deployments they require up to a 90-day reconstitution period,
primarily for personnel training. Maintaining our AEF rotation schedule
helps stability and predictability, but most of our stressed career
fields are exceeding the 90-day goal. While the Air Force has taken
steps to mitigate the impact of lost training, sustained operations
will remain a challenge. As long as the current OPTEMPO persists, we
expect Air Force training to remain at current levels improve, if not
decline, as training currencies and continuation training are harder to
achieved.

Recruiting
We remain committed to an All-Volunteer Force. Our volunteer airmen
are dedicated, experienced, smart, disciplined, and representative of
our country as a whole. We recruit and promote the unique and diverse
experiences and capabilities people from all backgrounds, all races,
and all religions contribute to our combat capability.
Last year the Air Force completed one of its best recruiting years
ever. This year, we expect to meet our annual accession goal of 37,000
by September 2004. With an increased advertising budget, enhanced
hiring incentives and enlistment bonuses, and improved recruiter
manning, the Air Force is making enlisted recruiting a priority, and it
is paying off. The Air Force also continues to attract the country's
best and brightest college graduates to join our officer corps. We have
introduced additional incentives to recruit more students into Reserve
Officers' Training Corps (ROTC), especially those with science and
engineering proficiencies. We continually adjust our goals to meet new
force requirements and the demands of a competitive marketplace.

Training
The Air Force requires sophisticated airmen who are trained to
leverage technology and ready to perform in a fluid environment--air
and space leaders for the 21st century. This will require targeted
investments in the next generation of airmen, from the ground up and
throughout their careers. To that end, the Air Force has introduced a
coordinated effort to address all aspects of an airman's career
development, professional education, and assignments in sum rather than
individually. This deliberate force development effort generates
policies tailored to the needs of the individual airman throughout his
career. Comprehensive in scope, our training is doctrinally based and
focused on three levels: tactical, operational, and strategic.

Force Shaping
Our number one personnel challenge is adapting to the new steady
state--a higher tempo of operations and a shifting skill mix
requirement. With a 30-percent reduction in manpower since 1990 and a
significant increase in worldwide taskings over that same period, the
Air Force is experiencing a dramatic jump in operations and personnel
tempo. We have discovered that while the number of airmen is adequate,
the mix of skill sets and the military/civilian/contractor ratio must
be adjusted to reflect new realities.
Recognizing the new demands placed on us by the war on terrorism,
we initiated a comprehensive manpower review to determine relative
stress amongst career fields and to explore options to alleviate that
stress. Our analysis shows we need to shift manpower to stressed career
fields to meet the demands of this new steady state, and we are in the
process of doing this. We have realigned personnel into our most
stressed specialties and hired additional civilians and contractors to
free military members to focus on military duties. We have also made
multi-million dollar investments in technology to reduce certain
manpower requirements. We have redirected our training and accession
systems and have cross-trained personnel from specialties where we are
over strength to alleviate stressed career fields. Supporting the
Secretary of Defense's vision of moving forces ``from the bureaucracy
to the battlefield.''

Retention
We have found that our high OPTEMPO and uneven workload are major
determinants in an airman's decision to leave the Air Force. Because
the skill-sets of our airmen are not easily replaced, we expend
considerable effort to retain our people, especially those in high-
technology fields and those in whom we have invested significant
education and training. In 2003, we reaped the benefits of an
aggressive retention program, aided by a renewed focus and investment
on education and individual development, enlistment and retention
bonuses, targeted military pay raises, and quality of life
improvements. Our fiscal year 2003 enlisted retention statistics tell
the story. Retention for the first term airmen stood at 61 percent and
exceeded our goal by 6 percent. Retention for our second term and
career airmen was also impressive, achieving 73 percent and 95 percent
respectively. Continued investment in people rewards their service,
provides a suitable standard of living, and enables us to attract and
retain the professionals we need.
Retention of pilots, navigators, and air battle managers remains a
major concern. Our flexible Aviator Continuation Pay (ACP) program is
one important part of our broad-based solution. Encouragingly, the ACP
long-term initial take rate rose sharply to 65 percent in fiscal year
2003 from 47 percent in fiscal year 2002. Retention for high tech
specialties is also a concern as the pull from industry is strong. This
draw is exacerbated by long, frequent deployments in many of our high
tech career fields.
While high retention is in itself great news, we are faced with the
fact that the Air Force is over its authorized end strength and our
skill mix is out of balance. Being overstrength, however, serves as a
mixed blessing that allows us to rebalance the skills without
exacerbating manning problems in the stressed career fields as we draw
down to authorized strength. Force shaping permits us to tackle these
challenges smartly.
The Air Force has reduced its civilian workforce by nearly 100,000
since 1990, leaving only 10 percent of today's Air Force civilians with
less than 10 years in service and over 40 percent eligible to retire in
5 years. We must revitalize our professional occupations with new hires
while minimizing the impact on the existing civilian employees. Force
shaping initiatives to restructure the civilian work force and
enactment of the National Security Personnel System (NSPS) to provide
the department with some streamlined authorities.

Future Total Force
Like never before in the history of the Air Force, we are a total
force. Mission success demands the interdependence of active duty, Air
Reserve Component (ARC), civilian workforce, and contractors. The ARC
continues to be an integral part of the AEF as a total force, and
accounts for more than three-fourths of our tactical airlift
capability, two-thirds of our strategic airlift capability, two-thirds
of our air refueling capability, and one-third of our strike fighters.
The Reserve component also makes significant contributions to our
rescue and support missions, and has an increasing presence in space,
intelligence and information operations. In all, the Reserve component
provides a ready force requiring minimum preparation for deploying in
support of worldwide operations. As such, they need compensation,
benefits, and entitlements commensurate with these increased
responsibilities. We are committed to using ARC volunteers versus
mobilization whenever possible to allow the units and members the
flexibility needed to meet combatant commander requirements.
We are also reviewing our ARC manpower to minimize involuntary
mobilization of ARC forces for day-to-day, steady state operations
while ensuring they are prepared to respond in times of crisis. Since
September 11, the Guard and Reserve have played a greater role in the
country's defense than ever before. But there is a limit to how many
demands we can place on our ARC forces in the current environment.
Historically the ANG and AFRC gain nearly 25 percent of separating
active duty members. Continued high OPTEMPO may threaten this source of
recruiting and force the ARC to explore alternative options to make up
the loss. We are also closely monitoring this situation and are taking
steps to relieve the pressure on the Guard and Reserve.
We are in the second year of our agreement to employ Army National
Guard soldiers for force protection (FP) duties at Air Force
installations, temporarily mitigating our FP shortfalls in security
forces. We are executing an aggressive plan to rapidly burn down the
need for Army augmentation by reducing our manpower requirements
through the insertion of technology (to enable manpower avoidance),
realigning current manpower within end strength limits, and maximizing
use of ARC volunteers to replace departing Army National Guard
soldiers. Coupled with civilian conversions and contracting options, we
are expanding total force (civilian, contract, active duty, and ARC)
involvement while at the same time reducing the stress on our forces
and the associated risks to our resources.

CONCLUSION

The greatest testament to Air Force readiness is our continued
success in projecting power around the globe and protecting America and
her allies from potential enemies. The Air Force, along with each of
the members of this joint team, is proud of our operational successes
over the past 2 years, but we cannot rest on our accomplishments. When
our President and this Nation called last year--we were ready. Within
21 days, this joint team had effectively broken coherent resistance in
Baghdad and collapsed the regime's control. Five days later, the joint
and coalition team captured the last major Iraqi city, unseated a
despotic government and liberated approximately 25 million Iraqis. The
readiness that made the Air Force's air and space power contribution
possible was the result of the hard work of the thousands of airmen and
civilians of our total force. Our success was also a tribute to this
committee's leadership and its staunch support at such a critical time
in our Nation's history.
We stand ready. Ready to project power to any point on the face of
the Earth. Lethal and responsive, America's airmen stand ready to act--
whenever and wherever they are called.
Mr. Chairman, Senator Akaka, thank you for your support.

Senator McCain. Thanks very much, General.
General Huly.

STATEMENT LT. GEN. JAN C. HULY, USMC, DEPUTY COMMANDANT OF THE
MARINE CORPS PLANS, POLICIES, AND OPERATIONS, UNITED STATES
MARINE CORPS

General Huly. Senator Akaka, Senator McCain, Senator
Inhofe, Senator Nelson, and Senator Cornyn, thank you for the
opportunity to appear here today.
Let me start by thanking you, thanking the entire
committee, for their continued and steadfast support for the
issues and the programs that are of vital interest and
importance to the readiness of your Marine Corps.
I would ask that my prepared statement be placed in the
official record.
I am proud----
Senator McCain. Without objection, your entire statement
will be made part of the record.
Thank you, General.
General Huly. Thank you, sir.
That concludes----[Laughter.]
Senator McCain. Thank you very much.
Go ahead, please, General.
General Huly. I'm proud and honored to be representing the
215,000 marines, both active and Reserve, in the Corps today.
They are amongst the finest women and men America has to offer.
Their performance in OEF and OIF, in support of the ongoing
global war on terrorism, has been superb. But, rest assured,
the Marine Corps is not resting on its laurels.
Currently, we're in the process of deploying 25,000 combat-
ready active-duty and Reserve component marines and sailors
from the 1st Marine Expeditionary Force to Iraq, and 1,500
marines and sailors from the 2nd Marine Expeditionary Force
have recently been deployed to Haiti. Our Reserve units and
individuals are combat-ready, and have rapidly integrated with
the Active Force, demonstrating the effectiveness of the Marine
Corps total force. We're set and ready to continue our role in
securing the security and interests of our Nation with forward-
deployed naval expeditionary forces tailored for the current
operating environment.
Our current success was possible because of the excellent
training and equipping of our marines, active and Reserve,
which you enthusiastically supported and generously funded. It
was the coordinated, sustained integration of fires, both air
and surface, in support of the Marine Expeditionary Forces
(MEFs) maneuver that led to victory in OIF. Our ability to
apply combined-arms doctrine was key as we integrated
intelligence, command and control, armor, dismounted,
motorized, and mechanizing forces, artillery, organic
helicopters, and fixed-wing close air supports, along with our
combat service support to produce combat power in tempo that
the former Iraqi regime could not stop. Throughout, our
training and equipment were clearly superior to that of our
opponent. Again, your role in that cannot be overstated.
Superior training is a hallmark of your Marine Corps. While
we endeavor to keep the keen edge on our warfighting skills,
the mission before us in Iraq requires an emphasis on support
and stability operations, and we have adjusted our training to
meet this challenge. We have carefully examined our experiences
in combat and training in preparation for our upcoming
deployment. Our Operation Iraqi Freedom-2 pre-deployment
training takes full advantage of a broad survey of lessons
learned, from convoy operations all the way to cultural
sensitivity training.
As a force, we are under some stress, due to increases in
maintenance cycles and operational tempo, as are all of the
Services; however, through careful and meticulous maintenance
management, our material readiness has shown steady
improvement. Owing to our commitment to quality of life,
recruiting, and retention programs, our personnel readiness now
remains high.
In closing, let me say that you have every reason to be
proud of the contributions and sacrifices of the young men and
women of your Marine Corps and the families that support them,
and to be confident in their continued success. Their readiness
is directly attributable to the superior training resources and
equipment made available through support of this committee.
Thank you for your support and the opportunity to appear
here today.
[The prepared statement of General Huly follows:]

Prepared Statement by Lt. Gen. Jan C. Huly, USMC

INTRODUCTION

Chairman Ensign, Senator Akaka, distinguished members of the
committee; it is my privilege to report to you on the state of
readiness of your Marine Corps. Your marines are firmly committed to
warfighting excellence, and the support of Congress and the American
people has been indispensable to our success in the global war on
terrorism. Your sustained commitment to improving our Nation's Armed
Forces to meet the challenges of today as well as those of the future
is vital to the security of our Nation. On behalf of all marines and
their families, I thank the committee for your continued support and
commitment to the readiness of your Marine Corps.

RECENT OPERATIONS AND CURRENT STATUS OF FORCES

Marine Corps readiness and warfighting capabilities have figured
prominently in U.S. military operations since September 2001 and the
beginning of the global war on terrorism. In Operation Enduring
Freedom, sea-based marines projected power hundreds of miles inland to
establish a stronghold deep in enemy territory. During Operation Iraqi
Freedom, more than 76,000 marines (including reservists), their
equipment, and supplies deployed to the Iraqi theater, using a
combination of amphibious warships, Maritime Prepositioning Force (MPF)
ships, and airlift. Once combat commenced, a Marine Corps combined-arms
team advanced more than 450 miles from the sea, to Baghdad and beyond.
In 2004, Marine Air-Ground Task Force (MAGTF) flexibility and agility
continues to be demonstrated as our marines stabilize and help to
rebuild Iraq and Afghanistan and maintain our commitments afloat and
ashore in other world regions.
United States marines are deployed around the world in 2004--from
Iraq and Afghanistan to Northeast Asia, from the Republic of Georgia to
the Horn of Africa, and from the Philippines to Romania. Marines
deployed at sea on the warships of Expeditionary Strike Groups are
conducting sustained operations ashore in support of U.S. security
interests and commitments. Our top priority continues to be to maintain
a high state of readiness and to provide forces capable of meeting the
demanding needs of the unified combatant commanders and our Nation in
the prosecution of the global war on terrorism.
Since the end of major combat operations in Iraq, the Marine Corps
has been setting the force in order to enhance warfighting readiness
for future contingencies. We have reloaded combat equipment and
materiel on the ships of the Maritime Prepositioning Force Squadrons
while also ensuring that the requirements for Operation Iraqi Freedom
II are fulfilled. With our modernization and transformation goals in
mind, we are using the funds provided by Congress to repair, refurbish,
and where necessary, replace equipment.
Starting in January, and continuing through today, the Marine Corps
is deploying forces to relieve the 3d Armored Cavalry Regiment and the
82d Airborne Division in Western Iraq in support of Operation Iraqi
Freedom II. In preparation for this new mission, we have made a major
effort to analyze lessons learned from the Iraqi campaign, and are
determining how best to apply them in the current operating
environment. Included in this effort is participation in the Army's
Improvised Explosive Device (IED) Task Force, a joint effort to share
the technology, as well as the Tactics, Techniques, and Procedures
(TTPs) of countering the IED threat.
While the entire force is under some stress due to increases in
unit operations tempo (OPTEMPO), individual deployment tempo
(DEPTEMPO), and the effort to repair and maintain our equipment, we
continue to meet our operational commitments. During 2004 Marine
Expeditionary Units will still deploy as part of Naval Expeditionary
Strike Groups in support of combatant commander requirements. Units
will continue to deploy to Okinawa and Iwakuni, Japan. However, some of
those forces will subsequently deploy from Okinawa in support of
Operation Iraqi Freedom II. Marine Corps units continue to support
exercises with our joint and coalition partners that are critical to
supporting the combatant commanders' theater security cooperation
plans, and counterdrug operations in support of joint and joint-
interagency task forces. While the operational tempo remains high,
recruiting and retention continue to meet our manpower goals. We are
continually monitoring the health of our Service, and we are focused on
ensuring that the Marine Corps remains ready for all current and future
missions.
People and leadership are the foundations of the Marine Corps'
readiness and warfighting capabilities. Operation Iraqi Freedom
demonstrated that the Marine Corps' recruiting, training, and continued
emphasis on education of the force are extremely successful in
maintaining the high standards of military readiness our Nation
requires. The Marine Corps remains committed to taking care of our
marines, their families, and our civilian marines.

MARINES

This past year demonstrated once again that the most important
weapon on any battlefield is the individual marine. While the
employment of precision weapons and advanced technologies provide us
unique advantages over our adversaries, our key to battlefield success
remains educated, highly skilled, and motivated marines. During
Operations Iraqi Freedom and Enduring Freedom, our small-unit leaders'
skills, adaptability, and flexibility produced victory on fluid,
uncertain and chaotic battlefields. The Marine Corps will continue to
recruit, train, and retain the type of individuals who brought us
success in these and many other operations. Consequently, in the coming
years some of our most important readiness efforts will revolve around
individual marines and their families. This will be a challenge,
especially in times of war, when we call upon our marines and their
families to make significant sacrifices. We must, therefore, pursue our
major quality of life priorities--pay and compensation, health care,
bachelor and family housing, infrastructure and installation
management, and community services--that contribute to maintaining the
stability of the force, enhance personal readiness and family cohesion,
and promote retention.

Personnel Tempo (PERSTEMPO)
As of February 27, 2004, the Marine Corps had 1,994 active
component and 2,111 Reserve component marines who have exceeded the 400
out of the preceding 730 days DEPTEMPO threshold. Currently, there are
42,721 active component and 17,099 Reserve component marines who have
accrued at least 1 day of DEPTEMPO. Prior to September 2001, the Marine
Corps maintained a 2.7:1 unit-level rotation ratio. As a result of the
current operational demands associated with the global war on
terrorism, Marine Corps units are rotating at a higher rate. The
increase in rotation rates will result in an increase in DEPTEMPO. The
degree to which the increase in unit-level rotation will affect
retention depends on the duration of the increased level of DEPTEMPO.
To date, we have no evidence that the increase in DEPTEMPO has
adversely affected retention.

Recruiting
Successful recruiting is essential to replenishing the force and
maintaining a high state of readiness. Sustaining our ranks with the
highest quality young men and women is the mission of the Marine Corps
Recruiting Command. Recruiting Command has accomplished this mission
for more than 8 years for enlisted recruiting and 13 years for officer
recruiting. This past year the Marine Corps recruited over 100 percent
of its goal with over 97 percent Tier I high school graduates. The
Marine Corps Reserve achieved its fiscal year 2003 recruiting goals
with the accession of 6,174 non-prior service marines and 2,663 prior
service marines. This year, as force structures are developed to pursue
the global war on terrorism, your support is essential in arming our
recruiters with the resources they need to ensure the readiness of your
Marine Corps.

Retention
Retaining our best and brightest marines is key to readiness.
Retention success is partly a consequence of the investment we make in
supporting our operational forces--giving our marines what they need to
do their jobs in the field, as well as the funds required to educate
and train these phenomenal young men and women. Our First Term
Alignment Plan (first tour) has achieved its reenlistment requirements
for the past 9 years. With just over one-third of the current fiscal
year completed, we have achieved 76 percent of our first-term retention
goal for the year. Furthermore, our Subsequent Term Alignment Plan
(second tour and beyond) reveals that we have already retained 47
percent of our goal for this fiscal year. Officer retention is at a 19-
year high, continuing a 4-year trend of increasing retention. Despite
increased retention overall, certain Military Occupational Specialties
continue to suffer perennially high attrition, examples include
Aviation Electronics Technicians, Electronic Maintenance Technicians,
and Public Affairs. We are attempting to overcome this challenge by
offering continuation pay for those marines with Military Occupational
Specialties that are in short supply. Military compensation to all
marines that is competitive with the private sector provides the
flexibility required to meet the challenge of maintaining stability in
manpower.

Marine Corps Reserve
Our Reserve marines are a vital and critical element of our total
force. The training, leadership, and quality of life of our Reserve
component remain significant Marine Corps priorities. In 2003, the
Marine Corps Reserve rapidly mobilized combat ready marines to augment
the active component. Marine Corps Reserve activations in support of
Operation Iraqi Freedom began in January 2003, and peaked at 21,316
Reserve marines on active duty in May 2003. Of the approximately 6,000
reservists currently on active duty, over 1,300 Individual Mobilization
Augmentees, Individual Ready Reserves, and retirees fill critical joint
and internal billets. As of March 1, 2004, we had 5,398 marines
mobilized; 4,114 in Selected Marine Corps Reserve units and 1,284
individual augmentees, and we have an additional 7,500 marines that
will be mobilized for our Operation Iraqi Freedom II requirements.
Judicious employment of Reserve marines remains a top priority of the
Marine Corps to ensure the Marine Corps Reserve maintains the
capability to augment and reinforce the active component. Our Reserve
units and individuals are combat ready and have rapidly integrated into
Active Forces commands demonstrating the effectiveness of the Marine
Corps total force.
Marine Corps Reserve units maintain high levels of pre-mobilization
readiness. Reserve Units consistently train to a high readiness
standard. Ninety-eight percent of Selected Marine Corps Reserve (SMCR)
marines called up for duty reported for mobilization and less than 1
percent requested a deferment, delay, or exemption. The Marine Corps
Reserve executed a rapid and efficient mobilization with units
averaging 6 days from notification to being deployment-ready, and 32
days after receiving a deployment order they arrived in theater.
Similar to the active component, the challenge for the Reserve
component is managing the high demand/low density specialties such as
civil affairs, KC-130, military police, and intelligence. To date, 96
percent of the civil affairs, 989 percent of the KC-130, 72 percent of
law enforcement, and 69 percent of the intelligence marines have been
activated as compared to 50 percent of Reserve infantry marines.
Building on the important lessons of the last year, the Marine Corps is
pursuing several transformational initiatives to enhance the Reserves'
capabilities as an even more ready and able partner with our active
component. These pending initiatives include: increasing the number of
military police units in the Reserve component; establishing a Reserve
Intelligence Support Battalion that includes placing Reserve Marine
Intelligence Detachments at the Joint Reserve Intelligence Centers;
returning some of our civil affairs structure to the active component
to provide enhanced planning capabilities to the operational and
service headquarters; and introducing an improved Individual Augmentee
Management Program to meet the growing joint and internal requirements.

End Strength
The Marine Corps is assimilating last year's congressionally
authorized increase in Marine Corps end strength to 175,000. The
increase of 2,400 marines authorized by Congress addressed an urgent
need to train and maintain enough marines for the long-term
requirements associated with the global war on terrorism. It has been
particularly important in enabling us to provide the Nation with the
4th Marine Expeditionary Brigade (Antiterrorism), a robust, scalable
force specifically dedicated to antiterrorism.
As the Marine Corps is expeditionary by nature, we are accustomed
to deploying in support of contingency and forward presence missions.
We are structured in such a way as to satisfy our enduring requirements
and meet operational contingencies as long as the contingencies are
temporary in nature. We do not believe, at the present time, that an
end strength increase is necessary.

Quality of Life (QOL)
As an expeditionary force, the Marine Corps conducts frequent and
sometimes lengthy deployments, and our senior leadership is focused on
understanding and mitigating the effects of these deployments on
recruitment, readiness, retention, and family life. For example, in
recognition of the importance of the transition home for both marines
and their families, the Marine Corps developed a standardized return
and reunion program in coordination with Marine Corps Community
Services (MCCS) personnel, health professionals, and chaplains. The
program was implemented in March 2003, and was specifically designed to
ease the assimilation of service members back into family life
following long periods of separation, as well as provide information on
the additional support programs offered in support of deploying service
members and their families. The program consists of a mandatory warrior
transition brief for the returning marine, a return and reunion
guidebook for marines and family members, a caregiver brief, and briefs
designed for spouses.
The Marine Corps will continue to look at our unique demographics
(e.g., the youth of the force, number of children/ spouses, number of
single parents, number of relocations/forward deployed marines) in a
holistic manner and adjust QOL programs to provide the counseling and
support needed before, during, and after deployments. The primary focus
must be on prevention so that intervention requirements are decreased.
The Marine Corps continues to monitor the attitudes and concerns of
marines and family members relative to their QOL as we provide support
during the global war on terrorism. We remain committed to improving
the standard of living in the Corps and ensuring that the ``QOL
benefit'' is clearly articulated to our marines and families.

TRAINING

Superior training has always been a hallmark of your Marine Corps.
Our training with the resources you provide enables us to maintain the
high state of readiness demanded of your Nation's expeditionary force
in readiness. In terms of operational deployments, 2003 was the busiest
year since 1991. Consequently, most service exercises were cancelled
and participation in exercises throughout the world was reduced, with
the exception of the Pacific region. In that area, marines embarked
onboard the U.S.S. Fort McHenry (LSD 43) participated in the
Cooperation Afloat Readiness and Training (LF CARAT) exercise sponsored
by the Commander, U.S. Pacific Command, engaging in a series of
bilateral training exercises in the Southeast Asian littoral region. At
home, the Marine Corps resumed service exercises as forces began to
deploy for training within the continental United States. Combined Arms
Exercises (CAX) at Twentynine Palms, California; Mountain Warfare
Training Center (MWTC) courses in Bridgeport, California; Weapons and
Tactics Instructor (WTI) courses in Yuma, Arizona; and MEU special
operations capable (SOC) workups began in earnest to prepare recently
redeployed forces for scheduled or emergent deployments. These
exercises also served to evaluate individual and unit proficiency, and
ultimately to maintain the readiness and operational primacy of Marine
Air-Ground Task Forces across the spectrum of operations.

Operation Iraqi Freedom II Pre-deployment Training
While we endeavor to keep a keen edge on our warfighting skills,
the mission before us in Iraq requires an emphasis on Security and
Stability Operations (SASO). We have adjusted our training to meet this
challenge. In preparation for Operation Iraqi Freedom II, I Marine
Expeditionary Force has analyzed lessons learned from their experiences
in conducting security and stability operations from March to September
2003, and from recent Army lessons learned. As they did last year, I
Marine Expeditionary Force is working closely with the Army forces in
Iraq. They have conducted a number of liaison visits with the Army
units they will soon relieve. They have drawn lessons from the tactics
of the British in Iraq, which reflects many years of experience in low
intensity conflicts and peacekeeping operations; procedures used by the
Los Angeles Police Department for neighborhood patrolling in gang
dominated areas; as well as study of the Marine Corps' own extensive
``small wars'' experience. Our deploying units have applied these
lessons through a comprehensive training package that includes tactics,
techniques, procedures for stability and counter-insurgency operations.
We have conducted rigorous urban operations training and exercises.
Over 400 marines are receiving Arabic language immersion training, and
all deploying marines and sailors are receiving extensive cultural
education. Our supporting establishment is focused on the equipment,
logistics, and training requirements of this force--paying particular
attention to individual protective equipment, enhanced vehicle and
aircraft hardening, and aviation survivability equipment and
procedures. Marine aviation elements have worked closely with Army
aviation and their recent Iraq experience. This exchange facilitated an
advanced aviation tactics exercise focused on mitigating the threats in
the current operating environment to tactical aviation. This type of
training and support is critical as we send marines back to war in a
volatile, dangerous, and changing situation.

Training at Eglin Air Force Base
Training at Eglin Air Force Base (AFB) is envisioned to provide a
near term pre-deployment training capability for East Coast Navy
Amphibious Ready Groups/Expeditionary Strike Groups and Marine
Expeditionary Units (Special Operations Capable), with the potential to
be part of the long-term solution. The training concept was designed
for up to two 10-day training periods per year. The long-term objective
is that during each 10-day period, the Expeditionary Strike Groups will
be able to conduct training across the full spectrum of operational
requirements. The Marine Corps has invested approximately $4.2 million
in environmental assessment/mitigation and infrastructure development
required to establish an initial training capability at Eglin AFB.
In December 2003, the Marine Corps completed its first 10-day
training period at Eglin AFB. The Marine Corps is assessing the quality
of the training available at Eglin AFB to determine whether training
there merits the expenditure of additional effort and resources.
Meanwhile, we continue to explore and develop other options, both
within the United States and abroad. While Eglin AFB has the potential
to meet Naval Expeditionary Force training requirements, full
development of this capability on a major range and test facility base
will require a significant investment by the Department of the Navy and
Department of Defense to upgrade existing facilities, as well as
changes to existing regulations governing test facilities.

Range Modernization
Rigorous, realistic training is crucial to combat readiness. We are
building a comprehensive plan to sustain, upgrade, and modernize our
ranges and training areas. Virtual and simulated training scenarios and
technology are increasingly important and add great value to the
complete training program for marines. However, live-fire combined arms
training and maneuver forms the core of our combat training programs.
The program to modernize our live-training capabilities will provide
both operating forces and installations the management tools and
resources to better plan and execute training and to honor our
commitments as good stewards of our training lands. The goal of our
range modernization program is to preserve and enhance the live-fire
combined arms training capabilities of Marine Air-Ground Task Force
Training Command, Twentynine Palms and Marine Corps Air Station, Yuma,
and to preserve the unit-training capabilities of the Nation's two
premier littoral training areas, Camp Lejeune and Camp Pendleton.

EQUIPMENT STATUS

The Marine Corps objective in setting the force for Operation Iraqi
Freedom and global commitments is to maintain a high state of
preparedness. This will take time and resources. Aviation units
deploying or deployed in support of the global war on terrorism are
maintaining mission capability rates above 85 percent. The remaining
units are operating at slightly lower levels due to the aircraft parts
priority being established for our forward deployed squadrons. Our four
divisions are currently making steady improvements in equipment
readiness because of the remarkable maintenance and repair efforts of
our marines, depot workers, and the support of Congress.
During Operation Iraqi Freedom, the Marine Corps offloaded two
Maritime Prepositioning Squadrons (11 ships). Our equipment offloaded
from Maritime Prepositioning Ships Squadrons 1 and 2 had equipment
readiness ratings of 98 percent and 99 percent respectively. After
combat operations much equipment was worn and broken, and the
assessment of that equipment is ongoing. In 2003, we had approximately
2,000 marines in Iraq working to inspect, and where feasible, repair
equipment in order to bring it back up to an operational capability.
The equipment for back load is operationally capable, i.e., able to
shoot, move, and communicate. The equipment used to support the
reconstitution of the Maritime Prepositioning Force losses was pulled
from assets left behind in the CONUS by deploying units, Norway Air-
Landed Marine Expeditionary Brigade (NALMEB) assets, and from global
war Reserve stocks. It will take time to return the Maritime
Prepositioning Force program to pre-Operation Iraqi Freedom employment
capability, and the use of Maritime Prepositioning Squadron assets in
support of Operation Iraqi Freedom II may extend reconstitution. One
squadron is essentially complete and ready to respond to any
contingency. Several ships in the other two squadrons had completed
reconstitution, but those ships have since been used to support the
Marine forces deploying for Operation Iraqi Freedom II. The current
schedule has one Maritime Prepositioning Squadron completing its
scheduled maintenance cycle in April 2005, and the second squadron
concluding its scheduled maintenance cycle in April 2006. The time it
will take until we have all three squadrons back up will be a function
of additional equipment requirements in support of Operation Iraqi
Freedom II, Corps-wide equipment readiness, and the condition of the
equipment that returns from Operation Iraqi Freedom II. In any case,
reconstitution of our forces and Maritime Prepositioning Squadrons will
be a challenge for at least a couple more years.
We have used assets from the NALMEB Prepositioning Program in the
reconstitution of our Maritime Prepositioning Ships Squadrons, and
expect to tap further into the assets stored there as we progress in
the overall Maritime Prepositioning Force reconstitution as well as in
support of Operation Iraqi Freedom II. Norway continues to demonstrate
its role as a critical and valuable ally to the U.S. through their
tremendous support regarding use of our geographically prepositioned
assets in their nation. Specifically, their forces have affected
several equipment draws, provided local security and in-country
transportation for those assets, and executed the loading of that
equipment onto military sealift command (MSC) shipping in support of
our overall Operation Iraqi Freedom requirements.

Depot Maintenance
Returning our operating and Maritime Prepositioning Force equipment
to full mission capabilities is one of our highest priorities, and that
priority is reflected in the fiscal year 2004 supplemental requests for
depot maintenance funding. However, we have constrained our request for
equipment throughput at our two Marine Corps depots in order to
preclude a significant investment in new facilities or production line
tooling.
The single greatest constraint on the ability of the Marine Corps
to execute depot maintenance funds in the near term (1-2 years) is
asset availability. Asset availability describes the ability to
initiate the maintenance process by designating a particular asset as
available for induction and the transportation of that asset to a depot
maintenance activity.
Marine Corps ground equipment assets are found in one of two
primary locations' with the operating forces, or in a preposition
location (afloat or ashore). The current operational tempo and our
requirement to rapidly reconstitute the Maritime Prepositioning Force
make the scheduling of assets for depot maintenance problematic. The
Marine Corps chose to strike a balance between the need to have a
Maritime Prepositioning Ship and its associated equipment available to
the combatant commander and the need to conduct depot level
maintenance. This balance is reflected in the planning of Maritime
Prepositioning Ship Maintenance Cycle (MMC) 8. MMC 8 began in early
2004. It is a 36-month cycle that will systematically rotate the fleet
of Maritime Prepositioning Ships through the Blount Island facility to
accomplish the necessary maintenance activities (including depot
maintenance), which may have been deferred.
We will continue to evaluate options to accelerate our depot
maintenance throughput in order to return mission essential equipment
to the operating forces as expeditiously as possible.

INFRASTRUCTURE

Marine Corps bases, facilities, training areas, ranges,
laboratories, buildings, and Navy hospitals provide the essential
framework for ensuring our force readiness at home and overseas. Marine
Corps infrastructure consists of 15 major bases and stations in the
United States and Japan. We continue to implement programs that
maintain and improve our infrastructure while using only those
resources that are absolutely necessary to accomplishing our goals. The
Marine Corps' Long-range Infrastructure Vision, Installations 2020
(I2020), provides a roadmap for the future of this critical support
element of our warfighting capability. One of the subjects that I2020
deals with is encroachment control.

Encroachment Control
The Marine Corps strives to be a good steward of the resources
entrusted to it. We are grateful to Congress for providing a tool to
manage incompatible developments in close proximity of military-use
lands. Monitoring, evaluating, and responding to encroachment is
critical to ensuring bases and ranges are available to support mission
readiness now and into the future. Many Marine Corps installations were
constructed 60 or more years ago in then-rural areas. Some of these
areas are now urban in nature due to regional development. The result
is encroachment and readiness challenges for the Marine Corps. We are
working with Federal, state, and local governments, to provide ``win-
win'' solutions to encroachment pressures to ensure compatible land use
which will not degrade mission readiness. Several potential partnership
acquisitions are in the conceptual phase at four installations: Marine
Corps Base Camp Lejeune, Marine Corps Air Station Beaufort, Marine
Corps Mountain Warfare Training Center Bridgeport, and Marine Corps
Base Camp Pendleton. Marine Corps Base Camp Lejeune, Marine Corps Air
Station Beaufort, and Marine Corps Base Camp Pendleton have established
conservation forums as a framework to address military requirements,
and to collaborate with Federal, state, local, and private entities in
the region to achieve mutual goals and objectives in compatible land
use plans. Other installations are also considering the need to
establish conservation forums, such as Marine Corps Base Hawaii, Marine
Corps Air station Yuma, Marine Corps Air Ground Task Force Training
Center Twentynine Palms, and Marine Corps Base Quantico. In addition,
an encroachment mitigation plan will be developed to monitor and
contain internal and external development threats to Blount Island's
long-term mission capability. These initiatives provide the opportunity
to develop a long-term vision for our installations for maintaining
training readiness.
Urban encroachment and environmental issues impact our ability to
maintain an acceptable level of access to valuable training areas, and
test ranges. Access restrictions have affected testing and the training
of our forces, sacrificing rigor and realism. This trend has stabilized
as a result of the previous 2 years' legislative efforts. The Marine
Corps supports the Resource Conservation and Recovery Act and the
Comprehensive Environmental Response, Compensation, and Liability Act
provisions that seek to codify prevailing regulatory policies and
practices of EPA and the states regarding munitions on operational
ranges; and protect us from negative judicial decisions that could
drastically undermine readiness.

Blount Island Facility
The Marine Corps will complete the acquisition of the Blount Island
facility in Jacksonville, Florida, in 2004. Upon ownership transfer to
the Marine Corps, Blount Island Command becomes responsible for the
stewardship of the land, buildings, and environment. To ensure a smooth
transition, efforts are in progress to establish facility management
processes for base operating support and services, capital
improvements, facilities sustainment and restoration, and antiterrorism
force protection.
The acquisition of the Blount Island facility in Jacksonville,
Florida, is critical to our Nation and to our Corps' warfighting
capabilities. Blount Island's peacetime mission is to support the
Maritime Prepositioning Force. Its wartime capability to support
massive logistics sustainment from the continental United States gives
it strategic significance. The Blount Island facility has a vital role
in the National Military Strategy as the site for maintenance
operations of the Maritime Prepositioning Force. The Marine Corps
thanks Congress for your role in supporting this acquisition project.

SAFETY

Safety programs are vital to force protection and operational
readiness. Marine leaders understand the importance of leadership,
persistence, and accountability in the effort to reduce mishaps and
accidents. The fiscal year 2003 off duty and operational mishap rates
were driven upward by the mishaps that occurred during and post
Operation Iraqi Freedom, while the aviation mishap rate decreased. To
meet the Secretary of Defense's challenge to all Services to reduce
mishaps by 50 percent in 2 years, the Marine Corps is focusing on
initiatives that deal particularly with the development of strategies
and specific interventions to preclude mishaps. The Marine Corps is an
active participant of the Defense Safety Oversight Committee. Our
leadership at every level understands the challenge, and we are
actively involved in the effort to safeguard our most precious assets--
marines and sailors.

OPERATIONAL READINESS OUTLOOK--NEAR TERM

We are preparing our marines and equipment for continued operations
in Iraq. We are hardening about 3,000 vehicles, including both large
vehicles and the smaller high-mobility multipurpose wheeled vehicles
(HMMWVs), against small arms, fragmentation, and improvised explosive
devices. We have enough body armor for every single marine, not only in
Iraq, but also in Afghanistan, to have sufficient protection. Working
with the Army, we are developing technical means to detect and defeat
improvised explosive devices. In our operation Iraqi Freedom II pre-
deployment training, we have sent our maneuver battalions through an
extensive 1-week course in southern California. All of our aircrew went
through a 2-week course in Yuma, Arizona, geared toward tactics and
survivability in the current operating environment in Iraq, including
convoy escort and manportable (MANPAD) surface-to-air missile
countermeasures and avoidance training. Each of our aircraft deploying
for Operation Iraqi Freedom are undergoing modification to install the
most modern aircraft survivability equipment (ASE) to mitigate their
susceptibility to the MANPAD threat. All deploying combat support and
combat service support marines have completed an extensive combat
training course, ensuring that we adhere to our fundamental tenet,
``Every marine a rifleman.''
Your marines deploying for operation Iraqi Freedom II will deploy
in two rotations of 7 months each. This rotation policy will result in
the least disruption to the long-term health of the Marine Corps. We
believe that this rotation policy is our best course to minimize stop-
loss/stop-move orders, interruptions in recruit training, ensure career
progression and development, professional military education, and to
allow flexible force applications for other deployment requirements.
The first force rotation, from March until September 2004, will be
composed of approximately 25,000 combat-equipped marines, including
almost 3,000 Reserve component marines. A second force rotation, from
September 2004 to March 2005, of like size and composition, will
overlap the first and ensure a smooth and stable transition.
Our single greatest concern as we look beyond Operation Iraqi
Freedom II is setting the force for subsequent training and operations.
When we refer to setting the force, we are addressing our ongoing
efforts to maintain the combat readiness of your Marine Corps. In our
preparation for current global operations, OPTEMPO, PERSTEMPO, and the
maintenance, repair, or replacement of equipment are our focus; but as
we set the force, we also have modernization and transformation in
mind.

MODERNIZATION AND TRANSFORMATION

Achieving our vision for the future of the Marine Corps while
maintaining near-term readiness will require the upgrade and
modernization of current systems until they can be replaced, while we
carry out key modernization and transformational programs. Our top
acquisition priorities, such as the MV-22 Osprey, the KC-130J, the
Expeditionary Fighting Vehicle, the Short Take Off Vertical Landing
Joint Strike Fighter, the Lightweight 155mm Howitzer, the High Mobility
Artillery Rocket System, and the CH-53X and UH-1Y/AH-1Z are the
cornerstone of the Marine Corps future capabilities. Initiatives like
the family of Navy and Marine Corps Mine Countermeasures systems,
concepts such as Tactical Air Integration, Logistics Modernization and
Command and Control, and improvements in Intelligence and Information
Operations are equally essential to our transformation effort, and we
are exploring technology and processes that facilitate our
transformation.
Most important of all to our future readiness are our Sea Power 21
initiatives in partnership with the Navy. We hold a deep and abiding
conviction that Sea Basing initiatives hold the greatest promise for
transforming your Marine Corps-Navy team into a more ready, flexible,
and responsive force--able to project sustainable power across the full
spectrum of operational capabilities anywhere in the world. More than
just an alternative to current capabilities, operations conducted from
a sea base may well become the preferred method for national crisis
response in the 21st century. Naval forces will be strategically and
operationally agile, projecting power from a fully networked sea base
while operating within the security derived from the Navy's command of
the sea. Sea Basing will provide national decisionmakers with
unprecedented versatility, because naval forces can exploit the freedom
of the high seas as maneuver space, relatively unconstrained by
political, geographic, or diplomatic restrictions. Navy and Marine
Corps warfighting capabilities, thoroughly integrated across all sea-
based systems and assets, will provide our Nation and regional
combatant commanders the combat ready forces necessary to fight and win
in the conflicts of the 21st century.
Several new ship classes are coming on line within the next few
years that are important to the readiness of the Navy and Marine Corps
team. The operational capability and flexibility of the naval
expeditionary fleet will be significantly enhanced with the fiscal year
2005 delivery of U.S.S. San Antonio, the first of 12 new landing
assault ships with advanced characteristics for amphibious warships.
LHA(R) concept designs are being evaluated within the context of Joint
Sea Basing and power projection. This ship will be the centerpiece of
the Expeditionary Strike Group, a contributor to the Expeditionary
Strike Force, and will carry expeditionary warfare through the middle
of this century. LHA(R) will greatly enhance command and control
capabilities and at sea training for embarked forces. The resulting
design is planned to provide a transformational capability that is
interoperable with future amphibious and Maritime Preposition Force
ships, high-speed vessels, and advanced rotorcraft like the MV-22 and
CH-53X, and the Joint Strike Fighter. The Littoral Combat Ship will be
a networked, agile, mission focused, stealthy surface combatant with
capabilities optimized for responsiveness to threats in the littorals.
This year, the Marine Corps continues to refine plans for the
Marine Expeditionary Brigade of 2015, in concert with our concept for
sea-based operations. Similarly, the analysis of alternatives for our
Maritime Prepositioning Force (Future), a critical component of Sea
Basing, will provide valid choices for achieving Sea Basing
capabilities. These initiatives will complement, rather than replace,
the amphibious lift and forcible entry capacity of the LHA(R), LPD-17,
and LHD, and will provide the Nation a deployment and employment
capability unmatched in the modern world.

CONCLUSION

In conclusion, I would like to again thank the members of the
committee for their continuing support of the Marine Corps, and for the
opportunity to discuss our readiness issues. The young men and women of
your Corps are doing an exceptional job in Operations Enduring Freedom
and Iraqi Freedom. Their accomplishments are a direct reflection of
your continued support and commitment to maintaining our Nation's
expeditionary warfighting capability. We go forward with confidence
because marines have the best training and equipment in the world,
thanks to the support of this committee, and the Nation we proudly
serve.

Senator Ensign [presiding]. Thank you, General. I
apologize, earlier, for mispronouncing your name. I think I
said Holy; I meant Huly. People mispronounce mine all the time,
by the way.
We're going to start, if the committee doesn't mind,
Senator McCain has a very limited time frame, so I'm going to
start the questioning with Senator McCain, and we'll have a
round of questioning based on the early-bird rule, other than
that, we'll have rounds of 6-minute questioning.
Senator McCain. Thank you very much, Mr. Chairman.
General Moseley, you testified before the House Armed
Services Committee, and I quote from your statement--you said,
``The options of contracting is not operationally viable. The
option of re-engining old 707s gives us a re-engined 50-year-
old Eisenhower-era tanker, not viable, from my perspective. Or
the ability to go look at something out there that is outside
the boundaries of a 767 airplane, so it''--it goes on to say--
``it takes a 767-class airplane.''
General, are you aware of the DOD guidance issued on
February 24, 2004, concerning the analysis of alternatives?
General Moseley. Senator, thank you for the question. Yes,
I am aware of that.
Senator McCain. Are you aware of what the options are, as
described in that----
General Moseley. Yes, Senator----
Senator McCain.--direction? You are.
General Moseley.--I'm fully aware of that.
Senator McCain. It's totally, then, in contradiction to
your statement before the House Armed Services Committee,
because it says ``options.'' It lists the options, ``retain,
re-engine, and make required modifications to convert remaining
KC-135Es to KC-135Rs, retire remaining KC-135Es, purchase a
commercial derivative aircraft.'' It goes on and lists those
aircraft, ``purchase military derivative aircraft, minimum
consider C-130J and C-17''--in other words, the Secretary of
Defense has ordered an analysis of alternatives to examine a
number of options, which you preclude in your statement before
the House Armed Services Committee.
General Moseley. Sir, could I address that for you?
Senator McCain. Yes.
General Moseley. Sir, I understand the analysis of
alternatives, and I understand and fully support the decision
by Secretary Wolfowitz. I was asked my personal opinion in the
testimony, and responded as the commander of OEF and OIF, that,
as we look through this, the operational feasible nature of a
767-class airplane will play out, in my opinion. But the
analysis of alternatives will be the deciding factor in that.
Senator McCain. General, I read your statement here.
There's no request for your personal opinion. This request was,
``That's the last question, I thank you folks for''--et cetera,
et cetera. He didn't ask for your personal opinion, General.
You volunteered it.
General Moseley. Sir, I took that as a request for my
personal opinion, as we were talking about operational
necessities of the new tanker.
Senator McCain. I've been on this committee for 18 years,
General, and I've never heard of someone volunteering their
personal opinion. You come over here representing the
administration, unless your personal opinion is asked for. Your
personal opinion was not asked for in that hearing.
But, more importantly, you state that the maintenance is
low, and that you're having more difficulty--let's see--you
state in your statement here before the committee--here's where
it is--before this committee, that, ``36 percent of the KC-135
fleet was not available, including those in depot and those
unit-possessed, but not mission-capable.'' That's according to
your statement to this committee. The B-1 has a higher--a lower
availability rate than the KC-135, as does the B-2?
General Moseley. Yes, sir, I do know that. But the----
Senator McCain. Do you know, also, that--go ahead. Please
respond.
General Moseley. But the KC-135 fleet is a key enabler for
everything that we do with global strike and global mobility.
Senator, we have to have the tankers to be able to provide
support for the Navy, for the Marines, and for global strike
and mobility in any of these theaters.
Senator McCain. Yet the availability is less than the B-1
and B-2 bomber. Also, the information that we received from the
United States Air Force--and I'd be glad to give you that--
it's, ``Headquarters U.S. Air Force Integrity, Fiscal Year
2003--quick look, aircraft performance trend''--according to
this, the availability rates are up from 2002 to 2003. Now,
maybe they've gone down between 2003/2004, but the availability
went up from the year 2003. Yet you state that the mission-
capable rates continue trending downward.
General Moseley. Sir, they still don't meet air-mobility
commands' established----
Senator McCain. But the rates are not downward; they're
upward.
General Moseley. Sir, we still could not deploy the KC-
135E----
Senator McCain. General, are the trends downward or upward?
General Moseley. Sir, they are still not leading air-
mobility commands' standard----
Senator McCain. I'd like an answer to the question,
General. Are the trends downward or upward, as far as
availability is concerned?
General Moseley. I would like to provide for the record
each fiscal year in each of the----
[The information referred to follows:]

Aircraft Mission Capable (MC) rates are defined as the percentage
of a fleet that is unit possessed (not depot possessed) and capable of
performing at least one assigned mission. The aircraft availability
rate is the percentage of a fleet's Total Active Inventory (TAI) (unit
and depot possessed) that is MC.
The KC-135 fleet MC rates are trending downward and decreased by
10.8 percent between 1991 and 2004. In fiscal year 2002, KC-135 MC
rates were 79.6; in fiscal year 2003, MC rates were 78.9; to date in
fiscal year 2004 MC rates are 76.9. The prime drivers leading to
decreased MC rates for KC-135s include scheduled inspections and fuels
systems repairs.
Both the B-1 and B-2 have shown improving MC rates. In fiscal year
2003, the B-1's 70.7 MC rate was the fleet's best MC rate ever
achieved. The B-2's MC rate of 43.9 was also its best MC rate recorded.
The improvements for both bomber fleets are primarily a result of
improved spares funding since fiscal year 1999.
Although the B-1 and B-2 MC rates are the ``best ever'' they are
lower than the KC-135 rates for a number of reasons. The KC-135 fleet
is a military derivative of the commercial Boeing 707; a relatively
simple design without the sophisticated combat systems of the B-1 or B-
2 aircraft. On the other hand, the B-1 and B-2 are military-specific
integrated combat weapon systems, employing an array of highly
sophisticated and often cutting-edge technologies. These additional
systems must all be functioning properly for the aircraft to be
considered MC. Therefore, there are more systems on the B-1 and B-2
aircraft (fire control radar, weapons delivery, low observables) that
can cause a lower availability rate than on the KC-135.
The long-term availability rates for KC-135 have trended downward
and decreased by 9.4 percent between 1991 and 2004. However, in the
short term, the KC-135 availability rate improved from a low of 33.6 in
fiscal year 2001 to 62.9 in fiscal year 2004, primarily as a result of
depot process improvements leading to fewer depot possessed aircraft.
Both the B-1 and B-2 availability rates are also trending upward with
fiscal year 2004 availability rates of 57 and 33.7 respectively. The
bomber improvements are primarily a result of increasing MC rates.

Senator McCain. Sir, I have that information right here----
General Moseley. Sir, I----
Senator McCain.--presented by the United States Air Force,
which is in contradiction to your statement.
General Moseley. Sir, I'm not familiar with what you have
there, but I would be happy to look at it.
Senator McCain. I'm getting very weary of the United States
Air Force coming over here, giving us doctored information,
making statements, which are contradicted by their own data,
and particularly comments that you made. You weren't asked for
your personal opinion before the House Armed Services Committee
about it, ``the 767 being the only option.'' You're supposed to
be representing the Department of Defense, the United States
Air Force. You are not doing that in your statement. Certainly
your statement before the House Armed Services Committee is in
direct contradiction to the direction given by the Under
Secretary of Defense.
I don't have any more questions, Mr. Chairman.
I'm getting very weary of it, General. A lot of us are.
You're harming the credibility of the United States Air Force
rather dramatically, in my eyes, and that of and members of the
committee and the American people.
Thank you, Mr. Chairman.
Senator Ensign. Care to respond?
General Moseley. No.
Senator Ensign. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
I want to raise an issue to all of you that I believe will
pose a continuing challenge to readiness, and get your thoughts
on the best ways to address it. Each of your budgets includes
significant increases to pay for growth in contract costs
beyond normal inflation. At the same time, DOD continues to set
policies and issue guidance that suggests increased reliance on
contractor support as you seek to return service members to
jobs more closely aligned with their military specialities.
While I am completely empathetic with that goal, my concern is
that we will find ourselves in a situation where we are forced
to pay higher and higher contract costs to keep the military
functioning, and that these must-pay bills will crowd out our
funding for training, spare parts, and possibly investment in
transformation accounts.
My question to all of you on this issue is--and on this
problem--what do you see as possible alternatives to help
mitigate contract-cost growth?
General Casey.
General Casey. A tough question there, Senator. As you
acknowledge, the trend is toward contractors, and we have
already talked, in the chairman's opening statement, about
military-to-civilian conversions, and to moving more toward
that to free up our military members to do military tasks. In
all candor, Senator, I need to think on that one a little bit
and get back to you with an answer.
Senator Akaka. That's fine.
[The information referred to follows:]

To a significant extent, base support contract cost growth is
inevitable so long as our missions and commitments continue to grow,
while the number of military personnel available to perform base
support missions continues to shrink because of greater training and
deployment requirements. If we increase the scope of most any contract,
we must expect to pay for the increase. Performance of base support
services by military and government civilian personnel is in many cases
more affordable, or at least more predictable, because the costs and
resources necessary to pay for such services are determined by law, and
grow relatively slowly. Costs for acquisition of contractor support, on
the other hand, are primarily driven by competition, or, rather, in
many cases, the lack of competition. For a variety of reasons, military
base support work is oftentimes not as attractive as it might be to the
broadest spectrum of contractors, which might compete for our work and
thereby yield lower costs. We will therefore continue our efforts to
make this aspect of government business more appealing to our
contractor community.
We can and will continue our efforts to promote competition through
encouraging broader small business participation in services
contracting. We must make use of the most successful contract types
such as performance-based contracts that better distribute risk between
the government and the contractor, and reward efficient and effective
performance. When appropriate, using fixed price contracts also reduces
cost growth over the term of the contract. We might pay a little more
initially depending on the competitive marketplace, but we will know in
the fixed price environment what we are obligated to pay for a
specified product or service, and can better plan and budget for those
costs. These solutions only work when the required goods and services
can be described and specified in enough detail and with enough
certainty that contractors can compete and where they can determine
that assumption of all cost risks is acceptable.
Imperative in this business is the need to change to what works.
Evolving from the days of the low bid contracts to the best value, from
time and materials to fixed price, and from cost plus to payment for
performance must happen on an accelerated pace such that we can
maximize our purchasing power.
In addition, we must change our working relationship with our
contractors. The new OMB Circular A-76 fundamentally changed the
process for comparing government versus contractor performance. When
fully implemented, it should better restrain cost growth by, among
other things applying Federal Acquisition Regulation-type procedures to
government as well as private competitors. By leveling this playing
field, we hop to attract more private competitors to these
procurements.

General Casey. Good question.
Senator Akaka. Any other?
Admiral Mullen. Senator Akaka, there are lots of different
kinds of contractors.
Senator Akaka. Yes.
Admiral Mullen. Are you speaking of contractors with whom
we are engaged, in terms of purchasing equipment, our weapons
systems, or other kinds of contractor support?
Senator Akaka. Yes, these would be contracting such as on
base supports.
Admiral Mullen. I, like my compatriot here, would like to
get back to you with a more detailed answer.
[The information referred to follows:]

Traditionally, many service contracts such as base support
contracts were cost reimbursable. Since the major cost driver of these
contracts was labor, and labor rates generally increase from year to
year, the costs associated with performance also increased. As a
result, it was necessary to budget additional dollars for the same
services. As a consequence, the contractor would continue to perform
the services in the same way, from year to year, often in accordance
with Government specifications, and with no improvements in efficiency.
Based on recent legislation, the Departments of Defense and Navy
have established clear guidance mandating the use of performance based
service contracting and the training of those who originate
requirements for contracts to develop the necessary performance work
statements. In performance based contracts, the Government requirement
is laid out not as a specification, but as a statement of desired
outcomes. Based on the desired outcomes, clearly defined metrics are
used to determine whether or not the contractor is achieving the
desired level of service. The metrics are in turn tied to contract
incentives: the service contractor earns more when desired outcomes are
achieved, less when they are not. Incentives can also be tied to
efficiencies and contract price reductions. For example, in a
competitive environment, a solicitation could require a 5-percent price
reduction during each year of the contract. Or, a solicitation might
request the contractor to propose price reduction targets as a factor
for consideration during source selection. Following award, contractor
compensation is tied to achievement of price reduction goals.
In particular, Commander, Naval Installations is aggressively
implementing performance based service contraction including the use of
contractor incentives as an important tool to ensure that service
contract costs do not squeeze out spending for training, spare parts,
and investment.

Admiral Mullen. But I will say that one of the--I mentioned
in my opening statement, we have, in particular, in base
support, and, I think we've put in place, this last year,
starting 1 October, the Commander of Navy Installations. That
is meant to be an enterprise-wide effort to much more clearly
understand the cost of doing business, including those who are
contracted to do whatever they might do on bases, or wherever.
From a headquarters perspective, we are challenged with the
tools, or the lack of financial tools, in order to track that
very carefully. We're challenged, in terms of being able to see
it across the enterprise. So it's really through this standup,
in particular, in that area, that we've taken that on. In fact,
in this budget, in 2005, we've actually reduced some of the
dollars that we would normally allot to that requirement, as a
risk mitigator, with the challenge, internally to the Navy, to
go out and make sure we generate those savings in contracts to
which you refer. So there's a considered effort to make that
happen. It's not just in base support--we're doing that across
the enterprise--but in particular in area that Commander of
Navy Installations has that charge.
Senator Akaka. Thank you.
General Moseley.
General Moseley. Senator Akaka, I would only add that the
other piece of this, for us, is we attempt to return
warfighters to warfighting billets. There are some
opportunities to reach out into the contracting world in some
of our base support and some of our home-station base support.
We are looking at that. We share the concern that you have
about under--stressing the cost of this, as well as being able
to surge that piece of the workforce, may be a bit of a
challenge.
Please let us get back to you with a more detailed
breakdown of the total force and where that lies.
[The information referred to follows:]

In response to the National Defense Authorization Act for Fiscal
Year 2002 (PL 107-107 Section 801) the Air Force instituted the
Management and Oversight of Acquisition of Services Process to increase
leadership's awareness of issues with services contracts to a level
similar to that we have in place to oversee major weapons systems
acquisitions. The process implements two major initiatives. The first
deals with how we acquire required services and mandates that requiring
activities and acquisition officials ensure services requirements are
performance based, contain incentives to ensure potential contractors
maximize effectiveness and efficiency, and set forth metrics against
which performance will be tracked. The second initiative requires all
services contracts with a total planned value in excess of the
simplified acquisition threshold ($100,000) to be reviewed annually by
a designated official. The intent is to ensure leadership, at the
appropriate level, is aware of any issues such as cost growth, schedule
slips, or problems with performance, and appropriate action is
addressed. By delegation from the Assistant Secretary of the Air Force
for Acquisition, the Air Force Program Executive Officer for Combat and
Mission Support is responsible for this oversight for any services
acquisition in excess of $100 million and is the Air Force-designated
official to ensure all commands have an effective management and
oversight process in place.
We are also working diligently to ensure we fully identify the
requirements and cost baselines and understand the impact that outside
influences, such as Department of Labor Wage Determinations and
Collective Bargaining Agreements, have on services contracts cost
growth. As the Air Force continues to identify positions that have
military personnel performing commercially available functions, we will
maximize the use of competition to ensure we acquire the most
economically advantageous business arrangements to assume those duties.

General Moseley. But we are trying to use some of that as
tools to return warfighting uniformed members into those
stressed Air Force Specialty Codes (AFSCs) out there in the
expeditionary Air Force.
Senator Akaka. General Huly.
General Huly. Senator Akaka, a great question. As a matter
of fact, the Commandant had a good sit-down with us about 2
weeks ago, and we addressed this very issue.
To us, in the Marine Corps, it's a matter of, how many
marines can we return to the foxhole? That's what it's all
about. We have had some great successes already, in some of the
areas--in contracting, in returning marines to the foxhole, and
to be able to improve their training and their commitment to
the job that they came in the Marine Corps to actually perform,
while simultaneously improving the service that they were in
before. A good example are our mess halls. For instance, we
have contracted the preparation and serving of meals. In some
instances, we're getting a lot better nourishment out of that.
So there's a great deal for improvement there, and we're
starting to realize some of it.
Not all of our contracting has proven to work out in the
long run, and we are taking a good, hard look at all of that,
just to see where it does make sense. We're trying to limit the
number of marines on active duty that we have. We want to hold
our current strength, because the largest expense that we have
is our manpower costs.
Senator Akaka. The reason I asked that question was, at a
hearing that we had with the combatant commanders, General
Abizaid and General Jones, it was mentioned that about $800
million had already been spent on contracting, and that
surprised me, to hear that amount. So that's the reason for my
question.
Mr. Chairman, thank you.
Senator Ensign. Thank you.
I'm going to allow Senator Inhofe to go, and then I'll take
my turn in the next round of questions.
Senator Inhofe. Mr. Chairman, I appreciate that very much.
Let me, real quickly, just cover four things. General Huly,
it's very rare that I would ever criticize the Marines. You're
optimistic. You're upbeat. But I want to caution you about--
when you're talking about, ``Yes, we do have this superior
manpower, but we don't always have superior equipment''--and I
think you said that a couple of times in your opening
statement--I would suggest to you that the Paladin is something
that you have used in the Marines, as well as the Army, and
it's an artillery piece that is--there are five countries,
including South Africa, that make a better one than--in terms
of rapid fire and all the characteristics you look for in
artillery. So I'd always be a little bit cautious, because
there are people, none of whom are in this room right now, but
those members who really don't believe that we need to continue
modernization, use statements that, ``We already have the very
best of everything,'' in opposition to modernization programs.
I thought I'd just mention that.
General Moseley, I had mentioned something when we had the
chiefs in, I think last week or the week before, in defense of
Tinker Air Force Base, because it had been alleged by several
individuals, but primarily Senator McCain, that when two
staffers went out there, that things were--that they doctored
up some of the exhibits that were used, and all that. I would
suggest in that--in fact, they're both here in the room with us
right now--in defense of Tinker, it could very well have been--
and I think we all understand this--that they were talking
about Tinker's experience. When you talk about the corrosion
incidence in bulkhead fittings, yeah, it's 5 percent. But
that's Tinker. While the overall is 11.5 percent. But if you
skip on down to fuselage, if they intentionally let point
number five off to try to deceive somebody, they would not have
left it off of the fuselage, because, in that case, the
occurrence rate is 22 percent, as opposed to 18 percent
service-wide. I just wanted to make that comment, that I
thought that they were acting appropriately out there.
For General Huly and Admiral Mullen, you know that we
fought and lost the battle of Vieques. We tried to keep it
open. We tried to keep that integrated training open. It's the
only place where we could do the things that had to be done. I
spent 2\1/2\ years of my life on that, and I don't like to
lose, but I did lose on that one.
I'd like to know, in terms of readiness--that is what this
hearing's all about, hearing from each of you--have we
adequately replaced the live-fire capability that we enjoyed in
the integrated training that we enjoyed on the Island of
Vieques?
Admiral Mullen, why don't you start?
Admiral Mullen. Yes, sir, Senator.
I'd say that we've adequately replaced it at this point.
When we--or, to answer that question, when we moved out of
there, Admiral Natter headed up a recommendation to the CNO and
the Secretary, but particularly to the CNO, in his training
hat, as a way ahead in what we call the ``training resource
track,'' to move forward. That was an investment over several
years to figure out, with the loss of that capability, how we
were going to train in the future. We're not--we're clearly not
there yet. We're moving in that----
Senator Inhofe. Well, I think what you're saying is, if we
change our method of training, that perhaps we can go into
other alternatives and maybe do the same thing at three or four
different sites that we used to do at one site. My feeling has
always been that the one site is better, in terms of the
readiness for the troops.
Do you have any comments on that, General Huly?
General Huly. Yes, sir. One site provides us the
opportunity to practice our combined arms--surface fires,
artillery and mortars, dropping aircraft ordnance, and, if
possible, naval gunfire support. We lost that when we lost
Vieques. We're attempting to replace that at Eglin Air Force
Base. We have conducted one training exercise there so far. We
have to work with the United States Air Force. That's an Air
Force range, and it's an experimental or a test range right
now, and that's different than a training range. We're working
through that cultural difference. It also has some significant
costs that have been associated with it to get us on that range
to be able to use----
Senator Inhofe. Yeah, and also there are a lot of airspace
problems that you have. You're going through civilian airspace,
so you have requirements that you would not have had elsewhere.
I remember so well, Admiral Mullen, that, in talking to
some of your sailors and some of the aviators, that you can
have the very best quarterback, and the very best end, and the
very best center, and the very best running back, all this, but
if they've never played together, you lose the game. That was
my feeling, and their analogy, or metaphor, that they used to
try to explain that we are having a problem.
General Casey, something I've been active in, I like the
idea that--General Jones, I think, has been the one kind of
heading this up--about looking at the problems we're having in
training in Western Europe, about the idea that we have some
40,000 families that are very, very expensive. All of the costs
that go with that make it very difficult. Perhaps a better idea
might be, instead of having 2- or 3-year deployments would be
to have 2- or 3-month deployments, go out to Eastern Europe. I
just came back from Romania, Bulgaria, Ukraine, places where
they really want us. They don't have the environmental
encroachment problems there. It just makes sense to me. It's a
lot cheaper way of doing it. Do you have any comments about
that?
General Casey. We'd agree, Senator. I actually commanded
the 1st Armored Division over in Germany, and had the
opportunity to go to some of those countries and look at the
training areas. We are actively working with General Jones to
look at training areas and develop some rotational plans to put
units in there for both presence and training.
Senator Inhofe. Well, I appreciate that very much.
Thank you, Mr. Chairman, for letting me go. My time is
expired.
Senator Ensign. Thank you.
I want to ask just a couple of quick questions here. Not
necessarily quick, but as far as the answers are concerned. We
know that we are resetting, reconstituting, right now, our
forces coming back from both of the operations, and there's a
lot involved--we all know that there's a lot involved in that.
We're seeing some of the costs in this year's budget.
One of the questions that I had in regard to that is, first
of all, just making sure that you all feel comfortable, and
adequate in what you're doing, and that you have adequate
funding; but the other is that--how the funding should be
allocated. In other words, we passed a $67 billion
supplemental, just the military part, last year. It would seem
to me that if we're trying to reflect--we have a ``peacetime''
budget and a wartime budget--it would seem to me that the part
of reconstituting is wartime, and that the costs should be
reflected in that and, if it isn't--in other words, if 100
percent of that is reflected, I'd like to hear from that--but
if it isn't, I think that that's something you all should
consider, into the future for next year's supplemental that you
send us up here, so we truly reflect the cost of the war versus
a peacetime budget, because if it's a war, then it's a one--
maybe a 1- or 2- or 3-year expenditure, or whatever it's going
to be; if it's something else, then it's building into the
baseline costs and budget for the military. Part of it, I
understand, is that it's been built up--or some of it is--
because you all are trying to get to the level that you should
have been; and, in years past, that had been--it had been too
low in the budget to be able to refit a lot on the maintenance,
on a lot of the equipment, was not where you wanted it to be,
and so you're kind of using this time to bring things up to
where you want to be, not to where it was before. So instead of
being where we were a few years ago, you want to be at the
level that you all feel that you need to be. So if I could just
have each one of you address that----
General Casey. Okay. As you mentioned, Senator, we are
working on the fiscal year 2004 base President's budget and
then supplemental. Right now, we believe that with that funding
we can accomplish what we need to accomplish in fiscal year
2004. However, some of the costs of resetting the force that
redeployed, and will redeploy in 2004, will obviously continue
off into 2005 and will become part of our 2005 supplemental
budget.
As I mentioned in my opening statement, the President's
budget covers our base plan, recapitalization, training
programs; it does not cover the war-related costs of
Afghanistan and Iraq, or the recovery costs, as you point out.
Those will be captured and will be rolled up in the 2005
supplemental as we develop these costs.
Senator Ensign. Just to further clarify, did your
reconstituting part, at least throughout this year, though, get
covered in the supplemental from last year?
General Casey. We were about----
Senator Ensign. Or are you going to be----
General Casey. Right. About $1.2 billion of what we
requested did not get funded, but we are executing--we are
funded for everything we can execute, in terms of depot-level
maintenance, in the 2004 supplemental, so those costs will roll
over into 2005.
Senator Ensign. Okay.
Admiral.
Admiral Mullen. Sir, when I testified over on the Hill last
fall--and I think this is true for all the Services--one of the
issues we addressed was the setting of the force, or the
resetting of the force, after the war. The Navy was fortunate,
in that throughout most of the end of last year, of 2003, we
were bringing our ships home, and we were doing that with the
thought of getting them reset as quickly as possible. The
target was mid-2004, and we're still basically on track.
Between the money that we had in 2003 and the supplementals
that we had there, the money that we have in the baseline
budget, plus the supplemental money that we received in 2004,
we're able to keep that target. I mentioned, in my opening
statement, we've also implemented this Fleet Response Plan,
which makes a much more ready force over a longer period of
time. So forces that come back, for instance, don't stand down
like they used right away.
One of the baselines that the Navy has to work on is--
Admiral Clark, since he's been CNO, in his first couple of
years here, he put $7 billion straight into readiness accounts,
and so that filled up magazines, spare-part bins, allowed us to
do depot and maintenance both on ships and aviation that really
brought us to a very high level that allowed us to perform as
the country called in both Afghanistan and Iraq.
So we clearly are--there are some shortfalls that we see.
There's about a half-a-billion-dollar shortfall in
transportation costs, moving the marines to Iraq for this
unanticipated pulse, if you will. So we're working with DOD
right now to see how that will be resolved. But right now we're
in pretty good shape, and we're on target for resetting, as we
had said before.
Senator Ensign. Okay.
General Moseley.
General Moseley. Mr. Chairman, I would say as we execute
2004, the funding that OSD provided was based on being able to
execute in this period, and we're okay with that. We can
execute what we have. We will have some shortfalls, and we're
mitigating that and working that, as you would expect us to,
either in the supplemental or in the resubmission, and we're
working those with OSD.
For 2005, I will tell you that we are able to stabilize
some of our contingency operations for the 2005 submission.
Basically, Operation Noble Eagle, since that has manifested
itself over time with the number of locations and the number of
aircraft, that ONE is much easier for us to predict than
operations in Afghanistan or Iraq. So we've made a step forward
in the contingency tasking to stabilize Operation Noble Eagle,
and then we'll go forward with the rest of the contingency
business.
Senator Ensign. General Huly.
General Huly. Thank you, sir.
We've had some unforeseen commitments. In addition to OIF-1
this year, we have prepared for OIF-2 and some of the other
contingencies that we're currently facing, as well as OEF, that
we weren't originally planning for. I can tell you that right
now we're about $800 million shy, unfunded, of what we think
our commitments--our requirements are going to be this year. As
you would expect, we have shifted money around. The long-term
impact of that on our accounts is, it's going to come out of
our modernization efforts.
Senator Ensign. Okay.
Senator Nelson.
Senator Ben Nelson. Thank you, Mr. Chairman.
General Casey, I've been concerned about the rotation of
the troops and the reliance on the National Guard and Reserve
units, particularly in theater. We know this past January
marked the 30th anniversary of the all-volunteer force. We
know, from our own experience now, that we've never before, in
the history of this nation, relied so heavily on our Guard and
Reserve units for missions around the world. It's a great
challenge that the Army National Guard has overcome since the
days of the Gulf War, when, then, three Army Guard brigades,
intended to supplement the active-duty, were deemed unfit for
combat. Much has changed since then.
I understand that, by summer, National Guard and Reserve
troops will represent nearly 40 percent of the 105,000
projected U.S. military men and women to be in Iraq. It's an
amazing accomplishment, and the leadership and men and women
all need to take great pride in where they are today.
But, General Casey, in your opinion and that of your
commanders, do you believe that these National Guard and
Reserve troops know exactly what they're going to be up
against? Are they prepared for the commitment that they are
about to make, or, in some cases, are currently making?
General Casey. Senator, short answer is, yes, I do believe
they have been extremely well prepared, well equipped, and well
trained.
You mentioned the levels of the Guard and Reserve will
approach 40 percent of the force in theater. That is correct.
When this rotation of OIF-2, which is ongoing right now, when
those reservists and guardsmen get over there, we will have
mobilized about 50 percent of the Guard and Reserve since
September 11. We could not have done what we're doing without
them.
Senator Ben Nelson. As part of the transformation, we're
seeking to rely on the Guard and Reserve units with different
skill sets in the future so that we would be less likely to
have to over-rely on them as we, I think, by our own admission,
have had to in this theater. Is that accurate?
General Casey. Absolutely. I mentioned, in my opening
statement----
Senator Ben Nelson. Right.
General Casey.--about what we're doing to balance about
100,000 spaces across the Army, between the Guard and Reserve
and the Active Force, to put low-density, high-demand
capabilities into the Active Force so that we will not keep
going to the well here and calling up our Guard and Reserve
soldiers for specialized skills.
Senator Ben Nelson. Well, because of the differences
between active-duty troops and Guard and Reserve units, whereas
the Guard and Reserve units leave their families behind, as do
the active-duty troops, but they also leave their employers on
hold, their careers on hold, their education, in some case, all
these things that are left on hold put them in a very difficult
situation, because I think, in fact, 41 percent face pay
reductions while activated, versus what they would be if they
were at home. Based on this, I'm concerned about being able to
sustain--even with transformation and changing the reliance--
about the long-term impact on our Guard and Reserve units. I'm
getting to my question now.
The Army National Guard recruiting is funded at only 83
percent of the requirement. Apparently the Army cut the Army
National Guard recruiting budget by $18 million. The National
Guard says that that budget request doesn't adequately fund
recruiting to achieve its accession goals, and the Army
Reserves' budget was cut by $13.7 million. Are you concerned
that these cuts, these underfunding circumstances, will
negatively affect our ability to recruit Guard and Reserve
units in the future?
General Casey. Senator, they will obviously impact on that.
I will tell you that right now the Guard is retaining at a rate
of about 130 percent of what they expected they would. The
Reserve is well above 90 percent, in terms of attaining their
fiscal year 2004 goals.
That said, we are concerned, and we're watching this very
carefully through the spring here as the units return. We think
we have the right incentives in place, and we'll watch this
carefully. If we need more money to help them out, we'll make
sure that they get it.
Senator Ben Nelson. Will we take it from the Air Force? I
suspect General Moseley won't like that.
I'm a little concerned about how we're going to balance out
2004 and 2005--even before we look at a supplement that's
already been projected and predicted for this budgeting cycle.
It won't be part of this budget, because it never is; but it'll
be part of this budgeting cycle. Are we robbing Peter to pay
Paul? Are we robbing Peter to pay Peter? It's a loaded
question; you don't have to answer that. I just----[Laughter.]
General Casey. Thank you.
Senator Ben Nelson. I'm only trying to make point, not put
you on the spot, that we have to be certain that as we fully
fund the requirements of the combined units--Guard, Reserve,
and active duty units--that we not do something that will put
us in arrears in our goals to have a full-capacity Guard and
Reserve set of units with the right skill sets to do the job in
the future.
General Casey. I think, you may know, we have a very
aggressive program working closely with the Guard and with the
Reserve to reshape themselves to the modular configurations
that the active Army is going to. We feel very positive about
that, and I would be happy to come up and talk you through the
details of that at your convenience.
Senator Ben Nelson. I appreciate that, General. You've
always been very cooperative and very open and frank, and I
appreciate your response. Perhaps as this goes along, we might
want to sit down and talk about--make sure that we're not
making, in short-term considerations, long-term implications
that aren't good. Thank you.
Thank you, Mr. Chairman.
Senator Ensign. Senator Cornyn.
Senator Cornyn. Thank you, Mr. Chairman. Gentlemen, thank
you very much for being here.
I also--I want to take up on Senator Nelson's line of
questioning, with maybe a little bit different twist, and talk
about the impact of budgets on readiness, on deferred
acquisitions and deferred maintenance, and ask you to comment
on what seems to me to be a true proposition, but I'd be
interested in your comments. That is, a significant amount of
what the Department of Defense budget today is seeking to do is
to make up for lack of funding that the military--that the
Department of Defense received in the 1990s. I know there have
been various proposals over time to phase out, one I'm familiar
with, two Army light divisions back in the middle of 1995, on
top of some significant budget cuts through the Department of
Defense.
But my question really relates to more recent events, and
that is, a number of us are concerned, of course, with the
deficit, but we also realize we're a nation at war. I want to
make sure, and I think ultimately this Senate will make sure,
that the commander in chief's budget request for the Defense
Department is met, but we are having difficulty addressing that
this week as we debate the budget resolution.
Can you just comment, perhaps starting with General Casey
and then coming down the line, about if you do not receive--if
the Department of Defense does not receive what the President
has requested, in terms of funding for the Department of
Defense, what that means, in terms of your readiness, the need
to defer acquisitions, or possibly even defer maintenance?
General Casey, could you address that first, please?
General Casey. Yes, Senator, thank you very much.
As I mentioned in my opening statement, we have over
300,000 soldiers deployed worldwide, about 165,000 of those on
unaccompanied short tours, primarily in a CENTCOM area of
responsibility (AOR). So we are--our readiness challenges
really are resetting the folks that come back, preparing the
next rotation to go--and that is about 45 percent done--and
then going on with our continued recapitalization plans to
ensure that we deal with readiness for the future, as well as
just the present. We have laid that out fairly precisely. It's
not fully funded in all of the areas. So if we don't meet the
President's budget, I think our ability to continue to provide
trained and ready forces to combatant commanders for these
ongoing missions can't help but be affected.
Senator Cornyn. I might just supplement my question for
Admiral Mullen, and that is that I know that the proposed
budget resolution calls for, or projects, a $30 billion
supplement request, that, obviously, is not built into the
baseline, or intended to be, but just for current operations in
Iraq and Afghanistan. Does a projected supplemental request
address your needs, or is that better met, more appropriately
met, in your view, by your annual budget request?
Admiral Mullen. Senator, as far as we're able to anticipate
the 2005 needs, and that--both the size of it and the etches of
it are important unknowns at this point. But, from my point of
view, this administration has treated us exceptionally well
with respect to the supplemental requirements that come on top,
the unanticipated needs. In the case of the Navy, there is an
awful lot of deployment capability that resides within the
normal budget. So I talked--the impact of a reduction, even
this year, in accounts like the readiness accounts. We took an
awful lot of risk in setting up our readiness accounts this
year. We really are trying to put a lot of pressure on
ourselves to more efficiently execute those accounts and
understand them better, and that's been a real priority for
Admiral Clark. We now have this new surge construct. I talked
about the Fleet Response Plan, which gets us--and we're pretty
close to there, to six available shortly, with two follow-on
carrier battle groups, carrier striking groups. If we took a
big whack out of those accounts, we could go to four-two or
two-zero very quickly, in terms of available resource,
available combat resources, to meet the needs. What that means
from an operational commander's standpoint is, that while we
are focused heavily in Iraq and in that part of the world right
now, that there are other parts of the world where the
President could choose options that would include those
resources that we might very well be short of, based on the
kind of decrement that was laid on us if what you postulate is
possible occurred.
Senator Cornyn. General Moseley, would you care to comment?
General Moseley. Yes, Senator Cornyn. Let me agree with my
two colleagues, and add a bit of an Air Force perspective to
that.
At the peak of Operation Iraqi Freedom, we had eight
equivalents of our ten air expeditionary forces deployed. We
now have three deployed. We've come down from eight to three.
But our steady-state requirement, or our steady-state desire,
is for two. So we are still stressing the system while we're
trying to reconstitute and recapitalize.
We're working the challenges of resetting the people, which
gets us to the training, that gets us to the munitions, the
training munitions; it also gets us to the notion of refitting
the vehicles, things such as fuel bladders, tents, our
expeditionary combat support, et cetera. We are still in the
business of reconstituting. Some of that, I mentioned in my
opening statement, will even take us out to 2007. So any
serious degradation in the budget that allows us to
reconstitute and recapitalize would have impacts on us.
Senator Cornyn. General Huly.
General Huly. Yes, sir. The Marine Corps has an active
component of about 175,000 active-duty marines. Today, about
50,000 of them are forward-deployed, and that includes about
5,000 reservists, give or take a couple of hundred, one way or
the other. Our annual budget, peacetime, is about $16 billion.
We have not compiled all the costs for OIF and where we are
with Iraqi Freedom-2 right now, but probably somewhere in the
neighborhood of about $2.5 billion is what that will cost us
per year. That does not include such unforeseen contingencies
as Haiti or other events like that.
The importance of that supplement is that it will pay for
that $2.5 billion additional price tag that we weren't
expecting. If we didn't get that, which is the crux of your
question, what would that effect? It would affect our
procurement of the replacements for the aging aircraft, the
weapons systems, the communications that we need to continue to
invest in to keep ourselves modern on the battlefield, the
training and the quality-of-life initiatives. We would be just
barely--we would be making our investment in the operations and
maintenance to sustain that.
Senator Cornyn. Mr. Chairman, if you'll permit me a
concluding question, let me just ask General Casey to comment
on this. Last year, Congress passed an $87 billion supplemental
which included funds for force-protection items like up-armored
high-mobility multipurpose wheeled vehicles (HMMWVs) and
advanced body armor. Can you give this subcommittee an idea of
what this funding has meant, in terms of the safety of our
troops, in terms of providing the resources that our troops
have needed in order to accomplish the objectives that the
commander in chief has asked of you?
General Casey. Senator, I can. It has enabled us to
significantly increase the protection for our soldiers
throughout the theater, Afghanistan and Iraq.
Senator Cornyn. Is it true that that came in the nature of
improved-armor HMMWVs and body-armor protection, things as
basic as that?
General Casey. Absolutely, Senator. In fact, I think it's
been reported here in the hearings over the last week or so,
that there is sufficient body armor, with the special
protection plates, in the theater now to equip every soldier.
There's some distribution to Afghanistan to fill out about a
thousand, but everybody in Iraq has the body armor with the
small arms protective inserts (SAPI) plates in it, and every
soldier crossing the border in this new rotation will cross the
border wearing the SAPI plates, the complete outfit.
With respect to the up-armored HMMWVs, we started off, last
November, with the requirement of about 35- or 3,600. The
requirement's up to 4,100 now. We have over 2,100 hard HMMWVs
in theater. We're also, with the money that you provided,
actively pursuing armored kits. Our intent is to provide
armored kits for 8,400 HMMWVs, and we expect to have those kits
available by August.
Senator Cornyn. Finally, is it fair to conclude if the
Congress had not stepped up and funded this $87 billion
supplemental, that it would have meant, or resulted in,
increased casualties on the battlefield as a result of the
failure to provide those up-armored HMMWVs and body armor?
General Casey. Either that, Senator, or we would have had
to gut the Army budget to find the money to do this. We're
committed to making sure our soldiers have the right equipment,
one way or the other.
Senator Cornyn. Thank you, Mr. Chairman.
General Casey. Thank you.
Senator Cornyn. Thank you, sir.
Senator Ensign. Senator Pryor.
Senator Pryor. Thank you, Mr. Chairman. I want to thank all
of you all for being here, and join my colleagues in telling
you how much we appreciate your service.
General Casey, let me ask you a couple of questions about
this budget. First, with regard to fiscal year 2004, Secretary
Brownlee testified last week that he had a commitment from the
Office of the Secretary of Defense (OSD) that they will provide
additional funds to the Army to get them through the remainder
of the fiscal year. Are you aware of that commitment?
General Casey. I saw the tape of the hearing, but we have
the same commitment from the people we work with.
Senator Pryor. Okay. How much money do you expect the Army
will need? What is your understanding of where that money will
come from?
General Casey. Senator, we're going through our mid-year
review cycle starting next month, and so I'll have a much
better feel for how much that we'll require here to get through
2004. So I can get back with you when we're doing that and give
you a better idea of what it is.
Senator Pryor. Yeah, I wish you would.
[The information referred to follows:]

As part of the mid-year review process, we are looking at our
execution and our requirements for the remainder of the year. We will
conduct our internal Army review over the next 6 weeks in preparation
for our review with the Office of the Secretary of Defense (OSD). When
we complete our review, we will know what we need for the remainder of
the year, and OSD has committed to addressing our needs during their
review. I do not know the source of additional funds, but I understand
OSD has some assets left in the Iraq Freedom Fund.

Senator Pryor. Do you have a preliminary number, or just a
ballpark?
General Casey. I don't right now. No, Senator.
Senator Pryor. Second, for the next fiscal year, 2005, by
my calculations the Army's current budget request is for $26
billion in O&M. If the spending continues next year at the rate
you've been going in recent years, I think the Army will run
out of O&M dollars within 6 months, in about March. In your
judgement--and, first, am I correct in that assumption? Second,
in your judgement, how long can the Army wait for a
supplemental before you either start having to increase the
price tag on the supplemental or you have to cut into other
programs in a harmful way?
General Casey. Senator, I'm tracking about $30 billion to
$32.5 billion in O&M for 2005. But the gist of your question
is--we think we can cash-flow the first two quarters of 2005 in
the O&M, and probably run out of money around the end of March.
That's what we're projecting.
Senator Pryor. Okay. Do you--and I'm assuming it's way too
early for this, but do you have any sense of what your
supplemental request might be?
I mean, it sounds like, if I understand what all of you all
are saying, is that you're coming in with this budget, but you
all anticipate the probability that you'll have a supplemental
request. Am I correct in that?
General Casey. We know we will have a supplemental request.
Senator Pryor. I guess what I'm trying to get a handle on
is just a general sense of how large you think those
supplemental requests will be for your various Services. Do you
have any sense of that, or is it just too early to know?
General Casey. Sir, I don't, other than going back and
looking at last year, or going back and adding up the monthly
burn rates. Those are the best projections that we have right
now.
Senator Pryor. I assume there are some variables right now
you just don't know. But it is fair to say that you all
anticipate needing a supplemental. Is everybody in agreement
with that?
Admiral Mullen. Yes, sir.
General Moseley. Yes, sir.
General Huly. Yes, sir.
Senator Pryor. Let's see. Again, General Casey, not to keep
you in the hot-seat, but Arkansas, of course, has the National
Guard unit, 39th Infantry Brigade, that's about to head that
direction. In fact, I've been down to Fort Polk and Fort Hood
to see them do their training. I cannot tell you how many
family members have contacted our office, in one way or
another, about personal body armor. So I'm glad to hear you say
that they all will have it as they cross into the theater. But
I must tell you that Secretary Brownlee, back in November of
last year, testified before the committee that they would
receive it by December 31, and that didn't happen. Then I went
down to Fort Hood, Texas, to see the Guard troops down there,
and they were assured, at that time, that they would receive it
at Fort Hood, and that didn't happen. But are you telling me
and telling the subcommittee today that you are confident, a
hundred-percent sure, that they will all receive their body
armor by the time they actually go into Iraq?
General Casey. Senator, you can tell those families that
I'm a hundred-percent sure that they will all receive their
body armor before they go into Iraq.
Senator Pryor. Great. That's good news. We've been assuring
them, because the Army's been giving us the assurance, but
that's good to know.
General Casey. So, I've seen e-mail traffic where the
commander of the brigade sent a note to someone on his forward
party, who said, ``Is it really there?'' and the note came
back, said, ``Yeah, it is.''
Senator Pryor. Good, great. Well, that's good news. I
believe it is. But, again, I just wanted to ask that for my
constituents' sake.
Another thing is, if I can sort of jump tracks here just a
little bit, we all have the base realignment and closure (BRAC)
round coming up, and there's something that we're aware of in
Arkansas, and that's white phosphorous production. I assume all
of you all, in some capacity, use white phosphorous. It's my
understanding that the--there's only one place that produces it
for us, and that's the Pine Bluff Arsenal in my State, and it's
my understanding that the private sector does not want to
produce white phosphorous because they don't do enough volume,
and also there are liability issues. It's very dangerous
material. My question is, If we do close the Pine Bluff
Arsenal, do you have any sense of where we might get white
phosphorous for military uses? General Casey, I'll just ask you
first. Have you given that any thought, has that hit your radar
screen yet?
General Casey. No, sir, it has not, Senator. I wouldn't
even want to speculate. I'll look at it and see if there's
other alternatives, but----
[The information referred to follows:]

Pine Bluff Arsenal (PBA) is our only source for loading white
phosphorous into munitions. The PBA buys the white phosphorous from
commercial manufacturers.
The Army owned industrial base for producing ammunition is
inefficiently configured for current and future production
requirements. Our strategy is to use the joint, comprehensive and
capability-based fiscal year 2005 Base Realignment and Closure (BRAC
2005) analysis to define and implement an efficiently-sized Government-
owned industrial base. In order for the BRAC 2005 analysis to truly be
comprehensive, Pine Bluff Arsenal and all other Army industrial
installations are being analyzed. The Office of the Secretary of
Defense has given us clear guidance not to discuss specific ``what if''
scenarios.

Senator Pryor. Would any of you all have any comment on
that? That's just something that we're certainly aware of in
Arkansas, because, they do produce it. It's very dangerous
stuff. Senator Inhofe mentioned, a few moments ago, about some
of the environmental concerns, encroachments concerns, around
the facilities, and I can assure you around that arsenal there
is no concern, even though they produce very dangerous material
in the Pine Bluff Arsenal.
If I also, General Casey, I promise you, I don't want to
just----[Laughter.]
General Casey. Can I introduce my colleagues? [Laughter.]
Senator Pryor. I don't want to pick on you, I'm sorry, but
it just so happens that my first few questions are for you.
But as I understand the fiscal year 2005 budget, you've
asked for 108 PAC-3 missiles. The contractor, as I understand
it, is facilitized for 144 missiles a year. I believe, in years
past, we've authorized 144 or more per year. If we could find
the money in this fiscal year, would you be willing to accept
144, in terms of, is there a need for that many? Or is the
previous authorization just too high? Do you know?
General Casey. Senator, the 108 we've asked for will allow
us to backfill what we've used and give us some hedge for the
future, so we think that's what we need.
Senator Pryor. Okay. 108.
General Casey. 108, yes, sir.
Senator Pryor. Is 144 too many? Is that excess?
General Casey. It's more than we need right now, yes, sir.
Senator Pryor. Okay. It's more than you'll anticipate that
you'll need, I assume from your answer.
Mr. Chairman, I have one last question for General Casey,
if that's okay; there's the line-of-sight anti-tank weapon,
called LOSAT. I understand LOSAT is something that has a lot of
promise and has proven effective and it appears to be a weapons
system that is very good and will be very helpful to our light
divisions, especially. But I also notice that you're fielding
only one LOSAT battalion in this budget. My question is why?
Part of my question is, I know there is an untested, unproven
technology system called the compact kinetic energy missile
(CKEM) system that is still, sort of, in process of being
developed, and I was curious if you're going to kind of do a
technology leap, so to speak, and maybe try to go for this
newer technology if it proves doable, or if there's another
reason why you've only funded one LOSAT battalion.
General Casey. That system, the one battalion that we're
fielding, is designed to go to the 82nd Airborne Division to
improve their anti-tank capability.
I have to be candid with you, Senator, as we go to this
concept of modularity that I discussed in my opening statement,
one-of-a-kind units like that are not necessarily what we're
looking for. Add to that the Javelins, up in Cincinnati, that
has come online and really gives the infantry soldier a great
anti-tank capability. We're actively looking at the LOSAT and
asking ourselves the questions about whether that is the system
that we still need.
Senator Pryor. Is one of the problems with LOSAT is that it
is not flexible enough? Is that right? It's got a limited
usefulness for military purposes, and maybe the Javelin and
other systems have more flexibility?
General Casey. There are other systems that are available.
Again, we're trying to get away from funding one-of-a-kind-like
units, and so that all of our units are more deployable and
more packageable.
Senator Pryor. Thank you, Mr. Chairman.
Senator Ensign. I think what we'll do is maybe have another
brief round of questions for those who want to stay, but we'll
try to get the generals out here as quickly as possible.
I just want to follow up. First of all, I want to thank
you. In that round of BRAC, we're going to preserve Pine Bluff,
but I understand some other bases in Arkansas are going to
close, so I appreciate your offering that. [Laughter.]
Just joking. But, anyway, what I want to follow up on
because I think we always have to remind ourselves--and the two
meetings that I had earlier this week, we talked a little about
this--we have to constantly remind ourselves that the
taxpayers' deserve good stewardship. The primary function of
the Federal Government is the defense of our country. To that
end, we need to do everything that we can to fund the Services
in the way that they need to be funded, but I just want to
constantly remind all of you, when you bring things to us, that
you have scrubbed it in every possible way that you can scrub
it. Admiral Mullen, this is just a reminder, because you did
say you--I remember, earlier in your testimony, where you said
that there is no fat in readiness. There's fat in everything.
Okay? The total number may not be fat, but there's fat in every
kind of program that we have within the Federal Government,
just like there is in the private sector. We constantly have to
be looking and challenging ourselves, ``How can we do it
better, more efficiently, less money?'' Sometimes we need to
spend more money, but we constantly need the reminder that
these are the taxpayers' dollars that they worked hard for, and
we want to do our best with them. That's just a brief
commentary.
I do want to follow up just a little bit along the lines of
the followup--what Senator Cornyn talked about, because there
were some statements made in the press this last week that we
sent our military into Iraq without being prepared. Matter of
fact, the--well, what was the quote here? Yeah, just basically,
we're not, ``not prepared for the present conflict in Iraq.'' I
had a little trouble with that statement, considering how
extraordinarily well our military did. But could each of you--
if they weren't prepared, and then we don't give them the
money, the $87 billion and the $67 billion--we found some--
there's always deficiencies. I mean, no matter what. We go in
right now--if we go in 10 years from now, we're always going to
find areas of weakness. I mean, that's part of a military
conflict, in doing analysis, where were we weaker and where we
could have been stronger.
But could each of you address the following. First of all,
did you feel that the services were doing their utmost, along
with Congress--whether we were prepared for the conflict in
Iraq. Could you each provide just a brief comment on that.
General Casey. Senator, first of all, I believe that we
were very well prepared in all of the Services. The comment I
think you're referring to came out of Secretary Brownlee's
testimony. I reviewed the tape, and you may have the transcript
there, but that was taken out of context. He was replying to a
question on the up-armored HMMWVs, and he was talking
specifically about that aspect of the preparations, not about
the whole force.
Senator Ensign. So that comment was taken out of context,
from the Secretary of the Army.
General Casey. Yes, sir.
Senator Ensign. Okay.
Admiral.
Admiral Mullen. Mr. Chairman, the Navy was better prepared
than I have seen it throughout my career. That gets back to the
readiness investment I talked about, and clearly we were ready,
and the troops performed consistently with that readiness.
Senator Ensign. Thank you.
General Moseley.
General Moseley. Mr. Chairman, I would have to tell you
that the Air Force, or all airmen, whether they were Navy,
Marine, or Air Force, were exceptionally well prepared. The
United States Air Force, 70 percent of our force is combat-
experienced. We went into OEF and OIF fully understanding what
was expected of us. So I believe that that was certainly taken
out of context, and I would take issue with anyone that
criticized our magnificent airmen, whether they are sailors or
marines or U.S. Air Force.
Senator Ensign. General.
General Huly. Sir, we fought the Iraqis some 12 years ago.
We learned our lessons, and we trained. We had sufficient
indications and warnings that we were going to go into this
conflict, and I believe we were very well prepared to go do
that. I think that's evidenced by the fact that we exceeded our
expectations, accomplished the mission in a shorter period of
time, with far fewer losses than we even anticipated ourselves.
That's not to say that we haven't learned some lessons. We're
applying those lessons that we've learned now; in future
conflicts we'll even be better prepared.
Senator Ensign. Thank you. Thank you, all of you, for the
service that you provide for our country, as well as the men
and women who are serving out there. I'm going to make one last
comment, and then I'll turn it over to Senator Akaka for a
second round.
I visited Iraq in December. I happened to be fortunate
enough to be there the day that they captured Saddam Hussein,
and it was quite an extraordinary experience for this Senator.
While you're there, what struck me the most was the missions
that our military men and women were doing that weren't part of
their normal duties. The extraordinary risks that they were
taking on their own to try to win the hearts and the minds of
the Iraqi people. When they're out there amongst the Iraqi
people, they're taking risks, and when they were painting
schools and building some of the things on their own, just
doing little projects on their own, especially up in the Tikrit
region, which was obviously still one of the more dangerous
regions, there was risk. If I thought I was proud to be an
American before I went there, I came away appreciating more
what our service men and women do than ever before. So I just
wanted to let you know that anytime I address them, and anytime
I see somebody in uniform today, or who had served in uniform,
I want to say thank you to you and to all of them for their
service.
Senator Akaka. Mr. Chairman, I have questions here, and
after hearing the statement you just made, I want to put my
questions in the record. [Laughter.]
Also I want to say that his statement is one that makes us
proud of what's happening there. Our military people are taking
on jobs that are more diplomatic today, in working with the
people wherever they are, as he mentioned, and so I want to end
with what he just said, praising our military forces for what
they're doing.
Thank you very much.
Senator Ensign. Okay.
Senator Cornyn.
Senator Cornyn. Well, I know I'm taking some risk asking
questions after that, but I certainly concur. But I would be
remiss if I didn't ask you about the Base Realignment and
Closing Commission. I know the vice chiefs play a key role in
that process. Of course, the Secretary came out with some
guidelines in December, and held those up for public comment.
Of course, we've known for a long time that joint warfighting
capability is key to our military in this new kind of
environment that we are in. But, of course, the guidelines were
pretty bare bones, and I know we'll put some meat on them as
time goes by. But I'd just like to hear from each of you
gentlemen, who are the key players in this process. As far as
you're concerned, what is your definition, or what do you
believe the appropriate approach to joint warfighting training
and readiness--what does that mean, from your standpoint?
Starting with General Casey.
General Casey. Senator, I've been being told, since I came
in the Army as a lieutenant, that you have to train the way you
fight. It's clear to all of us at this table, and our bosses,
especially after watching what happened in Afghanistan and
Iraqi Freedom, that we are going to fight jointly when we fight
in support of this Nation. So we are working initiatives with
each of the Services here to improve our ability to schedule
our training together, to ensure that the right pieces of our
force are supporting Air Force training, and vice versa.
We are also, as part of this, of the BRAC processes in the
building, working very closely to ensure that we are leveraging
all of the joint bases for all of the Services. We are all part
of the BRAC leadership here in the building, as you mentioned.
Senator Cornyn. Mike? Admiral Mullen?
Admiral Mullen. Senator, as we have been going through this
over many months now, and will for the foreseeable future,
through the rest of this year, certainly, it is dominantly a
joint perspective, and that is very significantly a guiding
principle for us. The criteria to which you referred, I think,
were the recently-published-for-comment military value
criteria. As I have immersed myself in this process over the
last several months, I recognize the responsibilities I have
this year, there probably is not one that's more significant,
in terms of making sure it comes out right. I see it, at this
point, as an extremely fair way to go. I recognize that it is
challenging for lots of reasons.
In the end, we want the best military capability, and I
would say joint-military capability, to be the result of what
the outcome of this is. I have felt, for many years, that it's
heroic--it has been heroic on the part of Congress to set this
Commission up, or this process up. From what I've seen so far,
it's a very fair process. There's a lot of data. This is going
to be a data-intense, very well analyzed process, from what I
can tell so far.
I also am convinced that we do have some excess capacity
that we are paying for, between 20 and 25 percent, and that
that is costing us resources that we could better well-spend on
the kinds of capabilities that we're talking about today that
we need for the future.
Senator Cornyn. General Moseley.
General Moseley. Senator Cornyn, let me add, to my two
joint colleagues, that I echo the notion that joint training is
absolutely required.
I would also add to that, joint rehearsals are absolutely
required, which takes you to the notion of having the ranges
configured properly and having the ability to get on the range
into layout scenarios, a lot like we did prior to Operation
Iraqi Freedom in the ranges out in Nevada that Chairman Ensign
is familiar with. We went out multiple times with the joint
team and set the conditions out there to rehearse exactly what
we were looking at relative to specific mission areas. Those
ranges are very critical, and the ability to do that is
essential to a commander.
I would also say the ability to do home-station training,
the blocking and tackling, prior to being able to go do this
serious joint training is also a fundamental requirement.
Whether those are artillery ranges, whether those are rifle
ranges, whether those are just vehicle operating areas, or for
the Navy to be able to steam and to sail, that the blocking and
tackling that leads up to those fundamental joint excursions,
rehearsals, and training are absolutely essential to us. We
have to find ways to better set those conditions, and we have
to find ways to better train.
Senator Cornyn. General Huly.
General Huly. Sir, we've just completed the most
significant operational joint evolution that the Armed Forces
of the United States have ever gone through. Having said that,
we were very successful, but there's still room for
improvement. Those improvements will be made on the training
fields, and those training fields will not only give us the
opportunity to train as we fight, as General Casey said, but
it'll also point out where we need to improve upon the
development of our joint equipment and our joint processes of
doctrine and coming up with how we're going--our tactics and
techniques and procedures of the future.
We need the opportunity to do that, and that is on the
bases that are becoming more and more limited. Now, I recognize
that there is probably some excess capacity out there. We, in
the Marine Corps, certainly support, ardently support, the BRAC
process. We don't have anything to contribute at this time to
that process, but we look, fondly, at how the other Services
are doing in opportunities that will still be out there for us
to train with them on their installations, as well as ours.
Senator Cornyn. Well, in closing, let me just say I want to
commend each of you. The wide-open spaces of Texas----
[Laughter.]
--it's a great place to train, wonderful quality of life
for our military, and not as many problems as other places,
with encroachment of populations. With that, I'll stop the
commercial, Mr. Chairman, turn it back to you.
Senator Ensign. Second only to Nevada, we appreciate----
[Laughter.]
Well, thank each and every one of you for your testimony. I
know the duties you have keep you very busy, just like ours,
but these oversight hearings and getting information from you
so that we can help you do your jobs the best and keep that
best-prepared, best-trained, best military in the world, I
think, is a very important part of the process. So thank you
very much.
The hearing is concluded.
[Questions for the record with answers supplied follow:]

Questions Submitted by Senator John Ensign

JUSTIFICATION FOR REAL FUNDING GROWTH INCREASES FOR READINESS PROGRAMS

1. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, the President's fiscal year 2005 budget request for
the operation and maintenance accounts of the Services totals
approximately $103 billion. This represents more than 5 percent real
growth in funding for accounts directly related to the near-term
readiness of the Armed Forces. While there are many that have strong
opinions about increasing budgets for defense programs, I also know
that we are receiving reports highlighting potential readiness issues.
For example, a December 2003 review by the General Accounting Office
reported their concerns with the condition of more than half of the
weapons systems that they analyzed. What is your assessment of how the
fiscal year 2005 budget request will support critical readiness
programs and enable the men and women of your Services to successfully
prepare for and accomplish their missions?
General Casey. We believe that the Army's fiscal year 2005
President's budget request fully supports the readiness of the Army's
units to prepare for execution of wartime missions. We are a Nation at
war. As such, we have adjusted our priorities to allocate funding to
ensure that our soldiers are well prepared to succeed on the
battlefield. Based on the funds available to us, we have provided
financial support to programs in direct support of the soldier. As a
result, overall real program growth in operations and maintenance, Army
is over $1 billion--4 percent real growth beyond inflation and other
pricing adjustments. Much of this growth is in accounts that directly
support readiness, such as operational tempo, training ranges, training
support, military exercises, and depot maintenance. In addition, we
needed to rectify serious under funding of Army installation
operations, and have begun to do so in this budget. Even so,
shortcomings in base support persist because of overall budget
constraints. While very few budget programs are fully financed, we
believe we have enhanced our critical readiness programs and have
balanced the risk in support areas such as facilities and base support.

Admiral Mullen. I am confident that our critical readiness programs
are properly funded within our fiscal year 2005 budget request,
delivering the right readiness at the right cost to the taxpayer. The
fiscal year 2005 Navy budget proposal was crafted through a rigorous
and analytically-based review with Navy leadership heavily involved.
This was a complex but important process designed to achieve the
required high level of operational readiness. We took a more integrated
review of these accounts to balance our investment in them, taking
well-considered trade-offs only after reviewing the risks and
balancing, on the whole, our current readiness needs with future
readiness investments. The lessons learned from Operation Iraqi Freedom
(OIF) thus far reaffirm that the capabilities-based investment
strategy, new warfighting concepts and enabling technologies we are now
pursuing in our Sea Power 21 vision are on the right course. This
allows us to support our overall critical readiness programs and ensure
our naval personnel are properly trained and equipped to carry out
their assigned missions now and in the future.
General Moseley. Delivering precise combat power anywhere at
anytime remains a top priority for the Air Force. To this end, we
continue to pay close attention and place necessary resources in all
readiness programs as we transform and retool to meet global threats.
For example, in the fiscal year 2005 President's budget request, we
have added resources to keep pace with our aging weapon systems. As a
result, we've increased depot maintenance, contractor logistic support,
and field maintenance to allow our forces to remain the most proficient
in the world.
General Huly. During fiscal year 2004, the United States is
responding to a wide range of challenges across the globe, including
fighting the long-term global war on terrorism, rebuilding Iraq into a
peaceful, productive member of the world community, and preventing the
spread of weapons of mass destruction. In this era, the Nation needs
forces that are highly mobile, flexible, and adaptable.
These characteristics define the Marine Corps, and they must
continue to do so in the future. The fiscal year 2005 Operation and
Maintenance budget supports critical readiness programs within the
Marine Corps Operating Forces, comprised of three active Marine
Expeditionary Forces (MEFs). Each MEF consists of a command element,
one infantry division, one air wing, and one force service support
group. This budget provides critical training and equipment maintenance
funds to Marine Corps Force Commanders so they can provide combat ready
forces to the combatant commanders.
MEFs provide a highly trained, versatile expeditionary force
capable of rapid response to global contingencies. The inherent
flexibility of the MEF organization, combined with Maritime
Prepositioning Force (MPF) assets, allows for the rapid deployment of
appropriately sized and equipped forces. These forces possess the
firepower and mobility needed to achieve success across the full
operational spectrum in either joint or independent operations.
Embedded within each MEF is the capability to source a Marine
Expeditionary Brigade (MEB).
These funds also support the 4th MEB Antiterrorism (AT), whose
mission is to detect, deter, defend, and conduct initial incident
response to combat the threat of worldwide terrorism. The 4th MEB (AT)
is the only MEB that has permanently dedicated structure. The budget
also supports the readiness posture of Marine Operating Forces and
continues the fielding of improved combat equipment and clothing for
the individual marine, enabling them to successfully prepare for and
accomplish their mission.

2. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, why is this level of funding necessary to sustain the
readiness of your Services?
General Casey. Because we are at war, we cannot risk being unready.
While we rely on supplemental funding to finance the incremental costs
of combat operations, we owe it to our soldiers and our citizens to
maintain the tough realistic training, necessary maintenance, and
adequate support to personnel that a baseline operations and
maintenance Army budget provides. We believe this budget reflects an
appropriate balance among many competing demands and should receive
your full support.
Admiral Mullen. The funding we are requesting for readiness is the
result of a lengthy, analytically-based and detailed review of
integrated requirements, balancing our current readiness needs with our
future readiness investments. In developing our fiscal year 2005 budget
request, we started from a common framework that readiness at any cost
is not the answer. As we built our request, we took an integrated look
across all of our readiness accounts to find efficiencies and, in some
cases, took some well-considered risk to balance current readiness
needs with our future readiness investments. These efforts will not
affect our ability to meet our assigned missions. Since these readiness
accounts are at the appropriate levels; however, any reduction to these
accounts would lower our readiness below requirements. In the end, I am
confident that our fiscal year 2005 budget request delivers the Nation
the right readiness at the right cost to our taxpayers.
General Moseley. Air Force warfighting capabilities depend on solid
training and a sustainable battle rhythm. While we've increased funding
in our flying operations areas, costs are rising to maintain our aging
systems (i.e., KC-135 engine struts, F-15 horizontal material
replacement, A-10 wing refurbishment, etc.). We believe the funds
provided in the fiscal year 2005 President's budget request is at the
level needed to provide trained forces to our combatant commanders
while sustaining readiness.
General Huly. All of the Services are challenged with balancing
competing priorities within readiness, training, and supporting
establishment accounts in a fiscally constrained environment. The
Marine corps uses the Program Objective Memorandum (POM) process to
determine funding levels for all programs. Our requested funding level
to sustain Marine Corps readiness is necessary based on requirements
submitted from the Operating Forces weighed against all other Marine
Corps programs and priorities.

3. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, what are the potential implications that could result
from reducing funds for these readiness programs?
General Casey. In this budget, we already accept risk in areas such
as base operations and facilities; therefore these programs have very
little capacity to absorb additional reductions. As a consequence, they
cannot buffer readiness programs from the adverse effects of
unspecified or general budget reductions. If training, operational
tempo, depot maintenance, or other critical readiness programs were to
be reduced, it would send a message to our soldiers and our adversaries
that we cannot fully support our top priority. Reductions in these
programs would have a direct impact to the Army's ability to
successfully prosecute the global war on terrorism, impairing our
preparations that are necessary to fight and win future actions.
Admiral Mullen. Navy's budget submission is already lean. Through
the Navy's analytically-based and detailed Integrated Requirements
Capability Assessment (IRCA) process, we've developed a well-defined
readiness requirement that, through consideration by senior Navy
leadership, already takes some well-studied risk in the readiness
accounts to meet future readiness investment requirements. Since our
budget is already programmed at the appropriate level for the risk we
are willing to accept, any significant reduction in readiness accounts
poses a higher, unacceptable and unplanned risk to our combat
capability.
General Moseley. Reduced program funding will create an inevitable
decline in Air Force readiness levels. Significant reductions in
readiness resulting from greatly increased commitments and burdensome
tempo beginning in fiscal year 2002 and continuing through today were
mitigated through increased funding. The increased flying operations
budget, with associated funds for consumables, spare parts, fuels, and
training, offset the adverse effects of high tempo and an aging fleet.
By reducing funds to these programs, readiness will continue to
decline throughout the Air Force's reconstitution efforts similar to
readiness degradation experienced prior to and after Operation Enduring
Freedom/Operation Iraqi Freedom. Supplemental authorization increases
were a key component for mitigating the effects of high operations
tempo.
General Huly. The fiscal year 2005 budget request for Marine Corps
readiness programs is adequate considering the need to balance those
programs against competing priorities of maintenance, modernization and
infrastructure within a fiscally constrained environment. Any reduction
in operation and maintenance, Marine Corps funding would have real
programmatic impact on our readiness, training, and supporting
establishment accounts. Reductions to the readiness accounts would
impact our essential operations and maintenance efforts that are
focused on maintaining unit readiness, such as organic, intermediate
and depot maintenance of our combat and support equipment. Other items
impacted could be corrosion control and purchase of secondary reparable
components for Marine Corps vehicles and equipment. Such reductions
therefore lead to greater inefficiencies as those efforts must be
delayed or deferred, with the attendant result of higher future year
operations and maintenance costs.

REBALANCING ACTIVE AND RESERVE MANPOWER

4. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, I believe that Secretary Rumsfeld is moving in the
right direction with the rebalancing initiative to make the current
levels of Active and Reserve Force manpower more accessible, usable,
and available to meet national security requirements. How are each of
your Services progressing on rebalancing active and Reserve manpower?
General Casey. The Army is aggressively rebalancing capabilities
within, and between, its active and Reserve components. These efforts
will increase high demand capabilities, such as military police and
civil affairs, decrease reliance on Reserve component units early in an
operation, and divest of cold war structure that is no longer relevant
for our current security environment. However, there is no current or
planned rebalancing of manpower strengths between components. Although
the active component is temporarily increasing its ranks by 30,000
soldiers to restructure its formations while fighting the global war on
terrorism, it is important to note that we are not altering the
programmed strength of our Reserve components.
Admiral Mullen. As an important element of the total force, the
Navy's Reserve supports routine fleet operations and provides critical
surge and sustainment capabilities to meet real world contingencies.
Providing a more tightly integrated force creates the opportunity for
reservists to train, deploy, and operate alongside their active
counterparts using current doctrine, concepts, and tactics, as well as
the most modern equipment in the Navy's inventory.
To support active-Reserve integration, the CNO and senior fleet
leadership have taken ownership of their Reserve, from recruiting and
training, to equipment and readiness. The fleet is identifying the
capabilities it will require the Navy Reserve to provide an input that
the Active and Reserve components together will use to design and shape
the force. This new sense of ownership will build closer day-to-day
operational relationships and allow for the seamless connection of
total force capabilities in the right place, and at the right time.
The near term goal for the Navy is to provide a Reserve force
shaped by fleet requirements and driven by SeaPower 21. To achieve this
goal, we will continue to align, measure risk, present options, and
rapidly move ahead with assignment of units and personnel to match
requirements with capabilities. These assessments will be driven by the
question: What resources can we apply that will enhance effectiveness
and efficiency, and will contribute to warfighting wholeness? If the
analysis indicates that the number of reservists should be adjusted to
meet current requirements and future capabilities, we will make that
happen. If that means that some equipment must be retired or realigned
to support the Active Force, then we will ensure that the Navy's
Reserve is integrated with the fleet and trains on and operates the
Navy's newest, most capable platforms and systems.
For the first time ever, one fleet commander acting for all other
Navy commanders, is conducting a Zero Based Review (ZBR), where every
Reserve unit and billet is being reviewed for capability relevance and
alignment with fleet requirements, and then forwarded to CNO for
inclusion in future budget deliberations and requests. The Navy Reserve
will continue to provide mission capable units and individuals to the
Navy-Marine Corps team throughout the full range of operations, from
peace to war, and will do so in a much more efficient and integrated
manner. The Navy has taken charge of its Reserve Force to further
enable it to provide predictable and effective support to the fleet,
ready and fully integrated, in the most efficient manner possible.
To fully realize SeaPower 21, and under the guidance of Commander,
Fleet Forces Command, the Navy and its Reserve will align, organize,
integrate, and transform around the four warfighting pillars of Sea
Strike, Sea Shield, Sea Base, and FORCEnet. To provide sufficient
operational range and depth to many of these capabilities, and to
efficiently and effectively meet its requirements as part of the Joint
Force, Navy must leverage its investment in the extraordinary
capabilities, critical skills, innovative nature, and entrepreneurial
spirit of its Reserve personnel. The active component is currently
engaged to clearly articulate requirements for the Navy Reserve. CFFC's
Reserve integration cell will soon recommend the future Reserve Force
structure necessary to meet these fleet capability requirements.
We are embedding key full-time support staff in headquarters, fleet
and type commands. We have developed strategic linkages between Reserve
Forces Command and Fleet Forces Command with tangible results, and
continue to build new bridges throughout the Navy. This was done to
more closely align Reserve and Active Forces and to improve combat
effectiveness and efficiency. These actions will strengthen ties
between the Navy's Active and Reserve Forces and are the first steps in
an overall initiative that seeks to define, and subsequently forge a
cohesive ``total force'' team that can more effectively satisfy the
Navy's operational requirements. We will continue to identify and
propose practical ways to better integrate reservists and equipment
with the fleet, and have taken steps to accelerate and solidify our
integration efforts.
General Moseley. The Air Force is reshaping its total force mix and
is on target to meet peacetime and contingency requirements. We do not
need to extensively rebalance to solve a spike in requirements due to
major contingency operations. We will continue to review our force
balance against the backdrop of current and future contingency and
peacetime operations as we go through our program review for the
Program Objective Memorandum 2006.
The Air Force leverages the Reserve component to be fiscally
responsible and cost effective. We use that capability only at the
right time and in the right amount. Prior to September 11, mobility
operations did not require the extensive Reserve call-ups that were
characteristic of Operations Iraqi Freedom, Enduring Freedom, and Noble
Eagle (OIF/OEF/ONE). The OEF/OIF efforts are not a new steady state as
evidenced by our gradual reduction in operations tempo over the last 2
years. During OIF, we selectively mobilized the Reserve component to
fulfill combatant commander requirements that could not be met by a
combination of Active Forces, Reserve full-time personnel, and
volunteers. We deactivated many of these forces as soon as the
requirements were met. Since last August, we have demobilized over
15,000 of our mobility personnel. These are smart, cost effective
business practices that work well for the Air Force and our Nation.
The Air Force continues to aggressively pursue rebalancing
initiatives as discussed with the Secretary of Defense. We call this
the Future Total Force. We have created a Future Total Force office
within our headquarters to explore new organizational constructs that
will strive to integrate active, Guard, and Reserve units. We continue
to explore integration opportunities to maximize capability and
efficiency through innovative organizational constructs; for example,
blended wing, associate program, and aircraft, manpower and mission
conversions. Further, as we continue to work on redefining our Manpower
Requirements Determination process, it will incorporate all components
of our workforce. By achieving integration of some units, we will
increase available manpower and take advantage of Reserve component
experience during surge operations, while keeping overhead lean during
peacetime. As we divest legacy weapon systems, we will increase
investments in unmanned aerial vehicles; space capabilities; and
intelligence, surveillance, and reconnaissance systems. These
investments translate into roles and missions that are ideally suited
for the Guard and Reserve. Our developing concepts of operations put
many Guard, Reserve, or blended units into front-line combat roles
while reducing the need to mobilize.
General Huly. The mission of the Marine Corps Reserve is to augment
and reinforce active component (AC) units during war and other
operational contingencies. Selected Marine Corps Reserve (SMCR) units
are assigned in the Secretary of Defense' Forces for the combatant
commanders memorandum and are included in all the war plans. To
effectively augment and reinforce the AC, SMCR units maintain the same
training standards as AC units. It is important to note that the
Reserve component (RC) in the Marine Total Force structure plays a
unique role that is distinct from the RC of other Services. Typically
mobilization of Reserve Forces is only necessary for large-scale
contingencies pursuant to the warfighting requirements of combatant
commanders. To date, the Corps has incorporated transformational
changes as a result of the global war on terror. The 4th Marine
Expeditionary Brigade (Anti-Terrorism), Air-Naval Gunfire Liaison
Companies, and Reserve Intelligence Battalion are all examples of
structure the Corps has added, or in the case of the Reserve
Intelligence Battalion, will add, to get us to the appropriate
capabilities with the right mix of active component and Reserve
component marines and assets. The Corps remains committed to
rebalancing efforts that optimize our ability to carry out our mission
In the spring of 2004, the Marine Corps conducted a comprehensive
review to determine how we needed to modify our force structure to
better prosecute the global war on terrorism and meet national security
requirements. As a result of this review, the Marine Corps approved
numerous changes to both our Active and Reserve Force structure; these
changes are being implemented in the fiscal year 2005-2008 time frame.
In the active component, the USMC is establishing two additional
Infantry Battalions, three Light Armored Reconnaissance (LAR)
Companies, two Force Reconnaissance Platoons and an additional Air-
Naval Gunfire Liaison Company (ANGLICO). We will also augment our
existing EOD, Intelligence, Aviation Support, Civil Affairs, C4, and
Psychological Operations assets.
In the Reserve component, we are establishing an Intelligence
Support Battalion, a Security/Anti-Terrorism Battalion, and two
additional LAR companies. We will also augment existing capabilities in
the areas of civil affairs and command, control, communications and
computers (C4). In addition, we are restructuring some Reserve units
converting them to Individual Mobilization Augmentee (IMA) Detachments.
This allows us easier and more timely access to these Marine reservists
to support contingency operations. The Marine Corps will continue to
evaluate our force structure to ensure that it provides needed
capabilities in a timely manner to support our national security
requirements.

5. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, are their any particular challenges as you execute
your plans and how do you propose to resolve those challenges?
General Casey. The largest challenges will undoubtedly center on
sustaining required force levels for future operations in Iraq,
Afghanistan, Bosnia, Kosovo, and other parts of the globe while
restructuring our formations. If force requirements increase, it will
delay Army efforts to transform. Our ability to access the Reserve
components for rotational overseas missions and homeland defense will
also prove challenging if current mobilization levels persist. For
those capabilities required to support current operations, the Army
will continue to seek relief through contracts, indigenous forces, and/
or from other Services.
Admiral Mullen. There are challenges to completing active-Reserve
integration (ARI). These issues are being addressed head-on by the CNO
and senior fleet and Navy Reserve leadership. Availability and
accessibility of both active and Reserve capabilities are the
functional drivers behind Navy's ARI. To gain combat effectiveness and
economic efficiency, the Navy is fully integrating its Reserve under
the Fleet Response Plan (FRP) through both unit level and individual
augmentation during day-to-day operational support. Under FRP, we will
also maintain the ability to mobilize reservists and equipment to
support expanded surge operations around the globe. The fundamental
construct of FRP is a surge-ready fleet, able to sail to any troubled
spot in the world, swiftly defeat the enemy, and then reconstitute in
minimum time. Therefore, the Navy and its Reserve will continually be
in a surge status requiring minimum time to reset. Experienced and
trained Reserve personnel are ideally suited for this surge capability.
The basic 24 drill days per year and 14 days of annual training are
provided at about 20 percent of the cost of full time personnel, and
they leverage prior Navy investment in training while maintaining a
continuum of service. Most reservists have both fleet experience and
critical civilian skills to contribute to this concept of efficient
utilization, and will fit perfectly into the unique surge mission
requirements of the Navy Reserve as envisioned in Seapower 21.
Full integration will ensure that Navy reservists in aviation Fleet
Response Units (FRU) will be able to quickly activate and support
global operations under FRP. The result is a Reserve Force that is
better prepared and more capable for both unit and individual
mobilization requirements. Co-locating our Reserve personnel and
hardware with their supported fleet units streamlines the activation
process enabling individuals to train alongside, and be more familiar,
with the units they will augment, training and operating state-of-the-
art equipment, as well as leveraging Active Force tactics and doctrine.
Realizing some total force objectives will aid in overcoming the
challenges of ARI.

Service Predictability: Every sailor in the Navy Reserve
wants to make a difference and needs to know with reasonable advance
notice, when and where they will train or perform fleet operational
support, whether mobilized, on active duty orders or on routine drills.
As part of a fully integrated force, reservists will train or perform
meaningful work that provides or enhances capabilities required by the
fleet. Additionally, individual reservists will be able to anticipate
drills and periods of active duty through processes that will track and
match necessary skills to appropriate billets or orders.
Periodicity: Individual reservists' availability varies
during the year and with each employer. These periods of availability
can be leveraged to enable each sailor to provide meaningful fleet
support. ``Flexible drilling'' is encouraged to allow reservists to
combine traditional drill weekends to serve for a week once a quarter,
two weeks every 6 months, or even for several weeks once a year to
satisfy participation requirements. If a unit or individual is called
to mobilize, reservists will receive as much notice as is possible,
with a target of 30 days, to help minimize potential employer or family
conflicts.
Pay and Benefits: Whether drilling, performing active duty
for training or mobilized, reservists should be confident of receiving
pay and allowances commensurate with benefits earned by the active
sailors with whom they are working. They should be assured that their
benefits will appropriately address their individual and family needs,
whether serving at home or abroad. Development of a single pay and
benefits system continues to be a priority to standardize the
administration of both active and Reserve personnel in all services.
Navy is pushing to accelerate introduction of DFAS' Forward Compatible
Pay System (an interim step toward DIMHRS) that will eliminate pay
problems associated with changes in service status and shorten
mobilization timelines.
General Moseley. There are a host of challenges that we must
address to allow us to successfully reshape the Air Force to meet the
ever-changing demands of our Nation for air and space power. These
issues run the gamut of law, policy and procedures, but they can be
remedied. First, weld like to thank the Members of Congress for
assisting us in overcoming some of the Title 10 and Title 32
limitations through recent changes to those laws, allowing us to create
a unique unit at Robins Air Force Base, Georgia. By addressing the
obstacles to integration as a Total Force, we were successfully able to
integrate two different units and forge a blended unit in which our
active-duty and Reserve personnel train like they fight, as one team.
We may require your additional assistance in the future as we begin to
explore and expand this blended unit concept within the Air Force.
Our efforts to optimize the synergies of integration have
introduced a new set of challenges. By studying the intricacies of
integrated force constructs we are separating myth from fact and
identifying the most challenging aspects of true co-operation. While
recognizing the unique cultural aspects of our Active, Guard, and
Reserve Forces we must work towards developing a common culture that
relies on the strengths of all three components and shares the positive
aspects of each culture to maximize our capabilities. To do this, our
next generations of leaders, military and civilian, are being educated
to sharpen their awareness of the legal aspects, policies and
procedures of each component. Where the active component provides a
guaranteed, on-call resource pool, the Reserve component brings an
invaluable experience base and a 72-hour contingency response. Having
highly experienced personnel working side-by-side with our young airmen
saves countless dollars in training, seasons our more junior active
personnel, and ensures training pipelines continue to flow during
normal deployment rotations.
More challenges remain, such as our aircraft recapitalization
efforts. The average age of our aircraft fleet is 23 years. Some of our
oldest aircraft are well over 40 years in age. When it comes to
hardware, time is the enemy. As part of our effort to recapitalize our
aircraft, we need not only to divest the older airframes but also re-
invest any manpower savings from divested aircraft. In this way, we can
reduce or avoid maintenance costs associated with older airframes,
while simultaneously increasing availability of newer airframes through
increased number of aircrews and maintenance personnel. Naturally, our
efforts will be impacted by the impending Base Realignment and Closure
process which will allow us to shed excess infrastructure in order
achieve greater operating efficiencies while avoiding unnecessary
operating costs. A final set of challenges is generated as we examine
legacy missions performed by the Reserve component and consider the
Reserve component's potential for new roles in emerging missions, such
as homeland security.
General Huly. As alluded to in response to questions #4 the Corps'
approach to utilization of the Reserve component mitigates the problems
faced by the other Services. Specifically, the mix of Active Component-
Reserve Component (AC-RC) marines are relatively well balanced. The
Corps' AC-RC mix has effectively minimized the amount of stress placed
on Reserve units that need to mobilize in order to carry out the
mission that the AC is unable to cover. It should be noted that the
Corps continues to look for ways to improve upon its current
utilization of AC-RC units as we strive to maintain the right balance
of forces to accomplish present and future missions.

COST MODEL FOR DETERMINING ESTIMATES TO REPAIR/REPLACE OIF EQUIPMENT

6. Senator Ensign. General Casey, you testified before the House
Armed Services Committee last fall that the Army's estimates for
repairing and maintaining equipment used to date in Iraq, the basis for
the fiscal year 2004 supplemental request to Congress, was calculated
from a model that relied on information developed from recovering from
the 1991 combat operations in Iraq. Has the Army made any changes to
this cost model since you testified before the House?
General Casey. We modeled our requirement to reconstitute the Army
units, based largely on our experiences in Operations Desert Shield and
Desert Storm. The model that we used to develop our fiscal year 2004
supplemental requirements is actually owned by Office of the Secretary
of Defense (OSD), so I will have to defer to the OSD Comptroller's
office to answer the fine details of the algorithms, but I understand
that the cost factors are regularly updated. Because of our experiences
following Operations Desert Shield and Desert Storm, we knew that our
equipment was sustaining far more wear and tear that it would have in a
more normal environment. Army assessment teams estimated that we would
need about $1.2 billion more than the model estimated, along with $1.5
billion for depot maintenance, entirely outside of the model.

7. Senator Ensign. General Casey, have the unfunded requirements
for repairing and maintaining equipment been updated to reflect those
changes?
General Casey. The cost factors have not been updated since we
built our supplemental request, but as I said, they are updated
regularly. We will use the data and experience we collect from
maintaining and repairing our Operation Iraqi Freedom (OIF) 1 equipment
to improve our estimates and methods for maintaining and funding
subsequent OIF rotations.

``RESETTING'' THE FORCES

8. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, one of the challenges for each of you has been to
ensure that forces that have returned from deployments overseas in
support of Operation Iraqi Freedom and Operation Enduring Freedom have
adequate resources for recovery and repair. Resetting or
reconstituting--as it is referred to by the Services--includes a
variety of recovery actions, including taking time for personnel to
recover and to sharpen their military skills, as well as repairing or
replacing any equipment that was damaged during the deployment. What is
the status of resetting forces in your Services?
General Casey. Resetting the forces, which includes personnel,
equipment, and training is ongoing and will continue as units redeploy.
The Army is on track, with the exception of aviation, to meet our reset
goal of 6 months for active units and 1 year for Reserve Forces.
Aviation reset has slipped to the right due to long lead-time repair
parts and repair parts availability. An assessment is ongoing to
determine the impact of the slippage. U.S. Army Forces Command, U.S.
Army Europe, and U.S. Army Pacific units are maximizing continental
United States and outside the continental United States based
installations, depots, and commercial repair facilities to execute
equipment reset. To the extent possible, Headquarters, Army Materiel
Command (AMC) is resetting equipment in theater to support current
operations and future requirements. Additionally, AMC and Headquarters,
Department of the Army, are working to identify excess to be used as
``seed'' assets to prime the repair line.
Simultaneously with equipment reset is personnel and training.
Soldiers are receiving regeneration training to acclimate from a combat
environment to peacetime as well as incorporating lessons learned into
individual and collective combat tasks. Additionally, to evaluate and
validate combat readiness units conduct a certification exercise at one
of the combat training centers.
Admiral Mullen. I have made a point of using the term constitute
vice reconstitute as we are truly leaning forward while undergoing a
transformation as we set the force. Through this operational
transformation, we will be fully ready to provide combat forces on par
with the OIF effort later this year.
General Moseley. Approximately 90 percent of the Air Expeditionary
Force (AEF), including its integral low density/high demand assets has
been able to reset. However, a continued high operations tempo
(OPTEMPO) is having an impact on our reconstitution efforts and
extending the time to fully restore our personnel and equipment to pre-
OIF levels. Given this continuing OPTEMPO, it will be difficult for the
remaining 10 percent of the AEF to begin reconstitution before March
2005. Our objectives for resetting the force fall into three main
categories which include: (1) restoring our equipment to the combat
effective state required to fight in the future; (2) incorporating
lessons learned to enhance existing platforms and integrate valuable
new technologies, and (3) properly equipping our forces currently
engaged in stability operations to accomplish the mission. As we focus
on these objectives, we emphasize that our goal is to reconstitute
warfighting capabilities, not specific equipment items.
We maintain our focus on these objectives while supporting
combatant commander requirements across the full spectrum of
operations. The Chief of Staff of the Air Force has emphasized our most
valuable asset, our people, be given the opportunity to recover at home
after lengthy and difficult deployments. He's directed our major
commands to implement a post-deployment stand-down program as another
quality of life initiative. The reconstitution that follows will have a
major focus on training. The emphasis will be on task proficiency as
opposed to training event currency. We are transforming our training
programs to better provide ready and capable forces to the combatant
commanders.
General Huly. We have established a methodology to track the
accelerated usage of equipment in order to make prudent decisions to
maintain Marine Corps capability in the future. Because of the stress
OIF I placed on our equipment, we are evaluating critical life cycle
degradation and the need to match shortfalls with our Total Life Cycle
Management Plan. In resetting the force we are evaluating the condition
of our equipment returning from Iraq and then making prudent decisions
regarding what needs to be replaced, refurbished, repaired or deferred
until a new capability is available. In some instances deferring
equipment replacement until the next generation capability is available
is the smart choice. Since we have not yet completed our evaluation of
equipment items returning from Iraq and assessed all of the options
available, a definitive list of replacement items or alternate
procurement is not yet available.
Maritime Prepositioning Force (MPF): We've fully reconstituted 1 of
11 Maritime Prepositioning Ships. The remainder are being reconstituted
in accordance with the MPF Maintenance Cycle 8 (MMC-8).
The AV-8B Harrier aircraft: We experienced increased operational
tempo and the loss of a Harrier during operations. Since that aircraft
is no longer being produced, we plan to wait until the successor
aircraft, the Joint Strike Fighter VSTOL variant, begins delivery in
fiscal year 2008.

9. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, how are you managing the resources that have been
provided by Congress for resetting your forces?
General Casey. As units begin to redeploy from the Iraqi and
Afghanistan theaters of operation, the Army will continue to reset or
set the force to meet future requirements. The goal is for all
returning active component units to achieve a sufficient level of
combat readiness within 6 months of equipment arrival at home station.
Reserve component units will likely take longer to achieve the desired
readiness level, and the working assumption is that Reserve units will
take 1 year to reestablish pre-deployment readiness after equipment
returns to home station.
Readiness involves three essential components--people, equipment,
and training. It is only by addressing our soldiers' needs,
reconstituting our organizational equipment, and training to standard
on our collective combat tasks that units will return to an acceptable
readiness level. Army units will also be reorganizing during the reset
period. The culminating event of these intense reconstitution efforts
should be a certification exercise at one of the combat training
centers. By adopting such an aggressive approach, the Army will
continue to ensure its ability to meet the combatant commanders' near-
term requirements. The intent is to return units to pre-hostility
readiness levels while continuing to support the warfight, transform,
modernize, and recapitalize.
The Army standards established for setting the force are: (1) bring
all equipment to 10/20 standards; (2) where sensible, upgrade
capability implementing Operation Iraqi Freedom/Operation Enduring
Freedom lessons learned; (3) replace obsolete equipment in pre-
positioned stocks; and (4) reconfigure Army pre-positioned stocks to be
more strategically relevant and responsive. The requirements were
broken into two major sections, maintenance/repair and equipment
investment. To prioritize requirements, the Army developed a tiering
methodology based on timing and associated risk.
Admiral Mullen. In my fall 2003 testimony, I illustrated several of
the largest challenges to set the force. In that testimony, I discussed
spares, depot maintenance, precision-guided munitions, EA-6B wing
panels and F/A-18 ancillary equipment. The fiscal year 2004
supplemental funding provided by Congress was applied to the immediate
needs of these critical capabilities; we thank you for approving the
supplemental last fall. The emergency war supplemental also financed
$2.1 billion of Navy depot maintenance. These funds were used to
maintain and restore our ships, aircraft, equipment and materiel to a
high level of readiness. The scope of many planned availabilities were
expanded to quickly improve ship and aircraft readiness levels to
support the continued prosecution of the global war on terror. We have
used your support to achieve, and crafted our fiscal year 2005 budget
request to now maintain, the Navy's force constitution; our fiscal year
2005 budget request keeps us on track for the future.
General Moseley. The Air Force is extremely appreciative of the
fiscal year 2004 Reconstruction of Iraq and Afghanistan Supplemental.
In terms of readiness, the funds are providing great dividends in
paving the way for us to prosecute this Nation's National Strategy
without unduly impeding our peacetime efforts and programs. Our
combatant commanders have been balancing requirements and resources to
ensure the most effective use of taxpayer's dollars. As our units and
equipment returned from their tour of duty in the desert, we are
revaluating the equipment that should be left at the base in case of
future contingencies and the materiel that can be moved to active
bases. Equally important, we are also evaluating equipment in terms of
the best place to fix. As aircraft and similar equipment return, we
determine whether we fix locally or send to depot. Our men and women
are constantly examining out fleet to make smart decisions on the
proper source and type of repair. While reconstituting equipment is
important, we are also reconstituting capabilities. With our fighter
and bomber forces ready to resume normal rotations, the Air Force is
beginning to return to pre-Operation Iraqi Freedom rotational cycles.
In large part, the funds supported by your committee allowed us to
ensure we maintain combat readiness in light of our rapid pace of
global activities.
General Huly. Managing the resources for resetting the force is
perhaps the most challenging aspect of global war on terrorism. Our
principle focus continues to be on funding current operations and in
providing force protection gear to our marines. Because of vehicle
combat losses, higher operating tempo and the harsh environment, a
significant portion of our ground equipment inventory used in Iraq and
Afghanistan has experienced accelerated usage or may be uneconomical to
repair and must be replaced. Decisions on whether or how best to
repair/replace this equipment, or accept a certain level of attrition,
requires careful evaluation. The Marine Corps is participating in the
Stress on Equipment analysis that will help us to determine the correct
strategies for major equipment repair/replacement. That effort is
integral to making informed and prudent resource decisions for
resetting the force. Meanwhile, the Marine Corps continues to use the
supplemental funding provided by the Congress to fund replacement
equipment in support of our MPS squadrons, depot maintenance for
repairs to our land vehicles and aircraft, and to replace ammunition
expended. Such efforts help to reduce the time it will take to reset
the force back to pre-OIF/OEF levels.

10. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, have adequate resources been provided to ensure that
units have recovered from their deployment and are prepared for future
missions?
General Casey. The Army requires $1.2 billion to fully fund the
reset of Operation Iraqi Freedom (OIF) 1 and Operation Enduring Freedom
(OEF) 4 units to ensure combat capability is restored. The fiscal year
2004 Emergency Supplemental funded approximately $2 billion of a $3
billion unit-level repair requirement and $1.2 billion of a $1.4
billion depot maintenance requirement. Additionally, the Army staff is
developing cost estimates for reconstitution of OIF-2/OEF-5 units and
sustainment of our forces while deployed in the theater of operations.
However, it is too early to state these estimates with a high degree of
confidence.
We believe that the fiscal year 2005 President's budget request
will adequately fund our peacetime operational tempo. However, without
reset funds, we will be forced to take risk and support the reset
effort from within the base budget.
Admiral Mullen. Yes, adequate resources have been provided to
constitute the fleet after OIF and the Navy will be able to field
forces on par with the OIF effort later this year, culminating the
fleet-wide implementation of one facet of the Navy's organizational
transformation, the Fleet Response Plan (FRP).
In the CNO's Guidance for 2004, one of his major action items was
to ``deliver the right readiness.'' It was clear in responding to OIF
that the Navy could not best meet the long-term global war on terrorism
force requirements using its traditional employment methods; we are
truly involved in transforming how we get our develop ready forces. The
FRP is among the most important of those transformations and is the
real reason we can provide such an immediate surge capability close on
the heels of major combat operations.
The FRP strengthens the Navy's commitment to provide combat-ready
forces to combatant commanders overseas in areas of vital U.S.
interest. The Navy has been, is now, and will always be a rotationally
deployed force. FRP fundamentally changes the way we get the fleet
ready. While continuing to rotationally deploy forces overseas, FRP
institutionalizes a higher level of force employability and provides
the surge capability necessitated by the global security environment.
At the same time, we respond more flexibly by deploying for a purpose
and add to the security of our forces by becoming less predictable to
those that would do us harm.
The ramp-up to support OIF, permitting the extended arrival window
of five Carrier Strike Groups at the outset, was impressive but we
cannot count on a passive competitor in the future. The 21st century
presents our Nation with varied and deadly new threats, including
regional adversaries armed with growing anti-access capabilities and
international terrorist and criminal organizations. Countering such
enemies and consistent with guidance espoused within our National
Security Strategy, Navy reviewed the best way to transform its fleet
employment policy. Last May, the Chief of Naval Operations approved
FRP, redefining our readiness process, and in doing so, provided a more
responsive force to meet our defense and military strategies, and
presenting the President with more force employment options. A premium
is placed on ready, flexible forces able to pulse rapidly either to
augment forward-deployed forces or respond to crises in remote and
widely separated locations.
By refining our maintenance, training and manning schedules, we
have institutionalized the capability to provide six Carrier Strike
Groups (CSG) within 30 days and an additional two CSGs within 90 days,
more commonly known as ``Six plus Two.'' CSGs are highlighted here
because they are the most complex components to prepare for deployment,
but FRP applies to the entire fleet. With the implementation of FRP,
half of Navy forces could be ready to provide homeland defense and be
either forward deployed or ready to surge forward with overwhelming and
decisive combat power.
We are now focusing our readiness efforts on achieving rapid
deployability once a strike group has emerged from an extended
maintenance period. This is a significant mind-shift change from the
old way of achieving deployment readiness on the verge of the scheduled
deployment date. The result is a period of extended readiness that
nearly doubles former readiness windows. Though the time that platforms
are available for employment will increase the total time sailors are
deployed will not.
General Moseley. We believe the fiscal year 2004 Reconstruction of
Iraq and Afghanistan Supplemental was properly sized at the time to
address our immediate needs for prosecution of the war and
reconstitution efforts. The Air Force, like our sister Services, is
first balancing its wartime requirements within available funding
levels. Where possible, less urgent requirements are deferred to a
later time without jeopardizing the state of readiness and our ability
to meet our wartime mission requirements. At the pace and demands of
operations to date, we believe we can manage this risk during the
execution year. However, if operational demands accelerate later in the
year, we may have to reevaluate our ability to sustain our efforts
without additional help (supplemental or reprogramming).
General Huly. Prior to their OIF II deployment, the Marine Corps
received supplemental monies for identified, but unfunded, equipment.
This support, combined with training specifically designed and focused
on future Iraq deployments, has enhanced the marines capabilities and
mission flexibility. The Marine Corps continues to evaluate its force
reconstitution requirements and is making maximum use of the funding
already provided to mitigate any shortfalls.

LOGISTICS PROBLEMS

11. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, there were a number of articles in the press,
particularly during the first few months of operations in Iraq, that
reported on a variety of problems associated with the logistics support
for operations in the Iraq theater of operations. Shortages of ammo,
spare parts, and fuel were a few of the examples cited. Some have
suggested that many of these problems were the result of too few
inventories. Others suggested that these shortages were associated with
the rapid advance of combat units into Iraq. Recent findings by the GAO
indicate that some problems continue to exist. The GAO, for example,
reported a $1.2 billion difference between the amount of material
shipped to the theater and the amount that units acknowledge receiving.
What is your assessment of the supply throughput to the forces in the
field? Are inventories of spares, ammunition, etc., of sufficient
inventories to support the current pace of operations?
General Casey. Supply throughput to the field has improved
dramatically over the last 6 months and units are receiving requested
supplies in a timely manner. Early deploying units did experience
problems with receiving shipments of needed supplies. The Army
identified the problem with mis-shipments of repair parts by
consolidating the delivery of full pallets of repair parts on a single
pallet destined to a specific supply warehouse in theater. The method
of ``pure palleting'' supplies has dramatically improved the percentage
of supplies reaching the correct unit and has reduced the time it takes
to reach the unit.
In respect to current spares inventories and ammunition, the supply
position of critical items is improving and is able to meet
requirements for units in theater. After years of successfully reducing
inventories to meet congressionally mandated targets for inventory
reduction, additional monies received in 2003 are beginning to add back
repair parts and ammunition items. Increases in operational tempo,
coupled with environmental factors, have increased the demands for
repair parts and ammunition. The Army continues to invest heavily in
the repair of unserviceable items as the first option for replenishing
inventory and satisfying demands. Depot repair production is up over
last year; however, higher demand is requiring the Army to increase
quantities for procurement and in some cases initiate emergency buys on
selected critical items.
Admiral Mullen. My assessment, based on Navy's history of operating
in the area at this pace, is that the supply throughput is adequate and
inventories are sufficient. For over a decade, the Navy has maintained
almost continually a Carrier Strike Group presence in the fifth Fleet
AOR. The logistics pipeline into the region is mature and highly
productive, providing support in an accountable and timely fashion.
Current Navy operations closely parallel the OPTEMPO we've maintained
in the region for years and the Navy supply system is resourced to
support the level of operations currently underway.
General Moseley. As our supply metrics will attest, our overall
spares support to the field is at its highest point since the early
1990s. Previous operations and exercises have highlighted the need to
begin planning combat support and sustainment in concert with the
mission planning. To cover wartime/contingency operations, the Air
Force approves additive levels of essential spares, or Readiness Spares
Packages (RSPs). These RSP assets are deployed along with the weapon
system to sustain operations until normal supply channels are
established to provide routine re-supply capability.
Our success in supporting contingency operations is evident in that
the Air Force supported over 860 Air Force aircraft in the area of
responsibility (AOR) at 27 locations and filled over 82,000
requisitions. At the height of Operation Iraqi Freedom, over 9,000 high
priority requisitions were delivered with an average Logistics Response
Time (entire pipeline from requisition to customer receipt in the AOR)
of 12 days vs. 21 days prior to September 11. Most importantly, no
sorties were lost due to lack of parts or munitions.
Based on current classified operation requirements and stockpile
inventories, the munitions inventories are sufficient to maintain the
current pace of Air Force operations.
The Air Force has a number of transformation initiatives in varying
states of implementation that will further enhance our ability to
support supply throughput to our deployed forces. These initiatives
focus on managing our supply chain from end-to-end to increase
availability and improve affordability. We are changing our processes
and providing the tools necessary to support our vision.
General Huly. The success of the supply throughput was challenged
by our lack of in-transit visibility (ITV). The lack of asset
visibility on unit stocks and ITV on ordered items made it difficult to
identify actual shortages, to locate needed items within stocks for
reallocation, and to direct and track the movement of ordered items to
requesting units. This resulted in delays, shortages, and at times an
inability to expedite critical parts.
Lack of visibility for OEF/OIF I in the supply chain resulted in
duplicative ordering of some spares, which produced an impression of
high usage early on. Additionally, lack of in-theater ground
transportation assets to push supplies forward of the port of
debarkation was a problem.
Today, OIF II presents significantly different conditions under
which logistics is provided to the operating forces than did OIF I. The
theater of operations is logistically more mature, forces are operating
in relatively static locations as opposed to conducting a continuous
assault over hundreds of miles, and the numbers of marines and
equipment in theater are significantly smaller than during OIF I.
Spare/repair parts availability for ground equipment is sufficient;
our current inventory is adequate to support operations. With our
improvements to our distribution system we anticipate no difficulty in
keeping up with the current pace of operations.
Regarding ammunition, there have been no significant ammunition
shortages based on Marine Forces identified requirements. Prior to
hostile action commencement, the Marine Corps experienced very minor
deficiencies to fulfill the total combat requirement; however, as
identified by the Marine Central Command at the time, no deficiency was
characterized as a `showstopper'. Current inventory levels are
sufficient for both training and war Reserve requirements. Our practice
of fully funding all ammunition requirements to the maximum
practicable, has positioned the USMC to limit the surge requirement
stress we have placed on the industrial base to only small production
increases. Current on hand stocks are sufficient for the current pace
of known contingencies.
The Marine Corps lessons learned from OEF/OIF affirmed we are on
the right track with our Logistics Modernization efforts. Our focus on
total asset visibility and enhanced maintenance concepts, all supported
by our Global Combat Support System-Marine Corps (GCSS-MC), will ensure
excellence in logistics support, through the logistics chain, both in
deployed and garrison operating environments.

12. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, in cases where there may be shortfalls, what steps
have the Services taken to increase the efficiency of supply support to
units in Iraq?
General Casey. The Army has implemented solutions in four key areas
to increase the speed and accuracy of supply shipments to Iraq. The
Army has ensured logistical requirements can be sent directly to the
United States by an assured information technology infrastructure
supported by commercial satellite equipment. This is allowing the Army
to ``see'' requirements in real time. The Army is reducing the chance
for misrouting of critical supplies by building pure pallets of
supplies earmarked for a specific unit. This initiative allows the Army
to speed the supplies to its final destination without having to
repackage the supplies for onward movement. The Army is supporting the
U.S. Transportation Command (TRANSCOM) initiative for a theater
Deployment Distribution Operation Center to help synchronize
distribution of materiel from origin to final destination by optimizing
strategic and theater lift. This initiative has resulted in improved
reliability, enhanced materiel visibility, increased speed, and
improved customer confidence. Finally, the U.S. Army Materiel Command
has deployed forward repair activities in Iraq to support the
requirement for repairing critical repair parts in theater.
Admiral Mullen. The Navy has aggressively supported our Marine
Corps teammates in Iraq. For example, cargo handling units are deployed
along the supply chain to speed the uninterrupted flow of replenishment
parts to deployed forces and the return of failed critical components
back to repair depots. A new program to ease the occasional difficulty
encountered by Seabee battalions in obtaining quality construction
materials is in the final stages of completion, integrating elements of
both pre-positioning and responsive, multi-national vendors located in
areas where we need them.
From a joint perspective, we have provided resources to support
TRANSCOM and General Handy's efforts to improve ``last mile'' material
distribution for all units operating in Iraq. Establishment of the
CENTCOM Deployment Distribution Operations Center (CDDOC) is providing
the structure, capabilities, and oversight to synchronize all levels
(strategic through tactical) of personnel and cargo distribution. This
center is focusing on eliminating bottlenecks and ensuring unimpeded
throughput of forces and material, enhancing logistic support for units
in theater.
General Moseley. Several initiatives have been undertaken to
optimize supply support in Iraq.
The concept of the Regional Supply Squadron (RSS) was born during
the Desert Shield/Storm experience, when the Air Force Contingency
Supply Support Activity was activated to centrally manage supply
support to deployed units. The RSS is aimed at providing improved
spares supply chain command and control by focusing the efforts of all
elements of the spares supply chain on the same goal . . . weapon
system availability.
The core Agile Combat Support (ACS) principles of responsiveness,
time definite delivery and resupply, continental United States reach
back, and leveraging information technology place strong demands on
materiel management activities sustaining the Air and Space
Expeditionary Force. The key ACS tenet ``train the way we fight''
mandates an RSS structure that seamlessly supports both peacetime
requirements of supported major commands and contingency requirements
of combatant commands.
The Air Force implemented the High Impact Target (HIT) list of all
``problem'' items by soliciting input from the major commands
concerning items driving deployed aircraft Mission Incapable Supply due
to the increased operations tempo. This process was expanded to
encompass Defense Logistics Agency managed items along with monitoring
outstanding Air Force contracts on HIT list items.
The Air Force and major commands have daily briefings on the status
of deployed aircraft and engines to ensure supply issues and parts
shortages are tracked to completion.
Under DOD guidelines, the Air Force has instituted the Spares
Priority Release Sequence that prioritizes Joint Chief of Staff (JCS)
requirements, regardless of priority, ahead of Air Force non-JCS
requirements. This prioritization process ensures that Air Force
deployed/tasked unit requirements are satisfied prior to other non-
tasked unit requirements.
General Huly. We overcame our supply issues by enhancing in-transit
visibility and by outsourcing some air transportation requirements
where feasible. We have implemented Radio Frequency Identification
(RFID) Tag technology, and partnered with the Defense Logistics Agency
(DLA) for pure pallet packaging. Containers and pallets that were
multi-packed for various units across the services had to be broken
down and manually sorted, then rebuilt before delivery to the tactical
end user, adding significantly to the distribution timeline. This issue
has been resolved using the pure-pallet initiative. The pallet is built
with items destined for a particular support site in Iraq. DLA,
traditionally a wholesale distributor, is now extending their supply
chain management functions to the Service-managed retail inventory
level.
We have partnered with the Army and Navy for supply and
distribution systems to leverage existing airlift channels to the
maximum extent. As a result of these initiatives, we are moving spare/
repair parts sustainment stock more quickly through the distribution
transportation system and pushing these stocks forward within 24 hours
after they arrive at the aerial port of debarkation (APOD).
Another challenge was the difficulty in communicating requisitions
to the supporting Theater Support Command for common item support due
to the incompatible supply and warehousing information systems. The
materiel distribution process was cumbersome at best. This issue was
also resolved using the pure-pallet initiative from DLA.

FLEET RESPONSE PLAN: FLEET PRESENCE

13. Senator Ensign. Admiral Mullen, fleet presence around the world
has been the foundation of the Navy's operating concept for over two
centuries. In the age of carrier battle groups, when any crisis emerged
in the last 50 years, one of the first questions from every president
since FDR has been: ``Where are the carriers?'' I understand that the
Navy has implemented a new operating concept called the Fleet Response
Plan. As I understand it, this new concept of operations is predicated
on maintaining a Navy ready to ``surge'' when required. What are the
benefits of this new operating concept?
Admiral Mullen. Senator, the FRP strengthens the Navy's commitment
to routinely provide forces through flexible deployments to combatant
commanders and additional combat-ready forces, faster, in times of
need. To be certain, the Navy was, is, and always will be a
rotationally deployed force operating overseas in areas of vital U.S.
interest. When needed in times of major crisis, the FRP enables the
U.S. Navy to respond with--to ``surge''--a greater number of forces and
significantly more combat power than under previous plans, providing
flexible and combat-credible options for the President.
The FRP realigns our readiness processes and ensures that more
forces achieve combat readiness sooner after a major maintenance period
and then maintain that combat readiness for an extended period. In
doing so, FRP provides the capability to employ up to eight Carrier
Strike Groups in a contingency response; this is fifty percent more
than possible under prior methods. This additional surge capability
does not come at any cost to the Navy's commitment to rotationally
deploy forces overseas but ensures as many forces as possible operating
in home waters are combat ready.
The FRP has also resulted in new force packages, like the
Expeditionary Strike Group (ESG) that couples the deep striking power
of cruisers, destroyers, and submarines with the proven forcible entry
capabilities of our marines embarked in Navy ships. ESGs provide
increased capability to the joint combatant commander that is
persistent and sovereign. The future addition of DD(X) and JSF STOVL
will enhance further the robust and flexible portfolio of combat
capability of ESGs. Over the next few years, two new SEAL teams and
four SSGNs will be fielded, enhancing the FRP and the projection of
naval power and influence.

14. Senator Ensign. Admiral Mullen, how does the Navy's FRP
continue to maintain worldwide fleet presence?
Admiral Mullen. Responding to the new world security environment,
it was clear that the Navy could not best meet the long-term force
requirements of global war on terrorism using its traditional
employment methods; we are truly involved in transforming how we get
our forces ready and increasing the combat readiness return on the
taxpayer dollar. The FRP is among the most important of those
transformations and is the real reason we can now provide such an
immediate surge capability close on the heels of major combat
operations.
The FRP strengthens the Navy's commitment to routinely provide
forces through flexible deployments to combatant commanders and
additional combat-ready forces, faster, in times of need. Specifically,
the FRP maintains the Navy's traditional commitment to rotationally
deploy forces overseas in areas of vital U.S. interest. These
capabilities-based forces are ready to respond across the entire
spectrum of international engagement, from diplomacy to major crises--
anytime, anywhere, in the far corners of the world, without a
permission slip. Furthermore, FRP also ensures that forces operating in
home waters quickly achieve and then maintain a combat-ready level of
readiness, providing more options to the President and additional
forces for crisis response or homeland security, as required. When
coupled with the Joint Staff deployment policies, naval forces can be
more flexibly employed to meet the near term demands of the security
strategy.
Naval forces will continue to deploy and provide a global naval
presence based on combatant commander prioritized and validated
requirements. FRP provides these ready forces overseas to meet the new
planning requirements of 10-30-30; detering crises, defeating the
intentions of an adversary, or winning decisively against a major enemy
with speed.

15. Senator Ensign. Admiral Mullen, to what degree has this program
been coordinated with the regional combatant commanders?
Admiral Mullen. The Combatant Commanders (COCOMs) have had full
visibility on the Fleet Response Plan as it was implemented. COCOM
staffs were briefed and the principles themselves by the Chief of Naval
Operations at a combatant commander conference in 2003, with regular
updates continuing. The Navy continues to meet Global Naval Force
Presence Policy (GNFPP) requirements every day and now--under FRP--
exhibits improved readiness and the ability to surge deploy additional
combat ready forces in times of national need.
Fleet Forces Command coordinates all presence and force flow
through the naval component commanders who in turn discuss options with
their COCOMs. In those few cases where the Service needs differ from
the COCOM requirements, the Joint Chiefs provide arbitration of the
issues prior to SECDEF approval, as they routinely have for many years.
In aggregate, the Fleet Response Plan increases, not decreases, the
total forces available to combatant commanders by having combat-ready
forces rotationally deployed overseas as well as operating in home
waters, available at the direction of the President or Secretary of
Defense.

FLEET RESPONSE PLAN: AVIATION TRAINING

16. Senator Ensign. Admiral Mullen, I understand that as a result
of implementing the Fleet Response Plan, the Navy will decrease flying
hours for aviators. Part of this decrease will be due to adjusting
training cycles and part will be, according to press reports, an
increased reliance on simulator training. A good deal of Navy aviation
training occurs over the skies of Fallon, Nevada, and much of that
training is not simulator based. What are the implications for Navy
training at Fallon with implementation of the Fleet Response Plan?
Admiral Mullen. There are minimal implications to training at the
Fallon Range Training Complex (FRTC) as a result of FRP implementation.
The increased use of simulators is predominantly in basic pilot
training. Basic pilot training is accomplished at aviators' home
stations whereas advanced, live, large force training exercises and
other unique events are conducted at FRTC.

TRAINING OF NAVY/MARINE CORPS TRAINING AT EGLIN AIR FORCE BASE: COST
ASSESSMENT

17. Senator Ensign. Admiral Mullen and General Huly, the Navy and
Marine Corps did a great deal of work to find alternative locations to
conduct joint task force training when it was determined that training
facilities on the island of Vieques would be closed. The Navy
programmed over $400 million into the budget last year for upgrades to
facilities, for instrumentation and range upgrades, environmental
costs, and exercise support as a result of relocating training from
Vieques. The costs for supporting Navy training at Eglin Air Force Base
were based on the Navy's old operating concept and old fleet
formations. What are the implications for training on the Florida
ranges with the implementation of the Fleet Response Plan and the
creation of carrier strike groups (CSGs) and expeditionary strike
groups (ESGs)?
Admiral Mullen. For ESGs and CSGs, training on Florida ranges will
increase due to the loss of the Atlantic Fleet Warfare Training
Facility (AFWTF) and the emphasis of the Fleet Response Plan on
maintaining high level of readiness. The displaced training shift to
Florida and other locations will take place on other Navy training
ranges, Major Range Test Facility Base (MRTFB) ranges (Eglin), and USAF
training ranges (Avon Park). While there is a cost to train on MRTFBs,
such as the Eglin AFB ranges, these have been included in the
President's budget. The Navy plans to operate in the Gulf of Mexico
only outside of the hurricane season. When limited access to the Gulf
is coupled with the fact that the MRTFB ranges rightly give scheduling
priority to test events, CSGs/ESGs may not always use the Eglin AFB
ranges during their training. Navy also trains on MRTFBs only on a not-
to-interfere-with basis to the test community. However, the Navy, Air
Force, and Marine Corps have signed an agreement called the Overarching
Range Cooperative Agreement (ORCA) that establishes protocols to
schedule the use of one another's ranges and accommodate the joint use
of those ranges. We use this agreement when the Navy desires to operate
at Eglin AFB. The Navy has recently conducted a CSG and ESG exercise
using Eglin and plans to use Eglin as an option for training in the
future. Additionally, if the Navy only operates along the east coast,
we will still use all the Florida ranges, including Eglin AFB, for
strike training.
General Huly. The Florida ranges provided a limited training venue
for amphibious forces in support of a naval campaign. However, when
these ranges are used in conjunction with other ranges along the east
coast, then that training venue expands to an enhanced environment that
links into the training transformation initiatives of the Navy/Marine
Corps.
Overall problems that made using Eglin, at best, a secondary option
for training are:

Difficulty coordinating
No naval gun fire
Rigid range requirements
Air-centric
Limited offload (LHA)
High demand with AF training
Overall time (sailing from east coast NC/VA AOA)
Expense

TRAINING OF NAVY/MARINE CORPS TRAINING AT EGLIN AIR FORCE BASE:
ALTERNATIVE LOCATIONS

18. Senator Ensign. General Huly, your prepared testimony, and the
testimony of the Commandant of the Marine Corps before the full
committee a few weeks ago, both indicate that the Marine Corps is
continuing to explore other alternatives to conducting Marine Corps
training at Florida locations. What are those alternate locations and
what are examples of some of the benefits that those alternative
locations will provide?
General Huly. The Marine Corps is continuing to assess the
potential and value of expanding the training capability of its
installations at Camp Lejeune and Cherry Point, North Carolina.
Improving specific capabilities at these locations will provide a
direct benefit to the forces resident at those locations and will
ideally provide a more robust regional naval expeditionary training
capability, when incorporated with the capabilities at the other naval
facilities in the North Carolina and Virginia Capes geographic area.
Specific benefits that these alternate locations would provide are:

(1) Proximity to existing east coast Navy and Marine Corps
installations eases operational/deployment tempo considerations
(2) Usable year-round (no standing restrictions due to
hurricane concerns June-October)
(3) Lower costs to transit to/from training areas and train on
USN/USMC installations
(4) Investments in infrastructure benefit not only the Marine
Expeditionary Unit but also the entire II Marine Expeditionary
Force
(5) Camp Lejeune supports integrated live fire, to include live
naval gunfire from ship-to-shore
(6) Significantly lower costs to conduct large-scale amphibious
training at Camp Lejeune and Cherry Point vice the Eglin Major
Range and Test Facility Base.

TRAINING OF NAVY/MARINE CORPS UNITS AT EGLIN AIR FORCE BASE:
IMPLICATIONS FOR AIR FORCE

19. Senator Ensign. General Moseley, in 2001 and 2002, the 46th
Test Wing, Eglin Air Force Base, documented 9,129 and 8,856 test
missions completed, respectively, on the Eglin range. Please provide an
update of test missions conducted at the Eglin Range Complex. Please
state how many missions were requested, how many missions were
scheduled, and how many missions were conducted for calendar year 2003
and calendar year-to-date for 2004. Please apportion each data set by
month and by customer.
General Moseley. A total of 10,107 missions were conducted at Eglin
Air Force Base in 2001, which included 4,419 tests and 5,688 training.
In 2002 a total of 10,300 missions were conducted of which 4,317 were
tests and 5,983 were training. In 2003, 10,331 missions were conducted
of which 4,273 were tests and 6,058 training. Initial data for 2004
shows a total of 1,761 missions conducted of which 803 were tests and
958 training. The attached spreadsheets contain the data requested.
As the data used for this response does not exactly match the
mission numbers shown in the question, we are providing 2001 and 2002
data in addition to that requested for 2003 and 2004 in order to
provide a consistent data set over the time span.
Spreadsheet number 1 shows Eglin Air Force Base test and training
missions requested, scheduled, and conducted by month for calendar
years 2001, 2002, 2003, and initial data for January and February 2004.
This data source does not identify specific customers.
Spreadsheet number 2 shows test and training sorties scheduled over
the time span and identifies specific customers. Please note that the
number of sorties will not match the number of missions as a single
mission may involve several sorties.

STRING OF FIRINGS OF NAVY COMMANDING OFFICERS

20. Senator Ensign. Admiral Mullen, the press is reporting that
there were a number of commanding officers of Navy ships that were
relieved from their commands. Reports state as many as 22 commanding
officers have been relieved in the past year. How many commanding
officers have been relieved of their command in the past year, how does
that number compare to previous years and what actions is the Navy
taking to address this problem?
Admiral Mullen. Since May 2003, 20 commanding officers have been
removed from operational command due to misconduct or a loss of
confidence in their ability to lead. Of that total across the Service,
11 were in command of surface ships, 3 of aviation squadrons, and 4 of
submarines.
Overall, the gross number is statistically higher for 2003 compared
with previous years. The data alone, however, does not support any
readily distinguishable trend or pattern in terms of casual factors.
Consequently, I have directed an internal review of the cases to
determine if there are any distinguishable patterns or trends and, if
so, corrective recommendations. Each detachment is carefully reviewed
and given due process and each of these were justified by the facts of
the individual case; indeed, detachment was critical in order to
maintain high standards in general, and the special trust and
confidence placed in commanding officers in particular.

ARMY AND MARINE CORPS PREPOSITIONED STOCKPILES

21. Senator Ensign. General Casey and General Huly, both the Army
and the Marine Corps used both land-based and sea-based prepositioned
stockpiles for major combat operations in Iraq. I understand the Army
is continuing to use those assets and the Marine Corps is once again
drawing on prepositioned stockpiles as Marine Corps units return to
Iraq. Since the forces have transitioned from combat operations to
stability operations, to what extent have your Services begun to return
equipment to the prepositioned stockpiles that will not be required due
to this change in operations?
General Casey. The reset of Army Prepositioned Stocks (APS) is
being impacted by the continued use of APS equipment in Southwest Asia
(SWA). As an example, over 3,800 individual vehicles from APS have
recently been issued in support of theater requirements. This presents
a challenge in accomplishing APS reset. APS equipment will be used to
support future Operation Iraqi Freedom (OIF) rotations. This is the top
priority for APS maintenance efforts both in and out of theater and
comprises a significant percentage of the APS equipment remaining in
SWA, again limiting our ability to fully reset APS.
APS reset actions have been accomplished on APS-4 (Korea), two
ammunition ships, the 1 1 for Guam/Saipan, and the 1
1 for Diego Garcia, which is being prepared to go afloat.
Additionally, 48 percent of the combat support/combat service support
equipment for the second large medium speed roll-on/roll-off ship for
Guam/Saipan has been removed from SWA and is undergoing repair in
Charleston, South Carolina. The Army will attempt to complete fill of
this ship; however, continued use of APS equipment in SWA may prevent
this.
General Huly. The transition from combat operations to stability
operations influenced the decision an withdrawal requirements from the
First Marine Expeditionary Force (I MEF) concerning use of Maritime
Prepositioning Force (MPF) equipment. The combination of an established
logistics infrastructure and force composition to support the
stabilization mission contributed to a selective (or tailored) approach
to withdrawing specific equipment and supplies from the MPF. This
selective approach resulted in a reduction in the requirement for much
of the prepositioned sustainment stocks (i.e., Meals Ready to Eat
(MREs), ammunition, package Petroleum Oil and Lubricants (POL),
fortification, or medical supplies) and focused on our prepositioned
Principal End Items (Class II/VII). As a result, the sustainment items
not required to support OIF-II, but normally used in the first 30 days
to support a Marine Expeditionary Brigade (MEB), are in the process of
being returned to prepositioning stocks to support the rebuilding of
our other prepositioning squadrons. As a result of the OIF II
deployment of MPS principal end items, asset availability continues to
be the major challenge in returning equipment to the prepositioning
programs.

22. Senator Ensign. General Casey and General Huly, what are the
particular challenges associated with this process?
General Casey. As previously noted, the continued use of APS
equipment in Southwest Asia is impacting APS reset. Support to future
Operation Iraqi Freedom (OIF) rotations will also require a large
amount of APS equipment. This has the benefits of reducing home station
equipment requirements, reducing the amount of strategic lift needed,
and leaves a pool of equipment in the continental United States in case
it is needed to support contingency operations elsewhere in the world.
However, by utilizing APS equipment, the Army limits its ability to
fully reset APS. Additionally, the continued use of APS equipment in
theater will result in higher maintenance costs and increased numbers
of replacements in the future.
A major challenge will be funding. The supplemental funding we
received this year was instrumental in resetting parts of APS. However,
with much of the APS equipment remaining in theater supporting current
operations and future OIF rotations, our reconstitution burden will
only increase. The Army has an approved APS future strategy that we are
continuing to refine, but without adequate funding, this strategy may
be at risk.
General Huly. Utilizing prepositioning assets for long-term
employment (6 months and beyond) creates challenges at the Service
level to adjust/shift the institutionalized support infrastructure
(i.e., Depot maintenance, Master Work schedule, service contracts,
outsourcing, etc) from long-term, pre-programmed, and budgeted workflow
to short-term, reactive resource management that impacts fiscal
efficiencies and strains workflow capacity. The long-term employment of
principal end items has created an equipment availability problem that
will only be alleviated by additional investments, redistribution from
the operating forces or return of assets currently employed in
contingencies. An extended equipment availability problem may result in
gapping the Marine Corps prepositioning maintenance cycle at Blount
Island Command, Jacksonville, Florida, which has the potential to
degrade long-term operational capability and debilitate the Marine
Corps ability to restart the maintenance cycle contract.

23. Senator Ensign. General Casey and General Huly, how are you
using your reset plans to redeploy pre-positioned assets for future
missions?
General Casey. The Army leadership recognized before Operation
Iraqi Freedom (OIF) that the APS strategy that was based on Cold War
realities had to change in order to meet Army transformation goals and
to address the world's changing environment. OIF afforded the Army the
opportunity to implement its new APS strategy in concert with Army
setting the force plans.
This new APS strategy is capabilities based and supports the
defense strategy by emphasizing rapid force closure, enhanced strategic
responsiveness, and provides flexible deterrent options to the regional
combatant commanders across the full spectrum of operations.
Under this strategy, the Army will maintain land based APS in
Northeast Asia, Southwest Asia, and Europe. The APS afloat program has
changed to an Army Regional Flotilla (ARF) concept where the afloat
capabilities are dispersed geographically in critical regions to
provide a set of modular capabilities. Each ARF will be comprised of
five ships with a total of three flotillas located in the
Mediterranean, Diego Garcia, and Guam/Saipan.
The approved APS reset timeline is currently being executed in
accordance with Army setting the force priorities. Recent APS reset
actions have allowed the Army to place critical APS assets in Korea,
Diego Garcia, and Guam/Saipan. These actions have mitigated some risk
in three of four critical regions; however, current operations continue
to impact full APS reset. The Army leadership has recognized for
sometime that the timeline may have to be adjusted. This decision is
still pending. As the Army goes forward, we will continue to place
prepositioned assets in those areas deemed most critical preparing the
Army for success in future missions.
General Huly. Our focus is reconstituting a second MPF squadron
(MPSRON-1) between now and April 2005. Additionally, we continue to
assess what resources are available or needed to begin to reconstitute
a third MPF squadron (MPSRON-2) beginning in May 2005 and ending in
April 2006. Due to equipment maintenance capacity and/or asset
availability, the reality may be that MPSRON-2 is not reconstituted
until the OIF mission is complete and the returning equipment is
repaired with associated equipment re-installed. Once the employing MEF
determines their OIF III equipment requirements and external sourcing
shortfalls, we will be able to better assess our ability to
reconstitute MPSRON-2 and return our prepositioning capability to pre-
OIF attainment and readiness status.

ARMY GROUND AND AVIATION OPERATING TEMPO REQUIREMENTS

24. Senator Ensign. General Casey, the Army has faced a number of
challenges in trying to ensure that Army pilots and tank commanders
complete the number of flying hours and tank miles planned for their
training. For example, the Army was authorized funding in fiscal year
2004 for 913 tank miles, but believes that it will execute closer to
899 this year. With respect to aviation training time, the Army
continues to fall short of the stated requirement for 14.5 hours/crew/
month. Are deployments for contingency operations the major cause for
under executing ground and air training time, or are there other
factors, for example, are the required number of hours required to
maintain ready air crews and tank crews correct, and what steps is the
Army taking to address this issue?
General Casey. Ground--The Army was authorized 913 tank miles, but
we subsequently developed major command (MACOM) unique training
strategies that updated the training requirement from 913 to 899 miles.
MACOM strategies more accurately depict and estimate training
requirements taking into account such factors as political and
geographic constraints to training. Since 2001, the Army has executed
its training mission and, in fiscal year 2004, execution is on track to
meet or exceed projections. Our Combined Arms Training Strategy (CATS)
is working and sustaining our warfighting readiness. We see the results
every day in Afghanistan and Iraq. As the Army transforms and fields
units of action and implements the force stabilization initiative, we
expect to further modify our training strategy.
Air--The CATS requirement for the modified table of equipment
combat aviation units is an average of 14.5 hours/crew/month. In the
first 5 months of fiscal year 2004, the active Army is on track to meet
or exceed its air training requirements. The Army believes the CATS is
accurate, however, a new training strategy is being developed as a
result of the mix of pilots and aircraft as we move aircraft and pilots
from the Corps into the Divisions under the Aviation Implementation
Plan concept. The under execution of the flying hour program in the
past was primarily due to three major factors: (1) Aviation
Transformation Plan (divestiture of several Vietnam-era aircraft, re-
sized units and movement of aircraft to other active component units
and into the Reserve component to replace shortages); (2) Aviation
units deployments to/from Bosnia, Kosovo, and Afghanistan requiring
additional maintenance down time and 3 months ship and recovery time;
and (3) Safety of flight (SOF) messages increased from an average of 12
between fiscal years 1997-1999, to 35 between fiscal years 2000-2002,
that caused numerous aircraft groundings waiting for new or improved
parts. SOFs were down to 13 in fiscal year 2003 that helped increase
execution to 14.1 hours/crew/month at home station. Currently there are
six SOFs through February 2004.

AIR FORCE AVIATION OPERATING TEMPO REQUIREMENTS

25. Senator Ensign. General Moseley, I note that the budget request
includes a reduction of approximately 20,000 hours for Air Force
pilots. What is the reason behind this reduction and what are the
implications for pilot training?
General Moseley. The major issue contributing to the ``20,000''
flying hour reduction was Air Education and Training Command's (AETC)
canceling of Undergraduate Pilot Training class 05-15. This action
provided funds to AETC to help build their fiscal year 2005 command
program. It was managed so that it supported the reduction of over
absorption pressures in the Air Force Operational Units and a reduction
of stress on Field Training Units. The related fiscal year 2005
undergraduate pilot production adjustment was from 1,100 to 1,014.

CAPACITY AT DEPOTS TO EXECUTE PLANNED MAINTENANCE

26. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, I am particularly pleased to read that the fiscal
year 2005 budget request includes increases for most of your depot
maintenance programs--in some cases, significant increases. How does
this level of funding address continuing concerns about maintenance
backlog?
General Casey. The Army defines the backlog as unfunded
requirements. Depot maintenance requirements include the following:
end-item overhauls and repairs, missile certifications, watercraft
certifications, embedded software maintenance, calibration support to
units, technical support to lower levels of maintenance, and the
recapitalization program. The Army's recapitalization program is fully
funded. Funding for depot maintenance commodities is at levels in
accordance with Army depot maintenance priorities and is balanced
against other key Army programs. As equipment continues to age, and
current operational tempo levels continue, sustainment costs will also
increase. While depot maintenance funding increases slightly from
fiscal year 2004-2005 (excluding the fiscal year 2004 supplemental),
backlog continues at higher than acceptable levels.
Admiral Mullen. Annual deferred ship maintenance has been reduced
every year since fiscal year 2000. The fiscal year 2005 budget request
provides the funding necessary to keep deferred maintenance low and
maintain high fleet readiness.
For aircraft depot maintenance, we have selected a more appropriate
metric based on readiness levels rather than maintenance backlog. For
airframes, the fiscal year 2005 program of record is resourced to
achieve the CNO readiness goal of 100 percent Primary Aircraft
Authorized (PAA) for deployed/work-up squadrons and 90 percent PAA for
non-deployed squadrons. In addition, through this year's cycle we were
provided an additional $33 million of funding to meet 100 percent of
the planned inductions for the fleet's critical aircraft. This level of
programming enables the Navy to meet operational commitments and
achieve flight line aircraft entitlements for critical type-model-
series. For engine depot maintenance, the fiscal year 2005 Program of
Record is financed to achieve the CNO readiness goal of zero bare
firewalls and 90 percent of the ready-for-issue spares.
General Moseley. Air Force depot backlog has decreased in recent
years due to supplemental and global war on terrorism funding. While
the Air Force increased funding in the fiscal year 2005 President's
budget (PB) for depot maintenance (82 percent--up from 77 percent in
fiscal year 2004 PB), we are still projecting 39 aircraft and 60 engine
deferrals, which are included on the Air Force's Unfunded Priority List
($242.8 million).
General Huly. The Marine Corps Depot Maintenance program funding
line remains consistent from fiscal year 2004 to fiscal year 2005 and
meets immediate readiness needs and maintains an acceptable level of
depot maintenance backlog.

27. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, are there any constraints at your depots that would
preclude your Service from executing the planned level of depot
maintenance?
General Casey. The Army and its depots are on track to execute all
planned depot maintenance workload. To accommodate the additional reset
workload, the depots have added second and third shifts, added
additional production lines, increased overtime, hired government and
contract employees, expanded contract hours, and implemented process
improvements. Even with this increased production, the depots have not
yet reached their maximum production capabilities and retain an ability
to increase production further to meet the demands of future rotations.
Admiral Mullen. The Navy carefully plans its maintenance and there
are no known constraints that would preclude depots from executing the
planned level of depot maintenance. A particular depot may experience a
short-term workload perturbation, usually accommodated by civilian
overtime and/or augmented by contractor artisans. Long-term workload
perturbations are accommodated through hiring additional personnel,
contractor augmentation and/or direct assignment of work to commercial
and inter-service depots.
General Moseley. No. We have the capacity to support workload that
may generate as a result of real world operations and reconstitution
efforts. We are meeting all demands and expect to continue to do so.
General Huly. Marine Corps Depots have the ability to execute all
planned depot level requirements. A primary constraint for the Marine
Corps in the near term is asset availability for planned depot
maintenance. Given the current operational tempo, many Marine Corps
assets are committed to support OIF II. This unplanned commitment of
assets initially slowed down asset availability for induction into the
depot maintenance cycle. However new induction plans for assets for
depot maintenance are being reviewed and continue to be updated to
ensure asset availability.

INVENTORIES OF SPARE PARTS

28. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, in the build-up to, and execution of, decisive
operations in Iraq, many had expressed concern that the pace of
operations had ``emptied the shelves'' of essential spare parts--
particularly in the Army. What is your assessment of the impact of
current operations on spare part inventories?
General Casey. During fiscal year 2003, several Army-managed
spares, critical in support of the global war on terrorism and
Operation Iraqi Freedom, were in short supply. Intensive management
efforts on the part of the U.S. Army Materiel Command's commodity
commands have, in most cases, been able to alleviate or significantly
reduce these shortfalls. However, the continued extremely high
operational tempo keeps the delicate balance of parts availability and
available resources precarious necessitating continuous oversight to
preclude recurring shortages.
Admiral Mullen. Spare parts inventories fully support current
operations and the Navy has maintained a similar level of OPTEMPO in
the region for many years. The Navy supply system is resourced to
support the level of operations currently underway.
General Moseley. The Air Force's spare parts inventory has remained
essentially level over the last 3 years, although our supply
performance (in terms of mission capable hours lost due to lack of
spares) has steadily improved. Aircraft grounded for lack of parts and
aircraft cannibalized for parts have remained approximately the same as
before Operation Iraqi Freedom. Our Air Force supply records indicate
the Readiness Spares Package assets (along with rapid re-supply
operations) were very successful in keeping weapon systems operational
during the overall conflict.
General Huly. Lack of visibility for OEF/OIF I in the supply chain
resulted in duplicative ordering of some spares, which produced an
impression of high usage early on. The combination of normal operating
stock and prepositioned assets on Maritime Prepositioning Ships (MPS)
mitigated the impact. The Marine Corps experienced minimal spares
impact as a result of operations. We overcame the visibility problems
by using the commercial freight company, Dalsey, Hillblom & Lynn (DHL),
to provide quick response to the operating forces in Kuwait. Because
the Marine Corps has an end-to-end supply chain secondary reparable
management program, we were able to minimize the impact to operations.
The impact of current operations on spare parts inventories is
improving.

29. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, to what degree can the industrial base support
requirements for spare parts?
General Casey. The industrial base adequately and satisfactorily
supports spare part requirements within contractual and material lead
times. A great majority of spare parts (80 percent) are under the
Defense Logistics Agency (DLA) management, and the U.S. Army Materiel
Command (AMC) manages the remainder. Overall spares support from AMC's
major subordinate commands and DLA's supply centers was tremendous.
However, critical items remain critical items even in a time of war.
Our industrial base responded to the challenges and surged production
on several key items such as tracks, road wheels, batteries, and rotor
blades in support of the high level of conflict intensity. Our
experience with the industrial base for this effort has been extremely
positive, and many of our contractors have given us their full support.
Admiral Mullen. The industrial base is adequately supporting the
requirements for spare parts. Performance based logistic contracts in
addition to the retirement of older ships and airframes have eased the
occurrence of spare parts shortages in general.
General Moseley. The aging fleet is increasing operating costs and
impacting readiness. Office of the Secretary of Defense has formed the
Joint Council for Aging Aircraft and the Air Force has established an
aging aircraft office at our Air Force Materiel Command to provide an
Enterprise Management Approach. We have formed a Diminishing
Manufacturing Source and Material Shortages Program to address
solutions such as redesign, and qualification of additional
manufacturers to include aftermarket sources for parts manufacturers.
We also have asked Air Force Research Laboratory to assess the
industrial base.
The Air Force, along with the other Services, are developing and
implementing capabilities to respond to the issue of parts
availability. Our aging fleet and some newer systems continue to
experience component availability problems. This is mainly with
microelectronic items but other commodity groups are impacted. We
expect that our current acquisition processes will keep us in step with
the industrial base and therefore, allow us to make rapid changes as
needed.
General Huly. Industry did respond to most of our surge
requirements for spares and repair parts for ground equipment.
Additionally, the Marine Corps leveraged our industrial base surge
capability for NBC equipment, and most recently, body armor. Also, the
requirement to armor plate our vehicles was met with quick, decisive
response from the commercial sector as well as our own depot expertise.
Marine Corps depots manufactured and shipped vehicle hardening to meet
the recent I MEF OIF-II requirement. For their expertise and devotion,
they were recently awarded the Meritorious Unit Citation by the
Secretary of the Navy.

30. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, what programs do each of your Services have in place
to manage procurement and distribution of essential spare parts?
General Casey. The U.S. Army Materiel Command prioritizes the
distribution and procurement of all essential spares based on the
priority of need for each customer. Procurements are awarded based on
funds availability. Currently, fiscal years 2002 and 2003 spare parts
procurement for peacetime requirements and procurement in support
contingency operations are on contract.
As with any massive deployment, there are challenges in meeting the
distribution. Multiple consignee shipments being broken down,
separated, and delivered to the requesting combat unit resulted in
extensive delays at the Theater Distribution Center. The Defense
Distribution Center is now building pure pallets to be sent directly to
the requesting major combat units. Additional transportation assets,
both ground and theater air, have been allocated to move parts into the
maneuver area. The Defense Logistics Agency (DLA) has been asked to
stand up a theater distribution center similar to its operation at
Susquehanna, Pennsylvania. This, coupled with U.S. Transportation
Command initiatives, will smooth the path to the port or rail stop.
Admiral Mullen. Navy's global supply chain is structured to support
naval operations worldwide in areas of vital U.S. interest, in peace
and war. The Navy system is focused on timely delivery of validated
requirements anywhere in the world, including procurement, stocking,
and expeditious movement of essential parts. Part visibility and
tracking in the logistic pipeline ensures efficient movement from
manufacturer to end-user. Parts are stocked aboard ships and submarines
based upon the contribution to achieving a weapon system readiness
goal. To meet the parts demand of afloat units, Navy has robustly
funded the wholesale requirement to ensure system responsiveness.
Increasingly, we use our commercial partners via performance based
agreements to improve the availability of mission essential parts that
have historically not satisfied the fleet's demand in a timely fashion.
To support sustainment, critical parts that have been used and are in
need of repair are flagged for expeditious movement back to depots for
rapid return to the fleet. There are isolated cases where support does
not meet fleet requirements, but these are exceptional support
challenges and not driven by lack of funding or current operations.
Overall, from end to end, we have the supply chain about right,
particularly for essential items.
General Moseley. Processes and procedures are in place to
accelerate procurement actions in response to an emergency, including
contingencies. Procedures are also in place that allow for expedited
delivery, including direct delivery to the user.
The Air Force Procurement and Supply Chain Management
transformation initiative incorporates a shift toward management of
material based on a commodity-centric approach, links purchasing and
supply chain management to the Air Force procurement and logistics
strategic goals. The objective is to align policies, processes, people,
and technology to facilitate continuous improvement to reduce total
ownership costs, manage risks, and improve performance (quality,
responsiveness, reliability, and flexibility).
With the increase in operations, a focused cell was established to
provide a ``one-stop shopping'' for shippers of Air Force Cargo. The
Continental United States (CONUS) Distribution Management Cell has
refined the skills resident within the Shipper Service Control Office
and the Air Clearance Authority to provide a service to expedite,
locate or divert cargo to meet our customer's needs. The CONUS
Distribution Management Cell is composed of a command and control cell
at Wright Patterson Air Force Base, and forward located personnel at
Norfolk Naval Air Terminal, Dover Air Force Base, and Travis Air Force
Base. The CONUS Distribution Management Cell is positioned to directly
support Operation Enduring Freedom/Operation Iraqi Freedom (OEF/OIF)
activities as well as any other operations needing specialized support
in asset visibility and expeditious movement of Air Force cargo.
An OEF/OIF shipment tool was developed in response to a United
States Air Forces, United States Central Command request to automate
important shipment data and policy directives. The shipment tool
summarizes by week, the transit time performance to all OEF/OIF
locations for Air Mobility Command and commercial carrier modes.
Additionally, delays such as cargo frustration, incorrect routing and
customs delays are shown to highlight problems encountered in various
shipping modes. Shippers as well as decisionmakers use this data to
determine preferred modes and carriers.
Another initiative that has helped optimize mode and carrier
selection is our partnerships with the World Wide Express carriers. On
a weekly basis, commercial carrier performance from an Air Force
perspective is forwarded to the carriers for their comments. Feedback
from the carriers usually detail problems they are having, get-well
plans and carrier specific routing. If carrier performance trends
indicate poor performance then a change in shipping mode or carrier is
considered and/or implemented. Monthly conference calls with the
carriers and carrier representatives located in the area of
responsibility have been effective in relaying Air Force priorities and
concerns.
General Huly. The Marine Corps has an end-to-end supply chain
secondary reparable management program. As a result, reparables are
reordered based on failures and replenishment of those items at
predetermined points as a result of the collaborative planning process.
Visibility of essential spare parts coming from the continental United
States was one of the greatest challenges during OIF. A recent
initiative to mitigate those challenges is the implementation of Radio
Frequency Identification (RFID) tags. We are using RFID tags on all
sustainment cargo (e.g., boxes, pallets, containers) for OIF-II and
will apply tags and interrogate down to the tactical level. We plan to
use RFID technology to obtain visibility to the battalion level and to
push tagged shipments as far forward as possible. Distribution teams
with interrogators are established at key nodes in theater to employ
RFID visibility to the tactical level. While we are working the initial
RFID implementation now, the end state is full integration into the
end-to-end distribution process.

DEPOT-LEVEL REPAIR/MAINTENANCE OF EQUIPMENT USED IN IRAQ

31. Senator Ensign. General Casey and General Huly, Army and Marine
Corps armored and mechanized vehicles, helicopters, and other equipment
have been tried and demonstrated durable and reliable, without
question, in the harsh Iraqi environment. As this equipment comes off
the line for depot-level repairs and servicing, what is the strategy of
the Army and Marine Corps to quickly and effectively make repairs and
return the equipment to the warfighters?
General Casey. The Army has established extensive ground, aviation,
and communications and electronics sustainment programs in theater to
support the warfight. The three primary locations where maintenance is
performed are Tikrit, Anaconda, and Arifjan. The U.S. Army Tank--
automotive and Armaments Command, Rock Island, Illinois, has
established Forward Repair Activities (FRA) composed of select
capabilities from both Anniston and Red River Army Depots (Anaconda and
Arifjan) to provide support to combat and tactical equipment. A HMMWV
support center was established in Iraq (Anaconda) on October 29, 2003,
to provide wheeled vehicle services. The Army is also in the final
planning stages for establishing an intermediate level maintenance
Heavy Tactical Vehicle Support Center in Iraq. The U.S. Army
Communications--Electronics Command, Fort Monmouth, New Jersey, FRA
(Tikrit and Arifjan) supports the Mobile Subscriber Equipment,
communications security, intelligence electronic warfare, logistics
automation programs, and other general communications and electronic
items. Technicians from Tobyhanna Army Depot are supporting logistics
automation hardware, Common Ground Stations, and the Firefinder radar
systems. The U.S. Army Aviation and Missile Command, Redstone Arsenal,
Alabama, has an Aviation Classification Repair Activity Depot (AVCRAD)
and a Mast Mounted Sight Team (Arifjan) capable of providing theater
level intermediate and selected depot support for all Army aviation
systems in the area of responsibility. The AVCRAD also supports
aircraft phase maintenance and conducts the processing and deprocessing
of aircraft at the port. Teams are also on the ground inspecting,
assessing, repairing, and servicing equipment; building wheel
assemblies; applying add-on armor; inspecting and evaluating battle
damage costs; and identifying and inspecting and processing repairables
for retrograde to the United States.
To accommodate the reset workload done at the depots in the U.S.,
the depots have added second and third shifts, additional production
lines, increased overtime, hired government employees and increased
contractor support, and implemented process improvements.
General Huly. The Marine Corps strategy includes early
identification of requirements, use of forward deployed contact teams,
and maximum use of remain behind equipment to quickly and effectively
repair and return equipment to the warfighter.
Early identification of requirements was accomplished by contact
teams sent in theater to conduct assessments of damaged and dead lined
principal end items. As a result of early identification of
requirements, the Marine Corps made sourcing decisions that expedited
the repair process. Blount Island Command dispatched a large contingent
of forward deployed contact teams to initiate on site repairs and begin
Maritime Preposition Force reconstitution. Marine Corps Logistics
Command dispatched contact teams to assess the condition of Remain
Behind Equipment (RBE). The contact teams identified the RBE that was
operational capable and available for MPF reconstitution, equipment
that needed repair and could be repaired on site, and equipment
requiring depot level repair.

32. Senator Ensign. General Casey and General Huly, to what degree
are the maintenance depots being used to effect repairs?
General Casey. In fiscal year 2004, the Army received $1.2 billion
for emergency supplemental reset funding for depot level overhauls and
rebuilds in addition to our peacetime budget for depot maintenance. The
Army is using reset funding to have its industrial base and industry
partners restore key combat systems to the condition our equipment was
in when it deployed with our soldiers. To accommodate the reset
workload, the depots have added second and third shifts, additional
production lines, increased overtime, hired government employees,
expanded contract hours, and implemented process improvements. Even
with the increased production, the depots have not yet reached their
maximum production potential and retain an ability to increase
production further to meet the demands of future rotations.
The U.S. Army Tank--automotive and Armaments Command, Rock Island,
Illinois, has established forward repair activities composed of select
capabilities from both Anniston and Red River Army Depots (Anaconda and
Arifjan) to provide support to combat and tactical equipment.
Technicians from Tobyhanna Army Depot are supporting logistics
automation hardware, Common Ground Stations, and the Firefinder radar
systems.
General Huly. The Marine Corps Depots have a major role in
returning the operating forces to full mission capable. Both Depots are
multi-commodity centers that can repair most Marine Corps ground combat
equipment and are committed 100 percent to reconstitution efforts for
Maritime Preposition Program and the MARFORs. Marine Corps Depots
accelerated execution is providing timely support to the reconstitution
effort.

ARMY AMENDED BUDGET REQUEST

33. Senator Ensign. General Casey, the Army recently cancelled the
Commanche helicopter program. As a result of the cancellation, the
President has submitted a revised budget request for the Army for
fiscal year 2005. The request indicates an increase of $57.0 million
for the Army operation and maintenance account for the Army's Flying
Hour Program. The request also indicates a decrease of $48.2 million
from the Army National Guard from the Guard's Flying Hour Program. What
are the implications for the aviation training programs of the Army and
of the National Guard as a result of these funding realignments?
General Casey. Active Army Flying Hour Program (FHP): Although the
Army requested an increase of $57.8 million for the Operation and
Maintenance, Army (OMA) appropriation, only $33.9 million is designated
for the FHP. The remainder of the $57.8 million is designated for other
aviation requirements (i.e., publications, $6.8 million; logistics
programs, $2.9 million; flight training, $10.2 million; doctrine
development, $4 million). The FHP increase funds the Army's move to the
new modular unit structure by moving aviation units from the Corps into
the Divisions, converting the 3rd Infantry Division, 101st Airborne
Division (Air Assault), 10th Mountain Division, 4th Infantry Division
and the 4th Air Troop/2nd Armor Cavalry Regiment by the end of fiscal
year 2005. The Army changed the mix of line pilots and staff pilots in
units that increased flight hours in modernized aircraft. This movement
to modular units caused the changes to aircraft allocation and crew mix
for UH-60, OH-58A1C, OH-58D and AH-64. More AH-64 Apache helicopters
and pilots will be retained in the Active Force and all Attack
Battalions will be converted to the more expensive AH-64D Longbows by
2005. Also, the Aviation School's Program of Instruction (POI) for
Implementing Flight School XXI changed causing a 12 percent increase in
flight hours but only a three percent increase in cost by using more
hours in less expensive TH-67 and OH-58AC aircraft.
Army National Guard FHP: New force structure changes for the Army
National Guard (ARNG) are based on the Aviation Implementation Plan.
The $48.2 million reduction in the President's fiscal year 2005 budget
submission incorporates force structure changes in the Army National
Guard (ARNG) FHP. The changes affect mix of aircraft and pilots for the
entire fleet of aircraft. The primary reduction in cost is a result of
the elimination of 6 Divisional Cavalry Squadrons (12 Air Troops and 6
Aviation Unit Maintenance Troops) and 1 Attack Battalion as a result of
new Army aviation designs. In addition, one of the ARNG Attack
Battalions originally scheduled for conversion to the AH-64D Longbow
will remain equipped with the older AH-64A.

34. Senator Ensign. General Casey, what does this mean in terms of
hours flown per air crew per month (the Army/Army National Guard metric
for aviation training)?
General Casey. Active Army Flying Hour Program (FHP): We have not
changed our crew operational tempo training strategy in fiscal year
2005--remains at 14.5 hours/crew/month. However, the strategy will
increase slightly as more aviation units are transformed into the new
modular unit structures (14.6 in fiscal year 2006 and 14.7 in fiscal
year 2007 and out). The Aviation Implementation Plan's new modular unit
structure changed the mix of line pilots that fly more hours than the
battalion's staff pilots in combat units. This change increased flight
hours in modernized aircraft. The plan changes the FHP based on
aircraft reallocation and crew mix for OH-58D, UH-60, CH-47D, and AH-
64. More AH-64 Apache helicopters and pilots will be retained in the
Active Force and all will be converted to the more expensive AH-64D
Longbows by 2005. We are retaining more UH-60As that are more expensive
to fly than the UH-60Ls. Also, the Aviation School's program of
instruction for Implementing Flight School XXI changed causing an
increase in flight hours and cost.
Army National Guard (ARNG) FHP: The ARNG aviation training strategy
has changed slightly upwards from 9.7 to 9.9 hours/crew/month. The
increase is due to the change in the mix of pilots and aircraft in the
modified table of equipment combat units. Overall, the ARNG reduced
authorized units, pilots and aircraft, which is the reason for the
decrease in funding.

BUDGETING FOR TRAINING EVENTS AT MAJOR RANGE AND TEST FACILITY BASES

35. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, one of the challenges identified with the growing use
of Major Range Test Facility Bases (MRTFB)-designated activities for
training purposes is financial solvency of the MRTFB. It has been
suggested that the services include funding for training at MRTFBs in
their Program Object Memorandums (POMs). How does your Service budget
for training at MRTFBs?
General Casey. Army MRTFBs do not program for training on their
ranges other than for the Integrated Training Area Management (ITAM)
program. The Army Test and Evaluation Command (ATEC) programs ITAM
requirements for White Sands Missile Range, Yuma Proving Ground,
Arizona; Dugway Proving Grounds, Utah; and Aberdeen Proving Ground,
Maryland. ITAM supports land management and maintenance at those
locations. Requirements are based on both testing and training
activities. ATEC does not program for range operations and range
modernization in support of training. Units using MRTFB for training
are normally required to reimburse the installation for range
operations support. Such funds would come from the unit's operational
tempo.
Admiral Mullen. Fleet commands budget for exercise activity on
MRTFBs from the Operation and Maintenance, Navy (O&M,N) account. These
O&M,N resources pay for training exercise support on MRTFBs and the
amount budgeted is developed using historical expenditures.
General Moseley. The Air Force programs for training activities on
the six Air Force MRTFBs, however not all training activities and units
are included in the POM submission.
The POM submission includes training funds only for the MRTFB's
host units. For example, Nevada Test and Training Range's (NTTR) host
unit is the Air Combat Command (ACC) wing at Nellis Air Force Base,
thus these units are budgeted for operations on NTTR, while no other
units are included in the POM submission. This rule applies to Utah
Test and Training Range (UTTR) as well with the exception that UTTR's
POM submission accommodates training for all ACC units. Large-scale
exercises on NTTR, i.e., Red Flags, are included in the POM by the
major commands in their Combat Air Forces Exercise and Readiness
Training Periodic Inspection. Otherwise, no other training on MRTFBs is
included in the POM submission.
General Huly. Currently, the Marine Corps does not have any MRTFBs
so therefore we don't budget for them. However, we do our testing at
Eglin AFB. The Air Force budgets for normal throughput at their
activity. When the Marine Corps has additional students to train, we
forward a Military Interdepartmental Purchase Request for the
additional cost only. Eglin AFB determines cost based on which course
it is and services needed.
Fiscal year 2004 global war on terrorism paid for 16 additional
students at a cost of $290,000 for the Navy Explosive Ordnance School.
Fiscal year 2005 global war on terrorism paid for 76 additional
students at a cost of $479,000 for the Navy Explosive Ordnance School.

36. Senator Ensign. General Casey, Admiral Mullen, General Moseley,
and General Huly, to what degree is budgeting captured in the current
POM development process?
General Casey. Only Integrated Training Area Management is
programmed to support training on the Army Test and Evaluation Command
major range test facility bases.
Admiral Mullen. The Operation and Maintenance, Navy (O&M,N) account
budgets projected workload for exercise support on ranges, to include
training on the Major Range Test Facility Bases. Fleet commands
resource these requirements within their budgets from the O&M,N
account.
General Moseley. Budgeting for training activities at Major Range
and Test Facility Bases (MRTFBs) follows the established Air Force
process and is captured in the respective Air Force Major Command
(MAJCOM) budgets. The current Air Force Planning Programming Budgeting
and Execution process allocates a fair-share portion of overall Total
Obligation Authority to each MAJCOM. Each MAJCOM allocates funding for
their programs based on required capabilities and current fiscal
realities. If a MAJCOM has a funding shortfall or excess, the issue is
elevated through the Air Force Corporate Structure process. The
Corporate Structure then ranks MAJCOM issues in accordance with Air
Force priorities, balancing disconnects and initiatives against
offsets. The Air Force Corporate Structure sees programmatic issues for
training events at MRTFBs during the POM only if the MAJCOM has a
broken program, a new program or is offering up funding from a program.
In short, program growth for MRTFBs is reviewed at the MAJCOM and air
staff level and competes for funding based on MAJCOM priorities and Air
Force priorities. MAJCOM priorities that don't receive funding are
consolidated and prioritized in the Air Force unfunded requirements
list.
General Huly. The POM development process captures all scheduled
training events at major range and test facility bases. Due to
deployments and other operational requirements, these schedules are
subject to change, and the corresponding adjustment in resources are
addressed in the year of execution through the budgeting process.
______

QUESTION SUBMITTED BY SENATOR JEFF SESSIONS
AIR FORCE C-5 FLEET

37. Senator Sessions. General Moseley, I am truly disturbed that
your C-5 fleet appears to be standing into trouble. We have a set of
programs on the books to upgrade the C-5s, the Avionics Modernization
Program (AMP) which is a comprehensive upgrade to the Avionics package,
and the Reliability and Re-engining Program (RERP) that fixes the
engines. I'm told these upgrades, in addition to improving the safety
of flight, will save over $1 million a day in operations costs and may
save over $8 billion through the Future Years Defense Program (FYDP).
Yet these programs were a bill payer in the Air Force budget this year,
and these badly needed upgrades are not even on your unfunded list. I
have heard further that your lead contractor, Lockheed Martin, may be
having trouble on the AMP software part of this and that the program
may slip even further than the year that the AMP program has already
slipped. Now with the C-5s in their current condition, it appears they
experience a lot of downtime, and many folks were upset that we leased
Antonov 124s where a company from the Ukraine flew our heavy lift
missions on a Air Force subcontract for close to $50 million during
Operation Iraqi Freedom. What is the plan for bringing these AMP and
RERP upgrade programs back on track to bolster the readiness of our
heavy airlift fleet or is the C-5 a divestment target?
General Moseley. With regard to C-5 AMP, last fall Lockheed Martin
briefed the program office of a 4-month slip in flight test completion
from June 2004 to October 2004. Since that time the Air Force has been
notified that flight test completion has been slipped to January 2005.
Funds were transferred from RERP to AMP in fiscal year 2005 for
Research, Development, Testing and Evaluation (RDT&E) and spare parts.
A C-5 must be AMP'd prior to being RERP'd due to avionics required for
the new engines. Therefore, our first priority is to ensure that AMP is
a success and remains on track. The current Air Force program procures
55 kits by the end of fiscal year 2006. Procurement of additional AMP
kits will be addressed by the Air Force during our fiscal year 2006
budget deliberation process.
Budget decisions removed RERP funds to pay for higher Air Force
priorities. Initial estimates from the program office indicated a one-
year slip in RERP RDT&E and procurement. Since those initial estimates,
the program office has restructured the program to bring RDT&E back to
the original schedule, however procurement has been slipped 1 year.
Three RERP kits were procured in fiscal year 2004 for RDT&E. During the
fiscal year 2006 budget deliberation process the Air Force will
evaluate several C-5 RERP options that keep this important program on
track with Air Force mobility requirements.
______

Questions Submitted by Senator Saxby Chambliss

AERIAL COMMON SENSOR PROGRAM

38. Senator Chambliss. Admiral Mullen, I am pleased that the Army
and Navy are teaming on the Aerial Common Sensor (ACS) program and
believe that the more our military approaches programs jointly the more
efficient we will be and the more value we will get for the taxpayers'
money. However, I have some specific concerns about the way the ACS
program is being competed. As you may know, the Army program manager
for the ACS program made the comment regarding the ACS platform that,
``It's like buying a car. I would love to have a Lexus or a Mercedes,
but my checkbook doesn't afford that, I get the minimum needs of a car
that I have to have.'' Now when it comes to fighting a war, collecting
sensitive intelligence in hostile environments, and ensuring the safety
of our men and women in uniform, I think that statement is a just a
little bit shortsighted. Can you comment on the Navy's requirements for
the ACS program, both regarding the sensors and the platform, and what
intelligence collection requirements you would not be able to meet if
you procured a platform that meets the minimum threshold versus the
more rigorous, objective requirements?
Admiral Mullen. The proposed ACS will meet the Navy's requirements,
exceeding EP-3E capabilities in both mission sensors and aircraft
performance while expanding the mission beyond the current Signals
Intelligence (SIGINT)--only capability. ACS mission systems represent a
significant improvement over the current EP-3E capabilities, performing
SIGINT (Communications Intelligence (COMINT), Electronic Intelligence
(ELINT), and special signals), Imagery (Electro-Optic, Infrared and
Synthetic Aperture Radar) and Measurement and Signature Intelligence
(MASINT). Additionally, ACS will exceed EP-3E aircraft performance
capabilities in terms of speed, altitude, and on-station coverage while
also meeting the EP-3E's maximum range criteria, significantly
surpassing the EP-3E's capabilities and meeting Navy intelligence
collection requirements even at the threshold requirement.

DEFENSE PLANNING GUIDANCE EMPHASIS ON PERFORMANCE BASED LOGISTICS

39. Senator Chambliss. General Moseley, in your written statement
you focus quite a bit on depot maintenance programs and funding. I am
pleased that the Air Force has a depot maintenance strategy and is
committed to it. I think the other Services would benefit from having a
similar strategy for their depot maintenance work. Apparently the most
recent Defense Planning Guidance issued in February 2004 requires that
all acquisition category 1 and 2 programs be reviewed for the
application of performance based logistics. I believe in performance
based logistics, but it often implies contractor support rather than
in-house depot maintenance, and the idea that we may be moving toward a
paradigm where we automatically assume that maintenance of major
weapons systems will be performed by contractors concerns me. We have
already seen this with the 767 tanker lease contract. What is the
intent and logic of this defense planning guidance directed review and
does it indicate that DOD is moving toward contracting out the workload
for our core logistics capabilities?
General Moseley. The Air Force agrees that current operations in
Operation Enduring Freedom--Afghanistan and Operation Iraqi Freedom
reinforce the value in terms of readiness, logistics footprint and
costs, of weapon systems operating under Performance Based Logistics
(PBL) arrangements (e.g. F-18E/F, C-17, F-117). PBL is the Air Force
preferred product support strategy for sustaining our systems.
PBL does not imply contractor support rather than organic support.
PBL places full accountability for product support on the program
manager using public, private, or a partnership between public and
private sector providers.
PBL will not impact core logistics capabilities, since, by law,
core logistics capabilities must be performed in Government-owned and
Government-operated (including Government personnel and Government-
owned and Government-operated equipment) facilities. We are able to
meet core logistics capabilities through partnerships that incorporate
the tenets of PBL. A good example is the C-17 PBL partnership between
the contractor and our Air Force depots on core workloads. These
partnerships will stand up core capabilities at all three Air Force
depots. WR-ALC currently performs depot maintenance on C-17 aircraft.
The Air Force is establishing additional core capability to perform
avionics work at WR-ALC, auxiliary power units at OO-ALC, and
pneudraulics and displays at OC-ALC. The Air Force will continue to
meet the requirements of the law.

BLOUNT ISLAND/MARINE CORPS LOGISTICS BASE ALBANY

40. Senator Chambliss. General Huly, I was pleased to see you refer
to Blount Island so extensively in your written statement. They and the
Marine Corps Logistics Base in Albany, Georgia, play an absolutely
central role in maintaining equipment and supplying the Marine Corps'
fleet of maritime preposition ships. From your comments in your written
statement on depot maintenance, it sounds like the Marine Corps has
requested less depot maintenance funding than you really need because
your depots do not have the capacity to handle the workload the Marine
Corps requires. It also sounds like you are not able to make equipment
available for depot maintenance at the appropriate intervals simply
because you need the equipment in the field so badly. Is it true that
the capacity of Marine Corps depots is insufficient to perform your
required workload, and what is your long-term plan for modernizing and
improving the efficiency of your depots in order to expand capacity so
they can meet all of the Marine Corps logistics requirements?
General Huly. The capacity of Marine Corps depots is sufficient to
perform the required workload. The depots can be operated at a surge
capacity and contracted support can be brought in to manage increased
workloads requiring rapid turnaround. The Marine Corps' organic
facilities have the capability to increase production to meet surge
demands through the use of overtime and working additional hours on the
weekends, without being augmented by additional facilities, equipment,
or personnel. If necessary, additional temporary personnel can be hired
to handle increased demand.
All Marine Corps Depot level requirements are being accomplished
through organic and commercial repair sources as required. The long
term plan is to transform the depots into a premier source of repair in
the Department of Defense, seeking workload outside the Marine Corps to
augment funded requirements and sustain critical skill sets. Public-
private partnering ventures are being developed to strengthen the
Marine Corps' competitive position and leverage expertise from both the
public and private sectors. The long term strategy includes modernizing
the depots to provide continuing support resulting from new equipment
acquisitions. Significant efficiencies continue to be realized within
the Marine Corps Depots as a result of process improvements such as
Theory of Constraints, Lean Thinking, and International Organization
for Standardization (ISO) certification.
______

Questions Submitted by Senator Daniel K. Akaka

TOMAHAWK MISSILES

41. Senator Akaka. Admiral Mullen, your testimony cites additional
investments in Tomahawk missiles, among other things, as the result of
lessons learned in Operations Iraqi Freedom and Enduring Freedom.
However, Tomahawks are also on the Navy's unfunded priority list. How
much have you invested in Tomahawks, and why have you not funded them
more robustly if they are an important warfighting capability?
Admiral Mullen. The Navy has significantly invested in the Tomahawk
weapon system which has repeatedly proven itself a valuable and
versatile weapon, investing $402.5 million in research, development,
test, and evaluation, Navy (RDT&E-N) funding from fiscal year 1998
through fiscal year 2004 towards the development of the Tactical
Tomahawk Missile; $510 million in the weapon (WPN) account in fiscal
year 2002 and fiscal year 2003; and the fiscal year 2005 President's
budget request contains $2.199 billion in weapons procurement funding
for fiscal year 2004-2009. This reflects $65 million additional funding
for fiscal year 2005 above the fiscal year 2004 President's budget
request profile. Also, the CNO unfunded list contains two unfunded
requests: one for additional Special Tooling and Special Test Equipment
to increase production capacity, and a second for an additional 163
Tactical Tomahawk missiles. By balancing the proper mix of other weapon
systems capabilities in combination with those of Tactical Tomahawk,
the fiscal year 2005 President's budget request represents the best
balance of resources to requirements across the Department of Defense.

FLYING AND STEAMING HOUR REDUCTIONS

42. Senator Akaka. Admiral Mullen, your statement acknowledges that
the Navy has reduced its goals both for steaming days and for flying
hours in this year's budget request. I know that all of the Services
are facing severe budgetary pressures, and that you are trying to be as
responsible as possible with your funding. However, I am concerned when
these pressures appear to lead to things like lowering required goals
and decreasing readiness. I have a couple of questions about this, but
I also want to state that this is an area where I am particularly
concerned about the relationship between the Navy and the Marine Corps,
with respect to funding. What I mean by that is, even if the Navy
decides that it can afford to reduce its flying hour requirements, for
example, I sincerely hope that these decisions are not forced upon the
Marine Corps, which might have a different view. Therefore, I hope that
the fiscal year 2006 budget request will reflect whatever the
independent judgments are of the Navy and Marine Corps about flying
hour needs, in particular. Was the flying hour reduction in this year's
Navy budget request driven by financial or operational concerns and
what about the reduction in ship steaming days?
Admiral Mullen. Our fiscal year 2005 budget request is the result
of a conscious, detailed, analytically-based effort to balance current
readiness needs and future readiness investments. Through an expansion
of our training cycle, efficiencies gained from shore-based training,
and increased utilization of flight simulators, we were able to reduce
flying hours and non-deployed steaming days while still maintaining a
readiness posture that supports the Fleet Response Plan. Simulators
systems have matured and become more widely available, providing a
realistic imposition of important combat and emergency situations that
are simply too risky for basic training in a live training environment
(e.g., airframe threatening aircraft emergencies, multiple weapon
firings, etc.), enhancing the overall regimen of both aviation and
shipboard training.
Concerning the Marine Corps Flying Hour Program, the Marine Corps
independently constructs its overall requirements in general and its
type/model/series training and readiness requirements in particular,
reflecting the significant differences in composition and mission
requirements of the two air fleets. Similar to the Navy, however, the
Marine Corps has also somewhat reduced their overall flying hour
requirement--which is fully funded--after a detailed review of their
training and readiness requirements and historical execution data.

READINESS

43. Senator Akaka. Admiral Mullen, what analysis has the Navy done
to demonstrate that less ready is still ready enough, or, put
differently, why were we previously paying for readiness we didn't
need?
Admiral Mullen. The Navy achieved over the last 4 years--and is now
maintaining--its highest, sustained level of readiness force-wide seen
in modern times. Indeed, only through your support and very aggressive
funding on readiness accounts by the CNO and Navy over the past 4 years
was the Navy able to implement such a far-reaching and transformational
force employment program like the Fleet Response plan (FRP). FRP is
among the most important of Navy's transformation efforts; it
strengthens--not lessens--the Navy's readiness and its commitment to
routinely provide forces through flexible deployments to combatant
commanders and additional combat-ready forces, faster, in times of
need.
FRP maintains the Navy's traditional commitment to deploy forces
overseas in areas of vital U.S. interest. These capabilities-based
forces are ready to respond across the entire spectrum of international
engagement, from diplomacy to major crises--anytime, anywhere, in the
far corners of the world, without a permission slip. Furthermore, FRP
also ensures that forces operating in home waters quickly achieve and
then maintain a combat-ready level of readiness, providing more options
to the President and additional forces for crisis response or homeland
security, as required. When coupled with the Joint Staff deployment
policies, naval forces can be more flexibly employed to meet the near
term demands of the security strategy.
We also continue to find new ways to enhance our current readiness.
We have, in particular, judiciously substituted flying and steaming
hours--where practical and where it makes sense--with additional
simulator time, decreasing our budget requirements but enhancing our
training. Only recently have we reached the point in terms of
technological maturity and fielded systems, particularly concerning
multi-ship exercises, that we can conduct realistic combat training
across multiple platforms in a simulated but realistic combat
environment. Aviation simulators continue to improve, enhancing overall
pilot training by the imposition of risky aircraft casualties not
prudent in live training.

DEPOT MAINTENANCE

44. Senator Akaka. Admiral Mullen, you state that the efficiencies
will be achieved both in depot maintenance and by increasing reliance
on simulations. What evidence do you have the maintenance efficiencies
will actually be realized?
Admiral Mullen. Our aviation depots are in the midst of a
transformation that will provide increased readiness to meet our
national security needs. Our AirSpeed initiative is aggressively
applying best business practices proven to work in industry such as
Lean, Theory of Constraints, and the principles of Six Sigma. We are
confident that we will actually realize efficiencies from these
practices because, first, they are being instituted where we have
identified strong parallels to the business model from which they were
drawn, and, second, we are already seeing positive results. For
example, using lean techniques, which focus on improving processes by
reducing non-value added steps, we have been able to reduce the cycle
time on F/A-18 brake assemblies by 68 percent. We have seen a 30-
percent decrease in turn-around time on the fiscal year 2004 aircraft
engine using Lean techniques in conjunction with a Performance Based
Logistics initiative. Using Theory of Constraints, which focuses on
identifying constraints in the process and minimizing their impact on,
overall process efficiency, we have been able to improve turn-around
time on H-53 standard depot maintenance by 10 percent. Based on the
improvements we have seen, the Naval Aviation Depots are expanding the
use of these proven process improvement techniques, where appropriate,
across a growing number of aircraft, engine and component programs.
This will allow us to move toward achieving ``Cost-Wise-Readiness'' and
allow the Navy/Marine Corps aviation team to effectively and
efficiently support the fleet.

45. Senator Akaka. Admiral Mullen, as for simulations, are you
buying additional simulators to support your new strategy or just
making increased use of ones you already own, and if it is the latter,
do you have enough simulators in the right locations to support your
new strategy?
Admiral Mullen. The Navy is procuring some new simulators to
support the training strategy included in this budget as well as
upgrading some existing ones. The simulators are in the right locations
to support our greatest training needs.

FLEET RESPONSE PLAN

46. Senator Akaka. General Huly, what are the implications of the
Fleet Response Plan (FRP) for the Marine Corps, and do you have any
particular areas of concern?
General Huly. To meet emerging threats in the global war on
terrorism, the Chief of Naval Operations directed the Navy to find ways
to provide additional forces in support of national objectives. From
this directive have come three concepts: Fleet Response Plan (FRP),
Flexible Deployment Concept (FDC), and SeaSwap.

FRP: By adjusting maintenance cycles, training
cycles, and revising ship manning this seeks to provide more
units to surge in response to unplanned contingencies and keep
individual units surge capable for a longer period of time.
This is designed to produce a consistent level of sufficient
readiness to enable short notice deployment whereas the
previous pattern demanded nearly perfect condition and training
prior to deployment and acknowledged substandard conditions
following.
FRP has the potential to increase overall capability.
USMC Position:

FRP has not yet been applied to Amphibious
Shipping.
The Marine Corps believes forward ``Presence
is the Purpose.'' The Marine Expeditionary Unit
(Special Operations Capable) [MEU(SOC)] is a highly
trained, specialized, and cohesive force, with a very
deliberate Pre-deployment Training Program. This
program provides the Combat Commanders with MEU(SOC)
that are able to respond to a wide range of missions
rapidly (due to forward presence) and ensures a
significant degree of parity due to the certification
process required for each unit prior to deployment. If
FRP does not require reduction in Navy support of MEU
forward presence, then improved readiness of non-
deployed assets is attractive. Other available Marine
Forces could deploy with these surge ready assets
should contingencies occur.
The MEU(SOC) program provides highly trained
units designed for forward deployment based upon the
Global Naval Forward Presence Policy schedule. FRP does
not necessarily threaten this highly used capability
but if the potential gains of FRP require reduced
forward presence deployments, as is the Navy Philosophy
in Carrier FRP, then geographic commanders will be
denied some portion of the MEU (SOC) forward presence
that has proven so useful in recent memory. Further,
current USMC efforts to increase SOCOM/USMC cooperation
in global war on terrorism depend on forward presence.

FDC: This concept intends to minimize `wasted'
employment of naval forces and provide improved employment
options. It codifies the Navy vision of ``Presence with a
Purpose,'' and seeks for sake of economy to retain its ships in
homeport or in local operating areas unless needed in direct
support of concrete national objectives.
USMC Position:

When applied to amphibious shipping it is a
direct counter to the philosophy of forward presence as
deterrence and crisis response, or ``Presence is the
Purpose.''
``Presence with a Purpose'' (per FDC)
equates to fewer days forward deployed.
Combatant commander requirements still call
for a 3.0 forward presence or greater (one MEU
continuously in each CENTCOM, EUCOM, and PACOM),
currently being met by a 2.5 presence. OIF/OEF have
further increased the utility of MEUs.
Crisis Response times are a relevant
concern, and surging from homeport in lieu of
responding from the immediate vicinity yields far
greater operational risk.

SeaSwap: A concept that maximizes the naval
capability deployed forward while minimizing the expenses
inherent in forward basing. In this model the ships remain
forward deployed while the entire crew complement is exchanged.
Crews are rotationally deployed for approximately 6 months,
removing the need for PCS orders, support housing ashore, and
the administrative structure to support dependents.
USMC Position:

Positive in this plan is the elimination of
transit time to the theater of operations.
Offsetting that will be the impacts
associated with turnover of equipment in theater, and
potential impact on overall capabilities as the marines
and sailors re-orient and regain full operational
readiness.
As ships, even within the same class, can
vary significantly there will certainly be challenges
associated with working up in CONUS on one set of ships
and then falling in upon another in theater.

Summation: It is the position of the United States Marine Corps
that the FRP, FDC, and Sea Swap concepts are viable, relevant, and
offer potential efficiencies. However, we must be sure we are not
losing critical capability in exchange for as yet unproven benefits.
When and how these plans are implemented could impact the United States
Marine Corps ability to remain the Nation's multi-purpose ``911''
force. We must remain cautious as we explore the potential of future
concepts and avoid further decrease in relevant forward deployed
capability in support of Combatant Commander requirements. Efforts to
increase the readiness of non-deployed amphibious shipping are welcomed
as well as implementation of proven concepts that meet forward presence
requirements more efficiently.

DEPOT MAINTENANCE

47. Senator Akaka. General Huly, I am concerned about funding for
depot maintenance. As I understand it, both the Army and the Marine
Corps are facing significant increases in maintenance associated with
operations in Iraq and Afghanistan that will not be fully covered by
supplemental funds. In addition, the FY05 budget request does not come
close to meeting your ongoing requirements to maintain equipment. The
Marine Corps only funded 65 percent of its known requirements. Your
statement suggests that this is because much of your equipment is being
used and is not available to go to the depots. However, the number one
unfunded operations and maintenance requirement is for depot
maintenance--an additional $43 million. So I am a little confused--is
there additional depot maintenance that needs to be done, and that
could in fact be done if you received additional funding, or is the
equipment not there?
General Huly. The Marine Corps has additional depot maintenance
requirements for fiscal year 2005 that have been identified in the
Unfunded Programs List. Given the current operational tempo, many
Marine Corps assets are currently committed to support OIF II. This
unplanned commitment of assets initially slowed down asset availability
for induction into the depot maintenance cycle. However, new plans have
been developed and continue to be updated to ensure asset availability.
The equipment that would be repaired with an additional $43 million has
been validated and will be available for repair.

UNFUNDED PRIORITY LIST

48. Senator Akaka. General Huly, is $43 million the maximum amount
of additional funding that could be executed if we were able to provide
it, or are there additional unfunded requirements that did not make the
priority list?
General Huly. The Marine Corps Depot Maintenance Program could
execute additional fiscal year 2005 funding if provided. The Unfunded
Programs List request of $43 million represents the highest priority of
remaining requirements. The Marine Corps continues to analyze equipment
usage as a result of OIF I and OIF II to determine if additional
requirements exist.

FORCE RESETTING

49. Senator Akaka. General Casey and General Moseley, how much
additional funding would you require to fully meet your known ``reset''
maintenance requirements, as well as to maintain your equipment during
normal peacetime operations?
General Casey. The Army needs $1.2 billion to reset Operation Iraqi
Freedom (OIF) 1 and Operation Enduring Freedom (OEF) 4. The total cost
requirement to reconstitute OIF-1 and OEF-4 was $3.4 billion, $2.9
billion for organic maintenance at installations and $1.5 billion for
depot maintenance. The fiscal year 2004 supplemental funded $2 billion
of a $3 billion requirement and $1.2 billion of the $1.4 depot
requirement. Additionally, the Army staff is developing cost estimates
for repair of OIF-2/0EF-5. However, it is too early to identify those
estimates with any fidelity. Without reset dollars, we will be forced
to take risk and fund within the base budget.
We do not anticipate a request for additional funds to maintain
equipment during normal operating tempo as long as the Army receives
the funds requested in fiscal year 2005 President's budget.
General Moseley. The Air Force requested $242.8 million on the
fiscal year 2005 Unfunded Priority List for depot maintenance. This
funding would eliminate 39 aircraft and 60 engine deferrals. It also
provides the Air Force opportunities to complete $10 million in
Intercontinental Ballistic Missile maintenance in lieu of deferring the
workload.

50. Senator Akaka. General Casey and General Moseley, what do you
believe are the immediate and longer-term readiness impacts if these
funds do not materialize?
General Casey. The Army will not be able to provide trained and
ready forces to combatant commanders in the numbers or with the
capabilities they require. The immediate impact would stall the current
momentum we have established for setting the force and produce a
cascading effect for purchasing parts, services, and reconditioning of
equipment, resulting in a backlog. Initially the impact may be
minimized by the diversion of peacetime parts or cash flowing this
requirement to address the shortfall, but this would delay rather than
fix the problem. The future readiness of the Army is largely dependent
upon the timely reconstitution of forces returning from Operation Iraqi
Freedom and Operation Enduring Freedom. Any decrement or delay in
funding this effort will result in a decrease in readiness and
degradation in the units' ability to conduct subsequent operations. The
long-term impact would be the Army's ability to provide trained and
ready forces to combatant commanders for ongoing missions and other
worldwide commitments.
General Moseley. If funds do not materialize, 39 aircraft and 60
engine depot inductions will be deferred. This places an additional
workload on blue-suit maintainers to perform extension inspections and
additional hourly inspections to ensure safety of flight. potential
grounding of some aircraft and/or engines could occur through
expiration of time or defects detected during extension inspections.

SPARE PARTS

51. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, one of the issues I want to ensure we get an update
on is the one that always seems to be identified as a problem after
every major operation, and that is spare parts. Can each of you please
briefly summarize your Service's experience with parts supply during
Operation Iraqi Freedom, any problems you might continue to have and
how they will be resolved, and any concerns you might have about spare
parts funding either for the remainder of fiscal year 2004 or in fiscal
year 2005?
General Casey. Inadequate spares in sustainment stocks and
Authorized Stockage List (ASL) create a potential readiness issue. Long
lead times for delivery of stocks and increased usage of repair parts
during contingency operations have adversely impacted Army's ability to
replenish ASLs and sustain equipment readiness. Currently, Army has
over $7 billion dollars in spare parts due from procurement contracts
and repair facilities. Spares needed to support contingency operations
are not projected during our peacetime budget operations.
As reflected in the logistics focus area, connect the logistician
and integrate the supply chain, there are three fundamental problems
with parts support for Operation Iraqi Freedom (OIF): lack of
communications connectivity for supply activities, distribution
challenges, and the availability of selected items of materiel.
Constant movement over extended distances during the early phases
of the operation precluded focused maintenance actions along with the
associated parts requisitioning. The communication connectivity
challenge has now been overcome by the purchase of commercial satellite
equipment for the tactical supply activities in theater. Equipped with
these terminals, OIF supply activities are now communicating their
requirements daily.
When materiel ordered in the early phase began arriving, movement
was constrained by the lack of secure distribution routes and the
limited availability of transportation. Constrained distribution
capability and the prioritization of supplies moving forward were
initially weighted on other than repair parts. Initially, more than 90
percent of available transportation assets were consumed moving water,
food, and fuel. Transportation challenges have also been addressed and
are showing improvements as more ground and theater air assets are
being used to transport parts to maneuver units. Additionally, this is
greatly facilitated by the Defense Distribution Center building pure
pallets of repair parts for major maneuver elements.
Increasing demands of OIF significantly impacted batteries and
tracks. Unanticipated high usage levels resulting from the increased
operating tempo and the desert environment caused temporary but
critical shortfalls until production and deliveries were able to catch
up. Actual OIF demands for repair parts for Abrams, Bradley, Palladin,
and HMMWVs, especially suspension parts, exceeded anticipated demand
factors by 6-10 times greater than normal peacetime usage.
Admiral Mullen. To ensure Navy could sustain extended combat
operations, we invested resources above peacetime levels in the
repairable supply chain well ahead of hostilities. As a result, ships
and submarines deployed with the necessary spares onboard to
successfully execute their missions and were adequately supplied
throughout OIF. Parts availability and the transportation pipeline met
Navy's requirement to support the continuous operations of seven
carrier and nine expeditionary strike groups. Today, our Navy continues
to experience the benefits of a robust supply system and, provided
there is no significant increase in OPTEMPO, parts availability is
expected to remain acceptable.
General Moseley. The Air Force does not have any congressional
spare parts funding issues for fiscal year 2004 or fiscal year 2005.
Due to robust funding of the flying hour program, backorders have
decreased, cannibalization rates are down, and aircraft not mission
capable for supply are at the best rate since 1995.
General Huly. Lack of visibility for OEF/OIF I in the supply chain
resulted in duplicative ordering of some spares, which produced an
impression of high usage early on. We have implemented Radio Frequency
Identification (RFID) tag technology, partnered with Defense Logistics
Agency (DLA) for pure pallet packaging, and partnered with the Army and
Navy for supply chain distribution support. The impact of current
operations on spare parts inventories is improving. DLA traditionally
was a wholesale distributor. DLA is now extending its supply chain
management functions to the Service-managed retail inventory level. In
the future, we will increase our partnership efforts with DLA applying
a National Inventory Management System (NIMS) concept. NIMS will
replace distinct wholesale and retail inventories with a nationally
integrated inventory. It will provide the Services with a much clearer
view of immediate stock requirements and minimize the Service's
financial investment in stocks. Class IX (spare and repair parts)
availability for ground equipment was not necessarily the problem;
parts were generally available from DLA and industry, BA-5590 batteries
were the exception. The problem was two-fold: (1) industry's inability
to respond to surge requirements in the time frame required, and (2)
funding constraints given the high daily usage and associated cost.
Marine Air-Ground Task Force (MAGTF) End-to-End (E2E) Distribution will
provide the tactical Marine the methods and tools to seamlessly execute
inbound and outbound movements for all classes of supply while
maintaining Total Asset Visibility/In-Transit Visibility throughout the
distribution pipeline. Working with our industrial base partners, who
will be required to assign RFID tags--both passive and active--will
provide visibility of assets on the shelves. As our industrial base
partners see the usage increase they can be more proactive in getting
supplies back on the shelves. MAGTF E2E distribution will facilitate
the flow of material through the logistics chain, both in deployed and
garrison operating environments.
With respect to fiscal year 2004 and fiscal year 2005 funding
concerns, there were no spare parts funding requests for ground
equipment on the Unfunded Programs List for either of those years.
However, there was funding for spares imbedded in the overall fiscal
year 2003 Supplemental for Reconstitution request. Currently, we are
evaluating the total force constitution that will determine the stress
on equipment repairs required at the depot level and Blount Island
Command to replenish our Maritime Prepositioning Ships. Additionally,
we will identify the amount of Class IX spare parts and secondary
reparables needed by Marine Forces to conduct in-theater repairs to
restore equipment to a full operational condition and extend the
service life.

52. Senator Akaka. Admiral Mullen, I understand that the Navy may
have identified a spares shortfall of $500 million over the Future
Years Defense Program. Is that the case? What is the Navy's shortfall
in spares funding, if any?
Admiral Mullen. As a result of the PR-05 Integrated Readiness
Capability Assessment (IRCA), spares were funded to 100 percent of the
post-IRCA requirement. Growth in future requirements has occurred
through the expansion of Navy's recapitalization and will be addressed
within POM-06. As a follower recapitalization account, the spares tail
will be adjusted accordingly to follow these changes in program, and
are thus continually changing year to year. This is particularly true
as the Navy divests several older weapon platforms with significant
spare parts tails. In all cases, however, routine resource sponsor
adjustments to the spares account take into full consideration the
attendant risks of a navy adjustments in terms of both timing--
specifically in cases of divesture--and funding levels, accepting only
well-understood conditions. In the final assessment of spares funding,
Navy is--under the Fleet Response Plan--ensuring that more operational
fleet units maintain a higher level of combat readiness for a longer
duration than in the past, deploying units as a matter of routine but
also ready to respond with significant forces if necessary.

TRAINING AT EGLIN AFB

53. Senator Akaka. General Huly, you say in your statement that the
Marine Corps is evaluating whether training at Eglin Air Force Base in
Florida is cost effective, and that you are examining other options.
Eglin was supposed to provide the best solution for training to
compensate for the loss of Vieques. What are the specific problems you
are experiencing at Eglin, and what changed from the analysis you did
prior to commencing exercises at Eglin that would cause you to pursue
other options?
General Huly. There are several challenges in conducting large-
scale amphibious and ground training aboard the Eglin AFB Major Range
and Test Facility Base (MRTFB) range complex as a result of fundamental
cultural differences between the testing and training communities.
These challenges and limitations include the lack of an integrated and
instrumented ground training range infrastructure, test directive
process inflexibility, inability to conduct live naval gunfire from
ship-to-shore, and the high costs to conduct training at Eglin. The
Marine Corps programmed its training costs for Eglin at approximately
$450,000 per exercise based on a series of cost estimates from Eglin.
Due to Eglin's decision to conduct the first exercise with exclusive
use of the ranges by the exercise force, the actual MRTFB costs became
significantly higher, nearly $1.25 million. As a result of these
limitations and high costs at Eglin, the Marine Corps is continuing to
assess the potential and value of expanding the training capability of
its installations at Camp Lejeune and Cherry Point, NC. The benefits
that these alternate locations would provide are:

(1) Proximity to existing east coast Navy and Marine Corps
installations eases operational/deployment tempo considerations;
(2) Usable year-round (no naval restrictions due to hurricane
concerns June-October);
(3) Lower costs to transit to/from training areas and train on USN/
USMC installations;
(4) Investments in infrastructure benefit not only the Marine
Expeditionary Unit but also the entire II Marine Expeditionary Force;
(5) Camp Lejeune supports integrated live fire, to include live
naval gunfire from ship-to-shore;
(6) Significantly lower costs to conduct large-scale amphibious
training at Camp Lejeune and Cherry Point vice the Eglin MRTFB.

54. Senator Akaka. General Huly, what other venues do you believe
might be available that would provide the necessary training, and when
do you expect to make a decision about whether you will move training
somewhere else?
General Huly. Both the Navy and the Marine Corps are planning to
use Eglin for training in some capacity for the foreseeable future. The
Marine Corps is continuing to assess the potential and value of
expanding the training capability of its installations at Camp Lejeune
and Cherry Point, NC. Improving specific capabilities at these
locations will provide a direct benefit to the forces resident at those
locations and provide a more robust regional naval expeditionary
training capability, particularly when incorporating the capabilities
at the other naval facilities in the North Carolina and Virginia Capes
geographic area. The Marine Corps will continue to seek new training
venues and locations, both within the United States and abroad, that
may offer site-specific training opportunities or enhance the operating
forces' overall regional training capability.

55. Senator Akaka. General Huly, can you describe what specific
changes to test facility regulations are necessary to improve training
at Eglin?
General Huly. The Marine Corps requires a naval expeditionary
warfare training venue for use during an advanced phase of the pre-
deployment training cycle. This venue must:

(1) provide tactical flexibility to the commander in planning and
execution of training events;
(2) exercise decisionmaking skills of units and leaders;
(3) forge Navy and Marine Corps interoperability in a dynamic,
realistic training environment;
(4) provide a dynamic, adaptable battle-space operating area vice
simply range-space.

The Marine Corps must not compromise training standards due to
Major Range and Test Facility Base inflexible test scheduling processes
or high costs to train. Should the Marine Corps continue using Eglin
for naval expeditionary force training, costs to train must be
controlled. Rigid test scheduling process must adapt to accommodate the
training requirements of large-scale amphibious and ground training
exercises which require expansive battlespace. Department of the Navy/
Department of Defense should make significant investments at Eglin to
provide substantial infrastructure, ground range, and instrumentation
upgrades to make it of equal or better training value than existing
North Carolina training areas. These improvements could include
development of proximate ground maneuver and dud-producing impact
areas, and instrumentation that supports training feedback of live-fire
tactical maneuver.

56. Senator Akaka. Admiral Mullen, the Navy has also begun training
at Eglin. Are you experiencing similar challenges, and do you agree
with the Navy that changes in the test range regulations are needed to
improve the Navy's training?
Admiral Mullen. Navy has trained on its west coast test ranges for
some time, and has experienced the same financial issues as experienced
recently at Eglin AFB. While the ability to mission fund some of the
assets on test ranges would lower the cost to train, the events
conducted on the major range test facility bases are already high
quality due to the high fidelity equipment required by the testing
mission. Close coordination with the test ranges facilitates effective
fleet use for training on a not-to-interfere basis, which should be
preserved to provide fleet access to the ranges and efficient use of
these range resources while still ensuring the RDT&E community is given
priority access to the resources required to adequately field new
systems to the fleet.

HAITI

57. Senator Akaka. General Huly, I know that you have a number of
marines who are on the ground doing great work bringing stability to
Haiti. How long do you expect this mission to continue, and what is the
impact on 2 MEF as it supports these forces?
General Huly. The target date for transition and Transfer of
Authority from the current Multi-National Interim Force Haiti (MIFH) to
a U.N. led coalition is 1 June. Impact on II MEF will be minimal as
long as the transition is accomplished in accordance with the published
timelines. 3d Bn, 8th Marines deployed to Haiti as part of the Air
Contingency Marine Air-Ground Task Force (MAGTF). They were originally
on the OIF II-2 Force List. CMC requested and SECDEF approved the
activation of 1st Bn, 23d Marines in order to fill the requirement in
support of OIF II-2.

58. Senator Akaka. General Huly, does the Haiti operation have any
impact on the Marine Corps' ability to support operations in Iraq and
Afghanistan or elsewhere in the world?
General Huly. The target date for transition and Transfer of
Authority from the current MIFH to a U.N. led coalition is 1 June.
Impact on ongoing Operations Enduring Freedom and Iraqi Freedom will be
minimal as long as the transition is accomplished in accordance with
the published timelines.

JOINT NATIONAL TRAINING CAPABILITY

59. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, I know all of you are participating in DOD's effort
to establish a Joint National Training Capability (JNTC), and that
Joint Forces Command recently directed the first JNTC event. Can each
of you please give me your perspective on how JNTC is progressing, as
well as a quick assessment of the initial event and are there any
improvements or refinements that you think are necessary?
General Casey. Through efforts to date, the Services, Joint Forces
Command, and the Joint and Office of the Secretary of Defense (OSD)
staffs have achieved considerable agreement about how to build the best
possible JNTC. JNTC is being developed to train both operational and
tactical level units and headquarters. For operational level units, it
provides a superb training opportunity for commanders and staffs of all
potential joint force headquarters; Army headquarters that must be
prepared to function as a Joint task force command, or Army
headquarters that must be prepared to function as Joint Force Land
Component Command. JNTC for tactical level units ensures they have the
opportunity to train joint and interoperability tasks within a ``true''
joint context, that is, as close as possible to how they will perform
during actual operations. In addition, JNTC at the tactical level gives
the Army a greater opportunity to train ``joint'' early in a soldier's
career.
The initial event was the first of four OSD-directed, Commander
U.S. Joint Forces Command sponsored JNTC exercises leading up to JNTC
Initial Operating Capability not later than October 1, 2004 with the
final operating capability scheduled for fiscal year 2009. The initial
event provided joint context for an Army National Training Center
rotation, an Air Force Air Warrior rotation, part of a Marine Corps
Combined Arms Exercise rotation at Twentynine Palms, and a Navy Surface
Launched Missile Exercise run virtually from three ships pier side at
San Diego, California. Three major technical tests were conducted at
the exercise locations to test the links between the live, virtual, and
constructive instrumentation and simulation systems. While operating
with service specific command and control systems proved challenging,
it did not result in any degradation to the network and the subsequent
training event. Integration of multiple Service tactical exercises into
a single coherent scenario was also challenging, but through Service
collaboration, advances were made towards the end of truly integrated
joint training. The progress made in developing a tactical-level JNTC
capability, as demonstrated in January's first ever JNTC event will
reinforce our efforts in fully integrating joint training capabilities
for all tactical level units, without significantly increasing
deployment and operating tempo demands on tactical units.
Admiral Mullen. The JNTC continues to make steady, positive
progress. The initial event was the first full tactical exercise of
joint close air support conducted within an enhanced joint context and
assessed to defined conditions and measures. In a significant
improvement over previous events, the execise incorporated the most
credible live and simulated opposing force ever constructed for such a
large event. While Navy participation was limited due to the nature of
the exercise, it included several geographically dispersed elements
participating both live and virtually.
In order to maintain the level of operational tempo important to
the well-being of our sailors and their families, it is important to
build JNTC participation upon existing Service-specific training and
within the existing Chairman's Exercise Program. The Navy's Fleet
Response Plan requires the capability to train Strike Groups in
geographically distributed Fleet concentration areas. The
infrastructure of JNTC should and will support this requirement, and
the addition of joint forces to Navy training events will enhance our
overall effectiveness. A concerted and collaborative joint effort is
essential to create JNTC that supports all of the Services' joint
needs. This approach builds individual Service core capabilities while
improving the joint context of training.
General Moseley. JNTC is just getting started but will greatly
enhance joint training at all levels. The addition of virtual and
constructive simulations to JNTC exercises provides participants much
needed joint context, increases training realism, and enhances home
station training quality, while reducing personnel tempo and deployment
costs. JNTC range instrumentation upgrades are also having a major
impact on the quality of training received by improving threat,
scoring, and feedback systems. In a collaborative way, Air Force and
other Service's organizations are providing valuable operational,
technical, and program expertise to assist the Office of the Secretary
of Defense, the Joint Staff, Joint Forces Command, and combatant
commanders with JNTC implementation. JNTC is on track to achieve
Initial Operating Capability (IOC) in October 2004 as planned.
The January 2004 Western Range Complex JNTC event was the first of
four JNTC events in fiscal year 2004 that define JNTC IOC. It created
an expanded, dynamic training venue for the Services while reducing the
costly requirement to transport exercise participants, their equipment,
and maintainers to a distant exercise location. Also, with the
integration of sophisticated virtual and computer-generated force
elements, the training was more complete and realistic than in previous
non-JNTC joint exercises.
Preparing our forces to deal with constantly changing real world
asymmetric threats is a huge challenge. In many cases, joint operations
have far exceeded our training capability to prepare our forces--
individuals, units, and staffs. JNTC has taken on this challenge to
blend the training environment and the operational environment to
prepare our forces under dynamic, adaptive conditions that ultimately
focus on mission rehearsal and true joint performance. The bottom line
is that this program must be fully funded to provide JNTC the resources
to prepare our warfighters to meet the challenges to fight and defeat
the global threats they face.
General Huly. From the Marine Corps perspective, the Joint National
Training Capability is progressing as well as can be expected
considering current operational commitments and fiscal constraints.
With forces deployed in support of Operation Iraqi Freedom and
Operation Enduring Freedom, as well as other commitments the Marine
Corps has around the world, forces available to conduct these exercises
are at a premium. We must ensure the JNTC events schedule reflects
well-defined training requirements and are not conducted simply in
order to fill the yearly schedule.
The Marine Corps was a full partner in the January 2004 Western
Range Complex Horizontal Training Event via the Combined Arms Exercise
at the MAGTF Training Command, Twentynine Palms, CA, and learned
valuable lessons from the event. The Marine Corps feels that there was
valuable training for the service members that were in direct support
of the Joint Close Air Support Missions, whether in the air or on the
ground. Two areas that require further work are better defining both
the training audience and appropriate levels of command, and continuing
to refine the Joint Tactical Tasks that the forces are to execute and
be assessed.

CORROSION

60. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, one issue I have long been concerned with is
corrosion; obviously, military forces in Hawaii constantly experience
the effects of hot, wet weather, and their equipment and facilities are
subject to severe corrosion problems. This affects their equipment
readiness, their manpower and maintenance costs, and their personnel
requirements. I am very proud of the actions this committee has taken,
along with our House counterparts, to raise the issue of corrosion
prevention to a higher level within the Department of Defense, and to
require DOD to centralize policy and oversight of the Services'
corrosion efforts in the office of the DOD Director of Corrosion
Policy. Our intent in creating a central corrosion office was not to
increase bureaucracy, but instead to drive common regulations and
testing requirements and to break down information barriers between the
Services and between the equipment and facilities communities. I am
interested, therefore, in your perspectives on DOD's current level of
effort on, and attention to, corrosion, the impact that you see of
corrosion on your forces and your budgets, and any additional steps
that might be taken to reduce the impact of corrosion and other factors
that drive high life-cycle costs, especially on the operations and
maintenance side. Could each of you please comment whether your Service
has begun to work together with the DOD Director of Corrosion Policy to
address this issue fully and, to address corrosion, has your Service
begun requiring that corrosion plans be developed for all equipment and
facilities, or do you anticipate doing so?
General Casey. The Army Corrosion Program is managed by the U.S.
Army Materiel Command where the Program Officer, Army Corrosion Program
sits as an Executive Committee member of the DOD Corrosion Prevention
and Control Integrating Product Team lead by the DOD Corrosion Policy
and Oversight Office. To date, there have been four Corrosion Forums,
in which each Service provided input to DOD on policy, standards,
capabilities, and requirements. It is in these joint committee meetings
that the Army participates with the other military Services to execute
the directives of the Bob Stump Act.
Among the efforts the Army has brought to bear in the fight on
corrosion is the work accomplished in Hawaii and Texas. The Hawaii
corrosion program is evolving into an Army Corrosion Center of
Technology. Army prototyped its first Corrosion Control Center (CCC)
for tactical vehicles and associated equipment at Schofield Barracks,
established the Pacific Rim Corrosion Center at the University of
Hawaii, and will install a newly designed Clearwater Rinse Facility at
Wheeler Army Air Field in the coming year that could become the
prototype for other Army aviation units. Successes in the Army's Hawaii
corrosion prevention and control initiatives led to the installation of
a similar CCC at Fort Hood, Texas, and plans for expansion to Fort
Polk, Louisiana, with others to follow.
Admiral Mullen. The Navy is aggressively supporting Mr. Wynne's
efforts as the designated DOD Corrosion Executive and has participated
in the DOD Corrosion Working IPT to develop plans and strategies to
mitigate the effects of corrosion. As part of this working team, we
assisted in the development of the DOD policy letter, the formulation
of the DOD Strategic Plan submitted to Congress last fall, and the
development of the revised DOD 5000.2. The most significant policy
achievement to date has been the DOD Corrosion Prevention and Control
Guidebook, which has already been passed to our acquisition programs.
Since this policy was released, several programs such as the V-22, H-1,
and MMA are already developing comprehensive Corrosion Prevention and
Control Plans and we anticipate continuing the introduction of these
plans for selected equipment. Coupled with appropriate funding profiles
and sufficient fiscal empowerment for the program manager, long-term
corrosion prevention will have a significant impact on life-cycle
costs.
The Navy has also supported the program through information
sharing. When Mr. Wynne first announced the formation of a working
team, the Navy leveraged existing Aging Aircraft efforts under the
Joint Aeronautical Commanders Group (JACG). The Joint Council on Aging
Aircraft (JCAA) developed a robust program to facilitate transition of
the latest technologies and tools to the fleet, resulting in decreased
maintenance man-hours and improved readiness. A joint effort from its
inception, the corrosion team has set the example by jointly evaluating
and qualifying new products, effectively identifying cross-service/
agency transition opportunities, increasing the sharing/acceptance of
inter-service test data and results, and reducing the time to implement
effective tools to detect, mitigate and remove corrosion. This joint
corrosion group is also leveraging existing DOD-wide, Coast Guard and
industry science and technology resources that are currently developing
improved corrosion detection technology and improved protection
systems.
Recent accomplishments in the battle against corrosion are
encouraging, and these changes, as well as other technologies and
processes, continue to be promising in the fight against corrosion. For
instance, sustaining engineering resources enable Reliability Centered
Maintenance (RCM) evaluations to effectively tailor and integrate the
proposed changes into platform lifecycle support plans; upgraded data
systems ensure relevant/timely information down to the component level
for informed trades; and available corrosion publications and related
training enable timely change implementation.
General Moseley. Yes, the Air Force is working closely with the DOD
Director of Corrosion Policy and Oversight (DCPO). An Air Force team
has participated in the DCPO's working forums since April 2003, led by
our Air Force Corrosion Prevention and Control Office, including
representatives from the Air Force Research Laboratory, Air Force
Coatings Technology Integration Office, Air Force Civil Engineering
Support Agency, and Headquarters United States Air Force Maintenance
Management Division. This team helped develop the new DOD corrosion
policy; led the compilation and reporting of the DOD cost of corrosion
maintenance; led the writing of the DOD Corrosion Prevention and
Control Planning Guidebook; and is leading the Air Force's current
effort to propose high-value corrosion projects for fiscal year 2005
DOD funding.
We are implementing the new DOD policy (OSD-AT&L memo November
2003), which requires corrosion planning by all acquisition programs
(for both equipment and facilities). The new policy has been
communicated to the Assistant Secretary of the Air Force, Secretary of
the Air Force for Acquisitions, Headquarters United States Air Force,
Air Force Program Executive Officers (PEO), and system program
managers. The DOD Corrosion Prevention and Control Planning Guidebook
has been provided to PEOs and program managers to assist them in their
planning. Air Force Instructions are already in place that require
corrosion programs, covering the entire life cycle, including design,
procurement, operation, and sustainment.
General Huly. The Marine Corps is actively engaged in supporting
the efforts of the DOD Director of Corrosion Policy and Oversight
through active participation in DOD Corrosion Forums and Working
Integrated Product Teams (WIPTs) that seek opportunities to reduce
corrosion, increase readiness, improve morale, and reduce costs
associated with corrosion control.
In support of the long term strategy of the DOD Corrosion Office,
the Marine Corps chairs the sub-committee on communication and
outreach, whose goal is the initiation of the DOD Corrosion Exchange
Web site for the collection and dissemination of corrosion data and
information.
The Marine Corps Corrosion Prevention and Control (CPAC) Program
Management Office, along with organizations at HQMC, are developing
several low risk Corrosion Control Projects using proven technologies.
These projects will focus on support for Marine Corps Ground Combat and
Support Equipment located throughout the world by detecting and
treating corrosion earlier and more precisely.
We are evaluating corrosion upgrades in the following areas:
Corrosion Service Teams. Focused on providing operator level
support in the battle against corrosion.
Long Term Storage. Indoor storage located near the warfighter used
to store assets both long-term and in a ready-to-roll mode.
On the Lot Storage. Takes advantage of current technology and
outdoor storage methods, where applicable and cost effective.
Wash Rack Upgrades. Upgrades to the old pre-established wash racks
used throughout the Marine Corps through a modernization program.
Additional funding will be requested in order to support the
project plans upon approval by DOD Corrosion Office.
The Marine Corps program has been working closely with the DOD
Corrosion Exchange Web site by disseminating posted information to the
operating forces using links from the Marine Corps CPAC Web site. The
information is constantly changing, but the site remains a user-
friendly location for the dissemination of information as intended.
The Marine Corps CPAC Program Management Office has helped to
develop the DOD Corrosion Control and Prevention Planning Guidebook.
The objective is to provide acquisition program managers with a tool
that provides guidance in developing and implementing a Corrosion
Prevention and Control Plan for all weapons systems.
HQMC and the Marine Corps CPAC Program focus on extending the
useful life of all Marine Corps tactical ground and ground support
equipment by reducing maintenance requirements and associated costs due
to corrosion damage. Additional funding for these efforts is desired to
ensure continued operation of Corrosion Service Teams, Equipment
Storage Programs, and Wash Rack up-grades. For corrosion fighting
efforts to be effective, continued support throughout DOD would be
required.

REDUCTION OF STEAMING DAYS FOR MINE HUNTERS

61. Senator Akaka. Admiral Mullen, I understand that while your
budget request funds an average of 51 steaming days for all ship
classes, some particular ship classes such as mine hunters had their
steaming days reduced rather dramatically, and that the Navy intends to
make up any resulting training shortfalls primarily through simulation.
How did the Navy determine which ship classes would have their more
realistic training reduced?
Admiral Mullen. Our budget funds an average of 51 deployed steaming
days and 24 non-deployed steaming days per quarter for all active ships
(less carriers and the submarine force), to include mine warfare ships.
Further, all Reserve ships are budgeted for 51 deployed steaming days
and 18 non-deployed steaming days per quarter. In the fiscal year 2004
budget submission, non-deployed steaming days for Reserve mine warfare
ships was budgeted at 28 steaming days per quarter, while all other
Reserve ships were budgeted at 18 steaming days per quarter. Our
current fiscal year 2005 budget reflects the adjustment to budget
Reserve mine hunter steaming days consistent with that of other Reserve
ships and to reflect actual steaming days being executed by the Reserve
mine warfare ships.

62. Senator Akaka. Admiral Mullen, how does simulation support for
mine hunters compare to simulations for other ship classes, in terms of
the number of simulators fielded and the quality of the resulting
training?
Admiral Mullen. Simulation support for minehunters is provided
through the Mine Warfare Training Center, located in Ingleside, TX. The
simulation support for minehunting platforms compares equitably to
other ship classes, respective to the mission requirements and size of
the ship class, and provides high quality training ashore that enhances
live training at sea.

STRAIN ON COMMAND AND CONTROL UNITS

63. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, given the number of operating locations and current
commitments, I would expect that the strain on command and control
assets is very large. I know, too, that despite unprecedented levels of
cooperation and integration in Operation Iraqi Freedom, our forces
continue to have problems with interoperability, communication on the
move, and bandwidth constraints. Please characterize the current level
of stress your service is experiencing for command and control units
and equipment, and describe what changes you think are necessary, to
include any requirements for additional funding, to help improve the
command and control situation.
General Casey. We thank the committee for its concern on the
effects of the worldwide deployments of Army command and control (C2)
units in support of our efforts in Southwest Asia and elsewhere
supporting operations in the global war on terrorism. We find those
effects most apparent in establishing a rotation of C2 units into Iraq
and Afghanistan while complying with deployment and dwell time
guidelines. This was made more challenging by the unprecedented numbers
of C2 units used in the successful preparation and prosecution of
Operation Enduring Freedom and Operation Iraqi Freedom. Because of the
unconventional nature of the operations and the distances involved,
more units were used than pre-OIF doctrine foresaw. This was especially
true of echelons above corps and corps level area signal battalion
units in the preparation for offensive operations and the current
support and sustainment operations.
The primary effect of this has been a more intensive management of
both Reserve and active component units to ensure that dwell time on
home station before redeployment does not break the 12-month guideline
established by the Army leadership.
Fortunately, two ongoing programs, 3rd Army's theater C4
commercialization and the Modularity efforts initiated by the Chief of
Staff, will support major improvements in bandwidth and joint
interoperability at all levels. The C4 commercialization program will
start to provide major reductions in echelons above corps and corps
level C2 units required in theater beyond OIF 3.
Theater C4 commercialization has already started fielding
commercial communications equipment and contracted personnel replacing
an abundance of military provided C4 capabilities and C2 units. This
effort results in a robust and interoperable theater backbone
communications system with a greater capacity in both data and voice
communications and interconnects the division, corps, joint task force
and combatant command elements to ensure radically improved command and
control communications to OEF/OIF.
The conversion of the 3rd Infantry Division into four modular units
of action (UA) and a unit of employment (UE) will provide a tremendous
C4 improvement. This conversion into the more modular UA/UE structure
is accompanied by the fielding of major improvements of battle command
equipment and higher bandwidth beyond line of sight satellite
communications down to the battalion level. This provides the
improvements in command and control and intelligence, surveillance, and
reconnaissance services documented as shortfalls in OIF lessons
learned.
These improvements in conjunction with continued intensive
management by the joint and Army staffs will provide the necessary
means to relieve the stress the current worldwide operating tempo has
induced in Army C2 units. Adequate support and funding of both programs
are crucial to maintaining the momentum established in transforming our
Army to cope with the new demands of global war on terrorism.
Admiral Mullen. Stress on some of our C2 systems, for example
tactical data links, is evident. We are addressing these challenges by
moving to more and more capable systems. We are phasing out capacity-
limited systems such as Link 11 (TADIL-A) and moving to the much more
robust Link 16 (TADIL-J). We found in recent operations, such as
Operation Enduring Freedom (OEF) and Operation Iraqi Freedom (OIF),
that the size of area involved in the conflict and the dispersion of
forces has created challenges in delivering the operational data to all
the locations that need the information. These shortfalls have been
identified by the Combatant Commanders and returning forces and we are
moving rapidly to correct the deficiencies. One interim solution that
produces significant capability is the NAVEUR Theater Maritime Fusion
Center to provide 24/7 fusion of all Tactical Data Link and Common
Operational Picture (COP) information. This Fusion Center bridges
several seams: between Carrier Strike Groups (CSGs) and other forces,
between fleet and shore, and between the Tactical Data Links and the
COP systems.
During OIF, available SATCOM bandwidth in all bands was
insufficient to meet demand in the forward theaters of EUCOM, CENTCOM
and PACOM. This strain affected data communications; Tomahawk Land-
Attack Missile (TLAM) operations; intelligence and strike planning; and
voice communications in all areas, as affected bands included SHF
(Defense Satellite Communications System (DSCS) and commercial);
Extremely High Frequency (EHF) (both Low Data Rate and Medium Data
Rate) Ultra-High Frequency (UHF); and commercial narrowband (INMARSAT).
Close cooperation among the forward theaters resulted in a worldwide
reallocation among all bands sufficient to meet the minimum
requirements. This shortfall is being addressed by greater capacity
systems such as the Wideband Gapfiller Satellite (WGS), the Multi-User
Objective System (MUOS) and the planned Transformational Communications
Architecture (TCA) SATCOM Roadmap. Navy must continue to field upgrades
afloat to take advantage of this, especially for smaller vessels that
provide Sea Strike capabilities in CSG/Expeditionary Strike Groups
(ESGs). Ashore, we will take advantage of the Defense Information
Systems Agency (DISA) Global Information Grid (GIG) to provide better
bandwidth using improved fiber optic paths, as well as taking advantage
of economies of scale.
As we move to a more joint, networked force the requirement to
execute timely command and control of forces continues to increase.
Additionally, in our continuing efforts to avoid blue-on-blue
engagements of not only our own forces, but those of our Allied and
Coalition partners, the ability to maintain continuous situational
awareness has become more and more challenging. The requirement remains
for a coherent global coalition C4 architecture with ease of
information transfer and capability to establish new networks
seamlessly as operations dictate. There needs to be a streamlined
strategy for releasing information to allies and coalition partners as
well as resources devoted to technically achieving this result.
Warfighters use a variety of systems to develop and maintain
situational awareness, but there is no single integrated common
operational picture. This requires operators to be adept on multiple
systems and results in operator information overload as they work to
mentally integrate the various pictures while executing multiple
functions. Many of our curret systems were not designed to handle the
amount of data that is currently required to achieve true network
centric operations. Although we have made progress in increasing data
throughput on the larger ships typically used by at-sea commanders
(CVNs, LHAs, LHDs, and LCCs), smaller escorting and supporting ships
continue to have very limited capability. Available funding and the
budget process limit the speed at which we are able to provide new
technology to improve this capability.
Current overall funding in the President's budget is adequate to
meet current program goals. There are, of course, areas where
additional funds would accelerate completion or enhancement of C2
system capabilities. For instance, there are currently shortfalls in
shore pier and training infrastructure that prevent full utilization of
synthetic training capabilities. Completion and modernization of this
infrastructure is necessary to allow the most efficient utilization of
C2 bandwidth and to train effectively while maximizing available
resources as was recently demonstrated by the Multi-Battle Group Inport
Exercise (MBGIE) that linked together three CSGs from both coasts. The
Navy is also migrating from its service-unique global communications
architecture to fully use the GIG and DOD teleports. This effort, both
complex and expensive, is essential to ensuring efficient, high
capacity joint interoperability. Simultaneously, as the transformation
to Internet Protocol (IP) routed networks occurs, the Navy needs the
tools to monitor and operate its networks to ensure efficient, reliable
command and control at sea.
General Moseley. Our Theater Air Control System (TACS) elements,
the Air Operations Center (AOC), Airborne Warning And Control System
(AWACS), Joint Surveillance Target Attack Radar System (JSTARS),
Control and Reporting Centers (CRC), Air Support Operations Centers
(ASOC) and Tactical Air Control Parties (TACP) remain engaged in
operations abroad and at home, The AOC, CRC, ASOC/TACP, and JSTARS are
key Command and Control (C2) Battle management nodes in Operation Iraqi
Freedom and Operation Enduring Freedom, AWACS, CRCs, and our Air
Defense Sectors are engaged in homeland defense missions such as ONE,
AWACS, and JSTARS simultaneously support operations while in Global
Military Force Policy Reconstitution. Reconstitution will help build a
sustainable AWACS and JSTARS force. The approach to AOC as a Weapon
System will equally enhance stability for operational level C2
warfighters. Efforts to standardize Joint Terminal Attack Controller
equipment, training, tactics, and procedures will benefit Close Air
Support C2, The recent force structure improvements to the CRC,
including the addition of a third crew per weapon system will stabilize
this ground based radar system. The stressors are unique to each C2
weapon system and there is no single solution; however, manpower is a
common thread that needs to be addressed. Some positions need to be
validated, funded, and filled, while others simply need time to
reconstitute. Focusing on C2 system manpower will allow us to sustain
today's operations as well as prepare for the next fight.
Interoperability and integration, communication on the move, and
bandwidth are certainly key elements of successful employment of our
TACS in planning and executing operations. Voice and digital
connectivity are required to vertically and horizontally integrate with
each other, attack and support assets, as well as with our sister
Services. Our forces continue to overcome challenges with
communications and interoperability, and bandwidth constraints by
participating in Joint, Service, and coalition programs such as the
Family of Interoperable Operational Pictures. C2-enabling capability
initiatives are underway which employ joint-level standards, including
Configuration Management and implementation coordinating committees as
well as the endeavor to fully implement Link-16. In addition we are
working closely with the Army on the development and fielding of the
Joint Tactical Radio System and the Joint Blue Force Situational
Awareness (JBFSA), an initiative to standardize flow of blue force data
amongst Service C2 systems to assist in the prevention of fratricide.
The Joint Forces Command sponsored Joint Battle Management C2 Roadmap
is designed to harmonize requirements and acquisition activities among
the Services and will help create an integrated, interoperable,
sustainable C2 weapons system supportable at all levels of planning and
execution. Funding initiatives such as these will improve machine-to-
machine interfaces required for timely and accurate prosecution of
operations.
General Huly. The Marine Corps continues to maintain a high state
of readiness for communications assets currently employed supporting
Operations Iraqi Freedom (OIF) and Enduring Freedom (OEF). This high
level of readiness is attributed to disciplined and aggressive
maintenance procedures as well as timely rotation of principle end
items. The current operational environment continues to redefine the
way we have traditionally employed communications across the
battlefield. Today there is a much larger requirement to push data, and
video capability down to lower tactical echelons of the Marine Air
Ground Task Force.
The challenge we have today is to continue to support the
increasing communication requirements with the current table of
equipment. Operational requirements dictate that additional bandwidth
be available at the lowest tactical levels to support enhanced ability
to share situational awareness. Old tables of equipment do not support
a `digital battlefield.' Increased bandwidth communications
requirements at lower echelons coupled with the requirement to sustain
a dispersed force across a large area of responsibility and the need to
track all entities (to include combat service support elements) across
the battlefield has stretched our current inventory of equipment.
Additionally, requirements to provide communications assets to Military
and Police Assistance Teams to train Iraqi Forces has exacerbated this
challenge. Current operational tasking outpaces our table of equipment
for many high demand command and control items. This creates challenges
to support home-station pre-deployment training as well as other
contingencies.
Efforts are underway to converge Army and Marine Corps friendly
force tracking capabilities that will provide over-the-horizon/on-the-
move capability while improving information exchange between the
Services and coalition forces at the lowest level. We have approved and
are executing a plan to develop a single capability among the services
that includes both hardware and software solutions. Based on efforts to
date, significant enhancements have already been realized; but much
remains to be done in this area to extend this capability to joint and
coalition partners. The goal for completion of this effort is fiscal
year 2007. We have also made significant strides in increasing the
density of Blue Force Situational Awareness devices on the battlefield.
Recent analysis indicated that our initial acquisition objective of
4,500 devices was insufficient. We have determined that we need to
procure 14,500 devices that will allow us to field such a capability to
every command and control platform in the Marine Corps and up to 40
percent of all other vehicle assets. Finally, our Communication-On-The-
Move-Network-Digital-Over-The-Horizon-Relay initiative will provide the
radio transmission capability required to bridge between echelons
beyond line of site.
We are addressing many of these increased command and control
requirements by `cross-leveling' equipment between forces returning
from OIF and forces preparing to deploy to OIF. This practice ensures
that forces deploying can meet the command and control requirements in
theater but creates shortfalls at home station for training.
To satisfy demands for bandwidth we contract for commercial
services. We are concerned with the increasing costs associated with
sustaining the commercial communication equipment and services to
support OIF and OEF. To date, the sustainment of these commercial
initiatives have almost exclusively been funded via annual supplemental
appropriations.
The fiscal year 2005 supplemental and cross leveling efforts will
help alleviate some of the stress on our command and control assets in
the near term. We are examining additional ways to alleviate some of
the strain on command and control assets while ensuring sufficient
assets to train with at home station.

UNIT MANNING POLICY

64. Senator Akaka. General Casey, I want to applaud the Army for
the depth and magnitude of the changes you are making to try to change
your force to be better suited to current needs. One of the Chief of
Staff's key initiatives in that regard is unit manning, or the plan to
stabilize personnel in a given unit for an entire 3 year assignment. As
I understand it, one of the primary rationales for unit manning is that
it will improve cohesion, which in turn will presumably improve
performance. I have a couple of questions about the logic behind this
plan. Can you explain to me exactly what the problem is that unit
manning is trying to solve and how you know that you have it? If it is
a lack of cohesion, and therefore performance, are there instances you
can point to where additional cohesion would have helped?
General Casey. Senator, unit focused stabilization (formerly
referred to as unit manning), is directed at making more capable and
combat-ready forces that are agile and deployable in support of an
expeditionary Army at war. In light of this guidance, unit focused
stabilization, and more specifically lifecycle manning, is designed to
focus all personnel turbulence of a brigade-sized unit to a focused
two-month window, called the reset phase. The unit then trains to build
from individual through full collective capability in a training phase.
Finally, the unit is validated or certified at its collective
capability and enters the ready phase (approximately 30 months in
length). While in this phase, the unit continues to build capabilities
through accretive training events. Unlike units manned under the
individual replacement system of today, the unit is more agile and
maintains continuity of personnel through deployments. Because the
entire team has remained together through the entire training phase,
each soldier knows his or her part in the mission. The unit can deploy
and immediately enter the fight if necessary. The unit of today cannot
make that claim. In any given year, approximately 30 percent of the
unit ``turns over'' through normal assignments and separations. A 2000
Rand study reviewed three units, that when notified for deployment, had
to exchange up to 40 percent of their assigned unit personnel as these
soldiers did not meet peacetime deployability criteria. Each of these
units then had to integrate and train these new soldiers to form a unit
prior to deployment. Similarly, when the 3rd Infantry Division (3ID)
deployed for Iraq, the Army had to first institute Stop Loss/Stop Move
in order to keep the majority of the soldiers with their units, but
still approximately 30 percent of the soldiers had less than 1 year
with their unit and had not been fully trained as a member of the unit.
Fortunately, units of 3ID had a number of months to train at team,
squad, platoon, and company level in the desert while awaiting
initiation of combat. Unit Focused Stability--lifecycle manning reduces
or eliminates the need for Stop Loss/Stop Move as the unit and all
assigned soldiers are on a common timeline synchronized to the
operational cycle of the unit. The team that trains together, deploys
together and fights together eliminating going to war with a ``pick-up
team'' and the need/requirement to spend months training while in a
forward location awaiting the order to fight. Cohesion is many things
to many people, and a number of studies have shown a positive
correlation between certain types of cohesion and performance.
Cohesion, while important, is not the final goal--agile, combat-ready
formations that maintain their continuity during deployments are.

65. Senator Akaka. General Casey, can you explain why some units
like the 82nd Airborne or the 101st Screaming Eagles are able to
achieve greater cohesion under an individual replacement system, and
why you can't use the same methodology to increase cohesion in other
units without going through the turmoil of implementing a unit manning
system?
General Casey. The units mentioned certainly have very high esprit-
de-corps, but cohesion as a term is too ambiguous in this context.
Units can be filled with highly motivated, vocal, aggressive
individuals who enjoy being together both militarily and socially yet
not have trained to the requisite collective capability to accomplish
their mission and return. These same units realize approximately 30
percent personnel turbulence annually driven by a combination of
factors including enlistment contracts, reenlistment rates, global
presence and overseas tour lengths, and promotion timing. In order for
a unit to support an expeditionary Army at war, the unit must be fully
trained at its wartime mission. Soldiers trained to a ``razor's edge''
have the best chance of completing their mission with the fewest
casualties. When soldiers are continuously entering and leaving the
unit, building and sustaining the highest levels of collective
capability is difficult or impossible. The unit must continually start
each major training cycle with the basics to fully integrate the newest
members, whether new to the unit or new to their position within the
unit.
Task cohesion, specifically the alignment of all members of the
team towards attainment of a collective goal, is the most important
form of cohesion for a military unit. Numerous studies have indicated a
positive correlation between task cohesion and performance. In
addition, many studies have shown that successful performance increases
cohesion, which can lead to a positive feedback loop in which increased
cohesion improves performance, which increases cohesion, etc. It is
next to impossible to reap the benefits from this feedback loop when 30
percent of the unit is continually new and did not attend the last
successful training events or missions. Shared experiences, trials, and
tribulations, which were overcome as a team lead to effective units and
also build cohesive units.

DEFENSE READINESS REPORTING SYSTEM

66. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, the Office of the Secretary of Defense (OSD) has
highlighted the importance of the Defense Readiness Reporting System
(DRRS) as a vast improvement over the way current readiness reporting
is conducted. I wanted to get each of your views on how this program is
moving ahead and the benefits it offers, but I also wanted to get a
commitment from each of you that you will ensure your Service is doing
all that it can to share access to data and information to ensure that
DRRS will be a success. What do each of you see as the primary benefits
of DRRS and will you make sure your Service is doing all that it can to
support it?
General Casey. The primary benefit of DRRS, as it is currently
envisioned, will be rapid integration of readiness data into war gaming
and scenario analysis. The Army is the lead Service in support of the
OSD effort to develop the DRRS and will continue to provide access to
required information. We are beginning with personnel information and
expect a demonstration of DRRS initial operational capability by
September 2004. OSD expects to achieve full operational capability in
fiscal year 2007, and the Army will continue to support that goal.
Admiral Mullen. Navy is working closely with OSD personnel and
readiness (P&R) and has already created a working prototype called
DRRS-N, building on the new Navy Training Information Management System
(NTIMS) which translates fleet training data into mission-oriented
capabilities. DRRS-N is a capability based readiness system that
captures and aggregates all Navy readiness data for direct use by Navy
leaders and DRRS. Navy is openly sharing the data and information
necessary to support the overall OSD (P&R) DRR effort. The greatest
benefit of DRRS-N is its ability to provide usable readiness
information in near-real time vice the time-late, platform-centric data
that is currently collected. As a result, DRRS-N and DRRS will improve
the quality and more accurately reflect the true current readiness of
naval forces worldwide for the benefit of all levels of leadership,
from unit commanders through senior staff members.
General Moseley. The Headquarters, United States Air Force staff is
working closely with OSD to ensure DRRS is a success for both the DOD.
and the Air Force. DRRS initiates a significant change in readiness
reporting which shifts the emphasis away from simply counting
resources. With DRRS, we'll evaluate our units' ability to execute
their warfighting tasks and also assess the capabilities needed to
provide the desired effect in the battlespace. DRRS' primary benefit is
in answering the question, ``ready for what?'' With any new system of
this magnitude, we can anticipate some bumps in the road, but we've
already taken several steps to support the DRRS construct. We formed a
team to review and update the mission essential tasks we perform in
support of the National Military Strategy. We also have another team
focusing on the inter-related databases and systems architectures
required for future readiness reporting and force management. Recently,
we issued an Information/Data Management Strategy that sets the path to
achieve the objectives of the Department of Defense, Netcentric Data
Strategy. One of the tenets of the strategy is to enable the sharing/
reuse of data to support improved readiness reporting. We are currently
in discussion with OSD to facilitate access to our personnel system,
the Military Personnel Data System (MILPDS), and will later move to
logistics and other data. We look forward to continuing support to DRRS
to dramatically improve readiness reporting.
General Huly. DRRS will enable every unit commander to report his
unit training objectives in a very candid and open manner. His
objectives can then be reviewed by all authorized users of the system.
Deficiencies can be expressed in terms of personnel, equipment, or time
required to train, which should refine our resource allocation
processes. The prime benefit of the DRRS system will be the recognition
of our perpetual commitment to warfighting excellence as exhibited by
our comprehensive training programs coupled with the presentation of
our fiscal requirements to sustain them. The Marine Corps is committed
to working with the Joint Staff and OSD to harness the technology
required to implement this decision support tool as an initial first
step toward a truly net-centric world.

FUNDING OF ONGOING OPERATIONS

67. Senator Akaka. General Casey, the committee has heard a lot of
testimony in the last month on the amount of funding the Services have
to continue funding ongoing operations for the rest of the fiscal year.
I want to ask you a couple of questions about this. For fiscal year
2004, Secretary Brownlee testified last week that he had a commitment
from OSD that they will provide additional funds to the Army to get
them through the remainder of this fiscal year. Are you aware of this
commitment? If so, how much money do you expect that the Army will
need, and what is your understanding of where the funds will come from?
General Casey. The OSD is committed to supporting the combatant
commander. As the Army is shouldering most of the burden for fighting
the war on terror, I would expect that OSD will provide some additional
funding, but I don't how much they have the ability to provide.
Over the next 6 or 8 weeks, we will conduct mid-year reviews with
all of our commands to determine the size of any shortfalls we have. We
will prioritize the shortfalls and do some reallocation among commands
to fund everything we can. After we get this consolidated picture, we
will meet with OSD to conduct a similar review at the Service level. As
far as the source of funding, assuming that there is no additional
funding coming into the Department of Defense (DOD), OSD would have to
use some of Secretary's reprogramming authority and reallocate funding
within DOD.

OPERATIONS AND MAINTENANCE FUNDING

68. Senator Akaka. General Casey, for next fiscal year, by my
calculations, if the Army's current budget request is approved
unchanged, you will have $26 billion in operation and maintenance (O&M)
funding. If spending continues at about the current rate, the Army
should have completely exhausted its O&M dollars within 6 months, or by
the end of March a year from now. In your judgment, how long can the
Army wait for a supplemental before you start either increasing the
size of the eventual bill and/or cutting into other programs in a
harmful way?
General Casey. If our fiscal year 2005 bum rate were similar to
fiscal year 2004, we would exhaust our O&M base budget in March 2005. I
do not know the extent to which a late supplemental will increase the
eventual bill, but it would have some effect on readiness and other
programs. From the beginning of the year, we will be forced to borrow
from base programs to fund global war on terrorism. If the Secretary of
Defense has sufficient temporary authorities to support the temporary
redistribution of funds across the Department of Defense, we may be
able to support the global war on terrorism without irreparably harming
our base programs and with repayment on receipt of a supplemental.

69. Senator Akaka. General Huly, the Marine Corps' O&M budget is
only $3.6 billion. If costs in Iraq remain high, this does not give you
much flexibility to ``cash flow'' to support your deployed forces. How
long do you expect your fiscal year 2005 budget, if approved at the
requested level, could support Marine Corps operations at current
spending rates?
General Huly. Based on the $25 billion supplemental, funds should
be more than adequate for the first 5 months of fiscal year 2005. We
will submit a supplemental request in February 2005 to cover the
remainder of the fiscal year. We do not anticipate any problems
supporting our deployed troops.

NATIONAL GUARD TRAINING

70. Senator Akaka. General Casey, we share what I am sure is great
pride in our National Guard and the great things they are doing for our
country. I have some concern, however, about how they are trained for
deployments. I know that some of the brigades that were recently
deployed to Iraq were trained by active component division headquarters
and their subordinate training support brigades. However, some of the
Guard units have expressed concern that they have not had sufficient
ownership of their training, which seems odd given that many of them
have equal or greater amounts of experience than their active duty
counterparts. Is the Army aware of this problem, and are you taking
steps to ensure that the enhanced brigades that have recently been
activated will have responsibility for their training that is
commensurate with their experience?
General Casey. The training division of the Army Directorate of the
National Guard Bureau addressed a similar question in January 2004 in
an information paper. The enclosed paper states that U.S. Army Forces
Command (FORSCOM) Regulation 500-3-1, paragraph 3.1.6 states the
continental United States Army (CONUSA) exercises operational command
over active component installations for mobilization, deployment
training, and execution. The CONUSA commander has command from the date
of mobilization until arrival at the power projection platform/power
support platform (PPP/PSP). While the regulation states the CONUSA has
operational command, it is Army policy and is clearly stated in Field
Manual (FM) 7-1. The unit commander is responsible for the wartime
readiness of all elements in the formation. The commander is,
therefore, the primary trainer of the organization. . .'' The problem
of training ownership and training validation continues to vex leaders.
With cooperation and understanding, Reserve and active component
commanders can solve their training ownership problems.

OPERATIONAL COMMITMENTS

71. Senator Akaka. General Casey and General Huly, the level of
operational commitments for Army and Marine forces is incredibly high
right now. I know that your Services will do whatever it takes to meet
the national needs, but I want to get a better sense for the level of
stress your units are facing. How would you characterize the current
level of stress, and how does it compare, in your experience, to past
levels of commitment? More specifically, how many major units do you
have that are reporting readiness levels of C-3 or below, and how long
do you expect these levels to persist?
General Casey. The Army has no major deployed units reporting C-3
or less as of March 15, 2004. The Army priority remains winning the
global war on terrorism while posturing to meet the requirements of the
National Defense Strategy. Our soldiers are combat experienced, better
trained, more capable, and better equipped now than at any other time
in history, and our major combat units will remain ready to execute
future contingency operations. The Army is entering one of the most
demanding periods in its history, but the coming months will also offer
unique opportunities to regenerate combat power while increasing the
capabilities of Army units. The combination of reconstitution and
supplemental funding will allow us to reset returning units and add
additional combat brigades through modularity, while ensuring units
remain capable and ready. The Army goal is to reconstitute Active units
within 6 months or less of their return to home station. Reserve
component units will likely require 6 to 12 months after their
equipment arrives at home station to attain pre-deployment readiness
levels. In order to meet this goal, the Army established C-3 as the
minimum readiness goal for redeploying units to help minimize the time
required for units to achieve C-1 readiness levels and capabilities.
The Army also initiated a new policy requiring commanders of deployed
units to assess and forecast their readiness levels over the estimated
redeployment timeframe as part of the monthly-deployed unit status
report. Additionally, the Army established the Reset Task Force, a post
Operation Iraqi Freedom/Operation Enduring Freedom (OIF/OEF)
reconstitution/reset effort designed to: (1) continue support to
combatant commanders; (2) return redeployed forces to pre-employment
readiness levels while continuing transformation; (3) reestablish and
restructure Army pre-positioned stocks to support rapid deployments
around the world; and (4) integrate reset procedures into
transformation, reorganization, modernization, and recapitalization
efforts to posture the Army for future operations. The Army has done
the necessary planning, applied available funding, and is executing
reset activities with priority going to units redeployed from current
missions and preparing for future contingency plans. The end-state will
be a trained, well equipped, capable, and battle tested force resourced
to successfully prosecute the global war on terrorism, build additional
combat force structure, and posture the Army for future requirements.
General Huly. The Marine Corps is being stretched in ways planners
never anticipated. We have marines in Iraq, with more on the way,
Afghanistan, Haiti, Africa as well as those marines stationed in Japan.
While our marines are keeping their chins up, the strain is showing on
people and equipment alike. Marines are being ordered to accelerate
deployments to Iraq and discussions continue on whether to extend those
already there. Seventeen percent of our Active Forces are reporting
degraded readiness with 54 percent of these units reporting equipment
as the degrader. Despite our efforts, it is anticipated that these
levels will persist, or even increase, as long as substantial force
commitments to OIF/OEF persist.

AREAS OF STRAIN AND COMMITMENT LEVELS

72. Senator Akaka. General Casey and General Huly, what is your
Service's particular areas of strain, and what, if anything, can be
done to alleviate those concerns?
General Casey. Today our Army is executing operations in defense of
the homeland (Operation Noble Eagle), stability and support operations
in the Balkans (Stabilization Force/Kosovo Force), peacekeeping in the
Sinai as part of the Multinational Force and Observers (MFO) and combat
operations in Iraq and Afghanistan (Operations Iraqi Freedom/Enduring
Freedom) (OIF/OEF). We are also forward stationed in Korea and
elsewhere. Approximately two-thirds of our active and Reserve combat
formations were deployed in fiscal year 2003 and will be deployed in
fiscal year 2004. To mitigate risk, the Army is embarking on a series
of initiatives.
An essential initiative is resetting forces returning from OIF and
OEF to a standard higher than before their deployment. Introduction of
new technologies for battle command and new concepts and designs for
modularized capabilities are examples of these improvements. Another
initiative establishes force stabilization measures to reduce
turbulence for soldiers, units, and their families. Predictability of
rotations, to include the essential training and exercise periods that
prepare units for combat deployments and operations, is an important
measure to reduce stress and other force management risks.
The Army is internally rebalancing active and Reserve component
forces to better posture our existing force structure to meet global
commitments. One example of a near-term measure taken by the Army is
the formation of 18 provisional military police comies in the Army
National Guard using field artillery formations that were not stressed.
Between fiscal years 2004-2009 the Army is converting approximately
30,000 spaces of cold war structure to capabilities needed for homeland
defense and the global war on terrorism (civil affairs, military
police, psychological operations, other Special Operations Forces,
etc.).
The Army has also begun to increase the number of available combat
brigades through modular reorganization. Newly restructured, trained
and equipped forces provide campaign quality capabilities that are
responsive and agile for both rapid deployment and sustained full-
spectrum combat operations. This increase in available brigades allows
the Army to improve strategic flexibility, sustain a predictable
rotation cycle and permit the Reserve component to reset. To facilitate
this end-state, the Army has been authorized to increase temporarily
its level of manning. These measures will mitigate risk and ultimately
provide increased capability to combatant commanders.
General Huly. The Marine Corps' particular areas of concern with
regard to strain on the force are personnel and equipment. As a result
of the current operational demands associated with the global war on
terrorism, Marine Corps units are rotating at a higher rate. The Marine
Corps tries to maintain a 1:3 deployment ratio for active component
marines. This means for every one day deployed a Marine is not deployed
for 3 days. This ratio has proven historically sustainable with no
undue stress on the force. We are currently at a 1:1 unit deployment
ratio. We are concerned about the effect that an increase in deployment
tempo may have on retention rates. As of 2 April 2004, the Marine Corps
had 2,270 active component and 1,963 Reserve component marines who have
exceeded the 400 out of the preceding 730 days deployment tempo
threshold (less than a 1:1 ratio). 43,948 active component and 16,644
Reserve component marines have exceeded 180 days of deployment tempo
(less than a 1:3 ratio). The degree to which the number of marines with
less than a 1:3 deployment ratio will increase will depend on the
duration of the increase in deployment tempo. Inasmuch as possible, the
Marine Corps is striving to maintain normal personnel assignment
policies. For Operation Iraqi Freedom II we will mitigate deployment
tempo by limiting the requirement for a 14 month presence to only those
marines serving in the I MEF command element. Marine units supporting I
MEF will rotate on 7-month deployments, which is more in line with our
normal deployment rotation periods.
Regarding the strain on equipment, we are using our equipment at a
much higher tempo for sustained periods in combat conditions. It will
take time to return the Maritime Prepositioning Force program to pre-
Operation Iraqi Freedom employment capability, and the use of Maritime
Prepositioning Squadron assets in support of Operation Iraqi Freedom II
may extend reconstitution. One squadron is essentially complete and
ready to respond to any contingency. Several ships in the other two
squadrons had completed reconstitution, but those ships have since been
used to support the Marine forces deploying for Operation Iraqi Freedom
II. The current schedule has one Maritime Prepositioning Squadron
completing its scheduled maintenance cycle in April 2005, and the
second squadron concluding its scheduled maintenance cycle in April
2006. The time it will take until we have all three squadrons fully
overhauled will be a function of additional equipment requirements in
support of Operation Iraqi Freedom II, Corps-wide equipment readiness,
and the condition of the equipment that returns from Operation Iraqi
Freedom II. In any case, reconstitution of our forces and Maritime
Prepositioning Squadrons will be a challenge for at least a couple more
years.

73. Senator Akaka. General Casey and General Huly, how do current
commitment levels affect your Service's ability to respond both to any
possible additional contingencies, for instance in Venezuela, or to
meet additional requests for forces coming out of Operations Iraqi
Freedom and Enduring Freedom?
General Casey. The Army retains the ability to respond to
contingencies and crisis around the world by maintaining a Brigade-size
element that can respond on short notice. In addition, the Army remains
strategically postured, and can meet the operational needs of joint
force commanders, and the force management challenges for operations in
Iraq and Afghanistan.
General Huly. The Marine Corps, as directed by Commander, U.S.
Joint Forces Command, maintains a rapidly deployable force called the
Air Contingency MAGTF (ACM). The ACM is home-stationed in Camp Lejeune,
NC and is currently deployed to Haiti conducting Peacekeeping
Operations. The target date for transition and Transfer of Authority
from the current Multi-National Interim Force Haiti (MIFH) to a U.N.
led coalition was late June 2004. Impact on ongoing Operations such as
Enduring Freedom and Iraqi Freedom will be minimal as long as the
transition is accomplished in accordance with the published timelines.
Once the ACM is redeployed from Haiti and reconstituted in Camp Lejuene
the ACM will be ready to respond to any regional contingencies such as
a potential crisis in Venezuela.

74. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, General Jones testified before the Senate Armed
Services Committee last week that European Command has done extensive
cost analyses of any upgrades that might be needed to ranges in Eastern
Europe and Africa as DOD moves to implement its new overseas presence
policy. Have any of your Services participated in those cost analyses?
If so, what is your understanding of the costs associated with
expanding the areas where forces will train in European Command and
when do you expect to request those funds?
General Casey. The U.S. Army, Europe (USAREUR) staff has
participated in the assessments of range capabilities at Eastern
European sites proposed for U.S. use by European Command. Specific
range upgrade requirements have not yet been identified; however, the
Office of the Deputy Chief of Staff, G-3, is ready to address these as
USAREUR establishes them. The G-3 staff also meets formally with the
major Army commands on a semi-annual basis to review all Army range
issues and requirements. As a contingency, we will provide USAREUR with
a supplemental range package of portable targetry and range support
equipment in fiscal year 2004. This package will permit USAREUR to
begin to rapidly improve Eastern European ranges when they are
identified and when appropriate approval for their use is granted. The
Grafenwoehr and Hohenfels Major Training Areas (GTA/HTA) in Germany,
remain central to the Army's training range capabilities for both
permanent and rotational forces stationed in Europe. We will continue
to improve GTA and HTA to provide the range capability required of our
Future Force, as well as our joint partners.
Admiral Mullen. The Navy is exploring the possibility of improving
select infrastructure on some foreign ranges in North Africa and
Eastern Europe, but no cost analysis has been performed at this time.
Any required funds will be included in future years budget requests.
General Moseley. In order to take advantage of potential savings of
the United States Air Forces in Europe, the Integrated Global Presence
and Basing Strategy initiative as defined in the Strategic Planning
Guidance, ``Shape Force Posture,'' there will need to be some
improvements to an existing range and the creation of a new range with
advanced electronic capabilities. The United States Air Forces in
Europe has participated in these costs analyses. The improved and new
European ranges would obviate the necessity for expensive Weapons
Training Deployments to the Continental United States. If the necessary
upgrades are made and additional range areas created, the considerable
yearly savings will offset the costs associated with this initiative.
Since this initiative is listed in the Strategic Planning Guidance, it
is scheduled to be part of the fiscal year 2006-fiscal year 2011
Program Objective Memorandum submissions. Savings will be realized.
Therefore, commensurate requests for these range additions will be
forthcoming.
General Huly. The Marine Corps has not participated in any cost
analyses relating to Ranges/Training areas in Eastern Europe and
Africa.

AMMUNITION PRODUCTION

75. Senator Akaka. General Casey, the Army continues to face severe
shortfalls in ammunition. I understand that you are looking at this
problem and possible solutions, although it seems apparent that the
Army will not be able to afford to make any serious progress on this
issue for some time in the future. General Schoomaker also testified
that the Army is considering adding additional production capacity to
help increase the rate at which ammunition can be bought. What is the
total amount of the ammunition shortfall and how does the Army expect
to address it? What is the Army's plan to increase ammunition
production?
General Casey. The current requirement for small arms ammunition
has five parts: (1) training; (2) war reserve; (3) current operations
in Iraq and Afghanistan; (4) support to other Services under the single
manager for conventional ammunition program; and (5) testing. Annual
requirements have ramped up from 1.1 billion rounds in fiscal year 2004
to 1.74 billion rounds annually through fiscal year 2009. The current
serviceable inventory is approximately 1.1 billion rounds (which is
spread among stateside depots and worldwide Army prepositioned
stockpiles). However, this inventory is being depleted at a higher rate
than we are currently able to refill it.
The Army's sole production facility for small arms ammunition is
Lake City Army Ammunition Plant, Independence, Missouri. Under the
current contact, the operating contractor, ATK-Alliant Techsystems, has
the capacity to produce at the rate of 1.2 billion rounds annually. Our
first step in taking care of the shortfall has been to fully fund Lake
City to produce at capacity. While Lake City is ramping up production,
the Army has awarded contracts to two commercial vendors for 140
million rounds to support the training base. We are working toward
long-term goals of increasing the capacity of Lake City to produce 1.5
billion rounds annually and establish commercial sources for an
additional 300-500 million rounds per year.

READINESS CONCERNS

76. Senator Akaka. General Casey, Admiral Mullen, General Moseley,
and General Huly, would each of you please tell me your primary
readiness concerns for the coming year?
General Casey. The Army provided to Congress its fiscal year 2005
shortfalls on March 23, 2004. This list laid out our readiness
concerns: vehicle bolt-on ballistic armor, modularity, reset the force,
replacement of combat-battle loss equipment, up-armored HMMWVs, and
military construction. In addition, the Army will be resetting units
from Operations Iraqi Freedom and Enduring Freedom, transforming
brigades into modular units of action, and preparing units for
deployment to continuing operations. Congressional support in the form
of adds and supplemental funding will address these concerns.
Admiral Mullen. We have submitted what I would characterize as a
``lean'' budget request, judiciously balancing current readiness needs
with future readiness investments. I believe we have trimmed all of the
``fat'' from our readiness accounts, and that these accounts ar
resourced to deliver the required readiness levels. I consider the
risks we've taken to be well thought out and executable, but any
additional reductions to these accounts would, in my mind, put
readiness at some new, higher and unacceptable level of risk.
More immediately, the challenges I discussed during my verbal
testimony remain. These include the capacity of the public ship repair
industrial base, fatigue life issues for our EA-6B and P-3 aircraft,
our stockpiles of precision-guided munitions, and encroachment on our
training areas.
General Moseley. The Air Force's primary readiness concerns are
Operations Tempo (OPTEMPO) and aging weapon systems. The increased
OPTEMPO, particularly during the past year, had impacts on Air Force
readiness, particularly among low density/high demand (LD/HD) assets,
as units experienced training and equipment/supply strains. Training
levels were impacted as deployed personnel and instructors were not
available in some systems. This affected aircrew training as well as
the balance between enlisted skill levels (3-level vs. 5/7-levels). LD/
HD communities are affected the roost if aircraft and instructors are
not available to train initial qualification students in career fields
that are already stressed. OPTEMPO also affects equipment and supplies
as they are used at a faster rate as the level of demand increases for
contingencies. While we have experienced reconstitution success and
returned to our Air Expeditionary Forces Battle Rhythm for most assets,
increased OPTEMPO would have further impacts on our readiness.
Aging aircraft are also a concern as the average age of the total
fleet is now 23 years. Technical surprises such as those driven by high
cycle fatigue, corrosion, and aging composites may impact the future
reliability/maintainability of our fleet and reduce our ability to
preserve its readiness.
General Huly. The Marine Corps' primary readiness concerns for the
coming year are the management of the operational tempo (OPTEMPO) of
our units, active and Reserve, and the effect on personnel tempo
(PERSTEMPO), as well as the repair or replacement of equipment as we
support operational commitments worldwide.
Prior to September 2001, the Marine Corps maintained a 2.7:1 unit-
level rotation ratio. As a result of operational commitments in support
of the global war on terrorism, our OPTEMPO has increased to a 1:1
ratio. Our near-term goal is to return to a 2:1 ratio by fiscal year
2006.
The Marine Corps' back-to-back participation in OIF I&II is
straining our materiel readiness, particularly the maintenance of our
Maritime Prepositioning Force equipment. Presently, we are meeting our
operational requirements within the constraints of our fiscal year 2004
global war on terrorism funding and depot maintenance capabilities.

PREPOSITIONED STOCKS

77. Senator Akaka. General Huly, you state that reconstituting the
Marine Corps' maritime prepositioning squadrons will be a challenge for
the next few years, and that right now, only one of the three squadrons
is available for contingency response. Are we using any equipment from
that squadron in Haiti?
General Huly. Currently, no prepositioned equipment and supplies
are being used in support of operations being conducted in Haiti.
Marine units are using their organic assets for that mission.

78. Senator Akaka. General Huly, what risks are associated with
there only being one maritime prepositioning squadron available?
General Huly. This question should also be directed to combatant
commanders since they are the ones who are actually supported with the
prepositioned squadrons. The Marine Corps' role is merely a force
provider in support of combatant commander requirements. That said, the
combatant commanders who are most directly impacted by the one squadron
currently offloaded and the other squadron currently cycling through
maintenance have assessed the risks entailed with this situation. Risks
are deemed mitigated through various global sourcing and use of CONUS-
based units and equipment sets. This will add strategic lift
requirements to Commander, U.S. Transportation Command (CDRUSTRANSCOM);
therefore, I recommend this question be directed toward the
CDRUSTRANSCOM staff with an eye toward gauging the impact of moving
globally sourced and/or CONUS based assets to support combatant command
requirements. If events remain as currently scheduled, spring 2005 is
when we expect to have our second squadron complete its maintenance
cycle and fully capable of supporting combatant commander assigned
missions. However, between now and then, individual ships from that
squadron will be completing their maintenance actions. This translates
to the following: By April 2004, two ships will ready; by July 2004,
three ships will be ready; by December 2004, four ships will be ready;
and the final ship of that squadron becomes ready by March 2005. The
third squadron will then commence its maintenance cycle and is
scheduled to conclude that cycle by spring 2006.

79. Senator Akaka. General Casey, what is the status of Army
prepositioned equipment and what risks are there to it not being fully
available for some time to come?
General Casey. APS reset actions have been accomplished on APS-4
(Korea), two ammunition ships, the 1 1 for Guam/Saipan, and
the 1 1 for Diego Garcia, which is being prepared to go
afloat. Additionally, 48 percent of the combat support/combat service
support equipment for the second large-medium speed roll-on/roll-off
ship for Guam/Saipan has been removed from Southwest Asia (SWA) and is
undergoing repair in Charleston, South Carolina. The Army will attempt
to complete fill of this ship; however, continued use of APS equipment
in SWA may prevent this.
Currently, the Army has adequate combat power in APS to support one
swiftly defeat the effort scenario and other contingencies, as
directed. The APS-4 (Korea) brigade set is in a ``ready to fight''
condition. The combat power in the two afloat brigade sets is rated
green. Lacking is the equipment needed to support these sets for an
extended period of time once employed.
The continued use of APS equipment to support current operations in
SWA does present limited risk to possible near term Army operations.
These risks have been identified and mitigation strategies have been
reviewed and implemented. The Army leadership has determined that the
best use of APS equipment currently is to support operations in SWA and
future Operation Iraqi Freedom rotations.
______

Question Submitted by Senator Bill Nelson

80. Senator Bill Nelson. General Casey, at the January 2004 Senate
Armed Services Committee hearing with the Joint Chiefs, I asked the
Chief of Staff of the Army, General Schoomaker, about a decision in the
DOD fiscal year 2005 budget process that reduced funding for Army Guard
and Reserve training by $600 million. At the time of the hearing,
General Schoomaker and Lieutenant General Steve Blum (Chief of the
National Guard Bureau) did not seem fully aware of the specific nature
of this reduction. The Army has had time to research this. I have been
told privately that this reduction is a heavy hit on the Reserve
component readiness and that it has a significant negative impact on
the Guard and Reserve ability to reset the force returning from
Operation Iraqi Freedom. It seems contradictory to want to reset the
Army, both active and Reserve components, without the required funds in
hand or a supplemental planned; and, it seems potentially disastrous
for the Reserve component to try to reset its force when they are
already $600 million behind their peacetime requirement. Please provide
the committee with an update on the resolution of this situation.
General Casey. The Reserve component training budget ensures the
funds necessary to conduct military occupational specialty training
(individual training), professional military education training (leader
training), and the necessary operational tempo to support collective
training for those units preparing for mobilization and deployment
while in a Reserve status, as well as enabling recently demobilized
units to maintain their readiness edge. The Army is committed to
ensuring that any future Reserve component cost avoidance will be used
for resetting its Reserve component units. In addition, the Army plans
to address both Active and Reserve component unfunded reset
requirements in the fiscal year 2005 supplemental request.

[Whereupon, at 4:20 p.m., the subcommittee adjourned.]

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

----------

TUESDAY, MARCH 23, 2004

U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.

DEPARTMENT OF DEFENSE FINANCIAL MANAGEMENT

The subcommittee met pursuant to notice at 2:30 p.m. in
room SR-222, Russell Senate Office Building, Senator John
Ensign (chairman of the subcommittee) presiding.
Committee members present: Senators McCain, Allard, Ensign,
Levin, Akaka, and Pryor.
Majority staff members present: William C. Greenwalt,
professional staff member; and Gregory T. Kiley, professional
staff member.
Minority staff member present: Peter K. Levine, minority
counsel.
Staff assistants present: Andrew W. Florell, Sara R.
Mareno, and Bridget E. Ward.
Committee members' assistants present: Lance Landry,
assistant to Senator Allard; and D'Arcy Grisier, assistant to
Senator Ensign.

OPENING STATEMENT OF SENATOR JOHN ENSIGN, CHAIRMAN

Senator Ensign. The Readiness and Management Support
Subcommittee meets this afternoon to receive testimony on the
state of financial management within the Department of Defense
(DOD). We are honored to have both the Comptroller General of
the United States, David Walker, and the Under Secretary of
Defense, Comptroller, Dov Zakheim, before us today.
I welcome both of you. I understand that Secretary Zakheim
will return to the private sector after April 15. I want to
thank him not only for his appearance today but for the service
he has given our Nation as the Under Secretary of Defense.
Though some may consider this a somewhat arcane topic, the
presence of both of you here demonstrates the high level of
attention this subject demands. Proper financial management and
accurate reporting of how defense dollars are spent are
critical requirements for decisionmakers and those responsible
for oversight of those decisions.
Lack of auditable and repeatable financial statements may
call into question the resource decisions made within the
Department and make carrying out our constitutional
responsibilities for oversight of those decisions more
difficult. The American taxpayers deserve better; and working
together, we must do better.
Two years ago, this subcommittee, under Senator Akaka's
leadership, met and received testimony from the same two
witnesses before us today. That hearing proved very informative
in discussing the shortfalls of financial management within the
Department of Defense and in laying out a framework to address
those problems.
Today we are here to receive an update of that hearing. I
would especially appreciate your straightforward assessment of
the progress made and the obstacles remaining toward achieving
clean, auditable statements and developing accurate and timely
financial management information to support effective
decisionmaking in the Department of Defense.
Two years ago, Secretary Zakheim presented a plan to
develop a comprehensive architecture for financial management
systems. While it appears those plans and time lines were
optimistic, it is also apparent that progress has been made.
DOD has reported progress in several areas, including: reported
improvements in contract payment backlogs and payment recording
errors; improved purchase and travel card management; the
number of purchase cards has been reduced by 50 percent--travel
card delinquencies are down; and there was the completion of an
initial draft financial management enterprise architecture in
May 2003.
As we enter another election season and as you, Secretary
Zakheim, prepare to step down from your post, I am concerned
that such gains may be lost during any transition period,
regardless of who wins the next election. Previous
administrations have launched reform efforts, only to be
replaced by the reform efforts of succeeding administrations or
Pentagon leadership teams. Already the separate Services have
briefed the committee on their financial management systems
plans that include milestones in conflict with the Office of
the Secretary of Defense (OSD)-established time lines and
funding shortfalls.
We must continue the progress made in this vital area of
financial management reform. We owe the American taxpayer no
less. Improving DOD's financial management will require the
support of several more successive administrations. In that
light, as you present your testimony, can either of you suggest
possible legislative actions or funding requirements, that
Congress may make to ensure that the progress gained so far
will not be lost and a solid foundation will remain for
continued financial management improvement?
Gentlemen, thank you again for the time to appear before
the subcommittee today. I look forward to your testimony.
But first, Senator Akaka, do you have any opening remarks?

STATEMENT OF SENATOR DANIEL K. AKAKA

Senator Akaka. Thank you very much, Mr. Chairman. I, too,
want to welcome our two witnesses, Secretary Zakheim and
Comptroller General Walker, to this hearing. This is a follow-
up, as was mentioned by the chairman, of a hearing 2 years ago
on the same subject. I believe today that the Department will
never be managed efficiently until it can get its financial
house in order.
When we met 2 years ago, DOD Comptroller Dov Zakheim told
us that the Department was committed to the highest levels of
addressing problems in the Department's financial management
systems. He told us that the Department would establish a new
financial management systems architecture, covering all of the
Department's business systems within a year. He told us that he
would start implementing DOD-wide solutions, on a prototype
basis, by the middle of 2003. He told us that he would control
the Department's investments in free-standing business systems
until the new plan was in place to avoid expenditures on stand-
alone systems that would not meet the Department's needs.
I know that Dr. Zakheim has retained his commitment to this
issue throughout his tenure as DOD Comptroller. Unfortunately,
it does not appear that he has been able to overcome the
Department's institutional resistance to change. Two years
after our last hearing, the Department still does not have a
working blueprint for a new financial management system, still
has not started to field new systems based on such a road map,
and still does not have an effective system in place to control
and coordinate investments in business systems by individual
DOD organizations.
In short, we are pretty much where we started. I hope that
today's hearing will give us an opportunity to focus not only
on what has gone wrong but on how we can move forward in a
constructive way to address the underlying problems. So, I look
forward to the testimony of our witnesses, Mr. Chairman.
Senator Ensign. Thank you, Senator Akaka.
Mr. Walker, why do you not start us off today?

STATEMENT OF HON. DAVID M. WALKER, COMPTROLLER GENERAL OF THE
UNITED STATES GENERAL ACCOUNTING OFFICE (GAO)

Mr. Walker. Thank you, Mr. Chairman, Senator Akaka. It is a
pleasure to be back before you. I want to commend this
subcommittee for staying with this issue. I mean, like so many
issues that have been decades in the making, it is going to
take time to be able to deal with it. We are going to go from
patience, to persistence, to perseverance, to pain before
ultimately we prevail. But it is important that we do prevail.
I think the bottom line would be as follows: During the
last 2 years, progress has been made, but much work remains to
be done. Sounds like a GAO report, does it not?
I think we have to keep in mind that it took decades for
DOD to get in the position where it is, that DOD is number one
in the world in fighting and winning armed conflicts. Nobody is
even close. But as I have said before, they are a D, graded on
a curve, in economy, efficiency, transparency, and
accountability.
There is no question that Secretary Zakheim, all the way up
to Secretary Rumsfeld, has been dedicated to trying to deal
with the process problems of which financial management is only
a sub-set of a much bigger management challenge. They have made
some progress. But I think that it is going to take
considerably more time before they are going to ultimately
prevail.
With regard to financial management, there has been a date
set by DOD and by the administration to try to achieve a clean
opinion on the financial statements of DOD, namely for fiscal
year 2007. I think that is an ambitious and an aggressive date.
But obviously, I think it is important that you have some goals
and milestones, and you try to do what you can to try to hit
them.
Clearly, the lack of an opinion on the financial statements
of the Department of Defense is the single largest obstacle to
the GAO being able to render an opinion on the consolidated
financial statements of the U.S. Government.
You also mentioned, Senator Akaka, about the issue of the
enterprise architecture. First, it was talked about as a
financial management system. Financial management is a sub-set
of an overall business management information system. Yes, they
do have the first version of an enterprise architecture but
they have much more work to do. It is my understanding they
expect to come up with at least a couple of other versions of
that architecture this year.
In my opinion, Mr. Chairman and Senator Akaka, I think if
you look on page 9 and page 15 of my testimony, I talk about
some of the underlying causes for the current challenges and
some of the ways forward in key for successful reform. I will
just mention a couple of things off the top of my head and then
turn it over to Secretary Zakheim to be able to cover his
opening remarks.
In my view, there are several things that are going to be
absolutely essential, two of which may require legislation. We
need to have a top-level management official at level-two level
within DOD. It could be Deputy Secretary for Management; it
could be Principal Under Secretary for Management; call it
whatever you want--the title is not important. However, the
level-two is important. This position should be focused full
time on trying to deal with DOD's business transformational
challenges. That means financial management, information
technology, human capital strategy, contract management, et
cetera, et cetera, et cetera.
DOD has currently 9 of 25 high-risk areas in the Federal
Government. The Secretary, the Deputy Secretary, the Under
Secretaries, including Secretary Zakheim, have full-time jobs
just dealing with the tremendous complexity of the Department
of Defense, which is arguably the largest single entity on
Earth, as a single entity.
So, we need somebody focused full time with the
responsibility and the accountability to make progress with
regard these challenges on a strategic, integrated basis. We
have recommended that there be statutory criteria for what type
of experience the person should have. This is not a policy
person. This is a management and leadership professional.
This person could come from the private sector, they could
come from the public sector. But the fact of the matter is that
they would have to have demonstrated successful experience in
similar positions and also have some understanding of how the
Federal Government operates and, hopefully, the Department of
Defense. They need to have a term appointment, preferably 5 to
7 years; they need to have a performance contract; and, they
need to be held accountable for results.
Second, we also need to look at how DOD's resources are
allocated, especially for systems development on the business
side, and to have more control over those resources by the
functional areas, or the so-called domains, rather than by the
Services. I think that it is critically important to make sure
that we do not have everybody doing their own thing and a
further balkanization of the business side of the house.
Third, Congress gave the Department of Defense the National
Security Personnel System Act, which gives the Department an
opportunity to fundamentally reform its human capital policies
and practices. Secretary of the Navy Gordon England is taking a
leadership role here, along with Under Secretary of Defense for
Personnel and Readiness David Chu. One key here will be to make
sure that in implementing that legislation that DOD aligns
their institutional, unit, and the individual performance
measurement reward systems to try to achieve desired outcomes
and to also do it in a way that prevents abuse of employees. I
think this is critically important.
If you do these three things, and if you have sustained
attention on these issues over a period of time, I think we can
eventually solve the problem. I question whether we will ever
solve the problem if we do not do at least those three things.
Thank you.
[The prepared statement of Mr. Walker follows:]

Prepared Statement by David M. Walker

Mr. Chairman and members of the subcommittee: It is a pleasure to
be back again to discuss financial management and related business
transformation efforts at the Department of Defense (DOD). At the
outset, I would like to thank the subcommittee for having this hearing
and acknowledge the important role hearings such as this one serve in
providing a catalyst for business transformation at DOD. The
involvement of this subcommittee is critical to ultimately assuring
public confidence in DOD as a steward that is accountable for its
finances. DOD's substantial longstanding financial and business
management problems adversely affect the economy, effectiveness, and
efficiency of its operations, and have resulted in a lack of adequate
transparency and appropriate accountability across all major business
areas. As a result, DOD does not have timely, reliable information for
management to use in making informed decisions. Further, as our reports
continue to show, these problems result in significant fraud, waste,
and abuse and hinder DOD's attempts to develop world-class operations
and activities to support its forces. Of the 25 areas on GAO's
government-wide ``high risk'' list, 6 are DOD program areas, and the
Department shares responsibility for 3 other high-risk areas that are
government-wide in scope.\1\ The problems we continue to identify
relate to human capital challenges, ineffective internal control and
processes, and duplicative and stovepiped business systems. The
seriousness of DOD's financial management weaknesses underscores the
importance of no longer condoning ``status quo'' business operations at
DOD.
---------------------------------------------------------------------------
\1\ U.S. General Accounting Office, High-Risk Series: An Update,
GAO-03-119 (Washington, DC: January 2003). The nine interrelated high-
risk areas that represent the greatest challenge to DOD's development
of world-class business operations to support its forces are: contract
management, financial management, human capital management, information
security, support infrastructure management, inventory management, real
property, systems modernization, and weapon systems acquisition.
---------------------------------------------------------------------------
Although the underlying operational conditions remain fundamentally
unchanged since I last testified before this subcommittee in March
2002, DOD has taken action to begin addressing a number of these
challenges as part of its business transformation effort. Business
transformation has been a priority of Secretary Rumsfeld. For example,
DOD has been granted additional human capital flexibilities and is in
the process of developing a new personnel management system for its
civilian employees. In addition, through its Business Management
Modernization Program (BMMP), DOD is continuing its efforts to develop
and implement a business enterprise architecture and establish
effective management and control over its business system modernization
investments. To date, however, tangible evidence of improvements in DOD
business operations remains limited to specific business process areas,
such as DOD's purchase card program, where improvements have generally
resulted from increased management focus and better internal control
rather than from major modifications to automated systems. It is
important to note that some of the key elements I highlight in this
testimony as necessary for successful business transformation were
critical to the success of several narrowly defined initiatives that I
will discuss today.
Because DOD is one of the largest and most complex organizations in
the world, overhauling its financial management and related business
operations represents a huge management challenge. In fiscal year 2003,
DOD reported that its operations involved over $1 trillion in assets,
nearly $1.6 trillion in liabilities, approximately 3.3 million military
and civilian personnel, and disbursements of over $416 billion.
Moreover, execution of DOD operations spans a wide range of defense
organizations, including the military services and their respective
major commands and functional activities, numerous large defense
agencies and field activities, and various combatant and joint
operational commands that are responsible for military operations for
specific geographic regions or theaters of operations. To execute these
military operations, the department performs an assortment of
interrelated and interdependent business process areas, including
logistics management, procurement, healthcare management, and financial
management. Secretary Rumsfeld has estimated that successful
improvements to DOD's business operations could save the department 5
percent of its budget a year. Using DOD's reported fiscal year 2004
budget amounts, this percentage would equate to approximately $22
billion a year in savings.
Two years ago, I testified on the challenges DOD faces in
transforming its financial management and related business operations
and systems, and I discussed several key elements necessary for reform
to succeed.\2\ If the past has taught us anything, it is that
addressing the Department's serious financial and related business
process weaknesses will not be easy. For several years, we have
reported on DOD's efforts to improve the effectiveness and efficiency
of its business operations and actions needed to achieve and sustain
reform. Many of the same underlying causes, such as lack of sustained
leadership, cultural resistance to change, parochialism, and stovepiped
operations, that impeded the success of previous administrations in
addressing DOD's problems continue today. If DOD is unable to address
these underlying causes that have resulted in the failure of previous
broad-based reform efforts, improvements will remain marginal, confined
to narrowly defined business process areas and incremental improvements
in human capital policies, business processes, internal control
systems, and information technologies.
---------------------------------------------------------------------------
\2\ U.S. General Accounting Office, DOD Financial Management:
Integrated Approach, Accountability, Transparency, and Incentives Are
Keys to Effective Reform, GAO-02-497T (Washington, DC: Mar. 6, 2002).
---------------------------------------------------------------------------
Today, I will provide my perspectives on: (1) the impact that long-
standing financial management and related business process weaknesses
continue to have on DOD's business operations; (2) underlying causes
that have impeded the success of prior efforts; (3) keys to successful
reform; and (4) the status of current DOD business transformation
efforts. In addition, I will offer two suggestions for legislative
consideration, which I believe will provide the sustained top-level
leadership and accountability necessary for the overall business
transformation effort to succeed. My statement is based on previous GAO
reports as well as on our review of the work of other DOD auditors and
recent DOD reports and studies.

IMPACT OF FINANCIAL MANAGEMENT AND RELATED BUSINESS PROCESS WEAKNESSES

As I previously stated, and we have reported on for several years,
DOD faces a range of financial management and related business process
challenges that are complex, longstanding, pervasive, and deeply rooted
in virtually all business operations throughout the Department. As I
recently testified and as discussed in our latest financial audit
report,\3\ DOD's financial management deficiencies, taken together,
continue to represent the single largest obstacle to achieving an
unqualified opinion on the U.S. government's consolidated financial
statements. To date, none of the military services has passed the test
of an independent financial audit because of pervasive weaknesses in
internal control and processes and fundamentally flawed business
systems.
---------------------------------------------------------------------------
\3\ U.S. General Accounting Office, Fiscal Year 2003 U.S.
Government Financial Statements: Sustained Improvement in Federal
Financial Management Is Crucial to Addressing Our Nation's Future
Fiscal Challenges, GAO-04-477T (Washington, DC: Mar. 3, 2004).
---------------------------------------------------------------------------
In identifying improved financial performance as one of its five
government-wide initiatives, the President's Management Agenda
recognized that obtaining a clean (unqualified) financial audit opinion
is a basic prescription for any well-managed organization. At the same
time, it recognized that without sound internal control and accurate
and timely financial and performance information, it is not possible to
accomplish the President's agenda and secure the best performance and
highest measure of accountability for the American people. The Joint
Financial Management Improvement Program (JFMIP) \4\ principals have
defined certain measures, in addition to receiving an unqualified
financial statement audit opinion, for achieving financial management
success. These additional measures include: (1) being able to routinely
provide timely, accurate, and useful financial and performance
information; (2) having no material internal control weaknesses or
material noncompliance with laws and regulations; and (3) meeting the
requirements of the Federal Financial Management Improvement Act of
1996 (FFMIA). Unfortunately, DOD does not meet any of these conditions.
For example, for fiscal year 2003, the DOD Inspector General issued a
disclaimer of opinion on DOD's financial statements, citing 11 material
weaknesses in internal control and noncompliance with FFMIA
requirements.
---------------------------------------------------------------------------
\4\ JFMIP is a joint undertaking of the Office of Management and
Budget, GAO, the Department of Treasury, and the Office of Personnel
Management, working in cooperation with each other and with operating
agencies to improve financial management practices throughout the
government.
---------------------------------------------------------------------------
Recent audits and investigations by GAO and DOD auditors continue
to confirm the existence of pervasive weaknesses in DOD's financial
management and related business processes and systems. These problems
have: (1) resulted in a lack of reliable information needed to make
sound decisions and report on the status of DOD activities, including
accountability of assets, through financial and other reports to
Congress and DOD decisionmakers; (2) hindered its operational
efficiency; (3) adversely affected mission performance; and (4) left
the Department vulnerable to fraud, waste, and abuse. For example:

450 of the 481 mobilized Army National Guard soldiers
from 6 GAO case study Special Forces and Military Police units
\5\ had at least one pay problem associated with their
mobilization. DOD's inability to provide timely and accurate
payments to these soldiers, many of whom risked their lives in
recent Iraq or Afghanistan missions, distracted them from their
missions, imposed financial hardships on the soldiers and their
families, and has had a negative impact on retention. (GAO-04-
89, Nov. 13, 2003)
---------------------------------------------------------------------------
\5\ The six case study units reviewed include the Colorado B
Company, Virginia B Company, West Virginia C Company, Mississippi 114th
Military Police Company, California 49th Military Police Headquarters
and Headquarters Detachment, and the Maryland 200th Military Police
Company. In addition, our limited review of pay experiences of soldiers
in the Colorado Army Guard's 220th Military Police Company, who are
recently returned from Iraq, indicated that some of the same types of
pay problems that we found in our case studies had also affected them.
---------------------------------------------------------------------------
DOD incurred substantial logistical support problems
as a result of weak distribution and accountability processes
and controls over supplies and equipment shipments in support
of Operation Iraqi Freedom activities, similar to those
encountered during the prior gulf war. These weaknesses
resulted in: (1) supply shortages; (2) backlogs of materials
delivered in theater but not delivered to the requesting
activity; (3) a discrepancy of $1.2 billion between the amount
of materiel shipped and that acknowledged by the activity as
received; (4) cannibalization of vehicles; and (5) duplicate
supply requisitions. (GAO-04-305R, Dec. 18, 2003).
Inadequate asset visibility and accountability
resulted in DOD selling new Joint Service Lightweight
Integrated Suit Technology (JSLIST)--the current chemical and
biological protective garment used by our military forces--on
the internet for $3 each (coat and trousers) while at the same
time buying them for over $200 each. DOD has acknowledged that
these garments should have been restricted to DOD use only and
therefore should not have been available to the public. (GAO-
02-873T, June 25, 2002).
Inadequate asset accountability also resulted in DOD's
inability to locate and remove over 250,000 defective Battle
Dress Overgarments (BDOs)--the predecessor of JSLIST--from its
inventory. Subsequently, we found that DOD had sold many of
these defective suits to the public, including 379 that we
purchased in an undercover operation. In addition, DOD may have
issued over 4,700 of the defective BDO suits to local law
enforcement agencies. Although local law enforcement agencies
are most likely to be the first responders to a terrorist
attack, DOD failed to inform these agencies that using these
BDO suits could result in death or serious injury. (GAO-04-
15NI, Nov. 19, 2003)
Tens of millions of dollars are not being collected
each year by military treatment facilities from third-party
insurers because key information required to effectively bill
and collect from third-party insurers is often not properly
collected, recorded, or used by the military treatment
facilities. (GAO-04-322R, Feb. 20, 2004)
Our analysis of data on more than 50,000 maintenance
work orders opened during the deployments of 6 battle groups
indicated that about 29,000 orders (58 percent) could not be
completed because the needed repair parts were not available on
board ship. This condition was a result of inaccurate ship
configuration records and incomplete, outdated, or erroneous
historical parts demand data. Such problems not only have a
detrimental impact on mission readiness, they may also increase
operational costs due to delays in repairing equipment and
holding unneeded spare parts inventory. (GAO-03-887, Aug. 29,
2003)
DOD sold excess biological laboratory equipment,
including a biological safety cabinet, a bacteriological
incubator, a centrifuge, and other items that could be used to
produce biological warfare agents. Using a fictitious company
and fictitious individual identities, we were able to purchase
a large number of new and usable equipment items over the
Internet from DOD. Although the production of biological
warfare agents requires a high degree of expertise, the ease
with which these items were obtained through public sales
increases the risk that terrorists could obtain and use them to
produce biological agents that could be used against the United
States. (GAO-04-81TNI, Oct. 7, 2003)
Based on statistical sampling, we estimated that 72
percent of the over 68,000 premium class airline tickets DOD
purchased for fiscal years 2001 and 2002 was not properly
authorized and that 73 percent was not properly justified.
During fiscal years 2001 and 2002, DOD spent almost $124
million on premium class tickets that included at least one leg
in premium class--usually business class. Because each premium
class ticket cost the government up to thousands of dollars
more than a coach class ticket, unauthorized premium class
travel resulted in millions of dollars of unnecessary costs
being incurred annually. (GAO-04-229T, Nov. 6, 2003)
Some DOD contractors have been abusing the Federal tax
system with little or no consequence, and DOD is not collecting
as much in unpaid taxes as it could. Under the Debt Collection
Improvement Act of 1996, DOD is responsible--working with the
Treasury Department--for offsetting payments made to
contractors to collect funds owed, such as unpaid Federal
taxes. However, we found that DOD had collected only $687,000
of unpaid taxes over the last 6 years. We estimated that at
least $100 million could be collected annually from DOD
contractors through effective implementation of levy and debt
collection programs. (GAO-04-95, Feb. 12, 2004)
DOD continues to lack a complete inventory of
contaminated real property sites, which affects not only DOD's
ability to assess the potential environmental impact and to
plan, estimate costs, and fund cleanup activities, as
appropriate, but also its ability to minimize the risk of
civilian exposure to unexploded ordnance. The risk of such
exposure is expected to grow with the increase in development
and recreational activities on land once used by the military
for munitions-related activities (e.g., live-fire testing and
training). (GAO-04-147, Dec. 19, 2003)
DOD's Space and Naval Warfare Systems Command working
capital fund activities used accounting entries to manipulate
the amount of customer orders for the sole purpose of reducing
the actual dollar amounts reported to Congress for work that
had been ordered and funded (obligated) by customers but not
yet completed by fiscal year end. As a result, congressional
and DOD decisionmakers did not have the reliable information
they needed to make decisions regarding the level of funding to
be provided to working capital fund customers. (GAO-03-668,
July 1, 2003)
Our review of fiscal year 2002 data revealed that
about $1 of every $4 in contract payment transactions in DOD's
Mechanization of Contract Administration Services (MOCAS)
system was for adjustments to previously recorded payments--$49
billion of adjustments out of $198 billion in disbursement,
collection, and adjustment transactions. According to DOD, the
cost of researching and making adjustments to accounting
records was about $34 million in fiscal year 2002, primarily to
pay hundreds of DOD and contractor staff. (GAO-03-727, Aug. 8,
2003)
DOD and congressional decisionmakers lack reliable
data upon which to base sourcing decisions due to weaknesses in
DOD's data-gathering, reporting, and financial systems. As in
the past, we have identified significant errors and omissions
in the data submitted to Congress regarding the amount of each
military service's depot maintenance work out-sourced or
performed in-house. As a result, both DOD and Congress lack
assurances that the dollar amounts of public-private sector
workloads reported by military services are reliable. (GAO-03-
1023, Sept. 15, 2003)
DOD's information technology (IT) budget submissions
to Congress for fiscal year 2004 contained material
inconsistencies, inaccuracies, or omissions that limited its
reliability. For example, we identified discrepancies totaling
about $1.6 billion between two primary parts of the
submission--the IT budget summary report and the detailed
Capital Investments Reports on each IT initiative. These
problems were largely attributable to insufficient management
attention and limitations in departmental policies and
procedures, such as guidance in DOD's Financial Management
Regulations, and to shortcomings in systems that support
budget-related activities. (GAO-04-115, Dec. 19, 2003)
Since the mid-1980s, we have reported that DOD uses
overly optimistic planning assumptions to estimate its annual
budget request. These same assumptions are reflected in its
Future Years Defense Program, which reports projected spending
for the current budget year and at least 4 succeeding years. In
addition, in February 2004 the Congressional Budget Office
projected that DOD's demand for resources would grow to about
$473 billion a year by fiscal year 2009. DOD's own estimate for
that same year was only $439 billion.\6\ As a result of DOD's
continuing use of optimistic assumptions, DOD has too many
programs for the available dollars, which often leads to
program instability, costly program stretch-outs, and program
termination. Over the past few years, the mismatch between
programs and budgets has continued, particularly in the area of
weapons systems acquisition. For example, in January 2003, we
reported that the estimated costs of developing eight major
weapons systems had increased from about $47 billion in fiscal
year 1998 to about $72 billion by fiscal year 2003.\7\ (GAO-03-
98, January 2003)
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\6\ Congressional Budget Office, The Long-Term Implications of
Current Defense Plans: Detailed Update for Fiscal Year 2004
(www.cbo.gov, February 2004). Figures from this report are in constant
fiscal year 2004 dollars.
\7\ U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Defense, GAO-03-98 (Washington, DC:
January 2003). Figures from this report are in constant fiscal year
2003 dollars.
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DOD did not know the size of its security clearance
backlog at the end of September 2003 and had not estimated a
backlog since January 2000. Using September 2003 data, we
estimated that DOD had a backlog of roughly 360,000
investigative and adjudicative cases, but the actual backlog
size is uncertain. DOD's failure to eliminate and accurately
assess the size of its backlog may have adverse affects. For
example, delays in updating overdue clearances for personnel
doing classified work may increase national security risks and
slowness in issuing new clearances can increase the costs of
doing classified government work. (GAO-04-344, Feb. 9, 2004)

These examples clearly demonstrate not only the severity of DOD's
current problems, but also the importance of reforming financial
management and related business operations to improve mission support
and the economy and efficiency of DOD's operations, and to provide for
transparency and accountability to Congress and American taxpayers.

UNDERLYING CAUSES OF FINANCIAL AND RELATED BUSINESS PROCESS
TRANSFORMATION CHALLENGES

The underlying causes of DOD's financial management and related
business process and system weaknesses are generally the same ones I
outlined in my prior testimony before this subcommittee 2 years ago.
For each of the problems cited in the previous section, we found that
one or more of these causes were contributing factors. Over the years,
the department has undertaken many initiatives intended to transform
its business operations department-wide and improve the reliability of
information for decisionmaking and reporting but has not had much
success because it has not addressed the following four underlying
causes:

a lack of sustained top-level leadership and
management accountability for correcting problems;
deeply embedded cultural resistance to change,
including military service parochialism and stovepiped
operations;
a lack of results-oriented goals and performance
measures and monitoring; and
inadequate incentives and accountability mechanisms
relating to business transformation efforts.

If not properly addressed, these root causes will likely result in
the failure of current DOD initiatives.
Lack of Sustained Leadership and Adequate Accountability
DOD has not routinely assigned accountability for performance to
specific organizations or individuals who have sufficient authority to
accomplish desired goals. For example, under the Chief Financial
Officers Act of 1990,\8\ it is the responsibility of the agency Chief
Financial Officer (CFO) to establish the mission and vision for the
agency's future financial management and to direct, manage, and provide
oversight of financial management operations. However, at DOD, the
Comptroller--who is by statute the department's CFO--has direct
responsibility for only an estimated 20 percent of the data relied on
to carry out the department's financial management operations. The
other 80 percent comes from DOD's other business operations and is
under the control and authority of other DOD officials.
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\8\ Chief Financial Officers Act of 1990, Pub. L. No. 101-576, 104
Stat. 2842, Nov. 15, 1990 (codified, as amended in scattered sections
of title 31, United States Code).
---------------------------------------------------------------------------
In addition, DOD's past experience has suggested that top
management has not had a proactive, consistent, and continuing role in
integrating daily operations for achieving business transformation
related performance goals. It is imperative that major improvement
initiatives have the direct, active support and involvement of the
Secretary and Deputy Secretary of Defense to ensure that daily
activities throughout the department remain focused on achieving
shared, agency-wide outcomes and success. While the current DOD
leadership, such as the Secretary, Deputy Secretary, and Comptroller
have certainly demonstrated their commitment to reforming the
Department, the magnitude and nature of day-to-day demands placed on
these leaders following the events of September 11, 2001, clearly
affect the level of oversight and involvement in business
transformation efforts that these leaders can sustain. Given the
importance of DOD's business transformation effort, it is imperative
that it receive the sustained leadership needed to improve the economy,
efficiency, and effectiveness of DOD's business operations. Based on
our surveys of best practices of world-class organizations,\9\ strong
executive CFO and Chief Information Officer leadership is essential to:
(1) making financial management an entity-wide priority; (2) providing
meaningful information to decisionmakers; (3) building a team of people
that delivers results; and (4) effectively leveraging technology to
achieve stated goals and objectives.
---------------------------------------------------------------------------
\9\ U.S. General Accounting Office, Executive Guide: Creating Value
Through World-class Financial Management, GAO/AIMD-00-134 (Washington,
DC: April 2000) and U.S. General Accounting Office, Executive Guide:
Maximizing the Success of Chief Information Officers: Learning From
Leading Organizations, GAO-01-376G (Washington, DC: February 2001).
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Cultural Resistance and Parochialism
Cultural resistance to change, military service parochialism, and
stovepiped operations have all contributed significantly to the failure
of previous attempts to implement broad-based management reforms at
DOD. The Department has acknowledged that it confronts decades-old
problems deeply grounded in the bureaucratic history and operating
practices of a complex, multifaceted organization. Recent audits reveal
that DOD has made only small inroads in addressing these challenges.
For example, the Bob Stump National Defense Authorization Act for
Fiscal Year 2003 \10\ requires the DOD Comptroller to determine that
each financial system improvement meets the specific conditions called
for in the act before DOD obligates funds in amounts exceeding $1
million. However, we found that most system improvement efforts were
not reviewed by the DOD Comptroller, as required, and that DOD
continued to lack a mechanism for proactively identifying system
improvement initiatives. We asked for, but DOD did not provide,
comprehensive data for obligations in excess of $1 million for business
system modernization. Based on the limited information provided, we
found that as of December 2003, business system modernization efforts
with reported obligations totaling over $479 million were not referred
to the DOD Comptroller for review for fiscal years 2003 and 2004.
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\10\ Bob Stump National Defense Authorization Act for Fiscal Year
2003, Pub. L. No. 107-314, Sec. 1004(d), 116 Stat. 2458, 2629, Dec. 2,
2002.
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In addition, in September 2003,\11\ we reported that DOD continues
to use a stovepiped approach to develop and fund its business system
investments. Specifically, we found that DOD components receive and
control funding for business systems investments without being subject
to the scrutiny of the DOD Comptroller. DOD's ability to address its
current ``business-as-usual'' approach to business system investments
is further hampered by its lack of: (1) a complete inventory of
business systems (a condition we first highlighted in 1998); (2) a
standard definition of what constitutes a business system; (3) a well-
defined enterprise architecture; and (4) an effective approach for
controlling financial system improvements before making obligations
exceeding $1 million. Until DOD develops and implements an effective
strategy for overcoming resistance, parochialism, and stovepiped
operations, reform will fail and ``business-as-usual'' will continue at
the department.
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\11\ U.S. General Accounting Office, DOD Business Systems
Modernization: Important Progress Made to Develop Business Enterprise
Architecture, but Much Work Remains, GAO-03-1018 (Washington, DC: Sept.
19, 2003).
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Lack of Goals and Performance Measures
At a programmatic level, the lack of clear, linked goals and
performance measures handicapped DOD's past reform efforts. As a
result, DOD managers lacked straightforward roadmaps showing how their
work contributed to attaining the Department's strategic goals, and
they risked operating autonomously rather than collectively. As of
March 2004, DOD has formulated Department-wide performance goals and
measures and continues to refine and align them with the outcomes
described in its strategic plan--the September 2001 Quadrennial Defense
Review (QDR). The QDR outlined a new risk management framework,
consisting of four dimensions of risk--force management, operational,
future challenges, and institutional--to use in considering trade-offs
among defense objectives and resource constraints. According to DOD's
Fiscal Year 2003 Annual Report to the President and Congress, these
risk areas are to form the basis for DOD's annual performance goals.
They will be used to track performance results and will be linked to
resources. As of March 2004, the department is still in the process of
implementing this approach on a Department-wide basis.
DOD currently has plans to institutionalize performance management
by aligning management activities with the President's Management
Agenda. As part of this effort, DOD linked its fiscal year 2004 budget
resources with metrics for broad program areas, e.g., air combat,
airlift, and basic research in the Office of Management and Budget's
(OMB) Program Assessment Rating Tool.\12\ We have not reviewed DOD's
efforts to link resources to metrics; however, some of our recent work
notes the lack of clearly defined performance goals and measures in the
management of such areas as defense inventory and military pay.\13\
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\12\ OMB developed the Program Assessment Rating Tool to strength
the process for assessing the effectiveness of programs across the
Federal Government. For fiscal year 2004, OMB rated the following 12
defense program areas: Air Combat; Airlift; Basic Research; Chemical
Demilitarization; Communications Infrastructure; Defense Health; Energy
Conservation Improvement; Facilities Sustainment, Restoration,
Modernization, and Demolition; Housing; Missile Defense; Recruiting;
and Shipbuilding. DOD linked metrics for these program areas, which
represent 20 percent of the department's fiscal year 2004 budget; it
linked another 20 percent in the 2005 budget and 30 percent in the 2006
budget, for a total of 70 percent.
\13\ In July 2003, we reported that DOD and the military services
do not have an effective approach to prevent and mitigate equipment
corrosion, and that DOD's strategic plan should contain clearly defined
goals; measurable, outcome-oriented objectives; and performance
measures. (U.S. General Accounting Office, Defense Management:
Opportunities to Reduce Corrosion Costs and Increase Readiness, GAO-03-
753 (Washington, DC: July 7, 2003)). Similarly, in January 2004 we
testified that existing processes and controls used to provide pay and
allowances to mobilized Army Guard personnel prevented DOD from being
able to reasonably assure timely and accurate payroll payments. We
stated that DOD needs to establish a unified set of policies and
procedures, as well as performance measures in the pay area (U.S.
General Accounting Office, Military Pay: Army National Guard Personnel
Mobilized to Active Duty Experienced Significant Pay Problems, GAO-04-
413T (Washington, DC: Jan. 28, 2004)).
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Lack of Incentives for Change
The final underlying cause of the Department's long-standing
inability to carry out needed fundamental reform has been the lack of
incentives for making more than incremental change to existing
``business-as-usual'' operations, systems, and organizational
structures. Traditionally, DOD has focused on justifying its need for
more funding rather than on the outcomes its programs have produced.
DOD has historically measured its performance by the amount of money
spent, people employed, or number of tasks completed. Incentives for
its decisionmakers to implement changed behavior have been minimal or
nonexistent.
The lack of incentive to change is evident in the business systems
modernization area. Despite DOD's acknowledgement that many of its
systems are error prone, duplicative, and stovepiped, DOD continues to
allow its component organizations to make their own investment
decisions, following different approaches and criteria. These
stovepiped decisionmaking processes have contributed to the
department's current complex, error-prone environment of approximately
2,300 systems. In March 2003, we reported that ineffective program
management and oversight, as well as a lack of accountability, resulted
in DOD continuing to invest hundreds of millions of dollars in system
modernization efforts without any assurance that the projects will
produce operational improvements commensurate with the amount
invested.\14\ For example, the estimated cost of one of the business
system investment projects that we reviewed increased by as much as
$274 million, while its schedule slipped by almost 4 years. After
spending $126 million, DOD terminated that project in December 2002,
citing poor performance and increasing costs. GAO and the DOD Inspector
General (DODIG) have identified numerous business system modernization
efforts that cost more than planned, take years longer than planned,
and fall short of delivering planned or needed capabilities. Despite
this track record, DOD continues to increase spending on business
systems while at the same time it lacks the effective management and
oversight needed to achieve real results. Without appropriate
incentives to improve their project management, ongoing oversight, and
adequate accountability mechanisms, DOD components will continue to
develop duplicative and nonintegrated systems that are inconsistent
with the Secretary's vision for reform.
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\14\ U.S. General Accounting Office, DOD Business Systems
Modernization: Continued Investment in Key Accounting Systems Needs to
be Justified, GAO-03-465 (Washington, DC: Mar. 28, 2003).
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To effect real change, actions are needed to: (1) break down
parochialism and reward behaviors that meet DOD-wide goals; (2) develop
incentives that motivate decisionmakers to initiate and implement
efforts that are consistent with better program outcomes, including
saying ``no'' or pulling the plug on a system or program that is
failing; and (3) facilitate a congressional focus on results-oriented
management, particularly with respect to resource-allocation decisions.

KEYS TO SUCCESSFUL REFORM AND CURRENT STATUS OF REFORM EFFORTS

Over the years, we have given DOD credit for beginning numerous
initiatives intended to improve its business operations. Unfortunately,
most of these initiatives failed to achieve their intended objective in
part, we believe, because they failed to incorporate key elements that
in our experience shows are critical to successful reform. Today, I
would like to discuss two very important broad-based initiatives DOD
currently has underway that, if properly developed and implemented,
will result in significant improvements in DOD's business operations.
In addition to these broad-based initiatives, DOD has undertaken
several interim initiatives in recent years that have resulted in
tangible, although limited, improvements. We believe that these
tangible improvements were possible because DOD incorporated many of
the key elements critical for reform. Furthermore, I would like to
offer two suggestions for legislative consideration that I believe
could significantly increase the likelihood of a successful business
transformation effort at DOD.

Keys to Successful Reform
As I have previously testified,\15\ and the success of the more
narrowly defined DOD initiatives I will discuss later illustrate, the
following key elements collectively will enable the department to
effectively address the underlying causes of its inability to resolve
its longstanding financial and business management problems. These
elements are
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\15\ GAO-02-497T.

addressing the Department's financial management and
related business operational challenges as part of a
comprehensive, integrated, DOD-wide strategic plan for business
reform;
providing for sustained and committed leadership by
top management, including but not limited to the Secretary of
Defense,
establishing resource control over business systems
investments;
establishing clear lines of responsibility, authority,
and accountability;
incorporating results-oriented performance measures
and monitoring progress tied to key financial and business
transformation objectives;
providing appropriate incentives or consequences for
action or inaction;
establishing an enterprise architecture to guide and
direct business systems modernization investments; and
ensuring effective oversight and monitoring.

For the most part, these elements, which should not be viewed as
independent actions but rather as a set of interrelated and
interdependent actions, are consistent with those discussed in the
Department's April 2001 financial management transformation report.\16\
The degree to which DOD incorporates them into its current reform
efforts--both long and short term--will be a deciding factor in whether
these efforts are successful.
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\16\ Department of Defense, Transforming Department of Defense
Financial Management: A Strategy for Change, (Washington, DC: Apr. 13,
2001).
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Human Capital Initiative
Human capital challenges at DOD are crosscutting and impact the
effectiveness of all of its business operations. Effective human
capital strategies are necessary for any business transformation to
succeed at DOD. For several years, we have reported \17\ that many of
DOD's business process and control weaknesses were attributable in part
to human capital issues. Recent audits of DOD's military payroll and
the individually billed travel card program further highlight the
adverse impact that outdated and inadequate human capital practices,
such as insufficient staffing, training, and monitoring of performance,
continue to have on DOD business operations.
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\17\ U.S. General Accounting Office, Major Management Challenges
and Program Risks: Department of Defense, GAO-01-244 (Washington, DC:
Jan.1, 2001).
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I strongly support the need for modernizing Federal human capital
policies both within DOD and for the Federal Government at large. We
have found that a critical success factor for overall organizational
transformation is the use of a modern, effective, credible, and
integrated performance management system to define responsibility and
assure accountability for achieving desired goals and objectives. Such
a performance management system can help manage and direct the
transformation process by linking performance expectations to an
employee's role in the transformation process. GAO has found that there
are significant opportunities to use the performance management system
to explicitly link senior executive expectations for performance to
results-oriented goals. There is a need to hold senior executives
accountable for demonstrating competencies in leading and facilitating
change and fostering collaboration both within and across
organizational boundaries to achieve results. Setting and meeting
expectations such as these will be critical to achieving needed
transformation changes. Simply put, DOD must convince people throughout
the Department that they must change business-as-usual practices or
they are likely to face serious consequences, personally and
organizationally. DOD has already applied this principle at the Defense
Finance and Accounting Service (DFAS). For example, DFAS managers--and
sometimes staff--are rated and rewarded based on their ability to reach
specific annual performance goals. But linking employee pay to the
achievement of measurable performance goals must be done within the
context of a credible human capital system that includes adequate
safeguards.
The National Defense Authorization Act for Fiscal Year 2004 \18\
authorized DOD to establish a National Security Personnel System for
its civilian employees that is modern, flexible, and consistent with
the merit principles outlined by the act. This legislation requires DOD
to develop a human capital system that is consistent with many of the
practices that we have laid out for an effective human capital system,
including a modern and results-oriented performance management system.
However, in our opinion, DOD does not yet have the necessary
institutional infrastructure in place within its organization to
support an effective human capital transformation effort. This
institutional infrastructure must include, at a minimum,
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\18\ National Defense Authorization Act for Fiscal Year 2004, Pub.
L. No. 108-136, Sec. 1101, 117 Stat. 1392, 1621, Nov. 24, 2003
(amending subpart I of part III of title 5, United States Code).

a human capital planning process that integrates the
department's human capital policies, strategies, and programs
for both civilian (including contractors) and military
personnel, with its program goals, mission, and desired
outcomes;
the capabilities to effectively develop and implement
a new human capital system, and
a modern, effective, credible, and hopefully validated
performance management system that includes a set of adequate
safeguards, including reasonable transparency and appropriate
accountability mechanisms, to ensure the fair, effective, and
credible implementation of the system.

The results of our review of DOD's strategic human capital planning
efforts along with the use of human capital flexibilities and related
human capital efforts across government underscore the importance of
such an institutional infrastructure in developing and effectively
implementing new personnel authorities. In the absence of this critical
element, the new human capital authorities will provide little
advantage and could actually end up doing damage if not properly
implemented.
As DOD develops regulations to implement its new civilian personnel
system, the Department needs to do the following.

Ensure the active involvement of the Office of
Personnel Management (OPM) in the development process, given
the significant implications that changes in DOD regulations
may have on governmentwide human capital policies.\19\
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\19\ U.S. General Accounting Office, Defense Transformation:
Preliminary Observations on DOD's Proposed Civilian Personnel Reforms,
GAO-03-717T (Washington, DC: Apr. 29, 2003).
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Ensure the involvement of civilian employees and
unions in the development of a new personnel system. The law
calls for DOD to involve employees, especially in the design of
its new performance management system. Involving employees in
planning helps to develop agency goals and objectives that
incorporate insights about operations from a front-line
perspective. It can also serve to increase employees'
understanding and acceptance of organizational goals and
improve motivation and morale.
Use a phased approach to implementing the system in
recognition that different parts of the organization will have
different levels of readiness and different capabilities to
implement new authorities. Moreover, a phased approach allows
for learning so that appropriate adjustments and midcourse
corrections can be made before the regulations are fully
implemented Department-wide. In this regard, DOD has indicated
that it plans to implement its new human capital system for
300,000 civilian employees by October 1, 2004. It is highly
unlikely that DOD will have employed an appropriate process and
implemented an appropriate infrastructure to achieve this
objective.

It is worth mentioning here that the Department of Homeland
Security (DHS) is also currently developing a new human capital system.
DHS is using a collaborative process that facilitates participation
from all levels of DHS, and directly involves OPM. We found that the
DHS process to date has generally reflected the important elements of a
successful transformation, including effective communication and
employee involvement.\20\ In addition, DHS plans to implement the job
evaluation, pay, and performance management system in phases to allow
time for final design, training, and careful implementation. I believe
that DOD could benefit from employing a more inclusive process and
phased implementation approach similar to the process used by DHS.
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\20\ U.S. General Accounting Office, Human Capital: DHS Personnel
System Design Effort Provides for Collaboration and Employee
Participation, GAO-03-1099 (Washington, DC: Sep. 30, 2003).
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BUSINESS MANAGEMENT MODERNIZATION PROGRAM (BMMP)

Another broad-based initiative that is vital to the Department's
efforts to transform DOD business operations is the BMMP, which the
Department established in July 2001. The purpose of the BMMP is to
oversee development and implementation of a Department-wide business
enterprise architecture (BEA), transition plan, and related efforts to
ensure that DOD business system investments are consistent with the
architecture. A well-defined and properly implemented business
enterprise architecture can provide assurance that the Department
invests in integrated enterprise-wide business solutions and,
conversely, can help move resources away from nonintegrated business
system development efforts. As we reported in July 2003,\21\ within 1
year DOD developed an initial version of its Department-wide
architecture for modernizing its current financial and business
operations and systems. Thus far, DOD has expended tremendous effort
and resources and has made important progress towards complying with
legislative requirements. However, substantial work remains before the
architecture will begin to have a tangible impact on improving DOD's
overall business operations. I cannot overemphasize the degree of
difficulty DOD faces in developing and implementing a well-defined
architecture to provide the foundation that will guide its overall
business transformation effort.
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\21\ U.S. General Accounting Office, Business Systems
Modernization: Summary of GAO's Assessment of the Department of
Defense's Initial Business Enterprise Architecture, GAO-03-877R
(Washington, DC: July 7, 2003).
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On the positive side, during its initial efforts to develop the
architecture, the Department established some of the architecture
management capabilities advocated by best practices and Federal
guidance,\22\ such as establishing a program office, designating a
chief architect, and using an architecture development methodology and
automated tool. Further, DOD's initial version of its BEA provides a
foundation on which to build and ultimately produce a well-defined
business enterprise architecture. For example, in September 2003,\23\
we reported that the ``As Is'' descriptions within the BEA include an
inventory of about 2,300 systems in operation or under development and
their characteristics. The ``To Be'' descriptions address, to at least
some degree, how DOD intends to operate in the future, what information
will be needed to support these future operations, and what technology
standards should govern the design of future systems.
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\22\ U.S. General Accounting Office, Information Technology: A
Framework for Assessing and Improving Enterprise Architecture
Management (Version 1.1), GAO-03-584G (Washington, DC: April 2003).
\23\ GAO-03-1018.
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While some progress has been made, DOD has not yet taken important
steps that are critical to its ability to successfully use the
enterprise architecture to drive reform throughout the Department's
overall business operations. For example, DOD has not yet defined and
implemented the following.

Detailed plans to extend and evolve its initial
architecture to include the missing scope and detail required
by the Bob Stump National Defense Authorization Act for Fiscal
Year 2003 and other relevant architectural requirements.
Specifically: (1) the initial version of the BEA excluded some
relevant external requirements, such as requirements for
recording revenue, and lacked or provided little descriptive
content pertaining to its ``As Is'' and ``To Be'' environments;
and (2) DOD had not yet developed the transition plan needed to
provide a temporal road map for moving from the ``As Is'' to
the ``To Be'' environment.
An effective approach to select and control business
system investments \24\ for obligations exceeding $1 million.
As I previously stated, and it bears repeating here, DOD
components currently receive direct funding for their business
systems and continue to make their own parochial decisions
regarding those investments without having received the
scrutiny of the DOD Comptroller as required by the Bob Stump
National Defense Authorization Act for Fiscal Year 2003. Later,
I will offer a suggestion for improving the management and
oversight of the billions of dollars DOD invests annually in
system modernization efforts.
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\24\ Business systems include financial and non-financial systems,
such as civilian personnel, finance, health, logistics, military
personnel, procurement, and transportation, with the common element
being the generation or use of financial data to support DOD's business
operations.

Until DOD completes its efforts to refine and implement its
enterprise architecture and transition plan, and develop and implement
an effective approach for selecting and controlling business system
investments, DOD will continue to lack (1) a comprehensive and
integrated strategy to guide its business process and system changes,
and (2) results-oriented measures to monitor and measure progress,
including whether system development and modernization investment
projects adequately incorporate leading practices used by the private
sector and Federal requirements and achieve performance and efficiency
commensurate with the cost. These elements are critical to the success
of DOD's BMMP.
Developing and implementing a business enterprise architecture for
an organization as large and complex as DOD is a formidable challenge
but it is critical to effecting the change required to achieve the
Secretary's vision of relevant, reliable, and timely financial and
other management information to support the Department's vast
operations. As mandated, we plan to continue to report on DOD's
progress in developing the next version of its architecture, developing
its transition plan, validating its ``As Is'' systems inventory, and
controlling its system investments.

Interim Initiatives
Since DOD's overall business process transformation is a long-term
effort, in the interim it is important for the Department to focus on
improvements that can be made using, or requiring only minor changes
to, existing automated systems and processes. As demonstrated by the
examples I will highlight in this testimony, leadership, real
incentives, accountability, and oversight and monitoring--key elements
to successful reform--have brought about improvements in some DOD
operations, such as more timely commercial payments, reduced payment
recording errors, and significant reductions in individually billed
travel card delinquency rates.
To help achieve the Department's goal of improved financial
information, the DOD Comptroller has developed a Financial Management
Balanced Scorecard that is intended to align the financial community's
strategy, goals, objectives, and related performance measures with the
Department-wide risk management framework established as part of DOD's
QDR, and with the President's Management Agenda. To effectively
implement the balanced scorecard, the Comptroller is planning to
cascade the performance measures down to the military services and
defense agency financial communities, along with certain specific
reporting requirements. DOD has also developed a Web site where
implementation information and monthly indicator updates will be made
available for the financial communities' review. At the Department-wide
level, certain financial metrics will be selected, consolidated, and
reported to the top levels of DOD management for evaluation and
comparison. These ``dashboard'' metrics are intended to provide key
decisionmakers, including Congress, with critical performance
information at a glance, in a consistent and easily understandable
format.
The DFAS has been reporting the metrics cited below for several
years, which, under the leadership of DFAS' Director and DOD's
Comptroller, have reported improvements, including

From April 2001 to January 2004, DOD reduced its
commercial pay backlogs (payment delinquencies) by 55 percent.
From March 2001 to December 2003, DOD reduced its
payment recording errors by 33 percent.
The delinquency rate for individually billed travel
cards dropped from 18.4 percent in January 2001 to 10.7 percent
in January 2004.

Using DFAS' metrics, management can quickly see when and where
problems are arising and can focus additional attention on those areas.
While these metrics show significant improvements from 2001 to today,
statistics for the last few months show that progress has slowed or
even taken a few steps backward for payment recording errors and
commercial pay backlogs. Our report last year on DOD's metrics program
\25\ included a caution that, without modern integrated systems and the
streamlined processes they engender, reported progress may not be
sustainable if workload is increased.
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\25\ U.S. General Accounting Office, Financial Management: DOD's
Metrics Program Provides Focus for Improving Performance, GAO-03-457,
(Washington, DC: Mar. 28, 2003).
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Since we reported problems with DOD's purchase card program, DOD
and the military services have taken actions to address all of our 109
recommendations. In addition, we found that DOD and the military
services took action to improve the purchase card program consistent
with the requirements of the Bob Stump National Defense Authorization
Act for Fiscal Year 2003 and the DOD Appropriation Act for Fiscal Year
2003.\26\ Specifically, we found that DOD and the military services had
done the following.
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\26\ The Department of Defense Appropriations Act for Fiscal Year
2003, Pub. L. No. 107-248, Sec. 8149, 116 Stat. 1519, 1572, Oct. 23,
2002.

Substantially reduced the number of purchase cards
issued. According to GSA records, DOD had reduced the total
number of purchase cards from about 239,000 in March 2001 to
about 134,609 in January 2004. These reductions have the
potential to significantly improve the management of this
program.
Issued policy guidance to field activities to (1)
perform periodic reviews of all purchase card accounts to
reestablish a continuing bona fide need for each card account,
(2) cancel accounts that were no longer needed, and (3) devise
additional controls over infrequently used accounts to protect
the government from potential cardholder or outside fraudulent
use.
Issued disciplinary guidelines, separately, for
civilian and military employees who engage in improper,
fraudulent, abusive, or negligent use of a government charge
card.

In addition, to monitor the purchase card program, the DODIG and
the Navy have prototyped and are now expanding a data-mining capability
to screen for and identify high-risk transactions (such as potentially
fraudulent, improper, and abusive use of purchase cards) for subsequent
investigation. On June 27, 2003, the DODIG issued a report \27\
summarizing the results of an indepth review of purchase card
transactions made by 1,357 purchase cardholders. The report identified
182 cardholders who potentially used their purchase cards
inappropriately or fraudulently.
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\27\ Department of Defense, Office of the Inspector General,
Summary Report on Joint Review of Selected DOD Purchase Card
Transactions, D2003-109 (Washington, DC: June 27, 2003).
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We believe that consistent oversight played a major role in
bringing about these improvements in DOD's purchase and travel card
programs. During 2001, 2002, and 2003, seven separate congressional
hearings were held on the Army and Navy purchase and individually
billed travel card programs. Numerous legislative initiatives aimed at
improving DOD's management and oversight of these programs also had a
positive impact.
Another important initiative underway at the Department pertains to
financial reporting. Under the leadership of Comptroller Zakheim, DOD
is working to instill discipline into its financial reporting processes
to improve the reliability of the Department's financial data.
Resolution of serious financial management and related business
management weaknesses is essential to achieving any opinion on the DOD
consolidated financial statements. Pursuant to the requirements in
section 1008 of the National Defense Authorization Act for Fiscal Year
2002,\28\ DOD has reported for the past 3 years on the reliability of
the department's financial statements, concluding that the Department
is not able to provide adequate evidence supporting material amounts in
its financial statements. Specifically, DOD stated that it was unable
to comply with applicable financial reporting requirements for (1)
property, plant, and equipment, (2) inventory and operating materials
and supplies, (3) environmental liabilities, (4) intragovernmental
eliminations and related accounting entries, (5) disbursement activity,
and (6) cost accounting by responsibility segment. Although DOD
represented that the military retirement health care liability data had
improved for fiscal year 2003, the cost of direct health care provided
by DOD-managed military treatment facilities was a significant amount
of DOD's total recorded health care liability and was based on
estimates for which adequate support was not available. DOD has
indicated that by acknowledging its inability to produce reliable
financial statements, as required by the act, the Department saves
approximately $23 million a year through reduction in the level of
resources needed to prepare and audit financial statements. However,
DOD has set the goal of obtaining a favorable opinion on its fiscal
year 2007 Department-wide financial statements. To this end, DOD
components and agencies have been tasked with addressing material line
item deficiencies, in conjunction with the BMMP. This is an ambitious
goal and we have been requested by Congress to review the feasibility
and cost effectiveness of DOD's plans for obtaining such an opinion
within the stated time frame.
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\28\ National Defense Authorization Act for Fiscal Year 2003, Pub.
L. No. 107-107, Sec. 1008, 115 Stat. 1012, 1204, Dec. 28, 2001.
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To instill discipline in its financial reporting process, the DOD
Comptroller requires DOD's major components to prepare quarterly
financial statements along with extensive footnotes that explain any
improper balances or significant variances from previous year quarterly
statements. All of the statements and footnotes are analyzed by
Comptroller office staff and reviewed by the Comptroller. In addition,
the midyear and end-of-year financial statements must be briefed to the
DOD Comptroller by the military service Assistant Secretary for
Financial Management or the head of the defense agency. We have
observed several of these briefings and have noted that the practice of
preparing and explaining interim financial statements has led to the
discovery and correction of numerous recording and reporting errors.
If DOD continues to provide for active leadership, along with
appropriate incentives and accountability mechanisms, improvements will
continue to occur in its programs and initiatives.

Suggestions for Legislative Consideration
I would like to offer two suggestions for legislative consideration
that I believe could contribute significantly to the Department's
ability to not only address the impediments to DOD success but also to
incorporate needed key elements to successful reform. These suggestions
would include the creation of a chief management official and the
centralization of responsibility and authority for business system
investment decisions with the domain \29\ leaders responsible for the
Department's various business process areas, such as logistics and
human resource management.
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\29\ DOD has one Enterprise Information Environment Mission, and
six departmental domains including (1) acquisition/procurement, (2)
finance, accounting, and financial management, (3) human resource
management, (4) logistics, (5) strategic planning and budgeting, and 6)
installations and environment.
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Chief Management Official
Previous failed attempts to improve DOD's business operations
illustrate the need for sustained involvement of DOD leadership in
helping to assure that the DOD's financial and overall business process
transformation efforts remain a priority. While the Secretary and other
key DOD leaders have certainly demonstrated their commitment to the
current business transformation efforts, the long-term nature of these
efforts requires the development of an executive position capable of
providing the strong and sustained executive leadership--over a number
of years and various administrations. The day-to-day demands placed on
the Secretary, the Deputy Secretary, and others make it difficult for
these leaders to maintain the oversight, focus, and momentum needed to
resolve the weaknesses in DOD's overall business operations. This is
particularly evident given the demands that the Iraq and Afghanistan
postwar reconstruction activities and the continuing war on terrorism
have placed on current leaders. Likewise, the breadth and complexity of
the problems preclude the Under Secretaries, such as the DOD
Comptroller, from asserting the necessary authority over selected
players and business areas.
While sound strategic planning is the foundation upon which to
build, sustained leadership is needed to maintain the continuity needed
for success. One way to ensure sustained leadership over DOD's business
transformation efforts would be to create a full-time executive level
II position for a chief management official who would serve as the
Principal Under Secretary of Defense for Management.\30\ This position
would provide the sustained attention essential for addressing key
stewardship responsibilities such as strategic planning, performance
and financial management, and business systems modernization in an
integrated manner, while also facilitating the overall business
transformation operations within DOD. This position could be filled by
an individual, appointed by the President and confirmed by the Senate,
for a set term of 7 years with the potential for reappointment. Such an
individual should have a proven track record as a business process
change agent in large, complex, and diverse organizations--experience
necessary to spearhead business process transformation across the
department and serve as an integrator for the needed business
transformation efforts. In addition, this individual would enter into
an annual performance agreement with the Secretary that sets forth
measurable individual goals linked to overall organizational goals in
connection with the Department's overall business transformation
efforts. Measurable progress towards achieving agreed upon goals would
be a basis for determining the level of compensation earned, including
any related bonus. In addition, this individual's achievements and
compensation would be reported to Congress each year.
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\30\ On September 9, 2002, GAO convened a roundtable of executive
branch leaders and management experts to discuss the Chief Operating
Officer concept. For more information see U.S. General Accounting
Office, Highlights of a GAO Roundtable: The Chief Operating Officer
Concept: A Potential Strategy to Address Federal Governance Challenges,
GAO-03-192SP (Washington, DC: Oct. 4, 2002).
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Central Control Over System Investments
We have made numerous recommendations to DOD intended to improve
the management oversight and control of its business systems
modernization investments. However, as previously mentioned, progress
in achieving this control has been slow and, as a result, DOD has
little or no assurance that current business systems modernization
investment money is being spent in an economically efficient and
effective manner. DOD's current systems investment process has
contributed to the evolution of an overly complex and error-prone
information technology environment containing duplicative,
nonintegrated, and stovepiped systems. Given that DOD plans to spend
$19 billion on business systems and related infrastructure for fiscal
year 2004--including an estimated $5 billion in modernization money--it
is critical that actions be taken to gain more effective control over
such business systems investments.
One suggestion we have for legislative action to address this issue
that is consistent with our open recommendations to DOD, is to
establish specific management oversight, accountability, and control of
funding with the ``owners'' of the various functional areas or domains.
This legislation would define the scope of the various business areas
(e.g., acquisition, logistics, finance, and accounting) and establish
functional responsibility for management of the portfolio of business
systems in that area with the relevant Under Secretary of Defense for
the six departmental domains and the Chief Information Officer for the
Enterprise Information Environment Mission (information technology
infrastructure). For example, planning, development, acquisition, and
oversight of DOD's portfolio of logistics business systems would be
vested in the Under Secretary of Defense for Acquisition, Technology,
and Logistics.
We believe it is critical that funds for DOD business systems be
appropriated to the domain owners in order to provide for
accountability, transparency, and the ability to prevent the continued
parochial approach to systems development that exists today. The
domains would establish a hierarchy of investment review boards with
DOD-wide representation, including the military services and Defense
agencies. These boards would be responsible for reviewing and approving
investments to develop, operate, maintain, and modernize business
systems for the domain portfolio, including ensuring that investments
were consistent with DOD's BEA. All domain owners would be responsible
for coordinating their business system modernization efforts with the
chief management official who would chair the Defense Business Systems
Modernization Executive Committee. Domain leaders would also be
required to report to Congress through the chief management official
and the Secretary of Defense, on applicable business systems that are
not compliant with review requirements and to include a summary
justification for noncompliance.

CONCLUSION

As seen again in Iraq, the excellence of our military forces is
unparalleled. However, that excellence is often achieved in the face of
enormous challenges in DOD's financial management and other business
areas, which have serious and far-reaching implications related to the
department's operations and critical national defense mission. Our
recent work has shown that DOD's longstanding financial management and
business problems have resulted in fundamental operational problems,
such as failure to properly pay mobilized Army Guard soldiers and the
inability to provide adequate accountability and control over supplies
and equipment shipments in support of Operation Iraqi Freedom. Further,
the lack of adequate transparency and appropriate accountability across
all business areas has resulted in certain fraud, waste, and abuse and
hinders DOD's attempts to develop world-class operations and activities
to support its forces. As our Nation continues to be challenged with
growing budget deficits and increasing pressure to reduce spending
levels, every dollar that DOD can save through improved economy and
efficiency of its operations is important.
DOD's senior leaders have demonstrated a commitment to transforming
the department and improving its business operations and have taken
positive steps to begin this effort. We believe that our two suggested
legislative initiatives will greatly improve the likelihood of
meaningful, broad-based reform at DOD. The continued involvement and
monitoring by congressional committees will be critical to ensure that
DOD's initial transformation actions are sustained and extended and
that the Department achieves its goal of securing the best performance
and highest measure of accountability for the American people. I
commend the subcommittee for holding this hearing and I encourage you
to use this vehicle, on an annual basis, as a catalyst for long overdue
business transformation at DOD.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions you or other members of the subcommittee may have
at this time.

CONTACTS AND ACKNOWLEDGMENTS

For further information about this testimony, please contact
Gregory D. Kutz at (202) 512-9095 or [email protected], Randolph Hite at
(202) 512-3439 or [email protected], or Evelyn Logue at (202) 512-3881.
Other key contributors to this testimony include Sandra Bell, Meg Best,
Molly Boyle, Mary Ellen Chervenic, Cherry Clipper, Francine Delvecchio,
Abe Dymond, Gayle Fischer, Geoff Frank, John Kelly, Elizabeth Mead,
John Ryan, Cary Russell, Lisa Shames, Darby Smith, Edward Stephenson,
Derrick B. Stewart, Carolyn Voltz, Marilyn Wasleski, and Jenniffer
Wilson.

Senator Ensign. Secretary Zakheim.

STATEMENT OF HON. DOV S. ZAKHEIM, UNDER SECRETARY OF DEFENSE
(COMPTROLLER)

Dr. Zakheim. Mr. Chairman, Senator Akaka, Senator Pryor, I
am happy to be here today to update you on the ongoing
transformation of DOD financial management. I have a relatively
long oral statement. I debated in my own mind whether I should
abbreviate it the way David Walker just did or whether I should
give it to you in full. It seems to me that, as you both
expressed, Senator Ensign and Senator Akaka, this is a major
top-level issue. So I hope you are going to indulge me and hear
me out as I go through a lot of different issues, because I do
think we have made some progress.
Also, I thank you for your kind words. This is going to be,
most likely, my last appearance before the committee as Under
Secretary of Defense (Comptroller). I want to thank the members
and the staff for the support and also the courtesy that has
been given me over the past 3 years. I remain convinced, as I
did before I took this job, that congressional oversight of all
facets of our national security posture is vital. The
committee's leadership has been very important to helping the
President and DOD fulfill their responsibilities. On behalf of
the Department and on my own behalf, I want to thank you.
I also want to thank my colleague sitting next to me. With
all due respect to separation of powers, David Walker has been
a major source of ideas, creative and constructive criticism
for the Department of Defense. We have acted on those ideas in
many cases. In some cases, we are moving ahead with them, as
you will see. But always, he and his staff have been people
with whom we could cooperate on a highly professional basis. I
want to thank him personally for that.
Turning to the subject of the hearing; first, I do want to
underscore the resolve of the Department of Defense. That
resolve goes beyond just those who are here for some period,
whether it is longer or shorter, to sustain and expand the
substantial financial management progress of the last 3 years.
It is not a simple matter, as you both have said. But we
have had to face a number of challenges. I want to talk a
little bit about what they were, how we have tried to overcome
them, and where we are headed.
Under my Secretary of Defense's strong leadership and
determination, the Department has made enormous progress in
overcoming challenges that developed and persisted over the
past several decades. Financial management generally has been a
backwater. Only in the government could the job of a chief
financial officer be less important, be less than that of
comptroller. I recently read in the paper about a major
corporation that promoted someone to the job of comptroller and
she is going to report to the chief financial officer. It does
not work that way in government.
For many years, DOD business management systems have been
unable, satisfactorily, to interact with one another and
facilitate the synthesis of management processes, or to provide
DOD decisionmakers with timely, accurate, and reliable
information, or to fulfill all financial management laws,
standards, and requirements, or to produce auditable financial
statements, as has already been mentioned.
The primary cause of this situation was that, for decades,
each military service and most Defense Department agencies and
functional communities were permitted to develop and use its
own business processes and systems. There was no requirement to
adhere to a DOD-wide architecture or a DOD-wide set of
standards.
Inevitably, these independent systems rarely could interact
with others. Their information cannot easily be exchanged nor
could it be aggregated for use by senior DOD leaders. The
Department's inability to produce clean, auditable financial
statements reflected the fact that DOD business systems were
not designed to produce the data necessary for them.
It is important to remember that the information required
for financial statement must come from very different, from
many different, DOD business systems: logistics, acquisition,
human resources management, and others. Most of these systems
were designed primarily to manage inventory, people, and
purchases, not to feed into financial statements.
In 2001, Secretary Rumsfeld and his leadership team
embarked on an aggressive path to achieve the comprehensive
solution needed to give the Department integrated management
processes and systems and to meet Federal Government
requirements, notably auditable financial statements resulting
in clean, unqualified, that is, audit, opinions.
On our path to reform, we have been fortunate to have had
access to private sector expertise through the Secretary of
Defense's business board, 20 distinguished private sector
business executives who advise the Secretary and senior DOD
leaders on business management and related subjects. Defense
Business Board (DBB) recommendations have been especially
valuable for the management of DOD-wide reform, development of
financial management metrics, reform of the defense working
capital fund, and development of balanced scorecard metrics
that align measurement with management risk areas.
One example that David Walker just mentioned, the idea of
having an under secretary or deputy secretary for management,
is a subject that was tackled by the business board. They have
made recommendations for the Secretary. So, this issue is under
active consideration.
Again, I am grateful to David Walker, as well as the
Comptroller of the Office of Management and Budget. Both have
served as observers on this board since its inception.
Now, to transfer DOD financial management, my fellow DOD
leaders and I realized that we needed to transform management
processes and systems in all major functional areas, not just
financial. To transfer all DOD business management, we created
the Business Management Modernization Program (BMMP). The
centerpiece of BMMP is the transformational tool known as the
Business Enterprise Architecture (BEA).
The BEA will help DOD's diverse business communities guide
and constrain the transformation of their processes and
systems. As we have already discussed, BMMP is a massive
undertaking and will take several more years to complete. This
program is as much about changing our business processes as it
is about eliminating redundant and noncompatible systems. We
are working to streamline, re-engineer, and standardize our
business processes, not simply to improve the handling of
information from those processes.
BMMP will enable us to transition from the current
collection of mostly incompatible and inadequate management
systems to an integrated network of systems based on the
uniform implementation of requirements across the Department.
Our last completed inventory identified about 2,300
business systems. Our ongoing efforts to identify all business
systems indicate that the real total is much higher, probably
at least twice as high as the number we now have. It is
important to remember that we are necessarily taking a top-down
incremental approach to business transformation. Our task is to
transform an extraordinarily complex conglomeration of business
systems. Our only practical option is to do that in increments.
We cannot shut down the Department of Defense for nearly a
decade, throw out all old business processes and systems, and
start from scratch, guided by a fully developed comprehensive
enterprise architecture.
The Department's ongoing and planned actions for BMMP are
consistent with the recommendations in GAO Report 03-1018. Most
of those recommendations were related to continuing development
of the BEA, which we are implementing. Our aim is that each
successive BEA version, and there will be successive versions,
includes more of the detail needed to guide and complete fully
the transformation of DOD business processes and systems.
The fiscal year 2005 budget requests $122 million to
continue the transformation efforts of BMMP, including the
evolution and extension of the business enterprise
architecture. I urge congressional support for that request,
which is critical to the business transformation that DOD, the
Office of Management and Budget, and GAO all agree is vitally
needed. You have already heard that our target is to have clean
financial statements by 2007. You have heard that it is a
challenging goal. I think it is terribly important that we
stick to that goal. I think it is terribly important that
Congress make sure that we stick to that goal. The money that
we are asking for in order to get the enterprise architecture
truly up and running is critical to the achievement of that
objective.
Even though the BEA is in continuing development, the
current version is sufficient to enable the Department to
ensure strong oversight over ongoing and planned investment in
business systems. We are accomplishing this through what we
term portfolio management by each of the owners of the seven
so-called domains or business areas: logistics, acquisition,
installations environment, human resources management,
accounting and financial management, strategic planning and
budgeting, and technical infrastructure.
Basically, what this means is that you now have the
various, as it were, czars of these business areas working
together to deal with one of the issues that Senator Akaka
raised: how do you get buy-in from the entire Department? You
cannot just do it through the Comptroller. That is why we
changed the program from financial management modernization to
business management modernization. We have the people who are
in charge of these various business areas working together to
ensure that their business processes will be in conformity with
the overall enterprise architecture. So, that is a major
development that we did not talk about when I was here 2 years
ago with Comptroller General Walker.
DOD leaders realized early on that BMMP was the only long-
term, sustainable solution to its financial reporting
inadequacies. But we also realized that, since it would take
several years to complete development and implementation of all
BMMP initiatives, that we would need faster remedies to fulfill
financial reporting requirements. So, we have been advancing
various complementary measures to achieve acceptable DOD
financial statements by fiscal year 2007.
I have initiated an unprecedented DOD-wide effort to attain
an unqualified audit opinion on all of the Department's fiscal
year 2007 financial statements. Central to this effort has been
the requirement that all major DOD reporting components develop
a financial management improvement plan that details how each
component will overcome the deficiencies that prevent it from
obtaining an unqualified audit opinion.
To ensure progress, my office conducts quarterly top-down
reviews of financial statements from DOD components and tracks
ongoing corrective actions year around. As Chief Financial
Officer, I have required semiannual briefings by all major
reporting components. I personally review progress, looking at
each financial statement, including its footnotes. The DOD
Inspector General (DODIG) is the responsible agent for
performing audits of DOD financial statements and the systems
that support the statements and for rendering an opinion on
their fair presentation of DOD operations.
The DODIG expects to continue to fulfill some of this
responsibility by contracting with outside auditing
organizations with the requisite qualifications. To fulfill
this responsibility, the DODIG estimates that its fiscal year
2004 costs will be $115 million. During fiscal year 2004, these
costs will be covered by the components that are being audited.
For fiscal year 2005, the Department has requested $231
million to enable the DODIG to perform these assessments and
audits. This request funds the increased involvement of the
auditors, which is vital to sustaining our progress toward
clean financial statements. My office, the DODIG, OMB, and the
GAO continue to work together to guide this progress.
We will also be working together to ensure the wise
expenditure of these fiscal year 2005 funds. This is a lot of
money. But if we are going to be serious, we have to pay for
the auditors. We have to pay for the people to do the job. If
we want clean statements, we have to give the auditors, the
Inspector General, the wherewithal to review and audit what we
give them.
So, yes, there is a price to pay, but I believe it is
worthwhile. I would also say that in my reviews of financial
statements, sitting with me at all times are representatives of
OMB and GAO and the Inspector General. You can imagine the
first few times when the components came in with their
financial statements and saw that there were not just going to
be briefing me but GAO, DODIG, and OMB. I can tell you that has
made a huge difference.
Of the 21 DOD components required to submit financial
reports, 5 received clean audit opinions. One received the
qualified audit opinion in fiscal year 2003, which means that
one-quarter of our components already are getting opinions.
Other DOD advances toward ensuring an unqualified audit
opinion on its financial statements include continuing to make
corrections on the reporting of environmental liabilities,
needed changes on expenditure reconciliation, and continuing
progress to correct weakness in inventory evaluation. Nearly 50
percent of the Department's reporting of liabilities received
favorable audit results in fiscal year 2003.
We have improved the timeliness of financial statements by
reducing annual financial report production time by 45 percent
in fiscal year 2004. We have improved the clarity, formatting,
and footnoting of our financial statements. We are establishing
a DOD audit committee. Again, this was a suggestion made by
some of our partner agencies to provide a concerted senior
leadership focus to achieve and sustain a favorable audit
opinion and to import the best practices from other
organizations who have achieved success in obtaining a
favorable audit opinion.
Now, besides BMMP and direct action to achieve auditable
financial statements, the Department has had other
accomplishments related to its financial management. We have
adopted a new approach to the management of retirement funds.
In response to a recommendation by the DOD Inspector General,
the Department created the DOD Investment Board to provide
additional oversight over the management of eight retirement
and trust funds with assets now totaling almost $250 billion.
These funds include the Medicare Eligible Retirement Health
Care Fund begun in fiscal year 2003. Its assets right now total
about $37 billion. But it is expected to eventually grow to
over $400 billion. The new board has approved an investment
strategy that aims to minimize risk and maximize return on
investments. As a result of our new strategy, currently the
Military Retirement Fund, with assets of about $200 billion, is
earning returns that are better than those of equivalent funds,
notably Vanguard and T. Rowe Price funds holding similar
government securities. We are doing better than the supposed
pros. Our retirement fund has better returns over a 1-year, 5-
year, and 10-year period.
We have also been using another initiative that we brought
into the Department's management structure over the past few
years, called management initiative decisions (MIDs) to improve
business processes directly. For example, we used the so-called
MIDs to make two especially significant changes. We initiated
the extensive use of performance metrics to measure program
results and began the use of metrics to improve programs and
guide budget decisions.
As my Secretary frequently says, ``If you can't measure it,
you don't know if you're making progress.''
We also designed and launched a new 2-year planning,
programming, budgeting, and execution process, whose features
include a combined program and budget review and a more
intensive focus on enhancing joint war-fighting capabilities.
Execution leads directly into reporting that goes into
financial management. So, we now have a complete flow from the
planning end to the reporting end that ultimately will lead to
those clean audits.
We have overhauled policies and management of DOD
government charge cards, both the purchase cards and the travel
cards. The problems we found centered on inadequate management
control, too many cards being issued and delinquent payments on
individually billed accounts. To remedy these problems, we
strengthened our internal controls, increased training,
curtailed and restricted cards, and developed automated
surveillance tools. Reflecting our progress, for purchase cards
since fiscal year 2001, we have reduced the number issued by 42
percent and we have cut delinquency payments rate in half.
For the delinquency rate for travel card, we surpassed our
fiscal year 2003 balance score-card goal of 3 percent for
centrally billed accounts, ending the year at 1.3 percent. For
individually billed accounts, we ended the year at 5.1 percent
of delinquencies, a significant reduction from the January
2003, level of 11.5 percent, which was more than twice as high.
In fiscal year 2003, we canceled 490,000 travel cards for
non-use and 9,000 due to separations and retirements. There
were roughly a half-million travel cards floating around that
were not being used and we have gotten rid of them.
We have made progress in eliminating Anti-Deficiency Act
(ADA) violations. We increased the spread of ADA
investigations, which helped us to determine what went wrong in
each violation and made the appropriate corrections.
Now, violations are frequently addressed with minor
disciplinary actions. While some may disagree with the
disciplinary decisions that were made, commanders and
supervisors have been given discretion and responsibility
appropriate to the facts and circumstances. But in my view, my
personal view, that is still unsatisfactory. Violators tend to
receive only minor punishments far too often. What kind of a
signal does that send to somebody who may be contemplating an
ADA violation?
If the word goes around that all you are going to get, if
you are caught, is a slap on the wrist, then how are you going
to deter people from trying to do just that? Spending
government money inappropriately where there is no
authorization to do so. I find this, and have found this,
extremely frustrating. There is very little that senior
civilian leaders can do to strengthen punishments because of
prohibitions on command influence on the military's punishment
decisions.
As long as that is the system, our hands are tied. The
problem is not with individual military officers, the problem
is with the system. This is a system that essentially has
translated essentially a non-military impropriety into
something that only the military can correct. There is a
disconnect there. We need your help to fix that.
Among our other accomplishments over the past 3 years--and
I will go through these quickly--we have reduced problem
disbursements from $4.1 billion in January 2001 to $1 billion
at the end of fiscal year 2003. Now, to say that we have $1
billion in problem disbursements is not to brag, obviously. But
it is not $4.1 billion, as it was a few years back. We are now
at 24 percent of the earlier level.
Problem disbursements consist of negative, unliquidated
obligations; that is to say, money that you paid that you
should not have and unmatched disbursements. But negative,
unliquidated obligations dropped from $1.4 billion in January
2001 to only $125 million in fiscal year 2003. That is quite a
drop. Unmatched disbursement dropped from $2.8 billion in
January 2001, to $854 million at the end of 2003.
We have also strengthened internal controls to detect and
prevent financial management mistakes. We have intensified
procedures to prevent erroneous commercial payments and to
recover such payments, if made. We have initiated measures to
detect, reverse, and prevent the use of closed appropriations.
We have initiated changes in partnership with the Treasury
Department so that we could improve the collection of Federal
debts from delinquent DOD contractors.
We have progressed towards strengthening the professional
qualifications of the DOD financial management work force; and
we have, so far, cut 236 systems. That is a drop in the bucket
of all those systems that are out there. But it demonstrates
that we are actually eliminating systems.
In closing, I again want to thank this committee and the
GAO for their interest and their support for the Department of
Defense effort to transform its business management and to
fulfill its financial reporting responsibilities. We are at a
critical stage in our transformation. We are off to a strong
start but a lot does remain to be done. We do face difficult
challenges as we maneuver our way through these next several
years.
This transformation is as complex and difficult as any
challenge the Department has faced. I make no presumptuous
statements that it compares to any war, large or small. But as
a management challenge, it is as tough as any. What is at stake
is nothing less than the future quality and cost of DOD
management of its hundreds of billions of dollars in assets,
liabilities, and appropriations; and frankly, its credibility
to the American taxpayer.
Successful transformation is essential to ensuring the very
best management of our defense resources and also is key to
sustaining strong support to America's Armed Forces. The
Department finally has a program, the Business Management
Modernization Program, that is comprehensive enough, truly, to
transform its business processes and systems in a sustainable
way. We owe our taxpaying citizens nothing less. We need and
welcome Congress' support and assistance to complete this
historic undertaking.
Thank you so much.
[The prepared statement of Dr. Zakheim follows:]

Prepared Statement by Hon. Dov S. Zakheim

Mr. Chairman, members of the subcommittee, I am happy to be here to
update you on the ongoing transformation of Department of Defense (DOD)
financial management.
Before doing that, since this is likely to be my last appearance
before the Senate Armed Services Committee as Under Secretary of
Defense (Comptroller), I want to thank committee members and staff for
the support and courtesy given me these past 3 years. Congress's
oversight of all facets of America's national security posture is
vital, and the committee's leadership has been very important to
helping the President and DOD fulfill their responsibilities. On behalf
of the Department and myself, thank you.
Turning now to the subject of this hearing, Mr. Chairman, I first
want to underscore the resolve of the DOD to sustain and expand the
substantial financial management progress of the last 3 years. I am
happy that the Comptroller General, David Walker, is joining the
discussion today because he and his people have provided key support
for our efforts. We in the Department continue to find the General
Accounting Office (GAO) a major ally as we seek to improve DOD
financial management. Both our Department and the GAO agree that much
remains to be done. With the support of Congress and continued help
from the GAO, the DOD can and must complete the planned overhaul of its
financial management.
Today I want to summarize the financial management challenges DOD
has faced, what we have done to overcome these challenges, and the work
ahead to finish the task.

FINANCIAL MANAGEMENT CHALLENGES DOD HAS FACED

Over the past 3 years, under Secretary Rumsfeld's strong leadership
and determination, the DOD has made enormous progress in overcoming
financial management challenges that developed and persisted over the
past several decades. Financial management generally has been a
backwater. Only in government could the job of Chief Financial Officer
be less important than that of Comptroller.
For many years, DOD business management systems have been unable
satisfactorily to:

Interact with one another and facilitate the synthesis
of management processes;
Provide DOD decisionmakers with timely, accurate, and
reliable information;
Fulfill all financial management laws, standards, and
requirements; or
Produce auditable financial statements.

The primary cause of this situation was that for decades each
military service and most DOD agencies and functional communities were
permitted to develop and use its own business processes and systems.
There was no requirement to adhere to a DOD-wide architecture or set of
standards. Inevitably these independent systems rarely could interact
with others. Their information could not easily be exchanged nor
aggregated for use by senior DOD leaders.
The Department's inability to produce clean, auditable financial
statements reflected the fact that DOD business systems were not
designed to produce the data necessary for such statements. It is
important to remember that the information required for financial
statements must come from many different DOD business systems:
logistics, acquisition, human resources management, and others. Most of
these systems were designed primarily to manage inventory, people, and
purchases--not to feed into financial statements. Moreover, DOD
accounting and finance systems were developed to track and ensure the
proper expenditure of appropriated funds, not to produce auditable
financial statements. Therefore, when the Government Management Results
Act of 1994 mandated that the DOD and 23 other Federal agencies produce
auditable financial statements, DOD systems simply were not capable of
complying.
One of the most important actions of the Bush administration
regarding DOD financial management was to decide that marginal changes
would not be sufficient to overcome challenges that had been developing
for decades. In previous administrations, marginal changes had produced
only marginal results. So in 2001, Secretary Rumsfeld and his
leadership team embarked on an aggressive path to achieve the
comprehensive solution needed to give the Department superlative,
integrated management processes and systems and to meet Federal
Government requirements--notably, auditable financial statements
resulting in clean (unqualified) audit opinions.
On our path to reform, we have been fortunate to have had access to
private sector expertise through the Secretary's Defense Business Board
(DBB)--20 distinguished private sector business executives who advise
the Secretary of Defense and senior DOD leaders on business management
and related subjects. DBB recommendations have been especially valuable
for the management of DOD-wide reform, development of financial
management metrics, reform of the defense working capital fund, and
development of balanced scorecard metrics that align measurement with
the key management risk areas. I am especially grateful that David
Walker of the GAO, as well as the Comptroller of the Office of
Management and Budget (OMB), have served as observers on this board
since its inception.

BUSINESS MANAGEMENT MODERNIZATION PROGRAM

To transform DOD financial management, my fellow DOD leaders and I
realized that we needed to transform management processes and systems
in all major functional areas--not just financial. To transform all DOD
business management, we created the Business Management Modernization
Program. The centerpiece of the BMMP is the transformational tool known
as the Business Enterprise Architecture (BEA). The BEA will help DOD's
diverse business communities guide and constrain the transformation of
their processes and systems.
BMMP is a massive undertaking and will take several more years to
complete. This program is as much about changing our business processes
as it is about eliminating redundant and non-compatible systems. We are
working to streamline, reengineer, and standardize our business
processes--not simply improve the handling of information from those
processes. BMMP will enable us to transition from the current
collection of mostly incompatible and inadequate management systems to
an integrated network of systems, based on the uniform implementation
of requirements across the Department. Our last completed inventory
identified about 2,300 DOD business systems. Our ongoing efforts to
identify all DOD business systems indicate that the real total is a
much higher number.
The Department's business transformation is being guided through an
extensive governance process that includes all senior DOD managers.
Specific responsibilities for business transformation will be detailed
in a directive to be published soon.
It is important to remember that we are necessarily taking a top-
down, incremental approach to business transformation. Our task is to
transform an extraordinarily complex conglomeration of business
systems, and our only practical option is to do that in increments. We
cannot shut down the DOD for a decade, throw out all old business
processes and systems, and start from scratch guided by a fully
developed, comprehensive enterprise architecture.

BMMP evolution
The Department's ongoing and planned actions for BMMP are
consistent with the recommendations in GAO Report 03-1018. Most of
those recommendations were related to continuing development of the
BEA, which we are implementing. Our aim is that each successive BEA
version includes more of the detail needed to guide and complete fully
the transformation of DOD business processes and systems.
We also are aggressively building a comprehensive, detailed
transition plan, which will depict the systems and schedules for
migration from our legacy systems environment to the new mix of systems
needed to achieve DOD business transformation goals. The transition
plan will guide us from our ``As Is'' inefficient and ineffective
environment to a ``To Be'' fully transformed state, which we are
continuing to refine and specify.
The fiscal year 2005 budget requests $122 million to continue the
transformation efforts of BMMP, including the evolution and extension
of the BEA. I urge congressional support for that request, which is
critical to the business transformation that DOD, OMB, and GAO all
agree is vitally needed.

Controlling business systems investments
Even though the BEA is in continuing development, the current
version is sufficient to enable the Department to ensure strong
oversight over ongoing and planned investments in business systems. We
are accomplishing this through what we term ``portfolio management'' by
each of the owners of the 7 so-called domains or business areas:
Logistics, Acquisition, Installations and Environment, Human Resources
Management, Accounting and Financial Management, Strategic Planning and
Budgeting, and Technical Infrastructure. Portfolio management efforts
of the components that serve as ``domain owners'' are coordinated and
integrated by the Business Modernization and Systems Integration
Office, which is the program office and leader of BMMP.
Each domain owner--for example, the Under Secretary of Defense
(Acquisition, Technology, and Logistics) for the acquisition domain--
oversees investments in business systems for that domain. The owner is
responsible for ensuring that those investments are consistent with the
BEA, Transition Plan, and requirements of section 1004 of the National
Defense Authorization Act for Fiscal Year 2003. Especially critical is
ensuring that these investments support achievement of an unqualified
audit opinion. The Department has certified some new system initiatives
with investments of more than $1 million and is setting up the
processes needed to review thoroughly all other like investments
exceeding $1 million, as required by law.
Each domain owner will also have the lead in determining what
business systems need to be phased out--and when to do so to best
complement the investment in new initiatives necessary to achieve an
unqualified audit opinion. Since the Department began its business
transformation in early 2001, we have eliminated about 238 systems. We
still have a long way to go.

PRODUCING AUDITABLE FINANCIAL STATEMENTS

DOD leaders realized early on that BMMP was the only long-term,
sustainable solution to its financial reporting inadequacies. But we
also realized that--since it would take several years to complete
development and implementation of all BMMP initiatives--we would need
faster remedies to fulfill financial reporting requirements. We,
therefore, have been advancing various complementary measures to
achieve acceptable DOD financial statements by fiscal year 2007.
I have initiated an unprecedented DOD-wide effort to attain an
unqualified audit opinion on all of the Department's fiscal year 2007
financial statements. Central to this effort has been the requirement
that all major DOD reporting components develop a Financial Management
Improvement Plan that details how each component will overcome the
deficiencies that prevent it from obtaining an unqualified audit
opinion. To ensure progress my office conducts quarterly top-down
reviews of financial statements from DOD components and tracks ongoing
corrective actions year-round. As Chief Financial Officer, I require
semi-annual briefings by all major reporting components--and I
personally check progress, reviewing each financial statement--
including its footnotes.
DOD Improvement Plans follow a process designed to ensure that the
Department complies with section 1008 of the National Defense
Authorization Act for Fiscal Year 2002, which is aimed at minimizing
DOD expenditures for preparing and auditing financial statements that
are not likely to be reliable. The essence of the improvement plan
process is:

Components identify and correct problems with their
accounting systems and financial reporting processes--problems
that prevent favorable audit opinions.
Components validate that corrections have been made
and then inform the DOD Inspector General (IG) that their
systems corrections and statement are ready for its review.
The DODIG performs a limited review to confirm that a
component's accounting system and financial statement is ready
for a complete review.

The DODIG is the responsible agent for performing audits of DOD
financial statements and the systems that support the statements and
for rendering an opinion on their fair presentation of DOD operations.
The IG expects to continue to fulfill some of this responsibility by
contracting with outside auditing organizations with the requisite
qualifications. To fulfill this responsibility, the DODIG estimates its
fiscal year 2004 costs will be $115 million. During fiscal year 2004,
these costs will be covered by the components being audited.
For fiscal year 2005 the Department has requested $231 million to
enable the DODIG to perform these assessments and audits. This request
funds the increased involvement of the auditors, which is vital to
sustaining our progress toward clean financial statements. My office,
the DODIG, OMB, and GAO continue to work together to guide this
progress, and we will also be working together to ensure the wise
expenditure of these fiscal year 2005 funds.
Of the 21 DOD components required to submit financial reports, 5
received clean audit opinions and 1 received a qualified audit opinion
in fiscal year 2003. Other DOD advances toward ensuring an unqualified
audit opinion on its financial statements include:

We continue to make corrections on the reporting of
environmental liabilities and needed changes on expenditure
reconciliation.
We continue progress to correct weaknesses in
inventory valuation.
Nearly 50 percent of the Department's reporting of its
liabilities received favorable audit results in fiscal year
2003.
We improved the timeliness of financial statements by
reducing annual financial report production time by 45 percent
in fiscal year 2004.
We substantially improved the clarity, formatting, and
footnoting of DOD financial statements. The statements and
notes are more citizen-focused and carry a reader friendly
analysis to show variances between comparative periods. Our
ability to communicate our financial position better enables us
to convey more clearly the challenges we face and the services
we provide.
We are establishing the DOD Audit Committee to provide
a concerted senior leadership focus to achieve and sustain a
favorable audit opinion, and import best practices from other
organizations who have achieved success in obtaining a
favorable audit opinion. The committee will review accounting
and auditing issues and provide advice and counsel to the
Secretary on solutions to resolve Department-wide challenges.
It also will review DOD progress on implementing improvement
plans and resolving major financial reporting deficiencies.

OTHER ACCOMPLISHMENTS

Besides BMMP and direct action to achieve auditable financial
statements, the Department has had other accomplishments related to its
financial management.
We have adopted a new approach to the management of retirement
funds. In response to an DODIG recommendation, the Department created
the DOD Investment Board to provide additional oversight over the
management of eight retirement and trust funds with assets now totaling
almost $250 billion. These funds include the Medicare-Eligible
Retirement Health Care Fund, begun in fiscal year 2003; its assets now
total $37 billion, but it is expected to grow eventually to over $400
billion. The new Board has approved an investment strategy that aims to
minimize risk and maximize returns on investments. As a result of our
new strategy, currently the Military Retirement Fund, with assets of
about $200 billion, is earning returns that are better than those of
equivalent funds--notably, Vanguard and T. Rowe Price funds holding
similar government securities. Our retirement fund has better returns
over a 1-year, 5-year, and 10-year period.
We have been using Management Initiative Decisions (MIDs) to
improve business processes directly. For example, we used MIDs to make
two especially significant changes:

We initiated the extensive use of performance metrics
to measure program results, and began the use of those metrics
to improve programs and guide budget decisions.
We designed and launched a new 2-year Planning,
Programming, Budgeting, and Execution process, whose features
include a combined program and budget review and a more intense
focus on enhancing joint warfighting capabilities.

We inaugurated the DOD Financial Management Balanced Scorecard
Program to align financial management performance measures to the
Department's overall priorities. Examples of our scorecard actions
include:

Our fiscal year 2003 goal for interest penalties for
late commercial payments was that we not exceed $206 per
million dollars paid. We surpassed that goal, ending fiscal
year 2003 at $160 per million. We have reduced our interest
penalties from $291 per million in April 2001 to $124 per
million in January 2004.
Our fiscal year 2003 goal was that we not exceed 5
percent of over aged invoices as compared to the total number
of invoices on hand. We surpassed that goal, ending fiscal year
2003 at 3.66 percent backlog.

We have overhauled policies and management of DOD government charge
cards (purchase cards and travel cards). The problems we found centered
on inadequate management control, too many cards being issued, and
delinquent payments on individually billed accounts. To remedy these
problems, we strengthened our internal controls, increased training,
curtailed and restricted cards, and developed automated surveillance
tools. Reflecting our progress:

For purchase cards, since fiscal year 2001 we have
reduced the number issued by 42 percent and cut the delinquency
payments rate in half.
For the delinquency rate for travel cards, we
surpassed our fiscal year 2003 balanced scorecard goal of 3
percent for centrally billed accounts, ending the year at 1.3
percent. For individually billed accounts, we ended the year at
5.1 percent, a significant reduction from the January 2003
level of 11.5 percent.
In fiscal year 2003 we cancelled 490,000 travel cards
for non-use and 9,000 due to separations and retirements.

We have made progress in eliminating Antideficiency Act violations.
We increased the speed of ADA investigations, which helps us determine
what went wrong in each violation and make the appropriate corrections.
Violations are frequently addressed with minor disciplinary actions.
While some may disagree with the disciplinary decisions made,
commanders and supervisors have been given discretion and
responsibilities appropriate to the facts and circumstances. In my
personal view, violators receive only minor punishment far too often.
This is frustrating, and there is little senior civilian leaders can do
to strengthen punishments because of prohibitions on command influence
on the military's punishment decisions. Perhaps Congress can help and
find a way through this major complicating factor.
Among our other accomplishments over the past 3 years, we have:

Reduced problem disbursements from $4.1 billion in
January 2001 to $1.0 billion at the end of fiscal year 2003--
just 24 percent of that earlier level. (The end of the fiscal
year is the best time to measure our progress.) Problem
disbursements consist of negative unliquidated obligations and
unmatched disbursements.

Negative unliquidated obligations dropped from
$1.4 billion in January 2001 to $125 million at the end
of fiscal year 2003.
Unmatched disbursements dropped from $2.8
billion in January 2001 to $854 million at the end of
fiscal year 2003.

Strengthened internal controls to detect and prevent
financial management mistakes.
Intensified procedures to prevent erroneous commercial
payments and to recover such payments if made.
Initiated measures to detect, reverse, and prevent use
of closed appropriations.
Initiated changes in partnership with the Treasury
Department to improve our collection of Federal debts from
delinquent DOD contractors.
Progressed toward strengthening the professional
qualifications of the DOD financial management workforce.

CLOSING

In closing, I again want to thank this committee, and the GAO, for
their interest in the DOD effort to transform its business management
and to fulfill its financial reporting responsibilities. We are at a
critical stage in our transformation. We are off to a strong start, but
much remains to be done. We face difficult challenges as we maneuver
our way during these next several years.
This transformation is as complex and difficult as any challenge
the Department has faced. What is at stake is nothing less than the
future quality and cost of DOD management of its hundreds of billions
of dollars in assets, liabilities, and appropriations. Successful
transformation is essential to ensuring the very best management of our
defense resources, and also is key to sustaining strong support to
America's Armed Forces. The Department finally has a program, the
Business Management Modernization Program, comprehensive enough truly
to transform its business processes and systems in a sustainable way.
We owe our taxpaying citizens nothing less. We need and welcome
Congress's support and assistance to complete this historic
undertaking. Thank you.

Senator Ensign. Well, thank both of you for your excellent
testimony. I think you have laid out the challenges before us.
I agree that they are great. A big reason that they are great
is because of the size of the Department of Defense. But they
are not overwhelming. We must believe that we can overcome
these.
Just quickly, maybe both of you can make a quick comment on
this. This gets to the culture in the Services themselves. I
mean, you look at the private sector, whatever their focus is,
building cars, providing services, whatever it is, you have
certain people in management where that is their focus. They do
not want to answer, they do not want to answer, basically, to
the people over here that are saying, well, what, we are public
company. We have to answer to the Securities and Exchange
Commission (SEC). We have to answer to our shareholders. But
also, for efficiency's sake, we need to have computer systems
and information systems that talk to each other, not just on
financial matters but just so it is well coordinated.
Without a strong Chief Executive Officer (CEO) driving and
understanding that importance, that stuff never happens in the
private sector the way that it needs to happen. So, I thought
it was interesting, both of you talking about the idea of
somebody with the authority at the Department of Defense, and
especially, Mr. Walker, your point about it being somebody who
is not really a political appointee but being somebody who is
there long term, who has the authority to carry through.
Because you know, we have mentioned time and again that
political appointments come and go and the bureaucracy just
kind of says ``bye-bye, I know I am still going to be here.''
When they welcome you in, they say: ``Do not worry. Whatever
you are going to try, I know I am going to be here after you
leave.''
So, it is very important to change the culture and the
services, this person does have to have the authority and has
to have the blessing of whoever the Secretary of Defense
(SECDEF) is, whether it's this administration or another
administration. They certainly have to have--even if they are a
non-political appointment, they still have to have the support
of the SECDEF.
Mr. Walker. I think from a practical standpoint, in order
for the person to be empowered and in order to be able to have
the credibility both within the Department, as well as the
ability for Congress to call that individual to testify, which
I think would be very important, I think from a practical
standpoint, you are talking about a presidential appointee with
Senate confirmation.
But what you are talking about that is different is you are
talking about an individual who would have specified statutory
responsibilities, that would have specified qualification
requirements to be appointed, who would have a term appointment
of, let us say, a 5-year to 7-year period of time, and
therefore would be there hopefully long enough to really see
through some of these challenging initiatives, who----
Senator Ensign. By the way, just getting to the 5-year to
7-year period----
Mr. Walker. Yes.
Senator Ensign. I like that aspect. But I like the aspect
where you talked about performance contracts and having a
provision in there to be able to remove them, if they are not
doing their job.
Mr. Walker. Exactly. That would not take a statutory
provision, but you could couple it with that. To have a
performance contract to get things done, and if the person is
not performing, then be able to remove them. They potentially
could be reappointed, if they were doing a great job.
I think you could also look at some performance-based
compensation here, as well as part of it. But I believe that,
frankly, Dov and Secretary Wolfowitz and Secretary Rumsfeld,
and the other key players at the Department of Defense have
more than a full-time job. What happens is, is that people
focus on the policy issues. People focus on the day-to-day
issues of this large and complex and important enterprise. We
do not have somebody focused over a long enough period of time
solely on these business transformation challenges. I think it
is critically important.
Now whether or not you need legislation, one of the things
that I know that the Defense Business Board is looking at is
options that may not require legislation. I think the jury is
out as to whether or not you will need legislation but I
believe this is of critical importance.
Dr. Zakheim. As you just heard and as I had mentioned, the
Defense Business Board has been looking at this and is making
some recommendations to the Secretary of Defense and to Deputy
Secretary Wolfowitz. I know that Dave Walker has also met with
the Deputy Secretary and briefed him on this.
But one has to at the same time say, ``okay, this may
happen. What do we do in the interim?'' One of the things that
I did when I came in was to appoint two additional deputy
undersecretaries, one of whom focused full time on financial
management, actually management reform. I also cleaned house in
my financial management office. I have a new Deputy Chief
Financial Officer (DCFO), who is with me, JoAnn Boutelle. She
has been with me for some time now. We actually went through
two DCFOs before we chose her.
We have a whole new senior staff in that office, and they
know that their reputations are going to stand or fall on how
the system works. In my years in and out of the Pentagon the
only way I have found to move the bureaucracy, is to give it a
stake in something. Once their reason for being is tied into a
particular program, then you are going to have advocates for
that program.
We also found, and I mention this in terms of the so-called
domain owners, that we could not do it on our own. We did have
to get buy-in. We do, I believe, have buy-in for most of the
OSD, if not all of the OSD senior leadership. Does that mean
there are not pockets of resistance? Of course there are.
We are going to need help, I believe, from Congress, to
keep shining a light on what we are doing. One suggestion I
might make is that instead of having a hearing like this every
2 years, you might want to think about twice a year or at least
once a year, so that you get progress reports.
One of the difficulties that I constantly encounter is that
those who are less inclined to move ahead keep coming back at
me and saying: ``Look, do not give us timetables. Do not force
us to give you dates. Let us just have it all be event driven.
We will accomplish X. We will move on to Y.''
Now it sounds logical, except it begs the question: How
long are you going to take to accomplish X? The answer is: We
just told you. Do not make us give you a timetable.
On the contrary--and I understand where Dave Walker is
coming from when he says 2007 is very ambitious. If you do not
have an ambitious goal, you do not have a goal. If you do not
have a goal, nothing is going to happen.
So, you could help us by challenging us and saying: You
gave us a timetable. How are you doing relative to that
timetable? Senator Akaka raised that today. You are absolutely
right.
Now, there are reasons why we slipped; and we can talk
about those. But the point is, you ask us that question. You
force us to be accountable. The combination of your doing that
and a staff, at least in the CFO's office--a career staff that
is dedicated to the success of this project, I think will help
us go a long way. Hopefully we will continue to have people
like Secretary Rumsfeld, who believe in this as a prime
concern.
Mr. Walker. Mr. Chairman, I would add that I do think it
would be highly desirable to have this hearing at least once a
year and ideally more than once a year. We are in a critical
juncture at the Department of Defense. Irrespective of what the
election outcome is, having ongoing oversight by this
committee, and other appropriate subcommittees, and other
appropriate entities in Congress, I think it is critically
important, in order to maintain momentum and assure appropriate
accountability for results.
Senator Ensign. Thank you, both.
We will just go back and forth, Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Dave Walker and Dov Zakheim, I feel that you are making a
plea to us. I am glad we started 2 years ago, putting our
finger on this. I know at that time we were optimistic. But
this is why I am commending both of you for what you are doing
and for working together in meeting this challenge, as you said
that we have set forth here.
I want to commend both of you for working so hard these 2
years. Our hope, of course, is that you would come back with
answers. I would tell you that I am looking upon what you said
as a springboard, a springboard into accomplishing something
more definite in the future. But you have put your fingers on
some of the, I guess, challenges that we have. I like the so-
called simple statement that Mr. Walker had and laid down three
things for us.
One was a top level official, who would have the power to
make differences and top level, too. You also mentioned that we
need to determine how to control our resources. The third thing
was human capital. Individually, these are huge challenges. But
you have put your finger on those. I am so glad to hear that
you two are working on this and, of course, saying that we need
other agencies to work with you on this.
So, let me start out by saying I really appreciate what you
have done. This is a springboard to the future challenges.
Mr. Walker and Dr. Zakheim, when you testified--I am going
back in history--2 years ago, you agreed that DOD needed
investment controls to avoid wasting money on systems that
would be inconsistent with the new architecture. Let me use the
word architecture. I will quote Mr. Walker at that time saying,
``We recommend DOD take action to establish centralized control
over transformation investments to ensure that funding is
provided for only those proposed investments, and systems, and
business processes that are consistent with the Department's
overall business process transformation strategy.''
Dr. Zakheim agreed with you at that time. We included a
provision requiring such an investment control system in our
annual authorization. Unfortunately, GAO has told us that ``the
vast majority of the billions of dollars that DOD invests in
business system improvements annually have not been subject to
the specific investment control process'' established pursuant
to this requirement.
Do you both still believe that the Department needs to
establish controls over proposed investments in business
management systems? If so, why has the current process not
worked? What do we need to fix it?
Mr. Walker. Well, Senator, I will start. First, there are a
number of circumstances in which people did seek and receive
permission for the million dollar plus systems approval
requirements. But there were many circumstances, as our report
pointed out, where they did not.
The step that you took was obviously a step in the right
direction. However, it was a system that says: ask permission.
Many are not asking permission. They are asking for
forgiveness.
The simple fact of the matter is, once you pass the money
out, you lose control. I think that one of the things that has
to be considered at the Defense Department is, the way I look
at it is, there are two types of primary systems. There are
warfighting systems, which is what DOD is all about. We are
number one in the world in fighting and winning armed
conflicts. On that, you might take one approach and you might
decentralize the funding more to the different Services.
Then there are business information systems, which you have
to approach on an enterprise basis, and which there really are
not boundaries between the different Services. Therefore, you
need to approach them on a more centralized basis. I think the
responsibility, the authority, the control over the related
resources ought to be more on a centralized basis.
I also think, as Secretary Zakheim mentioned, DOD has 2,300
business information systems and counting. As he said, he
thinks it may be double that. Now first, if we do not know how
many we have, we have a problem. Second, we need to somehow
differentiate between which ones are critical stay-in-business
systems, which is only a sub-set, and which ones are ones that
are somebody's personal preference or something that somebody
has designed for themselves over the years. If it is not a
stay-in-business system, we may need to kill it.
I think we have to take the money that we free up that is
not a stay-in-business system, and we have to re-deploy that
money to create the future. In summary, being able to separate
between warfighting and staying in-business systems, and to
centralize more responsibility, authority, and control over the
business system resources where people have to get approval,
where they are not seeking permission, they are seeking
approval; and, therefore, that would change the dynamics.
Senator Ensign. Before you go on, Mr. Secretary; Mr.
Walker, could you just maybe give an example or two of a non-
stay-in-business system?
Mr. Walker. Well, a system that, in a particular service,
in a particular command, that somebody has designed, that helps
them do something that they want done but is not essential or
integral to management information necessary for that Service
or the Department of Defense as a whole. We can probably come
up with some more specific examples. Believe me, I can assure
you there are plenty out there.
Senator Ensign. If you could come up with, just for the
record later on, just----
Mr. Walker. No problem.
Senator Ensign. Get that for us, I would appreciate it.
[The information referred to follows:]

Our audit work has not focused on identifying non-stay-in-business
systems, but rather on assessing DOD's ability to manage and control
system investments and identify non-stay-in-business systems within its
reported inventory of approximately 2,300 systems. Recent audits reveal
that DOD has made only small inroads in addressing these management
challenges. For example, the Bob Stump National Defense Authorization
Act for Fiscal Year 2003 \2\ requires the DOD Comptroller to determine
that each financial system improvement meets the specific conditions
called for in the act before DOD obligates funds in amounts exceeding
$1 million. However, we found that most system improvement efforts
involving obligations over $1 million were not reviewed by the DOD
Comptroller for the purpose of making that determination and that DOD
continued to lack a mechanism for proactively identifying system
improvement initiatives. We asked for, but DOD did not provide,
comprehensive data for obligations in excess of $1 million for business
system modernization. Based on a comparison of the limited information
available for fiscal years 2003 and 2004, we identified $479 million in
reported obligations by the military services that were not submitted
to the DOD Comptroller for review.
---------------------------------------------------------------------------
\2\ Bob Stump National Defense Authorization Act for Fiscal Year
2003, Pub. L. No. 107-314, Sec. 1004 (d), 116 Stat. 2458, 2629, Dec. 2,
2002.
---------------------------------------------------------------------------
Despite DOD's acknowledgement that many of its systems are error
prone, duplicative, and stovepiped, DOD continues to allow its
component organizations to make their own investments independently of
one another and implement different system solutions to solve the same
business problems. These stovepiped decisionmaking processes have
contributed to the Department's current complex, error-prone
environment, and have hindered its ability to identify systems that
should be phased out. The DOD Comptroller testified at the hearing that
DOD's actual systems inventory could be twice as many as the number of
systems the Department currently recognizes as its systems inventory.
DOD's ability to address its current ``business-as-usual'' approach to
business system investments, including the identification on non-stay-
in-business systems, is further hampered by its lack of: (1) a complete
inventory of business systems (a condition we first highlighted in
1998); (2) a standard definition of what constitutes a business system;
(3) a well-defined enterprise architecture; and (4) an effective
approach for the control and accountability over business system
investments.
In March 2003, we reported that ineffective program management and
oversight, as well as a lack of accountability, resulted in DOD
continuing to invest hundreds of millions of dollars in system
modernization efforts without any assurance that the projects will
produce operational improvements commensurate with the amount
invested.\3\ We have identified several DOD business system
modernization efforts in enclosure 1 that were not economically
justified on the basis of cost, benefits, and risk; will take years
longer than planned; and have fallen short of delivering planned or
needed capabilities. For more information, please contact Greg Kutz,
Director, Financial Management and Assurance at 202-512-9095 or Darby
Smith, Assistant Director at 202-512-7803, or [email protected].
---------------------------------------------------------------------------
\3\ GAO-03-465.
---------------------------------------------------------------------------
EXAMPLES OF TROUBLED DOD SYSTEM INITIATIVES

Defense Joint Accounting System (DJAS)
DJAS was planned as a DOD-wide solution for a portion of the
Department's general ledger accounting needs only to fall significantly
short of expectations and cost more than planned. In 1997 DOD selected
DJAS to be the general fund accounting system for the Army and the Air
Force as well as for DOD transportation and security assistance areas.
Subsequently, in February 1998, DFAS decided that the Air Force could
withdraw from using DJAS, because Air Force and/or DJAS processes would
need significant reengineering to permit use of the joint accounting
system. As a result, the Air Force initiated an effort to develop its
own general fund accounting system-General Fund and Finance System. In
June 2000, the DOD Inspector General reported \1\ that DFAS was
developing DJAS at an estimated life-cycle cost of about $700 million
without demonstrating that the program was the most cost-effective
alternative for providing a portion of DOD's general fund accounting.
The report stated that DFAS had not developed a complete or fully
supportable feasibility study, analysis of alternatives, economic
analysis, acquisition program baseline, or performance measures, and
had not reengineered business processes. During fiscal years 1997-2000
DFAS spent approximately $120 million on the development and
implementation of DJAS. Although DFAS considers DJAS fully deployed, it
is only operational at two locations--Fort Benning, Georgia, and the
Missile Defense Agency. In October 2003, the DOD Comptroller placed
DJAS in sustainment--that is, the system will continue to operate at
existing locations, but will not be enhanced further.
---------------------------------------------------------------------------
\1\ Department of Defense Office of the Inspector General,
Acquisition of the Defense Joint Accounting System, Report No. D-2000-
151 (Arlington, VA: June 16, 2000).
---------------------------------------------------------------------------
Defense Procurement Payment System (DPPS)
DFAS determined the need for DPPS in April 1995. DPPS was intended
to be the standard, automated information system for contract and
vendor pay authorization and addressing deficiencies associated with
overpayments, negative unliquidated obligations,\2\ and unmatched
disbursements \3\--all of which are longstanding problems in DOD. DPPS
also was to incrementally replace eight contract and vendor systems.
DFAS awarded a contract in June 1998 for the acquisition of a system
that was intended to address DOD's contract and vendor pay
deficiencies. In its assessment of the economic analysis, DOD's Program
Analysis and Evaluation office questioned the validity of the estimated
savings and the ability to implement DPPS within the original estimated
cost and schedule. Despite these concerns, the DOD CIO granted
permission to continue the project. The original full operational
capability date of April 2002 slipped to December 2005--a delay of over
3 years--with the estimated cost almost doubling to $552 million. In
December 2002, following our discussion with DOD Comptroller officials
of DPPS cost increases and schedule slippages, the DOD Comptroller
terminated DPPS.\4\ In making this decision, the DOD Comptroller noted
that the project was being terminated due to poor program performance
and increasing costs. At the time the decision was made, DOD had
invested 7 years of effort and $126 million.
---------------------------------------------------------------------------
\2\ Negative unliquidated obligations occur when recorded
disbursements exceed recorded obligations, indicating that expenditures
may exceed amounts obligated,
\3\ Unmatched disbursements occur when a disbursement cannot be
matched to an obligation.
\4\ DOD Business Systems Modernization: Continued Investment in Key
Accounting Systems Needs to be Justified, GAO-03-465 (Washington, DC:
March 28, 2003).
---------------------------------------------------------------------------
Defense Standard Disbursing System (DSDS)
Disbursing activities for DOD are largely accomplished through
systems that were designed 15-20 years ago. In 1997, DFAS launched DSDS
to be the single, standard DFAS automated information system for
collecting, processing, recording, and reporting disbursement data and
transactions for the military services and defense agencies. These
disbursing functions are currently being provided by multiple automated
information systems and manual activities at various DFAS locations.
For DSDS, an economic analysis was prepared in September 2000. However,
it had not been updated to reflect material changes in the project. For
example, the full operational capability date (FOC) \5\ at the time the
economic analysis was prepared was February 2003. However, according to
information provided by DFAS, the current FOC date was delayed to
December 2005--a schedule slippage of almost 3 years.\6\ In December
2003, the DOD terminated further development of DSDS after an
investment of approximately $53 million.
---------------------------------------------------------------------------
\5\ The full operational capability date represents the date that a
system will be operating at all intended locations.
\6\ DOD Business Systems Modernization: Continued Investment in Key
Accounting Systems Needs to be Justified, GAO-03-465 (Washington, DC:
March 28, 2003).
---------------------------------------------------------------------------
Joint Computer Aided Acquisition and Logistics System (JCALS)
JCALS was established in 1992 to provide the functionality to
manage, acquire, stock, and distribute inventory to the warfighter. In
September 2002, the DOD Comptroller directed the Army to stop
development of JCALS and enter the program in the sustainment mode
until an updated economic analysis was approved and a determination was
made to confirm that the program was affordable through the Future
Years Defense Plan. In May 2003, a DOD contractor reviewed the cost,
efficiency, and effectiveness of the JCALS program to ascertain whether
it can provide the intended level of service to the users within
budget. Overall, the contractor reported that JCALS was an inefficient
program and it had not been effective in satisfying user requirements.
Specifically, JCALS was costly to operate, maintain, and develop and
its key stakeholders were not involved in the making of critical
decisions. The study, among other things, recommended freezing all
JCALS software and technology spending and improving overall program
management. Acting on the results of the study, DOD has placed JCALS in
sustainment. According to DOD's fiscal year 2004 IT budget submission,
DOD has invested over $1 billion in JCAL since the inception of the
program.

Standard Procurement System (SPS)
In November 1994, DOD began the SPS program to acquire and deploy a
single automated system to perform all contract management-related
functions within DOD's procurement process for all DOD organizations
and activities. The goal of SPS was to replace 76 existing procurement
systems with a single Departmental system. DOD estimated that SPS had a
life cycle cost of approximately $3 billion over a 10-year period.
According to DOD, SPS was to support about 43,000 users at over 1,000
sites worldwide and was to interface with key financial management
functions, such as payment processing. Additionally, SPS was intended
to replace the contract administration functions currently performed by
the Mechanization of Contract Administration Services (MOCAS), a system
implemented in 1968. Our July 2001 report \7\ and February 2002
testimony \8\ identified weaknesses in the Department's management of
its investment in SPS. Specifically:
---------------------------------------------------------------------------
\7\ U.S. General Accounting Office, DOD Systems Modernization:
Continued Investment in the Standard Procurement System Has Not Been
Justified, GAO-01-682 (Washington, DC: July 31, 2001).
\8\ U.S. General Accounting Office, DOD's Standard Procurement
System: Continued Investment Has Yet to Be Justified, GAO-02-392T
(Washington, DC: Feb. 7, 2002).

The Department had not economically justified its
investment in the program because its latest (January 2000)
analysis of costs and benefits was not credible. Further, this
analysis showed that the system, as defined, was not a cost-
beneficial investment.
The Department had not effectively addressed the
inherent risks associated with investing in a program as large
and lengthy as SPS because it had not divided the program into
incremental investment decisions that coincided with
incremental releases of system capabilities.
Although the Department committed to fully
implementing the system by March 31, 2000, this target date had
slipped by over 3\1/2\ years to September 30, 2003. In an
October 2003 briefing to the DOD Comptroller, the SPS Program
Manager estimated that SPS would be completed in fiscal year
2006.
Defense Travel System (DTS). In July 2002,\9\ the DOD
Inspector General raised concerns that DTS remained a program
at high risk of not being an effective solution in streamlining
the DOD travel management process. The report stated that ``The
Defense Travel System was being substantially developed without
the requisite requirements, cost, performance, and schedule
documents and analyses needed as the foundation for assessing
the effectiveness of the system and its return on investment.''
The report further noted there was increased risk that the
$114.8 million, and 6 years of effort already invested will not
fully realize all goals to reengineer temporary duty travel,
make better use of IT and provide an integrated travel system.
Additionally, the DOD Inspector General reported that DTS was
to cost approximately $491.9 million (approximately 87 percent
more than the original contract cost of $263.7 million), and
DOD estimated that deployment will not be completed until
fiscal year 2006, approximately 4 years behind schedule.
---------------------------------------------------------------------------
\9\ Department of Defense Office of the Inspector General,
Allegations to the Defense Hotline on the Management of the Defense
Travel System, D-2002-124 (Arlington, VA: July 1, 2002).

Dr. Zakheim. As you just heard, I think part of the problem
is having visibility into what is out there. For instance, just
in the logistics area alone, we reckon there are about 3,000
systems that we still have to get our hands around. Well, that
would already kick the number up from about 2,400 to about
5,400, more than twice as much.
What has been happening is that we get requests from the
Services, from the components, to approve their moving ahead
with new systems that invariably, we are told, will eliminate
some others. Then the question becomes: Are these systems just
optimized for the Service or do they fit within this enterprise
architecture? That is the key question. Because you know, you
sub-optimize at the level above the optimal.
So if it as the commander's level, it is optimal. At the
admiral's level or the general's level, it is sub-optimal. By
the time you get to the top, it is chaotic.
We have eliminated 238 systems. In terms of the systems
that are a million dollars or above, we have reviewed 60
systems, and approved 44, because they are consistent with our
understanding of the architecture. We have essentially thrown
out 16. For systems under a million dollars, we have reviewed
53 systems and approved 27, and 26 are still under review.
But the real key is to get each of these business sectors,
like logistics or health or installations and environment, to
be responsible for the modernization of the systems within
their sector. We have a steering committee that brings the
heads of all these sectors together. Nevertheless, these
sector's offices have only just been established.
So, it is going to take a little time before they are able
to do what we have pretty much been doing in the financial
management arena. I still believe, as I said 2 years ago, that
we can get rid of 90 percent of these systems. That will still
leave maybe 500 systems. That is a lot. But I think it is do-
able. The fact that we have got rid of nearly 250 systems, even
without the system being fully established, where we have all
these domain owners working together, gives you an indication
that we are on the right track.
Senator Ensign. Senator Allard.
Senator Allard. Mr. Chairman, thank you.
Secretary Zakheim, I understand that you are retiring and I
want to wish you well.
Dr. Zakheim. Thank you.
Senator Allard. I do have a question that came up last
November. I hope nobody has asked this question, Mr. Chairman.
There was a GAO report issued about the Army National Guard
being mobilized. Out of the 481 guardsman in the case study,
450 had problems associated with their pay. I wondered how you
were dealing with this problem and if we were getting this
issue pretty well resolved within the Department.
Dr. Zakheim. First of all, of course, DFAS, the finance and
accounting system, is working with the Army. The problem is
that the system was set up so that we paid Reserve component
soldiers for their monthly drills. It was not really set up to
do what it is doing now, which is to pay tens of thousands of
Reserve component soldiers who are on extended active duty.
Should it have taken that into account? In theory, of
course it should have. Because when someone signs up, he or she
does not just sign up to do monthly drills. You sign up for the
potential of being on extended duty. But that is what the
system was designed to do.
So, you are starting with a system that was not entirely
appropriate for the challenge at hand. So, what have we done?
We are increasing training at the mobilization and
demobilization sites, at the U.S. property and finance offices,
and in theaters overseas. We are increasing compliance review.
We are having staff assistant visits to ensure that whoever is
processing National Guard pay understands and complies with
these procedures, that we pay our Guard in a timely fashion. We
have a new review process for mobilization and demobilization.
Part of the problem was that when people came home, they
were not necessarily being paid by the right organization or
the right place for the right activity. So, we are doing a lot
in the way of training, a lot in the way of oversight, to deal
with what seems to have been a systemic problem.
Senator Allard. The bottom line is that if that GAO study
was done today, would the results be substantially better?
Dr. Zakheim. Substantially? I do not know. I would not
venture to say. Would they be better? Yes. Would we be able to
point to system improvements? I think the answer is yes.
Senator Allard. Well, you know and I know it is an
inconvenience for your Department; but it is an inconvenience
for these guys to go overseas and serve. They never counted on
this. It is a inconvenience for the employers; a lot of people
are being inconvenienced. I think that it is inexcusable for
them to have to wait any length of time for them to get their
money. It is something that we need to get resolved.
Dr. Zakheim. I could not agree more. I do not think it is
an inconvenience for the Department; it is our responsibility.
Senator Allard. Yes.
Dr. Zakheim. We have to fix it; and we are trying to.
Senator Allard. Well, I hope you can.
Yes, Mr. Walker?
Mr. Walker. Senator Allard, I think this is a good example
of how poor financial management systems have real-life
consequences on people's lives. This is not just some
theoretical or arcane kind of issue. The fact of the matter is,
in the absence of having modern, effective, integrated
financial management systems, you cannot pay people the right
amount on time. That will, in time, have very real
implications, not only with regard to their quality of life
today and their family situation today, but it could very well
have very real implications on the ability to attract and
retain a motivated and qualified force.
These are not just financial management issues or business
issues. They have long-range implications, as well as real-life
implications for our troops and their families.
Dr. Zakheim. One other thing. May I, Senator?
Senator Allard. Yes.
Dr. Zakheim. One other thing. When you get rid of a system,
you have to have a replacement. That is part of the difficulty.
I mean, we have a system we are going to bring in called
forward compatible pay (FCP), which is going to help with a lot
of this. It is not going to be ready until 2006. Now could it
be accelerated? The people who are experts tell me that they
cannot. That is why we are doing a lot more in the way of
training and just oversight until the system comes into play.
It is a problem.
Again, when you talk about 5,000 systems out there, every
single one of those has some kind of implication. Each time you
want to get rid of one, you had better have something to
replace it or else you have nothing at all.
Senator Allard. Yes. Well, I understand. But I just cannot
over-emphasize how strong I feel. I do not think I am the only
one on the committee that feels that our Reserve and Guard
people are making a lot of sacrifices. We do not want to
inconvenience them. Their families are making a huge sacrifice.
So, I think even more so in some regard than what the regular
enlisted people are, because this is something that was
unexpected. All of a sudden they feel they are being used in
their deployment in operation tempos (OPTEMPOs) much higher
than what they had ever counted on.
So, I think the whole committee would probably be very
appreciative if you can get this turned around. So that, if
there is another GAO study, we are not looking at something
like this. That is the only thing I can say. I know you are
doing your best but just to let you know how important it is to
many of us.
Dr. Zakheim. We all understand that. I was out in Iraq 3
weeks ago; and Afghanistan. Better than half the time, it
seems, I am speaking to a reservist.
Senator Allard. Yes. Most of the morale over there is
pretty good.
Dr. Zakheim. Excellent.
Senator Allard. I was over last week myself. I think the
food is pretty good. They are happy about that.
Dr. Zakheim. We have worked on it.
Senator Allard. The question is the problem, I think. I
mean, the paychecks.
Dr. Zakheim. Yes, I agree.
Senator Allard. We do need to resolve that, if you would,
please.
Mr. Chairman, I think my time has expired. If not, I have
another question or two.
Senator Ensign. Senator Levin?
Senator Levin. Thank you, Mr. Chairman.
Welcome to both of you. Dr. Zakheim, good luck to you.
Dr. Zakheim. Thank you.
Senator Levin. I know, as others have said, you are
leaving. You have worked hard to improve the systems we are
talking about today. Hopefully, you will have great success in
wherever you land.
Dr. Zakheim. Thank you.
Senator Levin. A couple years ago, before this
subcommittee, I think both you, Mr. Walker, and I think it was
the DODIG, spoke about the auditing issue, whether we put the
plans in place before we do the auditing and whether it is
worth it to spend a lot of money on auditing before our
financial management is reformed. This is what you told us, Mr.
Walker, and I want to just see if this is still your position:

``Previous financial management improvement plans that
the DOD submitted to Congress have simply been
compilations of data on the stove-piped approaches to
financial management improvements received from the
various DOD components. It is our understanding that
DOD plans to change its approach and anchor its plans
in an enterprise system architecture. Given the size,
complexity, and deeply ingrained nature of the
financial management problems facing DOD, heroic end-
of-the-year efforts relied upon by some agencies to
develop auditable financial statement balances are not
feasible at DOD. Instead, a sustained focus on the
underlying problems impeding the development of
reliable financial data throughout the Department will
be necessary and is the best course of action.''

Is that still your position?
Mr. Walker. I agree with that. They need to get their
systems and controls in place. Frankly, not only is it not
possible or appropriate to engage in heroic actions after the
end of the year, the Secretary of the Treasury, the Director of
OMB, and I have agreed to accelerate the due dates for
financial statement audits for the individual agencies and the
government as a whole. Specifically, in fiscal year 2004, the
agencies are supposed to report by November 15, which is 45
days after the end of the year, with audited financial
statements. The consolidated audit due date will be 75 days
after the end of year. So, it would be physically impossible to
engage in the historical type of ``heroic efforts.''
But yes, I believe it is important we focus on the systems
and controls to make sure that we get it right and that we need
to be concerned about cost benefit considerations in allocating
resources to various activities.
Senator Levin. Okay. Now, this is what the DODIG said at
the same hearing along the same lines. ``Due to overall
resource constraints, it would be impossible to provide audit
support in the crucial systems improvement area, if we were
forced to expend resources on labor-intensive efforts to audit
the convoluted work-arounds and poorly documented transaction
that currently characterize most major DOD financial
statements. By rejecting the notion that financial statements
compiled by special efforts would bypass or override official
accounting systems are worth their high cost or constitute
progress, you have reintroduced an appropriate sense of
proportion.''
Now, that was the DODIG, which was similar to what you have
told us here again today, Mr. Walker.
Here is the question: Dr. Zakheim, when you appeared before
the committee a couple years ago, you agreed that the
Department's financial problems had to be attacked at the root
by developing and fielding new systems. By the way, then the
Department had a goal: establish an objective of achieving
financial statements that could be audited by the end of fiscal
year 2004. The military services were required to draft plans
for achieving that objective.
Then the Inspector General came in, reviewed the plans, and
determined that it would cost billions of dollars and would not
achieve sustainable results, so the Department dropped that
objective. Now, the Department has established a goal of
achieving financial statements that can be audited by the end
of fiscal year 2007. The military services, however, tell us
that they cannot have business management systems in place
before 2012.
So, you are proposing to increase your audit spending by
$231 million in fiscal year 2005 and $1 billion over the Future
Years Defense Program (FYDP). So, would that not lead to
exactly the same kind of labor-intensive efforts to audit
convoluted work-arounds and poorly documented transactions, to
use the IG's words of a couple years ago, that we have been
warned against? In other words, would we not be better off
spending the $1 billion that we are talking about on new
systems to address the underlying problems?
Dr. Zakheim. The figure that we are requesting was
developed together with the IG. We have worked together with
the IG on the principle that we are not asking them to audit
where bandaids are really what are being put in place. I do not
challenge the statement you just read, Senator. In fact, in a
number of cases where certain of the components said that they
thought they were auditable, the IG took a look and said, ``No,
we don't think they're ready.''
2007 is definitely a reach. What I cannot have, and I do
not think anybody would want, is to allow a kind of rolling
objective. So, one year we will be told 2009, and as we come
closer to it, it will be 2010. In fact, this is the first I
have heard of 2012, because one of the Services came back to us
and said, no, they could not do it until 2009. I consulted with
OMB. I consulted with the IG. We made it very clear to them
that they were supposed to go for 2007. They gave us a list of
milestones and achievements, literally line by line by in the
financial statements, when they are going to get things done.
They did not like having to do it.
What we need, I believe, Senator, is continued pushing from
this subcommittee and others to make sure that, in fact, they
stick with the timetables they have already given us. I am not
even going to ask you who went and told you this. All I will
say is it does not do anyone any good, if they come to me and
my staff and the IG and their staff and OMB and their staff,
because we work all together on this and say, okay, here is the
timetable you asked for. Then they go off and say, well, we
cannot really meet that.
That means that they are not serious with either you or us.
I think that we need your help to keep their feet to the fire.
Senator Levin. Okay. My time is up, but I would like you to
look at the Navy template. This is for improving their systems,
not for their statements. But this goes out to fiscal year
2012/2013, depending on----
Dr. Zakheim. Systems improvement, Senator, we are going to
continue to improve our systems even after we have clean
audits. My concern is that we do not waste taxpayer money on
coming up with phony clean audits. That is not what we want. We
want to have the information available that generates the
audits from the bottom up; 2007 is a goal that the DOD
components have signed up to, at least one Service quite
reluctantly. But they have done it.
They will continue to modernize their systems. We will
continue to have the oversight. We ask you to oversee us.
Senator Levin. Well, we will do that even without a
request. [Laughter]
Thank you, Mr. Chairman.
Senator Ensign. Senator McCain.
Senator McCain. Thank you.
Mr. Walker, in your written testimony, you report that
billions of dollars are lost through fraud, waste, and abuse
resulting from poor financial management within the Department
of Defense. Can you give us some examples of that?
Mr. Walker. Well, examples are, as Secretary Zakheim
mentioned, they have thousands of legacy, non-integrated
systems. In many cases, you can have a circumstance in which
DOD has inventory, they just do not know where it is.
Therefore, they have difficulty in being able to identify it;
and, therefore, being able to recover it. Or in certain
circumstances they may have more items in their inventory than
the system notes. Therefore they continue to order items when
they do not really need to order items.
Those would be a couple of examples and those can be big
ticket numbers.
Senator McCain. As we know, when defense spending is
restrained, which some of us think is going to happen within
the next couple of years, because of pressures of the deficit,
readiness suffers usually first and then new acquisitions. Do
you think that we are going to have a tough choice to make when
we are talking about new aircraft, tactical aircraft?
Mr. Walker. Senator, I think we are going to have a number
of tough choices to make in the Defense Department. That is one
of them, yes.
Senator McCain. Do you think that we can afford both an F-
22 and a Joint Strike Fighter?
Mr. Walker. Well, Senator, what I can tell you is, if you
look at the difference between what the Services want and what
the likely funding patterns are going to be, there is a huge
gap. We have said on the record that we believe that there
needs to be a new business case done, with a comprehensive
threat and risk assessment, with regard to the F-22. It is not
a matter of if we are going to build it. It is a matter of how
many we are going to build and at what cost and with what
consequences.
Senator McCain. Are you concerned about the cost escalation
of the F-22?
Mr. Walker. Absolutely.
Senator McCain. That cost has been roughly?
Mr. Walker. It is now up over $255 million a copy.
I can provide that for the record. But it has escalated
tremendously.
[The information referred to follows:]

The average total acquisition unit cost of the F/A-22 is
approximately $255.9 million. For more information regarding the F/A-22
program, please contact Allen Li at 202-512-4841 or Michael Hazard at
937-258-7917, or [email protected].

Senator, all too frequently what ends up happening, it is
the plug-and-pray approach. By that, I mean Congress will
appropriate X amount of money, you divide the cost per copy to
tell you how many you can buy, and you pray that Congress will
give you more money.
But as you properly pointed out, the fact of the matter is
we are facing real, serious fiscal constrains. It is only a
matter of time before it is going to hit the Defense
Department.
I might also mention, Senator, and then I will stop, if you
want to ask a follow-up----
Senator McCain. No. Please.
Mr. Walker. One of the biggest problems that they have is
not just the platforms, it is the personnel cost. The personnel
costs are really rising very dramatically. The health care
costs are really out of control. The fact of the matter is, one
of the things I think that Congress needs to consider is that
while there may be certain aspects of the military that need to
get more money and are not being compensated adequately, I
would respectfully suggest that it is not necessarily the same
at all levels and all Services and all occupations; and that we
might need to think about a more targeted approach, just as on
the civilian side as to how we compensate people.
Senator McCain. For example?
Mr. Walker. Well, for example, one of the things that is
being talked about is an across-the-board 3.5 percent
adjustment for every level, every Service, and every
occupation. My question is: what is the empirical data for
that? I have seen surveys, both conducted by GAO, as well as
some conducted by DOD, saying that the single biggest problem
they have in attracting and retaining qualified people is the
OPTEMPO and the quality of life. While there are selected
compensation problems at certain levels and occupations, there
is not a pervasive problem in the Services. Health care is
clearly a major challenge.
Senator McCain. Well, before we got on to health care, we
do things like sea pay and hazardous pay, overseas pay, and
separation allowances. There are a number of things that we
already do. You are suggesting we do more?
Mr. Walker. Well, I am suggesting that just as in the
civilian work force, where we end up having across-the-board
adjustments that everybody ends up getting it, no matter what
your level, no matter what your skills are, no matter what your
location is, no matter what your performance is, we might need
to think about taking a more targeted approach to allocating
those resources.
Senator McCain. Describe the health care problem. Is it the
expansion of health care for veterans? Is it the overall health
care costs? Is it eligibility for health care? What are the
prime sources of this challenge that we face?
Mr. Walker. It is a multi-dimensional problem, Senator.
Senator McCain. Dr. Zakheim, I would be glad for you to
follow up.
Mr. Walker. In fact, I would hope he would.
Senator McCain. Go ahead.
Mr. Walker. Senator, I think it is a multi-dimensional
problem. First, I think DOD is a sub-set of the health care
problem that the Federal Government has, which is a sub-set of
the health care problem our entire nation has. Health care
spending is growing much faster than inflation, and much faster
than Gross Domestic Product (GDP) growth. The cost growth is
driven not just by cost of health care well in excess of
inflation, but additional utilization and intensity. Congress
has, over the past several years, expanded health care benefits
for the military and for their families to the extent of----
Senator McCain. Including guardsmen and reservists.
Mr. Walker. That is correct. It has also considered doing
even more. I think one of the things----
Senator McCain. These are congressional actions more than
executive branch actions.
Mr. Walker. These are congressional actions.
Senator McCain. They, for once, take the side of the
executive branch.
Mr. Walker. Thank you, Senator; and I am not in the
executive branch. Let the record show I am in the legislative
branch. I am an Article I person myself. But----
Senator McCain. Yes. Go ahead.
Mr. Walker. But I think----
Senator McCain. I am saying that for Dr. Zakheim's benefit.
Mr. Walker. Well, I am saying that for my benefit and
GAO's, quite frankly, Senator.
Senator McCain. You hope he will take it back, right?
Mr. Walker. But Senator, I think one point--I testified
before the House Rules Committee this morning about the budget
situation. One of the things I think we need to realize is,
when Congress is debating fiscal proposals, whether it is
spending or taxes, one of the things that it needs to do is
think about the long-term cost implications of short-term
actions; that does not currently get done.
You stood up on the floor, for example, of the Senate and
talked about the long-term costs of the Medicare Part D
benefit. The trustees came out today, $8.1 trillion on a
discounted present value basis. That is how much money you
would have to have today invested at Treasury rates to deliver
on that promise over the next 75 years.
Similar issues with regard to health care costs for
military, civilians, or others.
Senator McCain. I understand that. I would like Dr. Zakheim
to respond. But I would just very quickly--but when we hear
about soldiers coming back from Iraq in inadequate facilities,
we act. We have no other choice. We hear about guardsmen and
reservists who are on active duty and serving in Iraq or
Afghanistan and their families are not getting health care.
Then we react.
It is hard for any of us to stand up and talk about the
long-term implications when we are in a war. But I think it is
very helpful to have your voice out there. I think you have a
15-year term. Is that----
Mr. Walker. That is it, Senator. I have 9\1/2\ years left.
I hope we get a clean opinion on the financials before the end
of my term.
Senator McCain. Well, about 6 years from now we will start
questioning your judgment. [Laughter.]
But it is very helpful to have your voice warning us of
these things. But I also hope you understand, and I know you
do, that we see on the front page of the newspaper soldiers
coming back wounded from Iraq, who are living in substandard
conditions at Fort whatever-it-was; I have forgotten now. We
need your continued voice of caution.
Yours, too, Dr. Zakheim. Secretary Zakheim, please go
ahead.
Dr. Zakheim. Yes. Thank you, Senator. I certainly share Mr.
Walker's concerns about the defense health program. I just
wanted really to point out two additional factors that he did
not mention.
The first is, as you well know, TRICARE is still a
relatively new system. The first few years of TRICARE, people
were not really sure whether this system would work out or not.
So, they hung on to their own individual health care plans.
Word of mouth has now spread that TRICARE is a very good system
and so, we are now seeing more and more people transfer,
particularly veterans, to TRICARE.
That means that the original estimated costs of what this
would--the impact on the defense budget, if I could use that
term, is likely to be much higher than we originally
anticipated, precisely because the system is so good.
Senator McCain. Has there ever been an entitlement program
whose costs were not more than anticipated in history?
Dr. Zakheim. I will not argue that point with you, sir.
The second factor is, when we talk about the Reserves in
particular, as you well know, when they are on active duty,
they are covered by the defense health program, TRICARE.
Senator McCain. I think I might have been speaking of
Guard.
Dr. Zakheim. Guard is a little bit different, yes. But
nevertheless, the question is how far to extend the benefit.
How many of these folks are really not covered by anything
else? In other words, are we going to be providing an
additional subsidy to the people so they can simply buy health
care more cheaply than they otherwise would in their civilian
life? Then the question really becomes are we now shortchanging
the active folks because they do not have that privilege?
Mr. Walker. Senator, that is a key point, the targeting. If
you look at how the benefit was expanded, it was available to a
broad range of people. Many of these people already had private
health insurance through their employer. Since there is a huge
subsidy available through the TRICARE program, then you are
going to get adverse selection. If the program is good and you
can end up getting it at a small fraction of the cost of what
you pay for your employer-provided coverage, then they are
going to end up dumping their employer-provided coverage, and
they are going to go with TRICARE.
Senator McCain. Well, I think obviously this is an issue we
need to pursue a lot more, because of the unintended
consequences, as well as intended. I thank you.
Secretary Zakheim, I wish you every success in your future
endeavors. Thank you for your service.
Dr. Zakheim. Thank you, Senator.
Senator Ensign. I want to follow up. Secretary Zakheim, you
had talked about the 5000 systems.
Senator McCain. Mr. Chairman, may I submit my questions? I
have to leave.
Senator Ensign. Yes, indeed.
Senator McCain. Secretary Zakheim, if you would, provide to
the committee the Service's plans to meet that 2007 deadline
for clean financial statements. Could you provide that----
Dr. Zakheim. Certainly, sir.
[The information referred to follows:]

Response retained in committee files.

Senator McCain. Thank you.
Sorry to interrupt you.
Senator Ensign. No problem.
The 5,000 total systems that you all talked about; and I
believe you said about 90 percent of them you believe can be
done away with and replaced. There could be some huge cost
savings. Do you have just a gut-level feeling? I am not going
to hold you to the numbers. Obviously, you are not going to be
here anyway. But do you have any just gut-level, are we talking
billions of dollars, though?
Dr. Zakheim. My guess is probably. I cannot give you the
foggiest notion of what it will total to, in part because some
of these systems are smaller than others. The ones that we have
the least visibility into, the ones below the radar screen, are
likely to be the smaller ones, are likely to be the less
expensive ones. Logic points in that direction.
But clearly, you are talking about efficiencies. I think,
though, the real issue is not so much the savings, which there
will be. The real issue is the visibility. I do not know how
one can continue to make decisions, quick decisions, money
management and cash flow decisions, in the middle of a year
with a $400 billion budget, without that kind of visibility.
I mean, we have always been geared, and rightly so, to
having all our figures essentially responding to the demands of
Congress that we provide budgets. So, everything is in terms of
budgets. But budgets are just estimates. I mean, I have been on
the soap box for the last 2 years saying I need more transfer
authority, simply because right now I only have three-quarters
of a percent to manage within a $400 billion budget. It is all
the same thing. It is a question of visibility. It is a
question of how you move your monies. It is a question of how
you make your choices.
So yes, I believe there will be savings. But more
important, I think we are going to have better, more efficient
management.
Senator Ensign. I have a follow-up question. But Mr.
Walker, you wanted to respond.
Mr. Walker. Billions. On the business side, the DOD spends
right now about $19 billion a year just on management
information systems, and another $10 billion plus a year on
warfighting information systems. Of the $19 billion, about $14
billion is for current legacy systems and about $5 billion is
for modernization. But sometimes you have to spend money up
front to save money down the road and that is part of the
issue.
Senator Ensign. I just want to kind of paint a picture
here, so I get what you are recommending, Mr. Secretary. I will
just start with a quick anecdote. When I was first running for
office in my State, and I met with the person in charge of the
welfare systems in the State of Nevada, she told me that within
6 months, they were going to have this new computer system to
help manage everything. It was a proprietary system, and it was
going to cost, oh, I forget how many million dollars that it
was going to cost.
That computer system came on-line last year, 10 years
later, and at a cost of about, I think it was, six to seven
times more than the original cost, because it was a proprietary
system. The first year that it was in place, as I recall, the
State of Nevada, because the system did not work very well,
became subject to some of the penalties under the Welfare
Reform Law.
The bottom line was that proprietary system. When the
systems themselves are centralized, and not the architecture,
not basically the oversight, I can see a need for centralizing.
But I am hoping that you are not calling for a centralizing of
the system, you are calling for a centralizing of the
oversight. As long as things are compatible with the
architecture, and as much as possible, that it would be off-
the-shelf-type of systems, whether they are financial or
otherwise.
Could you just kind of give me a picture of what you are
looking at?
Dr. Zakheim. That is absolutely right. I mean, the thing
that has to be central is the architecture. Everything has to
be compatible. When I say 90 percent, again, as I said, we are
still talking about 500 systems. Maybe it will be 80 percent.
Maybe it will be 1,000 systems.
The point is, first, we will know what systems we use.
Second, they will all interact. Right now, we do not know all
the systems we have; and by definition, they do not interact.
Now obviously, if you build the great computer HAL or
something, you are going up the wrong path. That is not what we
are talking about here. What we are talking about is nicking
down the number of systems, having the visibility and the
compatibility amongst them so that we can make decisions. What
is central is the architecture. That is absolutely right.
Senator Ensign. Well, I appreciate the time lines. Dr.
Zakheim, Secretary Zakheim, what you said concerning not having
goals, that maybe they are unrealistic goals. First of all,
coming--I have had a lot more experience in a private sector, I
realize we are dealing with probably one of the best
performing, most inefficient bureaucracies in the entire
government. I realize the challenges are much greater than a
private sector system. But coming from the private sector, it
seems to me that these goals seem even way too far out. It
almost boggles my mind that those goals that people are saying
are unrealistic.
I guess that tells us the enormity of the challenge that is
before us. I appreciate, Mr. Walker, what you said about how
you have to spend money sometimes to save money, especially
when you are looking at long-term costs. A lot of this is long-
term. If we spend more money up front, do we save more money in
the long run, if I may be so bold?
Dr. Zakheim. First of all, to deal with the first part of
your question, one of the things we did when we were initiating
how we were going to approach this enterprise architecture is
go around to private industry, see what they had done. The one
that keeps sticking in my mind is Gillette, a $9 billion
company at the time. It took them 5 years.
Here we are $400 billion, revenues from Congress, as it
were. Now by that measure, it would take us 1,000 years. So
obviously that does not work. On the other hand, we saw that
even companies that had done this, and there were some that
were still working the problem, some that thought they had
finished and really had not finished. We even went to the
British Ministry of Defense, who thought they had finished and
were still improving, that it was going to take longer.
So, what we had to do was balance the desire to get this
thing done with the reality that this is just a huge operation.
Now clearly, on the one hand, we were unrealistic when we
testified 2 years ago and said this thing can be done in 2004.
At the same time, I do not want people saying, well, let us
kick it off until 2010.
2007 seems to me to be a reach but not an unreasonable
reach, sort of like a kid who applies to a college that you
just might make it but it is a reach. It is that idea. We want
to push as hard as we can.
If we spent more money, frankly, one has to be judicious
about that, too. We are asking again for something over $100
million, in addition to what we are asking for the IG's audit
capability. But frankly, I do not think that if we doubled the
request, we would halve the time.
Senator Ensign. Thank you. Yes, Mr. Walker?
Mr. Walker. Mr. Chairman, I think----
Senator Ensign. Mr. Walker and then Senator Akaka is next.
Mr. Walker. I think you need a detailed project plan, which
obviously has a lot of other interim milestones. I hate to use
a sports analogy, but I will. You have to hit some doubles and
singles. You have to make sure that you are building towards
the ultimate objective and that each of the key milestones are
generating a positive return on investment.
I do think that Congress is going to need to very closely
monitor how progress is being made, all the more reason for
more frequent oversight hearings, and to determine an
appropriate resource allocation on building the systems,
enhancing the controls, versus the audit side. Because I think
it is going to take the periodic and ongoing monitoring to make
sure you get that right.
Dr. Zakheim. Perhaps I was not clear, if I may add. In the
plans that we have from the Services, from the various
components, to get to 2007, we have intermediate milestones.
That is why, I think, as David Walker just said, it is so
important that we do a check on those.
Senator Ensign. Well, here is how this subcommittee can
partner with you. First of all, we will have more frequent
oversight hearings. That is a commitment from the chairman. But
also, if we can get a fairly detailed plan from you that we can
help you in holding your feet to the fire and the various
branches' feet to the fire, as well.
Dr. Zakheim. We have those and we will get them to you for
the record.
[The information referred to follows:]

Response retained in committee files.

Senator Ensign. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
When I think back about the reports that we have received
from you in 1999 and also in 2001, how high risk this financial
management is with DOD, it makes it very important that we
really bear down on this. As I mentioned earlier, I thank you
for your efforts in doing this and to detail some of the
challenges that we are facing.
One of them that you mentioned and that was mentioned here,
Mr. Walker, was the reform of human capital practices. You
prepared a statement that included a discussion of the
implementation of new civilian personnel system authorized by
last year's Defense bill. You say that in your view, DOD does
not yet have the necessary institutional infrastructure in
place to support an effective human capital transformation
effort.
What in your view, Mr. Walker, is the likely consequence of
implementing a new civilian personnel system of the kind
envisioned by the Department without putting the necessary
institutional infrastructure in place? Are you aware of any
specific DOD plan or time line for addressing the three
elements of an effective infrastructure outlined in your
testimony? In the absence of such a plan or time line, what is
the likelihood that the Department will have the needed
infrastructure in place when they implement the new National
Security Personnel System next fall?
Mr. Walker. Well, first, Senator, let me say that I think
the risk is that if the DOD does not go about this in the
proper manner, if it does not have an adequate infrastructure
in place, if it does not end up having appropriate safeguards,
then there is a chance that they will get it wrong. If they get
it wrong, not only does that have adverse consequences for the
Department of Defense and its employees, it potentially has
adverse consequences for the entire Federal Government, because
it could undercut momentum for much needed modernization of our
human capital policies and practices.
I will say that last week I sat down the Secretary of the
Navy, Gordon England, who Secretary Rumsfeld has tasked to
provide some additional executive oversight as a supplement to,
not a substitute for, Under Secretary Chu, who is Under
Secretary for Manpower, et cetera. In my conversations with
Secretary England, he made it very clear that they were not
going to rush to try to hit the maximum numbers that were
provided for in the statute, that he agreed very much with a
lot of the recommendations that we had made, and that it is
important that you get it right rather than get it quick.
Yes, you want to move expeditiously but you need to make
sure that you have adequate systems and safeguards in place.
Under the statute, DOD would be allowed to implement the new
system for up to 300,000 people by October 1, 2004. There is no
way that they can realistically do that. I think Secretary
England knows that now. He is now going back to try to work
with Under Secretary Chu and others to come up with a plan that
will ultimately get them to where they need to be within a
realistic time frame and also implementing it on an installment
basis.
I think that is the way you have to do it. That is the way
we did it at GAO and I am encouraged by his comments.
Dr. Zakheim. Senator, I just would like to add that both
Secretary England and my colleague, Under Secretary Chu, are
working with the Office of Personnel Management (OPM) on this.
They also have the experience and the benefit of a number of
pilot projects that we already had in this regard, so that we
are not working off a clean slate. With the kind of high-level
fire power we have behind us, I am optimistic that we can make
the kinds of changes that Congress legislated.
Mr. Walker. Senator, I would agree, except for the fact
that, as I have already testified on the record, that while
there were some demonstration projects within the Department of
Defense, they represented less than 5 percent of the DOD's work
force. In addition, they were not representative of the balance
of DOD's work force.
But that being said, I am very encouraged by the meeting
that I had last week with Secretary England. We had a number of
GAO experts on human capital, both externally and internally,
go over and meet with a lot of DOD personnel this week. We are
going to try to play a constructive role, because I think it is
in DOD's interest. It is in the Federal Government's interest.
It is in the country's interest.
Senator Akaka. Mr. Walker, you stated in your testimony
that as DOD develops regulations to implement its new civilian
personnel system, the Department needs to ensure the active
involvement of OPM, ensure the involvement of civilian
employees and unions, and use a phased approach to allow for
appropriate adjustments and mid-course corrections.
Are you currently reviewing the Department's efforts to
implement its new National Security Personnel System? Do you
know to what extent the Department is addressing these three
issues? If not, will you review the implementation on our
behalf and report to us on the Department's progress in
developing the necessary institutional infrastructure in
addressing the issues raised in your testimony?
Mr. Walker. Senator, we do plan to monitor the design and
implementation of the National Security Personnel System on an
ongoing basis. After I met with Secretary England last week, it
is my understanding that he has a team pulled together to try
to come up with a proposed project plan within the next several
weeks. I think that will be very informative as to how they
plan to proceed from here. So, we will keep this subcommittee,
as well as other committees and subcommittees in Congress,
apprised.
Senator Akaka. Thank you.
Mr. Chairman, my time has expired. But let me wish
Secretary Zakheim well in your future plans.
Dr. Zakheim. Thank you.
Senator Ensign. Senator Allard.
Senator Allard. Thank you, Mr. Chairman. I just have one
more issue that basically I want to cover. I do not think I
will require my full amount of time.
But Dr. Zakheim, the last few years this committee has been
responding to some media reports on abuse of credit cards that
personnel in the Defense Department were using. As a result of
that, they have inserted some provisions in previous bills
about disciplinary actions when those cards are abused. This is
my question: how successful has the Department been in
enforcing these provisions? Have they approved accountability
among their users?
Dr. Zakheim. The answer is yes, we have been quite
successful. As you may recall, when this thing really blew up
in a big way, I put together a task force that came up, not
just with an analysis of what went wrong but with real
proposals as to what to do. We have been measuring our success.
For example, in the first quarter of this fiscal year 2004,
we canceled 68,000 cards. We canceled 490,000 cards in fiscal
year 2003 for non-use. Too many cards floating around, and
people not using them. We canceled 3,000 cards in the first
quarter of this year and 9,000 cards in fiscal year 2003
because of retirements. People were retiring and held onto
their cards. We canceled those.
We have implemented what is called mandatory split
disbursement for military personnel. That is to say, if you are
at a hotel, we pay that hotel. We do not pay you. It eliminates
a lot of problems that way. We also have salary offsets for
both military and civilian personnel. We can take money back,
if there has been some kind of irregularity.
Delinquencies, 1.7 percent of our total card holders were
delinquent in February. That was on 18,000 accounts, on $10.4
million. That is quite a drop from the past.
So, whether you are looking at delinquencies, whether you
are looking at the number of card holders, at the kinds of card
holders--also, by the way, some of the things that have
appeared in the press when people have been prosecuted, that is
due to our data mining techniques. One of the things that we
encourage, and we actually implemented, was checking in and
finding patterns. For obvious reasons, I do not want to get
into too much detail about that.
Senator Allard. Sure.
Dr. Zakheim. But we have been able to catch folks and catch
them with much more regularity. When potential fraudulent-type
people realize that we are going to catch them, because others
have been caught, that is a tremendous deterrent.
We have had help from Congress on this, as you well know,
Senator. I believe we have made tremendous progress here. Now
as far as I am concerned, one card abused is one card too many.
But we are working the numbers down.
Senator Allard. I guess the follow-up question is, is there
anything else we can do to help you continue keeping this
accountability? Is there something that we can include in
legislation this year, we have not had in the past, that would
help you in that regard?
Dr. Zakheim. Right now I cannot think of anything off hand.
On the other hand, with a little bit of time, I probably could.
So, I will get you some for the record.
Senator Allard. Well, if you think of something, please let
us know.
Dr. Zakheim. Absolutely. We will get you some things for
the record.
[The information referred to follows:]

Section 1009b of the National Defense Authorization Act for Fiscal
Year 2004 established the requirement to evaluate an individual's
credit worthiness prior to issuing a travel card and prohibits issuance
if an individual is found to be not creditworthy. Similar requirements
have been included in the Defense Appropriation Acts in fiscal year
2003 and fiscal year 2004. The creditworthiness requirement presents a
conflict in enforcing the mandatory use provisions of the Travel and
Transportation Reform Act. The creditworthiness requirement in section
1009b did not provide the authority to conduct a credit check without
the individual's consent. Therefore, an individual could avoid
mandatory use of the card simply by not consenting to a credit check.
This poses a potential problem to the Department in that historically
20 percent of applicants decline a credit check and receive a
restricted card, limited to a credit line of $2,000. The Department has
already implemented a minimum cut score for military personnel below
which no card is issued and has initiated its bargaining unit
obligations to apply the same score to civilian applicants. However, we
can implement the cut off score until bargaining obligations are met
which is a lengthy process to negotiate separately with approximately
1400 bargaining units. Compounding the problem is that there is no
contractual mechanism to provide credit checks on centrally billed
travel cards and some suggestions that the banks may not be able to
perform credit checks because those accounts are issued to the
government and not the individual. Therefore the Department would have
to establish an administrative structure to identify and have credit
checks conducted on individuals assigned to centrally billed accounts.
Prepaid cards have not been widely implemented because they do not
provide the same administrative savings that the travel card provides.
In the meantime the Department has been working to establish a
self-certification form that would ask the individual to attest to
their current financial circumstances with penalties for providing
false information. While the Department would prefer not to rely on
self-certification, we do not want to lose the administrative savings
provided through use of the travel card that could result from large
numbers of individuals declining a credit check in order to avoid use
of the card or assignment of duties related to centrally billed travel
cards. Since providing the Department the authority to conduct credit
check without individual consent would require a change to the Fair
Credit Reporting Act, we would suggest the following change to section
1009b:

(1) The Secretary of Defense shall evaluate the creditworthiness of
an employee of the Department of Defense or a member of the Armed
Forces before issuing a Defense travel card to such an employee or
member. The evaluation may include an examination of the individual's
credit history in available credit records. The Secretary will
establish a minimum credit score below which no card will be issued to
the individual. Individuals who decline to consent to a credit check
will only be issued a travel card with restricted limits or a prepaid
card.
(2) In circumstances where a credit check is not available, such as
where an individual does not provide consent to the credit check as
required by law, or is assigned responsibilities related to a centrally
billed account, the Secretary may develop and use an alternate approach
to evaluating the creditworthiness of the individual.

Senator Allard. Yes. Because I was one that was in favor at
one time just taking the cards away from them if they are going
to abuse them. I think you have done that on those that are not
using their cards and those who are retired. I think that is
responsible action, and I commend you for it. But there is a
savings that goes with the use of cards, apparently----
Dr. Zakheim. Yes, there is.
Senator Allard.--that is pretty substantial. I guess you
concur that there is a savings. So, I guess whenever we can
save taxpayer dollars, we want to do that, too.
Dr. Zakheim. Well, that is true. Otherwise----
Senator Allard. But we just need to reach a proper balance
here so we can take out the abuse.
Dr. Zakheim. Right.
Senator Allard. If you come up with any ideas, well, please
let us know.
Dr. Zakheim. We will do that for the record. You are
absolutely right, Senator. Otherwise, you would have to start
up disbursing offices again. That is really quite expensive,
both in terms of money and in terms of personnel.
Senator Ensign. Good comment, Senator.
Just both of you, I want to thank you both. It has been, I
think, a terrific hearing. If we had more people, I think, like
yourselves that wanted to solve problems throughout our
government and working together--I just want to compliment the
work that you all are doing and to stay with it. Especially
Secretary Zakheim, because you will not be here, we wish you
the best. But we have to figure out how to continue until we
get somebody maybe that is going to be there a long period of
time. The appointment-type process. In the meantime with you
changing jobs, regardless of which administration comes in, we
cannot afford to let the ball drop on this.
So I appreciate your commitment and what you have done. Mr.
Walker, and you also, for the great work that you all have done
at GAO. Just keep up the good work. Thank you very much.
Dr. Zakheim. Thank you.
Mr. Walker. Thank you.
Senator Ensign. Hearing adjourned.
[Questions for the record with answers supplied follow:]

Questions Submitted by Senator John McCain

LEASING REVIEW PANEL

1. Senator McCain. Dr. Zakheim, in December 2001, you and Secretary
Aldridge established by memorandum the Department of Defense (DOD)
Leasing Review Panel. Did the leasing review panel recommend favorably
the Boeing 767 tanker lease? Please explain fully.
Dr. Zakheim. The Leasing Review Panel never formally approved the
767 lease. As the co-chair of the panel, I believe that leasing has
several potential benefits to the Department and provides greater
flexibility in dealing with changing requirements. I believe that the
use of multiyear leases as a means of acquiring capital assets is valid
where it makes good business sense. In the case of the 767 tanker
lease, the leasing review panel provided direction to the Air Force on
the negotiations of a lease arrangement, but never approved the Boeing
767 tanker lease.

2. Senator McCain. Dr. Zakheim, are there other leases that are
being considered by this panel? Please list all programs by Service and
the disposition of each.
Dr. Zakheim. At the present time, there are no other leases being
considered by the Leasing Review Panel. Prior to the review of the 767
tanker lease, the panel approved the multiyear lease of four 737
aircraft in June 2002.
______

Questions Submitted by Senator Jeff Sessions

PRIVACY PROTECTION ON TRAVEL CARDS

3. Senator Sessions. Dr. Zakheim, I understand that your agency is
aggressively pursing the travel card program consistent with provisions
in the 1998 Travel and Transportation Reform Act (TTRA), which I
supported. Recently, it has come to my attention that one of my
constituents has been having difficulty in obtaining assurances that
his privacy data is being protected if and when he participates in the
program. Mr. Gene Lenning works for the Missile Defense Agency in
Huntsville, and his case was featured in the headlines of yesterday's
(March 22, 2004) Federal Times (see attached). My office has also sent
a letter to Secretary Rumsfeld recently on this issue as well and I am
sure he is working on this case. From your perspective as comptroller,
could you address for the committee if the benefits that we anticipated
when we passed the TTRA, and from the travel card program are being
realized. Are there savings accruing to the Department and please
characterize the magnitude of efficiencies resulting from process
improvements you have seen from this program?

ARMY CIVILIAN REASSIGNED JOB OVER REFUSAL TO GET TRAVEL CARD

Federal Times
Published: March 22, 2004--By Stephen Losey
Come April, Gene Lenning will have a new job for the first time in
14 years. But not by his choice.
Lenning enjoys his work as a chief engineer at the Missile Defense
Agency''s ground-based interceptor project in Huntsville, AL, and wants
to stay. He says the quality of his work is not an issue. In fact, he
said, half an hour after he found out about the move, Lenning received
a $2,000 cash award for outstanding performance.
Lenning says he is being moved to the Space and Missile Defense
Command also in Huntsville--and off the ground-based interceptor
project--because he refuses to sign up for a government travel card.
Lenning has two objections to the travel card: First, he said,
using a travel card puts him at risk of identity theft. He does not
want to give his Social Security number to Bank of America, which
provides travel cards for Defense Department employees. Lenning is
concerned that the bank could sell his Social Security number to
another party.
Lenning has a personal credit card with another company, but he
said that bank will withhold his information if he asks. He said Bank
of America's travel card does not have that option.
Second, Lenning said, waiting for Defense to reimburse him and the
bank for charges on a card under his name puts his credit rating at
risk. If Defense is late repaying Bank of America, Lenning said, the
bank could turn his account over to a collection agency or credit
agency, which will hurt his credit.
Under a system called split disbursement, Defense divides money it
pays for travel expenses. Out-of-pocket expenses are paid to the
traveler, and payments for card charges go directly to Bank of America.
Under the 1998 Travel and Transportation Reform Act, frequent
Defense travelers are required to use government-issued credit cards
for travel expenses. The Defense Department says it can better manage
finances with the cards.
But Lenning said the Missile Defense Agency has not addressed any
of his concerns since he first learned in 2000 that he was expected to
get a travel card. At that time, he asked the government if it would
provide him with legal and other support in the event his identity was
stolen after receiving a travel card. The Pentagon said no.
He applied for a travel card in 2000 using his payroll
identification number, but was turned down. The regulations at the time
allowed people with pending card applications to charge trips to their
offices, and Lenning took advantage of that option. He used his
office's account to Reserve trips through an online booking system
called the Internet Redstone Arsenal Travel System (IRATS). But an
August 2003 revision to Defense's financial management regulations
closed that loophole.
In November, Lenning's travel office canceled his planned trip to
Tucson, Arizona, and told him he would have to book his travel on his
own, without using the online booking system. He would no longer be
able to use his office's account to book trips online.
Lenning rebooked his canceled Tucson trip on his own. That was the
last time he would travel for the agency. On January 6, his superiors
told him not to book trips on his own, he said.
The Missile Defense Agency did not allow Lenning to book trips on
IRATS because he didn't have a card, and said he could not book trips
himself. Lenning was out of options, and his superiors told him he
could no longer travel. Because travel is a necessary part of his job,
his bosses said, he would not be able to remain there.
Army Lt. Col. Kyle Haase, Lenning's boss, declined to comment when
reached on March 9. Haase is program manager for the Missile Defense
Agency's ground-based interceptor's kill vehicle project, part of a
multibillion-dollar defense against intercontinental ballistic
missiles. The kill vehicle is the part of the interceptor that tracks
and destroys an incoming nuclear missile.
Lenning said the travel problems have disrupted his job. The latest
problem was that, because Lenning could not travel, he was forced to
miss an important March 9 meeting in Tucson to review designs for the
project.
``It's really something I should be participating in,'' Lenning
said.
Lenning is chief engineer for the kill vehicle project and oversees
22 engineers.
Lenning said the Missile Defense Agency never told him why he could
not book his travel on his own. He does not automatically object to
travel cards; he just says they are not right for him.
``I'm not opposed to the card,'' Lenning said. ``On the other hand,
I don't understand why they need it. Why they're pushing so hard, I
don't know.''
Lenning said Defense officials have given him reasons travel cards
are needed, but he says the reasons do not apply to him. Defense says
the cards improve DOD cash management, reduce administrative workloads
and improve service to travelers.
``The cards are mainly for the government to control [cash]
advances,'' Lenning said. He said he has received cash advances three
times during his 35 years of government service, and never in his
current job.
Before Lenning was banned from traveling, he took about 25 trips
each year.
Lenning was told March 3 that in about 4 weeks, he will be
transferred to a similar job at the Space and Missile Defense Command
in Huntsville.
The new job will pay the same salary and benefits and is not a
demotion, Lenning said. But he still does not want to leave his job and
the relationships he has with his co-workers and bosses.
``I've been with the program for 15 years,'' Lenning said. ``I
would like to see it to deployment.''
That is why he has not yet retired. But the prospect of moving--and
not knowing what his new job would be--has Lenning thinking about
retirement.
``I'm much closer to the door now,'' Lenning said. ``I'm old enough
[that] I'm not looking for a new activity.''
Lenning is not sure what his next step will be. He is considering a
legal challenge and talking about his problem with the American
Federation of Government Employees.
AFGE representative Garry Freeman said at least four Army employees
in Huntsville object to applying for the cards. Some have sought
changes with Bank of America to the terms of the travel card, and some
cut back on their travel. Lenning is the only employee Freeman knows of
who is losing his job because of his refusal to get a travel card.
A systems engineer at the Space and Missile Defense Command said
his career has ground to a halt because of his objections to the travel
card. The engineer, a GS-14 who asked to have his name withheld for
fear of reprisal, applied for a card in November 2000, but he tried to
change the terms of the Bank of America travel card contract that he
did not like. For example, he said, the Defense Department should not
be able to garnish cardholders' wages to settle unpaid bills without a
court order. His application was refused.
Before he applied for the card, the engineer traveled at least once
a month. Since then, he has traveled only once. The engineer said his
superiors assign him less work because he cannot travel, and as a
result, he cannot get promoted.
Bryan Hubbard, a spokesman for the Defense Finance and Accounting
Service, said the Pentagon does not know how many employees refuse to
apply for a travel card. That issue is handled locally and is not
reported to the National office, he said.
Hubbard said Bank of America is required under contract to keep
Defense employees' personal information safe.
According to the Postal Inspection Service, identity theft cost
almost 10 million Americans about $5.5 billion in 2003.

Dr. Zakheim. The concerns relating to privacy protections on the
government travel card are addressed in the response to question #4
which follows.
With respect to benefits and savings realized through the passage
and implementation of the Travel and Transportation Reform Act (TTRA),
we can not provide specific dollar amounts. The intent of the TTRA was
to provide a more automated and efficient method for providing the
funds required to meet the Department's travel requirements. The travel
card accomplishes that. The travel card is a far more efficient means
of funding travel requirements than issuing cash advances, even with
electronic funds transfers. The average fee on ATM transactions is
approximately $3.50 compared to an administrative cost of approximately
$32.00 to process a travel advance (based on fiscal year 2004 rates
charged by the Defense Finance and Accounting Service). One of Mr.
Lenning's objections to the travel card was that he would not request a
travel advance and thus it would not cost the Department anything to
allow him to use his personal card. While that may be true for Mr.
Lenning, it is unlikely that the majority of the 1.1 million current
Department of Defense travel card holders, who travel more than twice
per year, would be equally willing to fund their own travel
requirements without receiving a travel advance. Furthermore, the
Department, as well as other government agencies, receives discounted
airfares through the General Service Administration city pair contracts
with the airlines. The government travel card is the required
instrument to obtain those discounts. Since the discount varies by
carrier and location, we do not have annual savings resulting from city
pair usage. Prior year estimates of savings by GSA were as much as $2
billion annually of which it is reasonable to assume the Department of
Defense accounts for roughly half given that the Department's travel
card spend is slightly more than half of the total government spend.
While city pair discounts may also be accessed through a centrally
billed travel card, those cards are government liability instruments
that require additional administrative work to reconcile and pay the
balances due in a timely manner. Centrally billed accounts are a
valuable tool to the Department to obtain access to the city pair
discounts but are not the more efficient solution to providing travel
funds for all other official expenses the traveler may incur.

4. Senator Sessions. Dr. Zakheim, I ask for your thoughts on the
assurances in place for the protection of privacy data, such as our
employees social security and financial information? Can you, along
with Secretary Rumsfeld, ensure that Mr. Lenning at MDA receives
assistance and answers to his questions as soon as possible?
Dr. Zakheim. Your letter to Secretary Rumsfeld was assigned to the
Defense Finance and Accounting Service for immediate response given
that organization's assigned responsibilities for program management of
the travel card program. A response was mailed to your office on April
9, 2004. That response explained that the General Service
Administration's SmartPay master contract contains a restriction
against selling, sharing, or releasing information for any purpose
other than those described in the contract to any third party. In
addition, Bank of America uses the same identity theft process to
monitor transactions for suspicious transactions that it uses on its
commercial cards. Just as with a consumer card, the individual would be
asked to confirm the validity of transactions that were flagged for
further review.
Social Security numbers are required by the bank in order to issue
a card under provisions of the USA Patriot Act. We also match split
disbursement of payments to the Bank of America to the individual's
travel card account by their Social Security number.
All credit cards are vulnerable to being lost or stolen which could
lead to identity theft. Use of a personal credit card instead of a
government credit card would provide no additional protection while
depriving the government of the administrative savings resulting from
use of the government credit card.
______

Questions Submitted by Senator James M. Talent

BUSINESS MANAGEMENT MODERNIZATION PROGRAM

5. Senator Talent. Dr. Zakheim, your March 15, 2004, Business
Management Modernization Program (BMMP) Annual Report to Congress
indicated that the DOD is committed to transform business operations so
that accurate and timely business information is regularly available to
support decisionmaking at all levels in the Department. The report
states that the first of three parts of the BMMP transformation is
further development planning for processes and modeling for the
business enterprise architecture and estimating the total cost of the
business transformation enterprise wide. This phase is not targeted to
be completed until quarter 1 of fiscal year 2007. With this in mind,
what near-term steps are currently being undertaken by DOD to take
advantage of the innovative solutions provided by small businesses that
can be in operation in 6 months, that parallel ongoing modernization
efforts and accelerate the infusion of new processes, enhanced
security, and technology upgrades at costs of less than 1 percent of
Defense Finance and Accounting Service (DFAS) fiscal year 2004
technology investment?
Dr. Zakheim. DOD encourages small business participation in
ongoing modernization efforts through existing small business set
asides and small business utilization offices at the Service and
component level. DOD will continue to seek small business participation
as solutions are implemented by the Services and components. The
Department is currently assessing opportunities to competitively
acquire additional support for the BMMP and will give small businesses
every opportunity to participate.

6. Senator Talent. Dr. Zakheim, recent General Accounting Office
(GAO) reports and the December 23, 2003, DOD Inspector General (DODIG)
report found numerous and serious payment problems for active and
Reserve military personnel. All have made recommendations on the need
for new processes and technology applications to revamp DOD financial
management systems. I am concerned that after more than 2 years of
study and the expenditure of more than $2 billion, DFAS efforts are
still in the planning stage. Knowing this, what innovative processes
are currently available to you as near-term solution at relatively low
cost that can be implemented over the next several months?
Dr. Zakheim. DOD has established a long-term plan for the
management of military personnel and pay that resolves problems
currently affecting service members. The Defense Integrated Military
Human Resource System (Personnel and Pay) (DIMHRS (Pers/Pay)) program,
under the sponsorship of the Under Secretary of Defense, Personnel and
Readiness, has established a requirements baseline and has acquired a
developer/implementer contractor to support development of DIMHRS. The
DIMHRS program manager is currently reviewing the schedule to determine
the feasibility of accelerating the deployment of the system.
Due to the complexity and scope of delivering an integrated
personnel and pay system for all military services, DOD has approved
the DFAS strategy for a near term replacement of the Defense Joint
Military Pay System (DIMS), the current legacy military pay system, to
solve immediate payroll problems facing service members. This
replacement system is called Forward Compatible Payroll (FCP). FCP is
configured using the same software (People Soft HRMS/Global Payroll)
and requirements as DIMHRS to ensure seamless transition to DIMHRS.
Implementation of FCP will begin with the Army's Reserve components in
the spring of 2005, with final implementation by the spring of 2006.
In addition to these systems solutions, we have embarked on many
other initiatives to improve pay for all our service members. An
executive oversight committee has been established consisting of the
acting ASA (FM&C), the Director of the Army National Guard, and the
acting Director of the DFAS. This committee cooperatively oversees the
progress and reports on 52 action items that have been developed to
address the pay problems of mobilized Guard and Reserve soldiers. This
oversight committee made a commitment to provide quarterly updates to
the House Government Reform Committee regarding progress made to
improve pay for mobilized soldiers. The following highlights some of
these actions:

a. Inspect and review. DFAS currently has a Field Compliance Team
inspecting the finance sections of every mobilization/demobilization
station in the Army. The team is addressing shortcomings on the spot,
and is providing lessons learned across the network. A complete review
of all sites will be completed by the end of May 2004.
b. Improve training and education. DFAS deploys training teams on a
regular basis to Kuwait to assist finance personnel in theater. The
first team completed its training in November 2003, and the second
iteration will occur 16-28 May 2004. A joint team from DFAS, the United
States Army Finance Command, and the Reserve Component have developed
new training materials, have increased training capacity, and have
taken steps to emphasize strict adherence to established finance
procedures both in the continental United States and in theater.
Training has also been provided to selected United States Property and
Fiscal Officers and selected mobilization sites where the greatest need
existed.
c. Develop a military pay ``safety net'' through a series of
automated data reconciliation actions. DFAS conducts automated checks
with the goal of ensuring that all mobilized and deployed soldiers are
receiving their combat entitlements as appropriate, and with the goal
of ensuring that all demobilized soldiers get their combat entitlements
stopped in accurate and timely fashion. The safety net has already
produced results; for example, the data reconciliation's for
demobilized soldiers directly resulted in the correction of over 300
soldiers' pay accounts in March-April 2004.
d. Enhance ``myPay'' functionality and access. This is DFAS's web-
based tool which soldiers, sailors, airmen, and marines can use to view
and manage their own military pay accounts. Some of the enhancements
include: capability to manage financial allotments, availability of
viewing 1 year's worth of Leave and Earning statements, restricted
access with view only PIN number for spouses and the capability to
purchase savings bonds.
e. Automate certain entitlements on Defense Joint Military Pay
System-Reserve Component (DJMS-RC). For example, Hardship Duty Pay-
Location was automated in April 2004.

7. Senator Talent. Dr. Zakheim, recent testimony and DODIG reports
have stated that DFAS has spent over $2 billion to plan, study, and
develop transition timelines for technology hardware in an attempt to
change the system in its entirety. In the private sector, successful
technology transition is often best managed by transforming the whole
through introducing scalable innovative solutions to the parts,
allowing for continued upgrades and integrations. As the bulk of these
innovative solutions have come from quick moving agile small
businesses, it concerns me that according to the BMMP Web site there is
no small business office. What steps have you taken to get small
business more involved in the process of transforming the DOD financial
management system?
Dr. Zakheim. The Department's program office with responsibility
for implementing business transformation, Business Modernization System
Integration, conducts regular industry day conferences to alert small
businesses about DOD business and financial transformation efforts. We
also post industry day related information to the BMMP Web site.

8. Senator Talent. Dr. Zakheim, Web based financial services allow
real-time accounting and data retrieval in the credit card, debit card,
securities trading, and commercial banking sectors. Utilizing service
provider solutions for these applications has measurably increased
internet security without large infrastructure costs. Knowing these
facts, what steps have you taken to infuse these technologies and
processes into the current financial management systems at DOD?
Dr. Zakheim. The Business Enterprise Architecture is a blueprint to
guide DOD's diverse business communities in transforming their
processes and systems. It will describe the requirements that DOD
business processes and systems must meet to achieve goals of business
transformation. DOD is implementing the Architecture and re-engineering
related business practices incrementally using subject matter experts
from the Department's business domains. The Architecture defines
security requirements and mechanisms, such as Web based services, and
other leading practices for DOD. It also extends the Department's net-
centric strategy which includes services and data. The BMMP is using
nine core net-centric enterprise services and is illustrating them in
the architecture.
Business system improvements greater than $1 million must be
certified by Office of Secretary of Defense (Comptroller) as compliant
with the Business Enterprise Architecture in accordance with Section
8084 of the Fiscal Year 2004 DOD Appropriations Act. To ensure
compliance with the law, DOD is implementing portfolio management
policies and guidance to direct and constrain business system
investments.

9. Senator Talent. Dr. Zakheim, recent staff reductions at DFAS and
a lack of upgraded technology applications and hardware are creating a
number of difficult situations, to include the growing discrepancy
account balances between the DOD and U.S. Treasury accounts, and the
growing ``unbilled hours' to the various military services and DOD
agencies that DFAS services. What steps are you taking to alleviate the
DFAS staffs administrative burden so that personnel can be reallocated
to managing these issues?
Dr. Zakheim. DFAS will continue to meet operational challenges by
being strategy-based, customer-focused, and metrics-driven. Facing
these challenges, DFAS will employ several important mechanisms
including continual strategic planning, mid-term strategic target
setting, and balanced scorecard measurement. The strategy development
process at DFAS continually evaluates how DFAS can best satisfy
customers' needs, and, by establishing mid-term strategic targets,
helps DFAS identify flexible solutions that best accomplish those
objectives. In addition, DFAS strategic targets allow for appropriate
concentration of resources and focus DFAS staff members on solving
specific problems.
To this end, DFAS has identified five key strategic targets to
pursue. Achieving these five strategic targets will enable DFAS to
deliver higher-value to the customer.

1. achieve unqualified audit opinions on the fiscal year 2007
financial statements
2. implement electronic commerce for all Commercial Pay Business
Line processing by fiscal year 2005
3. pay service members what they are entitled to on the scheduled
pay date
4. develop a corporate capability to deliver client unique business
intelligence by fiscal year 2005
5. retain, recruit, and train a DFAS workforce capable of
developing and implementing the DFAS Strategic Plan

In addition to allocating resources to important issues, these
strategic targets give the workforce specific objectives, and allow for
improved efficiency and productivity using outcome-based metrics that
measure success in delivering products and services. Using a Balanced
Scorecard approach to metrics measurement keeps a corporate focus on
key indicators of success and enables all DFAS employees to remain
alert to specific customer desired outcomes.
______

Question Submitted by Senator Lindsey O. Graham

PAY AND ALLOWANCES TO MOBILIZED ARMY NATIONAL GUARD

10. Senator Graham. Dr. Zakheim, according to a recent GAO report,
the existing processes and controls used to provide pay and allowances
to mobilized Army National Guard personnel are so cumbersome and
complex that neither DOD nor, more importantly, the mobilized Army
National Guard soldiers could be reasonably assured of timely and
accurate payroll payments. In light of the significant contributions
being made by members of the Guard to the war on terror, could you
please comment on the steps that the Department is taking to correct
this ongoing situation and when we might expect a resolution to the
problem?
Dr. Zakheim. We have taken immediate actions, such as, simplified
remarks for special incentive pays on the Leave and Earnings Statement,
provided better soldiers' instructions, and automated many of the pay
transactions on the Reserve pay system. I expect that DFAS, the Army,
and the Army National Guard will continue to work jointly their efforts
to apply interim measures to solve pay problems by applying short-term
strategies to keep the expertise of the network up to expectations
regarding timely payment of our mobilized forces. At the same time. we
will continue work on our interim solution, the FCP system. We have a
very robust plan to field FCP to put both the active and Reserve
components on one platform by next spring. Of course, continue our
development of the ultimate solution, the DIMHRS, to greatly improve
pay support to our soldiers.

[Whereupon, at 4:10 p.m., the subcommittee adjourned.]

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

----------

THURSDAY, APRIL 1, 2004

U.S. Senate,
Subcommittee on Readiness and
Management Support,
Committee on Armed Services,
Washington, DC.

MILITARY INSTALLATION PROGRAMS

The subcommittee met, pursuant to notice, at 2:32 p.m. in
room SR-232A, Russell Senate Office Building, Senator John
Ensign (chairman of the subcommittee) presiding.
Committee members present: Senators Ensign, Inhofe, Allard,
Cornyn, and Akaka.
Committee staff member present: Leah C. Brewer, nominations
and hearings clerk.
Majority staff members present: L. David Cherington,
counsel; William C. Greenwalt, professional staff member; and
Lucian L. Niemeyer, professional staff member.
Minority staff members present: Peter K. Levine, minority
counsel; and Michael J. McCord, professional staff member.
Staff assistants present: Andrew W. Florell and Pendred K.
Wilson.
Committee members' assistants present: John A. Bonsell,
assistant to Senator Inhofe; Lance Landry and Jayson Roehl,
assistants to Senator Allard; D'Arcy Grisier, assistant to
Senator Ensign; Russell J. Thomasson, assistant to Senator
Cornyn; Davelyn Noelani Kalipi, assistant to Senator Akaka;
William K. Sutey, assistant to Senator Bill Nelson; and Andrew
Shapiro, assistant to Senator Clinton.

OPENING STATEMENT OF SENATOR JOHN ENSIGN, CHAIRMAN

Senator Ensign. Good afternoon. The Readiness and
Management Support Subcommittee meets today to receive
testimony on installation programs in the fiscal year 2005
budget request. We have also asked our witnesses to be prepared
to answer questions about the base realignment and closure
process.
Along with Senator Akaka, we welcome our witnesses: Raymond
DuBois, Deputy Under Secretary of Defense for Installations and
the Environment; Major General Larry Lust, Assistant Chief of
Staff for Installation Management, United States Army; Rear
Admiral Christopher Weaver, Commander, Naval Installations;
Brigadier General Willie Williams, Assistant Deputy Commandant,
Installations and Logistics, Commandant of the Marine Corps;
Major General Dean Fox, the Air Force Civil Engineer.
The fiscal year 2005 budget request for United States
installations programs presents a range of new and old
challenges in our committee. For example, environmental policy
poses many challenges. Yet the Department continues to show its
commitment to environmental stewardship by turning challenges
into opportunities for success.
One area where the Department of Defense (DOD) demonstrates
forward thinking is in its sustainable range management plan, a
plan to help maintain ranges necessary for training and live
fire testing while remaining compliant with environmental
requirements.
In a parallel effort to the sustainable range management
plan, the Department of Defense has requested legislation under
the Readiness and Range Preservation Initiative (RRPI), which
the committee has addressed in part over the past 2 years. To
date the committee has passed legislation resolving three of
the six RRPI legislative issues requested, but encroachment
still remains a large problem for the Department, and resolving
the problems laid out in RRPI will not answer all encroachment
challenges facing the Armed Forces.
When the Department listed the eight issues most affecting
the military's training and testing areas, four were not
addressed by RRPI. Urban growth and incompatible development
near military ranges and the corresponding airborne noise
concerns indicate a large encroachment problem that will
require active planning by the Armed Forces for decades to
come. It is often not the weight of a single type of
encroachment which is debilitating to a base or range, but the
aggregate of several restrictions which hampers military
readiness.
Turning to facility investment programs, the fiscal year
2005 budget request for military construction continues to
underinvest in the replacement of deteriorated infrastructure
and facilities. The Department's goal to invest in facilities
by fiscal year 2008 at a rate that recapitalizes facilities
every 67 years will require DOD to triple the amount of funding
historically requested, a level that the General Accounting
Office (GAO), in a report released in February 2004, believes
is not realistic.
Another goal set by the Department is to fund the annual
average facilities sustainment requirement at 95 percent. The
funding for the vital maintenance necessary to keep facilities
in working order has fallen victim to shortfalls in accounts
for base operations, support, and facility repairs. Only a
fraction of the high sustainment funding level proclaimed in
budget presentations to Congress is being realized at the
installation level.
This year the committee will also address the continued use
of housing privatization authorities to enable the Department
of Defense to quickly and efficiently upgrade or replace over
110,000 inadequate houses for our service members and their
families. We are faced with a revised interpretation by the
Congressional Budget Office (CBO) of the budget impact caused
by the public-private ventures. This interpretation reverses
CBO's views over the past 8 years and conflicts with guidance
by the Office of Management and Budget (OMB).
We look forward to testimony today by our witnesses on the
successes and merits of housing privatization. Throughout this
year's budget request for military construction, family housing
and environmental programs, we see projects that support
Defense Department initiatives to transform the organization,
basing, and posture of the total force. For example, the
Department continues to fund construction projects supporting
homeland defense, antiterrorism, and enhanced protection for
our personnel.
From a global perspective, the Secretary of Defense is
currently negotiating with our allies to establish new concepts
for the basing of U.S. forces while maintaining our traditional
commitments. These agreements promise to enhance training
opportunities and burdensharing by host countries while
improving flexibility and responsiveness to our national
security requirements.
We recognize that this year's request for a prudent
overseas construction investment responds to the current
dynamics of global basing plans. We look forward to more
definitive information soon on agreements and burdensharing
arrangements. We must continue to pursue every opportunity to
save money so as to free up funds for our Services'
transformation efforts and additional security initiatives at
home.
A potentially significant source of savings to the
Department is the upcoming round of base realignment and
closure (BRAC) in 2005. If properly executed, it will provide
an opportunity for our military to enhance our joint
capabilities by realigning functions to improve joint testing
and basing, improve the use of our ranges by concentrating our
investments on technology and infrastructure to support joint
training, and realign critical support functions to maximize
economy of effort, while providing substantially more and
better trained warfighters.
Some, perhaps politically motivated, have called for a
suspension or a delay in the BRAC process. It would be a huge
mistake, a huge mistake, to undermine this crucial opportunity
to improve the quality of our forces. Congress correctly
provided authorization in the Defense Department for BRAC in
2005 after the events of September 11, 2001, specifically
because we realized that we could not bear the burden of excess
costs to sustain a cold war posture and infrastructure in the
face of a significant and menacing threat.
Despite increases in the budget, the need for savings and
transformation remain. No one should play politics with a
process that has the potential to save $5 billion by 2011 and
$8 billion every year thereafter. This was done once during the
1996 presidential election and that unfortunate episode has
delayed to date any further rationalization of our
infrastructure and subsequent cost savings.
In a year where we have debated cutting the defense budget
by $7 billion during a time of war, how can we delay or deny
the Department the chance to save that much within the next 6
years? BRAC is a critical catalyst to our efforts to provide
the American people with the strongest military forces, jointly
based and trained, operating with the most lethal effectiveness
our limited resources can sustain.
I want to be clear to our witnesses and those in attendance
of the gravity of this issue and the results at stake that
should transcend politics.
Senator Akaka, I turn the floor over to you for any opening
statements that you may have.

STATEMENT OF SENATOR DANIEL K. AKAKA

Senator Akaka. Thank you very much, Mr. Chairman. Again, I
feel proud working with you on this subcommittee. I want to
join you in welcoming our panel this afternoon to discuss the
Department's military construction, family housing, base
closure, and environmental restoration and compliance programs.
We have made some considerable progress on taking care of
our installations in recent years. For example, we are on track
to modernize our soldiers' barracks, including the elimination
of gang latrines. In 2005, we will complete the initiative
begun by former Secretary of Defense Cohen to reduce average
out-of-pocket family housing costs to zero. We have increased
attention on the importance of putting money to sustaining our
facilities. The pace of housing privatization has increased and
we have given the Department new tools to work with non-Federal
entities to create a buffer zone or buffer zones around defense
installations.
At the same time, challenges remain. This administration's
first budget in 2002 brought the recapitalization rate of DOD
facilities down to 101 years, but we have not made much
progress in further reducing this rate. In fact, the 2005
budget has a recapitalization rate of 107 years.
This is in large part because our installations have not
shared in the tremendous funding increases the Department has
received over the past few years. The administration's initial
budget for 2002 requested $5.9 billion for military
construction and $328 billion for the Department of Defense
overall. The fiscal year 2005 budget requests $401.7 billion
for DOD, an increase of $73.7 billion or 22.5 percent over year
2002. But none of this increased funding has gone to military
construction. In fact, the amount requested for military
construction has actually decreased, from $5.9 billion to $5.3
billion.
I am also concerned about rising base operation costs, the
vast majority of which are now contracted out in ways that
limit our flexibility. While I believe the new DOD standard of
funding 95 percent of our facilities sustainment requirements
makes sense, it will not be as effective as it should be
without a similar standard to ensure that we budget adequate
resources to fund our must-pay base operations bills.
Understandably, the attention of the senior DOD leadership
and Congress has been focused elsewhere, on our operations in
Iraq and in Afghanistan. But there are considerable challenges
in the jurisdiction of the Readiness Subcommittee that demand
the attention of Congress and the Department, such as resetting
the force, making sure we get the best use of our test and
training ranges, and how we position our forces around the
world to meet the security challenges of the future.
The upcoming 2005 base closure round has gotten a great
deal of attention already and in the coming year will probably
dominate the discussion of basing and installations. Certainly
BRAC is important. This will be the first opportunity in 10
years to realign our forces and infrastructure.
But the positioning of our forces outside the United
States, which is not subject to the BRAC process, is of equal
importance. There has been a great deal of speculation in the
press on the global posture review, but the committee has
received very little hard information from the Department. We
need to get some answers very soon. In addition to their
foreign policy significance, these decisions on overseas
presence and basing strategy must precede and inform next
year's BRAC round.
I hope the Department will seize the opportunity provided
by next year's BRAC process to reduce excess infrastructure and
enhance the joint warfighting abilities of our forces by taking
new steps in joint basing and joint use of our bases and
ranges. As the Department studies its own requirements leading
up to next year's BRAC recommendations, it is imperative that
the Department consider the reality that national security is
now broader than just the Department of Defense and that the
missions and needs of other agencies, such as the Departments
of Homeland Security and Veterans Affairs, must be taken into
account.
Finally, Mr. Chairman, I want to say a word about something
that is not yet before us. DOD officials recently informed us
that they plan to resubmit their legislative proposals to
exempt certain DOD activities from the Clean Air Act (CAA),
Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA), and Resource Conservation and Recovery
Act of 1976 (RCRA) within the next week or two. These proposals
have been criticized in the past by State and local government
agencies and have been rejected by the last two Congresses.
They are not as important to military training and readiness as
the legislative proposals we have already enacted, but they
would have a much more direct impact on human health and the
environment.
I am concerned that to date we have not seen these
proposals from DOD, particularly since the short time remaining
for public review makes it difficult to have the kind of
reasoned discussion necessary to develop a legislative solution
that could be passed by the Senate.
Thank you very much, Mr. Chairman.
Senator Ensign. Thank you, Senator Akaka.
Senator Inhofe. Can I just make a brief comment?
Senator Ensign. Senator Inhofe.
Senator Inhofe. Just a brief comment, Mr. Chairman. I
listened to Senator Akaka. He makes a lot of sense on some of
the problems and the timing. I have questioned this timing even
before the acceleration of the war that is going on right now.
We are at war. We have the global posturing review, and the
tight Federal budget.
When you look at the savings--and I have been through every
one of them. I was elected in 1986, so I have been here through
the whole concept. I was here and actually developed the
process with Congressman Armey. I think some of these rounds
have been good and have eliminated I think some 92
installations that should have been eliminated.
Right now it is a different situation than we have been in,
and I am concerned. Let me just throw out a couple of things
and maybe you can address these in your opening remarks. One is
the estimates of savings and the timing of those savings is
never accurate, but what is certain is the cost up front is
high. It is estimated in this case to be $15 billion. If there
is ever a time when we are trying to make up for some of the
problems we had in the 1990s with our military in terms of
modernization and end strength and all the problems that
everyone in here is aware of, this is that time when we need
every precious dollar that we can get, not just to fight the
war, but to start rebuilding, the rebuilding process. There is
not a person in front of me who does not understand that and
appreciate that.
I have become very interested in General Jones' efforts in
the restructuring and how we are looking at Western Europe, as
Senator Akaka points out, some of the challenges, some of the
environmental encroachments on our bases. I say to my good
Marine and Navy friends, I fought the battle of Vieques for 3
years and lost and it was not much fun, but at least now we
have realized, people realize, we have a serious problem.
That problem is at home. We know it is happening with
environmental encroachment on our ranges here. We know it is
happening in Western Europe ever since the European Union (EU).
I have personally gone to Romania and Bulgaria and Ukraine and
I see other ways of doing this that would necessitate bringing
a lot of these families back stateside. Yet we are talking
about going through an infrastructure change without really
knowing what is going to be coming back.
So I question the timing of all of this, and I am hoping
that in this forum we will be able to discuss some of these
things.
Mr. Chairman, I thank you.
Senator Ensign. Thank you.
All of your statements, full statements, will be made part
of the record and if you could, just because of the large size
of the panel, so we can save plenty of time for questions, if
possible keep your opening statements to around 5 minutes, and
I would appreciate that.
We will start with you, Mr. DuBois.

STATEMENT OF RAYMOND F. DuBOIS, JR., DEPUTY UNDER SECRETARY OF
DEFENSE FOR INSTALLATIONS AND ENVIRONMENT

Mr. DuBois. Thank you, Mr. Chairman, Senator Akaka, Senator
Inhofe. This is my third time before this subcommittee, and I
am proud to appear this time with the gentlemen on my left and
right, as we refer to them, the installation warriors of the
Pentagon. It is a fine team and one that I think over the past
several years has proven its mettle in these particular
circumstances.
Now, at the beginning I want to express on behalf of
Secretary Rumsfeld his and our appreciation for particularly
what this subcommittee has done in my 3 years in office in
terms of improving our infrastructure assets as well as our
program to support environmental stewardship.
As you asked, Mr. Chairman, I have approximately 5 minutes
in opening remarks. If you will give me a minute or two more, I
can probably answer at least briefly some of the issues that
all three of you have raised with respect to BRAC.
Now, with regard to infrastructure, we believe that we have
a well-defined strategy to address the condition--and let us
face facts. The condition of our infrastructure, to include
military family housing was in a deteriorated position when we
came into office several years ago. Now, why was the health of
our facilities suffering? It was due, quite frankly, to
competing priorities, similar competing priorities every year.
Certainly this year is no different.
But there was another issue, a management issue, it seems
to me. We did not have a very good idea as to how to accurately
determine what the funding ought to be for sustainment and
recapitalization or, as we call it, sustainment, restoration,
and modernization, and how to accurately measure the results of
funding that went into those areas.
Now, our investment strategy begins with full facilities
sustainment. I know that you, like us here at this witness
table, have always been concerned that, no matter what level of
sustainment we ask for, the President asks for in his budget
request, in this case 95 percent across the board for all four
Services, there has always been a certain amount of migration
away and out of that budget. That is of concern to us, as it is
to you.
Nonetheless, this year the Department is requesting $6.5
billion for sustainment, which is to yield that 95 percent
goal. Now, by 2008 we hope that it is the 100 percent goal. But
full sustainment does not prevent deterioration or the
obsolescence of our facilities over the life of those
buildings. Managing sustainment costs is no doubt less
expensive than repairing or replacing unusable facilities, that
oft-referred to so-called strategy: Do not worry--we will
always replace it with new construction. I do not think that is
a valid way to approach our facilities and our infrastructure.
We need to recapitalize our facilities to coincide, yes,
with the needs of the Services, with the immediate mission-
critical needs of the Services, and the quality of our
infrastructure, as we all know, directly affects recruitment
and retention and training and readiness. We are requesting
$4.4 billion, the Department as a whole, for recapitalization,
and this is our second pillar of our investment strategy.
The third pillar, one that President Bush and Secretary
Rumsfeld identified within weeks of this administration taking
office, is military family housing. To that end, we have
established a four-pronged approach: One--and I think that
Senator Akaka made specific reference to this--increase the
basic allowance for housing; two, eliminate out of pocket
expense for off-base housing; three, increase housing
privatization projects; and four, maintain the appropriate
level of military construction funding for housing.
Now, we believe and I think you will find no one who will
criticize how we have used privatization to advance this goal,
that is to say obtain maximum benefit from the amount of
housing--excuse me--obtain maximum benefit from our housing
investment, the housing investment that you authorized and
appropriated for us.
Now, our policy requires that the privatization projects,
each and every one of them, yield a minimum, a minimum of three
times the amount of housing which would be traditionally funded
by military construction appropriations. We believe our housing
privatization efforts have now achieved unqualified success.
Installation commanders, service members, all say and welcome
privatization efforts to revitalize their family housing.
We are continuing to accelerate those efforts and we
project by the end of fiscal year 2005 to have awarded over
136,000 privatized units.
Now, let me add one thing here that I think is important
and where we need your help. The housing privatization
successes, that program's success over the last 3 years, has
used almost 70 percent, $600 million, of the $850 million
budget authority originally provided by Congress for housing
privatization. Because of the success, we project by the end of
this calendar year the rest of that money, the remaining 30
percent, will be used up.
We have submitted to Congress a legislative proposal to
increase our authority by an additional $1 billion. This will
allow us to complete contracting to eliminate all inadequate
family housing or nearly all by the end of fiscal year 2007,
and I ask for your support in that regard. I have testified in
front of the authorizers and the appropriators in the House as
well as the appropriators in the Senate, and from those
hearings I gather that you all are of one mind in helping us.
Range sustainment we have talked a little bit about. You
have talked a little bit about that this morning, or this
afternoon, excuse me. The realistic live-fire training is
absolutely crucial, as anyone who has served in uniform would
attest. But it requires substantial natural resources. It
requires air, land, and water where military forces can train
as they would fight. Obviously, replicating the challenges of
combat, the stress, the temperatures, the terrain, the
discomfort, those physical and psychological conditions of
actual combat, is imperative to readiness.
We have used the term ``encroachment.'' Encroachment has,
quite frankly, many meanings. It is environmental, it is urban
and suburban sprawl, it is air space restrictions, it is
frequency spectrum competition. It is a number of things that
we have to deal with, that we have struggled to deal with, and
with your help we have amended, for the first time in history,
for specific military readiness reasons, three environmental
statutes.
Now, if access becomes restricted due to encroachment,
obviously training opportunities become increasingly limited.
The Department, as you indicated, very much appreciates the
action of Congress over the last 2 years in adopting some key
provisions. These provisions, as we know, are key enablers to
range sustainability. Indeed, we have in the National Defense
Authorization Act for Fiscal Year 2003 a provision, section
2811, that allows the Services to take a proactive role in
developing partnerships with local land trusts, with local
chapters of the Nature Conservancy, with local conservation
organizations, and working with the States and local political
jurisdictions, to promote sound land use.
We have asked this year, in keeping with that authority
that you gave us last year, for a modest amount of money in
this regard, $20 million. It is a lot of money in some
respects, but in this regard, we believe it is a modest amount
to target those new authorities, to assist local communities
and States, and to develop partnerships with us to execute
compatible land use partnerships around our installations.
Environmental management. We are quite proud of how we have
gone about our environmental stewardship. The Department
currently manages 30 million acres of land. Now, when I was
first given that statistic, I said we must be the largest.
Well, clearly we are one of the smallest Federal managers of
land per se, but we are in point of fact the largest manager of
facilities.
Now, the Integrated Natural Resource Management Plans
(INRMPs) as required by the Sykes Act, we have in place at 95
percent of our installations, and in fiscal year 2005 our
environmental budget calls for over $3.8 billion in support of
our environmental programs.
Finally, Mr. Chairman, if you would let me make a few
remarks on Base Realignment and Closure (BRAC). BRAC is a means
by which the Department can rationalize its infrastructure, as
you have stated so cogently, to its force structure. It
enhances joint capabilities, and it will convert waste to
warfighting.
The question that Senator Inhofe has raised, and an
important one, is why do we need to do it now? Why is now the
important time to do it? Would a delay be more helpful? Now, we
believe, the Secretary believes, in the report that he
submitted to Congress recently, that any delay, any amount of
time, would be detrimental to the transformation of the Armed
Forces to meet the pressing challenges of the 21st century. It
would extend in our view, in the Secretary's view, in the
Chairman of the Joint Chiefs of Staff view, because he also
signed a document in that report, it would extend the
unnecessary expenditure of scarce resources on maintaining
excess infrastructure.
Any delay of BRAC, we believe, would postpone the estimated
annual recurring savings, notwithstanding Senator Inhofe's
correct statement, one must invest in order to achieve savings
up front. But we estimate, and GAO and the Congressional Budget
Office has stated in writing, that our savings have been
sustained and are real. But we believe that if there were a 20-
percent reduction in our plant replacement value, that would
equate to a $16 billion, i.e., 2 years times $8 billion, in
lost savings were we to delay the BRAC by 2 years.
I think it is also important to recognize that BRAC is not,
and never was meant to be, strictly a cost savings exercise. In
point of fact, in this case, and this is where it connects to
the international issues that you have spoken to quite
importantly, it will upset, in the Secretary's view and the
Chairman of the Joint Chiefs of Staff view, the ongoing review
of the overseas infrastructure, because BRAC is necessary to
correctly select the bases in the United States which will
receive that overseas force structure which returns.
We must do the overseas piece first, and in the next 60
days--and I have testified to this before three other
committees in the last several weeks. By the end of May, the
Secretary intends to close on those decisions, as I have stated
them, the major building blocks of what force structure will
return to the United States, in order to keep his promise to
you that the domestic BRAC process be informed by the overseas
reduction in footprint and by the overseas return of force
structure.
Now, I said that the Chairman of the Joint Chiefs in his
message accompanying that BRAC report supports this need for
additional closures and realignments at this time. In fact, if
I may quote: ``The Joint Chiefs of Staff unanimously agree that
additional base realignments and closures are necessary if the
Department of Defense is to transform the Armed Forces to meet
the threats to our national security and execute our National
Strategy.''
One last statement. You may remember at that period post-
September 11, that dreadful period in October, November, and
December 2001, eight former Secretaries of Defense for the
first time in history--the only two former Secretaries of
Defense that did not sign it were the current one, who is also
a former one, Donald Rumsfeld, and a former one who also
happens to be the Vice President of the United States. They
signed a letter that said, in no small measure because of the
events of September 11, it was critical to proceed with the
BRAC that you finally authorized for 2005.
Thank you very much, Mr. Chairman. I appreciate this
opportunity once again to appear before you.
[The prepared statement of Mr. DuBois follows:]

Prepared Statement by Raymond F. DuBois

Mr. Chairman and distinguished members of this subcommittee, I
appreciate the opportunity to discuss the President's budget request
for fiscal year 2005 and the plan of the Department of Defense for
improving its infrastructure and facilities. The Department is
continuing with its efforts to transform the force structure to meet
new security challenges and the way we do business. In Installations
and Environment, this translates into a renewed emphasis on taking care
of our people, providing facilities to support the warfighter by
eliminating facilities we no longer need and improving those that we
do, and modernizing our business practices--all while protecting the
environment and those assets for which we have stewardship
responsibility.
At the outset, I want to express the Department's appreciation for
the strong support of this subcommittee for our initiatives. With
regard to infrastructure, the Department has a defined strategy to
address the condition of our installations and facilities. These issues
are an integral component of readiness. Installations are the
``platforms'' from which our forces successfully deploy to execute
their diverse missions. Over many years, our facilities declined due to
competing priorities and poor understanding of funding requirements,
but we are significantly improving our military infrastructure through
focused attention to best practices drawn from standard business
models. Continuing to improve our facilities and military readiness is
a priority of the Secretary of Defense.
The Department currently manages nearly 600,000 buildings and
structures with a plant replacement value of $630 billion, and over
46,000 square miles of real estate. We have developed models and
metrics to predict funding needs and have established goals and
performance measurements that place the management of Defense
infrastructure on a more data driven business basis. We accelerated our
goal to eliminate nearly all inadequate housing from fiscal year 2010
to 2007. By the end of fiscal year 2005, we will reduce the number of
inadequate housing units by 66 percent (61,000) from our fiscal year
2001 level of 180,000 inadequates. The Department's facilities
sustainment budget funds annual maintenance, predictable repairs and
normal component replacements. We have increased funding for facilities
sustainment consistently since fiscal year 2002, sustaining facilities
at an average of 89 percent, and this year's budget request raises that
rate to 95 percent for each of the military services, TRICARE
Management Activity and the Department of Defense Education Activity.
Restoration and modernization--i.e. recapitalization--funds
unpredictable repairs, improvements and total facility replacements. We
have continued to improve our management of the recapitalization of the
inventory. The budget request improves the recapitalization rate to 107
years and we anticipate achieving our 67-year recapitalization goal in
fiscal year 2008.

INFRASTRUCTURE INVESTMENT STRATEGY

The Department's recent successes were made possible through
effective management and prudent budgeting. Our investment strategy
links the asset management plan to actual funding.
The traditional view of the Military Construction and Family
Housing appropriation funding requests for fiscal years 2004 and 2005
shows a slight increase in this year's request. The Military
Construction and Family Housing top-line is but one indicator of the
health of our program. However, it does not represent a comprehensive
approach to our management practices for the infrastructure as a whole.

COMPARISON OF MILITARY CONSTRUCTION AND FAMILY HOUSING REQUESTS
[President's Budget in Millions of Dollars--Budget Authority]
------------------------------------------------------------------------
Fiscal Year Request
-----------------------
2004 2005
------------------------------------------------------------------------
Military Construction........................... 4,574 4,877
NATO Security Investment Program................ 169 166
Base Realignment and Closure.................... 370 246
Chemical Demilitarization....................... 0 \1\ 82
Family Housing Construction/Improvements........ 1,251 1,625
Family Housing Operations and Maintenance....... 2,780 2,547
Homeowners Assistance........................... 0 0
Family Housing Improvement Fund................. 0.3 0.3
-----------------------
Total......................................... 9,144 9,460
------------------------------------------------------------------------
Note: Fiscal year 2004 request column represents the fiscal year 2004
Amended Budget Submission
\1\ Chem-Demil included in Military Construction totals for fiscal year
2004. For fiscal year 2005 Chem-Demil has a separate Treasury code.

Facilities Support Investment and Operating Expenses
Managing our facilities assets is an integral part of asset
management. Facilities are the ``platforms'' from which our forces
deploy and execute their missions. The quality of our infrastructure
directly affects training and readiness. In addition, from a purely
financial perspective, it is more cost effective in the long term to
fully fund the general upkeep of facilities than to allow them to
deteriorate and replace them when they are unusable.

SUSTAINMENT AND RECAPITALIZATION REQUEST
[President's Budget in Millions of Dollars]
------------------------------------------------------------------------
Fiscal Year Request
-----------------------
2004 2005
------------------------------------------------------------------------
Sustainment (O&M-like \1\)...................... 6,382 6,531
Restoration and Modernization (O&M-like)........ 1,012 1,243
Restoration and Modernization (MilCon).......... 2,350 3,161
-----------------------
Total SRM..................................... 9,744 10,935
------------------------------------------------------------------------
\1\ Includes O&M as well as related military personnel, host nation, and
working capital funds.

Facilities sustainment, using operations and maintenance-like \2\
appropriations, fund the maintenance and repair activities necessary to
keep an inventory in good working order. It includes regularly
scheduled maintenance and major repairs or replacement of facility
components that are expected to occur periodically throughout the life
cycle of facilities. Sustainment prevents deterioration and preserves
performance over the life of a facility.
---------------------------------------------------------------------------
\2\ Includes O&M as well as related military personnel, host
nation, and working capital funds.
---------------------------------------------------------------------------
To forecast funding requirements for sustainment, we developed the
Facilities Sustainment Model (FSM). FSM uses standard benchmarks drawn
from the private and public sectors for sustainment costs by facility
type and has been used to develop the Service budgets since fiscal year
2002 and for several Defense Agencies beginning in fiscal year 2004.

Full funding of sustainment is the foundation of our long-term
facilities strategy, and we have made significant progress in achieving
this goal. The fiscal year 2004 budget request funded sustainment at an
average of 94 percent of the FSM benchmarks across the Services,
TRICARE Management Activity, and the Department of Defense Education
Activity. The fiscal year 2005 budget request of $6.5 billion improved
this by standardizing sustainment funding at 95 percent for each of the
components, and we plan to achieve full sustainment in the near term.
Restoration and modernization, together called recapitalization,
provides resources for improving facilities and is funded with either
operations and maintenance or military construction appropriations.
Restoration includes repair and replacement work to restore facilities
damaged by inadequate sustainment, excessive age, natural disaster,
fire, accident, or other causes. Modernization includes alteration of
facilities solely to implement new or higher standards, to accommodate
new functions, or to replace building components that typically last
more than 50 years.
Recapitalization is the second step in our strategy. Similar
private sector industries replace their facilities every 50 years, on
average. With the types of facilities in the Defense Department,
engineering experts estimate that our facilities should have a
replacement cycle of about 67 years on average.

As with sustainment, we have improved the corporate
recapitalization rate for the third straight year. The budget request
includes funding of $4.4 billion for fiscal year 2005. The request
improves the recapitalization rate from 136 years last year to 107.
When we began our focused attention on this matter, the Department's
recapitalization rate stood at 192 years. Our out-year budget plan
would realize the target rate of 67 years in fiscal year 2008.
Even with full sustainment and a 67-year recapitalization rate, it
will take time to restore the readiness of our facilities from C-3 and
C-4 status to C-2. Sustainment stops deterioration and a 67-year
recapitalization rate stops obsolescence, but more is needed to restore
readiness in the near term. Thus, the third step in our plan is to
accelerate the recapitalization rate to restore existing facilities to
at least C-2 readiness, on average, by the end of fiscal year 2010.

Improving Quality of Life
One of our principal priorities is to support military personnel
and their families and improve their quality of life. Our Service
members deserve the best possible living and working conditions. At the
outset of this administration, the President and Secretary Rumsfeld
identified military housing and privatization of that housing as a
central priority for the Department. Sustaining the quality of life of
our people is crucial to recruitment, retention, readiness and morale.
To that end, the Department is committed to providing quality housing
using our ongoing approach--increasing the basic allowance for housing
and eliminating the out-of-pocket expense for off-base housing (where
over 60 percent of our service members live); increasing the number of,
and accelerating the pace of, housing privatization projects; and
maintaining military construction funding for family housing where
necessary.
The fiscal year 2005 budget keeps the Department on track to
eliminate nearly all its inadequate military family housing units by
fiscal year 2007, with complete elimination of some inadequate housing
overseas in fiscal year 2009. The budget continues the Department's
extensive use of privatization to advance this goal and to obtain
maximum benefit from its housing budget.
As I noted earlier, in January 2001, the Department had about
180,000 inadequate family housing units (out of a total of 300,000
housing units worldwide). At the start of fiscal year 2004, through
traditional construction and improvement projects, housing
privatization and demolition, we have reduced that number to roughly
120,000. The President's fiscal year 2005 budget includes funding to
allow us to reduce that number further--by the end of fiscal year 2005,
we will have reduced the number of inadequate housing units to roughly
61,000 inadequate.
The fiscal year 2005 budget request will eliminate the out-of-
pocket housing costs for the average military member through changes in
the basic allowance for housing, a key component of the Department's
approach to quality housing. The fiscal year 2005 budget request
includes necessary funding to ensure that the typical Service member
living in the private sector, where approximately two-thirds of our
members live, will have zero out-of-pocket housing expenses.
Eliminating out-of-pocket expenses is good for military personnel, but
also serves to strengthen the financial profile of the housing
privatization program by providing members the ability to pay
appropriate market rents.
Privatizing military housing is a priority for the President and
the Secretary and is an integral part of the administration's
management plan. The Department has skillfully used privatization to
advance this goal and obtain maximum benefit from its housing
investment. Our housing privatization program is crucial to providing a
decent quality of life for our service members.
We believe our housing privatization efforts have now achieved
identified success, with installation commanders and service members
welcoming privatization efforts to revitalize their family housing. As
of March 22, 2004, the Department has closed out awards on 29 projects,
which include 58,503 military family housing units (a 50-percent
increase over our privatized units as of January 2003). We project by
the end of fiscal year 2005 DOD will privatize more than 136,000 family
housing units
We project 20 more privatization awards in fiscal year 2004, and
over 25 in 2005--bringing our cumulative total end of year fiscal year
2005 to about 136,000 units privatized. We project by the end of fiscal
year 2007 that we will privatize over 160,000 units or more than 70
percent of our domestic family housing.
During fiscal year 2005, we expect several other bases to have
their renovations and construction completed or close to completion,
including those at Fort Carson, Colorado. Our policy requires that
privatization projects yield at least three times the amount of housing
as traditional military construction for the same amount of
appropriated dollars. Recent projects have demonstrated that leveraging
is normally much higher. The 29 projects awarded thus far reflect an
average leverage ratio of over 10 to 1. Tapping this demonstrated
leveraging potential through our 29 awarded projects to date has
permitted the Department, in partnership with the private sector, to
provide housing for about $550 million of military construction funding
that would otherwise have required over $6.7 billion for those awarded
projects if the traditional military construction approach was
utilized.
The Department has achieved privatization successes by simplifying
the process, accelerating project execution, and institutionalizing
best practices in the Services deals with the private sector. Many of
our projects require use of appropriated funds when subsidies are
provided to the projects, especially as investments, loans and limited
loan guarantees. The amount of such appropriated funds was limited in
section 2883 of title 10, United States Code, to $850 million for
military accompanied (family) housing and $150 million for military
unaccompanied housing. Due to the rapid acceleration of the program
over the last 3 years, we are now in position where almost 70 percent
(about $600 million) of the $850 million cap has been used. We project
the remaining 30 percent of the cap will be used up by the beginning of
fiscal year 2005; thus impeding the full implementation of the
President's Management Agenda initiative to eliminate all inadequate
military family housing by 2007. The administration has requested that
our budget authority for privatized family housing be increased by $1
billion so that we can continue to improve housing options for our
military families. We ask your support for this proposal.
Military construction is another tool for resolving inadequate
military housing. In fiscal year 2005, we are requesting $4.1 billion
in new budget authority for family housing construction and operations
and maintenance. This funding will enable us to continue operating and
maintaining the Department's family housing as well as meeting the goal
to eliminate inadequate housing by 2007--3 years earlier than
previously planned.
We recognize that a key element in maintaining the support of
Congress and of the private sector is the ability to define adequately
the housing requirement. The Department's longstanding policy is to
rely primarily on the private sector for its housing needs. Only when
the private market demonstrates that it cannot provide sufficient
levels or quality of housing should we consider the construction,
operation, and maintenance of Government-owned housing.
An improved housing requirements determination process, following
the Deputy Secretary's January 2003 memorandum, combined with increased
privatization, is allowing us to focus resources on maintaining the
housing for which we have a verified need rather than wasting those
resources duplicating private sector capabilities. The improved housing
requirement process is being used by the Department to better determine
the number of family housing units needed on installations to
accommodate military families. It provides a solid basis for investing
in housing for which there is a verified need--whether through direct
investment with appropriated funds or through a privatization project.
By aligning the housing requirements determination process more
closely with the analysis utilized to determine basic allowance for
housing rates, the Department is better positioned to make sound
investment decisions necessary to meet the Secretary's goal to
eliminate nearly all inadequate housing by 2007. Further, as more
military families opt to reside in the private sector as housing out-
of-pocket expenses decrease for the average member, the Services on-
base housing requirement should generally also decline. This migration
should permit the Services to better apply scarce resources to those
housing units they truly need to retain.

Range Sustainment
Another key initiative is our effort to ensure access to needed
test and training ranges and installations to support both current and
future requirements. This involves mitigating the effects of
encroachment around these facilities, and posturing our test and
training infrastructure for sustainable operations.
Training provides our soldiers, sailors, airmen, and marines the
combat skills they need to win and return safely to their families.
Experience has taught us that realistic training saves lives. Training,
however, requires substantial resources; air, land, and water where
military forces can train as they would fight--replicating the
challenges, stress, discomfort, physical and psychological conditions
of actual combat.
Encroachment at installations, training ranges and test sites,
however, interferes with the ability of our military to train and
execute their missions. Encroachment comes from many sources--
environmental, urban and suburban sprawl, airspace restrictions, and
the frequency spectrum. Endangered species and their critical habitats
in or near gunnery or bombing ranges also can reduce test and training
access. As access is restricted due to encroachment, training
opportunities for our men and women in uniform become increasingly
limited in terms of time, scope, or realism with cumulative impact on
military readiness.
The Department deeply appreciates the action of Congress in
adopting key provisions in both the National Defense Authorization Acts
for Fiscal Years 2003 and 2004 that were part of the administration's
Readiness and Range Preservation Initiative (RRPI). These provisions
are key enablers of range sustainability. For example, one of the most
useful provisions for countering physical encroachment due to
incompatible development is section 2811 of the 2003 Act. This
provision allows the Services to take a proactive role in developing
programs to protect installations and ranges from urban sprawl by
working with States and non-governmental organizations to promote sound
land use.
To assist the Services in implementing this authority and forming
compatible land use partnerships at the State and local level, the
President's fiscal year 2005 budget request includes a new initiative
of $20 million targeted to our new authority--to assist in developing
new policies, partnerships, and tools to assist communities and other
interested stakeholders in executing compatible land use partnerships
around our test and training ranges and installations. The new request
is intended to build upon ongoing efforts--innovative win/win
partnerships with our neighbors to enhance conservation and compatible
land use on a local and regional basis
Last year, the National Defense Authorization Act for Fiscal Year
2004 included important clarification of the Marine Mammal Protection
Act's (MMPA) definition of harassment. This action allows the Navy to
continue to test and train with active sonar, by clarifying regulatory
criteria that were previously based on imprecise statutory language in
the act's definition of harassment. Congress also added a national
security exemption to the MMPA for military activity in time of
national emergency, an exemption provided in other major environmental
legislation that was not present in the original and reauthorized
versions of the act. The National Defense Authorization Act for Fiscal
Year 2004 also authorized the use of Integrated Natural Resource
Management Plans (INRMPs) in lieu of critical habitat designation, if
approved by the Secretary of the Interior, thereby allowing ranges and
installations to effectively manage their natural resources while
supporting military readiness.
Another significant environmental accomplishment is in the area of
natural resources, where we are working to ensure continued access to
our critical test and training ranges, supporting our readiness
mission. The Department currently manages more than 30 million acres of
lands which are important to military training and readiness. We have
completed INRMPs, as required by the Sikes Act, at 95 percent of our
installations. INRMPs provide a management framework for our resources
for no net loss of test and training opportunities. Legislation in the
National Defense Authorization Act for Fiscal Year 2004 authorized the
use of INRMPs to substitute for critical habitat designation under the
Endangered Species Act, if those plans meet certain preparation and
implementation requirements and the Secretary of the Interior
determines that the DOD INRMP provides a benefit to the relevant
species. DOD is preparing an INRMP strategic plan to ensure that its
installations coordinate with all interested stakeholders, complete in
a timely manner the next round of updates to our existing INRMPs due in
2006, and fund all required projects.
Clearly, to protect our military we must also protect our all
important test and training ranges. Substantial urban growth and other
``encroachment'' around previously isolated ranges have strained our
ability to conduct necessary testing and training essential to
maintaining readiness. In response to this challenge, we are working to
expand efforts to sustain our training mission and protect the valuable
natural resources entrusted to our care. Both are required as we
endeavor to ensure that our men and women in uniform get the best
training available. Our troops deserve the best.

Improving Environmental Management
The Department continues to be a leader in every aspect of
environmental management. We are proud of our environmental program at
our military installations and are committed to pursuing a
comprehensive environmental program.

ENVIRONMENTAL PROGRAM--SUMMARY OF REQUEST \3\
[President's Budget in Millions of Dollars--Budget Authority]
------------------------------------------------------------------------
Fiscal Year Request
-----------------------
2004 2005
------------------------------------------------------------------------
Environmental Restoration....................... 1,273 1,305
BRAC Environmental \4\.......................... 412 322
Compliance...................................... 1,603 1,665
Pollution Prevention............................ 173 168
Conservation.................................... 153 169
Technology...................................... 190 186
International................................... 3 4
-----------------------
Total......................................... 3,807 3,819
------------------------------------------------------------------------
\3\ Includes operations and maintenance, procurement, RDT&E, and
military construction funding.
\4\ Funding levels reflect total BRAC environmental requirement planned
for execution. Funding levels are higher than the PB request (see page
4 chart) as a portion will be financed with BRAC land sale revenues.

In fiscal year 2005, the budget request includes $3.8 billion for
environmental programs. This includes $1.3 billion for cleanup, $0.3
billion for BRAC environmental, $1.6 billion for compliance; about $0.1
billion for pollution prevention, and about $0.1 billion for
conservation.
By the end of fiscal year 2003, we reduced the number of new
Federal and State Notices of Violations (NoVs) by 80 percent from the
1992 baseline. The Department's success is due to an aggressive self
audit program, which includes root cause analysis and corrective action
plans. While the number of new NoVs decreased, the number of regulatory
inspections increased by 12 percent in fiscal year 2003. Even as
regulators are increasing their oversight, they are finding more
installations in full compliance. In fiscal year 1994, every 100
inspections resulted in 37 new enforcement violations. In fiscal year
2003, every 100 inspections resulted in only 8 new enforcement
violations.
In calendar year 2002, we provided drinking water for over 2
million people worldwide and less than 5 percent of the population
received notices that the water exceeded a drinking water standard at
some point during the year. To further protect people, assets, and
mission, DOD is conducting vulnerability assessments and developing
emergency response plans for all systems serving 25 consumers or more;
far beyond the requirement in the Safe Drinking Water Act to assess
systems serving a population greater than 3,300 persons.
We reduced the amount of hazardous waste we dispose of by over 68
percent since 1992, reducing the cost to manage these wastes. The
Department diverted over 41 percent of all the solid waste generated
from landfills to recycling; thereby avoiding over $138 million in
landfill costs. These pollution prevention techniques continue to save
the Department needed funds as well as reduce pollution. We increased
the number of alternative fueled vehicles that we acquire to 77 percent
of all non-tactical vehicles acquired, exceeding the requirement in the
Energy Policy Act of 75 percent.
The Department's commitment to its restoration program remains
strong as we reduce risk and restore property for productive use by
future generations. We are exploring ways to improve and accelerate
cleanup with our regulatory and community partners. Achieving site
closure and ensuring long-term remedies are challenges we continue to
face. Conducting environmental restoration activities at each site in
the program requires accurate planning, funding, and execution of plan.
The Department must plan its activities years in advance to ensure
that adequate funding is available and used efficiently. As an example,
instead of waiting for Federal and State regulation to determine
cleanup standards before beginning planning for perchlorate
restoration, in September 2003 the Department required the military
components to assess the extent of perchlorate occurrence at active and
closed installations, and Formerly Used Defense Sites (FUDS). We will
use the data collected to determine priorities and funding requirements
for our cleanup responsibilities. As soon as perchlorate standards are
determined, the Department will be ready to request the appropriate
funding and begin execution. In addition, the Department has invested
$27 million to research potential health effects, environmental
impacts, and treatment processes for perchlorate. The remediation
technologies we are testing in several States continue to increase the
effectiveness of treatment. We are putting ourselves in the best
possible position to respond to any new requirement established by
regulatory agencies.
The Defense Environmental Restoration Program goals assist the
components in planning their programs and achieving funding for
activities. We achieved our goal to reduce 50 percent of high risk
sites at active installations by the end of fiscal year 2002 and are on
track to achieve 100 percent by the end of fiscal year 2007. At the end
of fiscal year 2003, 83 percent of BRAC sites requiring hazardous waste
remediation have a cleanup remedy constructed and in place, and 78
percent have had all necessary cleanup actions completed in accordance
with Comprehensive Environmental Response, Compensation, and Liability
Act standards.
We also are working to mitigate unexploded ordnance (UXO) on our
military ranges. Our operational ranges are designed to train and make
combat-ready our Nation's warfighters and prepare them for combat. UXO
on ranges is a result of our military preparedness training activities.
However, we are actively developing ways to minimize the amount of UXO
on our operational test and training ranges. The Department is
developing policies on the periodic clearance of UXO for personnel
safety and to ensure chemical constituents do not contaminate
groundwater.
To address UXO problems at locations other than operational ranges,
FUDS, some BRAC installations, and closed ranges on active
installations--we have the Military Munitions Response Program (MMRP).
We are currently developing goals and metrics for the program to track
our progress to completion and finishing the prioritization protocol
that will allow us to sequence sites by risk. We have an inventory of
our munitions response sites, which we shared with the States and EPA,
and have made available to the public. This inventory is being updated
as we reconcile our list with the States. Even though the UXO cleanup
program is in the early stages of development, considerable progress
has been made in cleaning up MMRP sites at our BRAC installations and
FUDS. As of the end of fiscal year 2003, DOD has fulfilled its cleanup
obligations at over 120 of the approximately 195 identified MMRP sites
at BRAC installations, and has cleanup actions underway at 27 sites.
These sites were identified prior to fiscal year 2001 as having UXO
contamination and the Department has been making steady progress to
eliminate their hazards--almost 65 percent of the BRAC MMRP inventory
has been addressed. A similar situation can be found at FUDS, where 45
percent of the MMRP sites identified have had all cleanup actions
completed. Over 790 of the 1,753 FUDS with currently identified UXO
contamination have been addressed, and another 36 are undergoing
cleanup actions.
In addition, we are developing new technologies and procedures
through the Environmental Security Technology Certification Program and
the Strategic Environmental Research and Development Program. Over 60
percent of the investments in these programs focus on projects to
sustain ranges and range operations. These, along with the Army and
Navy's Environmental Quality Technology Programs, have helped us make
tremendous strides for realizing our goal to reduce current and future
environmental liability.
Across the Department, we are actively implementing environmental
management systems based on the ``plan-do-check-act'' framework of the
international standard for environmental management systems (ISO
14000). Our objective is to transform environmental management in the
Department of Defense from an activity external to the mission to a
systematic process that is fully integrated with mission planning and
execution. This transformation is essential for the continued success
of our operation at home and abroad. Our new management systems target
reduction in our day-to-day compliance costs and long-term
environmental liabilities by increasing environmental awareness and
mobilizing all Defense organizations and employees to reduce
environmental impacts through improved control of day-to-day mission
activities. The military departments and Defense Logistics Agency
reported plans to implement environmental management systems at roughly
625 installations. Over 50 percent of these installations have
environmental management system policies in place--the first step
toward full scale implementation. To date, 33 installations have fully
implemented environmental management systems.

Utilities Privatization and Energy Management
The Department seeks to reduce its energy consumption and the
associated costs, while improving utility system reliability and
safety. To accomplish this, the Department of Defense is developing a
comprehensive energy strategy that will continue to optimize utility
management by conserving energy and water usage, improve energy
flexibility by taking advantage of restructured energy commodity
markets when opportunities present themselves and modernize our
infrastructure by privatizing our deteriorated and outdated utilities
infrastructure where economically feasible.
With approximately 2.2 billion square feet of facilities, the
Department is the single largest energy user in the Nation. Conserving
energy in today's high-priced market will save the Department money--
money that can be better invested in readiness, facilities sustainment,
and quality of life. Our efforts to conserve energy are paying off; in
fiscal year 2003 military installations reduced consumption by 1
percent resulting in a 2.7-percent decrease in the cost of energy
commodities from fiscal year 2002. With a 26.1-percent reduction in
fiscal year 2003 from a 1985 baseline, the Department has, thus far,
maintained a positive track to achieve the 2005 and 2010 facility
energy reduction goals stipulated by Executive Order 13123.
The comprehensive energy strategy will support the use of meters to
manage energy usage at locations where the monitoring justifies the
cost of installing, maintaining and reading the meter. Metering in
itself does not save energy, however use of meters can be beneficial to
determine accurate billing, perform diagnostic maintenance, and enhance
energy management by establishing baselines, developing demand
profiles, ensuring accurate measurement for reporting, and providing
feedback to users.
The Department has a balanced program for energy conservation--
installing energy savings measures using appropriated funding and
private-sector investment--combined with using the principles of
sustainable design to reduce the resources used in our new
construction. Energy conservation projects make business sense,
historically obtaining about $4 in life-cycle savings for every dollar
invested. The fiscal year 2005 budget contains $60 million for the
Energy Conservation Investment Program (ECIP) to implement energy
saving measures in our existing facilities. This is a 20-percent
increase from the fiscal year 2004 congressionally appropriated amount
of $50 million, partly because of the performance of the program to
date and because of the focused management effort for continued
success. The Department will also continue to pursue renewable energy
technologies such as fuel cells, geo-thermal, wind, solar, and purchase
electricity from these renewable sources when it is life-cycle cost-
effective. In fiscal year 2003 military installations used 3.2 trillion
British Thermal Units of renewable energy, and project an increase in
fiscal year 2004. The pursuit of renewable energy technologies is
critical to the Department's and Nation's efforts in achieving energy
flexibility.
The Department has reaffirmed its preference to modernize military
utility systems through privatization. Following on revised guidance
signed by the Deputy Secretary of October 2002, the DOD Utilities
Privatization Program has made solid progress. The Services have
greatly simplified and standardized the solicitation process for
obtaining industry proposals. The request for proposal templates have
been clarified to improve industry's ability to obtain private sector
financing and manage risks. Of 2,602 utility systems serving the DOD,
435 systems have been privatized, and 739 were already owned by other
entities. Over 900 systems are currently under solicitation as each
Service and the Defense Logistic Agency continue aggressive efforts to
reach privatization decisions on all systems by September 2005.

BASE REALIGNMENT AND CLOSURE

In accordance with the authorizing legislation, the Secretary
certified on March 23, 2004, that the need exists for the closure or
realignment of additional military installations and that the
additional round of closures and realignments authorized for 2005 will
result in annual net savings for each of the military departments,
beginning not later than fiscal year 2011. This certification is
contained in the report that was provided to Congress last week.
The Secretary's certification of the need for BRAC is a direct
result of the changed world in which we live. The conclusion that an
additional round of BRAC is needed is shared not just by the
Department's civilian leadership but also by the Chairman and Joint
Chiefs. Changes in the threats we face, how we prepare for those
threats, and changes in technology require that we reconfigure our
force structure to most effectively and efficiently support our forces.
Our force structure and the way we employ it is already transforming
and this will continue. BRAC has proven to be the most effective and
comprehensive tool to position our base structure to accommodate and
facilitate this transformation. Therefore, an additional base
realignment and closure round is essential to the Department's efforts
to transform the Armed Forces to meet the threats to our national
security and to execute our national strategy.
The Secretary's certification that there is a need for BRAC also
reflects the fact that the Department retains excess infrastructure
capacity, even after the previous four BRAC rounds. Excess capacity
diverts scarce resources from recapitalization. The report we have
provided includes a ``discussion of the categories of excess
infrastructure and infrastructure capacity'' as required by the
legislation. Elimination of excess capacity is an important goal of
BRAC because it is important to the Department's stewardship of the
taxpayer's dollar and to its application of taxpayer resources to
achieve their maximum effect. I must note, however, that the Department
is focused on the elimination only of truly excess capacity--that which
is not important to preserving military value. The Secretary has not
established any quantitative capacity reduction targets for BRAC and
the Department will not eliminate assets, even if only used marginally,
wherever these assets are important to the preservation of the
capabilities the Department must retain and enhance. This was a key
consideration in the previous rounds and is even more important now.
BRAC 2005 will be a capabilities-based analysis. The Department
recognizes that the threats our Nation now faces are difficult or even
impossible to forecast through conventional analysis. That realization
compels us to review our facilities in BRAC within the context of the
capabilities they offer instead of viewing our facilities against
definitive requirements. Because it is critically important for the
Department to retain the infrastructure necessary to accommodate its
ability to ``surge,'' the Department is gauging its installations
against the range of threats faced by our Nation so that it can
differentiate among and capitalize on those that offer needed
capabilities, and reconfigure, realign or close those that do not. The
previous BRAC rounds demonstrated that DOD has, in fact, focused on the
elimination of assets that are ``reconstitutable,'' that is, available
through construction or purchase in the private sector, while retaining
difficult to reconstitute assets like land maneuver areas and airspace
for training.
The Secretary has directed that BRAC must further transformation by
rationalizing infrastructure to force structure; enhance joint
capabilities by improving joint utilization; and convert waste to war
fighting by eliminating excess capacity. I know that you share the
Department's goal that BRAC 2005 must result in a base structure
configured to most effectively and efficiently support the capabilities
necessary to meet the threats of today and tomorrow. I also know that
this subcommittee appreciates the fact that every dollar wasted on
unnecessary infrastructure is a dollar diverted from improving Defense
capabilities. That is why Congress authorized BRAC 2005--it is the only
process that uses a rigorous, objective process rooted in military
value to rationalize the Department's infrastructure.

CONCLUSION

The Department is transforming its installations and business
practices through an asset management strategy, and we are beginning to
see the results of that transformation. We are achieving the
President's goal to provide quality housing for our service members and
their families, and we have made positive progress toward our goal to
prevent deterioration and obsolescence and to restore the lost
readiness of our facilities. We also are transforming our environmental
management to become outcome oriented, focusing on results. We are
responding vigorously to existing encroachment concerns and are putting
a long-term installation and range sustainment strategy into effect.
The BRAC effort leading to the delivery of the Secretary's
recommendations to the independent Base Closure Commission in May 2005
is a key means to transform our infrastructure to be more flexible to
quickly and efficiently respond the challenges of the future. Together
with the Global Defense Posture Review, BRAC 2005 will make a profound
contribution to transforming the Department by rationalizing our
infrastructure with Defense strategy.
In short--we have achieved significant accomplishments over the
last 3 years, and we are well on our way to achieving our goals across
the Installations and Environment Community.
In closing, Mr. Chairman, I sincerely thank you for this
opportunity to highlight our successes and outline our plans for the
future. I appreciate your continued support of our installations and
environment portfolio, and I look forward to working with you as we
transform our plans into actions.

Senator Ensign. Thank you for your statement.
General Lust.

STATEMENT OF MG LARRY J. LUST, USA, ASSISTANT CHIEF OF STAFF
FOR INSTALLATION MANAGEMENT, UNITED STATES ARMY

General Lust. Mr. Chairman and distinguished members of the
subcommittee, I am pleased to appear before you today to
represent the Army and discuss our fiscal year 2005 military
construction and environmental budgets. We have submitted a
robust military construction budget for $3.7 billion that funds
our highest priorities for the active Army, the Army National
Guard, and the Army Reserve facilities, along with our Army
family housing. This request supports the Army's vision of
people, current readiness, and transformation to the future
force.
We are fighting a global war on terrorism and
simultaneously transforming to become a more relevant and ready
Army. We currently have approximately 250,000 troopers
mobilizing, demobilizing, deploying, and redeploying. More
troopers are moving through our installations today than at any
time since World War II.
The Army recently identified key focus areas to channel our
efforts to increase the relevance and readiness of our Army.
One of the focus areas, Installations as Our Flagships, defines
the Army's requirement to project power, sustain facilities,
train forces, and support families. Our installations support
an expeditionary force where soldiers live, train, mobilize,
deploy, and enable our forces to reach back for sustained
support. Soldiers and their families who live on and off
installations deserve the same quality of life that is afforded
to the society they are sworn to defend.
The Installation Management Agency (IMA) provides the Army
with a single agency and a corporate structure to help us meet
this vision. Base support dollars are sent directly from the
IMA to the garrison in order to meet the Army's most critical
base support needs. With the IMA concept, commanders and units
are better able to concentrate on their warfighting missions
and tasks.
The fiscal year 2005 military construction budget will
provide the resources and facilities necessary to continue
support of the Army's mission and will provide new barracks for
4200 soldiers, adequate housing for 14,200 Army families,
increased military construction funding for the Army National
Guard and Army Reserve over last year's request, new readiness
centers for over 3,000 Army National Guard soldiers, new
Reserve centers for over 2800 Army Reserve soldiers, a $287
million investment in our training ranges, a battalion-sized
basic combat training complex, and facilities support and
improvements for four Stryker brigades.
Our budget request also supports the Army's environmental
program, which directly affects the readiness and well being of
our soldiers and their families. Overall, the fiscal year 2005
budget provides for a lean but effective investment in the
corrective and preventive actions that eliminate past problems
and will help prevent future ones.
The Army is committed to being a good steward of the
environment and our programs fulfil the public trust in
management of Army lands and protect the natural and cultural
resources. The Army's program provides the protection of
training lands, environmental compliance, restoration of
contaminated areas, and important technology and pollution
prevention initiatives. Our long-term environmental strategy
will be accomplished through sustained funding, divestiture of
excess capacity, and improvement in management and technology.
Mr. Chairman, our fiscal year 2005 budget is a balanced
program that supports the Army's mission. It funds programs
that support our efforts to win the global war on terrorism,
provides for quality facilities and programs for our soldiers
and their families, and maintains current readiness and enables
the transformation of the Army to the future force. With your
continued support, we will achieve these objectives.
Mr. Chairman, thanks again for the opportunity to appear
before you and for you and your committee's steadfast support
to the men and women of the Army who are on point for this
Nation. Thank you.
[The prepared statement of General Lust follows:]

Prepared Statement by Maj. Gen. Larry J. Lust, USA

INTRODUCTION

Mr. Chairman and members of the subcommittee, it is a pleasure to
appear before you to discuss the Army's Military Construction and Army
Environmental Program budget request for fiscal year 2005. This request
includes initiatives of critical importance to the Army and this
committee, and we appreciate the opportunity to report on them to you.
We would like to begin by expressing our appreciation for the
tremendous support that Congress has provided to our soldiers and their
families who are serving our country around the world. We are a Nation
and an Army at war, and our soldiers would not be able to perform their
missions so well without your support. My statement is in two parts.
Part I addresses the Army Military Construction Program. Part II
addresses the Army Environmental Program.

PART I: ARMY MILITARY CONSTRUCTION
OVERVIEW

The Army has begun one of the most significant periods of
transformation in its 228-year history. We are ``An Army at War--
Relevant and Ready.'' This maxim will define how we meet the Nation's
military requirements today and into the future. As we are fighting the
global war on terrorism, we are simultaneously transforming to be a
more relevant and ready Army. We are on the road to a transformation
that will allow us to continue to dominate conventional battlefields
and provide the ability to deter and defeat adversaries who rely on
surprise, deception, and asymmetric warfare to achieve their
objectives. To accomplish our objective, our operational force will
temporarily increase by 30,000 soldiers. We currently have almost
250,000 soldiers mobilizing and demobilizing, deploying and
redeploying--more troops are coming and going on our installations than
in any era since World War II. Military Construction is an important
tool to our network of installations to meet our challenging
requirements.
As part of this transformation, the Army is fielding and equipping
six Stryker Brigade Combat Teams (SBCT) to meet combatant commanders'
requirements and to continue the Army's commitment to the global war on
terrorism. These SBCTs allow the Army to continue modernizing and
transforming the current force. The rapid development and fielding of
six SBCTs is leading the transformation of the Army--physically and
culturally.
To meet the challenges of today's missions, the Army must sustain a
force of high quality, well-trained people; acquire and maintain the
right mix of weapons and equipment; and maintain effective
infrastructure and deployment platforms to generate the capabilities
necessary to sustain a lethal force. We must ensure that a trained and
qualified force will be in place to support the Future Force of a
transformed Army. To meet that goal and ensure continued readiness, we
must take care of soldiers and families. Our installations are a key
component in this effort.

Installations as Flagships
The Army recently identified 17 Army focus areas to channel our
efforts to win the global war on terrorism and to increase the
relevance and readiness of the Army. One of the focus areas--
Installations as Flagships--enhances the ability of an Army
installation to project power and support families. Our installations
support an expeditionary force where soldiers train, mobilize, and
deploy to fight and are sustained as they reach back for support.
Soldiers and their families who live on and off the installation
deserve the same quality of life as is afforded the society they are
pledged to defend. Installations are a key component in the tenets of
the Army vision. Our worldwide installations structure is inextricably
linked to Army transformation and the successful fielding of the Future
Force.

Installation Strategies
There is much work to be done if all installations are to be
flagships with the ability to both project power and support families
to an equitable standard. We are a world-class combat ready force being
supported by substandard facilities that impair our ability to meet the
mission. To improve our facilities posture, we have specific
initiatives to focus our resources on the most important areas--
Barracks, Family Housing, Focused Facilities, Ranges, and
Transformation.
Barracks
The Army is in the 11th year of its campaign to modernize barracks
to provide 136,000 single enlisted permanent party soldiers with
quality living environments. This year's budget request includes 19
barracks projects providing new or improved housing for 4,200 soldiers.
The new complexes provide two-soldier suites, increased personal
privacy, larger rooms, walk-in closets, new furnishings, adequate
parking, landscaping, and unit administrative offices separated from
the barracks. With the approval of $700.4 million for barracks in this
request, a significant portion of our requirement will be funded. We
are making considerable progress at U.S. installations and the Army
funded two barracks projects, based upon the combatant commander's
request, for Grafenwoehr, Germany.
Family Housing
This year's budget continues our significant investment in our
soldiers and their families by supporting our goal to have funding in
place by 2007 to eliminate inadequate housing. We have included funding
in this year's budget request to privatize 11,906 houses. In addition
we will replace 1,313 houses, build 100 new houses to support Stryker
Brigade Combat Team deployment, and upgrade another 875 houses using
traditional military construction. For families living off-post, the
budget request for military personnel increases the basic allowance for
housing to eliminate out-of-pocket expenses. Once overseas basing
decisions are made, we will adjust our plans for new housing
construction overseas.
Focused Facilities
Building on the successes of our housing and barracks programs, we
are moving to improve the overall condition of Army infrastructure with
the Focused Facility Strategy. The Installation Readiness Report is
used to determine facilities quality ratings of C-1 to C-4 based on
their ability to support mission requirements.

We are a C-1 Army living and working in C-3 facilities. Our goal is
to reach an overall Army average of C-2 quality by 2010 by
concentrating on seven types of C-3 and C-4 facilities. These focus
facilities are general instruction buildings, Army National Guard
Readiness Centers, Army Reserve Centers, tactical vehicle maintenance
shops, training barracks, physical fitness centers, and chapels. We are
requesting $207 million in fiscal year 2005 to support this initiative.
Army Range and Training Land Strategy
Providing ranges and training lands that enable the Army to train
and develop its full capabilities is key to ensuring that America's
forces are relevant and ready now. The Army's Deputy Chief of Staff G-3
developed the Army Range and Training Land Strategy to support the
Department of Defense's Training Transformation, Army Transformation,
and the Army's Sustainable Range Program. It identifies priorities for
installations requiring resources to modernize ranges, mitigate
encroachment, and acquire training land. The strategy serves as the
mechanism to prioritize investments for these installations and seeks
to optimize the use of all range and land assets. The result is a long-
range plan that provides the best range infrastructure and training
lands based on mission and training requirements.
Current to Future Force
The Army is undergoing the biggest internal restructuring in the
last 50 years. As part of this transformation effort, we are fielding
and equipping six Stryker Brigade Combat Teams throughout the Army.
This transformation will drive our efforts to ensure that our
``training battlefields'' continue to meet the demands of force
structure, weapons systems, and doctrinal requirements. Providing
ranges and training lands that enable the Army to train and develop its
full capabilities is crucial to ensure that America's forces are
relevant and ready now. Our fiscal year 2005 military construction
budget requests $305 million for projects for operations and training
facilities, training ranges, maintenance facilities, logistics
facilities, utilities, and road upgrades in support of the Stryker
Brigade Combat Teams.
The former Army Strategic Mobility Program ended in fiscal year
2003 with the capability of moving five and one-third divisions in 75
days. We must improve current processes and platforms so intact units
arrive in theater in an immediately employable configuration.
The new Army Power Projection Program (AP3) is a combat multiplier
for Army transformation and a catalyst for joint and Service
transformation efforts related to force projection. AP3 is a set of
initiatives and strategic mobility enabling systems, including
infrastructure projects, that ensures we are able to meet current and
future force deployment requirements. AP3 funding began in fiscal year
2004. AP3 ensures the capability to deploy Army forces in accordance
with regional combatant commanders' operational plans.

MILITARY CONSTRUCTION

The Army's fiscal year 2005 request has increased over fiscal year
2004 and includes $3.7 billion for military construction appropriations
and associated new authorizations.

----------------------------------------------------------------------------------------------------------------
Authorization of
Military Construction Appropriation Authorization Appropriation Appropriation
Request Request Request
----------------------------------------------------------------------------------------------------------------
Military Construction Army (MCA).................... $1,535,400,000 $1,771,285,000 $1,771,285,000
Military Construction Army National Guard (MCNG).... N/A 295,657,000 295,657,000
Military Construction Army Reserve (MCAR)........... N/A 87,070,000 87,070,000
Army Family Housing (AFH)........................... 636,099,000 1,565,006,000 1,565,006,000
-----------------------------------------------------------
Total............................................. $2,171,499,000 $3,719,018,000 $3,719,018,000
----------------------------------------------------------------------------------------------------------------

MILITARY CONSTRUCTION, ARMY (MCA)

The active Army's fiscal year 2005 military construction request
for $1,771,285,000 (for appropriation and authorization of
appropriations) and $1,535,400,000 (for authorization) is for people,
current readiness, and transformation to the Future Force. These funds
are critically needed to provide new barracks, invest in training
ranges and land, recapitalize existing facilities, and support three
Active Army Stryker Brigade Combat Teams in Alaska, Hawaii, and
Louisiana. The request also includes funds for planning and design for
future projects, along with Unspecified Minor Military Construction.
The Department of Defense continues to assess its global stationing
strategy. We have included only minimal, but critical, overseas
projects in the fiscal year 2005 military construction budget request.
These projects are required to provide the infrastructure necessary to
ensure continued soldier readiness and family well-being that is
essential throughout any period of transition.

People
We are requesting $798 million to improve the well-being of our
soldiers, civilians, and families. Approximately 50 percent of our MCA
budget request will improve well being in significant ways--providing
19 unit barracks complexes for 4,200 soldiers ($700 million), a basic
trainee barracks complex ($50 million), a physical fitness center ($18
million), a chapel ($10 million), two child development centers and a
youth center ($20 million).

Current Readiness
Our budget request includes $504 million to keep our soldiers
trained and ready to respond to the Nation's needs. Current readiness
projects include operational and training instructional facilities ($92
million), training ranges ($122 million), logistics facilities ($31
million), utilities and land acquisition ($27 million), maintenance/
production and tactical equipment facilities ($82 million),
communication/administration facilities ($104 million), a research and
development facility ($33 million), and community support facilities
($13 million).

Current to Future Force
Our budget request also includes $298 million for projects to
ensure the Army is trained, deployable, and ready to rapidly respond to
national security requirements and support transformation for the
Stryker Brigade Combat Teams. Projects include operations and training
facilities ($63 million), training ranges ($79 million), a maintenance
facility ($49 million), logistics facilities ($19 million), and
utilities and roads ($88 million).

Other Worldwide Support Programs
The fiscal year 2005 MCA request includes $171 million for planning
and design, along with Unspecified Minor Military Construction.
Planning and design funds ($151 million) are used to accomplish final
design of future projects and oversight of host nation construction. As
Executive Agent for the Department of Defense, the Army uses planning
and design funds for oversight of construction projects funded by host
nations for use by all Services. Finally, the fiscal year 2005 MCA
budget contains $20 million for Unspecified Minor Military Construction
to address unforeseen critical needs or emergent mission requirements
that cannot wait for the normal programming cycle.

MILITARY CONSTRUCTION, ARMY NATIONAL GUARD (MCNG)

The Army National Guard's fiscal year 2005 military construction
request for $295,657,000 (for appropriation and authorization of
appropriations) is focused on current readiness and transformation to
the future force.

Current Readiness
In fiscal year 2005, the Army National Guard has requested $116.1
million for nine projects. These funds will provide the facilities our
soldiers need as they train, mobilize, and deploy. They include one
Readiness Center, one Armed Forces Reserve Center, three Army Aviation
Support Facilities, two Ranges, and two Training projects. Current to
Future Force. This year, the Army National Guard is requesting $144.2
million for 23 projects needed to transform from Current to Future
Force. There are 16 projects for the Army Division Redesign Study,
three for Aviation Transformation, two for the Range Modernization
Program, and two for the Stryker Brigade Combat Team initiative.

Other Worldwide Support Programs
The fiscal year 2005 MCNG budget request contains $30.8 million for
planning and design of future projects, along with $4.5 million for
Unspecified Minor Military Construction to address unforeseen critical
needs or emergent mission requirements that cannot wait for the normal
programming cycle.

MILITARY CONSTRUCTION, ARMY RESERVE (MCAR)

The Army Reserve's fiscal year 2005 military construction request
for $87,070,000 (for appropriation and authorization of appropriations)
is for current readiness and other worldwide unspecified programs.

Current Readiness
The Army Reserve will invest $72.9 million in current readiness
projects. We will invest $58.6 million to construct four new Reserve
centers, and one military equipment park; invest $7.9 million to
modernize and expand one Reserve center, invest $3.9 million to
construct two ranges; and invest $2.5 million to acquire land for a
future Armed Forces Reserve center.

Other Worldwide Unspecified Programs
The fiscal year 2005 MCAR budget includes $11.2 million for
planning and design. The funds will be used for planning and design of
future projects. The fiscal year 2005 MCAR budget also contains $2.9
million for Unspecified Minor Military Construction to address
unforeseen critical needs or emergent mission requirements that cannot
wait for the normal programming cycle.

ARMY FAMILY HOUSING CONSTRUCTION (AFHC)

The Army's fiscal year 2005 family housing request is $636,099,000
(for appropriation, authorization of appropriation, and authorization).
It continues the successful and well-received Whole Neighborhood
Revitalization initiative approved by Congress in fiscal year 1992 and
supported consistently since that time, and our Residential Communities
Initiative program.
The fiscal year 2005 new construction program provides additional
housing in Alaska in support of a Stryker Brigade Combat Team and whole
neighborhood replacement projects at nine locations in support of 1,413
families for $394.9 million.
The Construction Improvements Program is an integral part of our
housing revitalization and privatization programs. In fiscal year 2005,
we are requesting $75.4 million for improvements to 875 existing units
at 3 locations in the United States and 2 locations in Europe, as well
as $136.6 million for scoring and direct investment in support of
privatization of 11,906 units at 6 Residential Communities Initiative
(RCI) locations.
In fiscal year 2005, we are also requesting $29.2 million for
planning and design in support of future family housing construction
projects critically needed for our soldiers.

Privatization
RCI, the Army's Family Housing Privatization Program, is providing
quality, sustainable housing and communities that our soldiers and
their families can proudly call home. RCI is a critical component of
the Army's effort to eliminate inadequate family housing in the United
States. The fiscal year 2005 budget request provides support to
continue implementation of this highly successful program.
We are leveraging appropriated funds and Government assets by
entering into long-term partnerships with nationally recognized private
sector real estate development and management firms to obtain financing
and management expertise to construct, repair, maintain, and operate
family housing communities.
The RCI program currently includes 34 installations with almost
71,000 housing units--over 80 percent of the family housing inventory
in the United States. By the end of fiscal year 2004, the Army will
have privatized 19 installations with an end state of 42,000 homes.

ARMY FAMILY HOUSING OPERATIONS (AFHO)

The Army's fiscal year 2005 family housing operations request is
$928,900,000 (for appropriation and authorization of appropriations),
which is approximately 59 percent of the total family housing budget.
This budget provides for annual operations, municipal-type services,
furnishings, maintenance and repair, utilities, leased family housing,
demolition of surplus or uneconomical housing, and funds supporting
management of the Military Housing Privatization Initiative.

Operations ($150 million)
The operations account includes four subaccounts: management,
services, furnishings, and a small miscellaneous account. All
operations subaccounts are considered ``must pay accounts'' based on
actual bills that must be paid to manage and operate family housing.

Utilities ($132 million)
The utilities account includes the costs of heat, air conditioning,
electricity, water, and sewage for family housing units. While the
overall size of the utilities account is decreasing with the reduction
in supported inventory, per-unit costs have increased due to general
inflation and the increased costs of fuel.

Maintenance and Repair ($402 million)
The maintenance and repair account supports annual recurring
maintenance and major maintenance and repair projects to maintain and
revitalize family housing real property assets. While the overall
account is smaller than fiscal year 2004, the reduced inventory allows
for greater per-unit funding than has been possible in the recent past.
This allows us to better sustain our housing inventory.

Leasing ($218 million)
The leasing program provides another way of adequately housing our
military families. The fiscal year 2005 request includes funding for
over 13,600 housing units, including existing Section 2835 (``build-to-
lease''--formerly known as 801 leases) project requirements, temporary
domestic leases in the United States, and approximately 7,700 units
overseas.

RCI Management ($27 million)
The RCI management program funding includes procurement
requirements, environmental studies, real estate requirements,
management, operations, implementation, and oversight of the overall
RCI program.

BASE REALIGNMENT AND CLOSURE (BRAC)

In 1988, Congress established the Defense Base Closure and
Realignment Commission to ensure a timely, independent and fair process
for closing and realigning military installations. Since then, the
Department of Defense has successfully executed four rounds of base
closures to rid the Department of excess infrastructure and align the
military's base infrastructure to a reduced threat and force structure.
Through this effort, the Army estimates approximately $9 billion in
savings through 2004.
The Army is requesting $100.3 million in fiscal year 2005 for prior
BRAC rounds ($8.3 million to fund caretaking operations of remaining
properties and $92.0 million for environmental restoration). In fiscal
year 2005, the Army will complete environmental restoration efforts at
three installations, leaving 11 installations requiring environmental
restoration. We also plan to dispose of an additional 8,000 acres in
fiscal year 2005.
Fiscal year 2003 was a superb year! Using all the tools Congress
provided, including the Conservation Conveyance Authority and Early
Transfer Authority, the Army transferred 100,957 acres of BRAC
property. This is almost 40 percent of the total Army BRAC excess
acreage, and almost as many acres as all prior years combined. To date,
the Army has disposed of 223,911 acres (85 percent of the total acreage
disposal requirement of 262,705 acres). We have 38,794 acres remaining
to dispose of at 28 installations. The Army continues to save more than
$900 million annually from previous BRAC rounds.

OPERATION AND MAINTENANCE

The fiscal year 2005 Operation and Maintenance budget includes
funding for sustainment, restoration, and modernization (SRM--$2.54
billion) and Base Operations Support (BOS--$6.57 billion). The SRM and
BOS accounts are inextricably linked with our Military Construction
programs to successfully support Installations as Flagships.

Sustainment, Restoration, and Modernization (SRM)
The fiscal year 2005 budget for SRM is $2.5 billion, of which $2.42
billion funds sustainment at 95 percent of the requirement. SRM
provides funding for the active and Reserve components to continue
making positive progress towards our goal to prevent deterioration and
obsolescence and restore the lost readiness of facilities.
Sustainment is the primary account in installation base support
funding responsible for maintaining the infrastructure to achieve a
successful readiness posture for the Army's fighting force. It is the
first step in our long-term facilities strategy. Installation
facilities are the deployment platforms of America's Army and must be
properly maintained to be ready to support current Army missions and
any future deployments.
The second step in our long-term facilities strategy is the
recapitalization by restoring and modernizing our existing facility
assets. In fiscal year 2005, the active Army request for Restoration
and Modernization is $93.2 million. Restoration includes repair and
restoration of facilities damaged by inadequate sustainment, excessive
age, natural disaster, fire, accident, or other causes. Modernization
includes alteration or modernization of facilities solely to implement
new or higher standards, including regulatory changes, to accommodate
new functions, or to replace building components that typically last
more than 50 years, such as foundations and structural members.
Base Operations Support
The fiscal year 2005 budget for Base Operations Support is $6.57
billion (Active Army, Army National Guard, Army Reserve). This is 70
percent of the requirement. This funds programs to operate the bases,
installations, camps, posts, and stations of the Army worldwide. The
program includes municipal services, family programs, environmental
programs, force protection, audio/visual, base communication services
and installation support contracts. Army community service and Reserve
component family programs include a network of integrated support
service that directly impact soldier readiness, retention, and spouse
adaptability to military life during peacetime and through all phases
of mobilization, deployment, and demobilization.

HOMEOWNERS ASSISTANCE FUND, DEFENSE

The Army is the Department of Defense Executive Agent for the
Homeowners Assistance Program. This program provides assistance to
homeowners by reducing their losses incident to the disposal of their
homes when military installations at or near where they are serving or
employed are ordered to be closed or the scope of operations reduced.
For fiscal year 2005, there is no request for appropriations and
authorization of appropriations. Requirements for the program will be
funded from prior year carryover and revenue from sales of homes.
Assistance will be continued for personnel at ten installations that
are impacted with either a base closure or a realignment of personnel,
resulting in adverse economic effects on local communities.

PART II: ARMY ENVIRONMENTAL PROGRAM
THE ARMY ENVIRONMENTAL COMMITMENT

The Army's Environmental Program budget request for fiscal year
2005 totals $1,459,735,000 (appropriations and authorization of
appropriations) for its Compliance, Restoration, Conservation,
Pollution Prevention, and Environmental Quality Technology Programs.
This figure includes $92,050,000 reflecting the environmental portion
of the total BRAC budget request. In addition, this figure reflects the
Office of the Secretary of Defense budget request of $216,516,000 for
the DOD Formerly Used Defense Site (FUDS) program for which the Army is
the DOD Executive Agent.
The Army Environmental Program supports readiness and contributes
to the well-being of our soldiers and their families. It fulfills the
public trust to manage Army lands by protecting natural and cultural
resources, in accordance with Federal, State, and local laws. The Army
is fully committed to complying with all Federal and State laws,
conserving natural and cultural resources and cleaning up active, BRAC
and FUDS. We will continue to expand implementation of Environmental
Management Systems (EMS) on our installations, an effort that began
Army-wide in fiscal year 2003, as well as efforts to further integrate
pollution prevention practices into all that we do--to include our
weapons systems acquisition procedures. Additionally, our technology
program continues to address environment, safety, and occupational
health needs comprehensively and cost effectively. By dedicating
resources to these activities, we are increasingly successful in
identifying efficiencies that support the Army's core missions and
business practices; developing creative solutions to support our
environmental stewardship efforts; protecting the health and safety of
our soldiers, civilians, and communities; and helping to fulfill the
Army's commitment to support and execute the National Military
Strategy.
We are further determined to accomplish our environmental program
tasks effectively and efficiently. Restoration, compliance and
conservation require the majority of our budget dollars; however,
programs in pollution prevention and innovative environmental quality
technology provide venues for targeted investments to reduce future
compliance and restoration requirements and recapture dollars for the
Army's core missions. Overall, our fiscal year 2005 budget request
provides for a lean, but effective, program implementation and
investment in both corrective and preventive actions that eliminate
past problems and prevent future ones.

RANGES AND MUNITIONS

The Army must provide our soldiers with tough, realistic, battle-
focused training in preparation for a wide variety of mission essential
warfighting scenarios ranging from desert to cold region operations in
both rural and urban settings. Ensuring our soldiers have access, now
and in the future, to the most realistic training possible is a
challenge for both our operational and environmental communities. The
continued development of surrounding lands for residential,
agricultural, and industrial uses, coupled with increasing
environmental requirements--a process we call encroachment--has
significantly added to the challenge of providing realistic soldier
training and fielding new weapon systems.
To meet these challenges, we have developed a sustainable range
management program that better integrates environmental considerations
into all of our range activities--to include live fire training and
testing operations. Our Army Range Sustainment Integration Council
provides the leadership framework to ensure a coordinated operational,
environmental and installation management focus on range sustainment.
The following initiatives illustrate the Army's commitment to range
sustainment:

We have completed an inventory of our 9,800
operational ranges within the United States.
We are quantifying encroachment impacts by determining
and defining external factors that are impacting the Army's
ability to train, test, and sustain force readiness.
We are evaluating potential environmental impacts of
live fire training/testing by looking at the air emissions from
functioning munitions, corrosion of munitions and
characterizing conditions of our operational ranges.

At closed ranges and former defense sites, the Army is taking
actions through the Military Munitions Response Program to address the
risk posed by unexploded ordnance (UXO), discarded military munitions,
and munitions constituents. Per Congressional direction, the Army
initiated an inventory of former ranges in 2001 and will report our
findings to Congress in 2004. The Army also is making prudent
investments in environmental quality technology to improve its ability
to detect, identify (discriminate), and respond to UXO, ultimately
reducing costs significantly.

COMPLIANCE

The Army requests $582,035,000 for the compliance program in fiscal
year 2005. This investment makes it possible for the Army to comply
with applicable Federal, State, and local environmental laws,
regulations, and Executive Orders, as well as international agreements
and Final Governing Standards overseas.
The Army's compliance goals are to attain and sustain cost-
effective compliance with all applicable laws and regulations. The
Army's long-term compliance objectives are to:

1. Integrate environmental compliance into all aspects of
operations that support the Army's mission and promote the
well-being of soldiers, family members, civilian employees, and
citizens of neighboring communities; and
2. Sustain or reduce compliance costs by continuing to
emphasize pollution prevention solutions as the preferred means
for achieving compliance.

The Army focuses on achieving environmental compliance through
strong command emphasis and the use of effective environmental
management systems; pollution prevention; diverse training; more
effective tools and innovative technologies; improved metrics and
processes; close tracking of new environmental laws and regulations to
ensure timely input and compliance; and, the development of strong
partnerships. The cumulative result of these efforts is best
exemplified by the Army achieving one of the lowest ``enforcement
action to inspection'' ratios ever. For comparative purposes, this
ratio was reduced to 0.15 in fiscal year 2003, as compared to 0.44 in
fiscal year 1997.
Since most environmental laws and regulations are designed to
protect human health and the environment, compliance with them is vital
to maintain the well being of the Army community, our neighbors and the
regions around our installations. We have steadily improved our
environmental compliance posture over time. The Army received fewer new
enforcement actions (ENFs) in fiscal year 2003 and continues to strive
to resolve ENFs more quickly. Consequently, the amount of fines paid
during fiscal years 2002 and 2003 were also significantly reduced as
compared to previous years.
In support of Executive Order 13148, The Greening of the
Government, the Army began implementing International Standard
Organization (ISO) 14001-based Environmental Management System (EMS)
Army-wide in fiscal year 2003. We have developed a Web-based Army EMS
Implementers' Guide plus a companion guide to facilitate
implementation. As a key part of our EMS implementation efforts, we
have changed our external audit system from a compliance focus to a
performance-based Environmental Performance Assessment System (EPAS),
which we expect to pay even greater dividends.
Lastly, installation sustainability, as a concept, has been
developed into a well-defined process through a pilot program initiated
by the United States Forces Command in 2001. This program was
recognized as a White House ``Closing The Circle'' Winner, and
currently six installations have undergone sustainability workshops.
The purpose of these workshops was to develop long-term sustainable
goals that would be included in the Installation Strategic Plans, with
full stakeholder involvement, including the local community. Mission
focused, yet environmentally conforming considerations are essential
components of these plans which help drive tangible results. The Army
plans to expand this underlying principle of sustainability for
improved planning and programming throughout the Army installations.
The Army sustainability effort is simply an approach that better
ensures the long-term viability of the military mission by minimizing
resource needs, reducing environmental impacts, and managing resources
so as to provide realistic military training and testing environments.
The sustainability concept will be further integrated across functional
lines and organizations within the Army. As an example, the Army has
many diverse programs that currently support sustainability, such as:
Sustainable Design and Development; Residential Community Initiative;
affirmative procurement; alternate fueled vehicle purchases/leases;
purchasing of renewable energy; construction debris recycling, and
qualified recycling programs. Also, the Army training community has
undertaken a Sustainable Ranges and Training Lands program that
specifically supports the warfighting mission through timely
consideration of environmental impacts and mitigation actions. One of
the primary thrusts of the Installation Management Agency is to
emphasize the importance of planning and to develop an Installation
Strategic Plan that will better integrate all of these various programs
into a comprehensive plan that guides sustainable actions. Integrating
construction, infrastructure, training, maintenance, and operations
with considerations for safety, energy, the environment and resources
will all help realize greater efficiencies and result in more effective
operations.

POLLUTION PREVENTION

Pollution prevention (P2) supports the Army by enabling our
compliance with current and future laws and regulations, promoting good
environmental stewardship of the lands entrusted to the Army, and
developing new technologies and partnerships with industry. The Army
requests $38,480,000 for pollution prevention. Achieving and
maintaining compliance through development and implementation of
pollution prevention strategies is a good business practice and a cost-
effective way for the Army to meet its environmental goals. The Army
continues to realize significant savings from our past pollution
prevention investments.
Efforts are underway to fundamentally improve operations through
development and implementation of better hazardous materials
management. This program is designed to enhance accountability while
reducing the amount of hazardous materials that the Army generates and
subsequently minimizing the amount of hazardous waste requiring costly
disposal. In 1994, The Army disposed of a total of 60 million pounds of
hazardous waste. That number decreased to 36 million pounds by the end
of 2002, a 40 percent reduction. Through improvements to the hazardous
material management program, we expect to continue this downward trend.
Our solid waste minimization efforts reduce costs while promoting
recycling. The goals for the solid waste management program are to
minimize the generation of solid wastes, develop cost-effective waste
management practices, protect public health and the environment, and
recycle to conserve natural resources. The Army currently reuses or
recycles over 37 percent of all solid waste generated. Our recycling
efforts significantly extend the lives of existing landfills and saved
approximately $39 million in disposal costs during fiscal year 2003.
The Army's Regional Environmental Offices have developed DOD/State
Pollution Prevention and Environmental Partnerships in 28 States, up
from 25 in 2001, while most of the remaining states have some type of
partnership in existence. These partnerships promote effective dialogue
on environmental issues among installations and state regulatory
agencies to resolve problems early. In addition, the partnerships give
regional environmental coordinators, DOD and our installations the
opportunity to actively participate in the development of emerging laws
and regulations to minimize disconnects and unintended compliance
requirements.
The Army has adopted the Sustainable Project Rating Tool (SPiRiT)
to evaluate our military construction projects in terms of their
sustainability, or how well they incorporate ``green'' building
techniques, such as recyclable building materials, energy efficiency,
natural daylight, and compatibility with the natural surroundings. This
initiative is a common sense design and building practice intended to
reduce life cycle costs while helping the Army support Federal
environmental and energy goals. One of the best illustrations is the
Army's Residential Community Initiative where the 50-year partnership
agreements to provide military housing requires a Gold SPiRiT standard.
While SPiRiT deals with how to make new buildings sustainable, another
initiative concentrates on what to do with existing buildings that have
reached the end of their useful lives. In the past, standard practice
has been to demolish old buildings and send the debris to a landfill.
Several current pilot projects focus on dismantling buildings and
selling the resultant components (e.g., hardwoods, windows, doors,
plumbing, wiring, etc.) for recycling or reuse. Efforts at Forts Knox
and Campbell successfully demonstrated that an installation could
auction off entire buildings to generate cost savings while minimizing
the impacts of demolition/deconstruction debris on the environment.
Buildings and components were removed and reused by the winning bidder.
Studies have shown that approximately 80 percent of the
environmental costs at military installations result from the operation
and maintenance of fielded weapons systems. Therefore, an important
aspect of the Army Pollution Prevention Program is the early
incorporation of environmental requirements, planning, and analysis
into the acquisition process. Our ultimate goal is to reduce the long-
term environmental costs and liabilities of systems now in development
and proposed in the future. Specifically, environmental requirements
continue to be an integral part of the Initial Capability Documents and
Capability Development Documents for each acquisition program, and
environmental quality specifications are included in development
contracts. For example, the development contract for the Future Combat
System (FCS), the cornerstone of the Army transformation program,
contains specific environmental requirements that will minimize the
environmental impact of the FCS when fielded. Environmental technical
support is also provided to the acquisition managers and staff in the
areas of environmental life cycle costs, technology and planning which
reduces program risks for acquisition managers in the all-important
areas of schedule, budget and performance.
Another successful pollution prevention initiative has been the
Army's efforts in reducing the dependence on foreign oil such that 78
percent of the acquired/leased vehicles in fiscal year 2004 used
alternate fuels. Pollution prevention is clearly the preferred method
of doing business in a sustainable and cost effective manner.
Prevention pollution has numerous other benefits such as reducing our
consumption and dependence on finite natural resources, minimizing
human exposure to toxic compounds, and presenting a positive public
image.

CONSERVATION

The Army's Environmental Conservation program is crucial to
sustaining the land and facilities used for our Nation's military
mission. Encroachment on military lands is increasing the Army's
conservation requirements to protect wildlife and habitats that further
impacts the ability of the Army to fully use its current land base for
training.
The fiscal year 2005 budget request of $76,933,000 will enable the
Army to continue its good stewardship of its land and facilities.
Preparing, updating, and implementing viable management plans will
enable the Army to continue to manage natural and cultural resources
and threatened and endangered species in compliance with applicable
laws. In addition to sustaining lands for military missions, the Army
provides multipurpose use of its natural and cultural resources and
grants public access to the extent that safety, security and the
mission allow.
In fiscal year 2004, the Army began to implement a campaign plan
for how it manages its historic properties and meets, among other
cultural resources statutes and regulations, the requirements of the
National Historic Preservation Act (NHPA) and its implementing
regulation, 36 Code of Federal Regulations 800--Protection of Historic
Properties. This campaign plan is now the foundation of the Army's
Historic Preservation Program and ensures efficient and effective use
of resources in executing compliance responsibilities that directly
support and sustain the Army's mission. The Army's historic properties
compliance requirement will substantially increase over the next 10
years due to the aging of its significant cold war era infrastructure.
By 2013, almost half of the Army's 172,000 buildings and structures in
the U.S. will be 50 years old or older, triggering compliance under the
NHPA. The Army also is responsible for 64,000 known archeological sites
requiring NHPA compliance. The Army is addressing these issues by
continuing to implement and institutionalize major programmatic
initiatives like the Army Alternate Procedures for NHPA regulatory
compliance and Army-wide programmatic compliance actions (agreements
exist for Capehart and Wherry Era Housing; and the Army is currently
developing more for other categories of historic properties).
Urban development continues to isolate natural habitats on Army
installations. As a result, management efforts and costs are increasing
as the burden for conserving endangered species grows. The Army's
increased operational tempo and expanded land acreage requirements for
weapons development and training is placing an increased demand on the
land. Integrated Natural Resources Management Plans (INRMPs), required
by the Sikes Improvement Act of 1997, provide excellent tools to
address future problems and reduce costs of repairing disturbed natural
resources while carefully managing threatened and endangered species
and their critical habitat. The Army has completed 174 of the 178
required INRMPs, and we are making progress on completing the remaining
four. In fiscal year 2003, the Army spent over $30 million to manage
and protect the 170+ threatened and endangered species on 99 Army
installations.
To address the issue of urban encroachment and to protect
endangered species habitat, the Army entered into a conservation
agreement with The Nature Conservancy as a pilot project at Fort Bragg,
North Carolina. The Army and The Nature Conservancy pooled funds for
The Nature Conservancy to purchase land near the installation to
prevent urban encroachment, enable training, and protect endangered
species habitat. This agreement formed the basis of the Private Lands
Initiative, now termed ``Army Compatible Use Buffers,'' and helped
provided impetus for the recently passed encroachment legislation.
In the National Defense Authorization Act for Fiscal Year 2003,
section 2811, Congress provided clear authority for the military
departments to enter into cooperative arrangements to stem the
encroachment on our installation boundaries. The Army has issued
guidance to formally establish the Army Compatible Use Buffer (ACUB)
program and to provide a rigorous evaluation process by which
installations proposals can be vetted to ensure our limited resources
are spent wisely. The Department of Army provides oversight and
approval of projects to ensure that Armywide interests are taken into
account. Since issuance of the ACUB memorandum, a number of
installations have begun to develop proposals, and several are making
their way forward for Army approval. This authority provided an
important mechanism to buffer Army installations from incompatible land
use in surrounding lands. Along with DOD, the Army will continue
pursuing these agreements as a means to protect our mission. An Army
National Guard installation in Florida, Camp Blanding, is our most
recent success where the Army will be able to leverage $20 million of
State funds for a 3-mile buffer around the installation. DOD and the
Army greatly appreciate the congressional foresight in adopting this
measure, which will result in significant benefits to the military
mission and the natural environment.

RESTORATION

The Army's commitment to its restoration program remains strong as
we reduce risks and restore property for future generations. With our
regulatory, private sector and community partners, we are aggressively
exploring ways to improve and accelerate cleanup. Achieving site
closure and ensuring long-term remedies are challenges we are prepared
to face. Improved business practices, partnerships, and innovative
technologies have enabled us to provide sound stewardship of the
environment and taxpayer dollars.
The fiscal year 2005 budget request for Army restoration is
$400,948,000, and this funding level will meet our legal agreements and
the Defense Financial Management Regulation goal of fiscal year 2014.
Also reflected in the total Army Environmental Program budget request
is $92,050,000 that represents the environmental portion of the total
BRAC budget request. In addition, as the Office of the Secretary of
Defense's (OSD) Executive Agent for the Formerly Used Defense Sites
(FUDS) program, the Army requested, and the OSD supported, a request
for $216,516,000.
The Army's environmental restoration program addresses Active,
BRAC, and FUDS properties that became contaminated due to past
practices. The Army also conducts compliance-related cleanup at active
installations worldwide. Last year the Army published a comprehensive
Army Environmental Cleanup Strategy with overarching objectives
applicable to the entire cleanup program. Protection of human health,
public safety, and the environment are primary objectives for the
Army's cleanup programs. Another Army objective is to support the
development and use of cost-effective cleanup approaches and
technologies that improve program efficiency. Of particular
significance, in fiscal year 2003, the Army's BRAC program exceeded its
goal to transfer 100,000 acres.
By the end of fiscal year 2003, the Army completed response actions
at 88 percent of active sites, 90 percent of its BRAC sites, and 56
percent of its FUDS.
The Army's Military Munitions Response Program is beginning to take
shape at its active installations. In December 2003, the Army completed
its inventory of ``other than operational'' ranges according to its
plan. As a result, we now have Comprehensive Environmental Response,
Compensation, and Liability Act Preliminary Assessment equivalent
information upon which to base resourcing decisions. Site Inspections
began in fiscal year 2003 and will continue over the next several
years. The Army's BRAC Military Munitions Response Program continues to
address munitions response at transferring sites. FUDS has been
addressing munitions and explosives of concern (MEC) since the
beginning of the program. Through 2002, about $40 million was spent
annually to address MEC in the FUDS program. We increased spending for
MEC to about $70 million in fiscal years 2003 and 2004.
The President's Management Agenda calls for 50 percent of services
contracts to be performance based by the end of fiscal year 2005, and
the Army is meeting this requirement through its Performance Based
Contracting (PBC) initiative. This contracting method is significantly
different from the standard cost-plus type environmental restoration
contract. The Army is giving contractors a statement of objectives and
soliciting fixed price bids on the basis of desired outcome (a remedy
in place and operating successfully, or site closeout) rather than task
orders for specific activities the Army wants conducted. The fixed
price element protects the Army from costly overruns and escalating
``costs to complete'' estimates. The fixed price also transfers
financial risk to the contractor, while the Army retains ultimate
environmental liability. In Guaranteed Fixed Price Remediation
contracts, a subset of PBCs, the contractor may obtain private
insurance to protect against cost overruns associated with unforeseen
cleanup requirements.
In early February 2004 when the budget request was submitted, the
Army had 16 PBC contracts in place at its active and BRAC
installations. Two of these contracts have been completed, giving the
Army site closure at those installations. In fiscal year 2003, the Army
awarded seven PBCs. In fiscal year 2004, the Army plans to implement 30
percent ($119 million) of its Restoration Program budget for active
installations using performance-based contracts.
The FUDS program will also take advantage of performance-based
contracts this fiscal year. The Army expects to award Fixed Price
Response with Insurance (FPRI) contracts for munitions response actions
throughout the United States. The Former Lowry Bombing and Gunnery
Range at Aurora, Colorado, a FUDS, will be used as the pilot task order
for a FPRI contract. The task order at Lowry will not exceed $5 million
and will be in addition to the $8 million that is already planned for
2004. The Army will award up to three nationwide indefinite-delivery/
indefinite-quality type contracts not to exceed $250 million in
contract capacity. Another successful initiative in the FUDS program
was making available a new tool that provides information on
approximately 1,500 FUDS properties throughout the United States and
its Territories to regulatory agencies and community groups by use of a
web-based Geographic Information System (GIS). This system provides
stakeholders with information on the location, cleanup activities,
estimated cost-to-complete, and a point of contact for FUDS properties.
Continuing with an initiative that began in 2001, the FUDS program
continues to expand the development of Statewide Management Action
Plans (MAP). A Statewide MAP (1) provides an agreement between the
State and the Army on the list of FUDS properties within that State,
(2) documents the activities necessary to complete cleanup on a FUDS
property, and (3) eventually leads to a long-range plan for cleanup at
each FUDS property. By the end of 2004, the Army will have developed 28
Statewide MAPs, which have been very favorable received by EPA and the
States.

ENVIRONMENTAL QUALITY TECHNOLOGY

The Army's Environmental Quality Technology (EQT) fiscal year 2005
budget request is $52,773,000. This will fund continuation of research,
development, test and evaluation that addresses the Army's highest
priority EQT requirements. Additionally, it supports increased
investment in range sustainability, reduces ownership costs, and
provides a high rate-of-return on investment of limited EQT resources.
The Army is currently transferring to the field the first products
developed as a result of the Army Environmental Requirements and
Technology Assessments (AERTA) requirements process initiated in 1999.
These products address challenges faced by the Army in complying with
lead based paint and hazardous air pollutants regulations. Illustrative
of our fiscal year 2005 programs is the continuation of initiatives
like range sustainment and the identification and discrimination of
UXO. The Army EQT training range-related programs use a holistic
approach to resolve environmental issues that impact military
readiness. The program addresses a comprehensive suite of historic and
emerging range-related environment and safety issues that include UXO,
impacts of explosives, contaminated soils on groundwater, dust control
and land rehabilitation. In addition, sustainability of ranges is an
over-arching concept, which incorporates appropriate sustainable design
elements into planning, design, construction, operation and maintenance
functions to enhance and balance total life cycle costs affecting
environmental, safety and occupational health issues impacting
soldiers, installations and adjacent communities.
Unexploded ordnance and munitions' constituents present a
significant challenge for installations to manage their test and
training ranges as well as cleaning up BRAC, FUDS, and non-operational
ranges. Current technologies used to identify, discriminate, and
address UXO and munitions constituents, are for the most part, neither
cost-effective nor time efficient. Development of new UXO
identification technologies capable of high detection rates and low
false alarm rates is needed for health and safety reasons as well as
drastically reducing the cost of site characterization and cleanup. In
fiscal year 2003, the Army opened a standardized test site at Aberdeen
Proving Ground, Maryland to evaluate methods of detection and
identification of buried ordnance in collaboration with the DOD's
Environmental Security Technology Certification Program. Development
and fielding of these technologies is among the highest priority for
the EQT Program and the DOD. The Army has recognized the importance of
this work and is committed to better detection and discrimination.
The EQT Program is an increasingly robust vehicle for
identification of Army environmental technology requirements. Through
its comprehensive management process, the program provides senior
leadership the confidence to champion its programs. Through this
program, the Army continues to sustain environmentally compatible
installations and weapons systems through development and exploitation
of technology, without compromising mission readiness or training. The
Office of the Secretary of Defense has placed the Army EQT process in
the forefront as an appropriate model to be used to identify,
prioritize, and resolve high-priority environmental quality technology
requirements.

ACQUISITION

The Assistant Secretary of Army (Installations and Environment)
works closely with the Assistant Secretariat of the Army (Acquisition,
Logistics, and Technology) in support of Army Acquisition Program
Managers and, by doing so, has significantly improved the Army's
ability to apply broad engineering principles to environmental issues
and to solve problems early in the development of systems. We are
meeting the intent of Congress in requiring acquisition programs to
identify the environmental quality-related costs of systems as part of
a system's total ownership cost. Not only are we assessing systems for
potential environmental, safety, and occupational health impacts, the
Army is working to improve our systems by exploiting environmentally
beneficial technologies and products as early as possible in systems
design and development.
We have been able to improve guidance for environment, safety and
occupational health analyses that is more responsive in meeting our
obligations under the National Environmental Policy Act, the Clean Air
Act, and other challenges of national interest. We have worked to
improve environmental analyses supporting decisions by system programs,
streamlined analytical processes, and improved public notification
using broadly available electronic media. These improvements have
mirrored suggestions by the President's Council on Environmental
Quality. We are working with the U.S. Environmental Protection Agency
(USEPA) to identify evolutionary technology requirements as a National
Emission Standard for Hazardous Air Pollutants (or NESHAP) for defense
landbased materiel. We have begun a significant environmental quality
technology effort to bring on-line coating technologies that will go
beyond the NESHAP criteria. Our efforts have also given us the
opportunity to address environmental challenges of national interest
with our most talented engineers. For example, we are working with our
researchers to formulate, test, demonstrate, and employ energetic
mixtures that do not require the use of perchlorates. At the same time,
we are preparing an overarching plan to evaluate potential
environmental issues concerning the use of both perchlorates and
Hexahydro-Trinitro-Trinzine (explosive/propellant) mixtures to target
high-value areas for potentially similar efforts.
Our programs are focusing on resolving future environmental quality
liabilities to our installations, our training and testing ranges, our
soldiers, and our communities. Our industrial-based installations are
also developing Environmental Management Systems to improve the day-to-
day operations. Our program executive officers and program managers are
taking on the mantel of environmental management and supporting
installation sustainability. As we move forward in fiscal year 2005 and
beyond, we will export environmental lessons learned to the acquisition
community to assist in the fielding of more environmentally acceptable
systems.

SUMMARY

Mr. Chairman, our fiscal year 2005 budget is a balanced program
that supports our soldiers and their families, the global war on
terrorism, transformation to the Future Force, and current readiness.
We are proud to present this budget for your consideration because of
what this $3.7 billion fiscal year 2005 request will provide for the
Army:

New barracks for 4,200 soldiers
Adequate housing for 14,200 families
Increase in Army National Guard and Army Reserve
funding over fiscal year 2004
New Readiness Centers for over 3,000 Army National
Guard soldiers
New Reserve Centers for over 2,800 Army Reserve
soldiers
80-year recapitalization rate for the Army
$287 million investment in training ranges
A new Basic Combat Training Complex
Facilities support for four new Stryker Brigades

Our long-term strategies for Installations as Flagships will be
accomplished through sustained and balanced funding, and with your
support, we will continue to improve soldier and family quality of
life, while remaining focused on the Army's transformation to the
Future Force.
This budget request further provides for protection of training
lands, environmental compliance with Federal and State regulations,
restoration of contaminated sites, and important technology and
pollution prevention initiatives in support of Army infrastructure,
material systems, and operations and training. This request is part of
the total Army budget request that is strategically balanced to support
both the readiness of the force, our soldiers, our natural resources,
and our citizens. Our long-term strategy can only be accomplished
through sustained, balanced funding, divestiture of excess capacity,
and improvements in management and technology.
Thank you again for the opportunity to appear before you today and
for your continued support for our Army. I look forward to answering
your questions.

Senator Ensign. Thank you, General Lust.
Admiral Weaver, please.

STATEMENT OF RADM CHRISTOPHER E. WEAVER, USN, COMMANDER, U.S.
NAVY INSTALLATIONS COMMAND

Admiral Weaver. Good afternoon, Mr. Chairman and
distinguished members of the subcommittee. It is a pleasure to
be here to discuss the Navy's fiscal year 2005 shore
infrastructure budget request. I am Rear Admiral Chris Weaver,
Commander, Navy Installations Command, and I am responsible for
developing the Navy's shore infrastructure programs and
determining shore capabilities necessary to maintain our Navy
in a high state of readiness.
Our facility investment strategy focuses on making prudent
investment decisions that balance shore infrastructure
improvements, that enhance readiness and quality of service,
while maintaining assets to effectively sustain support of our
Navy's operating forces. The Navy's fiscal year 2005 request is
the product of this investment strategy. It is a strong
statement of support for Navy installations around the world.
My written statement notes that our installations and
environmental budget request for fiscal year 2005 is $6.9
billion. I believe that our portion of the Navy's budget is
declining somewhat and that this bears witness to the successes
we have had in the last few years managing costs and pursuing
innovative solutions to long-term facilities challenges.
Coupled with mission accomplishment, our people are our
most important priority. Truly, both mission accomplishment and
people are inextricably linked. Providing better housing for
our sailors and families is of utmost importance to the Navy.
This budget culminates a 4-year effort to eliminate the average
out of pocket expenses for family housing. The increase in
basic allowance for housing means our sailors can find good,
affordable homes in the community without additional out of
pocket expenses.
We are achieving excellent results with family housing
privatization, as has been noted. The Navy's public-private
ventures (PPVs) are eliminating inadequate family housing and
delivering better quality new homes meeting or exceeding DOD
goals. We have developed a business strategy that limits our
financial liability by managing risk. Our approach promotes
private participation while incorporating essential safeguards
and protections.
This business strategy and acquisition approach have been
accepted and applauded by others, both in Government and the
private sector. PPV enables us to provide higher quality
affordable housing to sailors and their families faster and at
a lower initial and life cycle cost. It also benefits local
communities by refreshing aged housing stock and stimulating
local businesses.
We have now awarded nine PPV projects, for a total of 9,700
homes, and during fiscal years 2004 and 2005 we plan to award
another six projects incorporating another 20,000 homes.
However, the success of providing homes, adequate homes, to our
sailors and their families is clearly at risk, as has been
indicated by Secretary DuBois, due to the statutory cap on the
amount of budget authority that we can use in the military
family housing privatization effort. We project that we will
reach the current cap by the fall of this year. This will
impact our ability to award approximately 5,500 of the 20,000
homes we are planning to award in fiscal years 2004 and 2005.
Military family housing privatization is a success and it
is a tremendous tool that provides high-quality self-sustaining
housing for our Navy families. It is important that we stay
this course. We will continue to work with you to ensure that
our sailors and their families live in high-quality housing.
We are also committed to improving the quality of housing
for our single sailors. As you are well aware, we have roughly
18,000 sailors living on board ships while in homeport. These
sailors, like all sailors in the Navy, endure a very austere
lifestyle aboard ship while it is under way or on deployment.
While these ships are in home port, it is imperative that we
offer our sailors a better place to call home, one that is
similar to their shipmates' ashore both married and single.
This is a major quality of life issue that we take
seriously. We are programming and executing projects to address
this challenge. We are also looking at innovative ways to make
traditional high-quality housing available for all of our
single sailors, such as PPVs. We have been authorized three
bachelor quarters (BQ) PPVs and we are pursuing them, pursuing
one particularly in San Diego that looks very promising. We
hope to bring this project to you for consideration soon.
Our goal is to provide all shipboard sailors the
opportunity to live in quarters ashore when their ships are in
homeport by fiscal year 2008. This initiative will improve the
quality of life for these sailors and ensure a comparable
standard of living between sailors assigned aboard ship and
those assigned to shipboard duty.
Regarding environmental stewardship, sir, I would like to
take this opportunity to thank the members of this committee
for supporting the Department of Defense's Readiness and Range
Preservation Initiative. Changes made to the Endangered Species
Act, the Marine Mammal Protection Act in the National Defense
Authorization Act for Fiscal Year 2004, as well as the changes
made in the previous year to the Migratory Bird Treaty Act,
provide the proper balance between military readiness and
environmental responsibility.
We are implementing these changes in a manner befitting the
special trust and confidence Congress has placed in us and we
will continue to be outstanding stewards of the environment.
Lastly, I would like to take a few moments to comment about
Commander, Navy Installations Command, otherwise known as CNI.
As you are aware from testimony given last year, this past
October the Navy commissioned CNI in order to align all shore-
based support facilities and processes under one entity. Our
objective is to enhance the Navy's combat power with the same
or fewer expended resources ashore. As we centralize shore
support processes, we will become more focused and our product
delivery will become more efficient and effective. If forward
operating forces can consistently rely on our support, their
attention will remain focused on the operational task at hand,
improving their overall effectiveness.
The key aspect of CNI in our new business model is to
measure outputs of every function in the Navy support structure
and work to create the most efficient processes to meet those
needs for output. We need to move past a culture of deficiency,
in which we measure successes only on the financial inputs
provided, and drive towards a culture of sufficiency, in which
we focus on measuring our successes by the outputs necessary to
maintain a high level of readiness. The end result will be a
Navy that has measurable metrics to help determine how best to
use the limited resources we have in the most effective ways.
In closing, I sincerely thank you for the continued support
of this committee and your staff to the Navy, and we look
forward to working with you now and in the future. Thank you,
sir.
[The prepared statement of Admiral Weaver follows:]

Prepared Statement by Rear Adm. Christopher Weaver, USN

Mr. Chairman and members of the committee, I am Rear Admiral
Christopher Weaver, Commander, Navy Installations Command. It is a
pleasure to appear before you today to provide an overview of the
Navy's shore infrastructure and environmental programs.

FISCAL YEAR 2005 BUDGET OVERVIEW

Projecting power and influence from the sea is the enduring and
unique contribution of the Navy and Marine Corps team to national
security. The Navy's fiscal year 2005 budget request balances risks
across operational, institutional, force management and future
challenges identified by the Secretary of Defense.
The Navy's installation and environmental programs total $6.9
billion in fiscal year 2005. That our portion of the Navy's budget is
declining bears witness to the successes we have had in the last few
years managing costs and pursuing innovative solutions to long-term
problems. We continue to meet all Department of Defense (DOD) and Navy
installations and environmental goals. This budget provides funds to
operate, recapitalize, and transform our fleet assets and our shore
installations.
Base operations support funds provide fundamental services such as
utilities, fire and security, air operations, port operations, and
custodial care that enable the daily operations of our bases. Our
fiscal year 2005 request to support these services is $3.2 billion.
Our military construction request is a very robust $850 million. It
keeps us on track to eliminate inadequate bachelor housing, and
provides critical operational, training, and mission enhancement
projects.
The family housing request of $574 million provides funds to
operate, maintain and revitalize our worldwide inventory of 36,000
units. Our family housing request declines compared to fiscal year 2004
because of increases in the military pay accounts for Basic Allowance
for Housing (BAH), which makes finding affordable housing in the
community more likely, and the success of our housing privatization
efforts. Through privatization and future construction funds, the Navy
achieves the DOD goal to eliminate inadequate homes by fiscal year
2007.
Sustainment, restoration, and modernization (SRM) funding is used
to sustain existing facilities in an acceptable level of readiness and
restore and modernize inadequate or inefficient facilities. Operations
and maintenance funds dedicated to SRM activities in fiscal year 2005
is $1.33 billion. Facilities sustainment requirements are based on a
DOD model. The budget achieves 95 percent of the model requirement for
Navy bases, an increase of 2 percent above the fiscal year 2004
request. While the fiscal year 2005 recapitalization rate declines
slightly compared to fiscal year 2004, we will meet the DOD 67-year
recapitalization rate goal by fiscal year 2008.
Our fiscal year 2005 request for environmental programs totals $840
million. This request is sufficient to meet all known environmental
compliance and cleanup requirements, invest in pollution prevention,
and fund cultural and natural resources conservation efforts, including
implementation of Integrated Natural Resources Management Plans.
I will now discuss these areas in more detail.

HOUSING

We have made a special effort in this budget to maintain progress
in improving the quality of housing for our sailors.
Family Housing
Our family housing strategy consists of a prioritized triad:

Reliance on the private sector. In accordance with
longstanding DOD and Navy policy, we rely first on the local
community to provide housing for our sailors, and their
families. Approximately three out of four Navy families receive
BAH and own or rent homes in the community. Our bases have
housing referral offices to help newly arriving families find
suitable homes in the community.
Public/Private Ventures (PPV). With support from
Congress, we have used statutory PPV authorities enacted in
1996 to partner with the private sector to use private sector
capital. These authorities, which I like to think of in terms
of public/private partnerships, allow us to leverage our own
resources to provide better housing considerably faster to our
families.

Military Construction. Military construction will
continue to be used where PPV authorities don't apply (such as
overseas), or where a business case analysis shows that a PPV
project is not financially sound.

The Importance of BAH
Higher BAH allowances help more sailors and their families to find
good, affordable housing in the community without additional out-of-
pocket expenses. This reduces the need for military housing, allowing
us to divest excess, inadequate homes from our inventory. Higher BAH
also improves the income stream for PPV projects, making them more
economically attractive to potential developers. The fiscal year 2005
request completes a 5-year DOD goal to increase BAH and eliminate
average out-of-pocket expenses for housing.

Eliminating Inadequate Homes
The Navy remains on track to eliminate inadequate family housing
units by fiscal year 2007. We continue to pursue privatization at
locations where it makes sense. We will eliminate almost 70 percent of
our inadequate inventory through the use of public/private ventures. As
of March 1, 2004, we have awarded 9 projects totaling approximately
9,700 units. We recently awarded a joint Army/Navy military housing
project at Monterey, California, that includes 593 homes at the Naval
Postgraduate School. During fiscal year 2004 and fiscal year 2005, we
plan to award 6 projects totaling approximately 20,000 homes. This will
allow us to improve our housing stock and provide more homes to sailors
and their families much faster than if we relied solely on traditional
military construction. The Navy is now taking a regional approach to
accelerate progress and improve the financial viability of its PPV
projects.

There will still be a residual inventory of Government-owned
housing after fiscal year 2007 with a continuing need for family
housing construction, operations, and maintenance funds. However these
requirements will decline as family housing is privatized. We continue
to review these requirements, particularly in the management
subaccount, as we transition from ownership to privatization.
The single biggest challenge in our efforts to eliminate inadequate
family housing by fiscal year 2007 is the statutory ``cap'' on the
amount of budget authority that can be used in military family housing
privatization. DOD projects that the Services will reach the current
cap of $850 million in fiscal year 2004, and that it will impede our
ability to carry out our fiscal year 2005 privatization effort.
Military family housing privatization is a successful tool to provide
quality, self-sustaining housing for Navy families. It is important
that we stay the course. We will continue to work with Congress to
ensure that our sailors live in quality housing.

Bachelor Housing
Our budget request of $130 million for bachelor quarters
construction continues our emphasis on improving living conditions for
unaccompanied sailors. There are three challenges:

1. Provide Homes Ashore for our Shipboard Sailors. There are
approximately 17,500 sailors worldwide who are required to live
aboard ship while in homeport. Based upon actions taken by the
Navy and funds provided by Congress through fiscal year 2004,
we have now given 4,900 sailors a place ashore to call home.
This is our most pressing housing issue. The Navy will achieve
its ``homeport ashore'' initiative by fiscal year 2008 by
housing two members per room. Our fiscal year 2005 budget
includes one ``homeport ashore'' project at Naval Shipyard,
Bremerton, Washington. By housing two members per room, this
project will provide spaces for almost 800 shipboard sailors.
2. Ensure our Barracks Meet Today's Standards for Privacy. We
are continuing our efforts to construct new and modernize
existing barracks to provide more privacy for our single
sailors. The Navy applies the ``1+1'' standard for permanent
party barracks. Under this standard, each single junior sailor
has his or her own sleeping area and shares a bathroom and
common area with another member. The Navy will achieve these
barracks construction standards by fiscal year 2013.
3. Eliminate gang heads. The Navy remains on track to eliminate
inadequate barracks with gang heads for permanent party
personnel \1\ by fiscal year 2007.
---------------------------------------------------------------------------
\1\ Gang heads remain acceptable for recruits and trainees.

While we believe privatization will be as successful in
accelerating improvements in living conditions for our single sailors
as it has been for families, it does present a different set of
challenges. For years, we have built barracks to military rather than
local community standards. For example, there were limits on room size,
and no common area for occupants to prepare meals or to socialize. I
want to thank Congress for legislation last year to allow building
privatized barracks to private sector standards.
We must now consider other unique aspects in privatizing bachelor
housing: the impact of extended deployments on unit occupancy and
storage requirements; their location outside the fence line of the
base, or inside the fence line but on severable Government land; and
sharing a unit by two or more members. We are confident that the
Government can join with a private partner to fashion a solution to
these concerns that preserve the viability of a project while
protecting Government interests. We are developing pilot unaccompanied
housing privatization projects for San Diego, CA and Hampton Roads, VA.

MILITARY CONSTRUCTION

Military Construction Projects
Our fiscal year 2005 military construction program (Active and
Reserves) requests appropriations of $850 million. It includes $190
million for seven waterfront and airfield projects; $138 million for
five quality of life projects (including barracks); $69 million for six
force protection projects; $176 million for three projects supporting
new capabilities; $153 million for eight mission enhancement projects;
and $38 million for two environmental compliance projects. There is $74
million for planning and design, and $12 million for unspecified minor
construction.
In aggregate, about two-thirds of the military construction request
is for restoration and modernization projects. The remaining portion of
the program is for new footprint projects that provide for new
capabilities, e.g., force protection, bachelor quarters, and facilities
for new platforms.
There are five projects totaling $94 million at non-U.S. locations
overseas--Rota, Spain; Andros Island, Bahamas; Diego Garcia; and two
projects in Sigonella, Italy.
Nine projects totaling $426 million in fiscal year 2005
appropriations have construction schedules (including fiscal year 2004
continuing projects) exceeding 1 year and cost more than $50 million,
thus meeting the criteria for incremental funding. Four of these
projects received full authorization in fiscal year 2004 and are being
continued or completed in fiscal year 2005. We are requesting $245
million appropriations and $497 million in new authorization to start
five incrementally funded projects in fiscal year 2005.

Outlying Landing Field, Washington County, North Carolina
The new F/A-18E/F Super Hornet is replacing F-14 and older F/A-18C
aircraft. The Navy prepared an Environmental Impact Statement that
examined a range of alternatives for homebasing these new aircraft on
the east coast. A Record of Decision was signed in September 2003 to
base eight tactical squadrons and a fleet replacement squadron at Naval
Air Station (NAS) Oceana, VA, and two tactical squadrons at Marine
Corps Air Station (MCAS) Cherry Point, NC.
This homebasing decision requires a new outlying landing field
(OLF) to support fleet carrier landing practice (FCLP) training. The
current site near Virginia Beach, VA is not as effective for night-time
training due to ambient light sources, and lacks the capacity to handle
a training surge such as experienced for the war on terrorism and
Operation Iraqi Freedom. The Washington County site is about halfway
between NAS Oceana and MCAS Cherry Point. We believe it is the best
alternative from an operational perspective.
In fiscal year 2004, Congress provided authority to acquire
approximately 3,000 acres for the core area of the OLF and to begin
constructing the runway. We are now seeking authority to acquire a
30,000-acre buffer zone for noise, build a control tower, and erect
fire and rescue facilities. We are asking for this authority over 2
years, with the first increment of $61.8 million in fiscal year 2005.
There is some local opposition to the OLF site we selected; two
lawsuits challenge the sufficiency of the Department's Environmental
Impact Statement. The Navy wants to be a good neighbor, and will
consider the concerns of local property owners. For example, the Navy
has committed that all land not required for actual OLF operations will
be available for continued agricultural use. The Navy believes it has
met all legal and regulatory requirements, and is proceeding with
property acquisitions and construction planning.
VXX
Marine Helicopter Squadron One (HMX-1), located at the Marine Corps
Air Facility, Quantico, VA, now performs helicopter transportation for
the President, Vice President, and heads of state. Numerous
modifications and improvements have limited the mission effectiveness
of the current VH-3D and VH-60N helicopters. The planned acquisition of
a replacement helicopter, called VXX, will improve transportation,
communication, and security capabilities and integrate emerging
technologies. The total acquisition cost is $5.9 billion. Originally
planned for an initial operating capability in 2013, the acquisition
schedule has now been accelerated to December 2008.
The fiscal year 2005 budget includes $777 million in Research and
Development for VXX system design and demonstration, and $106 million
(Navy and Marine Corps) in appropriations ($166 million authorizations)
for military construction to support VXX. Facilities are required to
support the test and evaluation of three VXX scheduled for delivery in
October 2006, to provide hangar space for the eventual full complement
of 23 aircraft, and to provide in-service support for the life cycle of
the aircraft.
The accelerated VXX acquisition schedule required us to make some
judgments in the fiscal year 2005 military construction program to
ensure that facilities would be available in time to house the aircraft
and the combined Government/contractor support team. There is
insufficient excess hangar capacity to house VXX at Naval Air Station
Patuxent River, MD, where the Navy conducts most of its test and
evaluation of new aircraft. Similarly, the 1935 era hangers at Quantico
are inadequate to meet current HMX-1 needs.
However, before committing large sums to construct new facilities,
we are studying whether there is excess capacity elsewhere in the
National Capital Region that could be adapted to accommodate both the
test and evaluation phase and the operational mission for VXX at lower
cost than building new facilities at Patuxent and Quantico. In
addition, the VXX program manager has a business case analysis underway
to determine whether a Government-owned, contractor-operated facility
at Patuxent is the most cost effective solution for in-service support.
As another variable, the systems development and demonstration (SDD)
and initial production solicitation released in December 2003 gives the
vendor the option to use its own facilities. We plan to complete these
studies, consider the vendors' proposal, and decide this spring on the
most cost effective location for the facilities. This timeframe
supports the current acquisition timeline. In the absence of specific
locations, we labeled two VXX projects in our fiscal year 2005 program
under the title ``Various Locations.''

FACILITIES

Facilities Sustainment, Restoration, and Modernization (SRM)
Sustainment--The Department of Defense uses models to calculate
life cycle facility maintenance and repair costs. These models use
industry wide standard costs for various types of buildings.
Sustainment funds in the operations and maintenance accounts maintain
shore facilities and infrastructure in good working order and avoid
premature degradation. The Navy achieves 95 percent sustainment of the
model requirements in fiscal year 2005. Sustainment dollars decreased
compared to fiscal year 2004 due to the removal of old facilities in
our inventory as a result of our demolition program, and revised
pricing assumptions.
Recapitalization--Restoration and Modernization provides for the
major recapitalization of our facilities using military construction
and operations and maintenance funds. While the Navy achieves the
Department of Defense goal of a 67-year recapitalization rate by fiscal
year 2008, the fiscal year 2005 recap rate rises to 148 years from 140
years in fiscal year 2004. The Navy will manage its near term
facilities investment to limit degradation of operational and quality
of life facilities.

Closure of Naval Station Roosevelt Roads, Puerto Rico
The Navy will close Naval Station Roosevelt Road by March 31, 2004,
as directed by section 8132 of the fiscal year 2004 Defense
Appropriations Act. We have begun the required environmental reviews
and the initial phases of the property disposal process. The Navy is
taking great care in relocating military personnel and families, and
assisting civilian employees with relocation and outplacement. The DOD
school will remain open until the end of the school year.
As directed in the law, the closure and disposal is being carried
out in accordance with the authorities and procedures contained in the
Defense Base Closure and Realignment Act of 1990, as amended. The Navy
is establishing Naval Activity Puerto Rico as a successor organization
to maintain the property and preserve its value through disposal, which
we expect to occur in late 2005. The Commonwealth has formed a Local
Redevelopment Authority (LRA) that has begun land use planning for the
property. The Navy and DOD Office of Economic Adjustment are
coordinating with the LRA. We will ensure the needs of the military and
civilian employees are met as we carry out this closure and property
disposal.

Nebraska Avenue Complex
At the request of the Department of Homeland Security (DHS), the
Navy has agreed to relocate 10 Navy commands with 1,147 personnel from
its Nebraska Avenue Complex (NAC) in Northwest Washington, DC. The
556,000 square feet of office space will provide a headquarters
facility for DHS personnel. DHS will pay for the Navy's first move, and
if necessary, the first year's lease costs. As of the end of January
2004, seven Navy commands with 469 personnel had relocated. The
administration has requested authorizing legislation that would allow
the remainder to move by January 2005. To meet this timeline, the
requested legislation must be enacted by April 30, 2004. Several of the
Navy commands will relocate to Government-owned facilities, while
others will move to leased spaces until we identify permanent
Government-owned facilities.
The requested legislation allows the Navy to transfer custody of
the NAC property to the General Services Administration (GSA), who will
manage the facilities for DHS. We will require a legislative waiver
from section 2909 of the Defense Base Closure and Realignment Act,
which specifies that bases may not be closed except through the BRAC
process. The Navy will receive consideration for the fair market value
of NAC in the fiscal year 2006 budget process.

EFFICIENCIES

Commander, Navy Installations Command
The Navy established Commander, Navy Installations Command (CNI) on
October 1, 2003, to consolidate and streamline management of its shore
infrastructure. Instead of eight Navy commands responsible for
planning, programming, budgeting and executing resources for shore
installations, there is a single command--CNI. The Navy now has an
enterprise wide view of installation management and resources.
CNI will guide all regions and installations towards Navy strategic
objectives. The centralized approach will identify and disseminate best
business practices across all regions/installations. The ability to
identify standard costs and measure outputs is improving the capability
based budgeting process. Managing from a program centric knowledge base
allows for a top-level assessment of capabilities and risks.
This central focus on facilities can leverage capabilities between
the military services to avoid duplicate investments while still
creating surge capacity through joint use opportunities. CNI has
developed strategic partnerships with Naval Supply Systems Command
(NAVSUP) and Naval Facilities Engineering Command (NAVFAC) to apply
their logistics and contracting expertise.
The Navy is already realizing savings, estimated at $1.6 billion
across the FYDP, and improving services from CNI initiatives.

Consolidating installation functions at the regional
level versus installation level (e.g., housing management,
administrative functions, contracting, supply, comptroller,
business management, maintenance, warehousing).
Combining command staffs (e.g., Naval Amphibious Base
(NAB) Coronado and NAS North Island; Construction Battalion
Center (CBC) Port Hueneme and NAS Point Mugu)
Consolidating installation contracts (e.g., tug and
pilot contracts; custodial and grounds maintenance; negotiating
area wide utility rates).
Shifting installation level supply and contracting
functions to NAVSUP and NAVFAC (e.g., eliminate duplication at
the installation and regional levels).
Studying in 2004 the merger of other overlapping
installation functions from Bureau of Naval Personnel (e.g.,
morale, welfare and recreation programs, fleet and family
support programs, child care), NAVSUP (personnel support
programs such as food services), and NAVFAC (facilities
management).

Naval Safety Program
Senior level management attention to safety concerns, coupled with
selected financial investments, can yield profound benefits to the well
being of our sailors, civilians, contractors, and the bottom line
mission costs. Ensuring the safety of our people has been a top Navy
priority. Secretary Rumsfeld's recently challenged the Military
Services to reduce the rate of mishaps by 50 percent by fiscal year
2006.
That has amplified efforts to reduce mishaps and reaffirm the value
we place on safety. We have elevated the position of Commander of the
Naval Safety Center from a 1-star to a 2-star Flag Officer. On March
17, 2004, Secretary England convened the first senior-level Navy and
Marine Corps Safety Council to review Department of the Navy mishap
reduction plans. Navy Flag and Marine Corps General Officers chair or
co-chair four of the nine Defense Safety Oversight Council Task Forces.
We are reducing lost workdays due to injuries in our civilian
workforce.
Human error continues to play a role in over 80 percent of our
mishaps. We are studying ways to modify high risk driving behaviors.
Our fiscal year 2005 budget will expand our Military Flight Operations
Quality Assurance initiative, a highly successful program used in
commercial aviation that downloads flight performance data (black box
data) after every flight and allows the aircrew and aircraft
maintenance team to replay a high fidelity animation of the flight and
aircraft performance parameters. We are working to improve data
collection and analysis in order to effectively integrate safety into
the acquisition process.

Joint Cooperation on Installation Management
In February, the installation commanders from Navy's Aviation
Engineering Service, Lakehurst, the Army's Fort Dix, and McGuire Air
Force Base signed a partnership agreement encouraging joint solutions
for common problems between the three contiguous bases and their tenant
commands. The three installation commanders are already reducing
operating costs by consolidating firearms training, radar information
for air operations, and contracts for pest control, linen service, and
hazardous waste disposal. We want to encourage such cooperation
wherever we have opportunities to partner with the other military
departments.

BRAC 2005
Now more than ever, we need to convert excess capacity in our U.S.
shore infrastructure into warfighting capability. BRAC 2005 may well be
our last significant opportunity to reduce excess infrastructure, and
apply savings to improve readiness. More importantly, it will allow us
to transform our infrastructure to best support the force structure of
the 21st century.
Congress gave considerable thought on how to structure a BRAC 2005
process that sets fair and objective evaluation standards and
incorporates the lessons learned from four previous BRAC rounds. We
will be meticulous in meeting these statutory standards. We will treat
all bases equally. We will base all recommendations on the 20-year
force structure plan, infrastructure inventory, and published selection
criteria. In no event will we make any decisions concerning the
reduction of infrastructure until all data has been collected,
certified and carefully analyzed.
We will look for joint use opportunities in our analysis and
recommendations. We must apply the type of joint warfighting successes
witnessed in Afghanistan and Iraq to a more efficient and effective
Department of Defense shore infrastructure.

Demolition/Footprint Reduction
The Navy has achieved the fiscal year 2002 DOD goal of demolishing
9 million square feet of excess and vacant facilities. In fiscal year
2005, the Navy has budgeted $49 million to demolish 1.6 million square
feet.
The demolition effort has evolved from just eliminating ``eye-
sores'' to encouraging installations to consolidate, move out of costly
leased or antiquated facilities, and eliminate the most inefficient
facilities. We want to avoid spending SRM and base operating support
funds on facilities we no longer need.

Utility Privatization
Privatizing DOD electricity, water, wastewater, and natural gas
utility systems to corporations who own and manage such systems will
allow DOD to concentrate on core defense functions and yield long term
cost savings. The Secretary of Defense has directed that each Service
evaluate the potential for privatizing their utility systems, while 10
USC Sec. 2688 provides the legislative authority to convey utility
systems where economical. The Navy is on track to meet the DOD goal of
reaching a source selection authority (SSA) decision for all of its
utility systems by 30 September 2005.

Strategic Sourcing
Our strategic sourcing program examines cost effective options to
deliver service and support services to our shore installations. There
are three components: OMB Circular A-76 Competitive Sourcing program,
Strategic Manpower Planning, and Divestiture.
A-76 competitions compare performance costs for civilian employees
versus contract performance for facility management, logistics support,
real property maintenance, and other similar functions that are widely
available in the commercial sector.
Strategic manpower planning ensures uniform service members perform
assignments that are inherently military while converting functions
that are commercial in nature to civilian or contractor performance.
The Navy is currently studying military positions in fiscal year 2004
and fiscal year 2005 for potential conversion.
We are examining opportunities to divest functions that are not
core competencies of the Navy and are readily available in the
commercial sector. As an initial effort, we are studying whether to
divest our optical fabrication to private industry. The Navy has 380
military and civilian personnel and spends $36 million per year to
produce 1.3 million pairs of eyeglasses annually. The study is
scheduled for completion in fiscal year 2004.

PRIOR BRAC CLEANUP AND PROPERTY DISPOSAL

The BRAC rounds of 1988, 1991, 1993, and 1995 have been a major
tool in reducing our domestic base structure and generating savings.
All that remains is to complete the environmental cleanup and property
disposal. We have had significant successes on both fronts.

Property Sales
We have used property sales as a means to expedite cleanup and the
disposal process as well as recover the value of Government-owned
property purchased by taxpayers. We are applying funds received from
land sales to accelerate cleanup at the remaining prior BRAC locations,
both Navy and Marine Corps.
More property sales are planned that will be used to finance the
remaining prior BRAC cleanup efforts. We will use the proceeds from
sales to finance our fiscal year 2005 program of $115 million.

Property Disposal
The Department of the Navy (Navy and Marine Corps) had about
161,000 acres planned for disposal from all four prior BRAC rounds,
with the former Naval Air Facility Adak, AK accounting for 76,800
acres. Congress provided the necessary statutory authority last year to
allow the Navy to relinquish over 71,000 acres of the Adak land
withdrawal to the Department of Interior, and Interior to exchange
portions of that land with other lands held by The Aleut Corporation.
The Navy will fence and retain about 5,600 acres due to the presence of
munitions. I am happy to report that we completed the transfer of
71,200 acres of Adak on March 17, 2004 to the Department of the
Interior.
The transfer of Adak, along with recent successful property
conveyances at Louisville, KY; Key West, FL; Indianapolis, IN; and
Richmond, CA, puts us in position to have less than seven percent (or
about 11,000 acres) of the property from all four prior BRAC rounds
still to dispose by the end of this fiscal year.

Cleanup
The Department of the Navy (Navy and Marine Corps) had spent $2.3
billion on environmental cleanup at prior BRAC locations through fiscal
year 2003. We expect the remaining cost to complete cleanup at about
$495 million for fiscal year 2006 and beyond, most of which is
concentrated at fewer than 20 remaining locations. Any additional land
sale revenue beyond that currently budgeted will be used to further
accelerate cleanup at these remaining prior BRAC locations, which are
primarily former industrial facilities that tend to have the most
persistent environmental cleanup challenges.

ENVIRONMENTAL CLEANUP

Cleanup Program at Active Bases
We continue to make substantial progress toward completing our
environmental restoration program and are on target to complete the
cleanup on active bases by the DOD goal of 2014. For the third year in
a row, the number of cleanups completed at active bases exceeded the
planned target. Almost 70 percent of all sites have remedies in place
or responses complete. We have kept a stable funded program and predict
steady progress to cleanup the remaining sites.

Our Alternative Remedial Technology Team reviews
innovative technologies and promotes their use in the field.
Our partnering with regulators minimizes disputes and
has served as a model for other agencies. Our Environmental
Management Executive Council brings together two EPA Regions
and six states on the west coast to jointly resolve issues.
Our acquisition strategy matches the type of work to
be performed with the most cost-effective contractual vehicle
while enhancing opportunities for small businesses.

Munitions Response Program
We are working with the Office of the Secretary of Defense to
develop Munitions Response Program (MRP) objectives for discarded
military munitions and unexploded ordnance (UXO) at locations other
than operational ranges. We completed an extensive inventory of our
installations to identify potential MRP sites. We continue to move
forward on initiating and completing Preliminary Assessments (PAs) and
expect to achieve the DOD PA completion goal by fiscal year 2007. Site
Inspections (SIs) will begin in fiscal year 2006. Any imminent human
health or environmental concerns identified during our investigations
will be addressed immediately.

Vieques Cleanup
We ceased military training on Vieques in 2003 and, as required by
law, transferred 14,572 acres on eastern Vieques to the Department of
Interior (DOI) in April 2003. DOI will manage the majority of it as a
wildlife refuge, with the former Live Impact Area (about 900 acres)
designated as a wilderness area. The Governor of Puerto Rico has
proposed listing Vieques and Culebra on the National Priorities List
(NPL). We expect to sign a Federal Facilities Agreement to govern the
cleanup after the NPL listing becomes final.
Cleanup on western Vieques (the former Naval Ammunition Supply
Detachment (NASD)) is proceeding as we work closely with the Puerto
Rico Environmental Quality Board. Seventeen sites have been identified,
but none with major environmental contamination, as NASD was not an
industrial operation. These sites make up 490 acres of the 8,114 acres
transferred. We expect to spend about $16 million on these sites and
complete the cleanup by 2007.
Cleanup assessments are also underway on eastern Vieques (former
training/bombing range). Twelve sites consisting of 80 of the 14,572
acres transferred require assessment and potential cleanup. The sites
include routine waste disposal areas used to support the former Camp
Garcia, a landfill, and sewage lagoon. Other areas of concern will be
examined. We expect to spend about $14 million on cleanup for the 12
non-munitions sites and complete the cleanup by 2014.
The former bombing ranges will require munitions assessment and
cleanup. In the spring of 2003 the Navy investigated two beaches for
potential munitions. The Navy has budgeted $8 million in fiscal year
2005 for range assessments and initial clearance actions. Beaches and
the live impact area will be high priorities. We estimate a cleanup
cost of $76 million in fiscal year 2006 and beyond for munitions
assessments and clearance actions based on the land uses designated in
the statute. We will be working closely with the EPA and DOI. Worker
safety and minimizing disturbance of the natural environment will be
important considerations.

Kaho'olawe
Kaho'olawe is a 28,800 acre uninhabited island in Hawaii used as a
naval gunfire and bombing range from 1942 through 1990. In accordance
with title 10 of the Fiscal Year 1994 Defense Appropriations Act, the
Navy transferred title of Kah'olawe to the State of Hawaii in 1994, and
has been clearing ordnance according to the State's priorities.
Navy relinquished control of access to Kaho'olawe to the State on
November 11, 2003, as required by title 10, ending a 10-year cleanup
effort. Congress appropriated a total of $460 million for the cleanup,
including $44 million provided to the State to assist them in preparing
a reuse plan and managing the island. As of January 16, the Navy had
cleared a total of 22,059 acres, consisting of 1,543 acres cleared of
surface ordnance only; 20,516 acres cleared of surface ordnance and all
scrap metal (known as Tier I); and 2,636 Tier I acres that were further
cleared up to a 4-foot depth (known as Tier II). During the cleanup,
the Navy completed many non-clearance State goals, including road
construction, historic and archaeological assessments, and shipped over
11 million tons of scrap metal, along with tires and aircraft debris
used as targets.
The cleanup contractor is completing demobilization, removing
remaining scrap items and equipment not needed by the State. The Navy
has signed an agreement with the State, as required by title 10, to
respond to newly discovered, previously undetected ordnance found on
the island in the future. The Navy believes it has accomplished the
original title 10 goal to provide reasonably safe and meaningful use of
the island, as several thousand visits by the public have already been
recorded. However, there is no technology that can assure the complete
removal of all ordnance. The State and Navy will remain partners to
manage the risk to humans from ordnance that certainly remains on the
island.

ENVIRONMENTAL QUALITY

Marine Mammals
The Navy is proud of its record of environmental stewardship,
particularly our marine mammal research efforts and protective measures
for military training activities.

We are leaders in marine mammal research and are committed to find
methods and technologies that reduce the risk of harm to marine mammals
without compromising our ability to train effectively. The Navy spends
about $8 to $10 million per year in marine mammal research,
representing about half of all known worldwide investments in this
area. We coordinate with and share findings with other agencies such as
the National Oceanic and Atmospheric Agency, and the National Science
Foundation.
The Navy has protective measures to avoid harm to marine mammals
during training and operations at sea while preserving training
realism:

Planning--Using historical marine mammal location
information to plan training activities. Protective measures
are tailored to the type of training, location, and season.
Detection--Posting trained lookouts 24 hours per day
on surface ships. Submarines employ passive acoustic detection
devices to determine range and bearing of vocalizing marine
mammals. We may launch aerial searches for marine mammals in
training areas before, during and after training events.
Operations--Establishing buffer zones during training
exercises, and suspending operations when necessary. Navy may
limit active sonar training through standoff distances, source
power level reductions, limit nighttime and bad weather
operations, or opt to train in deep rather than shallow water.

The changes made by Congress to the Marine Mammal Protection Act
will allow us to better balance our readiness requirements with our
legal obligations to ensure military activities are protective of
marine mammals, and will allow us to ``train as we fight'' when our
activities do not have biologically significant effects on marine
mammals. We urge Congress to reaffirm those changes as they consider
reauthorization of the Marine Mammal Protection Act.

Shipboard Programs
The Navy invested $465 million in the last decade to install
pulpers, shredders, and plastic waste processors on its surface ships.
This equipment avoids the need to discard plastics into the world's
oceans and allows environmentally acceptable disposal of other solid
wastes such as food, paper, cardboard, metal and glass. Submarines will
be outfitted with similar solid waste equipment by the end of 2005,
well in advance of the December 2008 deadline established in the act to
prevent pollution from ships.

The Navy has been converting air conditioning and refrigeration
plants on its surface fleet from ozone depleting chlorofluorocarbons
(CFCs) to environmentally friendly coolants. We plan to spend a total
of $400 million on this effort, including $30 million in fiscal year
2005. We expect to complete the conversion of nearly 900 CFC-12 plants
by 2008, and over 400 CFC-114 plants by 2012. We expect to spend about
$35 million to install suites of pollution prevention equipment (e.g.,
high-volume, low pressure (HVLP) paint sprayers, aqueous parts washers)
on ships, including $5 million in fiscal year 2005. This equipment,
combined with management actions, reduces 10,000 pounds per year of
hazardous material brought aboard our large ships.
We continue efforts with EPA to establish uniform national
discharge standards for all Armed Forces vessels. This has proven to be
a very complex undertaking. Navy and EPA have opted to segregate the 25
types of discharges into ``batches,'' with control standards for the
first batch of 5 discharges (including hull coatings) to be published
by September 2005.

Alternative Fuel Vehicles
For the second year in a row, the Navy-Marine Corps Team
substantially exceeded the Energy Policy Act requirement that 75
percent of covered fleet vehicle procurements be alternative fuel
vehicles. In fiscal year 2003, the Navy acquired 86 percent of its
light duty vehicles as alternative fuel vehicles. Our Navy Public Works
Center in Washington, DC, converted the entire executive motor pool to
alternative fueled vehicles.
We are hoping to expand our procurement of hybrid vehicles in
fiscal year 2004 and beyond and to increase the use of bio-diesel and
ethanol. We are working with the Army's National Automotive Center to
place hydrogen-powered fuel cell vehicles in the San Diego area. These
actions will help develop a regional hydrogen infrastructure and
provide us with hands-on experience with hydrogen and fuel cell
transportation technology. While there are important environmental
benefits, these investments provide opportunities for technology
transfer to future weapons systems.

Conservation
Integrated Natural Resources Management Plans (INRMP) are the
foundation upon which Navy activities protect and manage lands. Navy
INRMPs already address endangered species and migratory birds. We have
revised our INRMP guidance to ensure they provide a conservation
benefit to endangered species. Our bases work closely with the U.S.
Fish and Wildlife Service, State fish and game agencies to prepare the
INRMPs. We take seriously our obligation to conserve natural resources
entrusted to us by the American people. It is the only means to ensure
continued access to these resources in furtherance of our military
mission. Good conservation practices and military training operations
can be mutually beneficial. Navy efforts increased the population of
the federally protected California least tern from 13 nests in 1977 to
1,200 today, and the snowy plover population from 12 nests in 1992 to
101 today at the Silver Strand portion of Naval Amphibious Base
Coronado. Because of this success, the Fish and Wildlife Service
reduced training restrictions on our Special Forces.

ENCROACHMENT

We have made great strides in addressing encroachment issues over
the past 2 years. Congress has provided much needed relief through
enactment of legislation in the National Defense Authorization Acts for
Fiscal Years 2003 and 2004 that allows the Navy to balance military
readiness and environmental stewardship.

We have worked closely with the Department of the
Interior to implement congressional direction to develop a rule
that clearly defines the relationship between military
readiness activities and the Migratory Bird Treaty Act. The
Department of the Interior plans to publish the proposed rule
soon.
Congress amended the Endangered Species Act to allow
the Secretary of the Interior to exclude military installations
from critical habitat designation when such installations are
managed in accordance with an INRMP and the Secretary
determines the INRMP provides a benefit to the endangered
species.
We will use the revised definition of harassment of
marine mammals in analysis of new technologies for military
readiness training programs (such as the Virtual At Sea
Training (VAST) system for naval gunfire), littoral warfare
training, and supplemental analysis on deployment of the
surveillance towed array sensor system-low frequency active
(SURTASS LFA) sonar system. The revised definition ensures that
analysis of impacts on marine mammals is based on science, not
speculation. The changes approved by Congress reflect current
methodologies used by Navy and the National Marine Fisheries
Service and reduce the likelihood of costly, time-consuming
litigation caused by ambiguous language.

Notwithstanding the gains we've achieved thus far, encroachment
continues to be a very real problem--one that will become more complex
as populations grow, pressures on ecosystems mount, and the means
required to sustain military readiness evolve through new technologies
and threats.
Coming to grips on when military munitions become solid wastes
under the Resource Conservation and Recovery Act can ensure effective
range management for both military readiness training and waste
management. Flexibility for implementing the general conformity
requirements of the Clean Air Act will allow more effective deployment
of new weapons systems and the realignment of existing assets. We
continue to discuss these important issues with the States and groups
such as the National Governors Association and the Environmental
Council of the States.
Congressional efforts to address the balancing of military
readiness and environmental stewardship have not gone unnoticed by
state legislatures. Following your example, three states--California,
Arizona, and Texas--have enacted laws requiring local governments to
consider impacts on military readiness during environmental planning
and land use planning processes.

CONCLUSION

In conclusion, I would ask the members of this committee to judge
the merits of the Navy's installations and environmental program
through the considerable progress we are making in virtually all areas.
That concludes my statement. I appreciate the support of each
member of this subcommittee, and will try to respond to your comments
or concerns.

Senator Ensign. Thank you.
General Williams.

STATEMENT OF BRIG. GEN. WILLIE E. WILLIAMS, USMC, ASSISTANT
DEPUTY COMMANDANT, INSTALLATIONS AND LOGISTICS [FACILITIES],
COMMANDANT OF THE MARINE CORPS

General Williams. Sir, Mr. Chairman and distinguished
members of the Readiness and Management Support Subcommittee,
good afternoon. I am Brigadier General Willie Williams. I am
the Assistant Deputy Commandant for Installations and Logistics
at Headquarters, Marine Corps. It is my pleasure to appear
before you today.
First, on behalf of the Commandant of the Marine Corps and
the marines that we serve, I would like to thank you for your
ongoing support for Marine Corps military construction, family
housing, encroachment and environmental programs. Our
installations are the fifth element of our Marine Air-Ground
Task Force and as such they are a critical component of our
readiness to fight and win our Nation's battles.
Our fiscal year 2005 active and Reserve military
construction and family housing budget requests $505 million.
This along with the $463 million for facilities sustainment,
$67 million proposed for restoration and modernization, and
$126 million in environmental funding, devotes over a billion
dollars to maintenance, sustainment, construction, and our
environmental initiatives at Marine Corps installations.
The combined active and Reserve military construction
program will provide $236 million toward urgently needed
readiness, compliance, and quality of life construction
projects. In 2005 our Reserves are proposing two vehicle
maintenance facilities for our fourth amphibious assault
vehicle battalion in Norfolk and Florida.
Our long-term capital improvement plan for waste water
treatment at Camp Pendleton continues with its second increment
of funding and our proposed investment of $75 million for
barracks projects at Camp Pendleton, New River, Yuma, and
Quantico will meet our goal of eliminating gang head barracks
for our permanent party marines.
The family housing request of $269 million will keep the
Marine Corps on track to have contracts in place to eliminate
inadequate family housing by the end of fiscal year 2007.
Public-private ventures are critical to keeping us on that
track. On September 30, 2003, the largest PPV to date within
the Department of the Navy was awarded. That provided over $500
million in construction as well as long-term management,
maintenance, and recapitalization of our Marine Corps family
housing communities in Virginia and California.
Military housing privatization projects have been extremely
successful and well received by our marines and their families.
Your support of the Department of Defense legislative proposal
to eliminate the $850 million cap on DOD cash contributions for
family housing projects will be needed in order to permit us to
continue to execute these critical and vital projects.
The facilities sustainment, restoration, and modernization
program proposal maintains full funding for the sustainment of
our facilities at 95 percent of OSD-established targets. The
Marine Corps has also committed to spending $67 million in
restoration and modernization of existing facilities. These
investments, while smaller than in fiscal year 2004, continue
to assure that our facilities will be in better condition at
the end of fiscal year 2005 than at the beginning.
The Marine Corps is committed to sustain and enhance
mission readiness and access to military training throughout
our environmental stewardship program and encroachment
programs. These programs ensure compliance with regulations and
policies that preserve the natural and cultural resources and
maintain our ability to train as we fight.
Mr. Chairman, the marines and their families make great
sacrifices in service to this great Nation of ours. The Marine
Corps prides itself on taking care of its own and we have a
legacy for doing that. We like to reward their sacrifices by
really providing them with the necessary resources that they
need to live, to train, and to recreate on our installations.
Mr. Chairman, the Marine Corps would like to thank the
committee for its strong continued support of our
infrastructure programs and the benefit this support provides
in improved readiness and quality of life. This concludes my
statement and thank you, sir.
[The prepared statement of General Williams follows:]

Prepared Statement by Brig. Gen. Willie J. Williams, USMC

Chairman Ensign, Senator Akaka, and distinguished members of the
Readiness and Management Support Subcommittee: I am Brigadier General
Willie Williams, Assistant Deputy Commandant for Installations and
Logistics (Facilities). It is a pleasure to appear before you today
with Mr. DuBois. First, I'd like to thank you for your ongoing support
for Marine Corps Military Construction. Installations, the fifth
element of the Marine Air Ground Task Force, are a critical component
of our readiness to fight and win our Nation's battles.
Our fiscal year 2005 Active and Reserve Military Construction and
Family Housing budget provides $505 million. This, along with $463
million for facility sustainment and $67 million proposed for
restoration and modernization for our Active and Reserve marines, the
Marine Corps proposes to devote over a billion dollars to construction,
sustainment, and maintenance at Marine Corps installations.
Our installation support program is approximately 6 percent of the
Marine Corps budget proposal and supports installations in the United
States and Japan with a value of over $25 billion and acreage that is
about 20 percent larger than the State of Delaware. This program is the
result of a long, comprehensive, review of Marine Corps requirements
and includes careful balancing of our total program in order to meet
the Marine Corps' most critical requirements.
The military construction portion of our program addresses some of
our most critical needs for readiness, environmental compliance and
quality of life. In 2005, our investment of $75 million in bachelor
quarters will meet our goal to eliminate gang-head barracks for our
permanently stationed marines and provide much needed operational,
maintenance, and infrastructure support.
The facilities sustainment, restoration, and modernization program
proposal maintains funding for the sustainment of our facilities at 95
percent of the OSD established requirement. The Marine Corps has also
committed to spending $67 million in restoration and modernization of
existing Active and Reserve facilities. These investments, while
smaller than fiscal year 2004, continue to ensure that our facilities
will be improved, though slightly, at the end of 2005.
The family housing request of $269 million will keep the Marine
Corps on track to have contracts in place to eliminate inadequate
family housing by the end of fiscal year 2007. Public-private ventures
(PPVs) are critical to keeping us on track. On September 30, 2003, the
largest PPV to date within the Department of the Navy was awarded that
will provide over $500 million in construction as well as long-term
management, maintenance and recapitalization of Marine Corps family
housing communities in Virginia and California.
The Marine Corps is committed to sustaining and enhancing mission
readiness and access to military training through our environment
stewardship programs. These critical programs ensure compliance with
regulations and policies, and preserve the natural and cultural
resources entrusted to our care by the citizens of our Nation and
shared by our surrounding communities.
The absolute necessity of maintaining military readiness is beyond
debate, and readiness also depends on our installations' ability to
provide quality-training facilities that realistically simulate combat
conditions. Encroachment is on the rise, and if left unchecked, will
detrimentally impact the mission of our bases, stations, and ranges in
the near term and threaten our future military readiness in the long
term. At stake for the Marine Corps is our success in combat. We must
do all in our power to ensure that marines, members of our sister
Services, and service member families do not pay an unnecessarily high
price for that success. Marines must train, as they will fight; and to
do that requires unencumbered access to sea, land, and airspace.
Now I would like to give you more detailed information on each of
the Marine Corps' programs that support our installations.

MILITARY CONSTRUCTION

Marine Corps bases and stations provide the ``platform'' upon which
our land, sea and air units develop, mature, train and deploy
individually and as a combined arms team. Our bases and stations are
the ``fifth element'' of the Marine Air-Ground Task Force because of
their close link to the operating forces; equipment maintenance; and
the communities where marines and their families live, recreate, and
socialize, often at some distance from their homes and extended
families. Our installation assets and capabilities need to always be
available to support operations and training requirements. Military
construction is the Marine Corps' primary funding source for
recapitalization and modernization of both operational and quality of
life infrastructure. As always, the Marine Corps prioritizes our
military construction facility requirements against other just as
pressing needs. This year, we propose $208.3 million in urgently
required construction projects and $14.4 million in planning and
design.
Operations, administration, maintenance, and infrastructure
facilities enhance marine quality of life. It is a pleasure to visit
our installations and hear young marines talk about how their new
facilities support their work in ways our older facilities do not. New,
adequate facilities give marines a great deal of confidence and
encourage the rigorous discipline required for them to perform at the
higher level. When new construction is deferred, we know that, in the
short term at least, marines will still find a way to accomplish the
mission.
The President's fiscal year 2005 budget addresses a number of our
mission support requirements. The Construction Weight Handling Shop at
Camp Pendleton, CA, consolidates a Marine Wing Support Squadron with
range operations and three explosive ordnance disposal teams into
efficient facilities from dilapidated, leaking, inadequate facilities.
This and our replacement armory at Camp Lejeune, NC; close combat
pistol course at Camp Pendleton; and the aircraft maintenance and
training facility at New River, NC, will give more marines high-tech,
indoor work areas that actually have heating, cooling, running water,
electrical power, restrooms, and enough space to accomplish their
mission. At Camp Pendleton, CA, we are continuing a long-term capital
improvement program for wastewater treatment. This project is funded in
fiscal year 2004 and fiscal year 2005 and is the first step in a series
of projects that will ultimately meet wastewater quality standards.
These new facilities will support deploying of well cared for marines
who are well trained. Without them, quality of work, quality of life,
and morale for many marines will continue to be seriously degraded.

MILITARY CONSTRUCTION, NAVAL RESERVE

The Marine Forces Reserve is an integral and vital portion of our
Marine Corps total force. Marine Forces Reserve is comprised of almost
39,600 selected Marine Corps Reserve personnel at 187 sites, dispersed
throughout 48 States. As these numbers suggest, maintenance of Marine
Corps Reserve facilities presents a considerable challenge. It is our
mission to make sure they are supported with adequate facilities. The
Military Construction, Naval Reserve program for exclusive Marine Corps
construction must effectively target limited funding to address $173
million in deferred construction projects. Over 50 percent of the
Reserve centers our marines train in are more than 30 years old, and of
these, 35 percent are more than 50 years old.
In addition to antiquated facilities, the equipment our marines use
today is bigger, heavier, wider, and longer. Much of it requires
appropriately constructed or modified maintenance facilities, as well
as adequate electrical power and other support infrastructure upgrades
to maintain combat readiness. The electrical demand on our facilities
has increased significantly due to the widespread use of electronic
devices and technologically advanced equipment, such as weapons systems
simulators. Facilities built to accommodate manual typewriters, M151
jeeps, and M-60 tanks are now inadequate for the equipment our modern
Marine Corps uses.
To help us address these challenges, the President's fiscal year
2005 budget for Military Construction, Naval Reserve contains $12.6
million in construction and $.4 million in planning and design. This
program addresses our most pressing requirements by providing a new
Reserve Training Center and Vehicle Maintenance Facility in
Jacksonville, FL; and a new Vehicle Maintenance Facility in Norfolk,
VA. The overall condition of Marine Corps Reserve facilities continues
to demand a sustained, combined effort of innovative facilities
management, a pro-active exploration of and participation in joint
facility projects, and a well-targeted use of the construction program.

FACILITY SUSTAINMENT, RESTORATION, AND MODERNIZATION

Facility sustainment funding is critical to keeping our buildings
functional and supports both the Active and Reserve Forces. In the
past, our infrastructure was not replaced at an appropriate rate,
causing portions of it to deteriorate. As a consequence, the Marine
Corps has had to use an increasing percentage of its facility
sustainment funds to bind together old, inadequate buildings throughout
the course of their service life, rather than maintaining newer, more
economical structures. Significant numbers of facility sustainment
projects were deferred due to a lack of funds. This directly impacted
the living and working conditions in barracks, mess halls, and other
facilities, in highly visible and negative ways. In addition, we
suffered a ``quiet crisis'' with respect to less obvious repairs to
steam plants, runways, sewer lines, and roads. In many cases these
repairs have a more direct impact on quality of life than specific
building projects. These requirements are no longer being ignored.
The Office of the Secretary of Defense (OSD) developed a model to
determine the amount of funding we need to sustain our facilities,
which continues to be refined and strengthened. We have been able to
maintain 95 percent of the OSD-established requirement for the
sustainment of our facilities. The Marine Corps has also committed to
spending $67 million of operations and maintenance funding on
restoration and modernization of existing Active and Reserve
facilities. These investments continue to ensure that our facilities
will be improved, though slightly, at the end of 2005. We look forward
to further increases in the overall mission readiness of our facilities
in the future.

Demolition
Defense Reform Initiative Directive #36 directed the Marine Corps
to dispose of 2.1 million square feet of excess or unneeded structures
by the end of fiscal year 2000. The Marine Corps exceeded this goal and
continues to aggressively pursue disposal and demolition of inadequate
facilities. In fiscal year 2005, the Marine Corps has budgeted $5
million to demolish an additional 0.3 million square feet.

BACHELOR HOUSING

The Marine Corps' force consists largely of young, single, enlisted
personnel. Providing appropriate and comfortable living spaces that
positively impact the morale and development of these young men and
women is extremely important to the Marine Corps.
The Marine Corps' primary focus is to house our junior enlisted
bachelor personnel in pay grades of E1 through E5 on-base, with a goal
of providing a 20 room standard that allows two junior
enlisted marines (E1-E3) to share a room with a private bath.
Noncommissioned officers (NCOs) in the pay grades of E4 and E5 are
provided a private room and bath in a 20 room. We believe that
assigning two junior marines to a room provides the correct balance
between the privacy desired by the marines and the Marine Corps' goals
to provide companionship, camaraderie, and unit cohesion. We also
believe that our NCOs (E4s and E5s) need to be in the barracks in order
to provide the oversight that strengthens team building and unit
cohesion tenets, particularly since we are a younger more junior
intensive force. This balance provides the atmosphere necessary to
motivate, train and develop marines, and foster unit integrity.
The Marine Corps maintains approximately 98,000 bachelor enlisted
housing spaces worldwide (78,000 in the United States, and 20,000 in
Japan). By the end of fiscal year 2004, we will still require an
additional 16,330 spaces to adequately house our enlisted bachelor
marines. Your support of our fiscal year 2005 $74.6 million request for
bachelor housing will address our most immediate goal to eliminate
permanent party gang-head barracks through four major barracks
projects: Marine Corps Base Camp Pendleton, CA; Marine Corps Air
Station New River, NC; Marine Corps Air Station Yuma, AZ; and Marine
Corps Base Quantico, VA. In addition to the efforts to provide
sufficient bachelor housing, we are working diligently to meet the
Department of Defense housing adequacy standards. Since 1998, with your
support, we have invested an average of $79 million per year towards
bachelor housing. As a result of these efforts, we have reduced the
number of inadequate spaces from roughly 16,000 in 1996 to 4,101.
Consequently, our marines can see signs of progress and know we are
working to provide quality housing and an increased quality of life in
the barracks.

FAMILY HOUSING

With over 170,000 family members, Marine Corps families are an
integral component of readiness. We must always remember that marines
and their families serve out of a sense of duty and loyalty to our
country and as they do so, they face the difficulties of the military
lifestyle--frequent relocations often far from extended family and
frequent deployments that separate families for months at a time. A
continued commitment to improving family housing helps us to convey our
appreciation for their service and sacrifices.
In continued support of the President's management agenda, we have
been increasing our quality housing inventory through PPVs and military
construction where necessary. The Marine Corps is on track to have
contracts in place to eliminate inadequate family housing by the end of
fiscal year 2007. In addition to PPV initiatives for family housing,
the Department's continued initiative to increase the Basic Allowance
for Housing (BAH) allows families to access quality affordable housing
in the private sector. This is important since more then two-thirds of
service members do not live on a military installation. However, many
families continue to prefer to live in military or PPV housing for a
number of reasons, including economics, safety, schools, and community
support. PPV and traditional military construction efforts will
continue to improve the homes necessary to supplement private sector
housing.
We have close to 25,000 owned, leased, or PPV family housing units
worldwide. Much of the inventory we own is in poor condition and needs
major renovation or replacement. The President's fiscal year 2005
budget includes $129.1 million for replacement, renovation, and PPV
seed money. Our 2001 family housing master plan identified close to
17,700 inadequate housing units with the majority of those units
requiring significant revitalization or replacement. Thanks to your
support we have been able to reduce our inadequate inventory by 7,000
homes since September 2002. The fiscal year 2005 budget will permit us
to replace roughly 198 homes at Marine Corps Air Station Cherry Point,
NC; and privatize 5,455 homes, which will result in the additional
replacement, renovation or demolition of 2,669 inadequate units at
Marine Corps Base Camp Lejeune, NC; Marine Corps Air Ground Combat
Center, Twentynine Palms, CA; and Marine Corps Reserve Support Command,
Kansas City, MO.

Public Private Ventures
We are seeing success from the PPV projects that we have awarded at
Marine Corps Base Camp Pendleton, CA; Marine Corps Air Station
Beaufort, SC; and Marine Corps Recruit Depot Parris Island, SC. Marines
and their families have also benefited from joint projects with the
Navy at Belle Chase, Louisiana and San Diego, California. The PPVs not
only improve the homes in which our families live, they also provide
community support facilities and recreation facilities that help create
neighborhoods and a sense of community. I have received only positive
feedback from marines and their families about these PPVs. Despite our
success we have one remaining challenge that is critical to the
continued success of our privatization program--the statutory ``cap''
on the amount of budget authority that can be used in military family
housing privatization. OSD projects that the Services will reach the
current cap of $850 million in fiscal year 2004. As cash contributions
are required for most Marine Corps privatization projects, any help you
can provide to eliminate or raise the cap so we may continue our
privatization initiatives will be greatly appreciated.
On September 30, 2003, the largest PPV to date within the
Department of the Navy was awarded. This project will provide for long-
term management, maintenance, construction, and renovation of family
housing communities at Marine Corps Base Quantico, VA; Marine Corps
Recruit Depot San Diego, CA; Mountain Warfare Training Center,
Bridgeport, CA; and Marine Corps Base Camp Pendleton, CA. A
groundbreaking ceremony was held on the site in Quantico on October 27.
This 50-year PPV includes:

Privatization of 4,629 existing homes (3,313 Camp
Pendleton, CA; 1,311 Quantico, VA; 5 San Diego, CA);
Demolition of 1,999 homes (832 Camp Pendleton, CA;
1,167 Quantico, VA) and replacement of 1,826 of those homes
(833 Camp Pendleton, CA; 993 Quantico, VA);
Renovation of 2,310 homes (2,161 Camp Pendleton, CA;
144 Quantico, VA; 5 San Diego, CA); and
Construction of 78 deficit reduction units at Camp
Pendleton, CA.

This will provide the Marine Corps with a total inventory of 4,534
units (3,392 Camp Pendleton, CA; 1,137 Quantico, VA; 5 San Diego, CA).
Moreover, part of the construction will include quality of life
community support facilities such as recreation centers and playgrounds
at Camp Pendleton, CA; Quantico, VA; and Bridgeport, CA.
PPVs only work when private investors can make a reasonable profit.
At some installations, low BAH rates and/or facilities condition mean
that a business case cannot be made for a PPV, and traditional military
construction is the only option. While privatization will not make good
business sense at every location within the Marine Corps, it will
ultimately help us address much of our housing requirement. We plan to
privatize 95 percent of our family housing. We will continue to review
opportunities for additional privatization in the near future.

ENVIRONMENTAL COMPLIANCE AND PROTECTION

The lands entrusted to the Marine Corps encompass over 2 million
acres of some of the most ecologically sensitive areas of the country.
These lands are where we train our marines to fight and win battles
using the full complement of weapons and tactics in realistic training
scenarios. Our challenge is to conduct our Marine Corps mission while
managing our lands in an environmentally sustainable manner so that we
can preserve these resources to train future generations of marines.
We have made great progress in managing these resources in the last
decade. Through dedicated efforts and a commitment of manpower and
funding, we have corrected deficiencies and put programs in place to
manage long-term issues. Through training and awareness we are
integrating environmental requirements into operations and training
across all functional areas. We have reduced our liabilities and
improved our compliance posture with an investment in qualified staff,
improvements to our facilities, use of pollution prevention measures
and an emphasis on providing training to our marines and civilians so
they can do their jobs in an environmentally sound manner.
We recognize that in order to have sustainable installations, we
must continue our commitment to environmental stewardship. In fiscal
year 2005, we have budgeted $126 million in operations and maintenance,
Marine Corps funds to comply with environmental requirements. This
funding allows us to meet air, water, and waste requirements, and
protect and conserve natural and cultural resources. Our fiscal year
2005 budget is an increase of $5 million over fiscal year 2004. This
additional funding will allow us to begin to assess our ranges for
potential environmental issues, protecting both our military mission
and the environment.

ENCROACHMENT

We are grateful to Congress for providing a tool to facilitate the
management of incompatible developments adjacent to or in close
proximity to military lands. We are working with State and local
governments and with non-governmental organizations such as the Trust
for Public Lands, The Nature Conservancy, the Sierra Club, and the
Endangered Species Coalition to acquire lands buffering or near our
bases including Camp Lejeune, Marine Corps Air Station Beaufort, and
Camp Pendleton. In return for our investment, the Marine Corps is
receiving restrictive easements that ensure lands acquired remain
undeveloped and serve as buffer zones against future encroachment on
our bases.
We are also grateful to Congress for codifying legislation that
gives us the opportunity to partner with the U.S. Fish and Wildlife
Service and State fish and game agencies in order to manage endangered
species present on military lands. Management via our Integrated
Natural Resources Management Plans, which we prepare in partnerships
with these agencies, allows us to protect and enhance populations of
these species on our lands while allowing marines to train. Finally, we
support the Secretary of Defense's efforts to provide flexibility under
the Clean Air Act and to clarify the governing authorities under which
DOD would manage operational ranges. The Marine Corps strives to be a
good environmental steward and the growing number of endangered species
on our lands and their increasing populations are examples of our
successes. We remain committed to protecting the resources entrusted to
us by the American people.
Mr. Chairman, marines and their families make great sacrifices in
serving their country. The Marine Corps prides itself on the legacy of
rewarding that sacrifice by taking care of its own. The Marine Corps
would like to thank the committee for its strong continued support of
Marine Corps infrastructure programs and the benefits this support
provides in improved readiness and quality of life.
Mr. Chairman, this concludes my statement. I will be happy to
answer any questions you may have.

Senator Ensign. Thank you, General.
General Fox.

STATEMENT OF MAJ. GEN. DEAN FOX, USAF, THE AIR FORCE CIVIL
ENGINEER AND DEPUTY CHIEF OF STAFF, INSTALLATIONS AND
LOGISTICS, USAF

General Fox. Thank you, Mr. Chairman and members of the
subcommittee. Good afternoon. I sincerely appreciate the
opportunity to appear before you to discuss the Air Force
fiscal year 2005 military construction program.
Air Force missions and Air Force members around the world
depend upon this committee's favorable support of our
infrastructure programs. We sincerely appreciate your
unwavering support of our military construction efforts, so
essential to supporting our people and our missions worldwide.
The total force--that is active Air Force, Air National
Guard, and Air Force Reserve--military construction and
military family housing programs are essential to the Air Force
mission, whether it is on the flight line where operations are
conducted, in the work place, or in the home. Although higher
priorities have not always allowed us to address all facility
needs, the Air Force recognizes the importance of investing in
our facilities.
We train and we fight from our bases. Our installations
commanders are responsible not only for the mission, but also
for the people who perform that mission and those who support
the mission as well. That makes our facilities and
infrastructure very critical to the mission.
The importance we place on our facilities is seen in our
recent budget submissions. Our military construction and
housing facility budgets increased in fiscal year 2003 and
fiscal year 2004, and increased further in this year's program
request of $2.6 billion. We sincerely appreciate your support
of our programs.
In total, between military construction, housing, and
sustainment, restoration, and modernization, we will invest
more than $4.8 billion in our installations in fiscal year
2005. The military construction request balances our need to
restore and modernize our infrastructure, bed down new
missions, and improve the quality of life of our people.
First on infrastructure, we are continuing an upward trend
in our sustainment, restoration, and modernization funding. The
fiscal year 2005 budget request includes $2.2 billion to
sustain our infrastructure as well as restore and modernize our
infrastructure by starting to buy down that backlog of needed
repairs to our real property.
On the new mission side, our military construction budget
also consists of projects to support the Air Force new weapons
systems, those which provide our combat commanders the
capabilities to meet our Nation's security needs. Forty-five
projects and more than $400 million in our budget facilitate
the beddown of those systems by providing the necessary
infrastructure and facilities, including infrastructure to
support the F/A-22 at Tyndall Air Force Base, Florida, and
Sheppard Air Force Base, Texas, expansion of the Predator
remotely piloted aircraft program, and beddown of the C-17
airlift aircraft at three bases.
Quality of life. The Air Force is committed to taking care
of our members and our families as well. Quality of life
projects such as our dorms and our housing help support them,
as our airmen are more frequently deployed away from home.
Knowing their families are well taken care of keeps our airmen
on focus for the Air Force's and our Nation's tasks.
The Air Force is committed to meet the Department's goal of
providing safe, affordable, and adequate housing for our
members. We are continuing our sustained investment in military
family housing and we are increasing our investment by over
$180 million from last year's request. For fiscal year 2005,
our request for $847 million will allow us to construct over
2,200 units at 16 bases, to improve more than 1,300 units at an
additional 6 bases, and will allow us to privatize 6,800 units
at 6 bases.
Just as we are committed to provide adequate housing for
families, we have an ambitious program to house our
unaccompanied junior enlisted personnel as well. Our dormitory
master plan will achieve the Department's goal to provide our
airmen with adequate permanent party dormitory rooms by 2007
and we will achieve our objective of providing adequate
technical training dormitories for Air Education and Training
Command students by 2009. We are well on track to meeting these
goals.
On behalf of all the airman affected by this important
quality of life initiative, I want to thank the subcommittee
for its great support. We know we could never have made this
without your tremendous efforts and support.
Ensuring we have adequate facilities overseas for our
airmen also remains a priority for the Air Force. With 20
percent of our airmen stationed overseas, it is very important
to make sure we continue to invest in those installations
supported as enduring locations by the combatant commanders.
Our budget request of $140 million for these locations consists
of the most essential facility needs to ensure our airmen can
perform their missions and provide the proper quality of life
for those airmen. We ask for your support of these operational
and quality of life projects.
In conclusion, Mr. Chairman, I thank this committee for its
continued strong support of the Air Force military construction
and family housing. I will be happy also to answer any
questions.
[The prepared statement of General Fox follows:]

Prepared Statement by Maj. Gen. L. Dean Fox, USAF

Mr. Chairman and distinguished members of the subcommittee, the
strength and flexibility of airpower and our joint warfighting success
in the global war on terrorism is directly enabled by three
interdependent factors; outstanding men and women in uniform, superior
weapons platforms, and an agile support infrastructure. The Air Force
fiscal year 2005 military construction (MILCON) budget request reflects
our commitment to ensuring the Air Force's continued ability to execute
the full range of air and space missions. In turn, the Air Force
continues to maintain the commitments made last year to invest wisely
in installations from which we project air and space power, take care
of our people and their families with adequate housing and quality of
life improvements, and to sustain the public trust through prudent
environmental management.

INTRODUCTION

Air Force facilities, housing, and environmental programs are key
components of our support infrastructure. At home, bases provide a
stable training environment and a place to equip and reconstitute our
force. Overseas bases provide force projection platforms to support
combatant commanders.
As such, the Air Force has developed an investment strategy focused
on sustaining and recapitalizing existing infrastructure, investing in
quality of life improvements, continuing strong environmental
management, accommodating new missions, optimizing use of public and
private resources, and reducing infrastructure wherever we can.
Total force military construction, family housing, sustainment,
restoration, and modernization programs each play vital roles
supporting operational requirements and maintaining a reasonable
quality of life for our men and women in uniform.
While the Air Force has always acknowledged the importance of
proper funding for facility sustainment and recapitalization, too often
competing priorities have not permitted us to address all the problems
we face with our aging infrastructure. Despite competing priorities,
you supported our request last year. The Air Force sincerely
appreciates your support.
Continuing a positive trend into fiscal year 2005, the Air Force
military construction program included in the President's budget
request is approximately the same as last year with an increase in the
military family housing program. The requested $2.6 billion for total
force military construction and Military Family Housing is a $200
million increase over last year's request. This request includes $664
million for Active military construction, $127 million for Air National
Guard military construction, $84 million for Air Force Reserve military
construction, and more than $1.7 billion for military family housing.
The Air Force has also increased operations and maintenance (O&M)
sustainment, restoration, and modernization (SRM) funding. This year,
the amount dedicated to SRM is more than $200 million greater than in
the 2004 request. With the fiscal year 2005 budget request, more than
$2.2 billion will be invested in critical infrastructure maintenance
and repair through our O&M program. This year's request is up almost 11
percent from last year, to continue to move to the Air Force goal of a
facility recapitalization rate of 67 years by 2008.
Considering the level of effort across the entire infrastructure
spectrum (MILCON, military family housing (MFH), and O&M SRM), the
overall Air Force fiscal year 2005 budget request is more than $4.8
billion.

Overseas Military Construction
Even though the majority of our Air Force personnel are assigned in
the United States, 20 percent of the force is permanently assigned
overseas, including 29,000 Air Force families. Old and progressively
deteriorating infrastructure at these bases requires increased
investment. While a new Global Basing Strategy is under development by
the Office of the Secretary of Defense, the Air Force fiscal year 2005
MILCON request invests in overseas installations supported as enduring
locations by the combatant commanders. The request for overseas
construction in the Pacific and European theaters of operation is $140
million for 13 projects. The program consists of infrastructure and
quality of life projects in the United Kingdom, Germany, the Azores,
Italy, Spain, Japan, and Korea. I also want to thank you for the
essential overseas MILCON funding you approved in the Fiscal Year 2004
Supplemental Appropriations Bill for construction projects in Southwest
Asia as well as at critical en route airlift locations, needed to
directly support ongoing operations in that region.

Planning and Design/Unspecified Minor Construction
This year's request includes planning and design funding of $160
million. These funds are required to complete design of the fiscal year
2006 construction program, and to start design of the fiscal year 2007
projects so we can be prepared to award these projects in the year of
appropriation. This year's request also includes $24 million for the
unspecified minor construction program, which is the primary means of
funding small, unforeseen projects that cannot wait for the normal
military construction process.

SUSTAIN, RESTORE, AND MODERNIZE OUR INFRASTRUCTURE

Operations and Maintenance Investment
To sustain, restore, and modernize infrastructure, there must be a
balance between military construction and O&M. MILCON restores and
recapitalizes facilities. O&M funding is used to perform facility
sustainment activities necessary to prevent facilities from failing
prematurely. Without proper sustainment, facilities and infrastructure
wear out quickly. O&M funding is also used to directly address many
critical restoration and less-expensive recapitalization needs. These
funds enable commanders in the field to address the facility
requirements that impact their near-term readiness.

INVEST IN QUALITY OF LIFE IMPROVEMENTS

The Air Force recognizes a correlation between readiness and
quality of life. Quality of life initiatives acknowledge the sacrifices
our airmen make in support of the Nation and are pivotal to recruiting
and retaining our country's best and brightest. When airmen deploy,
they want to know their families are safe, and secure. Their welfare is
a critical factor in our overall combat readiness. Family housing,
dormitories, and other quality of life initiatives reflect the Air
Force commitment to provide the facilities they deserve.

Family Housing
The Air Force Family Housing Master Plan provides the road map for
our housing MILCON, O&M, and privatization efforts, and it is designed
to meet the goal of ensuring safe, affordable, and adequate housing for
our members. The fiscal year 2005 budget request reflects an increase
of more than $180 million over the fiscal year 2004 budget for family
housing. With the exception of four northern-tier locations, inadequate
housing will be eliminated in the United States by 2007. The inadequate
units at those four northern-tier locations will be eliminated by 2008.
For fiscal year 2005, the $847 million requested for housing
investment will provide over 2,200 units at 16 bases, improve more than
1,300 units at 6 bases, and support privatization of over 6,800 units
at 6 bases. An additional $864 million will be used to pay for
maintenance, operations, utilities, and leases to support family
housing.

Dormitories
Just as we are committed to provide adequate housing for families,
we have a comprehensive program to house our unaccompanied junior
enlisted personnel. The Air Force is well on its way in implementing a
Dormitory Master Plan. The plan includes a three-phased dormitory
investment strategy. The three phases are:

(I) fund the replacement or conversion of all permanent party
central latrine dormitories;
(II) construct new facilities to eliminate the deficit of
dormitory rooms; and
(III) convert or replace existing dormitories at the end of
their useful life using an Air Force-designed private room
standard to improve quality of life for airmen.

Phase I is complete and we are now concentrating on the final two
phases of the investment strategy.
The total Air Force requirement is 60,200 dormitory rooms. The Air
Force Dormitory Master Plan achieves the Office of the Secretary of
Defense's (OSD) fiscal year 2007 goal to replace all inadequate
permanent party dormitory rooms and the Air Force goal to replace all
inadequate technical training dormitories by fiscal year 2009. This
fiscal year 2005 budget request moves us closer to those goals. The
fiscal year 2005 dormitory program consists of 7 dormitory projects,
1,104 rooms, at both stateside and overseas bases in direct support of
unaccompanied personnel, for a total of $128 million.

Fitness Centers
Fitness centers are a critical component of the Air Force quality
of life program. The growing expeditionary nature of our activities
requires that airmen increasingly deploy to all regions of the world,
in extreme environments and therefore must be physically prepared to
deal with the associated challenges. In other words, airmen must be
``fit to fight.'' Our new fitness program directs airmen to devote more
time and energy to being physically fit, and the use of our fitness
centers has dramatically increased to support this reorientation in our
culture. The fiscal year 2005 MILCON program includes three fitness
centers: Lajes Air Base, Azores; Hill Air Force Base (AFB), Utah; and
Elmendorf AFB, Alaska.

CONTINUE ENVIRONMENTAL LEADERSHIP

The Air Force continues to ensure operational readiness and sustain
the public trust through prudent environmental management. As part of
the overall military transformation program, we actively seek and
employ smarter solutions to long-standing environmental challenges. We
are applying lessons learned in terms of how, and the extent to which,
pollution can be prevented and contamination can be controlled. We are
investing in more efficient contracting methods as a key element in our
approach to future environmental restoration. Additional use of
performance based contracting will focus on cleanup performance goals
and thereby reduce process requirements. Finally, we are establishing
systems to better identify the equity value of our installations'
environmental resources to the surrounding community. For example, land
that provides habitat for an endangered species may be valuable as open
space in a community's redevelopment plan. That value should be
identified and understood.
In addition to ensuring our operations comply with all
environmental regulations and laws, we are dedicated to enhancing our
existing relationships with both the regulatory community and the
neighborhoods around our installations. We continue to seek
partnerships with local regulatory and commercial sector counterparts
to share ideas and create an atmosphere of better understanding and
trust. By focusing on our principles of ensuring operational readiness,
partnering with stakeholders, and protecting human health and the
environment, we remain leaders in environmental compliance, cleanup,
conservation, and pollution prevention.
The $3.3 million environmental project in the fiscal year 2005
MILCON program will allow Shaw AFB to meet current Environmental
Protection Agency (EPA) standards for wastewater discharge.

ACCOMMODATE NEW MISSIONS

As indicated earlier, joint warfighting success in the global war
on terrorism has been possible in part due to superior weapons
capabilities. New weapon systems are the tools of combat capability
that enable our combatant commanders to respond quickly to conflicts in
support of national security objectives. The fiscal year 2005 total
force new mission military construction program consists of 45
projects, totaling more than $403 million. These projects support a
number of weapons systems; two of special significance are the F/A-22
Raptor and the C-17 Globemaster III.
The F/A-22 Raptor is the Air Force's next generation air
superiority and ground attack fighter. F/A-22 flight training and
maintenance training will be conducted at Tyndall AFB, Florida, and
Sheppard AFB, Texas, respectively. Our fiscal year 2005 military
construction request includes two F/A-22 projects at Tyndall AFB for
$19 million, and one F/A-22 project at Sheppard AFB totaling $21
million.
The C-17 Globemaster III aircraft is replacing the fleet of C-141
Starlifters. C-17s will be based at Elmendorf AFB, Alaska; Travis AFB
and March Air Reserve Base (ARB) in California; Dover AFB, Delaware;
Hickam AFB, Hawaii; Jackson Air National Guard Base, Mississippi;
McGuire AFB, New Jersey; Altus AFB, Oklahoma; Charleston AFB, South
Carolina; and McChord AFB, Washington. Thanks to your support,
construction requirements for Charleston and McChord were funded in
prior-year military construction programs. The request for fiscal year
2005 includes two projects for $15 million at Elmendorf AFB, two
facility projects for $15 million at Travis AFB, two projects for $10
million at March ARB, and five facility projects for $26 million at
Hickam AFB.
Other new mission requirements in fiscal year 2005 include the
Global Hawk beddown at Beale AFB, California; Predator force structure
changes at Indian Springs Air Force Auxiliary Field, Nevada; Combat
Search and Rescue aircraft beddown at Davis-Monthan AFB, Arizona; C-
130J simulator facility at Little Rock AFB, Arkansas; F-35 Joint Strike
Fighter test facilities at Edwards AFB, California; and various
projects supporting homeland defense, such as the air sovereignty alert
missions flown by the Air National Guard at Andrews AFB, Maryland;
Duluth International Airport, Minnesota; Atlantic City International
Airport, New Jersey; and Truax Field, Wisconsin.

OPTIMIZE USE OF PUBLIC AND PRIVATE RESOURCES

In order for the Air Force to accelerate the rate at which we
revitalize our inadequate housing inventory, we have taken a measured
approach to housing privatization. We started with a few select
projects, looking for some successes and ``lessons learned'' to guide
the follow-on initiatives. The first housing privatization project was
awarded at Lackland AFB, Texas, in August of 1998, and all 420 of those
housing units have been constructed and are occupied by military
families. Since then, we have completed three more projects (Elmendorf
AFB, Alaska; Robins AFB, Georgia; and Dyess AFB, Texas) and have three
more under construction (Wright-Patterson AFB, Ohio; Patrick AFB,
Florida; and Kirtland AFB, New Mexico). Once these three projects are
complete, there will be nearly 5,500 privatized units. We are on track
to privatize 60 percent of our U.S. based family housing by 2007. The
fiscal year 2005 budget request includes $83 million to support the
privatization of nearly 7,000 units at 6 bases: Tyndall AFB, Florida;
Scott AFB, Illinois; Columbus AFB, Mississippi; Keesler AFB,
Mississippi; Holloman AFB, New Mexico; and Fairchild AFB, Washington.

CONTINUE DEMOLITION OF EXCESS, UNECONOMICAL-TO-MAINTAIN FACILITIES

For the past 8 years, the Air Force has pursued an aggressive
effort to demolish or dispose of facilities that are unneeded and no
longer economically feasible to sustain or restore. From fiscal year
1998 through fiscal year 2003, we demolished 15.5 million square feet
of non-housing building space at a total cost of $200 million. This is
equivalent to demolishing more than three average size Air Force
installations. For fiscal year 2004 and beyond, we will continue to
identify opportunities for demolition and facility consolidation. In
general, the facility demolition program has been a success, enabling
us to reduce the strain on infrastructure funding by getting rid of
facilities we don't need and can't afford to maintain.

CONCLUSION

The near- and long-term readiness of our fighting force depends
upon this infrastructure. We will continue to enhance our
installations' capabilities, remain good stewards of the environment,
and ensure Air Force infrastructure is properly distributed to maximize
military readiness.

Senator Ensign. Thank all of you for your testimony.
We will begin a round of questioning now, and I appreciate
all of your statements. Obviously, we will not have time to get
to all of the questions that we have if we spent all of the
time just on my questions. So I will be submitting questions
for the record in writing to all of you, and I am sure the rest
of the Senators will have other questions for the record as
well.
Mr. DuBois, I would like to start with you. I want to talk
about the overseas basing master plan. What I would like you to
address first of all is, we were supposedly going to have this
plan and I understand that things sometimes can be a little
difficult. Secretary Wolfowitz said that we would have it, I
think it was, early 2003. We are now in 2004, and we do not
have the master plan.
Could I have a general idea about when we are going to have
that? As you mentioned, the overseas master plan is critical to
the whole BRAC process and where we are going to be bringing
people home and that kind of issue.
Also, if you could address some of the assets moving around
in Europe, talk a little bit about the European phase as well
as the Pacific Rim phase in general to give the subcommittee an
idea of the direction of what is happening in Asia and also
General Jones' plan in Europe.
Mr. DuBois. Thank you, Mr. Chairman. As I indicated in my
opening remarks, it is my understanding that the Secretary of
Defense intends to, after consultation obviously with the
President of the United States and the National Security
Council, to bring to Congress his major building blocks in
terms of the integrated global presence and basing strategy by
the end of May.
It is a complicated and complex exercise, as you can well
imagine. We began doing this exercise in August 2001 when the
Secretary and I and others discussed, how would the combatant
commanders, specifically the four regional ones in Europe and
for the Pacific and Central Command and then Southern Command,
best involve themselves in the footprint in their areas of
responsibility (AORs). That was done.
The second step was how to blend those AORs, because, as
Secretary Rumsfeld said to each of those combatant commanders:
The force structure in your area of operations does not belong
to you; that force structure belongs to the Commander in Chief,
the President of the United States.
Step three was, once they came back and once the Joint
Staff and the Office of the Secretary of Defense began to
blend, if you will, these recommendations that came from
individual combatant commanders, we also recognized, quite
frankly, the opportunity presented to us by the lessons learned
of Operation Iraqi Freedom, Operation Enduring Freedom, to
restructure a cold war footprint overseas.
All of that is leading towards, as I indicated, an end of
May conclusion by the Secretary as to a global footprint set of
recommendations. You asked about Europe in particular. Perhaps
the largest muscle move, if you will, is potentially out of
Western Europe. One would argue that we no longer face the
Warsaw Pact, we no longer face an inter-German border, possible
penetration.
Therefore, and looking at the world, looking at the global
responsibilities of the United States, the Secretary of
Defense, again in discussions with the Secretary of State and
the President, have concluded that a substantial force
structure change is not only necessary, it is advisable with
respect to Western Europe. We have since 1945 had a
considerable amount of force structure there. It has been drawn
down over the years. A considerable amount of force structure
still exists there, well in excess of 150,000 troops.
I think it is safe to say that some major portion of that
force structure, to include the United States Army presence,
will be returned to the United States. There is also force
structure that the Air Force has had for many years in Europe
which is also being discussed for return. But at this point and
at this time, I think you can appreciate that I am not in a
position to say it is going to be X division or Y division.
The important thing is to realize the decision will be made
and the BRAC process is the process by which those bases will
be selected, those best bases will be selected for the
infrastructure.
Senator Ensign. If I may interrupt, from what I
understand--and obviously none of this has been finalized--with
Eastern Europe now being obviously more--would be much more
forward deployed and similar to what we have going on in Kuwait
and Qatar as far as bases, the types of bases they are talking.
I have heard discussions about much more temporary-looking
training type bases.
Have the discussions taken place, or at least preliminary
discussions, on those countries, and the current burdensharing?
Burdensharing in Asia is much more favorable to the United
States than currently happens in Europe. With some of the
redeployment of troops back home, that does not happen. But
have discussions taken place at all with countries on any types
of burdensharing type arrangements in a more favorable light
for the United States, since we would be providing security for
those countries?
Mr. DuBois. Two answers to your question, and it is a very
important question. With respect to cooperative security
locations or forward operating locations, as we look at our
global posture and where we think we need to position our force
structure, it is true that we are looking South and East in
terms of Europe. However, it does not mean that we are going to
take major force structure and permanently station it in
Eastern Europe. It does mean that we are looking and have had
discussions, preliminary discussions, with some of these
countries where we might together have a cooperative security
location or a forward operating location.
The second part of your question, or my second answer to
your question if you will, sir, is how would one go about
paying for it, the burdensharing question. I have suggested
that there are several ways to do that. Certainly one of them
is not--repeat, is not--to have military construction dollars,
U.S. taxpayers' dollars, pay for it. It could be done, for
instance, on the basis of a lease. It is almost like a time
share. The United States may choose to enter into a negotiation
with country X, which in turn has established or brought
together a consortium of construction companies to build the
base to our specifications. We will have a ground lease, if you
will, small ``g'', that will be for X period of time, years,
and then we will have a usage fee. But it may also be a North
Atlantic Treaty Organization (NATO) installation so that other
countries also can pay a usage fee.
So there are ways that we are looking at this creatively to
finance it so that the burden is not on the U.S. taxpayer, but
that we are still maintaining maximum flexibility for
throughput of force structure at the time of need.
Senator Ensign. Just my last comment. I hope when we are
looking at that that we do try to maximize the dollars that we
have for the U.S. taxpayer. Even in a lease situation, it is
still coming out of the U.S. tax dollars if we are paying. So
the bottom line is that we benefit from that, there is no
question. We recognize that. But they also benefit from it, and
it just seems to me that in Asia we have a much better
burdensharing agreement than we have in most of Western Europe.
Mr. DuBois. Make no mistake, if we were to pull major force
structure out of Europe that is an enormous decrease in the
costs that the American taxpayer sustains to keep that force
structure in Europe, housing and hospitals and so forth.
Senator Ensign. Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Mr. DuBois, to follow up on Senator Ensign's question on
overseas basing, what is the status of U.S. discussions with
the host nations of our major current bases, such as Germany,
Korea, and Japan, as well as with nations where we may be
seeking new basing rights? Have we reached agreement with any
other nations on changes in the long-term basing of our forces
in their countries?
Mr. DuBois. Senator Akaka, the study that has been
undertaken with respect to Europe in particular over the past 2
years has included significant discussions with the countries
impacted, if you will, both between the President of the United
States and the heads of those countries as well as the
Secretary of State and the Secretary of Defense with their
counterparts. Most recently, Under Secretary of State Marc
Grossman and Under Secretary of Defense Doug Feith have been in
Europe in discussions with these countries.
I personally have discussed this with regional officials of
Germany, but again not in, this is the answer or this is our
decision, but rather, in the alliance framework this is what we
are thinking about. The Minister of Defense of Germany is
actually undergoing and has undertaken his own BRAC process,
because he knows that we are going to pull back some heavy
force structure.
Senator Akaka. As part of this global basing strategy, will
DOD be seeking to build any new overseas facilities, or to base
our forces in countries where U.S. forces are not currently
stationed?
Mr. DuBois. At this time, because of Operation Enduring
Freedom and Operation Iraqi Freedom, we have temporarily
created footprint, if you will, to use the term of art, both in
Afghanistan and several of the surrounding countries as well as
in Iraq. It is temporary. I do not know--and I have talked to
General Abizaid about this--what would ultimately end up being
``enduring.'' The situation is fairly fluid, as you can
appreciate.
While it is true that General Jones in the European Command
and Admiral Fargo in the Pacific Command have looked at
possible forward operating locations and possible cooperative
security locations where we do not now have infrastructure, it
is again not for permanent basing of U.S. force structure. It
may be agreements that we have negotiated for planes to be
refueled, for troops to be assembled, for equipment, for
logistics reasons and equipment reasons. But we would not
necessarily build new footprint, new infrastructure. It would
be in response to a situation that was presented to us.
But the important thing is to negotiate those agreements
very carefully with multiple countries so that we do not find
ourself in the position that we were in during Operation Iraqi
Freedom (OIF), where certain countries prevented us from doing
what was necessary.
Senator Akaka. Mr. DuBois, what assurances can you provide
that, regardless of the timing or the final form of the DOD
Global Posture Review, all the overseas military construction
projects in the 2005 budget are necessary because our forces
are certain to remain at these particular locations?
Mr. DuBois. Yes, sir. As you will see, as you have seen, in
the President's budget submission for military construction
this year it is down overseas significantly, in no small
measure because of exactly the issue that you raise. We have
only asked for military construction overseas in bases that we
consider enduring, A; and B, for mission-critical requirements.
Senator Akaka. Mr. DuBois, have any DOD funds been expended
to date to create facilities that are intended or could be used
to support the long-term or permanent stationing of U.S. forces
in Iraq or Afghanistan?
Mr. DuBois. General Abizaid and the Joint Staff and the
Office of the Secretary of Defense are looking at a number of
possible infrastructure investments of a temporary nature in
Iraq, as I indicated. At this time there is no--repeat, no--
decision by the Secretary to do more than that, which would
require authorization by this committee, appropriation by your
colleagues in the Appropriations Military Construction
Subcommittee.
It is true that General Abizaid and the component commands
in U.S. Central Command (CENTCOM) have a number of different
infrastructure needs, and I will say this in public testimony.
Unfortunately, a given brigadier general in Iraq used the term
``enduring'' and he should not have. But we believe these to be
temporary in nature.
The legitimate question is, is ``temporary'' 1 year, 2
years, 3 years? Is it less than 5? Traditionally, when we talk
about temporary or expeditionary infrastructure necessary, it
has always been less than 5, although there is an ongoing
discussion between our comptroller and the appropriators as to
which pot of money, which color of money, can be used for
contingency construction purposes.
Senator Akaka. Mr. DuBois, can you describe how DOD plans
to use the 2005 BRAC round to enhance our joint training and
warfighting capabilities?
Mr. DuBois. The selection--I am sorry, sir; were you going
to say something else?
Senator Akaka. I have asked that you describe how DOD plans
to use the 2005 BRAC round to enhance our joint training and
warfighting capabilities.
Mr. DuBois. In the selection criteria, which was published
recently, it specifically calls for decisions to be made on the
basis of joint operating capabilities, joint training, joint
logistics. This is somewhat of a change from the four prior
BRACs. The Secretary is quite insistent that all four Services
work together to determine where and when Marine Corps air
assets could be better positioned from a warfighting standpoint
on an Air Force base, and I could use the examples obviously
from a----
Senator Akaka. Are you describing what you call the
``purple'' bases?
Mr. DuBois. Well, all bases except for one are ``owned by''
an individual service secretary, Army, Navy, or Air Force.
There is only one military installation that the Secretary of
Defense ``owns'' and that is the Pentagon, and I am proud to
say that I am the installation commander of the Pentagon. But
purple, that is the only purple one in that sense, sir.
Senator Akaka. Thank you.
Senator Ensign. Senator Inhofe.
Senator Inhofe. Thank you, Mr. Chairman. Mr. Chairman, I
have six questions, but I have two that I have never been able
to get the answer for, so I start with those because I am
afraid I will not be able to get around to the rest of them.
It has been interesting to me to listen to the variety of
descriptions of this, of the Global Posture Review. There are
about 12 different terms that are used, but I think they are
somewhat interchangeable. I became interested in this. I have
talked extensively with Doug Feith, with General Jones. As I
mentioned in my opening statement, I am very much concerned
over how this relates to the BRAC decisions that are being
made.
What I would like to ask you is, let us just take a
hypothetical. You are looking at something, and I agree with
you when you say if we had 40,000 families stationed in Western
Europe that obviously if we could bring those back statewide
and we could have shorter deployments in areas where training
can take place, such as Eastern Europe, where they do not have
the environmental encroachment, they have the ranges, they want
us there, they will billet us, you would save untold millions
of dollars to do it that way, and I think that is where we are
going. At least I hope that is where we are going.
Now, as far as this round is concerned, that would have a
dramatic change. Now, one, it would seem to me that you would
first have to determine how many of these assets are going to
return stateside, because we are talking about stateside
realignments and closures, before you make the decision, the
BRAC decision.
Now, I understand it is going to be something that will
have to be happening simultaneously, but so that we can fulfil
our constitutional duties of oversight it would seem to me that
we are going to have to see what this is going to look like
before it comes into a BRAC situation. For example, what if you
make this decision and predicate your BRAC decisions based on
30,000 families coming back and it ends up being 40,000 or
10,000? Then you have not done the closure part of it right.
So it is which comes first, number one; and are we as the
oversight committee going to have access to those
recommendations before they take place?
Mr. DuBois. You have said it better than I can, Senator. As
I hoped I had indicated, the Secretary of Defense intends to
make decisions as to what force structure will return from
overseas to the United States by the end of May of this year.
Giving the BRAC process, if you will, a full 12 months, 1 year,
so that the Army--and I will pick on the Army because they are
dealing with large force structure in Western Europe--can
appropriately decide which base or bases is best for the
repositioning of those troops and their families.
Senator Inhofe. At the point that that decision is made
prior to going to General Lust, we as an oversight committee
are going to be able to see the numbers and what the numbers
are going to look like so that we can properly exercise our
duties; is that correct?
Mr. DuBois. That is correct.
Senator Inhofe. Okay, that is what I came to hear.
Now, second, I submitted a question or a suggestion that
the 50-50 law and other statutory limitations be included as
criteria. They were not, but I would like to know just what
your intentions are. Let us just--you can use hypothetical
cases if you want to. I understand that Solomon Ortiz had more
than just a passive interest in this when it was over in the
House, and I do too, not really from a parochial sense as much
as where we are statutorily.
The law is on the books. The law says that 50 percent of
this work is going to have to be done in public depots. Now, is
that considered when you are making determinations as to, under
the new criteria, the realignments or closures will take place?
In other words, I would assume you would not make suggestions
or have the commission make the suggestions that would violate
a law that is currently on the books; is that fair for me to
assume that?
Mr. DuBois. The laws that pertain to whether it is 50-50 or
core, any statute on the books, we have to take into
consideration. They shall not be ignored by the BRAC process.
Senator Inhofe. Well, but there is a big difference between
``they shall not be ignored'' and ``they shall be followed.''
Would they be followed? Will the law be followed?
Mr. DuBois. I would submit to you, sir, that the 50-50
process in particular requires that 50 percent of all depot
maintenance dollars appropriated by Congress be spent in
depots. It does not mean that they have to be spent in depot X
versus depot Y versus depot Z, as you well know. It is looked
at in the aggregate.
The particular depot level maintenance and repair
facilities are going to be examined, as was the statutory
requirement, all bases examined equally, are going to be
examined within the BRAC process and any statutory constraint
is going to be carefully, carefully considered. Now, let me try
to be as precise as I can. You have asked and you have stated
correctly, there is a difference between saying we will not
ignore. I would suspect----
Senator Inhofe. No, there is a difference between consider
and follow.
Mr. DuBois. Right, and we will follow the statute.
Senator Inhofe. Okay.
Mr. DuBois. Now, if at the end of this tortuous path, this
difficult path, in May, no later than May 16, 2005,
recommendations are made which involve--and please forgive me;
I am trying to use my words carefully here, as you can well
imagine--involve other statutes on the books, it will be
obvious to all, because the Secretary will make these
recommendations. The depots in particular are considered during
the BRAC must take into consideration those statutes that you
have outlined. We know that. I can only say I do not know where
we are going to end up.
The BRAC process this time--and I can only emphasize it
because I think it is important. People have to recognize that
this BRAC process--and the gentlemen on my left and right are
part and parcel of the process--is going to be as comprehensive
and as fair as is possible.
Senator Inhofe. I understand, and I believe in the process.
In my opening statement I commented that I have been here when
the original legislation was passed, and I believe it has been
successful up to this point, though. The question just
specifically was, are you going to be following the law, and I
think you have said you will be following the law. That was
what I wanted to find out.
Okay, or do you disagree with that?
Mr. DuBois. No, I do not disagree with you.
Senator Inhofe. All right. Then I think I have just 1
minute left and I am going to real quickly ask these questions,
and perhaps you are going to have to do it for the record
because I am concerned about it.
First of all, I look on page 47 of your document, the
defense document that outlines the criteria, and I see that the
decisions made in terms of closing the bases are based on 43
brigades, while the Army, General Lust, is requesting 48
brigades. So it would be 19 percent in excess capacity based on
43 brigades, but 9 percent based on 48 brigades. Which are we
using? Maybe, General Lust, you have that answer?
General Lust. Sir, right now we have permission to go from
33 to 43. In fiscal year 2006 the decision will be made between
the Army and OSD as to whether we will be allowed to go and get
the other five, sir. Right now we are going to 43.
Senator Inhofe. I understand that. But you have recommended
48.
General Lust. Yes, sir. We are looking to have a place to
put 48, sir.
Senator Inhofe. Okay, that is fine. Thank you very much.
Then the other one, this can be for the record, Mr.
Chairman, because I am using up too much of your time. I would
like to know for the record, will your recommendations account
for the fact that we now need, with Future Combat System (FCS)
coming on line and looking out in the future, more maneuvering
room? Is that going to be a consideration that you will be
taking? You can answer that for the record.
[The information referred to follows:]

The Army's Base Realignment and Closure analysis and
recommendations to Office of the Secretary of Defense will consider
maneuver requirements associated with Future Combat System-equipped
formations.

Senator Inhofe. Then the last question I would like to ask
for the record is: we are looking at trend lines now in terms
of environmental encroachment. You accurately outlined other
types, urban encroachment and others too, but environmental
encroachment, the line is going up. So I will be asking, will
you be considering this, this increase of environmental
encroachment that we are all suffering under right now, both
here and overseas, as you make these decisions?
Mr. DuBois. I certainly will give you more complete answers
for the record----
Senator Inhofe. Very good.
Mr. DuBois. But the answers to both of your questions in
one word is yes.
[The information referred to follows:]

In accordance with the Base Realignment and Closure statute, the
Department will base all its closure and realignment recommendations on
approved selection criteria that reflect military value as the primary
consideration. The issue of encroachment is captured by criterion two,
which requires the Department to consider the availability and
condition of land, facilities, and associated airspace. The test of
selection criterion two follows:

The availability and condition of land, facilities, and
associated airspace (including training areas suitable for
maneuver by ground, naval, or air forces throughout a diversity
of climate and terrain areas and staging areas for the use of
the Armed Forces in homeland defense missions) at both existing
and potential receiving locations.

Senator Inhofe. Okay. Thank you, Mr. Chairman.
Senator Ensign. No problem.
Senator Allard. Mr. Chairman, I have about two and a half
single-spaced pages of questions here. Obviously I am not going
to make it through all my questions, and I assume we are going
to have an opportunity for us to submit questions for them to
respond within a week or 10 days? What will be your guideline?
A week?
Do you think you could respond back within a week?
Mr. DuBois. I will not let them do anything else.
Senator Allard. Well, this is important, and I would like
to bring to the committee's attention an issue that has evolved
over the last year at the now-closed Lowry Air Force Base in
Denver, Colorado. Specifically, I would like to touch on what
has happened after an initial discovery of asbestos buried in
the soil at Lowry. This discovery was found on a parcel of land
that was deemed suitable for residential use by the Air Force
and where houses had already been constructed.
Mr. Chairman, hundreds of Coloradans now live in these
houses. Unfortunately for the families living on the site, the
Air Force has been unwilling to work out an agreement to the
benefit of all parties. It is clear that the cause of asbestos
containment was an old Air Force hospital which was destroyed
and, rather than being disposed of, the debris was buried
across the site. Despite acknowledging this demolition after
the fact, the Air Force has now refused to cooperate with the
State of Colorado and the home builders who had to pay for the
cleanup of asbestos.
I have a series of questions that I would like to ask
General Fox. But before I get into them, I would like to
acknowledge that I met with Mr. DuBois yesterday regarding this
issue and I am pleased to report that Mr. DuBois is poised to
help resolve the problem at Lowry. We had left the discussion
at that time that we would follow up with some of the
questions, and we apparently are still going to get some
resistance from Under Secretary Nelson Gibbs. I felt very good
after our discussion yesterday, but today I do not feel so
good.
So I feel compelled to begin to ask some questions and just
begin to put some things in the record. I hope that you are not
offended or that General Fox is not offended in any way. But it
is just, I do not see the chairman having any more hearings
like this, so this is my one opportunity to begin to build this
into the record. So I have to take this opportunity at this
particular point in time.
In 1993 the Air Force, the Environmental Protection Agency
(EPA), and the State of Colorado conducted an environmental
baseline study for Lowry Air Force Base. While the survey
indicated a former hospital at the site, the survey did not
disclose the fact that the Air Force has buried debris,
including asbestos, across the Northwest neighborhood of the
Air Force base.
Mr. Chairman, I ask that the excerpts from the baseline
survey be entered in the record, and I have it.
Senator Ensign. Without objection.
[The information referred to follows:]

Senator Allard. My question to you, General Fox: Why was no
information about the buried asbestos disclosed by the Air
Force in 1993?
General Fox. Senator Allard, I would have to take that for
the record. I think that our investigations at that point did
not reveal to our knowledge that we had a problem. I think the
studies that have been done since and our investigations since
have not revealed the problem to the extent that has been
brought up.
I do want to add that the claims that are presented to the
Air Force--we are very concerned about, we want to be
responsive to. We are conducting legal reviews with our judge
advocate, with the DOD general counsel, and with the Department
of Justice, to look at the responsibility for those claims. If
the liability is with us, then we will do everything within our
power to adjudicate the claims quickly.
[The information referred to follows:]

The Air Force did not bury asbestos in the Lowry Northwest
Neighborhood (NWN). During past building demolition, some debris
remained in place, but to the best of our knowledge, the Air Force did
not intentionally dispose of asbestos construction waste.
Unfortunately, the Air Force was unaware of the subsurface items
containing asbestos at the time of the 1993 survey.
Had we known of remaining construction debris, we would have
disclosed this information. From the information that was available, it
wasn't known that anything like that had happened.
The Air Force, EPA, and State regulators, working together as the
BRAC Cleanup Team (BCT), have conducted numerous environmental studies
and reviews to identify any environmental contamination or conditions
affecting Lowry. These efforts included the 1993 Environmental Baseline
Survey (EBS), known as the EBS Phase I, which was supplemented in 1994.
The BCT was also involved in studies and document reviews conducted
under a facility assessment in 1996, an EBS Phase II completed in 1999,
the initiation of an EBS Phase III in 2002, a reevaluation of the
base's operational history in 2002, and an all-sites review (now being
addressed under a RCRA facility assessment ordered by the state)
initiated in May 2003. The completed studies and documents were made
available to the Lowry Redevelopment Authority (LRA) for their review,
as well. Despite these efforts by the BCT, locations containing debris
were not identified or raised as a concern by any of the BCT members.
The 1993 EBS mentioned possible demolition debris near the former
airfield runway, and four rubble sites at Lowry that might contain
demolition debris. The EBS described a 1973 aerial photo indicating
possible stockpiling of earth, residual concrete, and building rubble
from the demolition of the former base hospital near the northern end
of the former north-south airfield runway. The EBS also briefly
described a 1983 aerial photo that indicated the northern end of the
runway was then clear of the stockpiled material, and that possible
grading or removal of the material to other base locations may have
occurred since 1973. The 1983 photo showed that several former
structures near the NWN appeared to have been removed by demolition.
The EBS states that a former Lowry employee recalled that the
demolition debris was moved to a solid waste site on Lowry, away from
the NWN.

Senator Allard. Very good.
It is my understanding that this same baseline survey which
did not reveal asbestos in the soil also failed to include
dummy munitions later found at the base, failed to include
eight underground storage tanks filled with hazardous wastes
left on base, and did not include 20 millimeter high explosive
fragments from projectiles found at Lowry.
Knowing this, do you feel that the Air Force has done an
adequate job of characterizing the extent of environmental
contamination at Lowry?
General Fox. Sir, I would like to take that for the record.
[The information referred to follows:]

The Air Force, in conjunction with EPA and the State, has done and
continues to do more than an adequate job of characterizing the extent
of environmental contamination at Lowry. However, the Air Force always
seeks to do better, especially when deficiencies are discovered which
reveal that the painstaking process undertaken by the BCT to identify
unknown sites did not always succeed. Lowry has been a challenging
environmental effort, partially due to unknown environmental conditions
caused by the constant change in the numerous military missions and
tenants from 1937 until the base closed in 1994. We are continuing our
due diligence efforts to increase the possibility that other
potentially contaminated sites are located and receive an appropriate
response.
The ``dummy'' munitions that were found were brass shell casings
that contained no explosive charge or powder and are similar to the
small shells occasionally kept by military members as souvenirs. They
were not hazardous.
The projectile fragments referred to were target practice fragments
found by the Air Force during its remedial investigation of the base's
firing range berm, where one would reasonably expect to find such
fragments as a result of target practice. An ordnance team from Fort
Carson stated the fragments were not from high explosive projectiles.
Also, of the eight underground storage tanks referred to, three
contained hazardous waste, but all were found by the Air Force during
environmental cleanup, as part of the Air Force's ongoing investigative
efforts. Of course, the regulators and the redevelopers were kept
apprised of these Air Force discoveries. The Air Force removed the
tanks in consultation with the State regulators, who agreed with the
Air Force's work and disposal plans. When the tanks were discovered and
removed, the Air Force still owned the property where the tanks were
located.

Senator Allard. The Air Force also designated in the
baseline survey that the Northwest neighborhood was a category
I site, which means that there was no evidence of hazardous
materials and no further investigation of that site was
necessary. Given the discovery of asbestos across the site,
would the Air Force still give the site a category I
designation?
General Fox. Sir, I would have to respond to that for the
record.
[The information referred to follows:]

The Air Force did not designate the entire Northwest Neighborhood
as a ``Category I site.'' Portions of this property, which encompasses
over 90 acres, were given other DOD Environmental Condition categories.
For purposes of environmental due diligence, assigning DOD
environmental condition categories, and conducting environmental
restoration, the Air Force did not refer to or consider this entire
property as a single ``site.''
Most, though not all, of the property in the Northwest Neighborhood
was considered DOD environmental condition category I at property
transfer. Category I property is property where no release or disposal
of hazardous substances or petroleum products has occurred (including
no migration of these substances from adjacent areas). Property that
receives a DOD environmental condition category II through IV can also
be transferred by deed, and several properties within the NWN fell
within those categories.
Had we the information then that we have now, the Air Force would
not have designated as category I the former hospital site. If the
amount of health risk did not warrant a CERCLA response, that portion
of the property may have qualified as a different category that would
have still allowed the Air Force to transfer the property by deed. If
the health risk warranted a CERCLA response, then those portions of the
property would have been a different category that does not allow
transfer by deed until the necessary CERCLA responses are taken.

Senator Allard. Does this discovery not make the Air Force
liable for cleaning up the site? You probably want to consult
with your lawyer on that one.
[The information referred to follows:]

The issue of liability for environmental cleanup can be complex,
depending on the facts and circumstances, and agreements entered into
by the parties. It is impossible to generalize. The circumstances vary
from location to location. The Air Force and the Department of Justice
are currently investigating and analyzing facts and circumstances
surrounding the transfer and development of the property within the NWN
at the former Lowry AFB and the subsequent asbestos cleanup activities.
This investigation and analysis is guided by current CERCLA case law
and precedent. No decision has been made by the Federal Government as
to the liability of the various parties involved at this time. The
Federal Government, and specifically the Air Force, will pay whatever
portion of the liability it is responsible for pursuant to law.
The Air Force is required by Federal law (CERCLA) to promise future
property owners that it will perform whatever remedial action is
necessary under Federal law to protect human health and the
environment. Necessary remedial actions are determined in accordance
with Federal procedures established under CERCLA. The Air Force is
conducting a CERCLA investigation of what remedial actions are
necessary, if any, for the property in the NWN that it still owns. The
Air Force is also willing to conduct such an investigation for the
property that it has conveyed. This, of course, is somewhat complicated
because of actions by others on such property. What reimbursement the
Federal Government is obligated to make in these circumstances is what
is under investigation by the Air Force and the Department of Justice.

Mr. DuBois. Senator Allard, if I might. General Fox, the
Civil Engineer of the Air Force, has a great many
responsibilities, but one of them is not the issue of
environmental cleanup on previously BRAC'd installations. So I
just wanted for the record to demonstrate that the General,
knowledgeable about many things, that is why he is taking some
of these questions to be responsive to you in more detail
later.
Senator Allard. Well, why do we not do it this way. Like I
say, I have a number of questions here, and I did not expect
him to have the answer on these, but perhaps maybe you want to
share some enlightenment on it. In view of your comments, why
do I not just submit them to General Fox with the idea that you
will work with him and other individuals in the Air Force,
perhaps working with Assistant Secretary Nelson Gibbs, to see
if we cannot get a response back to us.
I would ask that you at least respond to the questions, and
I know that you will want to give them--perhaps more than one
person will want to aid in putting together responses.
Mr. DuBois. We will take your questions, sir. As I
indicated to you yesterday in our meeting, my understanding of
the recent events are that we are moving towards a constructive
dialogue with the seven claimants involved. We take very
seriously this issue of, A, not characterizing appropriately
the land. We have many parcels of land, quite frankly, with
very bad documentation.
Senator Allard. I understand that.
Mr. DuBois. B, that we will move to appropriate claim
adjustments when presented with appropriate documentation,
which we have some of but not entirely.
Senator Allard. I appreciate that, and I appreciate again
your reassurances that you will work with us on that. We will
get some questions to you. I want to thank you, Mr. DuBois, for
wanting to work with us. I appreciate that.
Again, thank you, Mr. Chairman.
Senator Ensign. Thank you.
Senator Cornyn, from what I understand, with your
indulgence, I have to catch a flight, so I just have two quick
questions and then you can chair the rest of the subcommittee
and you can ask your questions.
Mr. DuBois. Put the gavel in his hand.
Senator Allard. Mr. Chairman, before you go, I also had
another document I want made part of the record in putting my
questions. It is an economic development conveyance agreement
between the Department of the Air Force and the Lowry Economic
Redevelopment Authority.
Senator Ensign. Without objection.
[The information referred to follows:]

Senator Ensign. This actually would be a fairly quick
question for each one of the service engineers. Have you, any
of you, been able to identify an impact to your budget request
from any element of the housing privatization accounts other
than direct appropriations that you did not account for? Let us
go down the line.
General Williams. I think we in fact have accounted for the
impacts of privatization on our budget. We certainly have a
concern, as I mentioned earlier, with the cap and exactly how
that is going to affect us in our ability to continue with our
privatization program, our PPV program.
The one area that we continue to analyze, of course, is as
we privatize we certainly expect our maintenance and our
sustainment sort of requirements to go down. However, we
understand that it is certainly not a one for one sort of an
exchange. Although sustainment will be decreasing in some
cases, we still have older facilities that still are required
to be maintained and we end up pouring more dollars into those
older ones until we can continue with that overall
privatization effort.
I would say that we are in fact looking at that. We are
looking and taking those into consideration as we go through
our privatization effort.
Admiral Weaver. Sir, I believe we have accounted for that
in the budget submission. Approximately 30 percent of our
housing replacement is leveraged against 2005, and again we are
very concerned about the cap for that. But we have also
accounted for the transfer of housing allowance into the
purchasing process as opposed to continuing to maintain a
funding level of traditional family housing support. In other
words, we see them going in opposite directions, which is what
we intend for them to do.
Senator Ensign. General Lust?
General Lust. Sir, would you restate your question for me?
Senator Ensign. Have any of you been able to identify an
impact to your budget request from any element of housing
privatization agreements other than direct appropriations that
you did not account for?
General Lust. Now I understand. Yes, sir. When we do
privatization, we do not budget for the utilities, the service,
and maintenance, and that part is affected there. But like the
Marine Corps, I expected the requirement to drop down more than
it has. When we got to looking into it, what happened is what I
have left are a lot of historic quarters, which take a
tremendous amount of money to maintain.
But my real concern about privatization, sir, is getting
the cap lifted. If I get the cap lifted, housing, it is going
to take $256 million to complete current privatization projects
to get adequate housing. If it is not, the equivalent MILCON
will be $2.2 billion. It will take me somewhere over 25 to 30
years to get it built out. With the cap lifted, I can do it
somewhere between 8 and 14 years.
Senator Ensign. Okay.
General Fox?
General Fox. Senator Ensign, I will tell you that we may
have been a little over optimistic when we first started
housing privatization, and so we looked at the budget and
removed some operation and maintenance funds prematurely. We
now have caught up on the privatization side. We are actually
executing privatization at the rate that we thought we could
initially. So we are more in line with O&M expenditures as we
had projected.
By 2007, as we meet the goal to take care of our housing in
the continental U.S., our O&M accounts for housing are going to
come down, and we are already looking at that and how to
reprogram or budget that actually into base allowance for
housing. So there will be savings post-2007. But initially we
had a little problem because we were a little over optimistic.
Mr. DuBois. Mr. Chairman, if I might, just one quick
comment. I will sort of take advantage of your question,
because I think it is not only a matter of housing
privatization cap, it is a matter of scoring. This is an issue
that we struggle with, that OMB struggled with. But OMB and the
Department of Defense are clear, as I believe are a number of
the members of the House and Senate, that were our housing
privatization projects to be scored differently than they have
been scored to date the program would come to a halt.
Senator Ensign. Thank you. Well said.
Mr. DuBois, this has to do with the Readiness and Range
Preservation Initiative. We just want to get it on the record.
Since being enacted, how have each of these provisions
specifically, the ones that we have enacted, specifically
helped the armed services meet their military training,
testing, and readiness requirements?
Mr. DuBois. Yes, sir. A complete answer will be provided
for the record. It is a good question. It is a complicated
question, whether we are talking about the Migratory Bird
Treaty Act, the Marine Mammal Protection Act, or the Endangered
Species Act. I will say just briefly, the Endangered Species
Act amendment which allows the Sykes Act to be used for a
holistic approach to critical habitat management and
designation has resulted in some very significant protection of
endangered species habitats at the same time of no net loss in
training areas. This is true whether we are talking about Camp
Pendleton with respect to the Marines or Fort Bragg with
respect to the Army.
But I certainly will take this opportunity, and I
appreciate the question, to answer in more detail for the
record.
[The information referred to follows:]

Congress passed much-needed legislative provisions in the National
Defense Authorization Act (NDAA) for Fiscal Years 2003 and 2004 and the
provisions passed so far are key enablers of range sustainability, part
of the administration's Readiness and Range Sustainability Initiative.
The amendment to the Migratory Bird Treaty Act is ensuring that
military readiness activities can proceed without interruption. As
directed by the NDAA for Fiscal Year 2003, the U.S. Fish and Wildlife
Service (USFWS) has issued its proposed rule that will allow the
Department of Defense to incidentally take migratory birds during
military training.
The NDAA for Fiscal Year 2004 authorizes the use of integrated
Natural Resource Management Plans (INRMPs) in lieu of Critical Habitat
designation, if approved by the Secretary of the Interior, thus
allowing ranges and installations to effectively manage their natural
resources while supporting military readiness. The USFWS has authorized
the substitution of INRMPs for Critical Habitat designations under the
Endangered Species Act at Marine Corps Air Station Miramar and other
INRMPs are being considered.
Clarification of the Marine Mammal Protection Act's (MMPA)
definition of Level B Harassment in the NDAA for Fiscal Year 2004
allows the Navy to test and train with active sonar without
restrictions based on imprecise statutory language and varied
interpretation of the act's language. Congress also added a national
security exemption to the MMPA for military activity in time of
national emergency, an exemption provided in other major environmental
legislation that was not present in the original and reauthorized
versions of the act. These changes allow us to better balance our
readiness requirements with our legal obligations to ensure military
activities are protective of marine mammals--allowing us to ``train as
we fight'' when our activities do not have biologically significant
effects on marine mammals.
One of the most useful provisions for countering encroachment is
section 2811 of the NDAA for Fiscal Year 2003. This provision allows
the Services to take a proactive role in developing programs to protect
installations and ranges from urban sprawl by working with states and
nongovernmental organizations to promote sound land use. The Services
are now implementing this authority and forming compatible land use
partnerships at the state and local level. For example:

In late 2003, DOD, the State of Florida, and the
Nature Conservancy entered into a partnership to work to
conserve a corridor of open space stretching from the
Apalachicola National Forest to Eglin Air Force Base--the
Northwest Florida Greenway. The Nature Conservancy has praised
the Greenway as helping to protect an ``epicenter of
biodiversity in the United States,'' an area increasingly
threatened by urban sprawl.
Also in 2003, a landmark cooperative agreement was
signed between the National Guard Bureau and the Florida
Department of Environmental Protection allowing each to cost-
share the purchase of key buffer space around Camp Blanding, a
training site of the Florida Army National Guard. The
acquisition of 8,500 acres will be possible through funding
from the National Guard Bureau and the State's Florida Forever
Program.
The Army's Fort Bragg is actively participating in a
cooperative agreement with the State of North Carolina, the
Fish and Wildlife Service and several nonprofit groups to cost-
share the purchase of land or easements to reduce incompatible
land use and promote ecosystem protection around Fort Bragg. It
is also spearheading an effort called ``Sustainable Sandhills''
to strengthen regional planning in the area.
The Marine Corps' Camp Lejeune in North Carolina has
worked closely on surrounding regional land issues with
nonprofit groups and other governmental partners since 2001 as
part of the Onslow Bight Conservation Forum. In 2002, this
group purchased 2,500 acres of open space (which was slated to
become a housing development) adjacent to the Camp Lejeune tank
and rifle ranges.

Senator Ensign. Thank you.
Senator Cornyn.
Senator Cornyn [presiding]. Thank you, Chairman Ensign. I
apologize that I was delayed, detained by another hearing on
another important subject. That has to do with reform of our
immigration laws. But I did want to come to the hearing and,
now that Senator Akaka and I have you the rest of the
afternoon, I just have a few questions I want to ask.
Seriously, I do not have that many questions, but they are
important to me and important to the people I represent.
I know the hearing is designed to cover a range of
important military installation environment programs, but, as
Mr. DuBois knows from our earlier meeting this week, I wanted
to use this opportunity to ask some questions on the record
about BRAC. With 17 active military installations in my State
and 1 out of every 10 individuals in uniform calling Texas
home, this is a very significant issue.
But as I also told Mr. DuBois during the very helpful
meeting that we had earlier, I am fully committed to the goal
of being a good steward for the taxpayer, making sure that
every dollar that we spend on the Department of Defense budget
is spent wisely and in the national security interests of this
country. But this is always a difficult, difficult process, and
hence my interest and my constituents' interest in this
subject.
So Mr. DuBois, I do want to thank you again for your
courtesy in meeting with me earlier this week. We did have an
opportunity to meet for a good period of time. But I do want to
get your answers to some of these questions, some of which may
be slightly repetitive, on the record so I can know that I have
discharged my responsibilities and I have you on the record.
I know you talked about the Global Defense Posture Review
and how that interacts with the domestic BRAC, and I am advised
by my staff that you have indicated that this committee and
Congress ought to be able to get the results of the Global
Defense Posture Review by the end of May. Is that correct, sir?
Mr. DuBois. Yes, Senator, that is my understanding of the
Secretary's intention.
Senator Cornyn. Very good.
I have expressed to you in private and I will take the
opportunity to express again in public my concern that that is
a lot of balls in the air at one time to do the Global Defense
Posture Review, which I know has been under way for a number of
years and which is now just culminating, and at the same time
we are undertaking to do the base realignment and closing
process.
That is why it is important to me and I know important to
you and everyone at the Department of Defense that it be done
as deliberately and as carefully and as precisely as it
possibly can be. So we will be communicating often about that
subject as we go along, because I am intensely interested in
how that process is going to go forward.
Could you explain again just briefly how the joint cross-
service groups are working with the individual service BRAC
analytical teams to incorporate jointness in the process?
Mr. DuBois. This BRAC, that is to say the BRAC 2005,
Senator, the Secretary has instituted from the beginning of the
process even joint cross-service groups to look at those areas
of real property assets that more than one service has. The
joint cross-service groups operate independently. However, they
all report to the infrastructure steering group.
The infrastructure steering group, chaired by the Under
Secretary for Acquisition, Technology, and Logistics, on which
I serve as Deputy Under Secretary for Installations and
Environment (I&E), the four vice chiefs and the three Service
assistant secretaries for I&E, along with the vice chairman of
the Joint Chiefs, it is truly an integrated multi-service
effort. Each joint cross-service group, however--and you have
asked a very crucial question: how will they interface,
interact with, the individual Services and military
departments? We have addressed this issue at the infrastructure
steering group level. It is our intention and each of the four
vice chiefs have committed to not only sharing their views of
life and installations and military value assessments with the
joint cross-service groups and vice versa--in fact we have a
time line that shows those individual organizations sharing at
a particular time--it is also crucial that the Services share
between the Services.
Each of the vice chiefs and each of the assistant service
secretaries for installations and environment committed to
doing just that. In fact, it is already going on today.
Now, I hope everyone in this room appreciates the fact that
we must protect this process. By protection, I mean preserving
its integrity from outside influences and from an inadvertent
release, if you will, of information that taken by itself could
lead one to the wrong conclusion.
I have been asked frequently why can we not be more
transparent, and I have answered because I think the process is
very transparent in what it is supposed to do and how it is
organized, the selection criteria, the report that the
Secretary made a week-plus ago. However, the transparency is
also sustained at the other end of the process. When the
Secretary reports to the commission no later than May 16, in
addition to his conclusions and recommendations will come all
the documentation, all the computations, all the implementing
guidance, all the so-called subcriteria, all the weightings, so
that one and all, not just members of the commission but the
public at large, the impacted communities, will have plenty of
time to assess how the Department reached its decisions.
Senator Cornyn. Thank you very much for that. I just have
one other question. Then I will turn it over to Senator Akaka
for any additional questions he may have.
This is a question that, as you noted in our earlier
meeting, that I put to the Secretary of Defense. But I will ask
you now here in this meeting, like I asked him, on the record.
How will homeland defense be factored into the BRAC process?
Mr. DuBois. The selection criteria by statute requires
homeland defense to be considered in this process. No one knows
more intimately or, quite frankly, emotionally than the
Secretary of Defense as to the importance of our Nation's
security and our Nation's homeland defense and the
responsibility that the Department has to keep our people safe,
secure, alive and free.
How we go about incorporating the requirements for homeland
defense--another transparency--is in the selection criteria.
The Services will do it, the joint cross-service groups will do
it. As a matter of fact, I have already had discussions with
the Assistant Secretary of Defense for Homeland Defense, who is
our principal point of contact with Secretary Ridge and the
Homeland Security Department, on how to best incorporate his
views and needs as those of Secretary Ridge.
So it is a question and it is an issue that we hold dearly.
Senator Cornyn. Thank you very much for answering that
question. I would just say in conclusion before I turn the
floor over to Senator Akaka that I appreciate your recognition
of the importance of the transparency. Consistent with having a
BRAC process that maintains its integrity and freedom from
undue political and other influences. As some sage once said,
you cannot take politics out of politics. There is going to be
obviously attempts to politicize the process, and we have
already seen some of that, unfortunately.
But as long as I am convinced and I am confident, as long
as Congress is convinced, that this process maintains its
integrity and its goals and objectives, as you stated, and as
we have discussed before, it will retain the confidence of
Congress no matter how much local disadvantage or disruption
may exist, as long as those goals of being a good steward of
the taxpayer dollar and maintaining the maximum efficient use
of our military force are consistent goals.
Thank you.
Senator Akaka.
Senator Akaka. Thank you, Chairman Cornyn.
Mr. DuBois, we just received a copy of DOD's assessment of
its increased need for security guards after September 11, and
its plan for meeting those requirements on a long-term basis.
The report indicates that DOD's security guard requirements
will grow by over 60 percent compared to its size in fiscal
year 2001 and then will remain relatively stable for the
foreseeable future.
It also indicates that DOD managers have expressed a
preference for hiring new civilian employees to meet these
needs because, one, civilian guards can be authorized with
police powers not available to contractors; and two, security
guards often play important roles in the agency interface with
the public and it is preferable to have in-house employees for
this purpose.
Despite these findings, the report states the Department
has no intention of hiring any additional civilian security
guards to meet the increased need. The report states, ``Meeting
the increase through expanding either the civilian or active
military work force is difficult because the end strength of
both work forces is constrained and there are many other
demands on these personnel.''
For this reason, the Department has asked us to lift the
restriction on employing contract security guards. My question
is, what limitations are imposed on the end strength of the
civilian employee work force and why are you letting these
limitations drive you to contract out security guard functions
even though managers have told you that civilian employees
would be the preferred solution?
Mr. DuBois. Senator, that is a very complex question. I
will take it for the record. But let me answer at least
briefly.
The military personnel accounts, of course, the authorized
end strength of each of the four Services, is set by the
authorizing committees. It is true that we are trying to move
as many soldiers, sailors, airmen, and marines pulling security
duty out of that particular occupational specialty and
reassigning them to the field, to combat units. Using as an
example the Pentagon, after September 11 the Army had to
restation, rotating, not permanently, a battalion of military
police (MP) to protect the National Military Command Center
called the Pentagon. In the process I, as the Director of
Administration and Management, as the so-called mayor of the
Pentagon, I have increased the Pentagon civilian police force,
the Pentagon Force Protection Agency, by a factor of nearly
three.
It fortunately has been able to now--I have been able to
return to the Army that battalion of MPs for duties, as you can
well imagine, in Iraq and Afghanistan and elsewhere.
There is also a quirk, if you will, in the law that says
when we were asked for the authority to increase the guards on
installations so that we could free up uniformed personnel for
OIF and Operation Enduring Freedom (OEF), it said we could only
contract out the marginal increase as opposed to restructuring
where we would put our civilian employed guards.
I want to take your question for the record. I want to work
with Dr. Chu, our Under Secretary for Personnel and Readiness,
so that we can give you the best possible answer.
[The information referred to follows:]

The limitations that drive the Department are not based upon
manpower end strengths but rather the need to reduce the number of
Reserve soldiers mobilized for this effort. The hiring of contract
security guards was the most expedient means to get manpower on the
ground to help reduce the number of mobilized serve soldiers needed for
this purpose and to overcome the hiring lag of civilian police. The
Department needs to retain hiring flexibility because we cannot be
certain, at this time, that there is a long-term requirement that
justifies the hiring of permanent employees. Nowhere was this more
evident than in the Army. Section 332 of the National Defense
Authorization Act for Fiscal Year 2003, provides temporary relief by
authorizing the Department of Defense to employ new Contract Security
Guards (CSGs) during fiscal years 2003, 2004, and 2005, to meet the
increased requirements established in response to the terrorist attacks
of September 11. This authority permitted the Secretary of the Army to
hire over 4,100 CSGs, relieving over 4,100 soldiers from installation
access control missions to perform other more urgently needed
functions. During fiscal year 2004, the Department of the Army civilian
police manpower constituted only 30 percent of the authorized workforce
requirement.

Senator Akaka. I would appreciate that.
Mr. DuBois, last year DOD shifted its goal for cleaning up
formerly used defense sites--we know it as ``FUDS''--from 2014
to 2020. This year the Army has informed us that the funding
level for the cleanup of FUDS in its budget is not sufficient
to meet even the 2020 goal. Moreover, this goal does not even
include the cleanup of unexploded ordnance at FUDS, for which
currently we understand there is no goal.
Why has the Department of Defense not been willing to step
up to its responsibility and provide adequate funding to clean
up the environmental problems that it has caused at FUDS?
Last year the Army provided us with a plan for munitions
response activities at the FUDS in Waikoloa, Hawaii. The Army's
preliminary cost estimate for completing the required response
actions was $680 million. My question there is, when do you
expect that DOD will start providing the funds needed for this
cleanup action?
Mr. DuBois. Senator Akaka, let me be very clear. The
Department of Defense will clean up any FUDS, including any
BRAC site, any closed range, wherein we are presented with a
situation that results or could result in a negative impact to
health, human health or the environment.
We are presented every year, unfortunately, with situations
that we did not plan for or could have predicted. My old
neighborhood in Washington, DC, Spring Valley, is an example of
that. We moved dollars during the fiscal year to address the
Spring Valley situation.
Each of the individual Services--and I can defer to these
gentlemen or I can answer in more detail for the record if you
would prefer--fund FUDS. The Army is our executive agent for
that cleanup. I know that the Navy in particular in Hawaii at
Waikoloa have been working with the State for the past 10 years
on that cleanup situation.
The unexploded ordnance situation is, as we have promised
you and as we have testified to, a situation that does not get
any better defined unless we spend the time and the money to
characterize some of these sites, which we are doing in
conjunction with the States, trying to prioritize those sites.
But I will give you a more complete answer for the record.
[The information referred to follows:]

The Army submitted a report to the committee in July 2003, on their
plan to clean up the former Waikoloa Maneuver Area, in response to
Senate Armed Services Committee Report 107-151. In general, the Army's
plan for cleanup of the property is to: 1) perform required munitions
responses, in the near term, in those areas where the known or
suspected presence of munitions and explosives of concern pose the
highest risk to the public and 2) determine the best course of action
to address the potential risks in other portions of this area in the
longer term. The Army, in coordination with state regulatory agencies
and local communities, identified the Waikoloa Village, Waimea Town and
O'uli parcels as the highest risk because these areas are either
developed or are immediately adjacent to developed areas and the public
has encountered munitions at these sites. Since the report was
submitted, the Army cleared a total of 914 acres of ordnance from
within the Former Waikoloa Maneuver Area. This initial clearance effort
concentrated in and along the margins of existing neighborhoods in the
Waikoloa Village, Waimea, and Lalamilo communities. Due to a variety of
project efficiencies developed and adopted during this effort,
approximately 214 additional acres were cleared of potentially
explosive ordnance. Close to 100 potentially explosive items were
recovered during the clearance to include Mk II hand grenades, 60mm
mortar rounds, 81mm mortar rounds, 2.36 inch rockets, M9 rifle
grenades, M15 burster tubes, 75mm high explosive artillery rounds,
105mm high explosive artillery rounds, and 155mm high explosive
artillery rounds. The Army has also initiated a major follow on
clearance effort expanding the safety margin in and around the Waikoloa
Village, Waimea, and O'uli communities of the project. Army continues
to provide construction safety support and property assessment and
clearance to the proposed Castle & Cook development at Waikoloa and
residential construction for the Hawaii State Department of Hawaiian
Home Lands at Lalamilo. In addition, the Army is providing construction
support to the Waikoloa Highlands and Bridge Aina Lea Ltd. developments
in the Waikoloa area. Ongoing institutional support includes
development of educational materials for grade and middle school
students in the area. Other Army outreach efforts include numerous
print and video (television) reports, information posters, and
attendance at community fairs and celebratory occasions.

Senator Akaka. Last year, Mr. DuBois, unexploded ordnance
(UXO) was found on a playground of an elementary school at
Waikoloa. Can you look into this? Apparently it is strewn
beyond the ranges for some reason. But that was reported and I
would request that you look into this. I do not know what will
come out of it.
Mr. DuBois. I certainly will, Senator. I had not heard
that. Let me just add for the record: if any Senator comes
across a situation like this, remember our wonderful country
has been in existence for well over 225 years. The citizens of
this country through their representatives in Congress set
aside land for the purposes of our national security. We admit
that we have not husbanded it as well as we should have. But
certainly in the last 10 to 15 years that environmental
stewardship by the Department of Defense, that obligation that
we hold dear, has won us awards and we are proud of it.
But I would say that if there is a situation like this in
any State or congressional district, I would like to know about
it as soon as possible, and we will look into this particular
case.
Senator Akaka. My final question and I will submit the rest
of my questions for the record. Mr. DuBois, in last year's
report the committee directed DOD to evaluate the optimal use
of test and training ranges--so my question is on test and
training ranges--to include an assessment of any changes that
might be necessary to bring the different funding mechanisms
into closer alignment.
In December, the Marine Corps conducted its first training
exercise at Eglin Air Force Base, an Air Force test range.
Eglin was supposed to serve as one of the primary locations to
provide training similar to what Navy and Marine Corps used to
get at Vieques. However, Marine leadership has testified in the
past few months that training at Eglin is much more expensive
than anticipated and that the test range cost recovery
structure is such a significant obstacle that the Marines are
now exploring other locations.
These are precisely the types of situations we are seeking
to preclude with our direction last year. I know the report is
not due to us until November 2004. However, do you have any
initial thoughts to share with us about how this issue will be
addressed to ensure DOD is making the best possible use of all
of its ranges, especially as we have so many forces preparing
to go into combat situations?
Mr. DuBois. Senator Akaka, I am sorry that Senator Inhofe
is not here because the use of Eglin by the Marines, by the
Navy, and by the Air Force, along with instrumented ranges in
the Atlantic Ocean, as well as other ranges on the east coast,
have replaced the Vieques bombing range and I am told by the
Chief of Naval Operations (CNO), by the Chief of Naval
Operations, and the Commandant of the Marine Corps, replaced it
quite well.
You have raised a very crucial question and it has to do
with multi-service, multi-mission installations and how we pay
for it. It actually has a BRAC connection, for those students
of BRAC. The notion that we will move towards more multi-
service, multi-mission bases, while in concept and philosophy
has been embraced by the Joint Chiefs, the business of
operating those bases and who pays for what and when is still
under discussion. You have raised a very important point and
one that we are working on.
Senator Akaka. Well, I thank you, Mr. DuBois and all of
you, for your responses. I really appreciate it.
Thank you very much, Chairman Cornyn.
Senator Cornyn. Thank you, Senator Akaka.
Gentlemen, thank you for being here today. Thank you for
your service to our country.
With that, this hearing will be adjourned.
[Questions for the record with answers supplied follow:]

Questions Submitted by Senator John Ensign

READINESS AND RANGE PRESERVATION INITIATIVE

1. Senator Ensign. Mr. DuBois, the National Defense Authorization
Acts for Fiscal Years 2003 and 2004 included three of the six Readiness
and Range Preservation Initiative (RRPI) provisions which made
modifications to the following three environmental laws: the Migratory
Bird Treaty Act (MBTA), the Endangered Species Act (ESA), and the
Marine Mammal Protection Act (MMPA). Since being enacted, how have each
of these provisions specifically helped the armed services meet their
military training, testing, and readiness requirements?
Mr. Dubois. The amendment to the Migratory Bird Treaty Act is
ensuring that military readiness activities can proceed without
interruption. As directed by the National Defense Authorization Act for
Fiscal Year 2003, the U.S. Fish and Wildlife Service (USFWS) is about
to announce its proposed rule that will allow the Department of Defense
to incidentally take migratory birds during military training. The
USFWS has recently authorized the substitution of Integrated Endangered
Species Act at Marine Corps Base Camp Pendleton, and Marine Corps Air
Station Miramar. INRMPs are also substituting for Critical Habitat
designation at six Army installations on Oahu in Hawaii. The changes
made by Congress to the Marine Mammal Protection Act allow us to better
balance our readiness requirements with our legal obligations to ensure
military activities are protective of marine mammals, allowing us to
``train as we fight'' when our activities do not have biologically
significant effects on marine mammals.

2. Senator Ensign. Mr. DuBois, what has the armed services done to
ensure they are still meeting their stewardship goals and requirements
under these three environmental laws?
Mr. DuBois. DOD remains committed to its stewardship goals
regarding migratory birds, and threatened and endangered species. The
Department is preparing an INRMP strategic plan to ensure that its
installations coordinate with all interested stakeholders, complete the
next round of INRMP updates in a timely manner, and fund all required
projects. In early February the Department asked the military services
to report on the status of INRMP funding. The military services
reported to DOD that all class zero and class one INRMPs were fully
funded for fiscal year 2004 and programmed for fiscal year 2005. The
Navy continues its diligent efforts to protect marine mammals while
training and testing at sea. Naval procedures include protective
measures such as reducing or ceasing sonar or explosive operations when
marine mammals are present, detection of animals with lookouts and/or
passive sonar monitoring, and planning efforts to conduct exercises in
areas where the marine mammals are least likely to be present. Finally,
the Navy uses the National Environmental Protection Act where
appropriate to consider alternatives to any proposed action that might
impact marine mammals.

3. Senator Ensign. Mr. DuBois, the committee has been informed that
the remaining RRPI legislative proposals will be delivered within the
next week. They include legislation which will modify the following
environmental laws: the Clean Air Act (CAA), the Resource Conservation
and Recovery Act (RCRA), and the Comprehensive Environmental Response,
Compensation, and Liability Act (CERCLA). Specifically, how will each
of these provisions help ensure the armed services meet their military
training, testing, and readiness requirements?
Mr. DuBois. The three provisions that are being resubmitted this
year reaffirm the principle that military lands, marine areas, and
airspace exist to ensure military preparedness, while also ensuring DOD
remains fully committed to environmental stewardship of the lands under
its care. The modest clarifications DOD seeks to RCRA and CERCLA would
confirm--not change--the regulatory policy of the last two
Administrations and a majority of the States. These provisions would
preclude efforts to shut down munitions testing and training at an
operational range by claiming that the use of military munitions on an
operational range is a hazardous waste management activity or the
``release'' of a hazardous substance. The RCRA and CERCLA clarification
would apply only to munitions used on an operational range and only so
long as those munitions and their associated constituents remain there.
Regulation of ranges that are no longer operational ranges as that term
is defined in law, even if the land is still under DOD control, is not
affected by these two provisions.
The CAA provision would provide flexibility to States and the
Department by extending the allowable time to incorporate new military
readiness activities into a CAA State Implementation Plan when new
units are moved to an installation.

4. Senator Ensign. Mr. DuBois, why is it important that these
provisions are enacted sooner rather than later--are there some
pressing concerns?
Mr. DuBois. Our military forces need to test and train with the
weapons and equipment they use in battle, and it is imperative that our
ranges remain open for realistic use. We believe it would be
irresponsible to wait until our training activities are enjoined before
making the case for legislative adjustment. Lawsuits and other
challenges to live fire range activities cannot be addressed through
administrative action; only Congress can clarify its intent to ensure
our military readiness. Similarly, DOD must often base new weapons
systems or reposition forces to ensure we can test, train and operate
effectively. Current law under the Clean Air Act does not provide DOD
and the States with the flexibility necessary to make such moves in a
timely manner. We are asking for a legislative adjustment that will
grant such flexibility while continuing to protect air quality.

5. Senator Ensign. Mr. DuBois, what will the armed services do to
ensure they will meet their stewardship goals and requirements under
these three environmental laws?
Mr. DuBois. The Department of Defense's goal is to manage and
operate its operational ranges to support their long-term viability and
utility to meet national defense mission requirements while protecting
human health and the environment. Regarding the RCRA/CERCLA provision,
the Department has established clear policy that requires installations
to assess the environmental impacts of munitions use on ranges,
including the potential off-range migration of munitions constituents,
and begin any necessary remediation by 2008. In order to comply with
this policy, each of the military departments has budgeted for and
begun these assessments. These assessments address factors such as
environmental conditions, mission needs, and munitions use. The CAA
proposal does not exempt DOD from any emissions limitations or
pollution control requirements under Federal or State law or
regulation. It simply allows flexibility to the States and DOD to
provide basing efficiencies for new weapon systems or realigned
military readiness activities. DOD will continue to comply with the
same environmental laws as private organizations when engaged in the
same activities. It is only for those activities we engage in that have
no private sector analogue--military readiness activities--for which we
seek alternative forms of regulation, not exemptions from environmental
regulation.

BUDGET AUTHORITY FOR HOUSING PRIVATIZATION PROGRAM

6. Senator Ensign. General Lust, Admiral Weaver, General Williams,
and General Fox, a fiscal year 2005 legislative proposal to sustain
Department of Defense's (DOD) military housing privatization initiative
by increasing a statutory cap (currently $850 million) is at risk due
to a change by the Congressional Budget Office (CBO) in the way they
score the budget implication of the provision. Have any of you been
able to identify an impact to your budget request from any element of
housing privatization agreements, other than direct appropriations,
that you did not account for and if so, can you determine the amount
and reason?
General Lust. The budget privatization agreements have not
generated any additional liabilities on the part of the Government
beyond the direct investments or scored amounts for loan guarantees. By
design, these projects limit Government liability and minimize control
to that necessary to protect the interest of the Government. Financial
risk of failure fails on either the Army's developer-partner or the
financial institution that lends money to the projects. The Army does
not guarantee occupancy. The partner, as Managing Member of the LLC,
exercises control over ``day-to-day'' housing management activities.
The soldier/tenant pays rent and has the option of living off-post.
Admiral Weaver. No. Navy budget requests have fully accounted for
all impacts associated with military housing privatization. All
Government financial contributions to military housing privatization
projects have been scored in accordance with Office of Management and
Budget guidelines.
General Williams. No, there was no impact to the Marine Corps
budget request from any other element of our privatization agreements
beyond the direct investments or the scored amount of the direct loan
covered by the direct appropriations. While not part of the
privatization agreements, the Marine Corps direct appropriations also
included reductions in the family housing operations and maintenance
accounts as well as increases in the military personnel account to
address basic allowances for housing needs associated with planned
privatization.
Contrary to the assertions of the CBO, the Marine Corps seeks to
minimize its financial exposure and liability and negotiates agreements
that transfer the preponderance of the risk to the private-sector
business partners. The Marine Corps liability in the enterprise is
limited to its initial investment. Because the Marine Corps does not
direct or guarantee occupancy in the privatized housing, the military
members retain the choice of living in the privatized housing or in
comparable private sector housing. It is therefore incumbent on the
managing member in our partnerships to attract sufficient customers to
enable the projects continued success. If the managing member fails in
this regard, risk then falls on the financial institution that lent the
money for the project.
General Fox. There has been no impact on Air Force budget requests.
In its eight awarded housing privatization transactions, the Air Force
only once expended appropriated funds to address an unbudgeted
financial requirement. This was for an environmental remediation
project needed to resolve an unforeseen site condition affecting
construction at Elmendorf AFB in 2001. The requirement was funded
through the privatization support account. All other unbudgeted
financial requirements encountered in awarded projects were addressed
by making use of the income stream available within the project's
transaction. This is the same approach planned for use in all future
projects.

7. Senator Ensign. General Lust, Admiral Weaver, General Williams,
and General Fox, what feedback have you received from service members
and their families about the results of housing privatization
initiatives?
General Lust. Army resident surveys show improved satisfaction as a
result of privatization. In particular, the Army has noted improvement
for items that can be controlled in the short term-the housing office,
repairs, housing services, and safety and security. There is indication
that resident satisfaction improves with new and renovated homes. For
example, Fort Carson where the new construction is 100 percent
complete, scored the highest overall satisfaction among 28 Army
installations surveyed in 2003. The privatization program at Fort
Carson demonstrates a steady improvement in resident satisfaction and
highlights the importance of quality housing as a predictor of resident
satisfaction.
Admiral Weaver. Service members are happy to move their families
into market-quality, family-oriented housing. Timely response to
service calls and upgraded security are a few of the tangible aspects
that distinguish public/private venture housing from conventional
military family housing. Other value-added features that are mentioned
include free high-speed Internet access, organized community events and
children's activities, and upgraded recreation facilities.
General Williams. The feedback has been positive. The marines and
their families are encouraged by the progress we are making in
eliminating our inadequate housing. The members think the new and
renovated housing is great. Even members in housing still awaiting
replacement or renovation appreciate the increased level of service,
the improved responsiveness, the additional recreational opportunities
and the frequent and timely dissemination of information on community
events and construction project status. Indicative of this positive
response is the occupants of one of our privatized neighborhood
throwing a party for the on-site housing manager in appreciation for
his efforts.
General Fox. Senator Ensign, to date, the Air Force has awarded
eight projects and is on track to award five more within the next few
months. Service members like the open floor plans, the modern kitchens,
the garages, and the amenities included in the housing areas.
While there are a variety of subjective and objective measures of
tenant satisfaction, a project's occupancy rate is reflective of demand
for privatized housing. For the six projects closed prior to the last
reporting period, overall strong occupancy indicates a preference for
privatized housing. Occupancy rates for the reporting period were as
follows:

Lackland AFB, 97.2 percent
Dyess AFB, 98 percent
Elmendorf AFB, 99.16 percent
Wright-Patterson AFB, 97.2 percent
Kirtland AFB, 86.3 percent (steadily increasing)
Patrick AFB, 70.1 percent (project closed during this reporting
period)

8. Senator Ensign. General Lust, Admiral Weaver, General Williams,
and General Fox, what will be the impact to your Service's family
housing programs if we do not raise the budget authority for family
housing privatization this year?
General Lust. If the $850 million cap is not lifted, the Army will
not be able to renovate, replace, and construct new housing as promptly
as planned under privatization. Without relief, the Army cannot
complete privatization efforts currently underway at 12 installations
with about 19,000 homes. Also, long-term sustainment of adequate
housing would be at risk. The Army estimates more than $2 billion would
have to be programmed in military construction to eliminate inadequate
housing at these 12 installations: Fort Drum, New York; Fort Sam
Houston and Fort Bliss, Texas; Carlisle Barracks, Pennsylvania;
Picatinny Arsenal and Fort Monmouth, New Jersey; Fort Benning and Fort
Gordon, Georgia; Fort Knox, Kentucky; Fort Rucker and Redstone Arsenal,
Alabama; and Fort Leavenworth, Kansas.
Admiral Weaver. If the military family housing privatization cap is
not raised this year, the Navy would have to defer planned
privatization projects until the cap is raised, thus jeopardizing its
ability to eliminate inadequate family housing by fiscal year 2007.
Alternatively, the Navy would have to program $540 million for
traditional military construction to accomplish the investment
envisioned in these projects through privatization, this same level of
investment could be accomplished using only an estimated $70 million in
Government funds. Another alternative would be to significantly alter
the approach to military housing privatization in order to ensure no
budget authority is required. In order to accomplish the latter, we
would be forced to adopt approaches that run counter to the objective
of providing quality, affordable housing as soon as possible. These
approaches include significantly prolonging the period of time for
accomplishment of needed renovations and construction or allowing rents
to be set at levels higher than the military members' housing
allowances.
General Williams. If the cap is not raised, the alternatives are
either to execute `no cash' privatization projects or to return to
executing traditional Military Construction projects. `No cash'
projects could only be realized by an unacceptable lengthening of
project construction schedules, unfavorable rent increases by military
members resulting in substantial out-of-pocket expenditures, or both.
Privatization would no longer be a solution to our housing problem as
there would be little incentive for military members to choose to live
in substandard privatized housing while being charged `above market'
rents. The Marine Corps fiscal year 2005 budget request identified $102
million in investment ``seed money'' for privatization projects at Camp
Lejeune, NC; Twentynine Palms, CA; and Kansas City, MO. To provide the
same project scopes through traditional military construction would
require $271 million. Therefore, failure to raise the cap would require
a significant increase in the funding in the military construction
accounts or an equally significant reduction in project scopes. All of
these alternatives jeopardize the Marine Corps ability to eliminate
inadequate family housing by fiscal year 2007.
General Fox. As of April 2004, the Services have awarded 29
projects, transferring a total of $543.5 million to the Family Housing
Improvement Fund (FHIF). Based on projections from all the Services, we
anticipate the $850.0 million cap will be reached by November 2004. For
the Air Force, our projections show that we will be able to award a
total of 20 projects out of our 43 identified projects before the cap
is reached. The 23 projects above the cap represent 23,815 units.
Ultimately, the Air Force will be unable to meet the Defense Policy
Guidance (DPG) goal of eliminating all inadequate housing units by
2007.

OVERSEAS BASING MASTERPLAN

9. Senator Ensign. Mr. DuBois, the Department has been promising
Congress a global basing plan ever since it was directed by the Senate
in the Fiscal Year 2002 Military Construction report. That report
directed submission of a plan to the congressional committees no later
than April 1, 2002. Deputy Secretary of Defense Paul Wolfowitz later
responded that the basing study would be forwarded to the committees in
``early 2003". It is now April 2004 and no report has been delivered.
What is the current status of the masterplan and when will it be
provided to this committee?
Mr. DuBois. The Department of Defense is currently compiling a
report for the overall Global Posture effort based on combatant
commander and Service input. Per the President's instruction, the State
and Defense Departments are consulting closely with our allies and
conducting site surveys to determine feasibility of initial proposals.
The Department has frequently briefed Members of Congress and their
staffs on the proposals under consideration. A report to Congress will
be provided during summer 2004.

10. Senator Ensign. Mr. DuBois, will the plan be accompanied by an
estimate of the costs to implement the plan to establish new
expeditionary bases in numerous countries we do not currently have
bases?
Mr. DuBois. Yes. The report will include a broad estimate of the
overall costs of our posture changes over the Future Years Defense Plan
(FYDP). While current working cost estimates are continually being
updated, they represent less than one half of 1 percent each year over
the FYDP. The estimate will be refined as more detailed plans are
developed.

11. Senator Ensign. General Lust, Admiral Weaver, General Williams,
and General Fox, I was intrigued by a recent quote from a military
engineering commander in Iraq who, in the context of building enduring
locations in that country, said ``The engineering vision is well ahead
of the policy decision.'' This seems to be the case globally. What
insight did you have into the global basing masterplan as you prepared
your fiscal year 2005 budgets?
General Lust. The global basing master plan has not been finalized
and approved by the Secretary of Defense. However, the Army will
continue to have a worldwide presence, particularly in Europe and Korea
based on briefings by the Commanders of U.S. Forces Korea, U.S.
European Command, and U.S. Army Europe. As such, the fiscal year 2005
budget request was prepared accordingly.
Admiral Weaver. Full consideration was given regarding the
potential outcome of the Integrated Global Posture and Basing Strategy
(IGPBS) and resource investment was limited to those projects essential
to mission support. This was accomplished through the following
strategy:
Navy has identified key installations in the European theater
necessary to support DOD mission. While IGPBS has not been finalized,
the Navy considers these installations as enduring based upon their
joint mission support capability and their underlying combat
capability/support to combat operations.
MILCON projects included in the fiscal year 2005 program directly
contribute to ongoing recapitalizations of two enduring bases and have
been supported by Congress with previous MILCON funding. The projects
provide critical infrastructure upgrades that support joint operations
and eliminate serious AT/FP violations that unnecessarily place our
sailors in harms way. The fiscal year 2005 program does not include new
footprint project at these enduring bases, only recapitalization of
existing facilities.
General Williams. The overseas basing strategy was not developed in
sufficient detail in time to influence the fiscal year 2005 budget. At
this time, it has not been finalized or approved. If there are
requirements for redirecting installation funding to support the
overseas basing strategy, we will address them in the fiscal year 2006.

General Fox. Working with and based on input from the theater
combatant commanders, the Air Force fiscal year 2005 MILCON program
invests in projects at those enduring overseas installations that we
believe will continue to be required to meet the National Defense
Strategy.

OVERSEAS MILITARY CONSTRUCTION REQUEST

12. Senator Ensign. Mr. DuBois, considering the fact that DOD is
still actively engaged in negotiations with our allies about the global
basing masterplan, is the DOD absolutely sure that the overseas
military construction projects in the fiscal year 2005 budget request
will be required once the global basing masterplan and host nation
negotiations are completed?
Mr. DuBois. Yes. A careful internal review by the Department
ensured that the fiscal year 2005 budget request includes only military
construction projects that are located at installations which are known
to be central to our future military strategy. We are not negotiating
the closure or return of any installations where these projects will be
located.
Without these projects, the Department will waste resources on
disparate facilities, instead of consolidating forces and functions
onto efficient installations, and the quality of life of our forces
overseas will be adversely affected.

13. Senator Ensign. Mr. DuBois, has the final number and status of
U.S. forces to be stationed at each location in Germany and Korea been
determined?
Mr. DuBois. While the Department has detailed recommendations for
future posture in Germany and Korea, precise details are being
discussed through formal negotiations with these countries. Specific
details will be provided in the classified annex of the pending report.

14. Senator Ensign. General Lust, how much money does the Army plan
to spend over the current Future Years Defense Plan in Germany to
consolidate forces at one training area at Grafenwoerh?
General Lust. The fiscal year 2005 President's budget includes
three projects at Grafenwoehr that total to $77.2 million. Funding
planned in the FYDP for fiscal year 2006 through fiscal year 2009 is
$281 million. These projects enable the consolidating and closing of a
number of small, inefficient installations, thus gaining operational
and cost efficiencies while providing quality levels of services and
facilities, ready access to training areas, and enhanced force
protection to our forward-deployed soldiers and their families.

15. Senator Ensign. General Lust, will this training area support
NATO training and if so, how much money will be contributed by NATO?
General Lust. The facilities at Grafenwoehr are designed for use by
U.S. forces, but have the capacity and capability of supporting NATO
training. Forces of various NATO nations have and will continue to
train at Grafenwoehr on a reimbursable basis and at the convenience of
the U.S. military. Non-U.S. Armed Forces are billed at $58 per day, per
soldier. This fee is adjusted annually based on actual Grafenwoehr
operating expenses. Repayment-in-kind provisions exist that provide
U.S. Forces reciprocal training opportunities at other national
training facilities at little or no cost. This quid pro quo billing
strategy accommodates the training needs of U.S. forces and
participating nations.

16. Senator Ensign. General Lust, how much money does the Army plan
to spend over the current FYDP in Korea to implement the Land
Partnership Plan (LPP)?
General Lust. The estimated total military construction, Army
investment over the current FYDP to accomplish the relocation of U.S.
forces in Korea under the LPP is $252 million. The estimated Korean
investment under the LPP is over $2.3 billion.

17. Senator Ensign. General Fox, what is the status of the Rhein
Mein relocation initiative for the Air Force and what facility and/or
infrastructure requirements remain unfunded and who will be paying for
them?
General Fox. The replication of Rhein-Main capabilities at
Spangdahlem and Ramstein Air Bases is on schedule. In accordance with
the Rhein-Main Closure Agreement, we will return Rhein-Main to the
Federal Republic of Germany by 31 Dec 05. The agreement's German
partners or NATO has funded the vast majority of Rhein-Main Closure
Agreement requirements. Other requirements that were not part of the
agreement were funded in the fiscal year 2002, fiscal year 2003, and
fiscal year 2004 MILCON programs. The only requirement that remains
unfunded is the $4.3 million South Gate/Large Vehicle Inspection
Station project at Spangdahlem Air Base. All other facility and/or
infrastructure requirements are currently funded. The South Gate/Large
Vehicle Inspection Station is an antiterrorism/force protection project
in the U.S. Air Force-Europe (USAFE) fiscal year 2006 MILCON program
submission.

UNEXPLODED ORDNANCE

18. Senator Ensign. Mr. DuBois, the General Accounting Office (GAO)
issued a report titled Military Munitions--DOD Needs to Develop a
Comprehensive Approach for Cleaning Up Contaminated Sites (December
2003). In the report, GAO asserted that DOD has made limited progress
to identify, assess, and clean up unexploded ordnance (UXO) sites. GAO
recommended that DOD develop a comprehensive plan to: (1) establish
deadlines for completing its site inventory and initial evaluations;
(2) reassess the timetable proposed for completing its risk assessment
reevaluations; (3) establish Service-specific targets; and (4) work
with Congress to develop budget proposals for timely completion of
cleanup activities. What is your response to the GAO report on UXO and
what is DOD doing to address these concerns?
Mr. DuBois. In our response to GAO, the Department concurred with
GAO's recommendation to work with Congress to develop realistic budget
proposals, which will allow us to complete cleanup activities on
potentially contaminated sites in a timely manner. The military
services will continue to work with stakeholders to identify additional
sites and we will add these sites to our inventory, as appropriate. We
believe that most of the remaining sites not previously identified are
located on active installations still under DOD's control.
We plan to complete the prioritization of all of these sites by
2010, which is 2 years earlier than the original goal. The Department
has also established interim goals which have been adopted by each of
the military departments. By 2007, the Department plans to complete all
preliminary assessments, and by 2010 the Department will complete each
of the site inspections at these sites. The Department is working with
each military Service to establish additional goals and measures to
help us further gauge progress at these sites. In the interim, we will
continue to look for additional opportunities to accelerate site
inspections and prioritization to help ensure that resources are
targeted toward the highest risk sites.

19. Senator Ensign. Mr. DuBois, what is DOD doing to advance a
timely cleanup of UXO sites?
Mr. DuBois. The DOD established the Military Munitions Response
Program (MMRP) within its Environmental Restoration (ER) Program to
address the remediation of UXO, discarded military munitions, and
munitions constituents (MC) located on locations that are or were owned
by, leased to, or otherwise possessed or used by DOD at sites other
than operational ranges. DOD's objectives for sites in the MMRP
include:

Identifying where, what kind, and to what extent UXO,
discarded military munitions, or MC are present;
Determining both explosive safety hazards and
toxicological hazards to human health and the environment;
Establishing goals and metrics to track and evaluate
progress;
Setting priorities, programming, and budgeting to
effectively resource MMRP requirements;
Conducting necessary munitions response actions;
Developing and implementing effective MMRP-related
technologies; and
Ensuring the timely transfer of excess land to allow
for alternative uses that are consistent with the munitions
response completed.

During fiscal year 2003, DOD further developed its inventory and
identified additional potential munitions response sites. Through a
publicly available site, DOD shared its inventory results and continues
to solicit information from both the environmental regulatory community
and public stakeholders. DOD and the military components will continue
to work with stakeholders to identify additional sites and add them to
the inventory, as appropriate, on an annual basis.
DOD has established interim goals for the munitions response
program and incorporated them into internal DOD financial guidance.
Each military component will complete its preliminary assessments by
2007 and its site inspections by 2010.
During the early years of the MMRP, the Department will expend a
large percentage of funding on investigation activities. As the MMRP
matures the funding will shift to implementing cleanup remedies.
The Department published a draft proposed Munitions Site
Prioritization Protocol in the Federal Register on August 22, 2003, and
is preparing a draft final.

CAMP LEJEUNE CONTAMINATION

20. Senator Ensign. Mr. DuBois, the drinking water at Camp Lejeune
was contaminated with volatile organic compounds (VOCs), including
tetrachloroethylene (PCEs) from a dry cleaners just off base and
trichloroethylene (TCEs) from on-base industrial operations which used
metal degreasers. The contamination dates back at least to the 1960s.
VOCs were first discovered in the drinking water in 1980 but the source
was not known. The drinking water wells were first identified as
contaminated in 1984 and they were closed in 1985. Please provide an
update on General Hagee's panel to review the Marine Corps' response
following the discovery of VOCs in the drinking water at Camp Lejeune.
Mr. DuBois. General Hagee chartered the panel on March 18, 2004, to
conduct an independent review of the facts surrounding the decisions
made following the 1980 discovery of volatile organic compounds in
drinking water at Marine Corps Base, Camp Lejeune. At its first meeting
on April 1, 2004, the panel chair, retired Congressman Ronald C.
Packard, recommended, and the Commandant approved, the addition of two
distinguished scientists to the original, three- member panel. The new
panel members are William H. Glaze, Ph.D., and Robert G. Tardiff,
Ph.D., A.T.S. The panel is expected to complete its review by October
2004.
General Hagee chartered the panel because he wanted a better
understanding of the facts and circumstances leading to the 1985
closure of the impacted wells. The panel's work is concurrent with the
Agency for Toxic Substances and Disease Registry's ongoing
epidemiological study of the health of children born to women while
living at Camp Lejeune during 1968-1985. This study, which should
identify whether there is a link between the impacted drinking water
and certain childhood diseases, will include groundwater and drinking
water system modeling. The modeling is necessary, in part, because
exactly when the volatile organic compounds first impacted some of the
base's drinking water wells remains unknown.

21. Senator Ensign. Mr. DuBois, there have been some criticisms of
this independent panel as not being independent on the Camp Lejeune
issue. Please speak to this issue and what the panel is planning to do
to bring in outside experts or witnesses to ensure their final report
is a complete and independent look at the contamination issue.
Mr. DuBois. At its first meeting on April 1, 2004, the panel chair,
retired Congressman Ronald C. Packard, recommended, and the Commandant
approved, the addition of two distinguished scientists to the original
three-member panel. The new panel members are William H. Glaze, Ph.D.,
and Robert G. Tardiff, Ph.D., A.T.S. General Hagee chartered the panel
to conduct an independent review of the facts surrounding the decisions
made following the 1980 discovery of volatile organic compounds in
drinking water at Marine Corps Base, Camp Lejeune. The panel is
expected to complete its review by October 2004. The panel's charter
makes the panel solely responsible for the contents of its report. The
panel's charter also urges the panel to consider soliciting public
comment in fulfilling its duties. However, exactly what the panel is
planning to do remains within the panel's discretion.

FACILITY RECAPITALIZATION RATES

22. Senator Ensign. Admiral Weaver, I am concerned that this year's
budget request for the Navy funds a rate of recapitalization equal to
149 years. That means the Navy must build and maintain facilities to
last 149 years before the current level of annual funding will result
in replacement. The GAO recently concluded that the DOD goal of funding
a 67-year rate of recapitalization by 2008 is based on future funding
that is unrealistic. As the Commander of Navy Installations, do you
believe the Navy will meet the DOD goal to reach a level of annual
construction funding equal to a 67-year recapitalization rate by fiscal
year 2008?
Admiral Weaver. The current Navy FYDP (President's budget 2005)
supports meeting Department of Defense goals to attain an average 67-
year facilities recapitalization rate by fiscal year 2008.

23. Senator Ensign. Admiral Weaver, what amount of annual military
construction funding will be required by the Navy to meet that goal?
Admiral Weaver. The recapitalization rate is based on investment of
recapitalization-type funds compared to plant replacement value.
Recapitalization-type funds include military construction, sustainment,
restoration, and modernization (SRM) (i.e., O&M), Navy Working Capital,
and MILPAY appropriations. For fiscal year 2005, the Navy would need to
invest an additional $874 million of recapitalization funds to achieve
the 67-year recapitalization rate.

24. Senator Ensign. General Fox, what funding levels for both
military construction and restoration funds for the Air Force are
required to achieve the 67-year cycle and do you believe that the Air
Force will meet the DOD goal?
General Fox. Senator Ensign, the Air Force annual requirement to
meet and maintain the DOD 67-year recapitalization rate is $2.3
billion. The $2.3 billion requirement includes a combination of
recapitalization military construction projects and operations and
maintenance, restoration and modernization funding. With currently
programmed funding of this annual requirement, the Air Force will be
able to meet the 67-year recapitalization rate by 2008 and maintain it
in years beyond.

OPERATIONS AND MAINTENANCE FUNDS FOR FACILITY SUSTAINMENT, RESTORATION,
AND MODERNIZATION

25. Senator Ensign. General Fox, according to the most recent
installation readiness report, 77 percent of the total physical plant
in the Air Force is rated C-3 or worse, and the Air Force traditionally
has the best facilities. Obviously, the poor condition of our
infrastructure--developed over the past 10 years due to chronic
underfunding--affects Air Force readiness. Are you able to quantify the
impact to readiness?
General Fox. Due in large part to the funding support we received
from Congress in fiscal year 2003 and a focused investment strategy,
the recent 2003 Installations' Readiness Report highlights 67 percent
of our physical plant remains C-3 or worse. Significant or major
infrastructure deficiencies continue to severely inhibit or preclude
mission accomplishment.
For example in our operations and training facility class, degraded
airfield pavements pose risk of aircraft engine and structural damage,
impacting everything from basic airfield operations to day-to-day
aircraft maintenance. Other examples of deficiencies include obsolete
airfield lighting systems, inadequate training facilities, and
deteriorated/inadequate drainage systems. Inoperative fuel hydrant
systems force personnel to refuel by truck--increasing workload for
maintenance and supply personnel.
Deficiencies such as these degrade operational efficiency and make
operating and maintaining our air bases very challenging.

26. Senator Ensign. General Fox, what guidance do you receive from
Air Force leadership to fix the problem?
General Fox. Senator Ensign, the United States Air Force, fiscal
year 2006-2011, Annual Planning and Programming Guidance (APPG), signed
23 January 2004 by the Secretary and Chief of Staff of the Air Force
provides the following guidance:

``Major Commands will identify restoration and modernization
(R&M) investment requirements taking into consideration all R&M
funding sources to maintain an annual recapitalization rate
consistent with the Fiscal Year 2005 Amended Program Objective
Memorandum (APOM) position for fiscal years 2006 and 2007, and
to attain a recapitalization of 67 years by fiscal years 2008.
Major commands should focus on restoring and modernizing
facilities and infrastructure and concentrate projects on
eliminating C3/4-rated Installation Readiness Report facility
classes by 2010. Major commands will include communications and
infrastructure requirements in the military construction
programming documents, including cabling, ducting, and
connectivity to the point of connection.''

27. Senator Ensign. General Lust, according to the most recent
installation readiness report, 70 percent of all facilities in the Army
are rated C-3 or worse. What additional operations and maintenance
funds are required to buy out just your critical facility requirements
(C-4) in fiscal year 2005?
General Lust. It is important that all Army facilities be fully
sustained to protect our investment and to allow them to support their
missions for their full life cycles. Critical facility requirements are
being defined as the cost to improve our facilities to an Army-wide
average of C-2 (facilities support the majority of assigned missions).
The total cost to achieve this goal is approximately $12.4 billion. We
will use primarily Military Construction funds to accomplish this
objective.

MIGRATION OF OPERATIONS AND MAINTENANCE FUNDS FROM THE FACILITY
SUSTAINMENT ACCOUNT

28. Senator Ensign. General Lust, DOD has pointed to the goal of
funding 95 percent of facility sustainment requirements for the
Services in the fiscal year 2005 budget as an accomplishment. But, a
recent GAO report suggested that the sustainment level advertised by
DOD ranging above 90 percent of the total requirement is not being
experienced at the installation level. They found in random surveys at
various installations, sustainment funding levels between 35 percent
and 77 percent. Also, the Services have underfunded their base
operations support accounts in fiscal year 2005 by up to 30 percent
with the intention of shifting funds from sustainment to cover must-pay
bills in 2005, as they did in fiscal year 2003 and fiscal year 2004.
What were the actual obligations for the Army's facility sustainment
account in fiscal year 2003?
General Lust. Actual obligations for sustainment in fiscal year
2003 were $1.568 billion.

29. Senator Ensign. General Lust and Admiral Weaver, did DOD's goal
for facility sustainment have any bearing on your Service's decision
for facility sustainment account obligations in fiscal year 2003?
General Lust. Yes. The Army supports DOD's fiscal year 2005 goal to
fund facilities sustainment at 95 percent. Due to affordability in the
year of execution, dollars often migrate at the installation level from
SRM (sustainment) into base operations support (BOS) resulting in low
sustainment execution. To minimize and control migration of sustainment
funds, reprogramming greater than 15 percent requires Installation
Management Agency approval.
Admiral Weaver. Yes. Although the Navy programmed for a sustainment
rate of 84 percent in fiscal year 2003, the Navy actually executed 91
percent of the sustainment requirement. The requirement was based on
the facilities sustainment model.

30. Senator Ensign. General Lust and Admiral Weaver, does DOD need
to establish a goal for funding levels by the Services for BOS similar
to the goal they have established for sustainment funding?
General Lust. As DOD has established a model for sustainment and a
metric for recapitalization, I believe DOD should also establish a BOS
metric. But first, DOD would need a standard tool to measure progress
toward the goal. Efforts are already underway to develop such a tool,
similar to the one developed for facilities sustainment.
Admiral Weaver. No. The Navy believes that funding levels for
installation or BOS services are better established through the use of
requirements models that are based on the required operational
capabilities of each installation (as determined in consultation with
the mission commanders) and then applying four varying levels of
installation services that are priced out and evaluated in terms of
risks of delivery at each level as well as potential savings at each
level. Navy leaders thus have a series of funding options that they can
evaluate based on the output or capability to be delivered, weighed
against the savings and the risk of delivery of the services at these
various levels. Using a fixed formula would tend to move us away from
evaluating risks in determining funding levels. DOD is in the process
of developing a BOS model with standard levels of service for use by
all military services.

31. Senator Ensign. General Lust and Admiral Weaver, what were the
actual obligations for your Service's facility sustainment account in
fiscal year 2003?
General Lust. Actual obligations for sustainment in fiscal year
2003 $1.568 billion.
Admiral Weaver. Actual execution for the entire sustainment,
restoration, and modernization program for fiscal year 2003 was $1,943
million.

HOST NATION BURDEN-SHARING

32. Senator Ensign. Mr. DuBois, you have been asked for 2 years by
this committee what support the United States is getting from other
countries to maintain or build new facilities in Europe, the Pacific,
and Southwest Asia. You responded that ``burden-sharing reports will be
published soon, and we are exploring additional opportunities to
increase burdensharing by our allies.'' Where is the report?
Mr. DuBois. The Department published the ``Report on Allied
Contributions to the Common Defense'' in July 2003, covering
contributions made during calendar year 2002 by our NATO allies,
Pacific allies (Australia, Japan, and the Republic of Korea), and the
Gulf Cooperation Council (GCC) nations. The report presents an annual
assessment of the relative contributions made by our allies to the
common defense and mutual security, and identifies our efforts to
increase our allies and partner nations responsibility sharing
contributions.
Under legislative provisions dating back to the National Defense
Authorization Act of 1981 (Public Law 96-342, Section 1006), the
Secretary of Defense provides this report to Congress annually. The
most recent report may be found at http://www.defenselink.mil/pubs/
allied--contrib2003.

33. Senator Ensign. Mr. DuBois, what support is the United States
getting to maintain or build new facilities from various countries
around the world?
Mr. DuBois. The United States receives significant support from our
allies to maintain and construct new facilities at overseas locations.
In Europe, the NATO Security Investment Program has funded about
$1.7 billion in projects since 1989 for runway improvements, utilities,
missile maintenance, hangars, piers, ammunition facilities, roads and
pavements, and support to the Balkans. More than $717 million is being
provided for projects currently in design or under construction:
[In millions
of dollars]

Aviano Beddown 243
Ramstein Upgrades 224
Sigonella Upgrades 43
Fairford Upgrades 43
Lakenheath Upgrades 51
Mildenhall Upgrades 37
Souda Bay Upgrades 15
Keflavik Upgrades 20
Incirlik Upgrades 41

Another form of support from our European allies is derived through
payment-in-kind construction, given in lieu of cash payments for U.S.
capital investments at facilities being returned to them. Since 1991,
the U.S. has received payment-in-kind worth $36 million from the United
Kingdom, $1.6 million from Iceland, and about $372 million from
Germany. In addition, in exchange for returning Rhein-Main Air Base to
Germany, the German Government provided $487.5 million worth of
construction projects to replicate and enhance Air Force mission
capabilities at Ramstein and Spangdahlem Air Bases.
Japan's most significant responsibility sharing contribution lies
in the funding it provides in support of U.S. forces stationed on their
land. Japan's cost sharing in 2002 totaled $4.14 billion, covering
about 75 percent of U.S. basing costs (both direct and indirect).
Further, under the existing 5 year (2001-2006) bilateral Special
Measures Agreement (SMA), Japan is paying virtually all costs of local
national labor employed by U.S. forces, as well as a portion of costs
of public utilities on U.S. bases. The SMA also covers costs of
transferring U.S. training activities from U.S. bases to other
facilities in Japan when the Government of Japan requests such
transfers.
The Republic of Korea's (ROK) cost sharing support for U.S. forces
in 2002 totaled $998 million, covering 39 percent of U.S. basing costs
(both direct and indirect). This was a 15 percent increase over 2001--
the largest single increase in 8 years. Furthermore, under the 3-year
(2001-2004) SMA, the ROK pledged to significantly increase their cost
sharing support by 8.8 percent plus inflation in 2003 and 2004.
Direct construction support from Japan and Korea is provided
through their host nation funded construction (HNFC) programs. The
Japanese Facilities Improvement Program (JFIP) is the host nation
funded construction program supporting U.S. facility construction
requirements in Japan. Since its inception in 1979, it has funded
almost $20 billion in new projects. The Japanese fiscal year 2003 and
fiscal year 2004 programs were $680 million and $676 million,
respectively. In addition to the HNFC program, Japan's Special Action
Committee on Okinawa has funded approximately $120 million in each of
fiscal year 2003 and fiscal year 2004.
Korea's HNFC consists of the Combined Defense Improvement Projects
(CDIP) and the Republic of Korea Funded Construction (ROKFC) programs.
CDIP projects directly support warfighting capabilities, while ROKFC
funds support warfighting capabilities, force protection requirements,
and quality of life initiatives. In calendar year 2003, the CDIP
program was funded at about $60 million, while the ROKFC program was
funded at about $156 million.
In addition to alliances with Japan and Korea, the U.S. seeks to
sustain and adapt security partnerships with the Nations of the Gulf
Cooperation Council (GCC)--Bahrain, Kuwait, Oman, Qatar, Saudi Arabia,
and the United Arab Emirates (UAE). The GCC member States continue to
serve as important partners in support of our operations in Southwest
Asia. While they have not been directly involved in combat operations,
they have provided significant assistance critical to coalition
operations including basing and over flight rights to a large
contingent of U.S. forces. Additionally, host nation military bases,
civilian airports, and other facilities have been used for the bed down
and storage of U.S. aircraft, equipment, and personnel. A number of GCC
nations are providing troops and equipment for increased force
protection requirements as well as additional air traffic control and
fuel storage.
Collective efforts with allies and other friendly nations are
essential in the war on terrorism, since the responsibility and costs
of meeting the challenges of current and future threats around the
world cannot be met by any one nation alone.

34. Senator Ensign. Mr. DuBois, what progress has been made on
exploration of additional opportunities to increase burdensharing?
Mr. DuBois. While we encourage our allies and partner nations to
assume a greater share of the burden of providing for the common
defense and mutual security, the Department believes that their burden-
sharing, or responsibility sharing, efforts are generally positive.
Aside from the important military contributions made to multi-national
operations, our Allies and partners also provide bases and facilities,
numerous tax exemptions, and reduced-cost services. They also provide
direct support through host nation construction funding programs,
residual value payment-in-kind construction, and common-funded budgets
such as the NATO Security Investment Program (NSIP).

35. Senator Ensign. General Lust, what efforts are underway to
recoup residual value from U.S. investments in facilities at bases we
are leaving in Germany and Korea?
General Lust. Since 1991, the Federal Republic of Germany (FRG) has
provided the United States with residual value compensation of about
$41 million in cash payments and about $372 million in the form of
payment-in-kind construction. An additional $487.5 million in payment-
in-kind compensation was provided by the FRG as part of a ``quid-pro-
quo'' agreement to return Rhein Main Air Base and move strategic
capabilities from Rhein Main to Ramstein and Spangdahlem Air Bases.
The FRG and the Department of Defense have recently completed
negotiations for the return of a number of sites--including Bitburg and
Sembach Air Bases as well as the Frankfurt Contingency Hospital--for
which the proposed settlement is about $20 million in payment-in-kind
compensation. The FRG is committed to continue compensating the U.S.
for residual value; however, most of the returns have now been settled.
Current residual value negotiations are in progress for the return of
Bad Kreuznach and are expected to be completed in fiscal year 2006.
Article IV of the Status of Forces Agreement between the United
States and the Republic of Korea (ROK) relieves the ROK of any
obligation to compensate the U.S. Government for improvements made at
any sites being returned. By the same token, the U.S. Government is not
obliged to compensate the ROK for any environmental damage caused by
the U.S.

ENVIRONMENTAL TECHNOLOGY

36. Senator Ensign. Mr. DuBois, funding for environmental
technology is reduced in the fiscal year 2005 budget request. The
fiscal year 2004 appropriated level was $250 million. The fiscal year
2005 budget request is $186.2 million. As the Armed Forces seek
opportunities to reduce their compliance costs and restrictions, it is
often new technologies that will help meet new environmental standards
or requirements. Why is funding for environmental technology programs
being reduced so significantly?
Mr. DuBois. The Department works diligently to ensure that it meets
its obligations for compliance with new standards, and reviews annually
the Armed Forces investment strategy for environmental technology
opportunities. We believe the DOD has been steadfast for more than a
decade with its approach for balancing new investment opportunities in
coordination with the annual budget request when placed against the
priority environmental requirements of the Services. With this balance
of investment strategy, DOD continues to focus on two broad,
overarching goals as we strive to develop and transition environmental
technologies. These goals are to permit DOD training and testing ranges
to continue to provide venues for realistic and comprehensive training
into the future in a sustainable fashion, and to reduce the
Department's current and future liability by reducing life-cycle costs
for all aspects of military operations impacted by compliance with
environmental regulation. We believe the fiscal year 2005 budget
request adequately supports these objectives.

37. Senator Ensign. Mr. DuBois, one example which would seem to
justify a large investment in technology and innovation would be in
addressing the UXO issue. To what extent are the Armed Forces planning
to dedicate technology spending towards the UXO issue?
Mr. DuBois. Senator Ensign, you are correct that advanced
technology has significant potential to reduce the cost and improve the
process for addressing the Department's UXO issue. I recently sponsored
a Defense Science Board study to look at this exact issue. The Defense
Science Board completed its work this past winter and found that the
possible return on investment in UXO technology is significant. It has
the potential to save the Department billions of dollars.
Given this vast opportunity, DOD prioritized UXO technology
development as one of our highest environmental technology
requirements. UXO problems cut across all the Services and therefore
the leadership for these efforts resides in our DOD-wide RDT&E
programs--the Strategic Environmental Research and Development Program
(SERDP) and the Environmental Security Technology Certification Program
(ESTCP). In the fiscal year 2005 budget request, SERDP and ESTCP plan
to invest approximately $23 million in UXO technology which represents
over 25 percent of the total budget of these Defense-wide environmental
technology programs.

DEFENSE REPORT ON CLIMATE CHANGE

38. Senator Ensign. Mr. DuBois, there was a series of news stories
in February and early March of this year discussing a study
commissioned by the Pentagon on national security concerns caused by
climate change. The study was titled An Abrupt Climate Change Scenario
and Its Implications for United States National Security, published in
October 2003. Was this study requested by the Pentagon?
Mr. DuBois. Yes, the Department did request this study. DOD
routinely studies a very broad range of possible future world scenarios
and commissions many studies to help achieve this goal.

39. Senator Ensign. Mr. DuBois, a San Francisco Chronicle article
mentions that the Pentagon paid $100,000 for this study, but further
states that ``it isn't even a Pentagon report in the strict sense of
the word. It does not constitute an official DOD position paper or
policy statement . . .'' Can you please explain the process for such a
study to be initiated?
Mr. DuBois. The DOD Office of Net Assessment conducts studies in
three broad areas: To support ongoing net assessments; to better
understand major periods of change in the past, and to learn why some
actions and initiatives were successful while others were not; and to
better understand aspects of the future security environment that are
relevant to DOD. DOD seeks a wide variety of views and expertise to
help the Department think through these issues; however, these external
reports contain the views of their individual authors.
The climate change study fits in the third category. The history of
ice cores has shown that there were times in the past when the
temperature in the Northern Hemisphere abruptly warmed and cooled. If
the world experienced a temperature change like those seen in the past,
what would the specific regional climactic changes look like, and how
would they affect DOD policy and operations? Unfortunately, the climate
change study was not able to answer those questions.

40. Senator Ensign. Mr. DuBois, without trying to sound too
critical, what is the value of this type of report?
Mr. DuBois. The Department of Defense plans and develops our
National Security Strategy, assures allies, dissuades military
confrontation, deters threats and coercion, and, when required,
preempts or defeats our Nation's adversaries. DOD routinely studies
possible future world scenarios and commissions many studies to help
achieve this goal. The Defense Department continuously looks ahead to
ensure we are prepared in the future for any contingency.
What prompted DOD interest in the impact of abrupt global warming
was the National Academy of Sciences' report of 2002.

What are the different ways in which the climate can
change suddenly?
What countries would first be affected? How severe are
these impacts?

We want to know so that we can plan on whether affected countries
would suffer or benefit from climate change. Would that change make
them more or less stable? More pragmatically, what kinds of climatic
conditions might our world-wide forces encounter in the future? The
report was not able to quantitatively address these questions.
The Schwartz and Randall study reflects the limits of scientific
models and information when it comes to predicting the effects of
abrupt global warming. Although there is significant scientific
evidence on this issue, much of what this study predicts is still
speculation.

UTILITIES PRIVATIZATION

41. Senator Ensign. Mr. DuBois, on the issue of utilities
privatization, I acknowledge the DOD goal to make privatization
decisions by September 2005. In your written statement, you say
``Congressional support for this effort in fiscal year 2004 is
essential to maintain the procurement momentum and industry interest.''
What do you perceive to be the level of industry interest in taking
over deteriorated utility systems?
Mr. DuBois. The ongoing solicitations are normally receiving
adequate interest to achieve competition. This follows a successful
effort by the Services to share lessons learned and industry feedback
to improve solicitation templates and better align the program with
industry practices.
Many systems included in earlier solicitations, which closed prior
to March 2003 did not receive adequate interest. Most of these systems
were located on small Reserve or National Guard sites. Utilities had
not been interested in participating in the privatization of these
systems for a variety of reasons. In general, they perceived that the
cost of developing a proposal in a competitive arrangement did not
provide a cost effective business opportunity. With the improved
templates and engagement with industry representatives, interest has
improved. The Services are continuing discussions with industry to
identify barriers and develop resolutions.

42. Senator Ensign. Mr. DuBois, what can Congress do to maintain
the level of interest or to increase the incentive to the Services to
accelerate the privatization of utilities?
Mr. DuBois. Services have programmed adequate funding to privatize
those systems that are deemed economical per 10 U.S.C. 2688. To
maintain the momentum of the program, it is essential that the funding
levels in the President's Budget are supported by Congress.
DOD has submitted a legislative proposal that would allow a
streamlined approach to procurement at certain installations where the
United States does not own the preponderance of the land underlying the
installation. Enactment of this legislation would ease some of the
barriers to privatization at these smaller installations, while
ensuring that the action would provide long term benefits to DOD.
Though the Department has not generated any additional legislative
proposals, we are continually mindful of industry feedback. The complex
issues surrounding privatization occasionally generate barriers, which
require a remedy. If your constituents raise issues that require
legislation, it will be beneficial to ensure a unified approach.
My office is working closely with the Services as they aggressively
execute the program. Of the 1,863 utility systems available to evaluate
for privatization, 436 have been privatized, 195 systems have been
exempted by the Service Secretaries and 953 systems are currently being
evaluated following the issuance of a Request for Proposal. The
remaining 280 systems will be evaluated for privatization as the
Service plans are executed. No congressional actions are deemed
necessary to accelerate these actions.

PROJECTS TO SUPPORT NEW WEAPON SYSTEM ACQUISITION

43. Senator Ensign. Admiral Weaver and General Williams, the
Department of the Navy recently announced that they would delay the
selection of a source for the next helicopter to be used for
transportation of the President of the United States. The fiscal year
2005 military construction budget request includes $106 million to
construct facilities for this program. Is this military construction
still required in the fiscal year 2005 budget and if so, what would be
the repercussions to the research and testing of the program from a
deferral of the military construction projects?
Admiral Weaver. The Navy included $106 million for vertical lift
aircraft (VXX) facilities in the fiscal year 2005 budget request in
order to meet the planned arrival of the first VXX aircraft by November
2006. Although the Navy announced a delay in the System Development and
Demonstration (SDD) contract award, no significant delay is anticipated
in the arrival of the first aircraft. The Navy is using the additional
time made available by the delay in the SDD contract to more fully
investigate the design, performance, cost and tradeoff opportunities
with both offers, thus minimizing the need to delay the arrival date of
the first VXX aircraft. In addition, the Navy used a fast track 35-
month versus a more customary 55-month construction schedule to meet
the November 2006 planned arrival of VXX aircraft. Thus, VXX facilities
are still needed in Fiscal Year 2005, even if the SDD contract delays
the arrival of the first aircraft.
All funds are still required in fiscal year 2005. If these
facilities are not constructed, there will be an increased risk of
failing to meet the initial operating capability date as directed by
the White House.
General Williams. The military construction required at Marine
Corps Air Station Quantico in fiscal years 2005 and 2006 in support of
the next helicopter to be used for transportation of the President of
the United States is still required despite the selection delay. The
proposed projects are in accordance with Marine Corps Air Station
Quantico's master plan to replace facilities built in the 1930s that
are inadequate to support the existing aircraft. The projects are not
tied to the new aircraft delivery.

PILOT PROJECT TO DIRECT MILITARY DEPARTMENT TO EXCHANGE BRAC LAND FOR
MILITARY CONSTRUCTION

44. Senator Ensign. General Lust, Admiral Weaver, General Williams,
General Fox, Congress provided pilot authority in 2004, directing each
Service to enter into an agreement with a private entity to trade a
parcel of excess property from a prior round of Base Realignment and
Closure (BRAC) in exchange for new construction or land acquisition.
What is the status of this initiative and will you meet the deadline of
December 31, 2004 to complete one exchange and if not, why not?
General Lust. The Army has selected Bellmore Logistics Activity, a
17-acre property in Hempstead, New York, as its candidate for this
exchange authority. The property will be offered in exchange for
construction of a fuel truck storage facility project at Fort Drum, New
York, estimated at $1.1 million in value. The Army is finalizing the
disposal plan with support from the U.S. Army Corps of Engineers, New
York District, and the General Services Administration. A notice will
be placed in the Federal Register advising of this opportunity and
requesting proposals. Offerors will be qualified based on their ability
to accomplish the Fort Drum project, and a selection will be made based
on the proposal that offers the best value to the Department. We
anticipate providing Congress an appropriate notification in the
November 2004 timeframe before executing the exchange.
Admiral Weaver and General Williams. The Department of the Navy has
identified a parcel in Novato, California for initial use of this
authority. We have begun to develop the solicitation and contractual
documents that will be required for this new type of agreement. Our
experience with competitive public sale of other BRAC properties, as
well as contractual procurements of construction projects, indicates
that it will be difficult to complete an exchange that combines those
two processes into a single action by December 31, 2004, due to the
time required to properly market the property, receive and evaluate
competing proposals, and close escrow.
General Fox. The Air Force is actively pursuing this initiative
with a former 247-acre Weapons Storage Area at Carswell AFB by
completing our environmental investigation and obtaining clearances for
unexploded ordnance areas to allow unrestricted use of the property. We
expect the property will be environmentally ready for sale by early
summer 2004, which will coincide with our ongoing review of several
candidate MILCON projects that may meet criteria for a potential swap
with BRAC land. If the private sector expresses interest in the
proposed exchange and subsequent bids are acceptable, we will complete
this exchange by December 31, 2004.

TRENDS OF MILCON FUNDING

45. Senator Ensign. Mr. DuBois, looking back at the past 15 years
of funding for military construction and housing programs, it is
apparent that the annual budget request top-line for MILCON and housing
remained relatively constant during the four prior rounds of BRAC. As a
consequence, the significant costs of military construction and
environmental remediation required to implement BRAC actions was funded
by reducing the amount of military construction available to the
Services for new mission support and recapitalization. For example, the
percentage of authorization of appropriations requested for only
military construction in 1987 and 1988 averaged about 65 percent of the
total request for military construction and housing programs. This is
about the same percentage as our current fiscal year 2005 request. Yet,
the amount requested for military construction dipped as low as 25
percent in 1996 and averaged about 40 percent of the total annual
request through the four prior rounds of BRAC. This sustained low level
of funding for military construction new missions requirements and
recapitalization in the 1990s is a significant reason for the problems
we face today with over 60 percent of our facilities failing to meet
standards. Does the DOD plan to sustain from 2008 forward a level of
military construction funding that results in a recapitalization rate
of 67 years?
Mr. DuBois. Yes. But let me expand on that answer with two points.
First, achieving a 67-year recapitalization rate does not automatically
result in a fixed level of military construction investment. The
recapitalization rate results from a combination of investments--some
from the military construction appropriations and some from the
operations and maintenance appropriations and other fund sources. Major
repair projects that recapitalize facilities can be funded in either
the military construction or operations and maintenance accounts.
Second, our plan to restore facilities requires that we get below a 67-
year recapitalization rate in the near term. Once facilities readiness
is restored, we can revert to the 67-year rate. We currently have
funded plans in place to get below 67 years beginning in fiscal year
2008.

46. Senator Ensign. Mr. DuBois, what level of annual funding for
military construction and housing programs must be sustained in order
to achieve a recapitalization rate of 67 years AND fund a level of BRAC
requirements annually that allow DOD to meet the BRAC requirement of
achieving a net savings by 2011?
Mr. DuBois. Our fiscal year 2008 program is presently funded at
$14.3 billion to achieve these goals. However, the gross total
requirement for military construction appropriations including family
housing and BRAC should not be conceived as an annual level of effort.
For example, for recapitalization of facilities the military
construction appropriation is one important source of funding, but the
recapitalization rate is also influenced by operations and maintenance
appropriations, host nation funding, and working capital funds. Also,
in addition to recapitalization, housing, and BRAC, military
construction appropriations also provide for new acquisition of
facilities--the so-called new footprint requirements. Increases or
decreases in new footprint requirements and the availability of other
funding sources will change the gross total requirement for military
construction resources, so establishing a set level of effort for this
one appropriation is neither prudent nor necessary.

INSTALLATION MANAGEMENT

47. Senator Ensign. General Lust, now that the Installation
Management Agency (IMA) is 2 years old, what complaints and challenges
have you encountered with the program, and what is the Army doing to
correct deficiencies and improve the IMA?
General Lust. The Installation Management Agency (IMA) sought and
received constructive comments from major Army commands regarding IMA's
performance since its activation. It was concluded that IMA performed
well in its first year, considering the challenges of the global war on
terrorism and the centralization of Army installation management. It
was also noted that IMA needed improvement in areas such as enhancing
communication with senior mission commanders, strengthening pursuit of
common standards for installation support services and resources,
determining baseline requirements for funds and manpower, and setting
the way ahead with tangible, measurable results.
Consequently, IMA is aggressively pursuing initiatives such as
business process redesign of management and operational functions, and
implementing Army-developed standards for facility design and services
provided on installations. IMA is also implementing region and agency-
wide efficiencies generated from good ideas originating from
installations as well as top-driven initiatives to increase the buying
power of the base support budget.

48. Senator Ensign. General Lust, within IMA, how are resources and
funds allocated to installations? Are you confident that every base is
receiving an equal share of the funding available for base operating
support and facility sustainment?
General Lust. In fiscal year 2004, the Installation Management
Agency, for the first time, distributed funds directly to
installations, eliminating intermediate commands with differing
priorities and methods of allocation. IMA's fiscal year 2004 allocation
to installations was based on validated requirements and Army
priorities. Beginning in fiscal year 2005, IMA will improve its method
of allocation by using quantifiable metrics based on standard measures.

49. Senator Ensign. Admiral Weaver, as the Commander, Naval
Installations (CNI), what complaints and challenges have you
encountered with the program, and what is the Navy doing to correct
deficiencies and improve the central management of installations?
Admiral Weaver. Complaints and challenges have generally revolved
around the lack of consistency in the standards for installation
service delivery, lack of consistency in installation organization and
processes, too many layers of organization leading to duplication and
added cost, and the need to find savings to apply to the operational
side of the Navy.
In response, the Navy established a single process owner for
installation management in the form of CNI on 29 September 2003. This
allowed the previous eight operational and other mission commanders to
focus on their primary core missions such as training, warfighting, and
research and development, while also creating a core of professionals
whose only mission is to support the warfighters and the other mission
commands with installation support services in the most effective and
efficient way possible. While the standing up and staffing of a new
command is a challenge in itself, CNI has nonetheless been able to
address these challenges in its 8 months of existence. Integrated
process teams in each of the nine major installation core business
areas have established consistent standards of performance and service
for each major function that are in use today. Installation processes
are already being consolidated at regional or CNI headquarters levels
to eliminate duplication and overlap of such functions, generating
savings in the process. Through use of a matrix organizational concept,
CNI also uses experts elsewhere to perform some of the technical
functions that CNI must perform, such as for contracting for some base
services and materials. CNI uses the Navy Supply and Facilities
Engineering Systems Commands for these technical functions. This
enables CNI to avoid duplicate staffing and effort for these technical
functions, while using expertise that already exists.
CNI has also adopted and implemented a program centric management
approach (vice an installation centric approach) which further
facilitates the ``singling up'' of installation service delivery
processes above the installation level, thereby eliminating duplication
and overlaps. Establishment of a capabilities based resourcing process
now enables the Navy to use models that are based on the required
operational capabilities of each installation as determined in
consultation with the mission commanders and then applying levels of
installation services that are priced out and evaluated in terms of
risks of delivery for that capability as well as savings. This
capabilities based process enables Navy leaders to have a series of
funding options that they evaluate based on the output or capability to
be delivered, weighed against the risk of delivery of the services at
various levels of service as well as the savings that could be
generated by adopting a lower (though acceptable) level of service
delivery. Other current CNI initiatives include standardization of more
business processes and organizations across the entire CNI enterprise
(for consistency and less duplication) and the implementation of a
human capital and workforce shaping plan to attract, train and retain
the best and right mix of people to effectively and efficiently deliver
installation services in support of the warfighter and other mission
commanders.

50. Senator Ensign. Admiral Weaver, within CNI, how are resources
and funds allocated to installations? Are you confident that every base
is receiving an equal share of the funding available for base operating
support and facility sustainment?
Admiral Weaver. With the standup of CNI, the Navy now has one
entity to turn to for BOS resource requirements. Therefore, for the
first time, the true cost of BOS becomes evident. For the budgeting
process, CNI instituted capabilities based budgeting (CBB). This is a
zero-based ground-up analysis done annually which gives true visibility
of outputs and levels of service for dollars invested. It publicizes
what programs do, where dollars go, and what output is achieved for the
dollars invested. It also describes in detail the risks/impacts of
outputting at different levels of service allowing the identification
of where resources are the most critically needed. Funds are allocated
to the Navy regions and, in turn, the bases, based on the CBB approach,
where they are most needed.
This process will have long lasting benefits to the Navy. More is
learned about what each program buys, what is essential, what is
discretionary and what alternatives can be done in this era of
continued efficiencies while still delivering customer requirements. An
additional benefit from this process is the identification and
elimination of layering and duplication by centralization and
streamlining within CNI. The ultimate benefit from this process is that
there is credibility and confidence in the resourcing requirements.
______

Questions Submitted by Senator James M. Inhofe

BASE REALIGNMENT AND CLOSURE

51. Senator Inhofe. Mr. DuBois, I would like to start with a few
questions about the report recently sent to Congress that serves as the
certification of the need for another BRAC round. On page 47 of the
report you have a table that shows your estimate of excess capacity by
several categories: Administration; Depots; Industrial; Major Training
Areas Active and Reserve; Maneuver; Schools; and Test and Evaluation/
Labs. In the area of major training areas you use base acres and
maneuver brigades. Do these acres include acres that cannot be used for
training because of encroachment and because this is a projection to
2009 and ultimately 2025?
Mr. DuBois. No, encroachment was not considered in estimating the
base acres in the BRAC report. The purpose of the report was to provide
a macro-level analysis of excess capacity, as part of the analysis to
support the Secretary's certification of the need for closure and
realignment of additional military installations. In accordance with
the BRAC statute, the Department of Defense will base all its
selections on the approved selection criteria with military value as
the primary consideration. Within the detailed analysis of BRAC 2005
process, the Army will consider encroachment. To the extent that
encroachment limits an installation in fulfilling its mission
requirements, it will be factored into military value under criterion
two ``availability and condition of land, facilities and associated
airspace. . . .''

52. Senator Inhofe. Mr. DuBois, do you account for continued
encroachment at the current rate and the amount of training land will
lose by then?
Mr. DuBois. The rate of encroachment was not considered in the
macro-level analysis used in the report. Within the detailed analysis
of BRAC 2005 process, the Department will consider encroachment. To the
extent that encroachment limits an installation such as a major
training area to fulfill its mission requirements, it will be factored
into military value under criterion two ``availability and condition of
land, facilities, and associated airspace. . . .'' The BRAC 2005
process will take into account the factor of the current encroachment
rate in evaluating the need for training or basing spaces that support
the 20-year force structure.

53. Senator Inhofe. Mr. DuBois, does this account for the
significant additional acreage needed by the Army's future units of
action (brigades)?
Mr. DuBois. The BRAC report provides a macro-level analysis of
force structure and capacities, but does not specifically account for
the additional acreage that may be needed by the Army's future units of
actions (brigades). The BRAC 2005 process will consist of an in-depth
analysis to incorporate the requirements of the current and projected
force structure, including the Modular Brigades.

54. Senator Inhofe. Mr. DuBois, why are we considering only 43
brigades in the Army criteria when we know the Army has requested 48?
Why are we using the lower number when prudence would dictate we use
the higher number?
Mr. DuBois. The footnote to the Army's capacity table on page 47 of
the BRAC report submitted to Congress acknowledges the pending Army
request to increase the number of brigades and states the resulting
change in capacity. The footnote states ``The Army's goal is to
increase the number of Active Force brigade combat teams from 33 to 43
between now and fiscal year 2007. A determination for an additional 5
BCTs (for a total of 48) will be made at a later time. This number will
be reflected in the fiscal year 2006 budget submission. Such an
increase would reduce the overall excess capacity of the Army from 29
percent (table 1, page 3 and table 6-5, page 54) to 27 percent.''

55. Senator Inhofe. Mr. DuBois, I have similar questions about the
criteria used to determine excess in the test and evaluation/labs
field. Why did you use acquisition workforce as compared to square
feet? How is that an accurate measurement for excess purposes?
Mr. DuBois. Similar to the Department's 1998 report to Congress on
BRAC, the Army and Air Force compared the size of the facilities used
for their technical activities to the number of staff performing the
technical activities. They determined that the ratio of total technical
facility size, in square feet, to the number of personnel performing
these functions, represented by the size of the acquisition workforce,
was a suitable parametric estimate for this facility category. As noted
in the report, only a comprehensive BRAC analysis can determine the
exact nature or location of potential excess.

56. Senator Inhofe. Mr. DuBois, the DOD is still conducting a
global posture review. The DOD has indicated that it will include the
findings of this review in the BRAC process. However, it will be done
without formally submitting the findings to Congress. How do we fix
this problem and don't you think Congress should have the benefit of
such a review before it is formalized as part of the process?
Mr. DuBois. The Department has consulted with congressional defense
committees on all aspects of the global posture review, including
projected specific overseas changes. The Department has not yet
completed its review; however, we will continue to be in close
discussions with Congress on details on the overseas changes, both
before and after the Secretary and the President make their decisions
on such changes. The impact of these decisions on U.S. bases that may
accommodate any forces returning from overseas will be made within the
BRAC process and Congress will be provided this information, along with
all the information supporting the BRAC process, after the Secretary
provides base closure and realignment recommendations to the commission
no later than May 16, 2005.

57. Senator Inhofe. Mr. DuBois, during the recent public comment
period on BRAC criteria, I submitted a suggestion that the 50/50 law
and other statutory limitations be included as criteria. I don't think
that the law can be ignored or violated by closing bases and then
saying ``sorry we just don't have enough depots to meet the
requirements anymore.'' However, the answer you published in the
Federal Register did not adequately explain your rejection of this
suggestion. The DOD wrote: ``it is inappropriate to include any
statutory constraints in the selection criteria because they are too
varied and numerous and could preclude evaluation of all installations
equally. The absence of these requirements in the text of the criteria,
however, should not be construed as an indication that the Department
will ignore these or any other statutory requirements or limitations in
making its final recommendations.'' I don't understand your answer.
Will you make sure the final BRAC list complies with the requirements
in sections 2464 and 2466 of title 10 or not?
Mr. DuBois. The requirements of section 2466, as well as all other
statutory constraints, will be carefully considered. For BRAC to be a
truly comprehensive process and to achieve our objective in support of
the warfighter, the process must involve all of our installations,
including those that perform depot-level maintenance and repair. The
Department values the contributions made by all of its installations
and depots to our national security. As provided for by law, the
Department will conduct the BRAC process in a way that treats all
installations equally and fairly, making military value the primary
consideration. The Department will also ensure it retains the
capabilities necessary to protect our national security. As such, the
Department will examine all of its facilities, including depot level
maintenance and repair facilities, within this process and within all
applicable legal requirements, including section 2466.

58. Senator Inhofe. Mr. DuBois, do you believe that this authority
to conduct a BRAC gives you the authority to create conditions that
will circumvent or supercede existing statutory requirements?
Mr. DuBois. The Department values the contributions made by all of
its installations and depots to our national security. As provided for
by law, the Department will conduct the BRAC process in a way that
treats all installations equally and fairly, making military value the
primary consideration. The Department will also ensure it retains the
capabilities necessary to protect our national security. As such, the
Department will examine all of its facilities, including depot-level
maintenance and repair facilities, within this process and within all
applicable legal requirements, including section 2466.

59. Senator Inhofe. Mr. DuBois, I have seen several cost estimates
for this round of BRAC. Obviously we won't know the true costs until
after the process is complete and then even later when the true impact
is realized. However, we never seem to take into affect the costs to
the communities, the individuals who lose jobs are displaced,
businesses shut down, relocated, etc. But, at least we can look
realistically at what we do know of environmental clean-up costs and
mission relocation. What is your estimate of the costs of this BRAC?
Mr. DuBois. The Department has made some preliminary estimates of
BRAC 2005 costs and savings for budget planning purposes. Based on the
costs and savings experiences of BRAC rounds 93 and 95 (inflated to
then year dollars and interpolated to a 20 percent reduction in plant
replacement value), the Department estimates that total costs and
savings would be roughly equal at the end of the 6-year implementation
period. This would result in a cumulative net cost of about $200
million at the end of fiscal year 2011, followed by annual recurring
savings of approximately $8 billion. The experience of previous BRAC
rounds suggests that each military department will achieve annual net
savings beginning not later than fiscal year 2011. Of course, the
actual costs and savings from BRAC 2005 actions will depend on the
specific recommendations adopted.

60. Senator Inhofe. Mr. DuBois, can we afford those costs at this
time when the Services are struggling with the costs of this war?
Mr. DuBois. We cannot afford to stop the BRAC process--we must not
waste the opportunity. It is true that previous rounds suffered because
the funding required for implementation competed with weapons systems.
This competition created a perverse dynamic that limited BRAC's
potential. For BRAC 2005, the Department is exercising extraordinary
programmatic oversight to minimize this counter-productive funding
dynamic. Previous BRAC experience demonstrates that savings from BRAC
actions begin to accrue immediately, and these savings will be used to
fund the implementation costs.

61. Senator Inhofe. Mr. DuBois, the Army just submitted a UFR list
of $6 billion. On that list were up armored Humvees, body armor, and
other critically needed force protection needs. If we have Services
forced to put force protection needs on UFR lists during a war, how can
we pay $15 billion to shut down bases?
Mr. DuBois. Previous BRAC experience demonstrates that savings from
BRAC actions begin to accrue immediately, and these savings will be
used to fund the implementation costs.

62. Senator Inhofe. Mr. DuBois, in MG Lust's statement he said
``more troops are coming and going on our installations than in any era
since World War II.'' As we train and deploy these active forces, and
train, mobilize, and demobilize these Reserve Forces, how do we do all
this and add the turmoil of BRAC on top of that?
Mr. DuBois. Fighting the global war on terrorism creates
significant turmoil for our fighting forces and their families. But the
Department simply cannot ignore the benefits that a BRAC process offers
because of this increased level of activity. We cannot afford to stop
the BRAC process--we must not waste the opportunity to reconfigure our
current infrastructure into one in which operational capacity maximizes
both warfighting capability and efficiency. Retaining excess base
capacity diverts scarce resources away from funding critical military
capability. I would point out that we implemented portions of BRAC 88
and conducted the BRAC 91 process during Operations Desert Shield and
Desert Storm.

63. Senator Inhofe. Mr. DuBois, how do you see the implementation
of BRAC while we have forces moving in and out of the country at this
record pace? What are the costs associated with this added turmoil?
Mr. DuBois. The Department will apply the lessons learned from
prior BRAC rounds to ensure the implementation phase proceeds as
efficiently and effectively as possible, mirroring the excellent track
record of the past rounds. The costs associated with this heightened
activity, such as determining beddown requirements for overseas forces
returning stateside, will be addressed in the BRAC costs and savings
analyses as those specifics become known.

64. Senator Inhofe. Mr. DuBois, one of the criticisms in the past
for BRAC was the slow pace of actually moving things to realize the
cost savings. Won't all this turmoil slow the process down even
further?
Mr. DuBois. I can assure you that savings from prior BRAC rounds
are real and significant a position shared by both the General
Accounting Office and Congressional Budget Office. The GAO released a
report on April 5, 2002, stating: ``In addition to our analyses,
studies by other Federal agencies, such as CBO, the DOD Inspector
General, and the Army Audit Agency, have shown that BRAC savings are
real and substantial and are related to cost reductions in key
operational areas as a result of BRAC actions.'' This is not an
isolated finding. The report went on to indicate that ``Our analyses
have consistently affirmed that the net savings for the four closure
rounds are substantial and can best be depicted as cost avoidances in
specific operational areas.'' Through the end of the 1990-2001 BRAC
implementation period, the Department estimates the four BRAC rounds
generated savings of approximately $17 billion and that annual
recurring savings approximate $7 billion. These estimates include
environmental restoration expenses.

65. Senator Inhofe. Mr. DuBois, as part of the DOD's Unified
Command Plan, the Army, Navy, Air Force, and Marine Corps have been
tasked with learning how to better integrate their warfighting
capabilities and overall interoperability. In an effort to streamline
budgets and to get the most use out of our military bases, has any
consideration been made to creating joint use bases that will collocate
several Services together allowing for rapid deployment of joint forces
and the sharing of MILCON expenses?
Mr. DuBois. Yes, the Department is giving much consideration for
doing more in the joint arena. In his November 15, 2002, memorandum
``Transformation Through Base Realignment and Closure,'' the Secretary
established the goals and priorities for the 2005 BRAC round. A primary
objective, in addition to realigning our base structure to meet our
post-cold war force structure, is to examine and implement
opportunities for greater jointness. To reinforce the idea that we
should be looking across traditional lines to examine the potential for
jointness, the Secretary established an internal BRAC 2005
decisionmaking body that is joint at every level. The Infrastructure
Executive Council (IEC), chaired by the Deputy Secretary, and composed
of the Secretaries of the Military Departments and their Service
Chiefs, the Chairman of the Joint Chiefs of Staff and Under Secretary
of Defense (Acquisition, Technology and Logistics) (USD(AT&L)), is the
policy making and oversight body for the entire BRAC 2005 process. The
subordinate Infrastructure Steering Group (ISG), chaired by the
USD(AT&L) and composed of the Vice Chairman of the Joint Chiefs of
Staff, the Military Department Assistant Secretaries for Installations
and Environment, the Service Vice Chiefs, and the Deputy Under
Secretary of Defense (Installations and Environment) (DUSD(I&E)),
oversees joint cross-service analyses of common business oriented
functions and ensures the integration of that process with the military
department and defense agency specific analyses of all other functions.
Opportunities for increased joint operations through basing actions
will be aggressively pursued within BRAC 2005.
______

Questions Submitted by Senator Wayne Allard

ENVIRONMENTAL STUDIES

66. Senator Allard. General Fox, in 1993 the Air Force, the EPA,
and the State of Colorado conducted an environmental baseline study for
Lowry Air Force Base. While the survey identified a former hospital at
the site, the survey did not disclose the fact that the Air Force had
buried debris, including asbestos, across the Northwest neighborhood of
the Air Force base. Why wasn't information about the buried asbestos
disclosed by the Air Force in 1993?
General Fox. The Air Force did not bury asbestos in the Lowry
Northwest Neighborhood. During past building demolition, some debris
remained in place, but to the best of our knowledge, the Air Force did
not intentionally dispose of asbestos construction waste.
Unfortunately, the Air Force was unaware of the subsurface items
containing asbestos at the time of the 1993 survey.
Had we known of remaining construction debris, we would have
disclosed this information. From the information that was available, it
wasn't known that anything like that had happened.
The Air Force, EPA, and State regulators, working together as the
BRAC Cleanup Team (BCT), have conducted numerous environmental studies
and reviews to identify any environmental contamination or conditions
affecting Lowry. These efforts included the 1993 Environmental Baseline
Survey (EBS), known as the EBS Phase I, which was supplemented in 1994.
The BCT was also involved in studies and document reviews conducted
under a facility assessment in 1996, an EBS Phase II completed in 1999,
the initiation of an EBS Phase III in 2002, a reevaluation of the
base's operational history in 2002, and an all-sites review (now being
addressed under a RCRA facility assessment ordered by the state)
initiated in May 2003. The completed studies and documents were made
available to the Lowry Redevelopment Authority (LRA) for their review,
as well. Despite these efforts by the BCT, locations containing debris
were not identified or raised as a concern by any of the BCT members.
The 1993 EBS mentioned possible demolition debris near the former
airfield runway, and four rubble sites at Lowry that might contain
demolition debris. The EBS described a 1973 aerial photo indicating
possible stockpiling of earth, residual concrete, and building rubble
from the demolition of the former base hospital near the northern end
of the former north-south airfield runway. The EBS also briefly
described a 1983 aerial photo that indicated the northern end of the
runway was then clear of the stockpiled material, and that possible
grading or removal of the material to other base locations may have
occurred since 1973. The 1983 photo showed that several former
structures near the NWN appeared to have been removed by demolition.
The EBS states that a former Lowry employee recalled that the
demolition debris was moved to a solid waste site on Lowry, away from
the NWN.

67. Senator Allard. General Fox, it is my understanding that this
same baseline survey, which did not reveal asbestos in the soil, also
failed to include ``dummy'' munitions later found on base, failed to
include eight underground storage tanks filled with hazardous waste
left on base, and did not include 20mm high explosive fragments from
projectiles found at Lowry. Knowing this, do you feel the Air Force has
done an adequate job of characterizing the extent of environmental
contamination at Lowry?
General Fox. The Air Force, in conjunction with EPA and the State,
has done and continues to do more than an adequate job of
characterizing the extent of environmental contamination at Lowry.
However, the Air Force always seeks to do better, especially when
deficiencies are discovered which reveal that the painstaking process
undertaken by the BCT to identify unknown sites did not always succeed.
Lowry has been a challenging environmental effort, partially due to
unknown environmental conditions caused by the constant change in the
numerous military missions and tenants from 1937 until the base closed
in 1994. We are continuing our due diligence efforts to increase the
possibility that other potentially contaminated sites are located and
receive an appropriate response.
The ``dummy'' munitions that were found were brass shell casings
that contained no explosive charge or powder and are similar to the
small shells occasionally kept by military members as souvenirs. They
were not hazardous.
The projectile fragments referred to were target practice fragments
found by the Air Force during its remedial investigation of the base's
firing range berm, where one would reasonably expect to find such
fragments as a result of target practice. An ordnance team from Fort
Carson stated the fragments were not from high explosive projectiles.
Also, of the eight underground storage tanks referred to, three
contained hazardous waste, but all were found by the Air Force during
environmental cleanup, as part of the Air Force's ongoing investigative
efforts. Of course, the regulators and the redevelopers were kept
apprised of these Air Force discoveries. The Air Force removed the
tanks in consultation with the State regulators, who agreed with the
Air Force's work and disposal plans. When the tanks were discovered and
removed, the Air Force still owned the property where the tanks were
located.

68. Senator Allard. General Fox, the Air Force also designated in
the baseline survey that the Northwest Neighborhood was a Category I
site, which means that there was no evidence of hazardous materials and
no further investigation of that site was necessary. Given the
discovery of asbestos across the site, would the Air Force still give
the site a Category I designation?
General Fox. The Air Force did not designate the entire Northwest
Neighborhood as a ``Category I site.'' Portions of this property, which
encompasses over 90 acres, were given other DOD Environmental Condition
categories. For purposes of environmental due diligence, assigning DOD
environmental condition categories, and conducting environmental
restoration, the Air Force did not refer to or consider this entire
property as a single ``site.''
Most, though not all, of the property in the Northwest Neighborhood
(NWN) was considered DOD environmental condition category I at property
transfer. Category I property is property where no release or disposal
of hazardous substances or petroleum products has occurred (including
no migration of these substances from adjacent areas). Property that
receives a DOD environmental condition category II through IV can also
be transferred by deed, and several properties within the NWN fell
within those categories.
Had we the information then that we have now, the Air Force would
not have designated as category I the former hospital site. If the
amount of health risk did not warrant a CERCLA response, that portion
of the property may have qualified as a different category that would
have still allowed the Air Force to transfer the property by deed. If
the health risk warranted a CERCLA response, then those portions of the
property would have been a different category that does not allow
transfer by deed until the necessary CERCLA responses are taken.

69. Senator Allard. General Fox, doesn't this discovery make the
Air Force liable for cleaning up the site?
General Fox. The issue of liability for environmental cleanup can
be complex, depending on the facts and circumstances, and agreements
entered into by the parties. It is impossible to generalize. The
circumstances vary from location to location. The Air Force and the
Department of Justice are currently investigating and analyzing facts
and circumstances surrounding the transfer and development of the
property within the NWN at the former Lowry AFB and the subsequent
asbestos cleanup activities. This investigation and analysis is guided
by current CERCLA case law and precedent. No decision has been made by
the Federal Government as to the liability of the various parties
involved at this time. The Federal Government, and specifically the Air
Force, will pay whatever portion of the liability it is responsible for
pursuant to law.
The Air Force is required by Federal law to promise future property
owners that it will perform whatever remedial action is necessary under
Federal law to protect human health and the environment. Necessary
remedial actions are determined in accordance with Federal procedures
established under CERCLA. The Air Force is conducting a CERCLA
investigation of what remedial actions are necessary, if any, for the
property in the NWN that it still owns. The Air Force is also willing
to conduct such an investigation for the property that it has conveyed.
This, of course, is somewhat complicated because of actions by others
on such property. What reimbursement the Federal Government is
obligated to make in these circumstances is what is under investigation
by the Air Force and the Department of Justice.

70. Senator Allard. General Fox, in 1995 the Air Force and the
Lowry Redevelopment Authority (LRA) signed a land conveyance agreement.
The agreement included a provision that specifically states some
buildings and equipment may contain asbestos and that the LRA would be
responsible for the cleanup of these facilities. However, neither this
provision nor any other provision of the land conveyance addresses
asbestos in soils. Have you read the conveyance? If so, do you agree
that conveyance does not state anything about asbestos in soils?
General Fox. I have not read the agreement. Other Air Force
personnel have read the entire agreement. The conveyance agreement and
its provisions are among a multitude of pertinent facts and
circumstances being considered by Air Force and Department of Justice
lawyers.

71. Senator Allard. General Fox, the conveyance specifically states
that the LRA is not liable for the Air Force's use of toxic and
hazardous wastes or materials of any portion of Lowry Air Force Base.
Do you consider asbestos in soils to be a hazardous material?
General Fox. The Air Force lawyers do not agree and are conferring
with the Department of Justice as to its reading of the contractual
provisions contained in the Economic Development Conveyance (EDC)
agreement.
Several provisions have been brought to my attention that pertain
to this issue. The EDC agreement executed in June 1995, as amended by
EDC Amendment No.3 in December 1999, contains two provisions regarding
asbestos on the EDC ``Premises.'' EDC Premises is defined as the entire
EDC property and not limited to improvements or structures on the
property.
First, EDC provision no. 9 warns or informs the LRA that:

The EDC Premises has improvements that may contain
asbestos-containing material (ACM)
The LRA should inspect the premises for presence and
condition of ACM prior to applying for the EDC or assume the
risk that ACM may be present
The Air Force makes no express or implied warranties
about the presence or condition of asbestos on the EDC
premises, and the LRA's failure to inspect or be fully informed
about the condition of the EDC premises will not provide
grounds for any claim or demand for adjustment or withdrawal by
the LRA from the EDC agreement
Information about the EDC premises contained in the
EDC is based on the best information available to the Air
Force, but that any omission of information by the Air Force
does not excuse nonperformance of the EDC or any claim by the
LRA against the Air Force, and
The Air Force assumes no liability for damages for
personal injury, illness, disability, or death to anyone for
the purchase, transportation, removal, handling, use,
disposition, or another activity causing or leading to exposure
to the asbestos on the EDC premises

Second, EDC provision no. 23, which took effect for all EDC
Premises in December 1999 as a result of EDC amendment no. 3, provides
that:

The LRA assumes responsibility for compliance with all
laws and regulations related to the presence, containment,
release, abatement, removal, handling, transportation, and
disposal of ACM on the EDC premises
The LRA releases the Air Force of all liability
associated with ACM on the EDC premises, and agrees to
indemnify and defend the Air Force against, and hold the Air
Force harmless from, all claims, suits, demands, actions,
liabilities, judgments, and costs accruing for death, personal
injury, and property damage related to any activities
associated with ACM on the EDC premises

I mention these provisions to indicate that the situation is more
complex than it might seem at first sight. This is why we are currently
engaged in an in-depth analysis of this matter. Asbestos in soil may be
hazardous, depending on the asbestos type (e.g. chrysotile or
amphibole), form (e.g., capable of being inhaled and friable or non-
friable), amount, likelihood of exposure, and length of exposure, among
other factors. A risk assessment is the method used to determine under
CERCLA whether asbestos in soil at any given site constitutes a risk to
human health that warrants remediation. In Colorado, soil containing up
to 1 percent amount of asbestos can be disposed of as nonhazardous
solid material in accordance with 6 Code of Colorado Regulations
sections 1.2 and 5.2.

72. Senator Allard. General Fox, in section 13.3 of the land
conveyance, the Air Force recognizes and acknowledges its
responsibilities under the Comprehensive Environmental Response,
Compensation, and Liability Act. From my understanding, this provision
holds the Air Force liable for the removal of hazardous materials
released during its operations. Was asbestos deposited in soils of the
Northwest neighborhood of Lowry Air Force Base by the Air Force during
its operations? If so, under section 13.3 of the land conveyance, why
isn't the Air Force liable for remediating the hazardous materials in
the soils at Lowry?
General Fox. Past operations by the Air Force appears to be one of
several possible sources of the asbestos contained in soil in the
Northwest Neighborhood (NWN) at Lowry. Demolition debris, some of which
contained asbestos, remained in place at the site of demolished
buildings. Additionally, the Air Force does not remove underground
utility pipes from base closure property. Lowry followed standard
building demolition procedures used by industry when the demolition
occurred. Although the bulk of the demolished building materials were
removed from the site and properly disposed of, incidental amounts of
asbestos-containing material likely would have remained at the site.
Other potential sources of asbestos in soil within the NWN include
importation of soil into the area by the LRA and builders from other
portions of the base during redevelopment for use as fill and grading
material. Additionally, the LRA conducted some demolition of former Air
Force buildings and structures, including excavation or removal of
underground utility pipes containing or made of asbestos material, and
it is not currently known to what extent these activities may have
contributed to the fragments of asbestos being found in or on the soil.
The LRA and many of its builders were aware that the Air Force did not
remove the underground utility lines. It is the developer's
responsibility to ensure the proper removal of such pipes during
construction activities. Numerous fragments of asbestos, which the
State has described as ``discoveries'' of asbestos, have been found on
the surface of soils in re-graded areas, which indicate the asbestos
fragments appeared at least partially as a result of relatively recent
redevelopment activities conducted by the LRA and builders.
In a letter dated August 28, 2003, the Assistant Secretary of the
Air Force for Installations, Environment, and Logistics provided much
of this information to members of the Colorado congressional delegation
and to the Governor.
See response to first question above. The Air Force and the
Department of Justice are currently investigating the facts and
circumstances, including the provisions in the EDC agreement, regarding
the transfer and development of the property within the Northwest
Neighborhood at the former Lowry AFB and the subsequent asbestos
cleanup activities performed at the behest of the State. No decision
has been made by the Federal Government as to the liability of the
various parties involved at this time.

73. Senator Allard. General Fox, the State of Colorado determined
in its Final Response Plan that the presence of asbestos at the site
was a threat to public health. Specifically, the State of Colorado said
that a risk of 1 excess cancer in 1,000,000 was sufficient for
remediation. Does the Air Force agree with this standard? If not, why
then did the Air Force agree with the State of Colorado to clean up the
commissary site at Buckley Air Force Base, which had a similar problem,
to this same standard?
General Fox. There is not a standard in Colorado directly
applicable to this situation. The State has issued advisories and
orders concerning the steps it wants taken, but it has not promulgated
any generally applicable standard for sampling or remediating asbestos
in soil, nor has it formally adopted the risk limit described above.
The State made a risk management decision that the presence of any
detectable asbestos at the site posed an unacceptable risk. It did not
conduct a site-specific risk assessment to determine what level of risk
is present at the site prior to issuing response requirements to the
LRA, builders, and the Air Force.
Federal agencies conduct cleanup activities based upon an
assessment, conducted in accordance with applicable law, of the
potential risk of a situation to human health and the environment.
Lowering risk to 1 excess cancer in 1,000,000 may be a goal, but
depending upon the specific circumstances, other risk goals may be more
appropriate. For instance, U.S. EPA allows 1 excess cancer in 10,000 as
an acceptable risk for some CERCLA response actions. Analysis by the
Air Force under the applicable procedures is underway, and an Initial
Risk Assessment was published by the Air Force last month. Though
limited to an examination of the retained Air Force property, one of
its primary conclusions was that the potential health risk on the Air
Force's property does not require soil removal at the resent time. This
is significantly different from what the State has concluded.
As explained above, there is no applicable standard. It is not
correct that Buckley Air Force Base agreed to follow the same standards
being imposed at Lowry, either for its commissary site or for its
construction of the fitness center facility. Buckley AFB did agree to
excavate surface soils down to the depth of native soil. Sampling was
done for the purpose of confirming that the native soil level had, in
fact, been reached during the excavation process. Buckley is now under
a Colorado Department of Public Health Environment (CDPHE) compliance
order, citing allegedly applicable state solid waste regulations, to
remove stockpiled soils and develop a response plan to address other
soils disturbed by construction and development. It is the State's
position that asbestos is a waste material and the deposition of soil
with any concentration of asbestos constitutes illegal disposal. The
Air Force is appealing this order, and action which clearly indicates
that the Air Force and the State have not yet reached agreement on the
asbestos cleanup at Buckley.

74. Senator Allard. General Fox, before construction can continue,
the State of Colorado has mandated that the site be cleared up to a
level of non-detection for asbestos. According to the State of Colorado
and the LRA, the Air Force was inactive during the discussions and did
not voice objections to the standards of remediation that were being
developed at the time. Did the Air Force participate in discussions
during which standards for the remediation of asbestos at Lowry were
being developed?
General Fox. The Air Force participated in discussions, and we did
object. The Air Force worked extensively with the LRA and builders
during the time that the LRA, builders, and the Air Force were directed
by CDPHE in its Compliance Advisories to develop sampling and response
plans. Air Force personnel and contractors participated in every joint
LRA/builder asbestos workgroup meeting at which the Air Force was
invited to attend. At those meetings we provided or offered technical
support and assistance. This period of time ran from about 1 May 2003
to early July 2003. The Air Force contractor personnel alone devoted
over 120 hours of technical support with their participation in LRA/
builder teleconferences and reviewing and commenting on sampling plans
directly related to the LRA and builders' efforts. The Air Force
technical staff devoted numerous additional hours negotiating with the
state on indoor air sampling requirements and conducting air sampling
for the City of Denver's Child Care Center in the Northwest
Neighborhood.
The Air Force spent many hours working with the LRA's attorney to
negotiate a funding arrangement to cover certain prospective sampling
and remediation costs. The Air Force offered $1 million for fiscal year
2003, and also offered the LRA the opportunity to provide information
to the Air Force to justify expanding the geographic scope of the
agreement. No legal claims would have been waived to accept this
funding. The LRA rejected this offer.
Additionally, the Air Force fully supported a proposal developed by
the LRA and builders in a document titled ``Strategic Risk Management
in Lowry's Northwest Neighborhood, Denver, CO'', dated June 17, 2003,
in which the LRA and builders proposed to the State an alternative risk
management approach for responding to asbestos in soil in a manner
similar to that traditionally used by U.S. EPA. (The method imposed by
the State is to require soil removal whenever any amount of asbestos is
detected in soil, however slight.) The Air Force participated in
numerous meetings with the state in June and July 2003 about
remediation requirements and where the ``Strategic Risk Management''
proposal was specifically discussed with the State regulators. In
addition, the Air Force explicitly told the LRA and the builders that
their acceptance of the State's requirements would pose problems for
recovering costs from the U.S. for unnecessary response efforts.
On more than one occasion, the Air Force, LRA, and builders asked
the State to provide a copy of its risk assessment or study that the
State said supported its approach. After failing to get a copy from the
State, the Air Force informed the State on August 28, 2003 that it
would initiate a CERCLA response process, including a risk assessment,
for the remaining property in the Northwest Neighborhood still owned by
the Air Force. The Air Force released its initial health risk
assessment in March 2004 and will release the second interim report in
July 2004. The final health risk assessment report will be issued in
December 2004.

75. Senator Allard. General Fox, from your understanding, did the
Air Force object to the potential risk to exposure or to the standards
of remediation being developed at these meetings?
General Fox. During the May 1 to early July 2003 time explained
above, the Air Force voiced concerns, by teleconference and in person,
at meetings held with the State regulators, LRA, and builders, about
the sampling and cleanup requirements the State contemplated imposing
on all parties. Our counsel specifically raised a concern during a
meeting attended by the State regulators about how the State regulators
were trying to interpret their air quality regulation to impose a soil
standard that required remediation of any detectable levels of
asbestos. This same concern was voiced by the LRA and builders on
several occasions, and is reflected in their ``Strategic Risk
Management in Lowry's Northwest Neighborhood, Denver, CO'' paper
presented to the State regulators.

76. Senator Allard. General Fox, given our discussions, is the Air
Force liable for remediation of asbestos in soils at Lowry?
General Fox. The Air Force and the Department of Justice are
currently investigating and analyzing the facts and circumstances
surrounding the transfer and development of the property within the
Northwest Neighborhood at the former Lowry AFB and the subsequent
asbestos cleanup activities. This investigation and analysis is guided
by current CERCLA case law and precedent. No decision has been made by
the Federal Government as to the liability of the various parties
involved at this time.
______

Quiestions Submitted by Senator Daniel K. Akaka

PRESIDENTIAL HELICOPTER REPLACEMENT PROGRAM

77. Senator Akaka. Admiral Weaver, a few days ago the Department
announced a delay in the schedule for the presidential helicopter
replacement program known as the VXX. The 2005 budget includes
significant military construction funding that was geared to the
original time line. What impact does this delay have on your ability or
requirement to fund this military construction in 2005? Is all of this
funding still needed in 2005?
Admiral Weaver. The Navy included $106 million for VXX facilities
in the fiscal year 2005 budget request in order to meet the planned
arrival of the first VXX aircraft by November 2006. Although the Navy
announced a delay in the SDD contract award, no significant delay is
anticipated in the arrival of the first aircraft. The Navy is using the
additional time made available by the delay in the SDD contract to more
fully investigate the design, performance, cost and tradeoff
opportunities with both offers, thus minimizing the need to delay the
arrival date of the first VXX aircraft. In addition, the Navy used a
fast track 35-month versus a more customary 55-month construction
schedule to meet the November 2006 planned arrival of VXX aircraft.
Thus, VXX facilities are still needed in fiscal year 2005, even if the
SDD contract delays the arrival of the first aircraft.
All funds are still required in fiscal year 2005. If these
facilities are not constructed, there will be an increased risk of
failing to meet the initial operating capability date as directed by
the White House.

MILITARY CONSTRUCTION AT FORT STEWART

78. Senator Akaka. General Lust, this week the committee received a
notification from the Army invoking an emergency authority to begin
preparation to create new facilities to house an extra brigade at Fort
Stewart Georgia as the first example of the Chief of Staff's proposal
to change the structure of our combat divisions. While I have been a
strong supporter of Army transformation, this proposal raises some
questions. This initial military construction proposal we received will
require additional follow-on funding requests we have not yet seen.
What is the total cost of this proposal at Fort Stewart?
General Lust. We are in the process of determining what new
construction will be required to support the new unit of action (UA)
coming to Fort Stewart as part of the transformation process. We
continue to further define all needed facility requirements with
detailed cost estimates to provide facilities for the new UA.

79. Senator Akaka. General Lust, when and how will the balance of
costs for the project at Fort Stewart be funded?
General Lust. We are still determining the specific facility
requirements for the Fort Stewart project. The permanent facilities
will be funded in the Military Construction, Army (MCA) program. We are
planning to program MCA projects to replace the emergency relocatable
facilities being erected this summer with permanent buildings over
several years beginning in the earliest possible MCA program.

80. Senator Akaka. General Lust, how confident is the Army that
these facilities can be in place in time to adequately set up and train
forces under this new structure before they are sent back to Iraq late
this year?
General Lust. The plan is to have the first facilities in place by
early July 2004. The entire emergency relocatable project is expected
to be finished near the end of this summer to coincide with the full
staffing of the new UA. We are confident we can meet this schedule with
expeditious approval of the necessary reprogramming action to allow for
an early May construction contract award.

READINESS AND ENVIRONMENTAL PROTECTION

81. Senator Akaka. Mr. DuBois, the 2005 budget requests $20 million
for the Readiness and Environmental Protection Initiative. Does the DOD
envision the use of these funds for both the purchase of land that DOD
would own as well as for the purchase of easements without actual DOD
ownership of the land?
Mr. DuBois. This funding supports and is consistent with the
Administration's Readiness and Range Preservation Initiative,
specifically, 10 U.S.C. 2684a enacted in section 2811 of the National
Defense Authorization Act of 2003. With these funds, the military
departments will have greater flexibility to enter into cooperative
agreements with private conservation organizations or state and local
governments to cost-share the acquisition of easements to preserve
high-value habitat and limit incompatible development in the vicinity
of military installations.

82. Senator Akaka. Mr. DuBois, would this $20 million defense-wide
fund be the only funding available to the Services for such purchases,
or would they also be permitted to use their own funds?
Mr. DuBois. Under 10 U.S.C. 2684a, enacted by section 2811 of the
National Defense Authorization Act of 2004, the military departments
are authorized to use their own funds to enter into cooperative
agreements with private conservation organizations or State and local
governments to cost-share for the acquisition of property interests.

83. Senator Akaka. Mr. DuBois, does the DOD still require advance
approval by the Office of the Secretary of Defense before the military
departments may acquire more than 1,000 acres of land, or any land
worth over $1 million, or are you giving the Services more flexibility
to execute such arrangements where they see opportunities to prevent or
mitigate future encroachment problems by acquiring buffer zones?
Mr. DuBois. Yes, DOD still requires advance approval for any major
acquisition of real property, i.e., more than 1,000 acres of land, or
any land worth over $1 million. For those acquisitions outside of the
Washington, DC, area the approval authority is the Under Secretary of
Defense (Acquisition, Technology, and Logistics). For acquisitions
within the Washington, DC area, the Secretary or Deputy Secretary must
first approve the acquisition.

DRINKING WATER AT CAMP LEJEUNE

84. Senator Akaka. Mr. DuBois, 23 years ago, a military engineer
assigned to test the drinking water at Camp Lejeune, North Carolina,
wrote: ``Water highly contaminated with . . . chlorinated hydrocarbons
(solvents)!'' It took 2 years for the Marine Corps to confirm these
findings and another 3 years after that before the contaminated wells
were shut down. The Marine Corps has informed us that there was no
regulatory standard in place in the early 1980s for the specific
contaminants at issue and urged us not to impose today's standards on
them using 20-20 hindsight. I don't want to look backward at the events
at Camp Lejeune, I want to look forward. In particular, I want to look
at the issue of perchlorate. Right now, we know we have perchlorate in
the drinking water at a number of our military bases and surrounding
communities. As was the case with tetrachloroethylene (PCE) and
trichloroethylene (TCE) 20 years ago, we don't have any enforceable
regulatory standards for perchlorate today. My concern is that DOD's
position appears to be that it will wait for regulatory standards
before it takes any action to address perchlorate problems. Don't we
risk repeating the problems we had with Camp Lejeune if we wait for the
regulatory system to catch up before we address problems that we know
we have today?
Mr. DuBois. Before I answer your question, I would like to briefly
address the very complex issue at Camp Lejeune. While it is true that
there were no drinking water standards for the volatile organic
compounds that impacted the water at Camp Lejeune, and that the wells
were shut down prior to those standards being implemented, questions
remain about the reasonableness of decisionmaking leading to the
closure of the affected wells. To help the Marine Corps address this
issue, General Hagee chartered a panel on March 18, 2004, to conduct an
independent review of the facts surrounding the decisions made
following the 1980 discovery of volatile organic compounds in the
drinking water at Camp Lejeune. The panel is expected to report their
findings by October 2004.
With that being said, the Department's efforts to identify and
address, where appropriate, perchlorate reflects the Department's
commitment to respond to any public health threat in a manner
commensurate with the identified threat and based on the best available
scientific understanding of the threat. The Department initiated and
supports significant steps to help identify the threat posed by
perchlorate including funding, with other Federal agencies, an
independent assessment by the National Academy of Sciences focusing on
the science of perchlorate as the basis for the formulation of a
science-based regulatory standard. The Department continues to invest
in the development of new technologies to remediate existing
perchlorate contamination and to develop substitutes for perchlorate
use.

85. Senator Akaka. Mr. DuBois, what actions are you taking now to
address risks to human health from perchlorate contamination at
military facilities and surrounding communities?
Mr. DuBois. The Department is committed to using the best available
science to inform public policies and decisions. DOD believes that the
review undertaken by the National Academy of Science on health risks
associated with low levels of perchlorate in drinking water, sponsored
by DOD, EPA, National Aeronautics and Space Administration (NASA), and
Department of Energy (DOE) is a clear indication of that commitment. In
the interim, the Department has undertaken an aggressive environmental
sampling program requiring the services to sample for perchlorate
anywhere that there is a reasonable expectation that perchlorate may
exist and there is a pathway to a human receptor. The Department is
also researching and demonstrating perchlorate treatment technologies
at our installations. These efforts will help the Department plan,
program, and budget for future cleanup requirements once the risks have
been defined and a standard is promulgated for perchlorate.

OPERATION NOBLE EAGLE AIR DEFENSE

86. Senator Akaka. General Fox, the Air Force is currently using 16
bases to conduct the air superiority defense mission over the United
States as part of Operation Noble Eagle. The 2005 budget contains
military construction funding to upgrade facilities at some of these
bases to accommodate this mission. However, at other bases, funding is
not yet programmed pending a decision on whether or not this mission
requirement is likely to persist beyond a 5-year period. Who will make
this requirements decision, and when?
General Fox. The decision to upgrade facilities at some of the 16
Operation Noble Eagle air defense operating locations was based upon
recommendations of site survey teams comprised of Air Combat Command,
Air National Guard and Air Force Reserve representatives. These teams
performed extensive reviews in response to a HQ USAF Program Action
Directive published following the Commander, North American Aerospace
Defense Command (NORAD) decision in December 2003 to upgrade the Air
Sovereignty Alert mission from a ``contingency'' to a steady state
alert mission for the foreseeable future.''
Any decision to discontinue this mission requirement resides with
NORAD.

87. Senator Akaka. General Fox, why are military construction
dollars being devoted to some bases and not to others if no decision
has yet been made on whether or not the combat air patrol air
superiority mission is a long-term requirement?
General Fox. The decision to upgrade facilities at some of the 16
Operation Noble Eagle air defense operating locations was based upon
recommendations of site survey teams comprised of Air Combat Command,
Air National Guard, and Air Force Reserve representatives. These teams
performed extensive reviews in response to a HQ USAF Program Action
Directive published following the Commander, NORAD decision in December
2003 to upgrade the Air Sovereignty Alert mission from a
``contingency'' to a ``steady state alert mission for the foreseeable
future.'' The specific locations chosen to receive military
construction projects were based upon a basing template created by Air
Combat Command for all air sovereignty alert bases. Construction
recommendations dealt mainly with upgrading taxiways, parking aprons
and crew facilities to meet the minimum NORAD requirements for the
mission.

MILITARY CONSTRUCTION FOR KC-767 HANGARS

88. Senator Akaka. General Fox, it is my understanding that if the
Air Force does proceed to lease or purchase 100 Boeing 767 tanker
aircraft, approximately $600 million in military construction funding
would be required, because these aircraft will not fit in the hangars
used for our current fleet of tankers. Is there any military
construction funding in the current Future Years Defense Program to
support a tanker replacement program?
General Fox. The Department is committed to the recapitalization of
our aerial tanker fleet. The Department will make a decision on whether
to continue with the KC-767 procurement effort after receiving results
from the various assessments and investigations. The Air Force has
MILCON funding programmed in the Future Years Defense Plan to support a
KC-135 Tanker Replacement program. Should the KC-767 Lease/Buy proposal
be approved, MILCON funding from the Tanker Replacement program would
be applied to the associated MILCON requirements.

89. Senator Akaka. General Fox, how much new military construction
would be required to bed down 100 new tanker aircraft?
General Fox. The Department is committed to the recapitalization of
our aerial tanker fleet. Should the KC-767 Lease/Buy proposal be
approved, the required MILCON funding would be approximately $650
million to beddown 100 KC-767 aircraft. Any changes in aircraft beddown
requirements will result in changes to the MILCON funding estimate.

BASE REALIGNMENT AND CLOSURE

90. Senator Akaka. Mr. DuBois, decisions made in the 2005 BRAC
round will impact the mission of other Federal agencies. For example,
these decisions could impact the locations of DOD and VA clinics or the
requirements the Coast Guard might have to use naval installations to
support their homeland missions. What steps is the DOD planning on
taking to consider the impact of its proposals on the missions of other
Federal agencies?
Mr. DuBois. The Department understands the decisionmaking value of
a comprehensive consideration of costs. In accordance with the Base
Realignment and Closure Act of 1990, as amended, section 2913(d), the
Department's application of its cost and savings criterion will ``take
into account the effect of the proposed closure or realignment on the
costs of any other activity of the Department of Defense or any other
Federal agency that may be required to assume responsibility for
activities at the military installations.'' The Department will issue
guidance to the military departments and the Joint Cross Service Groups
that incorporates this requirement in the application of criterion
five.

INSTALLATION COMMAND CONSOLIDATION

91. Senator Akaka. General Fox, in the past few years the
Departments of the Army and the Navy have both decided to manage all
installations under one central organization. Is the Air Force
considering a similar change, or do you plan to maintain the current
decentralized system?
General Fox. No, the Air Force is not considering a similar change.
The current decentralized system, reflects the ``one base-one boss''
framework which we have determined best supports Air Force operations
and maintains quality of life.
______

Questions Submitted by Senator Bill Nelson

ENVIRONMENTAL THREATS

92. Senator Bill Nelson. General Lust, Admiral Weaver, General
Williams, and General Fox, over a year ago, Deputy Secretary Wolfowitz
sent a memorandum to the Secretaries of the Army, Navy, and Air Force.
In the memorandum, he asked them to provide ``timely information'' with
respect to ``any proposed environmental restrictions that you believe
threaten in a substantial way your ability to ensure the military
preparedness of the Armed Forces for which you are responsible.'' This
was for the purpose of utilizing the national security exemption
provisions available in the environmental laws. In response to Deputy
Secretary Wolfowitz's memorandum, did the Army, Navy, or Air Force
submit any information that warranted using the National security
exemption of the Comprehensive Environmental Response Compensation and
Liability Act (Superfund), the Solid Waste Disposal Act (also known as
the RCRA), or the Clean Air Act?
General Lust. No. The Army has not submitted information requesting
use of the national security exemptions under the CERCLA, the Solid
Waste Disposal Act, or the Clean Air Act. These environmental laws were
written with the understanding that the National security exemptions
would be rarely used. For example, invocation of the RCRA exemption is
to be based on ``the paramount interest'' of the United States--an
exceptionally high standard. These national security exemptions provide
relief that is brief in duration and focused on individual activities,
facilities, or pollution sources. They are unsuited to the Army's
routine, widespread and ongoing training activities, such as the daily
regimen of our soldiers firing munitions in testing and training on
operational ranges. These activities will be occurring continuously and
into the foreseeable future. Protection of these activities through an
annual invocation of a presidential national security exemption is not
a reasonable response. That is why we seek to protect our training and
testing activities through a focused, straightforward codification of
the existing munitions policy under RCRA and CERCLA.
Admiral Weaver. The existing exemptions in environmental law are
intended to be emergency powers exercised only in extraordinary
circumstances. They are limited in scope and are not meant for managing
the Department of Defense's routine training and testing requirements
or basing decisions. In most environmental statutes, the President may
grant national security exceptions only if it is in the ``paramount
interest'' of the United States--the highest standard in our laws. And,
even if an exemption is granted, our activities will not necessarily be
shielded from challenge in private litigation.
Although existing exemptions are a valuable hedge against
unexpected future emergencies, they cannot provide the legal basis for
the Nation's everyday military readiness activities. To date, the Navy
and Marine Corps have not asked the Secretary of the Navy to bring to
DOD's attention a case where a presidential exemption from an
environmental law would be warranted. Our readiness activities are not
``one-time'' events, but part of the day-to-day training regimen for
our forces and we believe it is not good public policy to ask for
exemptions for something that needs to take place on a regular basis.
Rather, we should resolve the basic issue.
The legislative changes sought by the Department will reduce the
likelihood of range closures or restrictions affecting live-fire
readiness activities on military ranges. In addition, they will provide
flexibility to base new weapons systems and reposition our forces. The
provisions will ensure that critical live-fire training and testing
opportunities for our service men and women are protected, and that the
health and welfare of our military personnel on these ranges or
installations as well as all citizens outside our range boundaries will
remain secure.
General Williams. The Marine Corps has not asked the Secretary of
the Navy to bring to DOD's attention a case where a Presidential
exemption from an environmental law would be warranted.
General Fox. To date, the Air Force has not had a need to submit
requests in response to the subject memorandum. However, we support the
proposed OSD RRPI legislative package, which your question directly
relates to.
The Air Force has complied with and will continue to comply with
all environmental laws. Through the use of workarounds, we have been
able to accomplish our training and testing needs. The RRPI provisions
will help clarify existing laws and will reduce the likelihood of range
restrictions that may affect readiness activities. The Air Force
foresees future challenges similar to other Services if these
environmental regulation clarifications are not addressed proactively.
The Air Force is committed to managing the natural resources on our
installations and ranges. Last year, Congress passed legislation that
encouraged the substitution of Integrated Natural Resources Management
Plan in lieu of critical habitat designations. Consequently, this year
when the U.S. Fish and Wildlife Service proposed critical habitat for
the California Red-Legged Frog, Vandenberg Air Force Base was excluded
from that designation because their INRMP was deemed to provide
sufficient protection for the species. This is an excellent example of
an RRPI provision providing flexibility to ensure military readiness
while maintaining, and even enhancing, species viability.
The initiatives are intended to ensure that critical training and
testing opportunities for our service men and women are protected. RRPI
legislative proposals like the INRMP give us the ability to quickly
adapt and reconfigure the training environment to respond to evolving
real world combat situations, while at the same time protecting our
portfolio of environmental resources.

93. Senator Bill Nelson. Mr. DuBois, I am particularly concerned
about recent reports that DOD is an extensive contributor to
perchlorate contamination in the water on or near military bases.
Perchlorate contamination is incredibly expensive to clean up and I am
concerned about DOD's response to suspected contamination and how
environmental exemptions would impact the current and future responses.
Has the military identified which installations are contaminated with
perchlorate as a result of DOD activities?
Mr. DuBois. DOD understands that it is more cost-effective to clean
up contamination on operational ranges before it has migrated than to
wait until it crosses the range boundary. The Department has initiated
a policy to assess potential hazards from off-range munitions and begin
remediation by fiscal year 2008. Each of the Services is acting on this
guidance. The Service assessments will include characterization of
potential areas of munitions contamination, as well as consideration of
hydrology and potential areas associated with drinking water supplies.
Our RRPI proposal explicitly waives its protections in the event of
off-range migration of munitions constituents, providing a powerful
incentive for the Department to proactively clean up ranges to prevent
such migration and the loss of the RRPI protections. These incentives
are reinforced by existing State and Federal authority under the Public
Health Service Act, which the RRPI does not affect. Under section 300i
of title 42 United States Code, EPA may issue such orders as it deems
necessary to protect against not only actual but also ``likely''
contamination of drinking water sources, as the Agency has done at
Massachusetts Military Reservation. Finally, RRPI preserves EPA's
similar order authority under Section 106 of the Comprehensive
Environmental Response, Compensation, and Liability Act. All of these
authorities and policies provide powerful incentives for DOD to assess
and cleanup contamination on ranges.
The Department of Defense issued an Interim Policy on Perchlorate
Sampling on September 29, 2004. This policy directs the DOD components
to ``sample any previously unexamined sites where a perchlorate release
is suspected because of DOD activities and where a complete human
exposure pathway is likely to exist.'' This direction includes sampling
at military installations. A current listing of the sites sampled was
provided to the Environmental Protection Agency, the General Accounting
Office, and the state regulators through the Association of State and
Territorial Solid Waste Management Officials.
The Department of Defense is committed to addressing any
contamination that poses an unacceptable risk to human health and the
environment. If, for any reason, perchlorate in the groundwater within
the confines of an operational range poses an imminent and substantial
danger to the public health or welfare, the DOD has the responsibility
to take appropriate action under section 104(a)(1) of the Comprehensive
Environmental Response, Compensation, and Liability Act.

94. Senator Bill Nelson. Mr. DuBois, what plans does DOD have to
identify those ranges and how is DOD planning to address and remediate
contamination?
Mr. DuBois. The Department of Defense (DOD) has identified its
operational ranges and provided that list to Congress in accordance
with the requirements of section 366 of the National Defense
Authorization Act for Fiscal Year 2003. In addition, DOD has directed
the Services to assess their operational ranges and begin required
remediation by fiscal year 2008. The Service assessments are underway
and include characterization of potential areas of munitions
contamination, as well as consideration of hydrology and potential
areas associated with drinking water supplies.
To ensure the process is consistent and defensible, the Office of
the Deputy Under Secretary of Defense (Installations and Environment),
in a cooperative effort with the Office of the Deputy Under Secretary
of Defense (Readiness), is developing a framework for the military
Services to use when assessing environmental conditions at operational
ranges. DOD needs such a protocol to enhance the ability to detect the
migration of munitions constituents toward off-range areas, and prevent
or respond to such a release before the munitions constituents reach
off-range areas.
The protocol developed will create a consistent and comparable data
set across Services, missions, and range types. The military services
will use the protocol to plan and execute range assessments and will
rely on both qualitative and quantitative assessments, and be flexible
enough to accommodate range- and mission-specific differences.
Specifically, the protocol will include:

A discussion of the overarching program objectives for
operational range assessments
Specific data quality objectives (DQO) for the
assessments
A list of parameters recommended for evaluation (e.g.,
specific munitions constituents, potential migration pathways)
Guidance on documenting and reporting the results of
operational range assessments
Guidance on releasing or reporting data to external
parties (e.g., the Federal or State regulatory agencies, the
public).

A final product is expected by September 2004.

95. Senator Bill Nelson. Mr. DuBois, what effort is DOD taking to
immediately protect the public health of service families residing on
installations from perchlorate and similar munitions contaminants?
Mr. DuBois. The DOD is committed to addressing any contamination
that poses an unacceptable risk to human health and the environment.
If, for any reason, perchlorate, or other munitions constituents in the
groundwater within the confines of an operational range poses an
imminent and substantial danger to the public health or welfare, the
DOD has the responsibility to take appropriate action under section
104(a)(1) of the Comprehensive Environmental Response, Compensation,
and Liability Act. DOD understands that it is more cost-effective to
clean up contamination on operational ranges before it has migrated
than to wait until it crosses the range boundary. The Department
initiated a policy to assess potential hazards from off-range munitions
and begin remediation by fiscal year 2008. Each of the Services is
acting on this guidance. The Service assessments will include
characterization of potential areas of munitions contamination, as well
as consideration of hydrology and potential areas associated with
drinking water supplies.
For perchlorate, DOD issued a sampling policy on September 29,
2003, which directs DOD components to consolidate existing perchlorate
occurrence data; sample any previously unexamined sites where
perchlorate is suspected because of DOD activities; and establish and
maintain databases containing perchlorate sampling data collected. In
addition, under the Unregulated Contaminant Monitoring Rule, the
Environmental Protection Agency required specific DOD water treatment
plants to sample for perchlorate. The 472 samples taken from DOD
drinking water systems did not reveal any perchlorate health concerns,
however the DOD components continue to monitor for potential sources of
perchlorate releases and will take the appropriate steps should a
health threat be identified.

96. Senator Bill Nelson. Mr. DuBois, in previous DOD requests for
exemptions from public health statues, such as Superfund, RCRA, and the
Clean Air Act, you have had a broad definition of ``operational
range'', or the area to which these exemptions would apply. What types
of ranges are intended for inclusion in this definition?
Mr. DuBois. The term ``operational range'' is now defined in
section 101(e)(3) of title 10, United States Code. Operational ranges
include areas used for the research, development, testing, and
evaluation of military munitions, other ordnance, and weapons systems,
and for the training of members of the Armed Forces in their use and
handling. The definition does not include areas that are no longer
under the jurisdiction, custody, or control of the Secretary of Defense
or that have been put to uses that are incompatible with range
activities.

97. Senator Bill Nelson. Mr. DuBois, are areas other than live fire
impact areas included in your definition of operational range?
Mr. DuBois. Live-fire impact areas are only one part of training or
testing ranges included under the statutory definition. Operational
ranges also include areas used for other training and testing
functions, such as firing points, firing lanes, test pads, detonation
pads, electronic scoring sites, maneuver areas, safety buffer areas,
and exclusionary areas. all these various parts of a range or range
complex are critical to readiness, and are included in the statutory
definition of an operational range.

98. Senator Bill Nelson. Mr. DuBois, under your definition, how
many operational ranges does the DOD possess?
Mr. DuBois. Under the criteria of the statutory definition, there
are 525 operational ranges and range complexes, and this number
includes 443 ranges within the U.S. and its territories.

99. Senator Bill Nelson. Mr. DuBois, how many acres of land would
be designated as an ``operational range'' and can you submit a copy of
identified ranges for the record?
Mr. DuBois. DOD's land base in the United States is approximately
30 million acres. Of that total, only those areas used for testing,
training or other readiness activities would be considered operational
range areas. That, however, includes most of the total land base, with
the exception of the built-up cantonment areas, including support
facilities such as housing, schools, water treatment facilities, and
similar non-readiness infrastructure. Typically, our cantonment areas
occupy only a very small percentage of an overall installation, about 1
to 5 percent of the total acres.
A complete list of DOD's training range complexes and ranges is
attached, as submitted to Congress in DOD's Section 366 Report,
``Implementation of the Department of Defense Training Range
Comprehensive Plan,'' February 2004. The full report is available on
the web at https://www.denix.osd.mil/denix/Public/News/OSD/i366/
i366.html.

______

Questions Submitted by Senator E. Benjamin Nelson

RUNWAY CONDITIONS AT OFFUTT AIR FORCE BASE

100. Senator Ben Nelson. General Fox, as you are aware, U.S. Space
Command and Strategic Command merged into an expanded STRATCOM,
headquartered at Offutt Air Force Base, Nebraska. This new United
States Strategic Command has a very extensive legacy and new command
and control (C2) requirements that must continue to be operational and
fully integrated. The new missions for STRATCOM include global strike,
global integrated missile warning/missile defense, informational
operations, global command, control, communications, computer,
intelligence, surveillance, and reconnaissance (C\4\ISR), and space
control. STRATCOM is one of seven Unified Commands located in the
United States and is instrumental in fighting the war on terrorism. In
short, STRATCOM is reshaping the Nation's military capabilities for the
demands of the 21st century. I understand that the scheduled runway
maintenance has nearly doubled in the past year and that there are
numerous critical conditions negatively impacting current missions. The
poor runway conditions and the fact that the Air Force has already
pushed this project back in the Future Year Defense Plan cause me great
concern. Will you explain why the Air Force decided not to include the
runway project in fiscal year 2005 budget?
General Fox. Unfortunately, taking into account the size of the
fiscal year 2005 military construction program and higher priorities
for new mission beddown and quality of life requirements, we were not
able to include this project in the fiscal year 2005 budget. Given
current anticipated funding levels, we feel this project is an
excellent candidate to receive funding in our fiscal year 2006 military
construction program.

101. Senator Ben Nelson. General Fox, I understand that a
construction contract has recently been awarded for the installation of
a Type-3 Hydrant System along the ramp. Is it true that if the runway
project was included in the fiscal year 2005 budget, thus enabling
simultaneous construction of the runway and hydrant projects, that the
negative impact to missions which utilize the ramp and runway would be
less?
General Fox. If the two projects were constructed at the same time,
the impact to the mission would potentially be reduced somewhat.
However, the risk of extending the duration of the aircraft relocation
doesn't outweigh the potential benefit of constructing the two projects
together.

[Whereupon, at 4:27 p.m., the subcommittee adjourned.]

DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
2005

----------

THURSDAY, MAY 13, 2004

U.S. Senate,
Subcommittee on Readiness
and Management Support,
Committee on Armed Services,
Washington, DC.

ACQUISITION POLICY ISSUES

The subcommittee met, pursuant to notice, at 2:29 p.m. in
room SR-222, Russell Senate Office Building, Senator John
Ensign (chairman of the subcommittee) presiding.
Committee members present: Senators Ensign, Allard, Levin,
Reed, Akaka, and Pryor.
Committee staff member present: Leah C. Brewer, nominations
and hearings clerk.
Majority staff members present: William C. Greenwalt,
professional staff member; Ambrose R. Hock, professional staff
member; Gregory T. Kiley, professional staff member; Thomas L.
MacKenzie, professional staff member; and Paula J. Philbin,
professional staff member.
Minority staff members present: Madelyn R. Creedon,
minority counsel; Maren R. Leed, professional staff member; and
Peter K. Levine, minority counsel.
Staff assistants present: Andrew W. Florell and Nicholas W.
West.
Committee members' assistants present: Lance Landry,
assistant to Senator Allard; D'Arcy Grisier, assistant to
Senator Ensign; Davelyn Noelani Kalipi, assistant to Senator
Akaka; William K. Sutey, assistant to Senator Bill Nelson; and
Andrew Shapiro, assistant to Senator Clinton.

OPENING STATEMENT OF SENATOR JOHN ENSIGN, CHAIRMAN

Senator Ensign. This afternoon, the Subcommittee on
Readiness and Management Support meets to receive testimony on
acquisition policy issues in a review of the defense
authorization request for fiscal year 2005.
We are departing from the usual practice by conducting this
hearing after the committee has marked up its bill. However,
the topics of discussion today will inform potential floor
action to support the committee in conference deliberations
with the House and serve as the basis for future oversight
hearings.
I am pleased to welcome today's witness on the first panel,
the Acting Under Secretary of Defense for Acquisition
Technology and Logistics (AT&L), Mike Wynne.
Today's hearing will address a full range of acquisition-
related issues. I look forward to hearing from Secretary Wynne
on the specifics of how the Department of Defense (DOD) is
transforming its acquisition process and the future of the
acquisition workforce.
In addition, the recent guilty plea to one count of
criminal conspiracy by a former Air Force official with major
responsibilities for negotiating the KC-767A tanker contract,
and other recent cases of potential contractor abuse, have
raised revolving-door and contractor-ethics issues to the
forefront of debate on acquisition policy. It is the
committee's understanding that the DOD has embarked on a
thorough review of its revolving-door and contractor-ethics
policies. While I expect we will discuss some of these issues
today, the subcommittee plans to hold a more detailed hearing
on the adequacy of procurement integrity safeguards in the
coming months.
Our second panel will focus on contract oversight in Iraq.
Recent events in Iraq have put many of these contracts in the
spotlight. Questions have been raised about the adequacy of DOD
contract oversight in Iraq, the appropriateness of functions
that are being contracted out, and how contractor security
functions should function in the U.S. military chain of
command.
The Senate Armed Services Committee included several
provisions in its bill this year to improve the oversight of
contractors performing security, intelligence, law enforcement,
and criminal justice functions in Iraq and other areas where
U.S. forces are engaged in military operations.
In the course of today's hearing, we need to evaluate
whether more needs to be done. Improving how the DOD buys goods
and services is critical to our national security. We need to
ensure that the money spent on defense acquisition is spent
appropriately and wisely, and I look forward to hearing from
our witnesses on DOD's efforts to address these challenges.
Senator Akaka.

STATEMENT OF SENATOR DANIEL K. AKAKA

Senator Akaka. Thank you very much, Mr. Chairman. Good to
be working with you and to be part of this hearing today, which
is a tradition of conducting an annual hearing to conduct
oversight of DOD acquisition policy.
In previous years, our hearings have focused on issues such
as public/private competition, the defense industrial base
proposals to streamline the acquisition process, and even
shortcomings in the Department's management of its $53 billion
in services contracts. We continue to have questions and
concerns about many of these acquisition policy issues.
This year is different from other years, however; and this
hearing will be different from other hearings. As we sit here
today, 135,000 American troops remain engaged in a hostile
environment in Iraq. Tens of thousands of contractor employees
are also in Iraq, supporting both the war effort and the
rebuilding effort. It has been widely reported that as many as
20,000 contract employees are engaged in security functions
alone. Our extraordinary reliance on contractors to perform a
wide array of services in a war zone has raised unprecedented
questions.
I would like to mention just three contractor-related
events in Iraq which I think demonstrate both the extent of the
contractor role in that country and some of the issues raised
by that role.
First, for more than a month, the Marine Corps was engaged
in combat operations in and around Fallujah, which have
resulted in a number of American casualties and many more Iraqi
casualties, helping spark unrest throughout the country. The
escalation of conflict in and around Fallujah was triggered by
the brutal murder of four American contractor employees in that
city in late March, which has raised serious questions about
the safety of the thousands of other contractor employees
throughout the country.
Second, for the last 2 weeks, the attention of the American
public, Congress, and the world has been riveted on the
horrible abuses reported at Abu Ghraib prison in Iraq. Press
reports indicate that at least two contractor employees may
have either witnessed or participated in abuses. The revelation
that contractors have been hired to participate in the
interrogation of prisoners in American custody has raised
serious questions about whether contractors are conducting
inherently governmental functions.
Finally, just last week I received a series of e-mails from
Hawaii soldiers currently deployed in Iraq, indicating that
they are suffering a shortage of food because of a contractor
who appears unable to continue deliveries. One e-mail states,
``My soldiers in Iraq have a shortage of food due to enemy
attack on food supply convoys. As I understand it, the
subcontractors who deal hands-on with the Army food supply
lines in Iraq are not being paid by the general contractor and
so are not distributing the food. I beg of you, please look
into this situation. Who is not paying our food bills? Do we
need new contractors to deliver food to our soldiers?''
I also wanted to tell you, Secretary Wynne, that I noted
your statement includes a discussion of the progress that has
been made on corrosion, which is an issue of great importance
to me. I'm so glad you're here today. You're doing a great job.
I applaud your efforts, Mr. Secretary. In particular, the
leadership that I understand that you have personally brought
into this problem has been great.
I also understand that the Defense Science Board (DSB) is
about to release a study estimating that the DOD can save
billions of dollars in maintenance costs over the next 5 years
through corrosion prevention and mitigation efforts. I hope
that this means that the fiscal year 2006 budget request will
include substantial funding in support of the anti-corrosion
fight.
Mr. Chairman, thank you for calling this hearing, and I
look forward to hearing our witnesses.
Senator Ensign. Thank you.
Senator Allard, do you have an opening statement?
Senator Allard. Mr. Chairman, I just have a few brief
comments. I want to, first of all, thank you for holding this
hearing, I want to thank Secretary Wynne for taking time to
testify before this subcommittee, and just mention that I'm
going to have to leave here to catch a flight. But I wanted to
at least be here just to make a few comments.
Senator Ensign. You go home for the both of us, since I
can't catch my flight. [Laughter.]
Senator Allard. Again, like I said, I appreciate, Secretary
Wynne, you taking the time to testify before the subcommittee.
I think the acquisition process of the DOD is very
important. The transformation of the DOD involves everything
from our increased reliance on joint operations to the
development of new financial-management systems. Our
acquisition channels in the Department are also part of this
transformation policy, and I continue to support the changes
that DOD and this committee has made in relation to acquisition
policy. Not only do we need to continue to modify the
acquisition process so that the Department can be more
responsive to the rapid changes of our military needs, but we
also must continue to refine the oversight process of such
major programs.
Again, thank you, Mr. Chairman, for having this hearing
today, and I look forward to the panel's testimony and
reviewing it.
Thank you.
Senator Ensign. Thank you, Senator Allard.
Now we'll hear from our first witness, the Honorable
Michael W. Wynne, Acting Under Secretary of Defense for
Acquisition, Technology, and Logistics.
Mr. Secretary?

STATEMENT OF HON. MICHAEL W. WYNNE, ACTING UNDER SECRETARY OF
DEFENSE FOR ACQUISITION, TECHNOLOGY, AND LOGISTICS

Secretary Wynne. Thank you, Mr. Chairman, thank you,
Senator Akaka, thank you, Senator Allard, for holding this
hearing. I think it's important that you get an annual report
on the state of play in acquisition, and I'm pleased to be
here.
I'd like to start by saluting the performance of the
134,000 proud members of the acquisition corps worldwide, a
significant but diminishing resource to protect the expenditure
of $150 billion in taxpayer-provided resources each year. Since
1998, this resource has been steadily reduced from 149,000,
while the number of customer-driven transactions continues to
increase, and the intensively-managed transactions have risen
57 percent.
These people, frankly, serve all over the world with, I
believe, over 100 deployed right now to Iraq and Afghanistan,
and are called upon to accomplish extraordinary efforts to
support our warfighters and participate in phase four of
warfare, reconstruction of stable democracy.
I'd like to salute our depot and industry partners from all
over the world, who respond quickly and, for the most part,
efficiently to our requests for instant surge and instant
technology as we gain experience and knowledge of modern
warfare and its many elements and what it requires from our
supply. Their performance in our Operation Iraqi Freedom (OIF)
and in Operation Enduring Freedom (OEF) has lifted the burden
from our warfighters in many instances, and provided them
products that are getting more and more reliable, and more and
more effective.
I would also like to salute you, members of this committee
and other Members of Congress, who provided not just resources,
but also advice from your personal experiences and travels to
provide feedback from warfighters. I, in my years as a supplier
and now as a buyer, have not seen this close a connection of a
laboratory and the front lines to bring our competitive
advantage to save battlefield casualties.
As we acknowledge and contend with the spectrum of warfare
best described as the global war on terror, we cannot turn away
from maintaining our competitive edge in other warfare specter
that has kept this nation free over the years. This calls for
an integrated resource plan that maintains an expected sea
dominance, maintains now expected air dominance, emphasizes
expeditionary warfare, and drives us towards knowledge-enabled
warfare by emphasizing awareness of the battle space.
Acquisition is responding to this diverse challenge with
flexible policies, better training, focusing on two defense-
related customer sets--the warfighter and the maintainer and
logistician--and working to satisfy our business-related
customers, that is you, Congress, and our industrial partners
and international customers.
I have established goals for the acquisition, technology
and logistics community that derive from the President's
management agenda, as well as the Secretary's top issues. The
defense agencies that report to AT&L have also each set goals
to emphasize their customers' goals. Defense Advanced Research
Product Agency (DARPA) is working with service technology
experts to speed technology to the warfighter. Defense Threat
Reduction Agency (DTRA) is partnering in the field with engaged
warfighters and combatant commanders across the world on
weapons of mass destruction. Defense Contract Management Agency
(DCMA) is putting their customer goals as their own, using the
activity-based costing to monitor their progress. The Defense
Logistics Agency (DLA) is maintaining high supply satisfaction
while reducing costs of operation with enterprise-wise
management that has advanced with many in our industry. Defense
Acquisition University is winning awards from professional
societies for training and partnering with educational
institutions, to teach them about virtual university and to
gain academic credit in management for its professional
courses.
Our internal transformation is aimed at improving the
business of defense, and ranges from automating the end-to-end
procurement process to embracing unique identification systems
for all of our purchases, and radio-frequency identification
technology for logistics tracking.
Our emphasis on small business has brought us ever closer
to our difficult goals. In fiscal year 2003, $42 billion was
awarded to small business, which represented $9 billion more
than in the previous year. This achievement puts DOD within a
few tenths of a percent of the 23 percent government-wide
small-business goal.
In summary, I'm pleased to report the progress we have
made, and advise there is still much to be done. We continue to
strive to get our major programs to be stable performers, on
schedule, and budget. We need a rational process to negotiate
contract closure efficiently. We need to pay attention to the
science and engineering talent pool that exists for the DOD to
draw on to maintain our technical edge in defense. Further,
we're in the middle of modernizing the business side of
acquisition and logistics, and we need to see these through to
meet your goal within the Chief Financial Officer (CFO) Act, as
we are a major element of the accounting and the cash flow of
the Department.
I want to again thank this committee for its attention to
this field of endeavor. I'm prepared to answer your questions,
and seek your continued support.
[The prepared statement of Secretary Wynne follows:]

Prepared Statement by Hon. Michael W. Wynne

Chairman Ensign, Senator Akaka, and members of the subcommittee:
Thank you for the opportunity to appear before you and discuss the
President's 2005 Acquisition Policy and Programs for the Department of
Defense (DOD). While we have made great progress in making acquisition
more efficient, in moving capabilities to the warfighter faster, and in
the transformation of our defense establishment, the Department
recognizes that we must make even greater progress in the future. I
thank the committee for your leadership in providing both the authority
and guidance for our efforts to date and ask for your continued support
of the Department's transformation program.

SUPPORT TO THE GLOBAL WAR ON TERRORISM--IRAQ

I want to begin by highlighting the Acquisition, Technology, and
Logistics (AT&L) workforce's efforts in the global war on terrorism,
emphasizing their work to support our forces in Iraq and the Iraqi
people. The acquisition workforce is doing extraordinary things under
the most trying of circumstances to achieve the President's goal to
establish a more secure, more peaceful, and democratic Iraq that will
stand against terrorism and no longer threaten America, the region or
the world. The reconstruction of Iraq is proceeding on a very
aggressive schedule and entails creating an infrastructure beyond what
had ever existed. Contracts totaling $5 billion for construction and
program management have now been awarded in response to requests for
proposals that were released in early January. Under Army leadership,
the principal Army contracts office--made up of Army, Navy, Air Force,
Marine, and civil service personnel--has awarded approximately 1,500
contracts so far, with almost two thirds to Iraqi firms. With only
about 30 personnel in-theater, this organization has established a main
office in the green zone, with three satellite offices around the
country. Additionally, under the Program Management Office of the
Coalition Provisional Authority (CPA), the acquisition workforce is
defining $6 billion worth of requirements for non-construction
procurements, again with a limited staff.
An example of the major efforts put forth by our stateside
contracting workforce to support our troops was the supply of Small
Arms Protective Inserts (SAPI) plates. Prior to Iraq, the estimated
fiscal year 2003 requirements were only $17 million. By November 2003,
we bought $370 million SAPI plates--using contracts awarded within 30
days, with an average delivery beginning within 83 days. Today, all
troops in Iraq are equipped with body armor.
Another example of support to our warfighters in Iraq and
Afghanistan is the DOD Combating Terrorism Technology Task Force
(CTTTF). It provides a valuable forum to examine the technology
alternatives to address immediate operational needs to support the
global war on terrorism. Leading up to Operation Iraqi Freedom the
CTTTF reacted to a broad set of operational issues. Technologies were
accelerated to field several specialized, unique weapons which focused
on specific, anticipated threats. Notable among these was the AGM-114N
Thermobaric Hellfire which built upon previous efforts supported by the
CTTTF in development of thermobaric weapons which were employed in
Afghanistan in Operation Enduring Freedom. The CTTTF sponsored the
Passive Attack Weapon to rapidly transition an Advanced Technology
Development prototype program to production, fielding 230 weapons in
160 days. This effort included weapons production, development of
operational tactics, delivery aircraft certification, field testing,
certification, and deployment.
A major focus of our current CTTTF effort is to enhance force
protection capabilities. We have actions underway to mitigate effects
stemming from terrorist use of weapons such as Improvised Explosive
Devices (IEDs), mortars, and rocket propelled grenades. A key focus is
detection and defeat of IEDs and on predictive analysis capabilities.
Contractor performance in Iraq has been good in many respects. Our
troops have obtained considerable in-country support from contractors
such as meals and other logistical needs. However, it has not been
perfect. Iraq presents a difficult security environment for
contractors. Many contractors that have not had problems in performing
their domestic DOD contracts are having difficulties in adjusting to
the unique environment in Iraq and to their own firms' influx of new
business. I believe that contractor financial and internal control
problems will be worked out, and in the meantime we are taking whatever
actions are necessary to protect the Government's financial interests.
I want to underscore that I am absolutely committed to an
integrated, well-managed contracting process in Iraq. The billing of
costs that are not properly documented and supported will not be
tolerated. If internal control systems are deficient, I will enforce
the use of protections, such as contract withholdings, suspension and
debarment, to safeguard our interests. I will also provide whatever
personnel and budget resources are needed to enforce integrity in DOD
contracts.

RIGHT PEOPLE, RIGHT PLACE, RIGHT TIME, RIGHT PAY, RIGHT SKILLS

I also want to address, right up front, the size of the AT&L
workforce. I believe we are at the point where any further reductions
in the size of this workforce will adversely impact our ability to
successfully execute a growing workload. The numbers are startling. The
AT&L workforce, as defined and managed by the DOD, shrank by 10
percent, from 149,439 people in March 1998 (when it was first defined)
to 134,431 people in September 2003. However, from a workload
perspective, the investment account funding (i.e., research,
development, test, and evaluation (RDT&E), procurement, and military
construction funds) increased 54 percent, from $96.5 billion in fiscal
year 1998 to $148.8 billion in fiscal year 2003. Similarly, the total
number of contract actions exceeding $100,000 (i.e., those that require
the vast majority of work by acquisition personnel) increased 57
percent, from 120,560 in fiscal year 1998 to 189,140 in fiscal year
2003. While the AT&L workforce has been shrinking, we continue to place
greater demands on our workforce. Today acquisition professionals must
work harder than ever to manage rising funding requirements, to execute
a growing number of contracting actions, and to administer an expanding
range and volume of complex acquisitions, including performance-based
contracting, services acquisition, major defense systems, and research
and development. To the extent that the workload continues to grow, we
will need to assess the size of the AT&L workforce to support the
growing demands of the global war on terrorism, buying of services, and
providing weapons systems and new technologies to the warfighter.
We are also faced with severe engineering shortages. As a result,
the Department is taking an extremely active role in attracting
inventors and engineering talent to the defense and aerospace
industries. There are a number of ``hard science'' areas where the DOD
provides between one-third and one-half of all government-funded
university research dollars in disciplines such as aeronautical
engineering, mechanical engineering, electrical engineering, materials
science, and computer science. In short, the Department actively helps
to grow the human element of the aerospace sciences. Over the past
year, the Department has also increased both the total number and
annual stipend for its Graduate Science and Engineering Fellowship
program--providing strong financial incentives to top science and
engineering students.

SEVEN AT&L GOALS

When I became Acting Under Secretary, I established seven goals for
AT&L specifically targeted to drive performance outcomes that will
directly contribute to our joint warfighting strategy and to
transforming DOD's business processes. These goals are:

1. Acquisition Excellence with Integrity
2. Logistics Integrated and Efficient
3. Systems Integration and Engineering for Mission Success
4. Technology Dominance
5. Resources Rationalized
6. Industrial Base Strengthened
7. Motivated, Agile Workforce

ACQUISITION EXCELLENCE WITH INTEGRITY

Acquisition Excellence with Integrity is all about improving our
acquisition processes. Evolutionary acquisition will push systems to
the warfighter faster by fielding increments of ever-increasing
capability. Spiral development will ensure systems maintain a
technology edge through user feedback combined with new/improved
technology. Our cost estimates must reflect the true total ownership
costs and be accurate enough to enhance our credibility with Congress
and the American people. We must ensure we can deliver at an affordable
cost. To ensure we look at joint warfighting capabilities--not just
individual programs, we must move to senior leadership capability
reviews.

LOGISTICS: INTEGRATED AND EFFICIENT

This goal directly impacts joint warfighting operational and future
capabilities. We have several critical initiatives here, among them:
moving to enterprise integration business systems and processes; end-
to-end management of logistics, which reduces logistics handoffs and
ensures reliable delivery of products and services; weapon system
support strategies founded on performance-based logistics, which drives
toward higher availability for weapon systems; designing OUT logistics
requirements through high reliability systems and reducing the
deployable logistics footprint of operational and support forces and
reducing logistics costs of operations.

SYSTEMS INTEGRATION AND ENGINEERING FOR MISSION SUCCESS

The purpose of this goal is to restore systems engineering best
practices at all levels of our architectures. My view is that we
collectively, both government and industry, almost lost this art, and
it is one that is sorely missed. As part of the goal, I established as
a matter of policy the requirement that all acquisition programs apply
a robust systems engineering approach that balances total system
performance and total ownership costs within the family-of-systems,
systems-of-systems context. This context will improve the integration
of complex systems by establishing net-readiness requirements and
common interfaces as integral portions of a system's design. In a
related effort, I have established a standardized methodology for the
conduct of system assessments. These assessments provide program
managers expert feedback and insight on their program's systems
engineering organization and processes. They also provide me insight
into the program's readiness for entry into the next acquisition phase
or into operational test and evaluation.
I have revamped systems engineering curricula and certification
methods and established a senior systems engineering forum to
institutionalize systems engineering discipline across the Department.
I am also establishing a government and industry community of practice.
We are leading the establishment of the systems view of integrated
architectures and are participating in the operational and technical
views. We are leading in the development of roadmaps and I will ensure
that Defense Acquisition Board (DAB) reviews consider milestone
decisions in a broader context of what individual programs contribute
to joint capabilities.

TECHNOLOGY DOMINANCE

Technology dominance provides our warfighters with the best
equipment today, and the capabilities needed for our future forces.
While many challenges exist today, technology can help address the
immediate needs for the global war on terrorism. Technology dominance
occurs through the alignment of the science and technology (S&T)
program with the needs of combatant commands and the joint functional
concepts; the continuing importance of basic research to enable the
development of future military capabilities; and most importantly that
we have the best scientific and technical talent available today and in
the future. Technology has a time value, but we cannot always predict
when time will confer criticality on any single technology. A diversity
of investments is required to maintain technology dominance over
adversaries who can focus on exploiting narrow technical
vulnerabilities. Our S&T plan seeks a balance of exploiting near term
opportunities and enabling technologies that might prove pivotal in the
future. Adroit applied engineering efforts and foresighted basic
research investments are both prominent in our S&T strategy.

RESOURCES RATIONALIZED

This goal is aimed at rationalizing infrastructure to enhance the
transformation of common business-oriented support functions, improve
joint utilization of assets, and reduce the total cost of ownership. We
will rationalize our infrastructure through both the base realignment
and closure process (BRAC) and the Global Posture Review. Both will
successfully allow the Department to position our infrastructure
globally to support joint warfighting capability, to address new and
evolving strategic imperatives, and to transform our business
practices. To that end, I am fully supporting the Department's Business
Management Modernization Program (BMMP). Three out of six domains fall
under my purview. They are: (1) Logistics, (2) Acquisition, and (3)
Installations and Environment domains. Together they are working toward
a corporate approach to legacy information technology systems and
business processes. As an example, under the BMMP, the acquisition
community of interest is working closely with both the BMMP domains and
the Services to transform our processes and to implement a net-centric
solution to provide on-demand access to acquisition oversight
information. As a result, for the first time, the acquisition oversight
community now has access to acquisition information from their
desktops, and we are well on our way to accomplishing program reviews
using our new system. In the future, we hope to provide Congress with
electronic access to the types of information they need for oversight
and to eliminate special hard copy reports such as the Selected
Acquisition Report (SAR). The end-state will streamline DOD processes
and yield long-term savings and efficiencies.
Dovetailing with the efforts of BMMP we continue our ongoing
assessment of the Department's acquisition process from end to end. We
are currently modeling our acquisition processes and integrating them
with the other five business domains so that the department's Business
Enterprise Architecture (BEA) is defined. By collectively defining our
business architecture we are able to re-engineer our business processes
to ensure that the best process can be combined with the most capable
information system infrastructure. Two of our significant systems are
the Standard Procurement System (SPS) and Wide Area Workflow (WAWF).
SPS is currently our enterprise system for procurement with over 24,000
users throughout the DOD. It is the authoritative source of data for
our business and financial process associated with procurement. WAWF,
also an enterprise solution, combines process change with technology as
it streamlines the receipts and acceptance process, moving from paper
to electronic invoicing, within the Department and commercial
community. It provides one interaction from the vendor to DOD to
process invoices, receiving reports and eventually Unique
Identification Data. This system has already allowed DOD to decrease
its interest penalty payments and increase its discounts taken for
prompt payment. Per my direction, WAWF is currently being deployed
across the DOD and to the vendor community and is processing an average
of over $1 billion in transactions monthly.

INDUSTRIAL BASE STRENGTHENED

The AT&L transformation mandate requires a defense industrial base
focused on, and capable of supporting, 21st century warfighting. We are
developing and employing a logical, capabilities-based approach to
identifying and evaluating industrial base sufficiency for critical
warfighting capabilities. Industrial base assessment information will
be used to identify remedies where critical industrial capabilities are
insufficient to meet DOD requirements, identify critical industrial
capabilities smaller innovative firms can provide, focus international
cooperation activities, and assess export controls. We are developing,
and plan to implement, policies that encourage smart industrial base
management on the part of acquisition program managers to keep the
industrial base robust and responsive.

MOTIVATED, AGILE WORKFORCE

Of course, without a ``Motivated, Agile Workforce'' none of the
other goals can be realized. Our people are a strategic asset and
represent a competitive advantage. DOD's transformation and warfighting
capability are dependent upon a world-class acquisition workforce. We
now plan to develop, motivate and equitably compensate employees based
on performance and contribution to mission and will provide maximum
flexibility to assign employees consistent with the needs of the
organization and individual's qualifications. We also plan to implement
a central referral system, a repository for all jobs, which will enable
the acquisition workforce to apply for jobs across the Department along
with non-DOD employees.
The Defense Acquisition University (DAU) will rapidly deliver
awareness training, through innovations like Rapid Deployment Training
(RDT), to keep the workforce up to speed on evolving practices and
major new policy initiatives. DAU is helping to create AT&L learning
organizations by fully deploying a capabilities-based approach that
promotes career-long learning and provides the workforce more control
over their learning solutions by balancing training courses; knowledge
sharing; and continuous learning.
In sum, I have set these goals to complement and facilitate
Secretary Rumsfeld's business transformation and joint warfighting
objectives and, even more fundamentally, to ensure that the resources
entrusted to the department are well managed and wisely used. In
implementing the seven AT&L goals, I have a number of AT&L initiatives
aimed at improving the way DOD manages acquisitions and programs,
several of which I would like to highlight for you now.

SYSTEMS OF SYSTEMS INITIATIVES

I have taken action to improve our acquisition decisionmaking to
account for how our acquisition programs will be integrated into joint
forces. I now require DAB reviews to include a presentation on all
other systems that the program under discussion relies on within its
mission context. I also review what systems rely on the program under
review. During the recent Space Based Infrared Systems (SBIRS)-High and
Stryker reviews, this approach achieved good results.
Working with the Joint Staff, we have begun to examine the use of
integrated architectures to guide investment strategies across the
Department. We have done so for Joint Combat Identification and the
lessons we learned from that process are being applied to other areas.
One major initiative we have embarked on in order to improve a key
capability for the joint warfighter is our Joint Battle Management
Command and Control (JBMC2) Roadmap. This roadmap guides both material
and non-material aspects of approximately $47 billion of programs
within the Department. The heart of JBMC2 is the Family of
Interoperable Operational Pictures (FIOP), initiated to provide an all-
source picture of the battlespace through the fusion of existing
sources of data. The FIOP includes a number of elements, to include
single integrated pictures for Air, Ground, Maritime, Space and Special
Operations. By fusing multiple sources of sensor, human intelligence,
and other data, the seamless family of interoperable pictures will
enable the joint warfighter to execute battle management activities
with real-time, decision-quality data, even at the tactical level.
One of the key JBMC2 enablers is the notion of appliques. As a
spiral development activity, an applique can provide current and legacy
forces with capabilities now to exchange information across the joint
force and with coalition partners. The Department believes appliques
may have broad application for current forces.

LOGISTICS TRANSFORMATION

We are continuing to transform our logistics and supply chain
business processes. In September 2003, I was designated by Secretary
Rumsfeld as the Defense Logistics Executive (DLE), and General Handy,
the Commander of U.S. Transportation Command as the Distribution
Process Owner (DPO). As the DLE, I will be the single focal point for
Defense Logistics and Global Supply Chain Management System in the
Department. General Handy will be the single overseer of the
distribution process and his organization will be the single ``go-to''
organization for all distribution related issues. General Handy and I
have the authority and accountability to manage the complex but
critical supply chain and distribution process. My goal is to put
interoperable information systems in place and synchronize distribution
pipelines in order to optimize the end to end distribution system.
Another of my strategic imperatives is to implement Radio Frequency
Identification technology, commonly referred to as RFID. Implementing
this technology will optimize the DOD supply chain, enhance materiel
visibility and increase our support to the warfighters. The Department
joins industry leaders, such as Wal-Mart, in adopting commercial
standard RFID technology at the case and pallet level to optimize our
supply chain while further leveraging the market place in driving
technology costs down. Radio frequency ``tags'' applied to the cases,
pallets and freight containers shipped to and within the DOD will
enable hands-free processing of materiel transactions, allowing us to
re-apportion critical manpower resources to warfighting functions. The
Department plans to take this technology one step further and apply
these tags to its most critical assets; those requiring a Unique
Identification or UID for short. RFID tags applied to the item
packaging of UID items will enable us to better manage and track these
critical assets. Likewise, the unique identification of items supports
our efforts to value military equipment and to develop supporting
documentation. Together these efforts will enable DOD's property
accountability, inventory, and financial management information systems
to achieve compliance with the Chief Financial Officers Act. As we
implement this new technology, we continue to consult with our industry
partners and employing commercial open, global standards.

SPEND ANALYSIS INITIATIVE

I have an important initiative underway to identify how to acquire
services in a more efficient and strategic way. To date, we have
completed a rough order spend analysis to categorize what we spend on
services and identify service commodity areas offering potential
savings from sourcing in a more strategic manner. We are now developing
strategic sourcing plans for the top service commodities, beginning
with administrative services. In conjunction with other efforts under
the Department's BMMP, we are striving to improve our capability to
obtain acquisition data and enhance our ability to perform spend
analysis functions to support the development of strategic sourcing
plans.

CORROSION CONTROL INITIATIVE

Another initiative is resident in my recent corrosion control
policy to ensure that technologies to enable selection of corrosion
resistant materials, development of corrosion preventing production
processes, and application of corrosion prevention treatments are fully
considered during the acquisition process. Effective corrosion planning
is now a standard topic for all programs subject to DAB reviews. Among
our recent accomplishments, the Defense Acquisition University
initiated Rapid Deployment Training on Corrosion Prevention and Control
(CPC) Policy and Planning; we have established a DOD Corrosion Web
site; and we have published a CPC Planning guidebook to help program
managers plan their CPC efforts. At my request, the Defense Science
Board has established a Task Force on Corrosion Control to assess
ongoing DOD corrosion control efforts, especially in research, and
provide recommendations for improvement. In order to directly enhance
our research program in corrosion we have included a focused research
initiative in the Small Business Innovation Research (SBIR)
solicitation released on May 1. Seventeen corrosion topics of broad DOD
interest have been included in the Pentagon-sponsored SBIR program in
addition to the six Service-sponsored corrosion topics. For the first
time ever, in a consolidated way, the Department has requested $27
million in the President's budget specific to corrosion prevention and
control for the Services to fund high return-on-investment projects. We
also continue to work with the General Accounting Office in a
completely transparent way to assist in its ongoing review of our
corrosion efforts and planning.
Some examples of our corrosion technology transition efforts are:
The Services will use Av-Dec sealant materials to significantly improve
corrosion resistance and reduce maintenance; products will be applied
to aviation systems including C-130s, EA-6Bs, and helicopters. The
USMC/Army is developing an automated, transportable vehicle wash down
system to significantly reduce costs and improve corrosion prevention
in a wide range of environments, including Iraq. The Navy is currently
adapting commercial technology in advanced, rapid-cure epoxy and
polyurethane anti-corrosion coatings for use in shipboard tanks; these
long-life coatings reduce application time and apply to a wide range of
systems. The Army is prototyping a clear water rinse facility that will
provide thorough after-mission drive-through rinsing of all service
helicopters at a number of airfields. The Air Force is using avionics
grade corrosion inhibiting lubricants and CPCs to drastically reduce
avionics corrosion failures.

CONTRACTING

Contract closeout continues to be one of my top priorities. We are
focused on reducing the backlog of over-age contracts, especially those
that have been physically complete more than 6 years. I am happy to
report that we have made significant progress. For example, at the
beginning of fiscal year 2002, we had approximately 20,000 over-age
contracts. This number has been reduced by 35 percent. Additionally, we
identified over 5,000 contracts as being physically complete for more
than 6 years. To date, 70 percent of these contracts have been closed.
We are institutionalizing practices to close contracts in a timely
manner and decreasing the amount of funds needed each year to replace
older cancelled funds on over-age contracts. This means the military
services are now using less current-year money to pay old bills.
To create a new synergy among the congressionally mandated Small
Business Programs within the DOD, I have approved a coordinated
initiative developed by the Office of the Secretary of Defense-Office
of Small and Disadvantaged Business Utilization (OSD-OSADBU) affecting
the SBIR, the Small Business Technology Transfer Research (STTR) and
Mentor Protege programs. The newly crafted initiative focuses on
selected innovative technology topics essential to DOD industrial
transformation. The effort allows for resources to be applied to
qualifying SBIR/STTR small business firms to take them from conception
to the end product through a select Mentor-Protege development plan.
The initiative allows for a formalized Mentoring relationship with a
larger prime contractor that possesses the technology infrastructure
support for the qualifying SBIR/STTR small business firm. Under this
initiative a SBIR/STTR firm that is selected into the Mentor-Protege
program should facilitate a quicker return on investment to the DOD
from topic conception to program application and end production of the
product or service that may have a commercial application.
Fiscal year 2003 was a banner year within the DOD for U.S.
businesses--both large and small. Total contract dollars awarded by the
DOD set a new record high. DOD awarded close to $190 billion in prime
contracts to U.S. businesses, of which approximately $42 billion was
awarded to small businesses--our best-ever year for small business.
Awards to small business increased nearly $9 billion from the prior
year, from 21.2 percent to 22.4 percent of total contract awards. The
DOD also did its part to strengthen the U.S. economy by awarding almost
$12 billion to socially and economically disadvantaged small business
concerns. In addition, small business subcontractors also have
benefited from DOD's increase in contract business opportunities. For
fiscal year 2002, the latest year for which we have compiled the data,
small businesses received subcontract awards totaling over $25
billion--$2 billion more than the prior year.

FEDERALLY FUNDED RESEARCH AND DEVELOPMENT CENTERS (FFRDCS)

Since the mid-1990s there have been congressionally-imposed limits
on FFRDC staff years of effort. These limits, contained in annual
appropriations acts, restrict the Department's efforts to acquire new
capabilities and to respond to worldwide operational challenges.
FFRDCs are an extraordinary source of high quality support on a
variety of technical, analytic, and operational issues. Given the
rising acquisition and R&D budgets, and the complexities of
transforming military forces for the future--while conducting global
operations against terrorism today--DOD needs all of the first-class
help it can get. However, since 1996, the DOD budget has grown by 46
percent in real terms, while FFRDC staff-years of effort have been
limited to a 9-percent increase. Continued constraints on FFRDCs
exacerbate negative trends in program acquisition support and in
achieving program integration in support of joint operations and other
enterprise-wide objectives. The constraints prevent DOD from obtaining
technical and analytic support to compensate for reductions in DOD's
acquisition workforce, the decline in experienced personnel in the
defense industry due to the aging workforce, DOD budget cuts in the
1990s, and initiatives that have reduced government oversight of
acquisition programs. The Department must be able to call on its FFRDCs
for help when they are the best source of technical and analytic
support.
I seek the committee's support in removing the legacy concerns
regarding management and ``right-sizing'' of DOD FFRDCs. These issues
have been resolved by implementation of the ``FFRDC Management Plan'',
which has been used and updated since 1996. This is not a funding
issue; it is about good governance. The Department needs to be able to
spend the money Congress provides in the most effective manner.

FISCAL YEAR 2005 INVESTMENT ACCOUNTS OVERVIEW

Before I conclude, I'd like to highlight some aspects of the fiscal
year 2005 Defense budget request for the investment accounts. This
includes $68.9 billion for RDT&E--a $7.1 billion increase over the
fiscal year 2004 President's budget. It also requests $74.9 billion for
procurement, a $2.2 billion increase over our fiscal year 2004 request.
The fiscal year 2005 budget increases transformation technologies and
capabilities--and balances support for this long-term transformation
with resources for current global operations and requirements. The
budget includes $3.2 billion to support the transformation of the Army
by fully funding the Future Combat System and $1.0 billion to procure
the combat vehicles for the 5th Stryker Brigade Combat Team (SBCT). It
supports fielding of the fourth SBCT and sustains the three SBCTs
already in the force.
For shipbuilding, the request includes $11.1 billion to support
procurement of nine ships in fiscal year 2005--up from seven ships for
fiscal year 2004. Fiscal year 2005 begins a period of transition and
transformation for shipbuilding as the last DDG 51 destroyers are
built, and the first DD(X) destroyer and Littoral Combat Ship will be
procured. The Department is also investing in additional technologies
and capabilities in our next-generation ships. Specifically, $1.0
billion is requested to continue development of, and procure long-lead
equipment to support, the planned fiscal year 2007 award of the lead
ship for the CVN-21, whose innovations include an enhanced flight deck,
a new nuclear power plant, allowance for future technologies, and
reduced manning. Another $1.6 billion is requested to continue
development of technologies to be applied to others of this new
generation of 21st century surface ships including the DD(X) destroyer,
Littoral Combat Ship, CG(X) cruiser and the Maritime Prepositioning
Force (Future) ship. The average shipbuilding rate from fiscal year
2005-2009 of 9.6 ships per year shows our increased commitment in this
area. This rate sustains the current force level and significantly adds
to Navy capabilities.
The President's budget continues to develop and will begin to field
the Joint Strike Fighter (JSF), a family of low observable strike
fighter aircraft for the United States Air Force, Navy, Marine Corps,
and the United Kingdom's Royal Navy and Royal Air Force. In addition,
seven other international partners, Italy, the Netherlands, Turkey,
Canada, Australia, Denmark, and Norway are participating in the
development program. The budget contains $4.6 billion for restructuring
the JSF program that will accommodate additional design work and risk
reduction in its System Development and Demonstration (SDD) phase. The
total cost estimate for SDD increases from $33.0 billion to $40.5
billion. Schedule delays on this very complex aircraft are prudent and
necessary to mature its design and ensure its ultimate success. The
Department also continues investment in the F/A-22, the next-generation
air dominance fighter, to counter emerging worldwide threats. We are
requesting $400 million to develop the EA-18G electronic warfare
aircraft, the next-generation solution to detect, identify, locate, and
suppress hostile emitters for decades to come. Finally, $1.7 billion is
requested to support ongoing development and procurement of 11 V-22
aircraft. The V-22 program was structured to enhance interoperability
in the next increment, implement additional cost-reduction initiatives,
and pursue a more executable production ramp following operational
testing, Milestone C review and DOD certification.
I am particularly proud of the Department's efforts to obtain
efficiencies and synchronize development efforts in the Unmanned Combat
Air System area. The budget reflects the initiation of the Joint
Unmanned Combat Air Systems Program (J-UCAS). J-UCAS consolidates
previous DARPA/Service unmanned combat air vehicles programs as a means
to develop and demonstrate a common operating system and enhance
competition between two contractor teams to achieve the best
capabilities for the Services. The program will accelerate key
capabilities leading to an operational assessment in fiscal year 2007-
2009. Unmanned aerial vehicles continue to provide new capabilities and
advantages that have proven critical in the global war on terrorism,
and we must exploit this technology to leverage our warfighting edge.
The transformation of America's military capabilities involves
developing and fielding military systems to achieve a new portfolio of
military capabilities to decisively combat the full range of security
threats--now and well into the future. A key objective is to provide
robust capabilities and innovative approaches for the full spectrum of
potential missions. Transformation will continue to require a strong
S&T program. The fiscal year 2005 S&T request is $10.5 billion, a 1.6
percent real increase over the fiscal year 2004 request. The program is
focused on a number of transformational capabilities that hold great
promise for the future.
A transformed military cannot function with inadequate facilities.
To provide and maintain quality facilities in which to work, the budget
funds 95 percent of facilities sustainment (maintenance) requirements--
up from 94 percent in fiscal year 2004. To modernize DOD facilities at
a satisfactory pace, Secretary Rumsfeld established the goal of
achieving a facilities recapitalization rate of 67 years. The fiscal
year 2005 request keeps DOD on track to reach that goal in fiscal year
2008. The budget also keeps the Department on track to eliminate nearly
all its inadequate military family housing units by fiscal year 2007,
with complete elimination in fiscal year 2009.

CONCLUSION

Before closing, I would like to note how extremely proud I am of
the world-class AT&L workforce. One metric of their ability and
dedication can be found in the awards they win. Some highlights of
these are: The Defense Acquisition University was recently recognized
by Training Magazine as one of the top 50 corporate training
organizations in America and was cited as Best-in-Class among
government organizations. The university also received the 2003
American Society of Training and Development (ASTD) Best Award. Our
efforts to transform business processes and practices won recognition
as well. The Acquisition Domain supporting the Department's BMMP was
selected as a finalist in the 2004 Excellence in Government Awards. The
Standard Procurement System (SPS) program, the cornerstone of the
Acquisition Domain business process transformation efforts, received
the Grace Hopper Government Technology Leadership Award from the
Council for Excellence in Government and Government Executive magazine.
SPS was also honored during the 2004 Excellence Government Awards.
Finally, the SPS Program Manager, Colonel Jacob Haynes, was selected as
one of the Top 10 Government Career Information Technology Managers by
the Government Computer News (GCN) magazine and was featured in the
GCN's ``Profiles in Leadership'' April 19 issue.
In closing Mr. Chairman, thank you for the opportunity to testify
before the subcommittee about our acquisition programs, policies,
processes, and, especially, our people. I would be happy to answer any
questions you and the members of the committee may have.

Senator Ensign. Thank you very much.
I want to delve into the whole ``Buy America'' issue.
There's a growing perception by some of our allies out there
that the DOD is not as open as it once was to foreign
participation in U.S. defense programs. How damaging is this
perception, and what will you do to address our allies'
concerns? Does the Department support enactment of the new
``Buy America'' legislation?
Secretary Wynne. Thank you for the opportunity here, sir. I
would tell you that our allies are a little bit concerned about
what America's posture is with regard to their assisting us
around the world, because they mostly have, over the years and
over the centuries, traded in commerce, as well as foreign
policy, and supply of force structure. We are, in every case,
following the rules of engagement that are dictated by the
procurement regulations and laws, and so cannot fault them.
That having been said, we would not like to see any
increased strictures, because it does, in fact, erode, I think,
a very competent base which we draw on every day. In the case
of Germany, we're using some of their ``buffalo trucks'' to, in
fact, get through mine fields or improvised explosive devices
(IEDs) over in Iraq. We contracted with Japan, on a quick-time
basis, to get their chemical suits, because we didn't have
enough chemical suits. These aspirations of our international
suppliers to be partners with us, I think, bodes very well for
us, and yet we tend to forget that the foundations of science
and mathematics and some of our engineering studies were
founded by the international community.
So what I'm doing to try to assist our international
partners in supplying us is working with the State Department
on transparency and licensing and trying to ensure that they
get a fair treatment as they come over for foreign comparative
tasks, and trying to make sure that when they do, in fact, put
themselves out on our behalf, that we are as sure buyers as
they are as sure suppliers.
Senator Ensign. Very good. The issue of whether to further
reduce the acquisition workforce has been a longstanding issue
between the House and the Senate Armed Services Committee. The
Senate believes that these reductions have gone too far, while
the House proposes that more cuts are necessary. In the next 5
years, do you anticipate the Department supporting further
reductions to the acquisition workforce, or do you believe that
the workforce needs to be expanding, given new demands? What
are you doing to meet the training needs of the existing
acquisition workforce?
Secretary Wynne. The acquisition workforce is extremely
stressed right now, and stretched. I would say that in some
areas I've actually had to ask the DCMA to stop inspecting
where they do not have a major impact, so that they can focus
on risk areas of nature. So what they have done is, they have
drawn up a set of business rules to work with their customers
on what constitutes critical items for inspection. We cannot
afford, any longer, to spread them any thinner.
The growth, frankly, in our supplier base is a good thing.
But when it comes to the DCMA, they don't have enough people,
essentially, to cover all of them, so I think they need to
focus on those riskier elements.
In the area of program office support, we're so thin on
systems engineers within our program office that we have a
severe loss of talent in that area, and I've been basically
trying to make sure that we pay attention, both at the
contractor level and within the government, to improve our
systems engineering capability, ever since I arrived. I was,
frankly, concerned, and have organized ``red teams'' to go out
and look at the F/A-22 to try help it get into the independent
operational tests and evaluation. I feel that I have done the
same thing with other projects of major costs--the Space-Based
Infrared Radar (SBIR) and now the Joint Strike Fighter (JSF). I
think this stress on our acquisition workforce did not really
pay attention to the fact that the products are getting to be
more and more expensive. At the same time, when we did not have
the systems engineering talent inside of our program office, we
went to reach out to the Federally-Funded Research and
Development Centers (FFRDCs) only to find that a cap had been
placed on our ability to secure assistance from them. One of
the results of that is, we're going very wanting, and have
turned to other styles of contracts to try to make sure that we
get technical support.
This having been said, I have turned the Defense
Acquisition University (DAU) into a virtual university to reach
out so that any changes that we make at headquarters take only
72 hours to get out to the lowest level of contracting
authority. We've tried to make sure that they had communities
of interest and communities of practice so they can rely on
each other, if you will, as a peer group and a peer evaluator
group. This has worked very well. As I mentioned in my opening
remarks, DAU has won awards, placards, and applause from other
professional universities for being at the top of the mark.
That's the way we're approaching it, sir.
Senator Ensign. Okay, thank you. I have one more question,
then I want to turn it over to Senator Akaka.
Even though we're going to have a future hearing on this,
just briefly, if you could, address the revolving-door issue
and if you feel that existing laws, regulations, and policies
governing revolving-door situations are sufficient to ensure
integrity in the Department's acquisition activities. Have you
undertaken, or do you intend to undertake, a review of existing
Department activities to ensure such controls are effectively
implemented?
Secretary Wynne. Thank you for that. At every change of
ethical behavior of people that I actually know personally, it
is surprising, and it's never to be understood. That having
been said, the laws and regulations that are on the books today
are, in fact, sufficient, just as the laws and statutes that
are underway are sufficient to prevent criminal behavior, but
criminal behavior still goes on. So all we can do is to
continue to increase the awareness that this is, number one, a
highlighted area, it's an area of trust. In fact, in
acquisition, trust is all you have. So, at the end of the day,
I have taken a review of what training there is available for
our acquisition workforce, I have asked the DAU to include in
the fundamental certification programs an acquisition integrity
module to make sure that we, in fact, follow one of my
principal goals, which is acquisition with integrity.
Senator Ensign. Okay, thank you.
Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
In response to questions from the Governmental Affairs
Committee, David Safavian, the President's nominee to head the
Office of Federal Procurement Policy, indicated that, one, he
supports the ability of employees to protest A-76 decisions to
the General Accounting Office (GAO); and, two, he doesn't
necessarily think that the ``the Agency Tender Official,'' is
the only person who could adequately represent in-house
employees in GAO appeals. GAO has provided us with draft
language that would extend protest authority to a single
individual appointed by a majority of the directly-affected
employees.
Secretary Wynne, do you agree that it is essential fairness
for the public side of a public/private competition to have the
same protest rights that the private side has?
Secretary Wynne. Sir, what I think I have heard is that the
public side should have protest rights, a la as if they were
under contract, and I'm not sure that I agree with that. I
don't agree with that because it would set up a means and
mechanism to really have an appeal external to their command
structure, and it would appear to me to not conform, if you
will, or to introduce a slice of the Federal acquisition
regulation into an aspect of doing business as a government
employee too much.
That having been said, I do agree that there should be some
appeal capability for the public side to make sure that they
are treated very fairly during an A-76 process. So while I
don't support this particular aspect, I, in fact, would reach
out and try to figure out how to give them the rights of appeal
through a GAO or some other mechanism, but not the particular
one-sided.
Senator Akaka. Do you agree with Mr. Safavian's statement
that the Agency Tender Officer is not the only person who would
adequately represent in-house employees in GAO appeals?
Secretary Wynne. This is a question of, How do you get to
somebody who could represent the employees adequately in an
agency appeal? I would tell David Safavian, if he were here,
that he's probably right, that maybe the agency tender official
is not the only one who should represent. But getting to who
should do it, as it is different than that, should probably be
arrived at, at the beginning of the cycle, and not at the end
of the cycle, so as not to drag out, if you will, by
essentially firing your attorney, and then trying to reeducate
another individual.
So if it can be accomplished that the agency tender
official and whoever was going to represent the employees would
be in it from the start, I think I could go along with his
statement.
Senator Akaka. Performance-based services contracting can
reduce contract costs and increase contractor performance by
establishing concrete standards against which contractors can
be measured. The National Defense Authorization Act for Fiscal
Year 2003 established a goal for the DOD to make 25 percent of
its services purchases on the basis of performance-based
contracting in fiscal year 2003 with increasing goals of 35
percent in fiscal year 2004 and 50 percent in 2005. Can you
tell us how well DOD did in meeting the statutory goal for
fiscal year 2003, and what steps you are taking to move the
Department toward accomplishments of the goals for fiscal years
2004 and 2005?
Secretary Wynne. What I would like to do, sir, is take the
first part for the record so that I make sure that I don't make
a mistake about what we achieved, because 2003 is just closed,
and we're just finding out all the attributes of it.
[The information referred to follows:]

In fiscal year 2003, the Department awarded contracts for services
totaling $118,473 million. The portion that used a performance-based
requirement and specified a firm fixed-price for the specific tasks
totaled $26,780 million or 23 percent of the total.

But we are very aggressively pursuing the performance-based
logistics. In fact, have it as one of our own internal goals to
successively achieve the targets.
That having been said, the services contract is exploding
on us with all of the attributes that are coming on in
Afghanistan and Iraq, and so I would have to say to you that we
might have to take a good look at what is an appropriate quest
and goal, given the anomaly of these two, I would say,
stability and reconstruction years. Because in these years, as
you'll hear from the panel number two, the Corps of Engineers
has let more contracts in 1 year than they usually let over a
5-year period, mostly service-based.
Senator Akaka. The National Defense Authorization Act for
Fiscal Year 2002 required DOD to conduct a spend analysis to
determine how it was spending its money for services and
identify possible economies. This legislation was recommended
by GAO on the basis of a review of best commercial practices.
We are not aware of a spending analysis conducted by DOD in
compliance with the legislative requirement. My question is,
has DOD conducted a spending analysis? If so, what lessons has
the Department learned from this review, and will you provide
the committee with a copy of the results?
Secretary Wynne. We have started on the spend analysis in
the commodities sector, thinking that it would be beneficial
across the board, and, in fact, I think, proceeded to contract
with one of the FFRDCs to conduct such a spend analysis. What
we intended to do is to consolidate our buying activity and
then we're going to try, once we pilot that and see what the
response from industry is, to extend it to the service sector.
So what I will do, sir, is, I will provide this committee with
the status of where we are in that regard.
[The information referred to follows:]

The Deputy Secretary of Defense directed DOD to conduct a
Department-wide, commercial-like spend analysis in February 2003. This
involved analyzing what type of services the Department is acquiring,
who we are acquiring them from, and who is acquiring them, in order to
identify how the Department could acquire services in a more efficient
and strategic way. We completed the initial phase of the spend
analysis, which identified several specific types of services, i.e.
commodity areas, that offer significant potential for savings. We are
forming joint commodity teams to further analyze these pilot areas and
develop, where appropriate, strategic acquisition programs. The initial
commodity team has started its effort to conduct more detailed spend
analysis and identify strategic acquisition approaches for
``miscellaneous administrative services.'' We are now forming the
second commodity team to analyze miscellaneous information technology
services. In addition, in conjunction with the Department's Business
Management Modernization Program, we are developing an improved
capability to obtain enhanced acquisition data which will significantly
improve our ability to analyze acquisition data and perform spend
analysis functions. Lack of detailed data hinders our ability to
perform accurate spend analyses and develop efficient, strategic
solutions. The Department has approved and funded a pilot program to
integrate spend information from the military department's business
intelligence systems. The development and fielding of this pilot
project will give us visibility into Department-wide detailed spend
data sufficient to support strategic acquisition of services.

Senator Akaka. Two years ago, Secretary Wynne, Congress
established a new Defense Test Resource Management Center
(DTRMC) to help ensure the Department provides adequate
resources to its testing infrastructure. Despite the
requirements of this legislation, the Department has not yet
appointed a director to head the new office, has moved farther
away from institutional funding for overhead expenses at test
facilities, has failed to increase funding for testing
infrastructure, and has developed only a preliminary version of
a strategic plan for testing investment. When can we expect to
see full implementation of the requirements of the testing
legislation that we enacted 2 years ago?
Secretary Wynne. I'm pleased to report to you that I meet,
approximately every other week, with the interim director of
that activity. We submitted our preliminary strategic plan,
and, in fact, have done a preliminary certification of the
budgets back to the Services to make sure that they are, if you
will, ``on notice'' that this new agency is coming alive and
being set up. I expect that we are--we will have sufficient
candidates to close on the director approximately in June. My
arrangement with the Director of Operational Tests and
Evaluation is, once we have a director in place, he will begin
to move over the major elements of management of the resources
into this new function.
It's staffed at approximately 55 percent right now. I just
met with the lady who has been invited on or appointed to be
the strategic planner. She intends to meet the statutory
guidelines by having a strategic plan available to this
committee. I intend to start the process, if you will, of doing
active certification of the budget to the Secretary as the
citation requires.
I will tell you that I think that meets the general intent
of the authorities that you granted us, and I'll have to follow
up to make sure that we are thorough in that. But I'm working
with Tom Christie, we are working as a partnership, together,
to set this in motion, because he was, as you might remember
during the hearing, actually on the DSB that argued for setting
up the DTRMC to start with.
Senator Akaka. Thank you for that. A series of mergers in
the defense industry over the last decade have substantially
reduced the number of major defense contractors. In many cases,
DOD officials find that they have only one or two sources to
choose from for key contracts. I have two questions there. In
your view, do we have enough competition in the defense
industrial base? The second is, in your view, how does the
issue of competition relate to the ``Buy American'' issue?
Secretary Wynne. I think, at the top layer--i.e., at the
super primes--we have adequate competition. The problem really
comes out at this third and fourth tier down, where those
contractors have actually become great marginal producers and
have come up against their own capacity stops, if you will,
that they are supplying to all major primes at a very efficient
price at a very efficient rate. One increase of any of those
primes in production exceeds the capacity then of this smaller
company. That is where I'm running into some difficulties, and
those are very difficult to spot, because everybody's trying to
save cost. So you tend to go to somebody who's got the marginal
price.
I would tell you that our sources are all over the world.
In fact, I can remember back in time when we had a satellite
producer who went to see Japan, and Japan realized that it was
already providing some 25 percent of that satellite's
infrastructure from Japan, and recognized as a supplier. We
have also moved to make sure that we have a sufficient supply
base for all of our major critical needs, and yet want to rely
on our international partners for innovation, and we encourage
them to continue to participate with us to gain contracts and
to gain access to our laboratories.
Senator Akaka. I appreciate your responses very much. Thank
you, Mr. Chairman, for allowing me the time.
Senator Ensign. Just very briefly, to follow up before we
have the next panel in. Dealing with competition, in Iraq, we
have the possible consolidation with the insurance, and what
the Department is looking at doing with the Army Corps of
Engineers, could you just address that issue in light of
competition and market forces? If you're going to sole-
sourcing, how does that, in the long run, get you the lowest
cost versus market forces getting you the lowest cost?
Secretary Wynne. In the world of insurance, I think getting
the largest pool is kind of one of life's answers, because in
the largest pool, you get, if you will, the lowest probability
of an individual incident; and, therefore, if you get the
sufficient revenue in for all of the incidents, it tends to
give you a lower premium.
That having been said, let me tell you what our practical
problem is. Our practical problem is that U.S. Agency for
International Development (USAID) has, in fact, competed and
got a pool of insurance for all of the employees or contractors
within the USAID in the combat zone or in the area of regard, I
guess, in Iraq, because it is into stability and reconstruction
phase. Now, that having been said, when we do a contract with
others, we cannot--and we've done some comparative analysis--we
can't match their prices. We ask our contractors to supply
their own insurance. Most of our contractors are seeing that
they can't fulfill the mission that they thought they were
going to do, because these are largely--they are cost-type
contracts, but they're capped as to how much money we can
allocate to them. They want to complete the mission. So they
have actually come back to us and asked us for help in making
sure we can compete against the USAID contract. So what we're
doing is, we're using the Corps of Engineers to essentially
do--because this is really not what we'd like to do, and we
haven't done it--but we've gone now to the Corps of Engineers
and asked them to run a pilot program to see if, in fact, it's
true that they can get, and they claim, up to 5-to-1 savings in
insurance premiums. For small business, this is absolutely
untenable for them. They can't quite compete.
So one of the things we're thinking about is, How do we
ease the burden on the small and disadvantaged businesses that
want to do business over there, but literally can't compete on
the insurance basis?
So it's a balance, sir. Because once I give this contract
to an insurance pool, which it'll probably be an insurance
pool, then I must direct all of my suppliers to go to that
insurance pool, because that's my deal with them, to buy their
insurance. While it bothers me, I think under these peculiar
circumstances it may well be to the maximum benefit of the
taxpayer to do that.
Senator Ensign. When you say ``the insurance pool,'' are
you talking a group of insurance companies?
Secretary Wynne. I would suspect we're going to give it to
one insurance company, but my guess is they will partner with
other insurance companies to offer this. It's a fairly large
base.
Senator Ensign. The problems in a war zone can be years
down the line. I'm not an insurance person, but I do know the
term ``tail,'' and this could be quite a long tail. We're in a
pretty competitive marketplace today, and what happens if the
insurance company that gets that bid is also a major insurer
for, say, a new World Trade Center that happens to get hit by a
terrorist attack, and they become insolvent with whatever their
commitments are? What happens in that situation, if you haven't
spread the risk around?
Secretary Wynne. Well, and I'm not the world's greatest
expert on insurance myself. But I do know about reinsurance,
and most of the insurance companies are--actually kind of take
it for administrative purposes, and then they will reinsure it
out the back door, if you will, for a far lesser premium,
because they're not doing the administration. I think by
spreading the risk, is how they intend to manage sort of what
you're describing as the and-on problem. That's about the best
I could describe it, sir.
Senator Ensign. Well, considering I'm not an expert on
this, we'll have a little more discussion on the second panel,
but I probably will have more questions, and so we'll submit
those in writing for the record.
Senator Reed, do you have any questions of the first panel?
Senator Reed. Mr. Chairman, no, thank you for your
hospitality.
Senator Ensign. Okay.
In that case, we will excuse Secretary Wynne. I appreciate
your testimony and openness. Like I said, we'll have quite a
few more questions that we can submit for the record in
writing.
Secretary Wynne. Thank you, Senator Ensign.
Senator Ensign. Thank you.
I call the second panel to the table. [Pause.]
I want to welcome the second panel. The second panel
includes Tina Ballard, Deputy Assistant Secretary of the Army
for Policy and Procurement; Major General Carl Strock, Director
of Civil Works, the United States Army Corps of Engineers;
Major General Wade H. McManus, Commanding General, U.S. Army
Field Support Command.
We want to welcome the panel. In that order, we will
receive your testimony. Know that your full testimony will be
made part of the record, and so feel free to summarize.

STATEMENT OF TINA BALLARD, DEPUTY ASSISTANT SECRETARY OF THE
ARMY FOR POLICY AND PROCUREMENT

Ms. Ballard. Thank you.
Good afternoon. Thank you, Chairman Ensign, Senator Akaka,
and distinguished members of the Subcommittee on Readiness and
Management Support. We thank you for this opportunity to
discuss contracting in Iraq and the role of the United States
Army.
I am pleased to represent Army leadership and the military
and civilian members of the Army's contracting workforce who
are the forefront in reconstruction and restoration of Iraq's
infrastructure. We are very proud of our dedicated men and
women, not only because of their extraordinary efforts to help
create a stable and successful Iraq, but because of their great
courage under difficult and dangerous conditions.
I respectfully request that my written statement be made a
part of the record for today's hearing.
Mr. Chairman, nearly a year ago, Secretary Wolfowitz
designated the Secretary of the Army as the executive agent for
the Office of Reconstruction and Humanitarian Assistance, now
known as the Coalition Provisional Authority (CPA) in Iraq.
Earlier this year, in January, the Deputy Secretary further
assigned responsibility for acquisition and program management
support to CPA to the Secretary of the Army.
The Army is the lead service helping Iraqi people build a
stable and democratic society. We continue to make steady
progress. We provide contracting and program-management support
both in Iraq and here at home. To date, we have awarded more
than 1,500 contracts valued at more than $11 billion. These
contracts have been for a variety of things: schools, clinics,
banks, railway stations, and water treatment plants, for
example. Contracts have also been awarded to uniform and equip
police and firefighters, to supply hospitals, and restore
electricity.
We are working closely with several government agencies--
the GAO, the Army Audit Agency, the Defense Contract Audit
Agency, among them. This is to ensure that the Army has
followed proper procedures in awarding Iraqi essential-services
contracts.
Mr. Chairman, we, in the United States Army, are very proud
of our role in helping to create and rebuild a stable and
successful Iraq. We're very proud of the courage, competence,
and dedicated efforts of our career civil servants and military
personnel, their success and, indeed, our success in helping
the citizens of Iraqi move toward governing themselves.
This concludes my opening remarks, Mr. Chairman. Thank you
for this opportunity to appear before you. I look forward to
your questions.
[The prepared statement of Ms. Ballard follows:]

Prepared Statement by Tina Ballard

INTRODUCTION

Mr. Chairman and distinguished members of the subcommittee, thank
you for this opportunity to report to you on the United States Army's
role in contracting in Iraq. It is my privilege to represent the Army
leadership and the military and civilian members of the Army's
contracting workforce who are at the forefront in the reconstruction
and restoration of Iraq's infrastructure. We are very proud of these
dedicated men and women because of their extraordinary efforts to help
create a stable and successful Iraq, especially in light of the dangers
they face every day.
This is a time of tremendous change, and we are most grateful for
the committee's wisdom, guidance, and strong support. Over the last
year, our Army has met the demands of the global war on terrorism, with
more than 330,000 troops deployed around the world in more than 120
countries. They are doing what our country needs them to do in Bosnia
and Kosovo, in the Sinai, in Korea, in Afghanistan, and in Iraq. The
United States Army--well-trained, well-led, and well-equipped--is an
important part of our globally engaged joint force. Our Army was
instrumental in the defeat of Saddam Hussein and the subsequent
liberation of more than 46 million people from oppression and despair.
Our Army remains a central and critical participant in Operation Iraqi
Freedom.

THE ARMY AS EXECUTIVE AGENT

On May 21, 2003, the Deputy Secretary of Defense designated the
Secretary of the Army as the Executive Agent for the Office of
Reconstruction and Humanitarian Assistance, later to become the
Coalition Provisional Authority (CPA) in Iraq. On January 14, 2004, the
Deputy Secretary of Defense further assigned responsibility for
Acquisition and Program Management Support for CPA to the Secretary of
the Army. The Army is the lead Service, helping the Iraqi people build
a stable and democratic country.
Our job is enormous, but we continue to make progress in an
extremely difficult situation. I would like to reiterate the widespread
neglect of basic services that Deputy Secretary of Defense Paul
Wolfowitz reported to the Senate Foreign Relations Committee on May 22,
2003. He said, ``Before the war:

Large numbers of Iraq's children under 5 years old
suffered from malnutrition;
Only 60 percent of the Iraqi people had access to safe
drinking water;
10 of Basrah's 21 potable water treatment facilities
were not functional;
70 percent of Iraq's sewage treatment plants needed
repair. According to UNICEF reports, some 500,000 metric tons
of raw or partially treated sewage was dumped into the Tigris
or Euphrates rivers, which are Iraq's main source of water;
80 percent of Iraq's 25,000 schools were in poor
condition; in some cases as many as 180 students occupied one
classroom--with an average of one book per 6 students--while at
the same time every 1 of the first 100 or so schools we
inspected in Southern Iraq had been used as military command
posts and arms storage sites;
Iraq's electrical power system operated at half its
capacity;
Iraq's agriculture production had dropped
significantly;
Iraq's oil infrastructure was neglected.''

It will take time to reverse these desperate conditions, but we are
making steady progress.
The Army, as Executive Agent, is providing contracting and program
management support both in Iraq and in the United States. We are
charged with procuring all non-construction items and services to meet
the humanitarian needs--the basic needs--of the Iraqi people as well as
the economic reconstruction and repair of Iraq's infrastructure. To
date in total, more than 1,500 contracts valued at more than $11.7
billion have been awarded. Of that total, more than 1,300 contracts
totaling $1.3 billion have been awarded by our contracting office in
Iraq. These contracts were awarded for the repair and renovation of
schools, banks, railway stations, clinics, mosques, a human rights
building, a teacher training institute, a woman's rights building, and
water treatment plants. These contracts were awarded to provide police
and fire fighters with uniforms and equipment; hospitals with badly
needed supplies; electrical power system equipment; rescue equipment,
and buses. In addition, our contract awards are helping to build
playgrounds, youth centers, emergency housing, and roads, sewer and
irrigation systems.
Again, of the overall total of more than $11.7 billion, contracts
awarded within the United States total $2.5 billion for more than 200
contracts for items and services such as restoring Iraqi Oil, shutting
down and repairing oil wells, fire fighting, explosive ordnance
demolition; restoring Iraqi electricity; radio installation throughout
Iraq; laptops; and emergency medical personnel in each of Iraq's 18
governorates.

PROGRAM MANAGEMENT OFFICE

Led by Admiral (Retired) Davis Nash, the Program Management Office
(PMO) for rebuilding Iraq is located in Baghdad with a support office
located in the Pentagon. As the requirement focal point for all Iraqi
reconstruction contracting, the PMO is responsible for oversight and
implementation of the $18.4 billion appropriated by the U.S. Congress
to support the reconstruction of Iraq's infrastructure. The
construction sectors are oil, electricity, public works and water,
security and justice, transportation and communications, and buildings,
education and health.
Overall, $12.6 billion will be spent towards actual construction
over the next few years, and $5.8 billion will be spent on providing
equipment, supplies and material to help support the construction.
Computers are needed to monitor and control electrical and water
systems; vehicles are needed to transport materials or to support
system maintenance; uniforms and supplies are needed to support the
police and civil defense corps; and supplies are needed to support
schools.
Of the $18.4 billion appropriated in the fiscal year 2004
supplemental, $10.9 billion was apportioned to various agencies. Of
this amount, agencies have obligated $3.1 billion through May 5, 2004.
On January 6, 2004, the Army released seven design/build
construction solicitations. Proposals were submitted in February and
the Army established a team composed of 130 civilian and military
personnel, with over 2,000 years of contracting experience, to support
the task of awarding construction contracts in approximately 90 days.
This is an unprecedented contracting mission. Between March 10 and
March 26, the Army awarded 10 design/build construction contracts for
the major construction sectors totaling a maximum of $5 billion. On
March 10, 2004, the Army awarded seven contracts to provide dedicated
program management and coordination support for all design and
construction activities being performed for the PMO.

A TOUGH JOB UNDER VERY DANGEROUS CONDITIONS
Our contracting personnel on the ground in Iraq are courageous,
dedicated volunteers. Since June 2003, when our first person arrived,
we have been operating in Iraq. We now have a total of 28 individuals.
They are multi-Service and civilian: 3 Army; 4 Navy; 1 Marine; 11 Air
Force; and 9 civilians working in small, jam-packed work spaces.
They are doing a phenomenal job under very tough, dangerous
conditions. Let me illustrate my point. Army Colonel Elias George
Nimmer, a Medical Service Corps Officer and a member of the acquisition
workforce assigned to the Office of the Assistant Secretary of the Army
(Acquisition, Logistics and Technology) (OASA(ALT)) was deployed in
late June 2003 as part of a team supporting CPA's work with Iraq's
Ministry of Health. In the early morning of October 26, 2003, a barrage
of rockets hit the al-Rashid Hotel where he was staying and a rocket
impacted directly inside his room. Colonel Nimmer was hit with shrapnel
in the spine and unable to move. Following three surgeries, he is doing
remarkably well and recently returned to duty within OASA(ALT).

PROPER PROCEDURES

Currently, the General Accounting Office (GAO), the Army Audit
Agency, the Defense Contracting Audit Agency, the U.S. Department of
Defense Inspector General, and the Coalition Provision Authority
Inspector General, in response to a request from Congress, are
reviewing Iraq essential services contracts to confirm that the Army
has followed proper procedures. We are working closely with them to
ensure that they have all the information necessary to complete their
work.

CONCLUSION

I have a deep and growing appreciation for the courage, competence,
dedication, and efforts of our contracting personnel. Thanks to their
hard work and extreme dedication, the United States Army leads the way
in providing contracting support to CPA and the people of Iraq. The
work has been--and will continue to be--performed in accordance with
proper procedures, by military and civilian volunteers who are
concerned and committed to accomplishing their work under the toughest,
most austere conditions. We are proud of our role in helping to create
and rebuild a stable and successful Iraq. Our accomplishments are
helping the citizens of Iraq move toward governing themselves and
sustaining, operating, and maintaining their own infrastructure which,
in turn, will help our soldiers, sailors, airmen, and marines to return
home sooner.

Senator Ensign. Thank you.
Major General Strock.

STATEMENT OF MG CARL STROCK, USA, DIRECTOR OF CIVIL WORKS, U.S.
ARMY CORPS OF ENGINEERS

General Strock. Mr. Chairman and members of the
subcommittee, I am Major General Carl Strock, and I am the
Director of Civil Works for the U.S. Army Corps of Engineers.
But from March through September of last year, I served with
the Office of Reconstruction and Humanitarian Assistance (ORHA)
and later with the CPA in a variety of positions, culminating
as Deputy Director for Operations and Infrastructure.
I will submit a full written statement for the record, and
I'll just take a few moments to summarize my remarks.
I'd like to talk about our preparation, the conditions we
encountered, and our response to those conditions. The ORHA
staff focused on three priorities--first, to avert a
humanitarian crisis in Iraq; second, to set the conditions for
a rapid return of Iraqi sovereignty; and, third, to restore the
infrastructure to its prewar conditions. We deployed to Kuwait
in mid-March 2003, just a few days before the commencement of
hostilities. In mid-April, ORHA deployed into Baghdad and
ultimately into Basra, Mosul, and al Hillah. Since that time,
the CPA has extended it reach and has established its presence
in each of the 18 governorates of Iraq. The humanitarian crisis
did not occur, and it became apparent, early on, that there
would be no quick turnover of sovereignty to the Iraqis. So
from this point on, I will focus on the infrastructure
reconstruction mission.
When we arrived in Baghdad, the conditions were much worse
than we anticipated. The nation's infrastructure was in
desperate condition. Due to the speed of the campaign and the
precision targeting, war damage was really minimal in all
sectors except communication. A larger problem was the
extensive looting and sabotage that took place after the
collapse of the regime. But, by far, our greatest challenge was
the dilapidated and fragile structure of virtually every public
utility and system in Iraq. This was caused by decades of
neglect and mismanagement. We recognized immediately that we
would have to do more than simply return things to their prewar
conditions.
Through a remarkable effort of identifying and mobilizing
the remnants of the Iraqi public service, we were able to
return essential services in a relatively short period of time.
The priority was to electrical power, and then to water and
sanitation, then to medical facilities. In a parallel effort,
we stabilized and restored oil production and refineries with a
specially-formed task force from the Corps of the Engineers.
We face a sophisticated enemy who understands the
importance of infrastructure to commerce, education, health,
and safety. It's clear that the enemy is doing everything they
can to thwart our attempts to improve the quality of life of
the Iraqi people. Looting, sabotage, and intimidation of our
Iraqi colleagues continue to plague our efforts.
In response to this situation, working with the USAID and
the Army Corps of Engineers, we created a special electrical
task force, because we saw that as the center of gravity. It
was modeled after our domestic disaster response mission. We
invested over $1 billion in a 90-day period to reestablish the
electricity grid across the country.
We have since taken a more formal approach to our support
and have established an engineer division in Baghdad with three
districts--in Mosul, Baghdad, and Basra. The Gulf Regional
Division will support both Coalition military forces and the
civil reconstruction effort.
Currently, we have 73 military and 327 Department of Army
civilians, all volunteers, working in Iraq. We accomplished the
vast majority of our effort through civilian contractors
working as an extension of our agency, much as they do at home
and at other overseas locations.
Mr. Chairman, that concludes my statement. I look forward
to expanding on these and any other points of interest you
might have. I thank you for the opportunity to appear before
you today.
[The prepared statement of General Strock follows:]

Prepared Statement by MG Carl Strock, USA

INTRODUCTION

Mr. Chairman and members of the subcommittee, I am Major General
Carl Strock, Director of Civil Works for the U.S. Army Corps of
Engineers and I am honored to appear before you today to testify on the
work of the United States, in concert with our coalition and Iraqi
partners, to repair and rebuild Iraq. I returned last September from 6
months in Kuwait and Iraq where I served with the Office of
Reconstruction and Humanitarian Assistance (ORHA) and the Coalition
Provisional Authority (CPA). I held a number of positions culminating
with service as the Deputy Director for Operations and Infrastructure
for the CPA.

PLANNING PRIOR TO THE WAR

As is usual in military operations, planning for reconstruction was
conducted simultaneously with planning for war. These plans included
extensive use of contractors to supplement military and governmental
capacity. Our original expectations were that we would have to repair
the damage caused by military action, deal with the humanitarian crisis
we were expecting to encounter, and set the stage for the new Iraqi
government to oversee reconstruction. In fact, we worked closely with
all elements of the joint and combined command in assessing potential
effects of U.S. and coalition munitions on critical Iraqi
infrastructure.
ORHA was an interagency and international organization consisting
of three ``pillars'': Reconstruction, led by the U.S. Agency for
International Development; Civil Administration, led by the Department
of Defense; and Humanitarian Assistance, led by the Department of State
(DoS). With the expectation of large numbers of displaced people,
shortages of food, water, and shelter, and the potential for widespread
disease, humanitarian assistance was the priority effort.
Reconstruction was focused on returning the country's infrastructure to
pre-war conditions and assistance in governance. Approximately $1
billion was allocated to reconstruction, the majority set aside for a
construction contract. Civil Administration was focused on assisting
the 23 Iraqi ministries in reestablishing control in their respective
sectors. We anticipated that the senior leadership would be absent but
the ministries and their staffs would largely be intact and capable of
running operations with the assistance of a small cadre of coalition
advisors--in some case as few as one or two people per ministry.
Knowing that much of this infrastructure would be critical to the
future of a free Iraq, the war planners, employing precision munitions,
deliberately attempted to minimize damage wherever possible. An even
greater concern going into the war was that Saddam Hussein's regime
would repeat their actions of the Gulf War, where they set ablaze and
crippled a large portion of the Kuwaiti oil infrastructure.
Understanding that the flow of oil was the essential lifeblood of the
future, free Iraqi economy, the acting Secretary of the Army designated
the U.S. Army Corps of Engineers as the executive agent for Iraq Oil
Infrastructure Reconstruction, and we formed Task Force Restore Iraqi
Oil (RIO) under the superb leadership of Brigadier General Robert Crear
to exert command and control over this important mission.

WHAT WE ENCOUNTERED

When we entered Iraq, we encountered relatively little war damage,
but instead an infrastructure crippled by a combination of long-term
neglect, recent looting, and sabotage. The country's infrastructure,
while experiencing some damage from the war, was sagging under the
weight of 30 years of neglect, misrule, and mismanagement. There was no
electricity, very limited public water supply, no sewage treatment, no
communication system except what we brought with us, no railroads in
operation and limited other modes of transportation, and basically very
little means for the new Iraqi government to do its work. Water was not
being controlled at the reservoirs on the Tigris, Euphrates, and other
rivers, so irrigation systems were disrupted and there was major risk
of flooding. Virtually all public buildings and their contents--
records, equipment, supplies--were destroyed by looters and saboteurs,
making it almost impossible to reestablish government and provide basic
services. Furthermore, the experts on the country's infrastructure were
Baath Party members who had fled or had been removed. Under the Hussein
regime public servants did only what they were told by their
supervisors, so there was no tradition of individual initiative. Our
relatively small cadre of advisors faced considerable challenges
dealing with this catastrophic situation.
I want to stress that we found very little actual war damage. This
was in large measure due to precision targeting and effects-based
weapons employment. The Iraqi transportation and utility systems,
although in near-complete disarray, were little damaged by war. The one
sector of Iraq's infrastructure that did suffer unavoidable harm during
the war was the communications network. The Coalition had necessarily
targeted key communications nodes to prevent Saddam Hussein from
effectively commanding and controlling his forces. This caused
communications difficulties that we struggled to overcome early in our
reconstruction efforts.
Moreover, the humanitarian crisis--the threat of mass starvation
and disease--that we feared might occur during the war's aftermath did
not come to pass, although we quickly had to rebuild the water supply
in many locations to help minimize these threats. Creating even greater
difficulties for reconstruction, many of the local Iraqis with
expertise necessary to restore and operate critical infrastructure were
either unavailable or fearful of working with the coalition.
During this period, early in the reconstruction, the effects of
widespread sabotage and looting were constantly undermining our
efforts. Because we had anticipated and planned for operations in just
such a difficult and dangerous environment, one of our immediate and
major efforts in the early days was to secure critical facilities. The
damage resulting from the actions of saboteurs and looters, however,
still turned out to be significant. As an example, it is estimated that
fewer than 50 high voltage electricity transmission towers were toppled
or significantly damaged as result of the war. At the peak of sabotage
and looting, this number grew to more than 700 as criminal elements
scavenged copper from the high voltage wires.
The greatest problem we faced, however, was dealing with an
infrastructure that had been neglected and mismanaged for 30 years as
the Saddam Hussein regime used such basic utilities as water and
electric supplies to reward his friends and punish his enemies. The
country suffered from a lack of capital investment as Saddam chose to
purchase weapons and build palaces instead of power plants and water
treatment facilities. International sanctions also contributed to the
lack of maintenance. It is a tribute to Iraqi engineers that the
country's systems were able to function at all, and that we were able
to assist in restoring them as quickly as we did.
It should be noted that those of us who were part of the OHRA team
initially suffered many of the same hardships as the Iraqi people. Like
them, we did not have basic services such as reliable food, water,
power, and sewage; nor did we have an adequate work area. Also like
them, we were greatly hampered by the lack of reliable communications
in the area; In fact, we often had no communications at all.

WHAT WE DID

In rebuilding Iraq's infrastructure, we faced an enormous and
monumental task. A country similar in size and population to
California, Iraq was not going to be successfully rebuilt without a
significant effort. In order to do this, we assembled a team consisting
of representatives from the following agencies: United States Agency
for International Development; Department of State; Department of
Transportation; Department of Health and Human Services; Department of
Agriculture; Department of Commerce; the Corps of Engineers; United
Nations agencies such as UNICEF, UNESCO, and UNDP; Iraqi Ministries;
non-government organizations such as the International Committee of the
Red Cross and CARE; and the private sector. We also knew going in--and
this was part of our planning--that Iraq's successful reconstruction
would require considerable contractor involvement.
My initial involvement was as a member of the ORHA. I arrived soon
after Baghdad had been secured, and was part of the group tasked with
the initial responsibility for reconstruction. As we began to establish
operations, the Logistics Civil Augmentation Program (LOGCAP)
contractor was essential in providing basic services such as food,
water, power and electricity. The LOGCAP contractor also provided
transportation and security services for ORHA. The contractor provided
these services to ORHA just as it did to military units across the
country.
The military units on the ground accomplished the very earliest
reconstruction, restoration, and relief efforts. They were restoring
electricity, water, sewage, and other basic services all across the
country. They helped rebuild schools and often provided employment
opportunities to many Iraqi citizens. Throughout Iraq, these military
units were the coalition presence, setting up local governments and
reestablishing safety and security in their areas. From the earliest
days, as we worked to get the infrastructure of Iraq back on its feet,
it was often a coalition military unit working directly with the local
Iraqi citizens doing the work.
Within the ORHA, we provided advisors to many of the Iraqi
ministries. We assumed these advisors would deal with ``decapitated''
ministries--ministries where the Baath leadership was absent but with
facilities and workforce largely intact. What we found, though, were
ministries that were non-functional. Their facilities were destroyed or
incapacitated due to a combination of warfighting, sabotage, looting,
and long-term neglect, with no communications, and no equipment.
Workers were fearful for their personal safety, and influence of the
Baath party, whose members had to be removed, reached deeper than we
had anticipated. Even when provided a place to work, many members of
these ministries were either unwilling or unable to return to these
vital public service agencies. Soon after arrival, therefore, we
quickly went to work assisting in the performance of initial,
rudimentary repairs to their workplaces, providing a secure work
environment, and offering our communications systems to assist them in
the day-to-day operations of a country struggling to restore its
society and culture and establish a new democracy. The advisors we
assigned to these ministries provided both technical expertise and
assistance in setting up models of governance and public service that
would work in a democracy, as opposed to the old models designed to
support a totalitarian regime.
We knew from the beginning that identifying and engaging Iraqis who
had the expertise in Iraq's infrastructure would be critical. Due to
the initial enormity of the tasks, even with the valiant efforts of the
military units, we knew that this group of Iraqi specialists would be
essential to the rapid restoration of basic services. Once again,
however, we found the lack of a basic communications system, such as
telephones, hindered this effort. All meetings had to be face-to-face.
For example, we scheduled regular meetings with the Iraq Ministry of
Electricity. During one of these meetings, I was introduced to an
expert in another utility area. I arranged a meeting at an appointed
place and time, but I was unable to make the appointment due to
security and transportation difficulties. Without a functioning phone
system or any other means of communication, I had to wait until the
next regularly scheduled meeting to arrange another appointment, and
hope we would both be able to meet at the agreed upon time and place.
Despite these challenges, we quickly identified essential Iraqi
citizens who often ``bridged-the-gap'' between efforts of the military
units and efforts of the contractors provided by ORHA and later, the
CPA.
Soon after coalition forces initially secured Baghdad, we
established Task Force Fajr, which translates to ``dawn'' or ``first
light.'' Task Force Fajr consisted of approximately 20 people--mostly
from the Corps of Engineers--led by Brigadier General Steve Hawkins,
commander of our Great Lakes and Ohio River Division. The initial
mission of Task Force Fajr was to initiate the restoration of power and
potable water, first in Baghdad, then throughout Iraq, to assist in the
hydrology and watershed management, and provide assistance in
reestablishing hospitals in Baghdad.
One of the early challenges facing Task Force Fajr was potential
flooding in the Tigris and Euphrates River basins. Rivers were rising
and the Iraqis who understood and operated the system had fled.
Employing ``reach-back'' techniques--Corps satellite video
teleconferencing kits--we were able to place engineers on the ground at
key reservoirs and link them via satellite with technical experts in
our Mobile District. The Mobile District used this and other
information to construct a hydraulic model of the entire Euphrates and
Tigris River Basins. The Mobile District then linked back to Task Force
Fajr Engineers at key reservoirs, and working with local Iraqis used
these reservoirs to regulate flow and avoid potentially catastrophic
flooding.
In reestablishing a normal life for Iraqis, our first priority was
to restore electrical power. Upon arrival in Baghdad, one of our first
challenges was to find the ``wiring diagram'' for the national
electrical grid. We soon discovered that the Saddam Hussein Regime
restricted this information to very few loyal Baath party members. In
fact, electrical power was used as a tool of punishment and reward,
with loyalists in the ``Sunni Triangle'' receiving ample power and the
southern Shia and northern Kurds receiving little. Because of this
strict, centralized control, few copies of the plans for the national
grid existed and had been destroyed before we secured Baghdad. The
first schematic of the entire Iraqi electrical grid was actually drawn
by a lieutenant in the Corps of Engineers 249th Prime Power Battalion.
As we began to restore power, we found that the system was more
like a string of old fashioned Christmas lights than a modern national
power grid. When one key facility went out, the entire system failed.
After years of operating as part of a totalitarian regime, power plants
now fell under the control of local governments in their area. Having
local government control pieces of the national power grid was not the
most effective or efficient method for meeting the country's energy
needs. Early on, for example, a number of power plants were forced by
local governments to put power on the local grid and drop off the
national grid. As a result, the remaining plants on the national grid
were asked to provide more power than they had available to meet the
national demand. The power plants still on the national grid were shut
down to prevent overload, and soon, the entire grid shut down. Whenever
this happened, we were forced to begin the laborious process of getting
all of the stations back up and running, applying power back to the
national grid. Accomplishing this, we might experience a failure at a
different power plant due to lack of maintenance or damage from looting
and sabotage.
Without an effective national communications network and with
antiquated control systems, we were sometimes unable to react in time
and were required to go through the entire process of shutting down and
restarting all over again. Over time, we educated individual plant
operators, negotiated operating schedules with local governments,
provided military communications systems to assist in operations and
control, and began providing reliable power across the country.
The combination of military units and local Iraqi people allowed us
to restore and stabilize basic life support functions. As planned, we
also began using contractors from numerous agencies, to include USAID
and the Corps of Engineers to provide more long term, permanent
solutions.

EARLY CORPS OF ENGINEERS INVOLVEMENT

To illustrate the use of contractors in the reconstruction efforts,
I will highlight two from the Corps of Engineers that assisted me in my
role overseeing the reconstruction of a portion of the infrastructure.
I must emphasize that these were only a few of the many contractors
that provided essential life support, security, and construction
services across Iraq.
To accomplish the mission of getting Iraq's oil production running
again, we established Task Force Restore Iraqi Oil (RIO). In Central
Command's planning for the Operation Iraqi Freedom, safety and security
of the oil fields was considered paramount to the overall success of
the operation. During the Gulf War, Saddam Hussein had demonstrated a
callous disregard for human health and the environment, as he set the
oil fields of Kuwait ablaze. Task Force RIO's immediate mission was to
secure the oil fields, put out the fires, and get the oil flowing to
provide refined fuel products for domestic use and ultimately oil for
export. With more than 12,000 wells in the southern Iraq Oil Fields
alone, the potential for disaster was enormous. We knew that this
effort would require extensive contractor involvement and the short
notice, requirements for secrecy, and essential nature of the mission
limited our contracting flexibility.
Task Force RIO operated in two main areas--Rumaila and Kirkuk. The
Task Force achieved tremendous early success. There were fewer than 10
significant fires, which we fought in a cooperative effort with
Kuwaitis. What we did encounter was extensive damage caused as looters
stole various components of the system. Terrorists and saboteurs
continually targeted the oil pipelines that cross Iraq. They recognized
that disrupting the flow of crude oil and refined petroleum products
could delay efforts to restore peace. Before the war, we estimated it
would take 12 weeks to reopen the fields. Due in large part to the hard
work of Task Force RIO, its contractors, and especially the Iraqi
experts in oil production, however, it took only about 3 weeks to get
the oil flowing again. Despite the fact that terrorist attacks against
the infrastructure continue today, Iraq is now producing more than 2.5
million barrels per day of crude oil, more oil than before the war.
Additionally, Iraq is now exporting more than 1.8 million barrels of
oil per day. These exports are pumping much needed funds back into the
Iraqi economy, much of which is being used to restore infrastructure.
The situation with Iraq's electrical grid, however, was not faring
so well. After initial restoration and stabilization efforts,
electricity production leveled off during the late summer at a peak
production capability of approximately 3,000 mega-watts. By this time,
responsibility for reconstruction had transitioned to the Program
Management Office (PMO) of the CPA. The PMO had the lead and was
working an excellent plan using USAID and Bechtel to provide large
scale generating, transmission, and control projects. What was needed
though was an immediate, short-term solution that would give a much-
needed boost to the availability of electricity across Iraq.
In September, the Corps of Engineers was asked by Central Command
to look at the electrical situation in Iraq again and see if there was
anything we could do to provide immediate assistance in order to allow
USAID to focus on more long-term solutions. We did this with Task Force
RIE (Restore Iraqi Electricity). Using our well-honed domestic
emergency management skills, within 2 weeks we had a team of more than
30 Corps of Engineers employees in Iraq working under the leadership of
the PMO. Working closely with the PMO and Iraqi Ministry of
Electricity, Task Force RIE initially was assigned 26 projects that
included new generation, generator rehabilitation, and restoring
transmission lines and control systems. Just as we do in domestic
emergency management situations such as recovery from Hurricane Isabel,
we used existing, competitively bid contracts to accomplish this work.
At the peak of activity, more than 2,000 contractor employees were on
the Task Force RIE team. The initial efforts of Task Force RIE placed
more than 500 mega-Watts of power back onto the Iraq electrical grids,
but more importantly, helped ensure the reliable distribution of that
power.

CONCLUSION

From the beginning of planning through current efforts, we have
recognized the enormity of the tasks facing us required extensive
contractor involvement on the Corps and coalition teams. This need was
not unique to either our prior wartime experience or our day-to-day
operations at home and abroad. The contractors involved in the
reconstruction effort brought extraordinary technical expertise,
dedication, and commitment to the team. I believe we would not have
enjoyed the success we experienced without their contributions.
I am intensely proud that I had the opportunity to work alongside
the extraordinary, professionals in the U.S., coalition, and new Iraqi
government. Thank you for allowing me to spend time with you today, and
once the other members of this panel have made their statements I will
be happy to take your questions.

Senator Ensign. Thank you.
General McManus.

STATEMENT OF MG WADE H. McMANUS, JR., USA, COMMANDING GENERAL,
U.S. ARMY FIELD SUPPORT COMMAND

General McManus. Mr. Chairman, members of the subcommittee,
I thank you for the opportunity and privilege to appear before
you today and discuss contractor logistics support.
In my capacity as the Commander of the Army Field Support
Command, we provide the majority of that type of support to the
force as it's deployed today. Among the many missions and
responsibilities that we execute, the LOGCAP is the primary
means by which we provide that support, and it's really the
major mission we're executing today in support of operations
in-theater.
The military and our Nation have relied on contract
logistics since the birth of our Nation. Today, our Armed
Forces and our Nation rely on our strong reliance with industry
to provide critical support capability when and where it's
required to support our forces as they are deployed and
employed.
Now, LOGCAP is a formal, competitively-awarded program
that's been in existence for really over a decade now. We are
on our third iteration of this contract. During this decade we
have, with each successive deployment of forces, that LOGCAP
mission has, indeed, grown in support of the missions. Today, I
will tell you we're at unprecedented levels in our support
mission, in terms of magnitude, flexibility, speed in response,
and, indeed, criticality. With each LOGCAP award, we've built
on lessons learned; yet with each iteration of employment, we
face new challenges in the spaces we employ and deploy forces,
and we support them.
LOGCAP provides critical and essential life and mission
support for men and women in uniform, for those civilians
deployed in supporting our national objectives, and for our
coalitions partners, as well. The LOGCAP, in my view, is truly
an element of our national power, both today and tomorrow.
I thank you for the opportunity, and, again, I look forward
to your questions. That concludes my statement, Mr. Chairman.
[The prepared statement of General McManus follows:]

Prepared Statement by MG Wade H. McManus, Jr., USA

INTRODUCTION

Mr. Chairman and distinguished members of the subcommittee, thank
you for this opportunity to report to you on the Logistics Civil
Augmentation Program (LOGCAP).
The LOGCAP provides vital support to our forces both in peace and
war. It increases the efficiency and warfighting capability of the
Armed Forces, immediately improves the quality of life for soldiers and
forces on the ground, and actually allows fewer soldiers to accomplish
a larger mission. While this specific program and the capability it
provides has been in existence for over a decade supporting American
forces in contingency operations around the world, the role of private
enterprise and contractors on the battlefield is as old as our Nation.

BACKGROUND

LOGCAP I covered the period 1991 to 1996. The contract was
competitively awarded to Brown and Root Company, and managed by the
Corps of Engineers. During this period, support was provided for the
Southwest Asia pipeline and principally to contingency operations in
Somalia and the Balkans.
LOGCAP II covered the period 1997 to 2001. The contract was
competitively awarded to DynCorps and managed by the U.S. Army Materiel
Command (AMC) and supported contingency operations in East Timor,
Colombia and the Philippines.
The latest contract, LOGCAP III covers the period from 2002 to
present. Again, this contract was competitively awarded to the company
now known as Kellogg, Brown, and Root Services, Inc. with continued
management by the U.S. Army Materiel Command. As of today, LOGCAP III
provides support to contingency operations in Iraq, Kuwait,
Afghanistan, Djibouti, Republic of Georgia, and Uzbekistan while
planning for contingency operations in other locations depending on our
national security needs.
Through LOGCAP, the Army plans for contractor logistics support for
existing operational and contingency plans and conducts exercises and
training events. More to the point, LOGCAP provides contingency support
wherever and whenever required.

THE LOGCAP CONTRACT

The LOGCAP umbrella contract statement of work (SOW) specifies the
support, which may be provided by the LOGCAP prime contractor divided
into three broad categories: supply operations, field services, and
operations and services. The flexible nature of the umbrella contract
allows the commander in the field to call on contractors to overcome
the logistics shortfalls as the situation on the ground evolves.
As I mentioned, LOGCAP is about providing support to our troops and
this support covers the full logistics spectrum. Some of the more
critical functions include laundry and bath, facilities and billeting,
clothing exchange and repair, waste and sanitation, food service,
mortuary affairs, supply support, maintenance, transportation and
distribution, and power generation and distribution to list but a few.
The more austere the operating environment, the more difficult it
becomes for the Army to insert theses critical services for our troops.
The current environments in Iraq and Afghanistan are among the most
difficult and challenging in which we have had to operate on a
sustained basis.
Although contract support is essential throughout the Army's
operations, here at home as well as overseas, exercising the option of
LOGCAP is not automatic. The initial choice to use LOGCAP is a careful
and deliberate analysis of all available support options in terms of
adequacy and time. Combatant commander requirements may be supported by
U.S. Active, Reserve, and National Guard support units; allied military
arrangements such as the North Atlantic Treaty Organization; host and
other foreign nation support; and, organic, in-theater contracting
capabilities. LOGCAP program managers assist the supported force with
planners to review all support options available.
The LOGCAP III umbrella contract was competitively awarded to Brown
& Root Services, Inc. (BRS) of Houston, Texas, now known as Kellogg,
Brown, and Root, December 14, 2001. The Army Materiel Command awarded
this contract following a competitive procurement, using best value
source selection techniques. Best value allows the Army to access
tradeoffs among cost and non-cost factors and accept the most
advantageous proposal. Two other major defense contractors submitted
proposals during this competition. We evaluated the companies on their
management plan, technical plan, past performance, financial capability
and proposed cost structure. We awarded the contract, without protest,
to the company determined to provide the best value to the U.S. Army
considering cost and all other factors.
The contract is an indefinite delivery, indefinite quantity (10/10)
contract. This allows the government to immediately set requirements
within the scope of the contract without further competition.
Requirements are placed against the basic contract as separate task
orders. Task orders are generally priced on a cost-plus-award-fee
basis, although some smaller tasks can be firm-fixed-price or cost-
plus-fixed-fee contracts. Cost-plus-award-fee contracts are appropriate
for contingency operations in which the performance parameters of the
contract, such as the size, location and field conditions of the
supported force, are not known with precision and are subject to
change. The Army pays only for work performed. No funds are applied
solely for having the contract awarded to a company.

THE LOGCAP PROCESS

Timing is key to all military operations. A LOGCAP contract is
designed to allow the warfighter the ability to place task orders on
contract rapidly, to support evolving, dynamic operations to provide
critical and essential life support to our forces operating in harsh
environments where host nation assets are unavailable or do not satisfy
the support requirement. LOGCAP contracts provide a means to respond to
a wide range of needs while retaining checks and balances to ensure
effective management of tax dollars.
Combatant commanders, or other supported customers such as the
Coalition Provisional Authority or the Iraqi Survey Group, develop
requirements for support based upon operational plans. The customer
examines the possible alternatives for satisfying that requirement
which including organic support, Reserve component units, host nation
support, or LOGCAP.
After the customer determines that LOGCAP is the only viable
capability to provide the support, normally within compressed timelines
due to operational realities and exigencies, the customer writes a
scope of work with the assistance of Army LOGCAP planners. This scope
of work is forwarded through channels to the Army's Deputy Chief of
Staff, Logistics, or G4, and then to the U.S. Army Field Support
Command's LOGCAP contracting office. The AFSC is AMC's subordinate
command responsible for executing the LOGCAP program.
Following reviews for legal and contractual compliance, the
procuring contracting officer (PCO), sends the scope of work to the
contractor and requests a rough order of magnitude (ROM) estimate of
the cost of performance and a technical execution plan. The contractor
develops this estimate and plan and provides them to the PCO and the
customer. After the customer accepts this estimated cost and execution
plan, and funds are received, the PCO issues a notice to proceed to the
contractor who initiates action to satisfy the warfighter or customer
requirement. In urgent circumstances this process can be completed in
72 hours following receipt of a scope of work. The ability to meet
urgent requirements in such an expedited time frame is one of the major
advantages and benefits of the LOGCAP contract.
At this point the government and the contractor have entered into
an unpriced contractual action, on a cost-plus-award-fee basis. The
rough order of magnitude estimate of the cost of performance has become
a ceiling, or ``not-to-exceed'' value for the contract. The estimated
cost of the action, against which the award fee will be calculated, has
to be ``definitized,'' the negotiated details of specific deliverables
and costs associated with resolution of a previously undefined task
order. The contractor will provide the PCO a proposed estimated cost
for completing the work under the task order. The Defense Contract
Audit Agency (DCAA) audits this proposal and provides the results to
the PCO. The PCO negotiates the cost estimate with the contractor and
modifies the task order to establish the definitized estimated cost
base.

LOGCAP IS GLOBAL

The first task order to support operations in Southwest Asia
awarded under LOGCAP III was for an update of the Worldwide Management
and Staffing Plan in January 2002 at a price of $853,000. The first
task order to support base camp operations was awarded in April 2002
for Karshi-Khandabad, Uzbekistan, at a price of $17 million. The Army
currently has identified 76 task orders against the LOGCAP III
contract. Of these, 16 directly support Operation Enduring Freedom and
38 support Operation Iraqi Freedom.
Two of the task orders that we executed under the LOGCAP contract
for OIF involved planning and preparation for the need to immediately
restore the Iraqi oil fields following hostilities. Following receipt
of funds and a scope of work from the Department of Defense, we issued
a task order for development of an oil field restoration plan in
November 2002. With hostilities imminent, OSD requested an additional
task order be issued in February 2003 to pre-position personnel and
equipment for a restoration effort. Following this effort, the Army
Corps of Engineers assumed total responsibility for the program called
``Restore Iraqi Oil,'' and issued a contract to Kellogg, Brown, and
Root.
LOGCAP is currently supporting America's global war on terrorism
contingency operations in seven countries. The program also assists
with the planning, training, and deployment of forces in the United
States.
Not only is Kellogg, Brown, and Root performing in Iraq, Kuwait,
and Afghanistan, but also in support of contingency operations in
Uzbekistan, the Republic of Georgia, and Djibouti as well as continuing
to support planning requirements and missions in the continental United
States. Over 25,000 employees and subcontractor employees are deployed
to augment U.S. forces. To date, Kellogg, Brown, and Root has suffered
a total of 29 casualties, of which 5 Americans were killed and 12
wounded as a result of hostile fire while performing these services in
support of U.S. military operations. The environment in which we are
applying the skills and services of our LOGCAP contractors is not only
harsh, but continues to be highly dangerous.
At this time the LOGCAP contractor is responding to further changes
in requirements due to the current troop rotation in support of OIF.
There are pending missions to support the Department of State when they
assume the CPA function in July and to support other agency projects in
Iraq.

LOGCAP REVIEW AND OVERSIGHT

The Government has a contract administration program in place to
oversee performance of the contract and manage costs. The PCO has
authorized Kellogg, Brown, and Root to requisition material from the
government supply system and to order material off of General Services
Administration supply schedules. The PCO also delegated authority to
the Defense Contract Management Agency (DCMA) to provide on site
administrative contracting officers (ACO). DCMA is a critical strategic
partner in the overall management and execution of this process.
The DCMA ACOs are located at numerous sites to provide daily
contract compliance oversight, review and approve all requisitions over
$2,500, evaluate and manage quality assurance, and monitor the use and
control of government property acquired under the contract. The ACO
team performs technical reviews of contractor cost proposals that
support the negotiation of the contract cost base.
The Defense Contract Audit Agency (DCAA) also plays a key role on
the government's contract management team. DCAA auditors perform audits
on the contractor's cost proposals. They review and approve the
contractor's cost estimating and accounting systems. DCAA reviews and
approves the contractor's payment vouchers, prior to sending them to
the Defense Finance and Accounting Service (DFAS) for payment. DCAA
audits all costs incurred to support the government contracting
officer's final determination of which costs are allocable, allowable,
and reasonably incurred under the contract. Any cost not found
allocable, allowable and reasonably incurred under the contract will
not be paid by the government.
Kellogg, Brown, and Root Services, Inc is also a critical,
strategic partner in this effort. In order to properly manage costs,
the contractor must account for those costs in accordance with both
Federal cost accounting standards and generally accepted accounting
practices. The contractor is required to maintain adequate accounting
systems, purchasing systems and invoicing systems. The corporate ACO
periodically reviews these systems.
In addition to the incentive to incur costs in a reasonable manner,
the contractor has two other incentives to exercise prudent cost
control. Controlling costs is evaluated by the PCO and becomes a part
of the contractor's performance record. This record, in turn, is used
as an evaluation criterion when the contractor competes for future
government business. Contractors who have a record of proven cost
control will be better positioned to win additional contracts. Finally,
the contractor's performance on cost control is one of the evaluation
factors, which determines the award fee.

LOGCAP IN IRAQ AND AFGHANISTAN

In these first phases of supporting our troops, the focus and
priority has been on responsiveness, but all within the framework
established by the Federal Acquisition Regulation (FAR). The process of
definitizing task orders has taken longer than we would like and
certainly much longer than we expected or even planned for. The speed
and volume of task orders placed and the numerous valid changes to the
customer's requirements have been major factors. The changing nature of
operations in Southwest Asia has impacted the contractor's ability to
submit valid cost proposals in a timely fashion and certainly has
impacted our collective ability to satisfy the 180-day requirement of
the FAR to definitize undefined contractual actions. The pace of
setting new requirements and changes to current requirements has
greatly exceeded the original plans of both the contractor and the
government.
Finally, the harsh operating environment of Iraq and Afghanistan,
the non-linear and non-contiguous operating area, and major
infrastructure shortfalls have hindered the implementation of robust
business management systems. Both the contractor and the government
have recently made substantial progress in augmenting personnel and
systems support. A firm timeline to establish final requirements and
costs has been established along with metrics and standards to measure
the performance of all agencies involved in this process. This
primarily includes the PCO, DCAA, DCMA, and KBR. Progress has already
been made, as we have negotiated three task orders for definitization
and have a commitment from KBR to accelerate the schedule of the next
few task orders. These include the two contract actions that supported
OSD for planning and preparation to restore the Iraqi oil fields.
The negotiated estimated cost will be the base against which the
award fee is calculated. The fee structure of the LOGCAP contract was
proposed by Kellogg, Brown, and Root Services Inc as a maximum of 3
percent, which comprises KBR's projected profit on this contract. One
percent is the base fee and a maximum of 2 percent is the award fee.
The award fee is determined by the government, following an evaluation
of the contractor's performance in terms of timeliness of technical
performance to include timeliness of response, quality of response,
quality of work, cost control and overall management. In the event we
cannot satisfy the established timelines for definitization, or we are
unable to agree, the Army is prepared to unilaterally definitize the
task orders.
When we enter into a cost-plus-award-fee contract, we realize that
the management of costs incurred under the contract is an important
responsibility. This instrument enables the contractor to control costs
throughout the process as they use their own capital to satisfy our
requirements prior to payment. The government only pays for goods and
services that meet certain criteria. DCAA audits all costs incurred
under the LOGCAP contract, as part of the definitization process and as
a final audit prior to the government determining the amount of final
payment.

LOGCAP FUNDING

I think it is also important to address the LOGCAP funding process.
Army LOGCAP funding starts at the Department of the Army level and is
passed down to Forces Command (FORSCOM). FORSCOM in turn allocates
funds to their subordinate levels (i.e., Combined Forces Land Component
Command or CFLCC). CFLCC issues funding authority to the various OEF/
OIF task forces (i.e., CJTF7, CJTF180 and CFLCC Forward). The task
forces furnish funds to the Army Field Support Command, AFSC, Resource
Manager who validates the accounting data and initiates acceptance.
Upon acceptance, funds are released to the AFSC contracting office
to create the task order for fulfillment of an approved requirement.
This task order gives the contractor authority to incur cost against
the LOGCAP contract. A copy of the task order is made available to the
LOGCAP customer for recording of the obligations and disbursements in
their own accounting system to meet their financial reporting
requirements.
Coalition Provisional Authority (CPA) and Iraq Survey Group (ISG)
funds flow is slightly different. Funds are allocated through AMC to
AFSC from DA. AFSC establishes the accounting record in the AFSC
accounting system. The funds are certified and then released to the
AFSC contracting office for generation of the task orders. All
accounting for these funds are recorded within the AFSC accounting
system and certified at the end of the fiscal year. CPA and ISG funds
account for approximately 10 percent of the LOGCAP funds received at
the AFSC.
Over the next 12 months, the LOGCAP government team will work with
the combatant commander in-theater to continue to improve the process
and control costs. The focus is on the requirements process to refine
and improve the total LOGCAP process through internal process
improvement teams and meetings between government representatives and
KBR. We will aggressively definitize completed task orders and stay on
task with KBR on the agreed to plan of action. Additionally, we will
develop a strategy to determine the most effective method of transition
from contingency contract operations to sustainment contract
operations.

LOGCAP SUMMARY

The role of the LOGCAP program is recognized and valued by the
supported combatant commander and our troops. I believe that it has met
its original intended goals and has proven that it has even greater
potential than originally expected of a contingency contracting
instrument.
It provides a flexible, viable alternative for supporting our
logistics requirements and providing augmentation to our support units
for early entry of our forces, as well as long term sustainment needs
that would otherwise place great strains on our warfighters. We have
seen an unprecedented level of contractors on the battlefield, with
more than a division's worth of contractors working side-by-side with
our soldiers. They too are our troops and we need to ensure that the
policies and systems are in place to support and take care of our total
force, which includes our contractors
We are committed to supporting current operations and transform
simultaneously. Supporting our soldiers remains our number one priority
and ensuring they get the very best quality of life and other logistic
support is one way that the people of AMC do that. As I have described
to you earlier, LOGCAP contracting is a process we need to constantly
review and improve if we are to improve the Army's tooth to tail ratio.
We will improve and continue to improve our management of this program.
Thank you for your support of America's armed forces and our efforts to
support them.

Senator Ensign. Well, thank you all.
There are so many different places that I want to go with
questions. I guess, let me start with--Department of Defense
Inspector General (DODIG) raised concerns that Iraq contracts
they reviewed did not have adequate oversight after contract
award, and the GAO has raised concerns that the staffing may be
inadequate to oversee Iraqi reconstruction contracts. How are
you addressing these concerns for the contracts that you
administer?
Ms. Ballard. Mr. Chairman, we've addressed those concerns
by increasing the staffing in Iraq, working directly with DCMA
in Iraq to provide contract-management oversight. Our staffing
has gone up to 54 people this month, and will reach 70, and
that is just for the contracting support. Overall, we will
have, in program management and contracting support, more than
400 people in-theater by the end of June. Additionally, sir, we
are leveraging our contracting assets in the United States.
I would defer, then, to General Strock to speak to the
Corps of Engineers staffing in-theater.
General Strock. Thank you, ma'am.
Sir, I think we do have an adequate level of oversight in-
theater now. The Army Corps of Engineers is involved in a
variety of different missions over there, and, as I mentioned,
we have taken a traditional approach by establishing a command
in the theater. Currently it is comprised of about 400 people,
and they are focused on all aspects of contract management,
from the actual contract specialists to construction
representatives on job sites to see that we are getting what we
pay for.
We are mobilizing and will increase the force as the
contractors mobilize and move forward. I have absolutely no
concerns about the level of oversight of our contract activity,
sir.
Senator Ensign. Can you describe how Iraqi reconstruction
contracts currently overseen by the CPA's Program Management
Office (PMO) will be managed after the CPA is abolished on June
30?
Ms. Ballard. Senator, right now our plans and all the
discussions center around a few key points. One is that the
Secretary of the Army has been very clear to his staff and in
meetings with the State Department that the Chief of Missions
and the State Department will be responsible for the
supplemental money that will be managed by CPA and by the
contracting office. They will also set priorities for
requirements. The PMO and the contracting people in-theater
will continue to operate under the Army and our executive-agent
responsibility.
Senator Ensign. Just so I understand what you said there,
you said post-June 30, though, the contract authority goes for
Department of State, but yet the people responsible for
overseeing the contracts are still under Department of Army?
Ms. Ballard. No, sir, let me clarify. All of the
contracting and program management will continue to be done by
the Army under our executive-agent responsibility. The Chief of
Missions will be responsible for the supplemental, expenditure,
and the prioritization of requirements.
Senator Ensign. Put that in plain English.
Ms. Ballard. The State Department has the money.
Senator Ensign. Give me an example of a contract.
Ms. Ballard. An example of a contract----
Senator Ensign.--and a contract existing, and then a new
contract that happens, post-June 30. Who has responsibility
now, and who will have--for that contract that exists now, who
will have oversight? Then who will have oversight post-June 30?
Then if a new contract comes in, who has responsibility, also,
post-June 30?
Ms. Ballard. Right now, the process is, there's a
Requirements Review Board in-theater, and that board falls
under the responsibility of Ambassador Bremer. Those
requirements, once approved, are contracted for by the PMO and
the Army and our contracting people in-theater. So Ambassador
Bremer, right now, determines the requirements and the priority
of those requirements. We do program management and
contracting.
After June 30, the chief of missions and State Department
will fulfill what Ambassador Bremer currently does, and we will
continue to do program management and contracting.
Senator Ensign. So, in simple terms, you all will work for
State instead of CPA.
Ms. Ballard. Yes, sir.
Senator Ensign. Okay. That's kinda the simple thing. You
have to keep things simple for Senators. [Laughter.]
The next question has to do with the level of violence
that's there today. With contractors--we hear press reports of
all kinds of contractors leaving. Let me just state the
question accurately. Has this number remained the same since
April--as far as the number of contractors in Iraq working on
construction projects--has this number remained the same since
April, or are contractors now returning to Iraq? Because they
dropped prior to April, from what I understand. Basically, just
walk through the numbers, what you're seeing right now. Either
one of you, any of the panel can answer that.
Ms. Ballard. Senator, I'd like to take the specifics on
numbers for the record.
[The information referred to follows:]

Only one Project and Contracting Office contractor, Lucent
technologies, has stated that it will move it's folks to Jordan in the
next 2 weeks or so. We are unaware of similar statements to leave by
any other contractors. Contrak IntI however, has indicated that it will
be shutting down operations for a week to 10 days until the sovereignty
changeover is complete upon advice of their security managers.
Many contractors previously in Iraq are returning. The following
file contains an ``approximation'' of contractors in Iraq under the
listed companies for the Design/Build (D/B) and Sector Program
Management Office Contract (SPMOC) contracts. The list also includes
some KBR personnel numbers and USAID contractors but is not a complete
listing nor was it intended to be relied upon as a complete and
comprehensive listing of contractor personnel in-theater. Since the
data is not segregated out by monthly totals, it is not possible to
provide monthly figures. The lists are updated as necessary and were
not intended to provide for or show monthly fluctuations. The
fluctuations in personnel can be attributed to increased work required
in country, R&R rotations, or other nonsecurity related situations.
We have contacted the Contractor Coordination Cell (3C) in Kuwait
for a more comprehensive listing of contractor personnel. The data is
currently being staffed for concurrence and will be provided once
received in our office.

Ms. Ballard. In my discussions with Admiral Nash, what he
has provided to us is that our contractors have continued to
work in-theater on the reconstruction effort.
Senator Ensign. So the press reports that we read about
contractors leaving are inaccurate?
Ms. Ballard. I have no knowledge of our Army contractors
leaving the theater, no, sir.
Senator Ensign. Okay.
General Strock. Sir, there are, I understand, some
contractors who have left, but it's a relatively small number.
Some of those doing the electrical rehab, I understand, have
left the country, some Russian contractors. But, for the most
part, as Ms. Ballard has stated, our contractors have stayed on
the job.
Now, during the intense period of violence, they hunkered
down, but they have gone back to work now, largely, across the
country. It's a challenging environment, but it's one we're
working through.
Senator Ensign. Once again, I have a lot more questions,
but I want to give the rest of the subcommittee a chance to ask
their questions, and so we will. I'm sure we'll have many more
questions for you in writing for the record.
Senator Akaka.
Senator Akaka. Thank you very much, Mr. Chairman.
Last week, I received a series of e-mails from Hawaii,
soldiers currently deployed in Iraq, indicating that they are
suffering a shortage of food because of a contractor who
appears unable to continue deliveries. One e-mail states, and
I'm quoting, ``My soldiers in Iraq have a shortage of food due
to enemy attack on food supply convoys. I understand that the
subcontractors who deal hands-on with the Army food supply
lines in Iraq are not being paid by the general contractor and,
so, are not distributing the food. I beg of you, please look
into this situation. Who is not paying our food bills? Do we
need new contractors to deliver food to our soldiers?''
General McManus, I believe you----
Senator Ensign. Can you chair the hearing?
Senator Akaka [presiding]. I believe you are responsible
for the LOGCAP contract. Were you aware that we have troops in
the field who are not getting food because the contractor is
not paying its bills? Would you agree that it is unacceptable
for our troops to experience a food shortage because of a
billing dispute with a contractor? How will you address this
problem?
General McManus. Senator Akaka, the food shortage issue
really, I think, was probably about 3 or 4 weeks ago. It was in
the height of the conflict, and there were some limitations on
convoy operations because most of our delivery is via our
LOGCAP--our convoy operations there. However, at that point in
time, when we were slowing down convoys, the theater manages,
on a daily basis, the level of food stocks at each of the base
camps throughout the theater of operation. At no time during
either the heightened intensity, or even if there were
disrupted supply lines of operation, was I ever aware of any
issue of the inability for the Army to feed forces or the
contractor support forces in the various dining facilities.
I'll certainly look into that. I can take that on for the
record and come back to you.
But I was never aware of any break in the supply line to
supply the force.
[The information referred to follows:]

To our knowledge, troops have always received meals although the
type of meal provided may vary. In April 2004, terrorist attacks on our
convoy operations required the Army to increase security measures to
counter the changing terrorist tactics. As a result, supply deliveries
were delayed for several weeks in April which affected the supply of
fresh food delivered to our troops in areas of Iraq. KBR continued to
move supplies, but at a slower pace until May when more robust security
procedures allowed supplies to resume at the required delivery pace
conducted before the April attacks. During the slowdown of convoy
movements in April, the Army changed the feeding cycles from three hot
meals a day to two hot meals and one cold meal daily to conserve fresh
food supplies until normal convoy operations resumed in May. Again, to
our knowledge, no soldiers were without meals to include the period
while convoy security was improved.
We also reviewed the issue of troops possibly not receiving food
due to KBR not paying its subcontractors and determined that services
by KBR subcontractors to our dining facilities have not been
interrupted. The Defense Contract Audit Agency questioned some of the
costs of KBR subcontracts for dining facility services. KBR initially
responded by withholding payment to some of its subcontractors, pending
an internal KBR review. After the review was completed, KBR determined
that its subcontractors should receive full payment in accordance with
the terms of the subcontracts, and KBR has made those payments. The
government can withhold payment to prime contractors when a dispute
arises over costs. During the period when KBR withheld payment to its
subcontractors, all subcontractors continued performance at the dining
facilities.
Food service to troops in Iraq varies. Some receive MREs, while
others have access to a full dining facility. The availability of each
level of meals depends upon the location of the troops, ongoing
operations, the security situation at that location, and other factors.
The combatant commander decides the level of meals provided.

General McManus. The other issue of the payment of
contractors, that's the issue there, sir, I think. I know this
is an issue we're working with now, in terms of how we manage
the prime and the prime-to-sub relationship. Those issues are
being resolved. But at no time was I aware of any of those
issues affecting the ability of our Army to support or feed the
forces in the various base-camp locations.
Senator Akaka. As I indicated in my opening statement,
contractor employees have played a central role in key events
that may play an important role in shaping the future of Iraq.
First, the brutal murder of four contract employees in Fallujah
in late March triggered an Iraqi uprising that led to numerous
American and Iraqi deaths last month. Second, press reports
indicate that at least two contractor employees may have either
witnessed or participated in the abuses at Abu Ghraib prison.
At a hearing on the abuses at Abu Ghraib prison earlier
this week, I asked Lieutenant General Lance Smith, the Deputy
Commander of Central Command, who is responsible for keeping
track of the contractor employees in Iraq--I asked him who
would have information on how many such contractor employees we
have over there, and what are they doing? General Smith said
that Central Command is not tracking any of this information,
and that perhaps the contractors would have it. That was his
comment.
Ms. Ballard, General McManus, and General Strock, do any of
you have this information? Is it really possible that we are
sending thousands of noncombatants into a war zone without even
keeping track of how many there are or what they're doing?
Ms. Ballard?
Ms. Ballard. Senator, I, too, am shocked and remorseful
about the things that have occurred at Abu Ghraib prison. The
Army, in our contracts, has published, and we are using, a
contract clause that requires our contractors to do personnel
administration. They are responsible for keeping track of all
their deployed personnel. They are responsible for processing
them through a central location. They are responsible for
keeping emergency contact information on them. Additionally,
our contracts have other provisions with regard to security,
life support, and other things in this area.
Senator Akaka. General McManus.
General McManus. Yes, sir. Senator Akaka, for their
contracts that we're responsible for, as Ms. Ballard indicated,
we put the same stipulation on them as we would on a unit, in
terms of the pre-deployment/deployment administrative
processing. In line with that, what we do within the contracts
that we manage within my command--and specifically I'll address
LOGCAP, if I could, sir--we go through the process of
accounting up through to the corporate headquarters, and I get
daily reports, just as they do. Accountability, in terms of
specific locations by base camp or mission, is done within the
theater. But on a daily basis, we get the numbers and we track
those, because the missions change, and the skill sets required
will change, the numbers required will change. So there is, if
you will, an up-and-down approach to this, because some will go
in, some will come out; in some cases, some will complete tours
of duty, they will redeploy back, they will be replaced; or, in
some cases, they'll redeploy, their mission is not required,
they won't be replaced. So all that is handled through a daily
status reporting process and a weekly accounting process, if
you will, between my command and the corporate headquarters
that owns that contract.
Sir, if I may, we also have in-theater for those contracts,
too. We have what we call a Contractor Coordination Cell. So as
we coordinate for these contractors into the area, they will
process out of a location within the United States, they will
be picked up as they arrive in-theater, through this Contractor
Coordination Cell, and then they will be sent to the mission
locations that they will be performing while in-theater.
Senator Akaka. I understand that the contractor employees
who were murdered in Fallujah were heavily-armed security
contractors. At least one of the contractor employees who was
implicated in events at Abu Ghraib was hired as an
interrogator. Other contractor employees are currently
providing security for CPA Administrator Paul Bremer, and DOD
has awarded a contract for a private company to provide
security for the Green Zone, where most of U.S. officials live
and work.
Has the Department undertaken a legal and policy review to
determine under what circumstances is it appropriate for a
private contractor to provide security to U.S. personnel and
facilities in a war zone? In particular, do you have a legal
determination that it is appropriate for contractor employees
to provide security for U.S. government personnel and property,
and conduct interrogations of enemy prisoners of war and other
detainees?
Ms. Ballard. Senator, the contractors that we have in-
theater are providing security in three ways--personnel
security, as you mentioned, non-military site security, and
non-military convoy security. All of those are provided in
accordance with the terms and conditions of our contracts.
Senator Akaka. Any other comments?
My time is expired. Let me call on Senator Reed for your
questions.
Senator Reed. Thank you very much, Senator Akaka.
First, let me thank Senator Ensign for this timely hearing,
and for his excellent line of questioning and his hospitality
in allowing me to participate. I think I always have to thank
General Strock, because he was my escort last July, and I
apologize for forcing him to fly in a Black Hawk helicopter
with the doors open. [Laughter.]
General Strock. Not at all, sir.
Senator Reed. Sorry about that, sir. [Laughter.]
We had Hueys when I was in the service, and the doors
always seemed to be open. Forgive me.
I want to follow up Senator Ensign's question. With the CPA
going away on July 1, June 30, I've been told that there are
different standards for contracts for CPA versus DOD contracts.
Will there be a unified standard in terms of forms, the
requirements, regulation, after July 1?
Ms. Ballard. Let me be sure I understand your question,
sir. Are you asking if we are using different regulatory
requirements in DOD contracts versus CPA contracts?
Senator Reed. Yes, ma'am. What will happen after July 1,
when the CPA no longer exists.
Ms. Ballard. The contracts that we award using appropriated
funds are, by law, required to follow the Federal Acquisition
Regulation (FAR), and we do use those regulations for any
contracts using appropriated funds. Contracts using other fund
sources, such as Development Fund for Iraq (DFI) or other
money, in Iraq is governed by a CPA order--I believe, sir, it's
number 4. It is my understanding that there is a transitional
administrative law that says the orders established by CPA will
continue to be used after June 30. From that, sir, I have
concluded that the CPA order number 4, which applies to DFI
funds, would continue to be used.
Senator Reed. Thank you very much.
One of the issues that has risen in this investigation of
the prison is a contractor and there's been allegations made
that he might be engaged in inappropriate conduct. He seems to
have not been charged or in any way restrained, which raises
the issue, do you feel we have the legislation to hold
contractors accountable in Iraq at this time?
Ms. Ballard. Sir, the government has legal and contractual
options available to it regarding contractors' conduct in-
theater. These come in the form of the War Crimes Act of 1996,
the Military Extra-Territorial Jurisdiction Act of 2000, the
Uniform Code of Military Justice, which would apply to
civilians who are retired military. Additionally, sir, Title
10, Section 2408, provides prohibitions against contractors who
are involved in defense contract related felonies. So we do
have several means by which we could take action.
Senator Reed. After July 1, what agency could invoke those
legal sanctions against the contractor?
Ms. Ballard. Sir, CPA order number 17 specifies that
contractors, Coalition contractors, and subcontractors in-
theater are not affected by Iraqi law. As I said under the
transitional administrative law, that order will continue to
prevail. Therefore, in consultation with General Counsel, we've
concluded that those acts which I addressed would apply to our
contractors in-theater.
Senator Reed. Let me ask a question that might seem fairly
naive, but in listening to all this, it appears that, on July
1, the sovereign government of Iraq will have no direct
authority or responsibility with respect to all these
construction activities and reconstruction activities in Iraq.
Is that accurate?
Ms. Ballard. Sir, I'd have to take that question for the
record.
Senator Reed. Could you please do that?
Ms. Ballard. Yes, sir.
[The information referred to follows:]

Upon dissolution of CPA, Ambassador Negroponte, the United States
Chief of Mission, assumed responsibility for the $18.4 billion Iraq
Relief and Reconstruction Fund (IRRF). He will set the policy and
establish the priorities for the execution of projects funded by the
IRRF.
While IRRF funds were being obligated prior to July 1 to strengthen
Iraq's economic and security situation, several billion dollars
remained uncommitted as of July 1, in order to provide Ambassador
Negroponte with the resources and flexibility he needs. The Department
of Defense is ready to support him in managing both existing and new
contracts.
On July 1, State Department's Iraq Reconstruction Management Office
(IRMO) assumed responsibility for policy and program oversight of the
IRRF. The dissolution of the CPA and PMO will not jeopardize continuity
in the execution of the reconstruction programs in Iraq.
Army's Project and Contracting Office (PCO), formerly the Program
Management Office (PMO), will continue to provide contracting and
program management support as requested by the Chief of Mission and
other agencies.
The various agencies (e.g., DOD, State, USAID, and Treasury) that
have been executing contracts funded with IRRF resources will continue
to do so after the transition. The current list of infrastructure
projects were prioritized working closely with the Iraqi ministries,
governorates and the military commanders on the ground to decide which
projects would have the most impact on the country.

Senator Reed. All right.
I have been told that, on July 1 or sometime after that,
that security for the Green Zone will be provided by
contractors, not by American military personnel. Is that
accurate? Has a request for proposal (RFP) to that extent been
released?
Ms. Ballard. Sir, we'll take that question for the record.
[The information referred to follows:]

Contractors have always been involved in certain aspects of
security within the Green Zone, such as guarding some building
entrances and providing personnel security details (PSDs), and this
continues to be the case after June 30. Military forces will continue
to provide overall security to the Green Zone in coordination with
Chief of Mission.

Senator Reed. Thank you very much.
I'm also under the impression that as security cost goes up
from a fixed amount of money, then construction progress must
go down, and there's an inverse relationship. We understand
security costs are going up. Do you, Madam Secretary, or any of
the general officers, have an estimate of the present security
costs and the likely impact on real progress in construction?
Ms. Ballard. Yes, sir. Security costs range generally about
10 percent. CPA originally estimated security cost at about 20
percent of the construction cost. I gave you the range of 20
percent based on what we saw in the offerors' proposals on the
recently-awarded construction contracts.
Actually, the security costs will vary, depending on
circumstance. It's very environment-dependent, it's very
requirement-dependent. For example, one of the areas I
mentioned that we have security provided by contractors is
personal security. Security for a delegation or a senior
government official would require a different level of
security, perhaps, than site security. Also, the periods of
performance vary. So all of these factors make estimating
actual security costs very fluid.
Senator Reed. Ms. Ballard, if we assume a 20 percent
security cost, in dollars, what would that represent for the
contracts that are already outstanding and the contracts you
anticipate in the next year? How many billions of dollars?
Ms. Ballard. We have awarded $5 billion in construction
contracts, sir. So if we use that as a sample, and apply 10
percent to that, as that is the range that was shown, we'd be
looking at, if my math is anywhere near good, about $500
million in security costs as the range that we saw in the
contractors' proposals.
Senator Reed. Thank you very much. Thank you for your
testimony.
Thank you.
Senator Akaka. Senator Levin.
Senator Levin. Ms. Ballard, just on that same point, the
estimate which our staff got from the CPA Inspector General
(IG) about security costs on contracts for the reconstruction
is that they may now be running as high as 25 percent. Would
that surprise you, or is that consistent with your answer?
Ms. Ballard. As I said, my estimation is based on what we
saw in the construction contracts. I don't know what the IG
used, because there are other government entities in-theater.
So if they used USAID rates or other contracting entities'
rates, that may be affecting the percentage that they provided.
Senator Levin. Now, on top of the security costs, there are
insurance costs, which we understand now run from 8 to 25
percent of payroll. Is that your understanding, too? Any of you
can just chime in at any time.
Ms. Ballard. Sir, again, in using our construction
contracts as a baseline, those insurance costs did range
between as low as 5 percent and 20 percent. There were some
factors that affected that. The contractors don't apply their
insurance the same across the board, so contractor A may have
different insurance costs than contractor B. The employee pools
may be different. So those affect what exact percentages we'd
get in the range of security.
General McManus.
General McManus. Sir, on the LOGCAP contract, my security
costs, as part of the contract cost, tend to be on the lower
range, around the 5 percent category. That's been consistent
from the origin of the operation. That may change over time,
but right now we're on the lower end of that range, just right
at 5 percent.
Senator Levin. Now, does the Army provide the security on
those contracts?
General McManus. Sir, for the LOGCAP contracts, the answer
is yes. On the resupply missions we require them to integrate
with the theater security operations. So the military provides
security for those contractor logistics operations that we
provided under the LOGCAP instrument.
Senator Levin. So that's one of the reasons why costs are
lower.
General McManus. Yes, sir. Of course, by the same token,
the insurance costs may be variable, because some employees are
in safer areas, some in more dangerous missions are not
exposed, but you're exactly right.
General Strock. Sir, if I might, also. I think the LOGCAP
contract generally is focused on fixed installations and the
lines of communication between those; whereas, the construction
contracts tend to be out in the community, and, hence, the
security requirements are higher and more costly, and they
cannot take advantage of military security.
Senator Levin. Thank you.
Now, Ms. Ballard, it's been reported that we're currently
paying for as many as 20,000 private security employees in
Iraq. Now, you didn't have a range before, you wanted to supply
numbers, for the record, I think, to Senator Reed, but does
that sound like an approximation, or do any of you know, in
terms of the number of private security employees in Iraq?
That's been a published figure or estimate, I believe.
Ms. Ballard. Sir, the 20,000 number that I'm aware of is
reported in relation to all contractors in Iraq, and I am
looking at Army contractors in Iraq. As I indicated, that
number fluctuates. But General Strock has additional
information.
Senator Levin. Okay.
General Strock. Yes, I'm not sure where this fits into the
big picture, sir, but due to the sabotage that we were
experiencing on the oil infrastructure, we created a thing
called Task Force Shield, which is a security force of about
14,000; 150 of them are non-Iraqi, but the bulk of those are
Iraqi security personnel who guard the oil infrastructure. So
that number does not sound out of line if you include the Task
Force Shield.
Senator Levin. Okay. In terms of the legal status, you
believe that that legal status, Ms. Ballard, is governed by
interim administrative law, is that correct? After July 1, I
mean.
Ms. Ballard. Yes, sir, the transitional administrative law.
Senator Levin. General Strock, on March 8, 2003, the Corps
of Engineers awarded a sole-source contract to Halliburton.
This was for the reconstruction of the Iraqi oil fields.
General Strock. Yes, sir.
Senator Levin. On March 25, 2003, there was a fact sheet
that was issued that stated that the Army Corps of Engineers
had ``put in place a bridge contract with Brown and Root, which
will be used for an interim period as a bridge to
competition.'' Then it was stated as follows, that ``the Corps
of Engineers will limit orders under this contract to only
those services necessary to support the mission in the near
term.'' Now, that sole-source contract remained in place for
roughly a year, in which time more than $2 billion worth of
orders were placed under the contract. For a period of 10
months, roughly, the DOD fell short, then, on a promise--and
there were more than one--about getting a fully competitive
follow-on contract in place while the value of the work awarded
to Halliburton continued to rise. I just want to go through
some of these commitments that were made to us.
In April of last year, the Army Corps said that they
expected to award a fully-competitive contract in June. In May,
the Army Corps said they expected the competitive award to be
made by August. In June, the Army Corps delayed the contract
award until October. In October, the Army Corps delayed the
contract award until December. In December, the Army Corps
delayed the Army contract until January. Then new contracts
were finally awarded on January 16.
Now, the amount of work that was awarded under the original
Halliburton contract, which was $700 million at the end of
August, had grown to more than $2.2 billion by January. By
contrast, the maximum value of the two follow-on contracts,
taken together, is only $2 billion.
Now, even after the award of the follow-on contracts, the
DOD waited some 2 months to release supplemental money to fund
these contracts. Consequently, work continued to be performed
under the original Halliburton contract for a substantial
period after the award of the competitive contracts.
Why didn't the Army Corps live up to that commitment to
rapidly award a competitive contract and to limit orders under
the Halliburton contract to only those services that were
immediately needed?
Ms. Ballard. Senator, if I could, I'd like to address the
aspects of the date associated with awarding the contracts.
Originally, sir, we did start planning immediately for the
competition for oil, the Restore Iraqi Oil contract. At the
time that we began our acquisition strategy, there were several
things that needed to be overcome. For example, at that time,
we were just reaching the end of hostilities, and there were
laws on the books that would preclude us from actually having a
contract in Iraq. This was intended to be a full and open
competition. Also, the Trade Agreements Act had to be
considered. We had Coalition partners that were not covered
under the Trade Agreements Act, and so we needed to address
that. We had to determine the best acquisition strategy, we had
to develop the solicitation, and several other actions that
went into getting proposals from offerors.
Once the proposals were received, sir, the evaluation
process took considerable time as we made sure that not only it
was a competitive acquisition, that each offer that was
received got a full evaluation, and that we leveraged the
expertise of members of the community, including DCMA and the
DCAA, personnel from Tank-Automotive and Armanents Command
(TACOM). So we brought in the best experts we could to make
decisions about how we would structure, run, and evaluate this
contract. That continued to move that award date to the right.
Senator Levin. But weren't those factors known in March
2003, when that fact sheet was issued which said that the Corps
would limit orders under this contract to only those services
necessary to support the mission in the near term?
Ms. Ballard. Yes, sir. Those factors were known. However,
what we didn't know is how much time it would take to execute a
fully substantiated decision on who should receive the award.
General Strock.
General Strock. Yes, if I might add, the mission did change
over time. In March we really didn't fully understand what we
were getting into.
I would like to point out that, as I look at the invoices
we received on that to date, we have about $2 billion of
invoices of about $2.5 billion that's been done. Of that $2
billion, approximately $1.4, $1.3, something like that, has
been for the acquisition of refined fuels and was not directly
associated with the reconstruction of the oil industry, which
was the focus of that contract and task force. We did not
anticipate that we would be in the fuel-delivery business, and
so that was a huge expense that was added onto this contract. I
can get you the details of that for the record, sir.
[The information referred to follows:]

Given the unforeseen circumstances we encountered--the domestic
fuel crisis, the sabotage, and the escalating post-war violence--we
don't believe the time required to end the bridge contract with
Kellogg, Brown, and Root and award the competitive contracts for
Restore Iraqi Oil (RIO) was excessive. The acquisition strategy took
about 3 months to draft and be approved. The presolicitation conference
was held in July. At that time we said we would award two follow-on
contracts by mid- to late-October. As we were preparing our final
analyses of the proposals submitted, the corps realized we would
probably exceed the maximum amount allowed within 2 to 3 months and
would be required to recompete basically the same contract within a few
months. It made sense to issue an amendment that allowed the companies
that had submitted proposals to reevaluate their proposals based on a
higher projected amount ($800 million in the north and $1.2 billion in
the south.) That amendment and the desire to ``get it right'' delayed
the award until January 2004. Our goal in this process was to find the
best possible contractor working under the best possible contract, not
necessarily award a contract by a specific date.

Senator Levin. Thank you.
General Strock, Halliburton's performance on the sole-
source contract raised serious questions about the adequacy of
its estimating, accounting, labor, billing, budgeting,
compensation, material, and purchasing systems. As a result,
the DCAA issued a warning on January 13, 2004, which said the
following, ``A previous audit report was issued on August 20,
2002, which concluded that BRS' estimating system and related
internal control policies and procedures were adequate. The
purpose of this memorandum is to inform you DCAA no longer
believes the opinion expressed on August 20, 2002, is accurate.
Collectively, the deficiencies described above bring into
question Halliburton's ability to consistently produce well-
supported proposals that are acceptable as a basis for
negotiation of fair and reasonable prices.'' So that's the DCAA
warning.
Despite receiving the memorandum, the Army Corps awarded
Halliburton a follow-on competitive contract 3 days later. The
Army Corps' source-selection memorandum gave Halliburton top
ratings for its business systems, stating that Halliburton
``showed the ability to perform cost accounting on a daily
basis''--that's in quotes--in Iraq, and that its purchasing
system, ``has been government approved for over 10 years, and
it has an exceptional understanding of best-value procurement
and property control.''
My question. Is the Army Corps' failure to heed DCAA's
warning about Halliburton's performance and its internal
controls unique to this contract, or is there some kind of a
broader breakdown in the ability of different parts of the DOD
contracting system to communicate with each other?
Ms. Ballard. Senator, if I may just address a couple of
those points.
DCAA was a participant in our evaluation of that award that
was made to KBR. Additionally, sir, just prior to the award, in
accordance with the regulation, the contracting officer made an
affirmative determination of responsibility, meaning that KBR
could, in fact, receive the award. The regulation also requires
that when there are findings regarding contractor systems, that
we have an obligation to proceed through due process. We must
identify the deficiencies, we must assess those, and determine
whether or not a contractor can correct them. To not award a
contract to KBR on the basis of DCAA's advice to us would
constitute, potentially, a de facto debarment. The courts have
continually held that we cannot deny awards to contractors on
the basis of allegations.
Senator Levin. Okay, now, what you're saying is you cannot
bar them from offering a proposal. But that's a different issue
from how you evaluate their performance. The evaluation of
their performance was pretty tough here. It brings into
question, according to DCAA, Halliburton's ability to
consistently produce well-supported proposals that are
acceptable as a basis for negotiation. I mean, that's pretty
strong language there. Yet the contract was awarded anyway. So
I'm not talking about a ban on their offering bids. I'm talking
about evaluating their performance.
Ms. Ballard. Let me clarify, Senator. It is not to say that
I am speaking to a ban, other than to note that if we did not
award to them when they have been evaluated in accordance with
the regulations to be the best value offer, or are including
consideration of their estimating system, including an
assessment as to whether or not they can correct any systemic
issues, in effect, we are not complying with what the courts
have continually held. We were bound to evaluate them based on
that proposal. We did rely on DCAA membership. Senator, I
personally requested that DCAA provide a senior auditor, who
did participate in that evaluation, not only at the working
level of that evaluation, but then on a senior advisory board.
So DCAA participated. There was a past-performance evaluations
done, and the conclusion of the people who evaluated that was
that KBR could perform this contract.
Senator Levin. Well, in other words, there's a disconnect
inside DCAA, then.
Ms. Ballard. No, sir, I'm not----
Senator Levin. But, I mean, this is a DCAA warning.
Ms. Ballard. It is a DCAA warning that----
Senator Levin. Did the person who represented them at that
conference that you just described not heed their own warning?
Ms. Ballard. That warning came in essentially at the end of
the evaluation period. The evaluation did consider past
performance. It considered evaluation information that was
obtained from DCAA. That one incident would not be
significant--or substantial enough, let me say, to prevent an
award to KBR.
Senator Levin. Well, it's not just one incident; it's the
whole estimating system.
Ms. Ballard. Yes, sir.
Senator Levin. Related internal control policies and
procedures are inadequate. It said, at one point, they were
adequate. Then this warning says that the DCAA no longer
believes that that's accurate. I mean, that's more than just
one incident. That's a pretty strong condemnation, it seems to
me, of the whole estimating system and internal control
policies. Do you disagree with that?
Ms. Ballard. Sir, I would say that DCAA provides us a
service in reviewing the estimating systems. They provide
advice to the contracting officer. We had reviewed that
proposal, we determined that the contractor could perform.
Whatever findings there were made by DCAA, the contractor could
correct those findings. The regulatory requirement is that we
have to make a determination that a contractor cannot correct--
we have to go through due process. So even though DCAA had
these findings that were in the letter, we could not deny an
award to the contractor on the basis of that.
Senator Levin. So that if a contractor's performance has
been as inadequate as this one is, if you believe it's
correctable, you have to ignore their previous performance?
Ms. Ballard. No, sir. We consider their previous
performance, but we cannot deny them an award when it is
correctable.
Senator Levin. Can you consider the previous performance in
awarding something?
Ms. Ballard. Yes, sir, and we do.
Senator Levin. Is that called denying them an award, or is
that just called considering previous performance?
Ms. Ballard. What I am trying to communicate, sir, is that
we did, in fact, consider this in their previous performance.
We considered all the data made available to us by DCAA, and
the conclusion of the evaluation team was that it was
appropriate to award to KBR, and the procuring contracting
officer (PCO) made an affirmative determination of
responsibility.
Senator Levin. Are you sure that this warning was
considered at that time?
Ms. Ballard. I am certain that the contracting officer made
an affirmative determination----
Senator Levin. No, I know that, but----
Ms. Ballard.--responsibility. I can't----
Senator Levin. Do you know whether----
Ms. Ballard.--provide for you the date line.
Senator Levin.--that warning was considered?
Ms. Ballard. Sir, I'd have to take that for the record,
because you're asking me a timing question.
[The information referred to follows:]

Yes, the DCAA Flash Warning Memorandum of January 13, 2004, was
considered by the contracting officer in reaching his Responsibility
Determination.
As the source selection for the follow-on Restore Iraqi Oil (RIO)
contract was being reviewed by Army General Counsel (AGC) prior to the
January 16, 2004 award date, the AGC required the United States Army
Corps of Engineers (USACE) Chief Counsel to personally review the
source selection documentation in Dallas, Texas.
While that review was being completed, USACE received a copy of the
memorandum from DCAA. The memorandum was reviewed and a determination
made by the contracting officer that the memorandum would be addressed
in his responsibility determination.
The responsibility determination was prepared as a memorandum for
record dated January 15, 2004. The contracting officer determined that
the estimating system issues should not change current source selection
determinations or contract award since they could be overcome and the
contractor could be brought into compliance given a reasonable
opportunity.
The responsibility determination was reviewed by counsel and the
source selection authority and assessed as adequate to support contract
award.

Senator Levin. Yes, very much so, because it was just,
what, 5 days later, something like that? That despite a warning
like that--I mean, were there any meetings between the time of
that warning and the time the contract was awarded, if it's
only a 3-day period later?
Ms. Ballard. Sir, I'm saying----
Senator Levin. Were you involved personally in a meeting?
Ms. Ballard. Yes, I was involved personally.
Senator Levin. Do you remember whether the DCAA person who
was involved with you at that deliberation was aware of this?
Do you have any idea?
Ms. Ballard. I was involved to the extent that I received
briefings regarding the decisions on the source selection. I
would have to go back, for the record, and get you information
on that.
[The information referred to follows:]

The DCAA panelist who served on the Source Selection Panel was in
fact aware of the DCAA Flash Report and participated in communications
on the subject.

Ms. Ballard. But I do know personally that an affirmative
determination of responsibility was made by the PCO. I know
personally because I discussed it with General Counsel that
even if we had received this letter 5 days before the award
decision, due process would be required, and we could not deny
the contractor an award.
Senator Levin. Is that a written opinion?
Ms. Ballard. Sir, there is actually legal case law
regarding our inability--the courts have continually held that
we cannot deny contractors awards on these sorts of bases.
Senator Levin. On the sort of a warning like that? You've
got a case that says that?
Ms. Ballard. Yes, sir. In fact, Myers & Myers versus the
United States Postal Service would be one reference. General
Counsel has pulled several, because we wanted to consider every
legal aspect of this prior to making a decision on the award.
Senator Levin. I'd be interested in you giving us those
citations that say that a warning like this cannot be
considered in awarding a contract, because what's the point of
the warning?
Ms. Ballard. It is advice to the contracting officer, sir,
but we will provide that for the record.
[The information referred to follows:]

Courts have consistently held that imposing the consequences of a
suspension or debarment, without complying with the agency's due
process procedures of providing the contractor notice and an
opportunity to be heard, is tantamount to an improper de facto
debarment. Following are two case law examples:

In Myers & Myers, Inc. v. United States Postal Serv., 527
F.2d 1252 (2d Cir. 1975), the court found de facto debarment
where the Postal Service refused to renew six delivery
contracts because of suspected criminal conduct.
In Leslie & Elliot Co. v. Garett, 732 F. Supp. 191 (D.D.C.
1990), a de facto debarment was found because the Navy attacked
the contractor's integrity and developed a policy to declare
the contractor nonresponsible on all contracts.

Senator Levin. Do either of you have comment on that?
General Strock. No, sir. I would defer to Ms. Ballard for
this. I was not directly involved in this, and can't speak with
any authority over why these decisions were made and the
timing. So--
General McManus. Sir, nor was I.
Senator Levin. It goes back, Ms. Ballard, to a fundamental
question. It's not whether they can be denied an award. Of
course you can't deny someone an award if they're entitled to
an award. The question is whether or not, in deciding who
should receive a contract, that kind of performance and the
warning about it can be considered. It's obvious that it can be
considered.
Ms. Ballard. Yes, sir. I'm not denying that it can be
considered.
Senator Levin. Well, if it can be considered, we have to
know why was it considered. You're going to tell us that for
the record, because you don't know for sure.
Ms. Ballard. For the timing purposes of it, sir. You're
citing the specific date----
Senator Levin. That's correct.
Ms. Ballard.--of the warning in relation to when the
decision was----
Senator Levin. That's correct.
Ms. Ballard.--made on the contractor----
Senator Levin. That's correct.
Ms. Ballard.--selected.
Senator Levin. So you're going to let us know whether this
was considered----
Ms. Ballard. Yes, sir.
Senator Levin.--and if it wasn't considered, why it wasn't
considered.
Ms. Ballard. Yes, sir.
[The information referred to follows:]

Given the unforeseen circumstances we encountered--the domestic
fuel crisis, the sabotage, and the escalating post-war violence--we
don't believe the time required to end the bridge contract with
Kellogg, Brown, and Root and award the competitive contracts for
Restore Iraqi Oil (RIO) was excessive. The acquisition strategy took
about 3 months to draft and be approved. The pre-solicitation
conference was held in July. At that time, we said we would award two
follow-on contracts by mid to late October. As we were preparing our
final analyses of the proposals submitted, the Corps realized we would
probably exceed the maximum amount allowed within 2 to 3 months and
would be required to recompete basically the same contract within a few
months. It made sense to issue an amendment that allowed the companies
that had submitted proposals to reevaluate their proposals based on a
higher projected amount ($800 million in the north and $1.2 billion in
the south.) That amendment and the desire to ``get it right'' delayed
the award until January 2004. Our goal in this process was to find the
best possible contractor working under the best possible contract, not
necessarily award a contract by a specific date.

Senator Levin. You'll let us know that for the record.
Okay, thank you. Thank you all.
Senator Akaka. Thank you, Senator Levin.
I want to follow up on a question that was asked by
Chairman Ensign regarding oversight of existing contracts. I
want to ask Ms. Ballard, Do you believe that it's appropriate
to rely on contractor personnel to oversee the efforts of other
contractors?
Ms. Ballard. Senator, contractors do not exercise any
inherently governmental functions, so, no, we follow that rule
very closely, sir, that they don't exercise inherently
governmental functions.
Senator Akaka. I want to thank our panel, too, Secretary
Ballard, General Strock, and General McManus, for appearing
today at our hearing. I think it has answered some of our
questions, and I want to thank you for coming.
On behalf of the chairman of this subcommittee, Senator
Ensign, I adjourn this hearing.
[Questions for the record with answers supplied follow:]

Question Submitted by Senator John Ensign

DEFENSE BASE ACT INSURANCE PROGRAM

1. Senator Ensign. Secretary Wynne, you testified last week that
the Department of Defense (DOD) and Army Corps of Engineers intend to
move forward with the implementation of a DOD centrally managed Defense
Base Act insurance program that would rely on one insurance firm--in
effect a monopoly--to cover all workers' compensation insurance abroad
for U.S. defense contractors. Given the realities we now face in Iraq
and elsewhere, can one insurance provider actually cover the rising
risks without exposing itself and, perhaps, ultimately the DOD to a
rash of unmanageable claims?
Secretary Wynne. We have encouraged the U.S. Army Corps of
Engineers (USACE) to pursue a Defense Base Act (DBA) workers'
compensation insurance pilot program because we received complaints
last year from companies doing business in Iraq (and from the
Professional Services Association) that: (1) the rates for this
mandatory insurance had increased precipitously--going from $4 to over
$20 per $100 of labor costs, and (2) in some cases, they could not get
DBA insurance at all. This difficult DBA insurance market hit small
businesses particularly hard because there is often a minimum premium
of $15,000, regardless of how few contractor employees are overseas or
how short a time period they will be there.
The USACE pilot program we envision is based on two similar,
successful programs at the Agency for International Development (AID)
and the Department of State (DOS). AID has been awarding its
competitive requirements contracts for DBA insurance since the late
1970s, while the DOS program began in 1992--with regular recompetitions
for these contracts every 5 years. The DBA insurance rates under both
the AID and DOS programs have been very reasonable, with no minimum
premium requirements.
It is incorrect to categorize the planned USACE pilot program as a
monopoly or sole source procurement. As with the DBA programs at AID
and DOS, the USACE pilot program contract will be competed; but after
award, all requirements for DBA insurance on USACE contracts will be
placed with the winning contractor for an initial period of 2 years.
This is no different from what DOD does on other competitive
requirements-type contracts. If the USACE pilot program proves
successful, it will be periodically recompeted thereafter. We also want
to emphasize that this is not a DOD-wide program; it will be limited to
the DBA insurance requirements of USACE contractors only.
USACE currently plans to issue a draft request for proposals (RFP)
for its DBA Insurance pilot program and then to carefully consider any
industry comments before issuing a final RFP and evaluating proposals.
If the proposals submitted for the pilot program are not advantageous
to the government based on comparison with open market DBA rates and
availability, USACE will not award a contract. However, in view of the
longstanding, successful programs at AID and DOS, we expect that the
USACE pilot program will also prove successful.
______

Questions Submitted by Senator John McCain

LEASE REVIEW PANEL

2. Senator McCain. Secretary Wynne, on October 15, 2002, you
established the Tanker Lease Review Panel (LRP) and subsequently served
as the panel's co-chairman. To your knowledge, has the LRP ever
favorably recommended to SECDEF or anyone else the execution of the
lease for 100 Boeing 767 Tankers?
Secretary Wynne. The Leasing Review Panel was established on
November 1, 2001, in a joint memorandum between the previous Under
Secretary of Defense (Acquisition, Technology, and Logistics), Pete
Aldridge, and the Under Secretary of Defense (Comptroller), Dov
Zakheim. This panel was formed to review the benefits of leasing, prior
to the 767 lease proposal being put on the agenda. A working group of
the Leasing Review Panel first reviewed the 767 lease on December
7,2001, continued to evaluate the pros and cons of both leasing and
purchasing 767 tanker aircraft, and presented its findings periodically
to the Leasing Review Panel. Subsequently, Secretary Aldridge
recommended to the Secretary of Defense that the tanker lease proceed
and signed the lease decision memorandum on May 23, 2003.

3. Senator McCain. Secretary Wynne, aside from the Boeing 767
tanker lease, what other leases have been or are being considered by
the LRP? Please include for the record, the names of the lease
programs, the projected costs, and the conclusions reached by the LRP.
Secretary Wynne. The current lease of four Air Force C-40 (B737)
aircraft was approved by the Leasing Review Panel on June 20, 2002. The
total projected cost of the program was $378.5 million. The panel
determined that a lease would be more cost-effective than a purchase.

4. Senator McCain. Secretary Wynne, I assume the LRP was
established to ensure a competitive process and make sure the taxpayer
received a good deal in the spirit of open and fair competition. Please
respond to the following: Did the LRP suggest competing engines between
Pratt & Whitney and General Electric? Did the LRP suggest competing the
contractor logistics support (CLS) function? Did the LRP suggest
competing the modification of the tankers?
Secretary Wynne. Consistent with its charter, the LRP evaluated the
wisdom of leasing, rather than purchasing, tanker aircraft. The LRP did
not make specific recommendations regarding subsystem acquisition.

5. Senator McCain. Secretary Wynne, every report on the tanker
lease has shown that the government did not get a good deal and the
taxpayer was ripped off in the order of about $5 billion. Is that
correct, or can all of these independent, studies, investigations, and
reports be wrong?
Secretary Wynne. The suspension the program is currently under
serves the purpose of allowing the Department to review the studies
that have been and are currently being conducted, such as the Analysis
of Alternatives and the Mobility Capabilities Study. When the analysis
of all of the studies has been completed, the Department will choose
the best course for both the warfighter and the American taxpayer.

6. Senator McCain. Secretary Wynne, by what directive was the
Leasing Review Panel established?
Secretary Wynne. The memorandum that established the Leasing Review
Panel was signed on November 1, 2001, by the former Under Secretary of
Defense (Acquisition, Technology, and Logistics) and Under Secretary of
Defense (Comptroller). The purpose of the panel was to evaluate
proposals for multiyear leases under major automated information
systems programs and major defense acquisition programs, as well as
proposals for multiyear leases projected to cost a total of $250
million or more.

7. Senator McCain. Secretary Wynne, why did you not recommend
convening a Defense Acquisition Board instead of a Lease Review Panel?
Secretary Wynne. The Under Secretary of Defense (Acquisition,
Technology, and Logistics) at the time, Pete Aldridge, used the Leasing
Review Panel to inform his decision, prior to signing the lease
decision memorandum on May 23, 2003.

8. Senator McCain. Secretary Wynne, is it possible that if you had
recommended a Defense Acquisition Board (DAB), and followed, instead of
bypassed, the established acquisition process, alternatives to the
Boeing 767 lease could have been assessed, a more transparent
acquisition strategy could have been approved, and acquisition
regulations could have been followed?
Secretary Wynne. In his role as the Defense Acquisition Executive,
the Under Secretary of Defense (Acquisition, Technology, and
Logistics), Pete Aldridge, used the Leasing Review Panel to inform his
decision to proceed with the 767 tanker program prior to signing the
lease decision memorandum on May 23, 2003. The acquisition process
allows considerable flexibility in providing the best value to the
warfighter and the taxpayer. On occasion, we waive traditional
requirements in order to achieve that objective. In light of legitimate
questions regarding the proposed lease of 767 tanker aircraft, however,
the Department has undertaken numerous studies, including an analysis
of alternatives. The Secretary of Defense has suspended the program
until we have had an opportunity to evaluate the results of those
studies. Upon completing our evaluation, we will be in a better
position to determine whether we should meet the Air Force's aerial-
refueling requirements through innovative or traditional means.

9. Senator McCain. Secretary Wynne, in light of all that has
happened with the Boeing Tanker 767 program, what DOD guidance, policy
directives, changes to the FAR/DFAR, or drafting assistance for
legislation have you instituted or proposed over the last 2 years to
prevent this kind of taxpayer ripoff from ever happening again?
Secretary Wynne. As part of the review of this program, I
recommended, and the Deputy Secretary of Defense subsequently directed,
that the Industrial College of the Armed Forces (ICAF) be tasked to
conduct a study of lessons learned regarding the proposed lease of 767
tanker aircraft. This study was intended to provide the Department with
valuable insight into areas in which we can improve our processes with
regard to leasing and the procurement of commercial items. ICAF
delivered its report on April 20, 2004. Additionally, I have asked the
Defense Acquisition University to form a task force to review lessons
learned from the Defense Science Board study, the DOD Inspector
General's Report, and the ICAF study, to determine whether changes or
additions should be made in the form of policy, guidance, or training.
I have requested the task force's report by September 1, 2004.

10. Senator McCain. Secretary Wynne, when is this committee going
to receive the documents from the DOD that have been requested
regarding the Tanker Lease?
Secretary Wynne. I understand that the DOD Office of the General
Counsel delivered the first set of documents regarding the program to
the Senate Committee on Armed Services on July 13, 2004. This matter
remains the subject of active discussions between representatives of
the Committee on Armed Services, the Department, and the White House.

CORROSION CONTROL INITIATIVE

11. Senator McCain. Secretary Wynne, you mentioned the corrosion
control initiative that you are applying to systems like the C-130, EA-
6B, and helicopter programs in your statement. Why did you not include
KC-135s in that group as well?
Secretary Wynne. With regard to the KC-135 specifically, there is
an extensive program in place to manage corrosion control. The program
includes a field-level maintenance and inspection program and a 60-
month programmed depot maintenance cycle (shorter for aircraft
permanently stationed in corrosive environments).

TANKER ORD

12. Senator McCain. Secretary Wynne, it would be commendable if--as
you mentioned in your statement--your office really did pursue
acquisition excellence by ensuring cost estimates encompassed total
ownership, affordability, and joint warfighting requirements. Why does
the tanker lease provide almost no cost transparency, a $5.4 billion
overcharge to the taxpayer, and manipulation of the operational
requirements document?
Secretary Wynne. The Department is dedicated to acquisition
excellence, and will seek the best value for the taxpayer and
capability for the warfighter in any procurement. The merits of the
tanker lease program, which is currently under a DOD-imposed suspension
in order gather additional information that will be useful in
evaluating the proposal, are being examined. Any decision regarding the
future of the program will reflect these values.

13. Senator McCain. Secretary Wynne, do you accept the fact that
the Operational Requirements Document (ORD) was tailored specifically
for the Boeing 767, or do you require more investigations to point that
out to you?
Secretary Wynne. The Operational Requirements Document is part of
the Joint Capabilities Integration and Development System, It is a
warfighter document, overseen and issued by the Joint Requirements
Oversight Council (JROC), I am not a member of the JROC, and therefore
cannot comment on the integrity of that process, However, I do rely on
requirements validated by the JROC in coming to an acquisition
decision.

DEFENSE BASE ACT

14. Senator McCain. Secretary Wynne, the DBA requires defense
contractors to provide necessary workers' compensation insurance to
overseas employees. Today, employees receive this insurance through a
variety of free-market means, including insurance policies purchased by
contractors and subcontractors from a broad range of insurance
carriers, as well as self-insurance by certain larger contractors.
It has come to my attention that DOD is moving forward with a
proposal for a contract to provide for a centrally-managed source of
Workers' Compensation Insurance. This program would in effect eliminate
competition for DBA insurance rates, effectively giving one company a
monopoly in the marketplace. This program would replace the current
workers compensation insurance system with a mandatory one-size-fits-
all insurance program for all contractors and subcontractors, provided
by a single insurance company.
While I understand DOD's concern over the expense of the war effort
in Iraq, I do not think that DBA insurance is an overwhelming or
unreasonable contributor to the overall cost of civilian contractors
employee compensation packages. I also do not think DOD's anxiety over
their requests for funding from Congress, should result in their
imprudently resorting to a monopoly.
I understand that in last week's Readiness and Management Support
Subcommittee hearing, you indicated that the DOD could achieve a
savings of 5 to 1 with a sole source program. Please explain how you
arrive at such a cost savings and provide me with a detailed analysis
supporting your assertions. Please include in this analysis your study
of the progress of DBA rates since May 2002 and compare that to the
current DBA rates with comparable, less hazardous exposure in the
United States.
Secretary Wynne. We have encouraged the U.S. Army Corps of
Engineers (USACE) to pursue a DBA workers' compensation insurance pilot
program because we received complaints last year from companies doing
business in Iraq (and from the Professional Services Association) that:
(1) the rates for this mandatory insurance had increased precipitously
going from $4 to over $20 per $100 of labor costs (an alarming 5 to 1
increase), and (2) in some cases, they could not get DBA insurance at
all. This difficult DBA insurance market hit small businesses
particularly hard because there is often a minimum premium of $15,000,
regardless of how few contractor employees are overseas or how short a
time period they will be there.
The USACE pilot program we envision is based on two similar,
successful programs at the Agency for International Development (AID)
and the Department of State (DOS). AID has been awarding its
competitive requirements contracts for DBA insurance since the late
1970s, while the DOS program began in 1992--with regular recompetitions
for these contracts every 5 years. The DBA insurance rates under both
the AID and DOS programs have been very reasonable, with no minimum
premium requirements.
As I stated in the Readiness and Management Support Subcommittee
hearing, it is incorrect to categorize the planned USACE pilot program
as a monopoly or sole source procurement. As with the DBA programs at
AID and DOS, the USACE pilot program contract will be competed. After
award, all requirements for DBA insurance on USACE contracts will be
placed with the winning contractor for an initial period of 2 years.
This is no different from what DOD does on other competitive
requirements-type contracts. If the USACE pilot program proves
successful, it will be periodically recompeted thereafter. We also want
to emphasize that this is not a DOD-wide program; it will be limited to
the DBA insurance requirements of USACE contractors only.
At this time, I cannot estimate the savings. USACE currently plans
to issue a draft request for proposals (RFP) for its DBA insurance
pilot program and then to carefully consider any industry comments
before issuing a final RFP and evaluating proposals. After analysis if
the proposals submitted for the pilot program are not advantageous to
the government based on comparison with open market DBA rates and
availability, USACE will not award a contract. However, in view of the
longstanding, successful programs at AID and DOS, we expect that the
USACE pilot program will also prove successful.

IRAQI CONTRACTS--FIRST RESPONDER NETWORK

15. Senator McCain. Secretary Wynne, recent media reports in the
Los Angeles Times on April 29, 2004, the Anchorage Daily News on May 1,
2004, the Sunday Times of London on May 2, 2004, and the Washington
Times on May 9, 2004, allege that the Deputy Under Secretary of Defense
for International Technology Security engaged in conduct, that, if
true, would raise serious concerns that Federal procurement integrity
and ethics laws and regulations have been violated. Please provide, for
the record, answers to each of the following questions, based on a
review and analysis of all communications between Mr. Shaw and anyone
(a) within the Department of Defense or the DOD Secretariat, (b) the
Coalition Provisional Authority and/or the Iraqi Ministry of
Communications, or any other Iraqi Ministry, (c) anyone associated
with, acting on behalf of or representing those entities known for
International Technology Security have responsibility to establish,
define or dictate ``requirements'' for the Iraqi Ministry of
Communications' ``First Responder Network'' FRN or have authority to
communicate, demand, or otherwise attempt to or participate in the
determination of any requirement including the scope of work for the
FRN?
Secretary Wynne. I did not provide specific direction or authority
to the Office of the Deputy Under Secretary for International
Technology Security regarding Iraqi Telecommunications matters and to
my knowledge he had no responsibilities to establish, define or dictate
requirements for Iraqi Ministry of Communications' First Responder
Network. In August 2003, I signed a Memorandum of Understanding (MOU)
with the DOD Inspector General (DODIG), pursuant to which Dr. John A.
Shaw carried out duties in the investigation of Iraqi
telecommunications matters. Dr. Shaw's report came out May 11, 2004.
Attempts to discredit Dr. Shaw and his report on Iraqi
telecommunications contracting matters were brought to the attention of
the DODIG. Based on the Office of the Inspector General's working
relationship with Dr. Shaw, the DODIG appropriately referred the entire
matter to the Federal Bureau of Investigations (FBI) for any action the
FBI deemed appropriate. Any questions concerning FBI activities in
response to the referral should be directed to the FBI.

16. Senator McCain. Secretary Wynne, did Deputy Under Secretary
Shaw communicate, demand, or otherwise attempt to or actually
participate in the determination of any requirement including the scope
of work for the First Responder Network?
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the Federal Bureau of Investigations (FBI) for any
action the FBI deemed appropriate. Any questions concerning FBI
activities should be directed to the FBI.

17. Senator McCain. Secretary Wynne, was an attempt made by the
consortium consisting of NANA Pacific, Guardian Net, Qualcomm, and
Lucent, to surreptitiously insert into the scope of the Iraqi First
Responder NetWork FRN, without CPA request or approval, language that
would have effectively given the Guardian Net consortium the
requirement to provide Iraqi nationwide commercial mobile phone
capacity even though such requirement was never and is not now a
requirement of the FRN?
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the FBI for any action the FBI deemed appropriate.
Any questions concerning FBI activities should be directed to the FBI.

18. Senator McCain. Secretary Wynne, throughout April 2004, did the
First Responder Network PRN statement of work/scope of work for any
sole-source 8a contract contemplated by CPA officials for an Iraqi
police radio pilot program include any requirement for the inclusion of
a commercial mobile phone capability?
Secretary Wynne. No, the First Responder Network statement of work
in the April 2004 ID-IQ contract did not include a requirement for
inclusion of commercial mobile phone capability.

19. Senator McCain. Secretary Wynne, did the scope of work/
statement of work issued by the CPA Head of Contracting Activity and
CPA Program Management Office, to the NANA Pacific Guardian Net
consortium for the Iraqi police radio pilot program include any
requirement for commercial mobile phone capability?
Secretary Wynne. No, there was no CPA statement of work to NANA
Pacific that included a requirement for commercial mobile phone
capability.

20. Senator McCain. Secretary Wynne, did NANA Pacific unilaterally
change and/or amend the scope of work/statement of work for the Iraqi
police radio pilot program and submit it to the CPA contracting office
stating: ``The FRN shall be designed so that the operators of the
network shall be able to offer nationwide commercial cellular service
on a nationwide basis throughout Iraq?''
Secretary Wynne. No, NANA Pacific did not unilaterally change and/
or amend the statement of work to include a statement offering a
nationwide cellular service.

21. Senator McCain. Secretary Wynne, did Deputy Under Secretary
Shaw participate in any way in the development and/or the NANA Pacific-
Guardian Net consortium's inclusion of any such language in the Iraqi
police radio pilot project scope of work/statement of work?
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the FBI for any action the FBI deemed appropriate.
Any questions concerning FBI activities should be directed to the FBI.

22. Senator McCain. Secretary Wynne, did Deputy Under Secretary
Shaw communicate in any way to the Office of the CPA Senior Advisor to
the Ministry of Communications any request or demand whatsoever that
such language be included in the NANA Pacific-Guardian Net consortium
sole-source Iraqi police radio pilot program contact scope of work/
statement of work?
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the FBI for any action the FBI deemed appropriate.
Any questions concerning FBI activities should be directed to the FBI.

23. Senator McCain. Secretary Wynne, under what authority did
Deputy Under Secretary Shaw, on behalf of the Department, communicate
to the Office of the CPA Senior Advisor to the Ministry of
Communications, the limited, previously-approved scope of work/
statement of work of a sole-source acquisition of an Iraqi police radio
pilot program under section 8a of the Small Business Act should be
expanded into an unapproved, sole-source contract scope of work/
statement of work for the design of the FRN ``so that the operators of
the network shall be able to offer nationwide commercial cellular
service on a nationwide basis throughout Iraq?''
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the FBI for any action the FBI deemed appropriate.
Any questions concerning FBI activities should be directed to the FBI.

24. Senator McCain. Secretary Wynne, did Deputy Under Secretary
Shaw hire or contract Julian Walker, a principal in the Liberty
Holdings, to work for the Office of the Deputy Under Secretary of
Defense for International Technology Security and/or the Office of
International Armament and Technology Trade and ensure that he was
adequately supervised during the course of his employment or contracted
service?
Secretary Wynne. To my knowledge, Ambassador Julian Walker was not
hired or contracted to work for the Deputy Under Secretary of Defense
(International Technology and Security) or the Office of International
Armament and Technology Trade.

25. Senator McCain. Secretary Wynne, as a consequence of his
involvements with the Department of Defense in general and the Office
of the Deputy Under Secretary of Defense for International Technology
Security and International Armament and Technology Trade in particular,
did Mr. Walker improperly gain access to any government and/or other
contractor confidential and proprietary or bid or proposal information
that may have accorded an unfair competitive advantage to any business
with which Mr. Walker was or is in any way associated, including, but
not limited to Liberty Mobile or Guardian Net?
Secretary Wynne. To my knowledge, Ambassador Walker was not
authorized to have access to any such government or any contractor
information.

26. Senator McCain. Secretary Wynne, it has been reported that you
and DODIG Joseph Schmitz signed a MOU on 4 August 2003 creating the
Directorate of International Armament and Technology Trade (IATT) to
track arms and technology transfers and that one investigation is under
way on telecommunications contracting improprieties.'' Please provide a
copy of the above- referenced 4 August 2003 MOU and state whether
Deputy Under Secretary Shaw has had any position, involvement or
responsibilities with respect to the IATT.
Secretary Wynne. Attached is a copy of the August 4, 2003 MOU,
pursuant to which Dr. Jack A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. In August 2003, I
signed a MOU with the DODIG, pursuant to which Dr. John A. Shaw carried
out duties in the investigation of Iraqi telecommunications matters.
Dr. Shaw's report came out May 11, 2004. Attempts to discredit Dr. Shaw
and his report on Iraqi telecommunications contracting matters were
brought to the attention of the DODIG. Based on the Office of the
Inspector General's working relationship with Dr. Shaw, the DODIG
appropriately referred the entire matter to the FBI for any action the
FBI deemed appropriate. Any questions concerning FBI activities should
be directed to the FBI.

27. Senator McCain. State what investigative authority the
Directorate of International Armament and Technology Trade and Deputy
Under Secretary Shaw possess to conduct the investigation discussed in
the Washington Times article of May 9, 2004. The article states that
``Nadhmi Auchi, an Iraq-born British national who was involved in
international arms trading, is being investigated for purportedly
rigging bids with the Iraqi Communications Ministry and the Coalition
Provisional Authority, which resulted in contracts being awarded to
three companies tied to Europe.''
Secretary Wynne. In August 2003, I signed a MOU with the DODIG,
pursuant to which Dr. John A. Shaw carried out duties in the
investigation of Iraqi telecommunications matters. Dr. Shaw's report
came out May 11, 2004. Attempts to discredit Dr. Shaw and his report on
Iraqi telecommunications contracting matters were brought to the
attention of the DODIG. Based on the Office of the Inspector General's
working relationship with Dr. Shaw, the DODIG appropriately referred
the entire matter to the FBI for any action the FBI deemed appropriate.
Any questions concerning FBI activities should be directed to the FBI.
______

Questions Submitted by Senator Saxby Chambliss
Federal Outsourcing

28. Senator Chambliss. Secretary Wynne, I am concerned about the
increasing pressures placed on the Federal civilian workforce as a
result of the outsourcing process (including those conducted under the
auspices of OMB Circular A-76) as well as the impending dislocations
that will occur as a result of the fiscal year 2005 Base Realignment
and Closure (BRAC) process. To this end, I am encouraged by the
development of alternative methods for transitioning workers from the
Federal civilian workforce into the private sector. These methods use
techniques that allow for workers to continue to participate in the
Federal retirement benefit plans and to continue accruing credit for
time in service. I am particularly interested in techniques that allow
for and encourage job growth and stability for displaced workers
utilizing nonprofit organizations, universities, or State and local
governments that act as catalysts in this effort to provide for such
transitions. One such program is the transitional benefits corporation
model. Please provide your assessment of the transitional benefit
corporation model and how it might be used to provide savings and
efficiencies within the Department of Defense.
Secretary Wynne. Two primary factors currently prevent us from
implementing transitional benefits corporations (TBCs). First,
formation of the TBC itself presumes that the workforce will leave the
government. Since Federal and DOD policies require public-private
competition with regard to commercial activities, most government
workers choose to participate in those competitions. To my knowledge,
no component of the Department has received a request from its
employees to form a TBC. Additionally, analysis by DOD counsel
indicates that numerous amendments to existing law would be necessary
before the Department could establish a TBC. Since no TBC candidates
have been identified, we have not pursued the TBC model further.
We will continue to pursue public-private competition as the
primary driver of savings and efficiency in our service functions. The
Department supports efforts to ease the transition of government
workers to the private sector, whether the transition results from
public-private competition or BRAC.

29. Senator Chambliss. Secretary Wynne, I am pleased with the
actions the Department of Defense has taken regarding the increased
utilization of expert contractual personnel for specialized projects
within the Department that require expertise not generally found at the
installation level. Specifically, the Army has used a total performance
warranty approach with expert contractors in dealing with longstanding
problems associated with roofing and facilities. I believe this
approach could be used across the Department in the future. Please
provide your assessment of using expert contractual personnel for
specialized projects within DOD and outline additional areas where this
approach could add value and efficiency to the Department's operations.
Secretary Wynne. The Department is studying and, where possible,
undertaking a number of methods for protecting our investments in
infrastructure. The performance warranty in roof work is an example of
focusing attention and resources in a specific category of work to
enhance asset performance. In addition, the Department has a number of
programs (e.g., PAVER, ROOFER, RAILER) that are used to assess material
conditions and make recommendations for upkeep. The Department is also
testing a pilot program authorized by Congress that employs the
expertise of construction contractors to perform all required
maintenance and warranty work on new facilities for the first 5 years
of operation. The intent is to keep new facilities operating like new
for more years at less cost. A complete interim report on this program
will be submitted early next year. The Department will be pleased to
discuss this information when available.

30. Senator Chambliss. Secretary Wynne, it has come to my attention
that the Department may be seeking to privatize a work function at the
Defense Finance and Accounting Service for desktop management services
without undergoing a public-private competition. This direct conversion
is being conducted under the auspices of a ``Pioneer Project'' and the
Department is claiming that the related work function is ``new work.''
I understand that this work function is not ``new work'' under the
definition of that term in the revised Circular A-76, page D-7. Also,
direct conversions of this nature cannot be conducted in light of
Section 8014 of the Fiscal Year 2004 Defense Appropriations Act. Also,
the May 2003 version of A-76 forbids such direct conversions absent the
Office of Management and Budget's (OMB) grant of a deviation. To date,
the Department has not requested a deviation for this work function.
Please provide an update on the status of this specific work function
as well as the status of any other ``pioneer projects'' or initiatives
within the Department which will result in direct conversions of work
performed by civilian employees without undertaking an OMB Circular A-
76 cost comparison process. Please also include the rationales for such
initiatives, whether or not the Department has sought the required
deviation from OMB for these direct conversions, as well as OMB's
response to any requests from DOD for such deviations.
Secretary Wynne. The DFAS Desktop Management service requirement
involves providing desktop computing services to our workforce in a
manner similar to the acquisition of electric or telephone service.
Instead of purchasing desktop computers, software, and peripheral
hardware, and then managing and maintaining those assets, DFAS would
transfer the responsibility and risk for providing, managing,
maintaining, and updating desktop assets to the commercial sector. This
would include help desk and application training support for desktop
computers, software, and peripheral hardware. The contractor would
provide desktop computing capability to the DFAS workforce as a
performance-based service, on a per-employee ``seat'' basis. Because
the contractor would acquire and own software and hardware, DFAS would
no longer install, support, or maintain Government-owned desktop
assets, nor would DFAS have a requirement to operate help desks for
Government-owned computers. This is a new requirement that does not
involve possible conversion of a function performed by Department of
Defense (DOD) civilian employees. As a new requirement, this initiative
is not subject to public-private competition under OMB Circular A-76.
The Department has no additional Pioneer Projects which result in the
direct conversion of functions presently being performed by Government
employees to contract performance.
______

Questions Submitted by Senator Carl Levin

FEDERAL WORKFORCE

31. Senator Levin. Secretary Wynne, in your prepared testimony, you
highlight the need for a ``motivated, agile workforce'' to support your
efforts at transformation. Congress has provided a number of
flexibilities for the defense laboratories and technical centers to
execute personnel demonstration programs to better attract and retain
this type of workforce. There has been continual and growing
frustration with the Department's efforts at aggressively using the
demonstration programs to experiment with personnel systems and
approaches to attract scientists and engineers to government service.
Please provide us with an update of your efforts to expand and improve
the ongoing laboratory personnel demonstrations and your efforts to
increase the number of laboratories participating in demonstration
programs.
Secretary Wynne. The Department continues to support the testing of
innovative personnel management practices through the laboratory
demonstration project. Proposed changes to these demonstrations or any
new starts will be evaluated based on sound management principles,
mission needs and the goals of the Department.

32. Senator Levin. Secretary Wynne, do you intend to fully utilize
the authority granted by Congress under Section 342 of the National
Defense Authorization Act (NDAA) for Fiscal Year 1995 and Section 1114
of the NDAA for Fiscal Year 2001, which provided the labs with the
needed authority and flexibility to attract and retain the best and the
brightest scientists and engineers to support our military?
Secretary Wynne. Yes, the Department intends to fully utilize these
authorities granted to our defense laboratories.

FEDERALLY-FUNDED RESEARCH AND DEVELOPMENT CENTERS

33. Senator Levin. Secretary Wynne, your written testimony implies
(and your May 3, 2004, letter to Congress explicitly makes) a request
to remove the staff-year ceilings on Federally-Funded Research and
Development Centers (FFRDC). Please provide an accurate accounting of
how much and what type of study and analyses and systems engineering
and integration work the FFRDCs have been forced to decline because of
ceiling limitations.
Secretary Wynne. DOD FFRDCs perform work that is consistent with
their mission, purpose, and capabilities; their core competencies; and
the strategic relationship with their sponsor; and cannot be performed
as effectively by existing in-house, other not-for-profit, or for-
profit contractors. The FFRDCs were unable to provide the following
support to DOD due to ceiling limitations (see attached analysis).

34. Senator Levin. Secretary Wynne, there are a number of non-FFRDC
private organizations that provide similar studies and analyses and
systems engineering and integration support to DOD. Is there a reason
that DOD cannot make greater use of these resources to meet their need
for high quality support on technical, analytic, and operational
issues?
Secretary Wynne. DOD makes extensive use of non-FFRDC private
organizations and this use is increasing. However, DOD needs to be able
to access its FFRDCs for high-quality support on technical, analytical
and operational issues that cannot be performed as effectively by
existing in-house or other contractor resources. The Department
established its FFRDCs to have a long-term, strategic relationship with
their DOD sponsors and users. This relationship enables the FFRDCs to
maintain in-depth knowledge of their sponsors' programs and operations,
maintain currency in special fields of expertise, and provide a quick
response to emerging DOD needs. Each FFRDC is required to conduct
business in a manner befitting its special relationship with the
Government, to operate in the public interest with objectivity and
independence, and to be free from organizational conflicts of
interests. FFRDCs must avoid actual or perceived conflicts of interest
and accept stringent restrictions on their scope, method of operations,
customer base, and the kinds of efforts they can undertake. DOD needs
to be able to obtain support free from any conflicts of interest. Non-
FFRDC private organizations, both not-for-profit and for-profit, are
not required to operate under these restrictions and therefore may not
provide the same high-quality support free from organizational
conflicts of interest.

35. Senator Levin. Secretary Wynne, would the Department support
the establishment of a system that permits the FFRDCs to compete with
these private organizations for studies and analyses and systems
engineering and integration support contracts once the FFRDCs have
reached their congressionally-mandated ceilings?
Secretary Wynne. The Department would not support any arrangement
that would allow FFRDCs to compete with private organizations for DOD
work. Section 35.017-1 of the Federal Acquisition Regulation (FAR)
requires that FFRDC sponsoring agreements, or sponsoring agency
policies and procedures, prohibit FFRDCs from competing with non-FFRDC
organizations for other than the operation of an FFRDC. We agree with
this policy. The primary reason for that constraint is to prevent the
appearance that FFRDCs are using their special access to Government and
commercial information to compete unfairly with firms that do not have
such access. Even with this restriction on FFRDC competition, for-
profit companies sometimes complain--inappropriately in the
Department's view--that FFRDCs are taking business from them. If the
FAR's ban on FFRDC competition were eliminated in full or in part, we
would expect complaints from for-profit firms to increase
substantially. Thus, while it might be tempting to relax the
constraints on FFRDC competition in order to solve the current problem,
the blurring of distinctions between FFRDC and non-FFRDC work could
create different problems for the Department over the long term. The
current problem arises because the Department does not have sufficient
access to its FFRDCs due to ceilings on overall FFRDC staff-years of
work. We believe the best solution to the problem is to eliminate the
ceilings, not to alter the ``non-competition'' management construct for
FFRDCs that is embodied in the FAR and in DOD's Management Plan for
FFRDCs. We believe these operating practices for FFRDCs are sound and
have proven to be effective.

COMBATING TERRORISM TECHNOLOGY TASK FORCE

36. Senator Levin. Secretary Wynne, your written testimony
highlights the important work of the Combating Terrorism Technology
Task Force (CTTTF) in supplying advanced capabilities to the warfighter
in the global war on terrorism. How much funding (including
reprogrammings) has been used for the activities of the CTTTF since its
inception?
Secretary Wynne. Over $500 million has been used for CTTTF
activities to rapidly transition advanced technology capabilities to
the warfighter. A summary follows:

The CTTTF was established by the Director, Defense
Research and Engineering immediately after September 11 to
support the acceleration of technology in support of
operational needs for the global war on terrorism. During Phase
I (September 2001 to February 2002), the Department was
successful in prioritizing $181 million and $212 million
respectively from the fiscal year 2002 and 2003 Defense
Emergency Relief Fund (DERF). These funds were allocated to
support over 40 high priority initiatives across the military
Services, the Defense Threat Reduction Agency, and with the
Technical Support Working Group.
During Phase II operations leading up to and including
the land conflict in Iraq, $78 million was allocated, via
various internal reprogramming authorities, to support 9
investment programs in the areas of: detecting and defeating
weapons of mass destruction; ISR capabilities; humanitarian
assistance; and improved weapons lethality for cave and
building penetration.
Phase III CTTTF operations were initiated in June 2003
to assist in post-major hostilities issues in Iraq, primarily
in the area of Force Protection. To date, approximately $62
million (reprogramming of fiscal year 2003/2004 funds) has
supported over 15 project investments for: detection and defeat
of Improvised Explosive Devices; intelligence capabilities;
surveillance and reconnaissance; information fusion and
analysis; development of a centralized test site; and
accelerating the active Denial System Advanced Concept
Technology Demonstration.

37. Senator Levin. Secretary Wynne, how much funding was requested
for the activities of the CTTTF in the fiscal year 2005 budget request?
Secretary Wynne. The CTTTF currently does not have a direct funding
line. However, as noted in response to your first question on the
amount of funds allocated to date, we have been very successful in
reprogramming funds to address near-term, unforeseen requirements
generated as a result of operational issues to fight the global war on
terrorism.

38. Senator Levin. Secretary Wynne, do you anticipate requesting
supplemental fiscal year 2005 funding or further reprogramming of
fiscal year 2004 or fiscal year 2005 funds for these activities in the
future?
Secretary Wynne. Based on our prior experience in addressing the
near-term, quick-reaction needs to support the global war on terrorism,
I would expect follow-on requirements to be addressed in departmental
supplemental and reprogramming actions.

39. Senator Levin. Secretary Wynne, what role does the operational
test and evaluation community play in the rapid development and
deployment of technologies by the CTTTF?
Secretary Wynne. Every technology supported by the CTTTF is tested
at Yuma Proving Ground (YPG) before deploying to the theater. CTTTF
representatives, working with the Army Test and Evaluation Command and
the Technical Support Working Group, are developing common testing
procedures for devices used to counter or detect improvised explosive
devices. In addition, members from the test and evaluation community
form the core of the CTTTF testing team at the Yuma Proving Ground
(YPG). Specifically, we have testing procedures in place that are
designed to ensure the most promising prototypes can be rapidly fielded
by moving prototypes from technical solutions to operational
capabilities.

40. Senator Levin. Secretary Wynne, how do you ensure that the
technologies are adequately tested before they are fielded?
Secretary Wynne. The CTTTF has established a streamlined, yet
comprehensive testing process for assessing all technology capabilities
at Yuma Proving Ground (YPG) before fielding. As soon as the Department
recognized that the use of improvised explosive devices was a force
protection issue for deployed U.S. and coalition forces, the Department
conceived and rapidly built a very detailed test facility at the YPG
using CTTTF funds. This facility contains different road, village and
background environments to include a town we call ``Little Baghdad.''
Force protection equipment can be rapidly tested with operators before
deployment. One timely example is the testing of a system that pre-
initiates IEDs using ground and airborne capabilities now deployed to
the theater. This was a coordinated effort by numerous organizations.
______

Questions Submitted by Senator Daniel K. Akaka

NATIONAL DEFENSE EDUCATION ACT

41. Senator Akaka. Secretary Wynne, in your testimony you make
reference to the ``severe engineering shortages'' that you face and the
difficulty in attracting talent in the so-called ``hard sciences.'' I
have a bill, S. 589, that the Senate has passed and is now being
considered in the House that would provide scholarships for individuals
in a number of critical fields, including the sciences, with the
provision that they later serve in the government. Have you had a
chance to review my bill and do you have any comments on it?
Secretary Wynne. I am aware of S.589 and that the DOD Office of
Under Secretary for Personnel and Readiness has been engaged on the
bill.

42. Senator Akaka. Secretary Wynne, has the administration given
any thought to reauthorizing the National Defense Education Act that
was passed in the late 1950s and was so critical to ensuring this
country trained the right talent in the sciences as well as other
fields?
Secretary Wynne. As a part of our review of things to consider we
have re-read the act you describe and recognize it fit its time and may
not exactly fit this period. I believe that any solutions that DOD
might recommend in the future, whether legislative or otherwise, must
be more finely tuned to DOD's future needs for critical skills,
especially in emerging subdisciplines and specialties that are
potentially transformational to our future military capabilities. I
also believe that any such solutions must be developed in the context
of a much more technologically competitive, diversified, and complex
global economic environment than that of the late 20th century.

[Whereupon, at 4:05 p.m., the subcommittee adjourned.]