[Senate Hearing 109-172]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-172
 
    WAGING WAR ON WASTE: AN EXAMINATION OF DOD'S BUSINESS PRACTICES

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

                                HEARING

                               before the

                  OVERSIGHT OF GOVERNMENT MANAGEMENT,
                 THE FEDERAL WORKFORCE AND THE DISTRICT
                        OF COLUMBIA SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 28, 2005

                               __________

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs


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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk


   OVERSIGHT OF GOVERNMENT MANAGEMENT, THE FEDERAL WORKFORCE AND THE 
                   DISTRICT OF COLUMBIA SUBCOMMITTEE

                  GEORGE V. VOINOVICH, Ohio, Chairman
TED STEVENS, Alaska                  DANIEL K. AKAKA, Hawaii
NORM COLEMAN, Minnesota              CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

                   Andrew Richardson, Staff Director
              Richard J. Kessler, Minority Staff Director
            Nanci E. Langley, Minority Deputy Staff Director
                       Tara E. Baird, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Voinovich............................................     1
    Senator Akaka................................................     3
    Senator Lautenberg...........................................     5
    Senator Levin................................................    20

                               WITNESSES
                        Thursday, April 28, 2005

Hon. David M. Walker, Comptroller General, U.S. Government 
  Accountability Office..........................................     7
Hon. Clay Johnson, III, Deputy Director for Management, Office of 
  Management and Budget..........................................    10
Bradley M. Berkson, Acting Deputy Under Secretary for Logistics 
  and Materiel Readiness, U.S. Department of Defense.............    11

                     Alphabetical List of Witnesses

Berkson, Bradley M.:
    Testimony....................................................    11
    Prepared statement...........................................    71
Johnson, Hon. Clay, III:
    Testimony....................................................    10
    Prepared statement...........................................    68
Walker, Hon. David M.:
    Testimony....................................................     7
    Prepared statement...........................................    33

                                APPENDIX

Responses to questions for the Record from:
    Mr. Walker...................................................    92
    Mr. Johnson..................................................    95
    Mr. Berkson..................................................    96
Charts submitted by Mr. Berkson:
    Focus on continuous improvement (Maintenance Cycle Time Days)   104
    Performance Based Logistics (PBL) proven in the Global War on 
      Terrorism..................................................   105
    IRAQ Air Shipments Cycletime.................................   106


    WAGING WAR ON WASTE: AN EXAMINATION OF DOD'S BUSINESS PRACTICES

                              ----------                              


                        THURSDAY, APRIL 28, 2005

                                       U.S. Senate,
          Oversight of Government Management, the Federal  
       Workforce and the District of Columbia Subcommittee,
                            of the Committee on Homeland Security  
                                         and Governmental Affairs, 
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:09 p.m., in 
room SD-562, Dirksen Senate Office Building, Hon. George V. 
Voinovich, Chairman of the Subcommittee, presiding.
    Present: Senators Voinovich, Akaka, Levin, and Lautenberg.

             OPENING STATEMENT OF SENATOR VOINOVICH

    Senator Voinovich. The hearing will please come to order. 
The Subcommittee on Oversight of Government Management will be 
in order.
    Good afternoon, and thank you all for coming. This 
afternoon's hearing is entitled ``Waging War On Waste: An 
Examination of the Department of Defense's Business 
Practices.''
    The rules of this Committee give the Subcommittee 
jurisdiction over the management, efficiency, and 
effectiveness, and economy of all departments, agencies, and 
programs of the Federal Government.
    I will never forget what my predecessor in the Senate John 
Glenn said, ``If you can get on Governmental Affairs, George, 
do it, because it means that you can meddle in anything you 
want to.''
    It is pursuant to this broad oversight jurisdiction that 
this Subcommittee is holding the first of what will be a series 
of oversight hearings on the programs and operations of the 
Department of Defense that have been designated as high risk by 
the Government Accountability Office. High-risk programs and 
operations are considered especially vulnerable to waste and 
mismanagement.
    This past January, GAO designated eight areas of DOD as 
high risk. Many of these problem areas were first identified in 
the 1990's. In addition, there are six government-wide high-
risk areas that DOD shares with all Federal agencies.
    Today's hearing focuses specifically on a new area 
designated by GAO--DOD's approach to business transformation. 
This high-risk area impacts many facets of the Department's 
business systems and program areas, including business systems 
modernization, support infrastructure management, financial 
management, weapon systems acquisitions, contract management, 
and supply chain management. In other words, improvements in 
this high-risk area are essential to ensure that the Department 
manages its people, systems, and programs in an efficient 
manner.
    We are holding this hearing because these high-risk areas 
and the resources and management efforts they consume degrades 
the ability of our Armed Forces to perform their missions as 
effectively as possible. We are holding this hearing because 
the men and women serving abroad and fighting for our freedom 
and interests deserve the best support possible from the 
agencies responsible for those missions.
    I think there would be a universal agreement that, despite 
our current best efforts, we need to do better. Let me also say 
at the onset that we are all in this together. We are all 
interested in reducing inefficiency at the Department of 
Defense and providing the best possible support.
    As I mentioned at the Subcommittee's hearing on the high-
risk list in February, I intend to address the management 
challenges confronting the Department of Defense in a manner 
similar to how we have addressed the Federal Government's human 
capital challenges. In fact, the management challenges at DOD 
remind me of the government's human capital challenges in a key 
respect. It is a case of good people caught in a flawed system. 
At DOD, these challenges are exacerbated by the enormous scope 
of its operations involving millions of people spanning the 
globe.
    The Subcommittee will examine and explore the management 
challenges at DOD. Once we have a firm grasp on the challenges, 
I will work with Senator Akaka, Senator Collins, and all other 
interested parties in trying to find solutions.
    Legislation may be required. Indeed, just last week, 
Senator Akaka and I joined Senator Ensign in introducing S. 
780, which would establish the Deputy Secretary of Defense for 
Management at the Department of Defense. Other solutions may 
require new approaches to doing business and can be done 
internally by the Executive Branch of government.
    When the Secretary of Defense Rumsfeld began his efforts to 
transform the Department of Defense, he meant far more than 
just the way the Armed Forces fight in the field. He also meant 
the way the Pentagon itself works on a daily basis. Ironically, 
Secretary Rumsfeld began his own campaign to transform the 
defense bureaucracy on September 10, 2001. At a speech at the 
Pentagon, Secretary Rumsfeld stated, ``The modernization of the 
Department of Defense is a matter of urgency. In fact, it is a 
matter of life and death, ultimately, every American's.''
    He went on to say, ``This effort will succeed because it 
must. We really have no choice. It is not in the end about 
business practices, nor is the goal to improve figures on the 
bottom line. It's really about the security of the United 
States of America. Our job is defending America, and if we 
cannot change the way we do business, then we cannot do our job 
well, and we must.''
    In our invitation letter to the Secretary, Senator Akaka 
and I asked for DOD's response to GAO's assessment, as well as 
an outline of DOD's comprehensive plan to address these 
challenges. We also wanted to learn the Department's views on 
establishing a nonpolitical chief management officer to oversee 
the Department's operations.
    Based upon the testimony of Under Secretary Wynne before 
the Armed Services Committee on April 13, DOD is opposed to the 
idea. As this concept has not yet been fully explored, this 
strikes me as a little premature in terms of their judgment.
    It is my hope that, through oversight, we can affect 
positive change for the Department of Defense so that the men 
and women who defend our Nation can get the best possible 
support.
    I now yield to Senator Akaka. Quite frankly, he is far more 
familiar with these issues than I am, due to his service on the 
Armed Services Committee, where he is the Ranking Member of the 
Readiness and Management Support Subcommittee.
    Senator Akaka, I thank you for your leadership. And it is 
just wonderful that the two of us are involved in this 
Subcommittee, particularly on this subject.

               OPENING STATEMENT OF SENATOR AKAKA

    Senator Akaka. Thank you very much, Mr. Chairman.
    Again, I say it is a pleasure working with you to increase 
government efficiency through the oversight of government 
operations in high-risk programs. And I also want to say it is 
good to see our witnesses again, as they have really helped to 
shape what we are doing here.
    As you know, 2 weeks ago, the Armed Services Readiness 
Subcommittee held a hearing on management weaknesses at DOD. As 
that panel's Ranking Member, I had the opportunity to discuss 
with Comptroller General Walker and DOD officials the problems 
facing the Department. At that hearing, I reiterated my 
disappointment that out of 25 high-risk areas on the year 2005 
list, 8 are unique to DOD, and 6 are government-wide areas that 
apply to DOD.
    I sincerely appreciate Senator Voinovich's interest in 
working on this issue by adding DOD's management challenges to 
the portfolio of this Subcommittee. I am proud to join you, Mr. 
Chairman, in this effort because I believe we are at a 
crossroads with the Department of Defense, given the growing 
deficit and the costs associated with the war in Iraq.
    GAO has long pointed to the billions of taxpayer dollars 
wasted annually because of systemic weaknesses in DOD's 
business operations. Every extra tax dollar that DOD spends on 
business systems is one less dollar for our war fighters.
    Today's hearing, which builds upon both our February 
hearing and this month's Armed Services Readiness Subcommittee 
hearing, keeps the pressure on DOD to resolve its long-standing 
financial and business management problems. Until DOD drops its 
cultural resistance to change and addresses the lack of 
sustained leadership within the Department, we will continue to 
see DOD occupying the bulk of the high-risk list.
    To deal with these challenges at DOD, the Readiness 
Subcommittee has enacted legislation addressing several of the 
DOD high-risk areas. For example, after DOD failed to have a 
promised enterprise architecture blueprint for its business 
systems in place by March 2003, we required the Department to 
develop and implement a new financial management architecture 
and transition plan by early 2004. I am troubled that there is 
no plan today, despite statutory requirements.
    To improve efficiencies across the more than 4,000 non-
integrated and duplicative business systems, the Fiscal Year 
2005 Defense Authorization Act placed conditions on the 
obligation of funds for defense business systems modernization, 
which included approval requirements and accountability for 
purchases over $1 million.
    As I noted, the barriers to DOD's business transformation 
are long-standing and deep-rooted. But there is progress. In 
addressing congressional mandates, and as Mr. Berkson will 
testify, DOD has taken steps toward improvement. For example, 
in May 2003, DOD established the Business Management 
Modernization Program Committee.
    However, despite these efforts, there continues to be an 
overall lack of progress in DOD's business transformation 
efforts. Wheels are turning without much forward movement. The 
lack of sustained leadership and commitment to business 
transformation is why I worked with Senator Ensign, the 
Chairman of the Readiness Subcommittee, and with you, Chairman 
Voinovich, on a legislative proposal recommended by the 
Comptroller General to establish the position of chief 
management officer, a CMO, within DOD.
    I am hopeful our measure, S. 780, will be included in this 
year's DOD authorization bill. This new position will create a 
Level 2 deputy secretary, who will be responsible for business 
operations at DOD, including planning and budgeting, 
acquisitions, logistics, financial management, and human 
resources and personnel. The CMO would also be responsible for 
developing and implementing a department-wide strategic plan 
for business reform.
    Our bill does not add another layer of bureaucracy at DOD. 
Rather, it divides the responsibilities of the existing deputy 
secretary between policy and management so that both areas 
receive adequate attention. DOD needs one person whose term of 
office overlaps administrations and who will be accountable and 
responsible for leading change. Without one person in charge of 
overall business transformation within DOD, I fear the 
Department's programs will remain on GAO's high-risk list for 
many years to come.
    Our war fighters are supported through the various 
management systems within DOD. We can no longer afford a 
fragmented and half-hearted approach to DOD business 
transformation. No less than the security of our Nation depends 
upon it.
    Our growing deficit puts us on an unsustainable fiscal path 
that will damage our national security, as General Walker 
observes in his testimony. This is not a partisan issue, and it 
can only be resolved by bipartisan cooperation.
    I want to again commend Chairman Voinovich for his efforts. 
We intend to do everything we can to ensure DOD solves these 
management problems. I look forward, Mr. Chairman, to the 
testimony of our distinguished witnesses, and I thank you for 
having this hearing.
    Senator Voinovich. Senator Lautenberg, I want to thank you 
very much for being here today and I am looking forward to your 
statement.

            OPENING STATEMENT OF SENATOR LAUTENBERG

    Senator Lautenberg. Thanks very much, Mr. Chairman. It is a 
pleasure to work with you and Senator Akaka. In particular, you 
have established a reputation for getting to the bottom of 
things in your term as mayor, governor, and U.S. Senator. We 
greatly admire that quality.
    Two weeks ago, Comptroller General Walker told the Senate 
Subcommittee that the DOD, the Department of Defense, can't 
account for tens of millions of dollars that it spent in Iraq, 
Afghanistan, and elsewhere in the U.S. war on terrorism. And I 
quote you here, General Walker, trying to figure out where the 
money went is ``like pulling teeth.''
    This isn't, unfortunately, anything new. For years, the 
Government Accountability Office has reported that DOD 
squanders billions of taxpayer dollars through waste, fraud, 
and abuse, and poor management. Now this would be a serious 
matter for any part of our government. It is especially serious 
in this case because the Department of Defense is the Federal 
Government's largest purchaser.
    Now reference was made to Secretary Rumsfeld's speech on 
September 10, 2001, the day before the great American tragedy 
took place. Secretary Rumsfeld then said that he never saw an 
organization that couldn't save 5 percent of its budget with 
better management. In DOD's case, that comes to $21 billion. So 
we should all be concerned about management practices at the 
Pentagon.
    Now I am especially concerned about several sweetheart 
contracts that were given to the Halliburton Company. They had 
been the beneficiary of a $2.5 billion no-bid contract and a 
cost-plus contract that actually provides an incentive to waste 
taxpayer dollars.
    Now under this cost-plus arrangement, also known as LOGCAP, 
Halliburton gets reimbursed for every dime that it spends. And 
then, on top of that, it gets a calculated percentage for 
profit. And that is why Halliburton didn't hesitate to pay 
$1.50 for a can of soda. After all, it wasn't their money. And 
that is why they overcharged taxpayers more than $27 million 
for meals that were never even served to our troops. After all, 
it wasn't their money.
    And that is why they overcharged the Army $61 million for 
gasoline delivered to Iraq. Once again, it wasn't their money. 
It came out of the pockets of American taxpayers.
    Now, Mr. Chairman, I understand that cost-plus contracts 
are sometimes justified by special circumstances. When that is 
the case, the contractor must account for every dollar spent. 
And Halliburton hasn't done that.
    Army auditors wanted to withhold payments from Halliburton 
because it couldn't account for how it spent hundreds of 
millions in taxpayer dollars. But as it always seems to do, the 
Pentagon gives Halliburton special treatment, waiving the 
requirement for accountability.
    Now we saw something in the newspapers just a couple of 
days ago about four Marines who had been in combat, and they 
were brave, loyal troopers. But they pointed out that lack of 
proper armor on the Humvees was responsible for the deaths of 
their colleagues because the armor was not only inadequate, it 
also was too short to really protect them. So the head wounds 
that came from shrapnel killed four of their colleagues.
    Families in this country are giving their sons and 
daughters, husbands and wives. And when they see this 
profligate spending, when they couldn't get the equipment they 
want, they are justifiably complaining about the lack of 
appropriate protections for themselves. The American people 
want to get to the bottom of these contracts, and allegations 
that they are not available turn out to be truths.
    The public wants to know whether Halliburton or any other 
company is engaged in war profiteering. Yet no Senate committee 
has held a bipartisan hearing about these specific allegations 
of waste, fraud, and abuse.
    Mr. Chairman, once again, I thank you for convening this 
hearing today. And I hope that when the full Committee holds a 
hearing in the future that one of the things that they will 
focus on, Halliburton and its contracts. Not because I want to 
pick on Halliburton, but because they are the most glaring 
example of unaccountability.
    And coming from the corporate world, as I have, and good 
sense, as my colleagues here have, you just can't favor anybody 
to that extent and then complain about waste.
    Thanks, Mr. Chairman.
    Senator Voinovich. Thank you, Senator Lautenberg.
    Today, we have a distinguished panel of witnesses before 
us. The Hon. David Walker is Comptroller of the United States. 
I understand you have just flown back from Indonesia to make 
this hearing. I thank you for your efforts.
    Mr. Walker has been sounding the alarm from GAO and 
conducting valuable evaluations of DOD's business practices for 
some time.
    Joining him is the Hon. Clay Johnson, Deputy Director for 
Management at the Office of Budget and Management. Mr. Johnson 
is the leading the charge at OMB on addressing DOD's management 
challenges.
    Mr. Johnson, I commend you and the Bush Administration for 
the no-nonsense approach you have taken to management issues. 
The President's management agenda is the most comprehensive 
results-oriented program that I have seen of any administration 
during my years in public service. I tell many people that this 
is one of the Administration's most overlooked achievements, 
and I believe it will be one of the Bush Administration's 
greatest legacies.
    I would like to state that there are a lot of issues that 
we are getting into today that, quite frankly, we just haven't 
bothered with. There is a tendency sometimes to just do 
nothing. If we do nothing, then we will never see change within 
the DOD.
    I had Steve Perry in my office yesterday from General 
Services Administration. He was talking about pay-for-
performance and how they have changed the attitude over there 
in the Department in terms of their rating and so on. Quite 
frankly, he was a yellow on where he was and a green on his 
progress. So that people are being held accountable for the 
things that they are doing. And that is something that we ought 
to be doing, and I congratulate you for that.
    Representing the Department of Defense is Bradley Berkson, 
Acting Deputy Under Secretary of Defense for Logistics and 
Materiel Readiness. Mr. Berkson, thank you for your service to 
this country.
    On Tuesday, I had the opportunity to meet Ken Krieg, the 
President's nominee for the Under Secretary of Defense for 
Acquisition, Technology, and Logistics. He began his service at 
the Defense Department in July 2001, and it is admirable that 
Mr. Krieg has decided to remain in public service.
    One of the things that I appreciate is the fact that people 
who have served in the first 4 years of the President's 
Administration have stuck around because they have all this 
knowledge and everything. And the fact that they are going to 
stick around and continue, I think, is really important because 
their contribution will be so much greater because of the time 
that they have spent.
    I understand that your office will play a role in reforming 
the Department's business practices. I look forward to working 
with both of you. When it comes to managing the Department of 
Defense, we have to do better. I know you realize that. The 
Secretary does. I applaud your efforts to address these 
challenges, and we look forward to learning what you intend to 
do.
    If you will stand, it is the custom of this Subcommittee to 
swear in the witnesses. Do you swear that the testimony you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you, God?
    [Witnesses sworn.]
    Senator Voinovich. Let the record show that they answered 
in the affirmative. We will start with Mr. Walker.

TESTIMONY OF HON. DAVID M. WALKER,\1\ COMPTROLLER GENERAL, U.S. 
                GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Walker. Thank you, Mr. Chairman, and other Senators. It 
is a pleasure to be back before this Subcommittee today to 
discuss business transformation at the Department of Defense.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Walker appears in the Appendix on 
page 33.
---------------------------------------------------------------------------
    At the outset, I would like to thank you, Mr. Chairman, and 
all Members of this Subcommittee for your continued commitment 
to engage in oversight of key management operations and issues, 
including the Department of Defense.
    Mr. Chairman, I would also like to commend you, Senator 
Akaka, and Senator Ensign for your leadership and your 
sponsorship of proposed legislation to establish a Deputy 
Secretary of Defense for Management. Implementing a CMO 
position, in our opinion, is critical to successfully 
transforming DOD's business operations.
    While DOD maintains military forces with unparalleled 
capabilities, it continues to confront pervasive and decades-
old management problems related to business operations that 
support these forces. These management problems cost the 
American taxpayer billions of dollars a year.
    DOD senior leadership is committed to transforming DOD's 
business operations to correct these problems and has taken a 
number of steps to begin this effort. We recognize that 
overhauling the business operations of one of the largest and 
most complex organizations in the world represents a daunting 
challenge, and it is not a new challenge.
    The extent of this challenge is further demonstrated by our 
2005 high-risk list, which you touched on before, Mr. Chairman. 
Counting the six government-wide high-risk areas, DOD has 14 of 
25 high-risk areas, and several of these have been on the list 
since the beginning.
    Although OMB has worked closely with a number of agencies 
that have high-risk areas historically, over several 
administrations, OMB has been much less engaged with regard to 
DOD. Quite candidly, Mr. Chairman, the Congress has been much 
less engaged in oversight of DOD over many years as well. That 
must change.
    To his credit, Clay Johnson, OMB's Deputy Director for 
Management, recently reaffirmed plans to re-engage with GAO on 
the new high-risk list and to make as much progress as possible 
in the second term of the Bush Administration. He is also 
committed to working with DOD on a much more active basis to 
help make sure that they put together a plan to address all 
their high-risk areas. I think it is critically important that 
they do so. In addition to OMB's engagement, it is critically 
important that Congress stay on the case as well with regard to 
these matters.
    There are a number of institutional barriers to change at 
DOD. DOD has begun several broad-based reform efforts to 
transform its business operations over several decades. But to 
date, there has been little tangible evidence of substantial 
and sustained progress. Yes, there has been progress, but not 
substantial enough and, clearly, not sustained.
    We do not fault the ability or commitment of those 
individuals who have been involved in these efforts over the 
years, including those who are involved at the present point in 
time. Our work has identified four underlying causes or 
institutional barriers that we think represent real impediments 
to long-term progress.
    First, the lack of sustained leadership and accountability 
for correcting problems. Mr. Chairman, the simple truth is that 
nobody is in charge of business transformation at DOD. If there 
was, I would want to know why they are not here today and why 
they weren't at the hearing last week. Nobody is in charge of 
overall business transformation at DOD.
    Second, cultural resistance, service parochialism, and 
stove-piped operations--or I call them hardened silos--that end 
up reinforcing the status quo. The absence of a department-
level, results-oriented business culture that places values on 
plans containing results-oriented goals and performance 
measures, coupled with centralized monitoring processes, 
inadequate incentives, and accountability mechanisms for 
change, and historically inadequate oversight has led to our 
current situation.
    There are three key elements that we have noted in my 
testimony--which I would respectfully request, Mr. Chairman, be 
included in the record--that have to be addressed in order to 
be successful. First, there has to be a plan. There is no 
comprehensive strategic and integrated business transformation 
plan at DOD, which sets priorities, has appropriate key 
milestones, and puts individuals responsible for accomplishing 
certain objectives within specified timeframes. To my 
knowledge, there never has been one over decades. But there 
clearly is not one now.
    Second, there needs to be more centralized control over the 
billions of dollars in systems investments. Third, DOD needs a 
chief management official.
    I want to conclude by talking about the chief management 
officer position. I want to discuss what it would and would not 
do, because there is some misinformation with regard to this 
position. First, the CMO would be responsible and accountable 
for overall business transformation, not for policy issues such 
as military transformation.
    This responsibility would involve planning, integrating, 
and executing an overall business transformation plan. That is, 
with all due respect, a full-time job that has never been 
filled.
    The CMO would not assume the responsibility of the under 
secretaries of defense, the service secretaries, or other DOD 
officials for day-to-day management of various business 
activities. Quite candidly, the under secretaries and the 
service secretaries have full-time jobs dealing with their day-
to-day responsibilities, and it is inappropriate to have a new 
layer involved in discharging those responsibilities.
    At the same time, the breadth and complexity of DOD's 
management problems and the overall level that this has to be 
addressed within the Department precludes the under 
secretaries, such as the DOD comptroller and also the under 
secretary for AT&L, for asserting the necessary authority over 
selected players and processes while continuing to fill their 
substantial day-to-day responsibilities.
    Since the CMO and DOD managers would have clearly 
delineated roles and responsibilities, creating a CMO would not 
add another hierarchical layer to oversee day-to-day management 
of the Department. As Senator Akaka mentioned your legislation 
clearly delineates roles and responsibilities and makes it very 
clear that this is not a new layer. It does, however, for the 
first time, make somebody responsible and accountable for 
business transformation.
    Some say this concept was tried in the past and didn't 
work. I would respectfully suggest that people need to go back 
and read the legislation and the related legislative history. 
Such an assertion compares apples and oranges.
    Over 30 years ago, Secretary of Defense Mel Laird asked 
Congress to establish an additional deputy secretary of defense 
for many of the same reasons we are proposing now, and Congress 
did so. But there were a number of substantive differences. 
Your legislation clearly delineates responsibility and 
authorities, makes it clear that it is not a new layer and 
level, and focuses the individual full time on business 
transformation. That past legislation did not do that. It did 
not specify duties and responsibilities for the new position 
thereby creating potential confusion and overlaps.
    Second, unlike your legislation, which would provide for a 
7-year term appointment, therefore, making sure that you had a 
professional which had enough continuity to try to be able to 
make real and sustainable progress. The past legislation did 
not do that.
    Therefore, in form, you may call it the same thing, but in 
substance, it is very different. Mr. Chairman, I believe that 
we have to focus on substance, not form.
    In closing, I would like to quote two secretaries of 
defense. The first quote, ``Management deficiencies that we 
have all observed in the past have, in large measure, been due 
to insufficient senior management attention to the affairs of 
the Department of Defense. I am convinced that authorization 
for an additional deputy secretary will provide the capability 
for this necessary level of attention. At the same time, I 
think it is particularly important that we do not increase the 
layers of management within the department.''
    That was Secretary Mel Laird, February 9, 1972--33 years 
ago.
    The second secretary of defense's quote. ``Our challenge is 
to transform not just the way we deter and defend, but the way 
we conduct our daily business. Let us make no mistake. The 
modernization of the Department of Defense is a matter of some 
urgency. In fact, it could be said that it is a matter of life 
and death, ultimately, every American's. Every dollar 
squandered on waste is one denied to the war fighter.''
    That was Secretary of Defense Donald Rumsfeld, September 
10, 2001. I strongly agree with both secretaries. How many more 
years and decades will we have to continue to deal with the 
status quo?
    Mr. Chairman, as you and Senator Akaka mentioned before, 
this is all about supporting the war fighter and recognizing 
fiscal realities. The status quo is unacceptable and 
unsustainable, and we appreciate your, and the Members of this 
Subcommittee's, interest.
    Thank you.
    Senator Voinovich. Thank you, General Walker. Mr. Johnson.

  TESTIMONY OF HON. CLAY JOHNSON, III,\1\ DEPUTY DIRECTOR FOR 
          MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET

    Mr. Johnson. Mr. Chairman and Senators, thank you.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Johnson appears in the Appendix 
on page 68.
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    We are all working to make sure the Defense Secretary's 
commitment to business transformation is translated into 
demonstrable improvement in all of DOD's business operations. 
OMB's experience is that management opportunities--normal 
opportunities and super complex opportunities, like those at 
DOD--get addressed 100 percent of the time when four things 
exist.
    There is top management commitment to solving the problem. 
There is a clear picture of what needs to be accomplished. 
There is a clear, aggressive action plan, like General Walker 
talked about, for solving the problem. And there is a clear 
definition of who is responsible overall, and who is supposed 
to do what by when.
    OMB's role in this is that we help ensure that these 
elements exist so DOD, or any agency, can most assuredly get to 
where it wants to be in the desired timeframe. We also help 
agency leadership ensure that progress occurs as planned and 
scheduled. In the case of the high-risk items, we also help 
ensure that Congress and GAO are satisfied with the Agency's 
plans and progress.
    Mr. Chairman, I look forward to working with you and your 
Subcommittee on these matters. You have a proven record of 
getting more for the taxpayers' money, and that is what all of 
us are focused on and capable of doing here.
    Thank you.
    Senator Voinovich. Thank you. Mr. Berkson.

    TESTIMONY OF BRADLEY M. BERKSON,\1\ ACTING DEPUTY UNDER 
SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS, U.S. 
                     DEPARTMENT OF DEFENSE

    Mr. Berkson. Chairman Voinovich, Senators, thank you for 
the opportunity to appear before this Subcommittee and discuss 
business transformation at the Department of Defense, and thank 
you for your kind comments.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Berkson appears in the Appendix 
on page 71.
---------------------------------------------------------------------------
    Since this is my first appearance before the Senate, I 
would like to briefly describe to you my background and how it 
is relevant to DOD business transformation.
    I have been working on business transformation full time 
since arriving at the DOD 2 years ago. I am currently serving 
as Acting Deputy Under Secretary of Defense for Logistics and 
Materiel Readiness. In this role, I am the senior DOD logistics 
official. Logistics, by the way, is probably the largest 
business operation at the Pentagon. I am engaged daily in 
transforming our Nation's $129 billion DOD logistics and supply 
chain enterprise.
    I am an engineer by training. I earned an MBA from Harvard, 
and I was a partner in McKinsey & Company, where I was serving 
leading commercial enterprises around the globe on matters of 
strategy, organization, finance, and business operations. I 
have worked in the commercial sector from start-ups to the 
world's largest corporations.
    Mr. Chairman, you mentioned in the last hearing on this 
subject the need for talent from the private sector that would 
come into government and help ensure and accelerate 
transformation. I hope my background had some of the qualities 
that you would like to see.
    I would like to frame the challenge of business 
transformation within DOD. What has been most surprising to me 
in coming from the commercial world to DOD is the dramatic 
difference in scale and complexity. DOD has the world's largest 
fleet of aircraft, but it is not an airline. We have the 
largest fleet of ships, but are not a shipping company. We have 
one of the largest fleets of trucks, and we are not a trucking 
company. We have the largest fleet of ground vehicles, and we 
are not a car rental company.
    We are the second-largest operator of warehouse space, but 
logistics is a supporting mission. In the private world, any 
one of our programs, armories, depots, shipyards, 
transportation modes, or logistics systems would be of 
sufficient scale to compete in the global market.
    A key point to note, though, is although we have world-
scale business operations, business is not our mission. In 
every commercial forum in which I have ever served or worked 
for, the business missions were primary, particularly finance. 
For example, the mission of General Electric is to make money 
for its stockholders. It does so by aligning its business 
operations, personnel, and capabilities to maximize its 
financial performance.
    As I understand it, the mission of the Department of 
Defense is to defend the United States of America from its 
enemies. The job of the secretary of defense is to see that 
that mission is accomplished. Business transformation is 
necessary, but it is not sufficient for the secretary to be 
successful in his duties.
    When Secretary Rumsfeld announced his intentions to 
transform the Department of Defense, I feel certain that 
business transformation was central to that intent. Twenty-four 
hours later, our country faced the most significant challenge 
to its security in several decades, requiring complete 
attention be focused on defending our country.
    While he and our senior leadership have remained consistent 
in driving their vision for transformation, the ability of the 
Department of Defense to focus exclusively on fixing business 
operations in the midst of our largest sustained military 
campaign since Vietnam is problematic.
    That said, I would like to show you what we have been doing 
over there. The chart to my right depicts some of the results 
of DOD business transformation. In this case, it is the cycle 
time performance for the F404 engine.\1\ This is the engine on 
the F-18 Superhornet.
---------------------------------------------------------------------------
    \1\ The chart entitled ``Focus on continuous improvement 
(Maintenance Cycle Time Days)'' submitted by Mr. Berkson appears in the 
Appendix on page 104.
---------------------------------------------------------------------------
    Overall cycle time for this engine has been reduced by an 
order of magnitude. We have taken it from 85 to 5 days. This 
was accomplished using Lean 6 Sigma. Lean 6 Sigma is a business 
process improvement methodology widely used in industry, and it 
has helped us to achieve dramatic performance improvements not 
only in the F404, but in dozens of systems and locations from 
Pearl Harbor to Warner Robins, from tank engines to radar 
systems.
    In my opinion, Lean 6 Sigma has the most potential of any 
single initiative to transform the business operations of the 
Department. We have plans within each of the services and at 
OSD to accelerate and institutionalize it.
    Another bold transformation is found in our performance-
based approach to buying.\2\ Historically, DOD has been a buyer 
of parts and labor. This left us with the job of integrating 
these and other production factors across the Department. Led 
by us in logistics and materiel readiness, through performance-
based logistics, we are emphasizing the more valuable task of 
managing outputs vice inputs.
---------------------------------------------------------------------------
    \2\ The chart entitled ``Performance Based Logistics (PBL) proven 
in the Global War on Terrorism'' submitted by Mr. Berkson appears in 
the Appendix on page 105.
---------------------------------------------------------------------------
    In the last 4 years, DOD has migrated over 100 systems to 
performance-based contracts. The results of this can be seen in 
the chart to my left. This chart shows the readiness of several 
of our critical weapon systems in a PBL regime on the left and 
under a traditional support approach on the right.
    We have responded to suggested improvements from people, 
from folks like Mr. Walker, not only by improving the 
traditional approaches, like inventory management, but in 
transformational ways, like eliminating the need for inventory. 
The next chart shows our distribution cycle time to the CENTCOM 
area of operations.\3\ This is for aerial shipments. It shows 
that we have cut the time nearly in half.
---------------------------------------------------------------------------
    \3\ The chart entitled ``IRAQ Air Shipments Cycletime'' submitted 
by Mr. Berkson appears in the Appendix on page 106.
---------------------------------------------------------------------------
    Using leading-edge technologies, like radio frequency 
identification, or RFID, and unique identification, or UID, the 
DOD is leading the world in applying these cutting-edge 
technologies to its business operations.
    In closing, Mr. Chairman, I would like to reiterate the 
great strides we are making in transforming the business 
operations of the DOD. We have daunting challenges in scale and 
complexity. At the same time, we have an unswerving commitment 
to mission accomplishment.
    We are convinced that transforming the business operations 
at DOD, as you are, are key to serving our war fighters and our 
Nation. My colleagues and I are dedicated to making that 
happen.
    I invite you and your fellow Subcommittee Members to 
receive our briefings on the business process changes we are 
making, especially Lean 6 Sigma. I would also encourage you to 
visit the locations and meet the people that have been making 
it happen.
    Thank you for the opportunity to testify, and I would be 
happy to answer your questions.
    Senator Voinovich. Thank you, Mr. Berkson.
    General Walker, last month, the deputy secretary of defense 
moved DOD's business transformation efforts from the under 
secretary of defense comptroller to the under secretary of 
defense for acquisitions, technology, and logistics. Do you 
think that this organizational shift will create a clear and 
accountable business transformation effort?
    Mr. Walker. No, I don't think it is enough. There is a lot 
of work that needs to be done in AT&L. There are high-risk 
areas that deal with AT&L. It is true to say that some progress 
has been made. There is no question about that. You have just 
heard several examples of where progress has been made. But 
much more work needs to be done.
    As you know, AT&L is involved both on the policy side, as 
well as on the operational management side, and there are major 
challenges on both sides of the house dealing with AT&L. So I 
believe you still need a chief management official. I don't 
believe that the head of AT&L can do both jobs.
    I believe it is important that, in addition to having a 
person at the right level focus full time on business 
transformation, they need to have a term appointment. You need 
somebody who has a proven track record of success, who has the 
requisite experience, who, if they do a good job, is going to 
be there for at least 7 years.
    I have been in the private sector for 21 years and 
consulted all over the world on change management it takes 7-
plus years to achieve effective cultural transformation. 
Namely, to make changes that will stick beyond the person who 
started it.
    We don't have anybody at DOD that long. It is going to take 
more than 7 years at DOD, but we don't have a fighting chance 
unless we have somebody with the right kind of track record 
focused full time for a sustainable period in order to give us 
a fighting chance of success.
    Senator Voinovich. Could you point to some other agencies 
where this concept has worked?
    Mr. Walker. This is a relatively new concept. If you look 
in the government, most of the presidential appointee positions 
that exist with Senate confirmation are not term appointments. 
There are some notable exceptions. The comptroller general of 
the United States, my position, has a 15-year term appointment.
    Believe me, that makes a huge difference in being able to 
take on serious management challenges and to engage in a 
fundamental transformation of an agency. I have been at GAO now 
6\1/2\ years. I would respectfully suggest that we have engaged 
in a fundamental transformation in that 6\1/2\ years. If I got 
hit by a truck tomorrow, it is a different place today than it 
was 6\1/2\ years ago.
    But other than the comptroller general, then you go to what 
other positions? The head of the FBI, which is 10 years. The 
Federal Reserve is 14 years. There are very few term 
appointments other than board positions like SEC commissioners.
    Senator Voinovich. How about the Internal Revenue Service?
    Mr. Walker. You are correct. Thank you, Mr. Chairman. The 
commissioner of the Internal Revenue Service, I believe, has a 
5-year appointment.
    Mr. Johnson. Social Security is now term.
    Mr. Walker. Social Security is now term. I think both of 
those are very good examples. Thank you, Clay. Those are very 
good examples because both of those jobs are not intended to be 
policy jobs. As you know, tax policy is set by the Treasury 
Department in conjunction with the White House and others. The 
Internal Revenue commissioner is supposed to basically handle 
tax administration.
    The head of the Social Security Administration is supposed 
to handle administration of Social Security's huge retirement 
income, disability, and survivors benefits responsibilities. 
They are not in policy positions.
    So there are some analogies in government, Mr. Chairman. 
Thank you, Clay, for mentioning that.
    Senator Voinovich. Mr. Johnson, this afternoon, you 
outlined a template for addressing DOD's supply chain 
management challenges in your testimony. I commend you for your 
efforts because this issue has been on the list since 1990.
    Based on your testimony, it appears that the Administration 
is taking what I would like to refer to it as a ``bottom-up 
approach'' to solving DOD's business transformation efforts. 
What steps will the Administration take to ensure that the 
Department of Defense is taking also a ``top-down approach'' to 
solve the overreaching high-risk area of business 
transformation?
    Mr. Johnson. Right. You talked about Ken Krieg earlier. I 
have talked to Ken about this because it is one thing to look 
at, how to tackle each one of the seven, but then with what 
priority? All seven probably can't and shouldn't be tackled 
with the same priority. Some are more important than others. 
Some are more problematic. Some have huge costs associated with 
them. All that needs to be looked at as a total.
    And there is a change now taking place, as you know, with 
the deputy secretary. And so, what Ken suggested we do is if 
and when Secretary England is confirmed for being the deputy 
secretary, that we then sit down with him and review this and 
understand what he would recommend be the priorities and the 
timeframes. Because we can agree on amongst ourselves and GAO 
on a 3-year timeframe or a 6-year timeframe on some of these 
things, but it should not be done without the consent and the 
full participation of, today without a CMO, of the deputy 
secretary.
    So you talk about as soon as Gordon, if and when he is 
confirmed for the position, gets in there and gets settled, 
that we sit down and work out the corporate timeframes for 
this. He has to be there to create an attitude and an approach 
to business transformation.
    One of the things that needs to be understood about a chief 
management officer is that the most fantastically talented 
chief management officer will be totally ineffective if the 
secretary of defense and the President are not fully supportive 
of management change to the Defense Department. No term, no set 
of credentials can make a management officer effective at the 
Defense Department, or any place else, if the head of that 
Department or the President don't consider it to be a very high 
priority. And so, it is important in this case that the deputy 
be there and be involved, intimately involved, in setting the 
timeframes and the priorities for overall business 
transformation.
    I think, as I understand it from Ken, and his suggestion to 
Senator Ensign on the subject of a chief management officer is 
that he be allowed a little time to get in there and survey the 
situation. I think he had agreed totally that there needs to be 
a person that is clearly in charge of this, and that is working 
with the relevant under secretaries to drive their individual 
initiatives. Let him have a chance to take a look at the 
situation and come back and engage you all in a more 
intelligent debate about the pros and cons of a chief 
management officer.
    Senator Voinovich. As I mentioned, I think that Mr. Krieg 
has been with the current administration for 3\1/2\ years and 
hopefully is going to stick around. But once a new 
administration steps in, how do we keep the momentum going?
    I would like to know that if we get things moving in the 
DOD, and I leave this place, that there is somebody who will be 
there to make sure that business transformation is 
accomplished.
    Senator Akaka.
    Senator Akaka. Thank you very much, Mr. Chairman.
    Mr. Berkson, the GAO has testified previously that cultural 
resistance to change and the lack of sustained leadership are 
two underlying causes of DOD's inability to resolve its long-
standing financial and business management problems.
    As you know, I joined with Senators Voinovich and Ensign in 
introducing legislation establishing the position of chief 
management officer. In your written testimony, you said that 
the creation of this office would ``further remove the 
Secretary of Defense from vital and timely information on the 
workings of the department.''
    In the absence of such a new position, who, in your 
opinion, is responsible for creating and implementing the 
business transformation plan at DOD?
    Mr. Berkson. Senator, thank you for the question, and I 
appreciate your comments.
    In reaction to the notion of the cultural efforts and the 
term efforts, I would also like to just also get us back to the 
scale. At one point, we were talking about when an issue was 
raised about separation of the military and the business side 
of the Department of Defense. I will just give you it from 
where I am working, Senator.
    My job has been full time on business transformation for 
the last 2 years. And if I look at what do I need, did I need 
another supervisory role with expertise like a number of our 
senior officials--Secretary Wynne, Secretary England, Ken 
Krieg? I mean, Mr. Krieg actually hired me. So that requirement 
for more bosses hasn't been what I have been missing.
    To really get this done, you need fundamental 
transformation across a $130 billion logistics enterprise and a 
$450 billion overall enterprise. And my experience so far, in 
doing this every day, has been actually driving the change down 
to the workers, the managers, and the people who run shipyards, 
the people who run depots, the people who run our distribution 
warehouses. That is where the real business operations occur.
    And transformation, in my experience so far there, has 
really been about introducing and driving change in 
transformation ways of thinking. Lean 6 Sigma is a 
transformation way of thinking. Unique identification and RFID 
is a transformation way of thinking.
    We just had our first receipt of RFID. Radio frequency 
identification tag was placed on by one of our suppliers and 
received in a DLA distribution warehouse this week, using Wide-
Area Work Flow. I just picked off three of the major business 
transformations we have been working on, and they are starting 
to come together.
    I agree that it takes a long time to do this. But the thing 
that I am not sure of and I haven't seen is how another 
supervisor in this role, given how complex and vast this 
enterprise is, how that person would bring me something that 
would allow me to do this.
    If I look at what the real characteristics of the proposed 
legislation, I think definitely we are looking at it and 
considering it carefully. If I just tick off a few of the 
things, a Level 2 with business experience who is third in 
precedence. Currently, that describes for the business 
operations, the under secretary of defense for acquisition, 
technology, and logistics.
    Under Title 10, he must have business experience. Or he or 
she must have business experience. The chief business 
operations of the Department of Defense, in my experience so 
far, are in those acquisition, technology, and logistics 
arenas. And the secretary has just designated and as the 
Congress has designated a chairman for business transformation, 
the BMM program. And again, now that Secretary Wynne and the 
AT&L has that role by law, he is the third in the order of 
precedence for all matters related to that.
    So as I look at the structure of what is being proposed, I 
try to understand how it is going to continue to move us down. 
I know the intent is very strong, and we really want to 
improve. And we are all desperately working to make that 
happen, but I step back, and I have secondary questions.
    One is I have a role that can do that. Another issue that I 
would raise--these are my personal opinions--is that I ask what 
does the AT&L do in the event that all the business operations 
at the Defense Department, which he is currently responsible 
for--acquisition, technology, logistics--are now superseded and 
taken up to a level, and a level which, as I am hearing more 
about it, which is not going to interact with the military.
    In my experience, I am the chairman of the Joint Logistics 
Board. So I have all of the joint logistics leadership in my 
room when I am leading that board. That board is primarily made 
up of three-star and four-star general officers and admirals in 
our Nation's defense. They are the senior business leadership 
who is driving a majority of our business operations.
    The notion of separating the business from the military 
operations in logistics at least, where I am familiar, is 
something I cannot even imagine. Logistics in our operations is 
a military maneuver. A convoy is a military operation. And the 
notion of that separation is something that I struggle to 
understand.
    Senator Akaka. General Walker, do you have anything to add?
    Mr. Walker. If I can, Senator. I thought your question was 
who is in charge? The answer is nobody. Memos get issued from 
time to time at DOD. I have seen plenty of them.
    The problem is you don't solve problems with issuing memos, 
and you can't take a command and control approach to the 
civilian side of business transformation. I can show you memo 
after memo after memo appointing somebody in charge. It's not 
memos but results that count.
    With all due respect, Management 101, you have to have 
somebody who is in charge. You have to have, as Clay Johnson 
said, committed and sustained leadership from the top. You have 
to have a plan that clearly sets priorities and fixes 
responsibility and accountability. You have to link 
institutional unit and individual performance measurement and 
rewards systems in order to make sure everybody is pulling in 
the same direction in order to achieve the priorities within 
the specified timeframes.
    We also have to recognize these things are interrelated. 
But my point is that none of these things have been done in 30-
plus years.
    Senator Akaka. Mr. Chairman, may I ask Mr. Walker just one 
more question to follow up on what he said?
    Mr. Walker, the issue is span of control. Mr. Wynne has no 
authority over financial systems, which are the responsibility 
of the comptroller. He has no responsibility for personnel 
systems, which are Dr. Chu's responsibility. Mr. Walker, would 
you care to comment on that?
    Mr. Walker. Thank you, Senator Akaka. You are exactly 
right.
    The fact of the matter is AT&L is right now the third-
ranking person. It is a Level 2 position. I would respectfully 
suggest that the under secretary for AT&L has a full-time job 
dealing with the logistical and acguistion transformation that 
Brad has mentioned. Some progress has been made, no doubt about 
it. But much remains to be done. That sounds like a typical GAO 
report.
    In addition to that, AT&L has to deal with a number of 
high-risk areas and also is involved in the military 
transformation side of the business in addition to the business 
transformation side. Ordinarily there is no way that we are 
going to be able to afford and sustain all the weapon systems 
that are currently in the pipeline. It isn't going to happen.
    So you are correct, Senator Akaka, in noting that in 
Chairman Voinovich's, Senator Ensign's and your bill recognizes 
that we need to take a more strategic and intergrated approach 
crossing a number of different under secretaries of which AT&L 
doesn't have responsibility and authority, as well as the 
service secretaries and the military. Thank you.
    Senator Akaka. Thank you, Mr. Chairman.
    Senator Voinovich. Senator Lautenberg.
    Senator Lautenberg. Thank you very much, Mr. Chairman.
    There is a culture in the military, I think, that almost 
defies the kind of control that we like to see. The war 
fighters have their job, and they do it wonderfully. We want 
them to pay attention to it.
    But I see a difference in availability of materiel, when we 
are budgeting, especially with these supplementals. I mean, 
there frankly is not a lot of detail that is explored when we 
do these things. Mr. Berkson, we are happy that you are here. 
You bring a lot of experience. But I think there is another 
look to be had at whether or not the business side of the thing 
can be separated from the management side of the war fighters.
    And I served on a hospital board. They never had a doctor 
in charge, chairman of the board. And there are lots of 
examples where the skilled person, the scientist, doesn't run 
the company. Someone else runs the company, and those who are 
assigned their responsibilities pick up from there.
    Because, very frankly, Mr. Chairman, I am delighted that 
you are holding this hearing because I think it triggers a kind 
of thinking in our minds that doesn't go into the budgeting 
process. Yes, there is an Armed Services Committee, and they 
are diligent, and there are good people on the committee.
    But I think it needs an intermediate step. You have 
budgeting. You have reauthorization. You have appropriations. 
And when it comes to the military and you see the stars. It 
took me 3 years to make corporal. And when I used to see a 
captain's bars, my knees used to knock, and you know, here we 
sit among the stars. And it is transformational.
    Here comes a guy with all these ribbons that he has earned 
in his lifetime and his career, heroic medals, many of them, 
and they make the case. And it is really kind of hard to say 
no. It is hard to say, ``Hey, but how are you spending this 
money?''
    Mr. Chairman, I went full time in uniform in 1943, and I 
drew KP on a train going from New Jersey to Camp Crowder, 
Missouri, where I had basic training. And the worst guy in the 
world to work for was the cook because he had very few people 
to pick on. So he picked on those who were assigned KP duty, 
and I was one of those.
    And when we got to the end of the journey, we had these 
full jars. I remember them. I think they are number 10 size. 
But they are big ones with pickles and mustard and ketchup, and 
he said, ``Throw them out.''
    I said, ``Throw them out?'' I came from a poor family, and 
we would have given anything to have a jar of pineapple that 
size. And I said, ``Sarge, why are we throwing these away?'' He 
said, ``Shut up and throw them away. Because you know what 
happens if I get there, and I have got stuff left over? Do you 
know how much I get the next time?''
    Well, you don't have to be a mathematician to figure that 
one out. And we have seen flagrant abuses in the contracting 
side.
    This high-risk list began, I believe, in 1990? In 1992, 
contracting was listed as one of the worst parts of the DOD 
expenditures or purchasing routine. And there were eight areas 
of high risk listed then. And Mr. Berkson, you have a right to 
be satisfied or at least encouraged with some of the progress 
made, as demonstrated by your proofs here. But we still have 
eight units, high-risk units listed as areas that need serious 
attention, that are easily subjected to waste, fraud, and 
abuse.
    So I don't know when we catch up, but I think thought has 
to be given to how the whole management process is done. A 
four-star general may be a brilliant tactician, strategist in 
fighting the battle, but that doesn't mean that he also ought 
to be making the financial decisions. He ought to be making the 
recommendations, but I think there ought to be some 
intermediary step that should get a look.
    We have lots of questions, and I appreciate the fact that 
Senator Akaka and Senator Voinovich have asked some of the 
questions. I am going to ask one here because you have heard me 
talk about Halliburton, and I, for some time now, have wanted 
to look at how Halliburton has managed its own money.
    One question I have, Mr. Johnson--forgive me. I understand 
that DOD recently decided to pay Halliburton in full for its 
work, overruling Army auditors' recommendation that it be 
penalized for overcharging on its contract. Do you, or perhaps 
Mr. Berkson is the one that I should address this to. Do you 
know why DOD overruled the Army auditors' recommendations?
    Mr. Berkson. Sir, I would have to take that question for 
the record. I am not familiar with it.
    Senator Lautenberg. Well, I hope so. Was OMB, Mr. Johnson, 
involved in this decision?
    Mr. Johnson. I really know nothing about it. I can get back 
to you on that.
    Senator Lautenberg. Well, I would appreciate it. And Mr. 
Walker, earlier this month, you said that in a Senate 
subcommittee that DOD is unable to track how it spent tens of 
millions of dollars in Iraq and Afghanistan and elsewhere in 
the war against terror. I just heard you say a couple of 
minutes ago that no one was responsible or no one in charge for 
tracking these things?
    Mr. Walker. There are persons in charge of tracking that. 
What I said was that there is not a single person who is 
responsible and accountable for overall business 
transformation.
    As you know, Senator Lautenberg, DOD's financial management 
is one of the areas that has been on GAO's high-risk list for a 
long time. There are interrelated problems here. I mean, DOD 
has thousands of legacy systems that are non-integrated. In 
many cases, you have to input a 16-digit code for a single 
transaction, and you might have to enter the same transaction 
into multiple systems.
    The comptroller may have recently taken a step to make sure 
that there is separate visibility over the use of supplemental 
funds, such that, hopefully, you would be able to find out how 
that pot of money was used in a more efficient manner than has 
been the case in the past.
    We are doing work, at the request of the Congress, to find 
out how the supplemental funds were spent. It is very difficult 
getting detailed records. Furthermore, a lot of costs are based 
upon estimates rather than actual. We will be reporting later 
this summer, but I expect that there will potentially be a 
material difference between what we come up with and what has 
been reported.
    Senator Lautenberg. Colleagues, I just say this. That DOD 
is the one place where if you make mistakes, it doesn't matter. 
You can always get more money if you need it.
    And once again, Mr. Chairman, I commend you for holding 
this hearing, and I think follow-up is critical here. I thank 
the witnesses.
    Senator Voinovich. Thank you, Senator Lautenberg.
    We are going to follow up, just like I did on reform of the 
personnel system. I am going to devote 5\1/2\ years to this. We 
are going to have a lot of hearings on DOD transformation. We 
are going to stay on this.
    I am really pleased that we have the Ranking Member today 
with us and anxious to hear the questions he would like to ask 
the witnesses.
    It seems to me that we just can't keep going on like this. 
We are talking about a $22 billion savings. Today, we have a 
tight Federal budget and a rising deficit. A billion dollars 
would make a big difference. This has got to stop.
    Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Thank you very much, Mr. Chairman. I think 
half of our discretionary spending now is Department of Defense 
spending.
    First, let me thank you and commend you and Senator Akaka 
for what you are doing here. This is not particularly glamorous 
work, and that is an understatement.
    I remember back in the early 1980's, when Bill Cohen and I 
served as Chairman and Ranking Member of this Subcommittee, we 
took on a lot of issues. We made some progress in some of those 
issues--competition in contracting. We made progress in 
inventory management. We used to have hundreds of warehouses 
stocked with stuff, when we wanted just-in-time delivery to 
replace it. We made some real progress there.
    We made some real progress on commercial products, making 
it easier to buy commercial products. But there is a whole area 
of financial management which you have identified, where we did 
not make much progress. Despite some efforts, we just have not 
made progress.
    And it is essential that there be Senators such as the two 
of you who are just willing to sink your teeth into this 
subject, and your determination to do this for 5\1/2\ years, or 
whatever it takes, is as far as I am concerned not just music 
to my ears, it should be music to the ears of every taxpayer in 
this country. Because it takes Senators like you or Members of 
Congress like you who will just take it on and not let it go. 
And I am very appreciative of that.
    Just a few questions, and I apologize that I couldn't get 
here earlier. First, for you, Mr. Walker, I want to 
congratulate the GAO. Without your efforts here, the task of 
the few senators and members of Congress who are willing to 
take on an unglamorous area would just be probably impossible. 
They need your full assistance, and I know they have had it, 
and they are going to continue to have it.
    But shortly after the then-DOD comptroller Dov Zakheim was 
confirmed, he came before the Armed Services Committee. He 
testified that the Department would prepare a comprehensive 
business enterprise architecture and transition plan to serve 
as a blueprint for fixing the Department's ``systems and 
business processes--now isolated from each other across the 
functional areas--logistics, health care, accounting, finance, 
and others.''
    He promised to have that blueprint in place by March 2003. 
And we went through this with the then-comptroller to press him 
for the very type of blueprint which, you have so effectively 
pointed out, does not exist.
    Well, March 2003 obviously has come and gone. It is 2 years 
later. DOD spent hundreds of millions of dollars on a contract 
to develop a business enterprise architecture. So, Mr. Walker, 
is it fair to say that more than 2 years after the date set by 
Dr. Zakheim that we still do not have that blueprint that he 
promised us?
    Mr. Walker. We don't have it yet, Senator. My understanding 
is they are working on it and trying to put something together 
by the end of this fiscal year, but you may want to ask the DOD 
witness.
    Senator Levin. OK. I will do that in a moment. You, I 
think, told the Armed Services Committee last year that the 
Department had made no significant progress in addressing its 
financial management problems. Is that still true?
    Mr. Walker. They still do not have a comprehensive plan for 
dealing with their financial management problems.
    Senator Levin. All right. So now, Mr. Berkson, where is the 
plan? Where is the beef? Where is the plan?
    Mr. Berkson. On which aspect, Senator?
    Senator Levin. Well, we were promised--I will read it to 
you again--a comprehensive business enterprise architecture to 
serve as a blueprint to fix the Department's--and I am quoting 
Dr. Zakheim here--the Department's ``systems and business 
processes--now isolated from each other across the functional 
areas--logistics, health care, accounting, finance, and 
others.''
    Where is that architecture?
    Mr. Berkson. OK. First of all, I want to take that question 
for the record. I will tell you about my knowledge of where 
that plan is. At this point, and I think pursuant to 
legislation that described a new structure for the business 
management modernization plan, they are currently developing 
and, in fact, installed Mike Wynne as the vice chairman of a 
group that will be actively reviewing all of the investments in 
what is called, I think the term is, an investment review 
board.
    So all investments over $10 million, I think that is the 
threshold, for IT systems, we are setting up the architecture 
and the infrastructure and the efforts to manage that 
consistent with the legislation. In doing that, there has also 
been a transfer of that role, of driving that process from the 
comptroller to the AT&L side. And there are a number of folks 
that are in the midst of, and I think Mr. Wynne testified to 
this as well, in the midst of redrafting and formulating how we 
are going to proceed and go forward on that.
    It is very challenging. In fact, again, this is my 
experience in serving and seeing dozens and hundreds of these 
implementations put in in different companies around the world. 
Ours is, by far, the most challenging of any that I have ever 
seen. And the team is at work and is, I think, putting a plan 
together that will address that. And again, I need to take that 
for the record because it is not exactly what I do.
    Senator Levin. What is the time table?
    Mr. Berkson. I think in order to be compliant with the 
authorization act, that team and process is to be in place, 
with regard to business systems approval of the investment 
review board, by the end of the fiscal year is my 
understanding.
    Senator Levin. This fiscal year?
    Mr. Berkson. My understanding is, again, according to the 
act, we----
    Senator Levin. Well, forget the act, putting the act aside 
for a moment, how are you coming along? Will you meet that 
deadline?
    Mr. Berkson. The deadline for being compliant with the act?
    Senator Levin. In the act. Assuming it is the end of the 
fiscal year, will you meet that deadline?
    Mr. Berkson. My understanding--again, it is not my area of 
the Defense Department--is that they are working to meet that 
deadline.
    Senator Levin. Mr. Johnson, last year's defense 
authorization act, this is what the Armed Services Committee 
basically did. We told the Department to stop spending money on 
financial audits.
    And the reason for this was as follows. The GAO 
consistently told us that there is a right way and a wrong way 
to fix the Department's financial management problems. The 
right way is to attack the problems at the root by fixing the 
business systems that yield bad data. The wrong way is to 
unleash an army of auditors to audit the system into 
compliance, to try to audit the system into compliance but 
without addressing the underlying systems' problems.
    Now the DOD agreed with that assessment. The Department 
told us last year, however, that it still wanted as much as $2 
billion to try to achieve an auditable financial statement by 
fiscal year 2007, which is before the Department is going to 
address its underlying system problems. We responded by 
prohibiting them from spending more money on financial audits 
until they have a business enterprise architecture and 
transition plan in place, which is the origin, I believe, of 
what Mr. Berkson made reference to.
    Now I understand, Mr. Johnson, that some of the pressure on 
DOD to get an auditable financial statement as soon as possible 
comes from OMB. Do you agree with the assessment that the right 
way to fix DOD's financial management problems is to attack 
them at the root, rather than just try to get a favorable audit 
without fixing the underlying system problems?
    Mr. Johnson. I do.
    Senator Levin. Long question, short answer?
    Mr. Johnson. And I don't think the 2007 goal came from us. 
It was what I heard the very first time I met with Dov Zakheim. 
And I had a meeting last week with Defense Comptroller Tina 
Jonas, and they laid out exactly what you talked about, which 
is the goal is not to get a clean audit.
    The goal is to have an audit reflect the business practices 
that are as they should be and that are creating the 
disciplines within the Defense Department that will allow us to 
address material weakness, that will allow us to get a clean 
audit, or both are, in fact, the business practices that would 
allow us to save money or improve service. That it is a 
reflection of just what you said, improved disciplines, 
improved method of operation, and it is not a clean audit for 
the sake of a clean audit. So I agree totally with that. And 
they do, too.
    Mr. Walker. Clay Johnson is correct, 2007 was the DOD's 
date. They don't have a plan to meet that date, and they don't 
have a prayer to meet that date.
    Mr. Johnson. They don't have a desire to meet that date.
    Mr. Walker. Well, good thing. But they need a plan, just 
like they need a plan for the other areas that we are talking 
about. Furthermore, I think it is important to note some of the 
words that you touched on.
    There are assertions coming out of DOD saying that they 
can't make progress in certain areas because the act is written 
such that they can't spend money on things that they want to 
address. To me, there is a fundamental difference between 
financial management and financial auditing. Executive 
leadership has an ongoing responsibility to assure that they 
have appropriate controls in place, that they have appropriate 
financial management systems in place, and that they 
continuously improve those controls and systems.
    That is different than spending a lot of money to try to 
re-create the books and engage in work-around auditing 
procedures or by doing preliminary audit assessments before you 
have done the basic work. I think there may be some problems 
with regard to nomenclature here. I think they need to be able 
to make progress with regard to internal controls, and with 
regard to improving financial management systems.
    What they shouldn't be doing is spending money on audits or 
work-around procedures or preaudit assessments before they have 
layed the fundamental foundation.
    Senator Levin. Thank you, Mr. Chairman. And the defense 
authorization bill is being marked up in a few weeks. If you or 
Senator Akaka or our witnesses have suggestions for any steps 
that can be taken immediately that will move in the direction 
that I know we all want to move, I am sure that Senator Warner 
and I will be happy to consider any suggestions.
    These are long-term solutions, not the next few week 
solutions. But I just say that on the chance that there may be 
something immediate which does need attention. And I also want 
to assure you and Senator Akaka that both Senator Warner and I 
are very open to any suggestions and recommendations that this 
Subcommittee may have.
    Senator Voinovich. I really appreciate that because you 
have all of this history, and so does Senator Akaka. I have 
very little.
    And I think that if we can collaborate on some of these 
things because part of the problem around here is you have the 
authorization committee, then you have the appropriations 
committee. And it is going to take, I think, in many instances, 
appropriations and authorization to work together and team up 
to get the kind of result that we would like to get.
    I am going to have another round, if it is all right with 
you, Senator Akaka?
    Mr. Berkson, I have a question that has two parts. First, 
on April 13, Under Secretary Wynne testified before the Senate 
Armed Services Committee on readiness and management. In his 
testimony, he said the acquisition, technology, and logistics 
workforce fell from 149,439 employees in March 1998 to 134,000 
employees in September 2004.
    At the same time, the number of contract actions, over 
100,000, increased from 101,663 in fiscal year 1998 to 160,338 
in 2004. Could you describe the impact that these dynamics have 
on AT&L's ability to manage its workload?
    Mr. Berkson. Yes. Senator, I will have to, respectfully, 
take that one for the record. The acquisition workforce is 
outside of my domain. So I will have to get back with you on 
that one.
    Senator Voinovich. The Deputy Secretary of Defense moved 
business transformation from the Under Secretary of Defense 
Comptroller to the Under Secretary of Defense for AT&L. AT&L's 
workforce is already operating with the resource limitations.
    The question is do they have the ability to take this on?
    Mr. Berkson. With regard to the place with which I would 
want to have responsibility for business transformation, I 
actually support and think it is very valuable to have the 
acquisition, technology, and logistics under secretary driving 
the business management modernization program.
    The majority--again, as you look in commercial industry and 
you look in our system--the majority of the business functions 
and operations are in the AT&L portfolio. And to the extent 
that we are trying to go beyond audits and we are trying to 
improve processes and improve operations, the senior executive 
leading those business operations should, in my opinion, be 
actively responsible for the systems that support those.
    So that migration is a very good move and, I think, will 
actually improve the progress we make. And we will apply the 
improvements we need to the places where the business 
operations are most significant and most large scale.
    Senator Voinovich. One thing you said earlier was that you 
are trying to drive it down to where the people are that are 
actually getting the work done. Is there any effort in the 
Department to look at total quality management and empowering 
the people in those agencies to come back with recommendations 
on how they can do it better?
    Or are we in the same area we have been for years, where 
somebody comes in and says, ``This is the way you are going to 
get the job done because some consultant told us this is the 
way you are supposed to do it.''
    Mr. Berkson. What has been most successful in business 
process change, and TQM was a term that was popular and an 
active program pursued over 10 years ago. What we have found to 
be more successful in taking TQM and actually going on as it 
has evolved--as you know, TQM drove concepts like 6 Sigma, GE's 
program to minimize variance and get working on quality. 
Quality and 6 Sigma are closely related. And then the Toyota 
production system, which is Lean, has also driven a lot of 
value. And we have combined those.
    But what the most valuable force of application of those 
has actually been directly from the working-level of the 
Department, literally at the business operations. The example I 
showed you where we went from 85 to 5 days is a group of 
sailors out at the Lemoore Naval Air Station. Those sailors--
those aren't a kind of business gurus or consultants--and their 
experiences in industry, a very strong and intelligent 
commander came in from industry and realized how much value 
these processes could have. And she took it upon herself to 
make that happen at Lemoore.
    And we have now dozens and dozens of cases where we have 
started that business transformation literally from the ground 
up, and we are essentially constructing a network now that 
connects and provides resources so that those happen and can 
accelerate, and best practices can be shared across the massive 
scale we have.
    So, it is an interesting concept. But the top-down, one has 
to be very careful when you apply it. ``I am from the Office of 
Secretary of Defense. I am here to help you'' is sometimes 
helpful and necessary. But also it is often better to let many 
of those changes start springing up and then feed them and grow 
them and make them accelerate. And that is what we have found 
so far.
    These changes, as they are coming, and we have been putting 
the vision out and providing resources and driving them, now we 
are actually working at the working levels to create them and 
make them happen.
    Another one that we just have to be really clear on. There 
seems to be this discussion that came up, some of the 
discussion today. I have three air logistics centers. They are 
the largest industrial operations of the Department of Defense.
    I have three air logistics centers at Hill Air Force Base; 
Ogden, Utah; and Oklahoma City. These are run by military 
leaders. I have three NADEPs, naval aviation depots, again, 
$500 million businesses--huge businesses. These are run by 
military officers, 06s--captains, Navy captains. I have 
probably a half dozen Army depots also run by 06s.
    Our business operations are run by the military. So the 
separation of the business from the military is very difficult. 
And driving change, therefore, isn't something I just do as a 
civilian workforce. I have to have every sailor, soldier, 
airman, and marine in the logistics side capable as any GM 
employee of driving change and working their team out and being 
able to provide that kind of expertise at that level.
    And again, the notion is I have to go work that right down 
at the cold face, and I have to drive that change from there 
and then accelerate it. And again, driving it from the top is, 
again, we have a focus on it.
    But I struggle in trying to figure out, as I have been 
doing this, I can't separate the military from the civilian. 
The change has to happen in a thousand different places around 
the system. And to do that requires things--process changes, 
Lean 6 Sigma, taking the next generation of TQM--and efforts 
that have been done in the commercial sector and applying them 
here.
    So I think your hypothesis and your drive on a TQM as an 
approach is right. I think I would suggest some alternatives. 
But it has to be driven in these hundreds and thousands of 
different locations where we are running the business.
    Senator Voinovich. In Ohio, we have Wright-Patterson Air 
Force Base and the materiel command in Dayton, Ohio.
    One thing that bothers me is, we get general after general, 
at the end of their career, taking over command. They are there 
for 3 years and then leave. I don't understand why the military 
moves these people around every 3 years.
    I think we need to look at time commitment, when it comes 
to reforming the DOD. We can't expect reform to happen when 
turnover is so frequent.
    Mr. Walker. Mr. Chairman, I think that is a good point. In 
fact, I remember testifying several years ago before a Senate 
Subcommittee of Armed Services regarding how much turnover 
there is.
    Starting from the secretary of defense, deputy secretary, 
under secretary, all the way down to the program managers or 
program directors. I mean, there is preprogrammed turnover in 
the case of some of these critical positions, and it just 
doesn't make sense to have preprogrammed turnover to the extent 
that we currently have it.
    I have to follow up on something that both Clay and Brad 
said. You absolutely need committed and sustained leadership 
when you are talking about transformation. Let's talk about one 
of the most important transformation efforts going on at the 
Department of Defense right now, NSPS, normally the National 
Security Personnel System.
    They are currently in the meet and confer period. I asked 
this morning whether or not there are any PASs, presidential 
appointees, with Senate confirmation--participating actively in 
the face-to-face meetings among the meet and confer period. The 
answer I was given was no. As a result, it is my understanding 
that the president of AFGE, and other key unions, have not been 
participating either.
    This is the most probably fundamental transformation issue 
on the civilian side that is going to happen in the Department 
of Defense. I mean, how can you not have top people actively 
and visibly engaged in these types of substantive discussions. 
In my view, human capital is key to my successful 
transformation effort?
    I hope I am wrong on that, and I am going to follow up to 
try to make sure. But I am very disappointed if that is the 
case.
    Senator Voinovich. I agree with you, Mr. Walker. NSPS is 
the most important transformation effort going on within the 
DOD. Having all parties involved with the process is 
imperative.
    I have received many complaints about the process and I 
hope the DOD is listening. I spent time yesterday with Steve 
Perry and stressed to him my support for NSPS but also my 
concerns with involvement of all interested parties. I plan to 
monitor the implementation.
    Senator Akaka.
    Senator Akaka. Thank you, Mr. Chairman.
    After hearing the comments from General Walker, I can't 
help but think of our Chairman and human capital, which is 
rearing up as a huge problem for our country. And I know, Mr. 
Chairman, we will certainly look at NSPS. We know if it is not 
done correctly, we are going to be in trouble.
    Let me follow up on something, Mr. Berkson, since we have 
heard a response from General Walker, can you respond to Mr. 
Walker's comments on NSPS?
    Mr. Berkson. Unfortunately, no, sir. I am not involved in 
the NSPS rollout. So I can't do it. I absolutely support and 
know how important that a human capital change is, and I get 
very parochial about it.
    I need very high-performing business people. And if you 
were to give me something, it probably wouldn't be another 
boss. It would be 50, 100 people I could get in quickly to help 
me go about the change in the Department at the various levels 
that we can work. So I am clearly committed to making that 
happen, and it is a very daunting personnel challenge.
    Senator Akaka. Mr. Johnson.
    Mr. Johnson. On NSPS, there is one person in charge, who is 
talking about whether there should be a chief management 
officer. Gordon England is the person that the secretary has 
put in charge of the NSPS adoption process.
    So if things are not working there, it is not because--or 
if they are working there, it is because there is a very 
capable person in charge. So what I suggest you do is ask 
Gordon England because he is the one that is responsible for 
that, and he is very involved in all of that.
    I don't know about your particular claim was if someone 
from the union was there, they cut them off. But whether there 
are PAS people involved or not in individual meetings, I don't 
know. But I do know there is a very well-regarded, high-ranking 
PAS person in charge of the whole thing, and he is the one that 
needs to be held accountable for whether it works or not.
    Senator Akaka. Mr. Walker.
    Mr. Walker. Senator Akaka, yes, it is my understanding that 
Gordon England is responsible and accountable, he has been 
deputized by the secretary for NSPS. He is a very capable 
professional and an excellent choice by the President to 
nominate as deputy secretary.
    It is also my understanding that during this very critical 
meet and confer period, that no PAS--not just Gordon England, 
but any PAS--is involved in any meet and confer meetings 
dealing.
    I am hoping that is wrong, but that is what I was told this 
morning. We are going to follow up and try to find out whether 
or not that is accurate.
    Mr. Johnson. But that is a process concern. The question 
is, is it having an impact? But I mean, again, Gordon England 
is the one to ask that.
    Mr. Walker. I would respectfully suggest there are two 
things you have to get right because if you don't get them 
right, you fight a 2-front war. One, you have to get the policy 
framework right. Two, you have to get the process right.
    If you don't get both right, your odds of success change 
dramatically. Process is important. You need to have top people 
visibly involved. Not in every meeting, however, you are not 
going to get the top labor leaders there if you don't have top 
people from the Department there. They are going to delegate 
it, too.
    You are going to have people there who are not empowered to 
make a decision, and this isn't negotiations. It is meet and 
confer. But nonetheless, you have to have people who are 
empowered to make decisions at some of the meetings. There is a 
lot more details that it wouldn't be appropriate for a PAS to 
be involved with.
    Senator Akaka. Well, I really appreciate learning from your 
experiences and having your wisdom. Mr. Berkson, I am asking 
that you bring our concerns to Secretary Rumsfeld so he will be 
aware of them.
    Mr. Johnson, DOD, and you, have alluded to this DOD 
business transformation requires a commitment from both the 
Legislative and Executive Branches. Do you support creating a 
chief management officer at DOD?
    Mr. Johnson. Let me give you my personal opinion. It is 
probably a pretty good idea. It is not a silver bullet. You can 
put the kind of person that General Walker has suggested, put 
them in a term, although I don't think the term buys you 
anything. But again, that is my personal opinion. And it is 
possible that you won't get the transformation that we all 
want.
    It has to be, as I mentioned earlier, a high priority for 
the administration, for the President and the secretary. 
Because if it is not, the most effective chief management 
officer can be made to be ineffective.
    For instance, I am in a specific management position that 
has been created at OMB. This position has existed since 1990. 
Some of the people in my position have been effective. More 
than that have not.
    So the presence of a management person in that at OMB has 
not necessarily guaranteed that the Federal Government, the 
Executive Branch would be as focused on management as I think 
we are today. It is not a silver bullet.
    Senator Akaka. General Walker.
    Mr. Walker. I agree with Clay, but it is not a silver 
bullet. You have to have the President's commitment. You have 
to have the secretary of defense's commitment. You need more 
OMB involvement. So I agree with that.
    However, I would respectfully suggest that while it, in and 
of itself, is not a silver bullet, having a CMO is essential if 
you want to be successful.
    Senator Akaka. Let me ask a final question, Mr. Chairman. 
Mr. Johnson, today and at our February hearing, you pledged 
your commitment to working more closely with DOD on addressing 
the high-risk areas. And you heard Mr. Berkson say there is no 
business modernization plan.
    DOD needs help. So my question is what are your goals over 
the next 3 years regarding DOD high-risk areas?
    Mr. Johnson. Well, let me tell you what we have been doing 
since the hearing in February. OMB, the people that work for 
the DOD, the DOD branch, and GAO have been working on supply 
chain management to figure out, get agreement on what a good 
plan looks like, and we are very close.
    We will be back to you within not days, not months, but in 
a few weeks with a plan for that particular area as an example 
of the level of detail--the clarity of the definition of 
success, the specificity of due dates, the clarity about who is 
responsible for doing what to whom by when--for you all to say 
this is adequate or inadequate.
    Then once there is agreement on that, the staff at DOD and 
GAO and OMB are generally pleased with what we have. I think if 
you would ask any of them, they would say there has been very 
good working relationship between the three entities. We think 
we are going to come to you in a couple of weeks with something 
that you all will be impressed with.
    Once there is agreement on that, or if there is not, then 
we will get something to where we are in agreement on, and we 
will go back and work with DOD and GAO to develop similar 
templates, similar plans for the other six areas.
    So then, all of a sudden now, there is a plan with all of 
the clarities that I have talked about and all of the implied 
accountabilities that I have talked about when you talk about 
your next 5\1/2\ years, my suggestion to you is that is what 
all your hearings be focused on is their adherence to those 
plans.
    And it shouldn't be a hearing upon the due date or a month 
after the due date when the whole thing is supposed to be 
finished. It ought to be with the kind of regularity that you 
are talking about, where it is every 6 months or whatever. And 
the same thing with OMB working with DOD on whether they are 
adhering to the plan and accomplishing the subgoals that they 
laid out for themselves.
    So that is the approach we are taking. And that is the 
approach we have taken with the one area. And it is very 
important that it be to everybody's satisfaction, and we are 
close to getting back to you with a proposed approach using one 
of the seven areas as an example.
    Senator Akaka. General Walker, Mr. Berkson's testimony 
discusses the accomplishments of the Defense Acquisition 
University. However, you testified that, and I am quoting, 
``DOD also needs to have the right skills and capabilities in 
its acquisition workforce to effectively implement best 
practices and properly manage the goods and services it buys.''
    You correctly point to DOD workforce reductions between 
1989 and 2002 that resulted in a loss of skills and 
competencies needed to ensure proper acquisition and 
contracting. Do you believe this is an issue of insufficient 
staff or improperly trained contract and auditing staff, or 
both? And has GAO examined the training issue?
    Mr. Walker. We believe that the acquisition workforce is 
under significant stress. We believe that there are real issues 
with regard to whether or not it is an adequate size. There are 
clearly skills, imbalances, and succession planning 
challenging.
    The Defense Acquisition University does a good job. We have 
partnered with the Defense Acquisition University on some areas 
of mutual interest and concern. We have actually provided some 
information and I think even co-instructed certain classes from 
time to time. We have also taken some of their classes. It is a 
quality organization.
    But the workforce as a whole is part of the high-risk area 
that deals with human capital at DOD. I might note that with 
regard to Clay's comment, he is correct that we are trying to 
work on a constructive basis with OMB and DOD to come up with a 
model for one area, namely, supply chain management.
    But I would respectfully suggest that DOD has 14 because it 
has got 8 on its own and 6 that it shares with others in high 
risk, and they need to have plans on all 14.
    Senator Akaka. All right. Well, thank you very much, Mr. 
Chairman.
    Senator Voinovich. Thank you very much for your testimony.
    Clay, I would like to stress to you the importance of 
having everyone involved in implementing your plan to reform 
the DOD's supply chain management process.
    Mr. Johnson. Well, that has got to be a key part of that 
plan, what is the plan.
    Senator Voinovich. Yes. But the people that are doing the 
work are the ones that should have input in driving the plan 
and saying this is what we think needs to be done.
    I have been visiting bases in Ohio and it has been a great 
experience for me. About 8 years ago, Patterson Air Force base 
in Springfield, Ohio was asked to put together an additional 
training facility for F-16 pilots.
    The reason why they have been successful is that team has 
been working together. They worked it out. They talked about 
it. They brought in the technology. It is an example of where 
you have had a team together that can feed off each other. This 
was their baby, they had a plan, and they were really proud of 
what they were doing.
    I would like to find out who decides that these people are 
rotated every 3 years.
    Mr. Walker. My son is in the Marine Corps. He is a Captain 
and fought in Iraq.
    That, my understanding, is long-standing policy to try to 
be able to make sure that military officers get a broad range 
of experience within a certain period of time in order to 
position them for promotion to the next level.
    I think that we need to relook at a number of the critical 
positions, especially in the acquisitions area. The problem is 
when you have preprogrammed turnover nobody is really 
responsible and accountable. Everybody is focused on trying to 
make sure nothing bad happens during their, in many cases, 2-
year or 3-year tours.
    We are talking about weapon systems that, in some cases, 
involve hundreds of billions of dollars.
    Senator Voinovich. So the Joint Chiefs of Staff probably, 
that is----
    Mr. Walker. Well, no. It is a combined effort. Mr. 
Chairman, I will provide more for the record because I know I 
am under oath here. My understanding is that the desire for the 
frequent turnover has come from the services. That is not 
something that has come from the OSD or from the under 
secretaries or even from the service secretaries.
    It is something that the services have wanted to do, and I 
think it is something that has been in existence for many 
years. This needs to be relooked at.
    Senator Voinovich. I want to thank all of you for 
testifying today. This hearing is adjourned.
    [Whereupon, at 3:59 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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