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



 
   MILITARY CONSTRUCTION AND VETERANS AFFAIRS, AND RELATED AGENCIES 
                  APPROPRIATIONS FOR FISCAL YEAR 2006

                              ----------                              


                         TUESDAY, MARCH 8, 2005

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

                         DEPARTMENT OF DEFENSE

STATEMENT OF HON. TINA W. JONAS, UNDER SECRETARY OF 
            DEFENSE (COMPTROLLER)
ACCOMPANIED BY PHILIP W. GRONE, DEPUTY UNDER SECRETARY OF DEFENSE 
            (INSTALLATION AND ENVIRONMENT)


           opening statement of senator kay bailey hutchison


    Senator Hutchison. I will call the Military Construction 
Subcommittee meeting to order and say that I am very pleased 
this is our first hearing of the year. I am very happy that I 
am able to chair this subcommittee once again. It is a 
subcommittee I have really enjoyed, and I also very much enjoy 
my partnership with my Democratic colleague. We have been 
chairman and ranking member together in order, reverse order, 
and order again, and we have always worked very well together. 
And I am very happy that we have this team again. We have been 
able to have the experience now to know some of the issues, and 
I think it is going to be a very good year.
    I will just say for the record too that I think Senator 
Feinstein and I have had some major impact since we have been 
chair and ranking member of this subcommittee in two areas. 
Senator Feinstein particularly has been attuned to 
environmental cleanup that has been so important for closed 
bases and making sure that that is done correctly.
    I think together our efforts on the Overseas Basing 
Commission and really focusing on getting a timely assessment 
of foreign bases and problems in foreign deployments before we 
address our own BRAC, which we are now in the beginning stages 
of addressing, are beginning to pay off.
    I am pleased that the Department of Defense did start 
looking at foreign bases and training constraints and 
operational constraints and made the announcement last year 
that they are, indeed, going to have a global realignment. I 
think it is going in the right direction. I think the 
Department of Defense did look at this and is making some very 
wise decisions for the long term for not only the best training 
and the best way to operate, but also better quality of life 
for our military and its families. So I am very pleased with 
that and glad that we are all here once again.
    This year's military construction budget request is $12.1 
billion, up 27 percent from last year's request. There is a 
wedge of $1.9 billion intended to cover the initial costs of 
the 2005 round of base realignment and closure, and I think 
that is going to be something we are going to want to have some 
specificity about as we go down the road.
    I am pleased that for the third consecutive year the 
administration's request for Reserve Component funding is up 
significantly from last year's request. Reserve Component 
facilities have long been underfunded through the years, and 
this Department has made good on its commitment to improve that 
situation. We all know the huge load the Guard and Reserve are 
sharing in this war on terrorism, and I think bringing their 
facilities up to a higher standard is not only the right thing 
to do but well deserved.
    I am also pleased to receive what I believe is a more 
focused request for construction at overseas bases. In the past 
few years, we have had a dialogue with the Department regarding 
these overseas bases, and I think we are now coming to a very 
good point where Congress is going to be able to evaluate the 
overseas facilities through our own Overseas Basing Commission, 
and I think we are going in the right direction.
    Related to overseas construction is the NATO Security 
Investment Program. The request for this program is up 25 
percent over last year. I do support NSIP, but I am concerned 
that the program is increasingly funding non-infrastructure 
expenses in favor of high technology electronics and software 
systems. NATO is now considering what could be a significant 
expenditure for a battle management command and control system 
for missile defense. I certainly support missile defense, but I 
think we are getting farther away from the intent of the 
Security Investment Program, which is to fund common 
infrastructure projects, and we need to assure that the United 
States gets more than a one-for-one return on the investments 
it is making in the program. So I intend to look carefully at 
this program and make sure that we are doing what we intended 
to do.
    A major initiative this year is the 2005 round of Base 
Realignment and Closure. That commission is in the process of 
being appointed. Sixteen percent of this budget request is for 
beginning to implement that 2005 BRAC if Congress agrees with 
the BRAC recommendations made later this year. While we all 
know and hope that BRAC will save in the future, we also know 
that it does not save in the short term, that you have the 
costs of closing bases, and we are now looking at major 
restructuring of the Army and the Marine Corps; bringing 70,000 
troops home from bases abroad; and repositioning remaining 
forces overseas into new facilities. So we know this is going 
to cost money and we certainly want to have a close look at the 
recommendations that will be coming from the Department to 
prepare for this kind of a realignment.
    I also want to comment on the housing privatization 
program, for which the Department is requesting $216 million 
this year. I am a strong supporter of the privatization 
program. I have seen the results. They are terrific. But I also 
think we need to make sure that we are making good decisions on 
these privatization projects and that we are monitoring the way 
the money is spent. In a few instances the privatization has 
not gone the way it was intended, and we need to make sure that 
where we do appropriate this money, it is being spent on 
quality construction that is doing the job we are asking be 
done.
    I certainly will have a number of questions, but I would 
like at this time to turn the microphone over to Senator 
Feinstein, my able ranking member who has been a great partner 
through the years on this subcommittee.


                 STATEMENT OF SENATOR DIANNE FEINSTEIN


    Senator Feinstein. Thank you very much, Madam Chairman, and 
I think you know that it has also been a pleasure for me to 
work with you, and I look forward to the year. I also look 
forward to the year because there is much more money to deal 
with and some new challenges in this. So I am delighted.
    I do not want to repeat what you said but there are a few 
things that kind of come through to me. I just want to point 
them out.
    The fact that the Army is down 16.5 percent over the 
requested amount, or 24.6 percent below the enacted amount of 
last year's request, I would like to ask about that.
    I am delighted to see that the BRAC environmental cleanup 
is nearly $132 million, 33.5 percent up from last year's 
request. I think that is very good news.
    The Navy's request this year includes $143 million, plus an 
estimated $133 million derived from land sales at El Toro and 
Oakland, totaling $276 million. My understanding is the Navy 
has planned to spend at least $172 million of that in 
California. I am very grateful for that. We had 29 bases closed 
in the last round, and just getting the environmental cleanup 
done has been a huge problem.
    It is also my understanding that the military family 
housing request has increased by $70 million and that the 
initiative of DOD to privatize over 75,000 housing units are 
designed to reach its goal by 2007. I think that is good news 
as well.
    You and I have worked together on overseas basing. That 
total is $782 million: $238 million for Germany, $28 million 
for Italy, $215 million for Korea, $125 million to Guam, and 
$109 million to the UK. So that is 25 percent over last year's 
request, and I think we need to take a look at it as well.
    Let me just forewarn the people. I have been very concerned 
about, in your State and my State and about 26 other States, 
the advent of perchlorate. Perchlorate comes from rocket fuel. 
It is really all a military responsibility. This was their 
subcontractors. It has leached into groundwater. It has 
contaminated drinking water wells. And so my question will be 
whether some of this environmental cleanup money can be used 
for perchlorate cleanup, and we will get to that.
    I do not want to take any more time. We will get on with it 
and say welcome to the witnesses.
    Senator Hutchison. I would like to now call on our newest 
member of the subcommittee. We welcome him, and we are very 
pleased that he is a new member of the full committee. I am 
pleased that he is now on our subcommittee as well. Senator 
Allard from Colorado.


                   STATEMENT OF SENATOR WAYNE ALLARD


    Senator Allard. Well, thank you, Madam Chairman. I do not 
have much of an opening statement. I look forward to working 
with you and Senator Feinstein from California. I know that you 
vacation from time to time in Colorado.
    Senator Hutchison. We both do actually.
    Senator Allard. I really appreciate that.
    I just look forward to the opportunity to serve here.
    You have seen me now in front of a number committees, Ms. 
Jonas. You never know when I might pop up, but I have a 
different set of questions for you this time around. So you 
will perhaps appreciate that. So I look forward to hearing your 
testimony.
    Thank you, Madam Chairman.


                   SUMMARY STATEMENT OF TINA W. JONAS


    Senator Hutchison. Now we welcome the Under Secretary of 
Defense who is the Comptroller and Chief Financial Officer of 
the Department of Defense, Secretary Tina Jonas. Welcome.
    Ms. Jonas. Thank you, Madam Chairman.
    I am going to just quickly summarize a few things. I have 
got a written statement for the record and request that it be 
placed in the record. I appreciate the opportunity to be here, 
and Senator Feinstein, I appreciate the opportunity to work 
with you and with the rest of the members of the committee.
    I would specifically like to thank this committee for its 
strong support of our men and women in uniform. We look forward 
to continuing to work with you to ensure that our armed forces 
have everything they need to carry out their difficult and 
dangerous missions.
    The President's budget request for the Department of 
Defense for 2006 is $419.3 billion. This is a $19.2 billion 
increase over the 2005 enacted level, and this will sustain the 
President's pledges to defeat global terrorism, restructure 
America's armed forces and global defense posture, as well as 
take care of our forces and develop advanced warfighting 
capabilities.
    Of special importance to this committee, the President's 
budget shows his clear commitment to our military people and 
their families, with emphasis on quality facilities and family 
housing and on restructuring our military basing. I will not go 
over the specifics. As you have pointed out, Madam Chairman, 
$12.1 billion is the request for military construction and 
family housing requirements. I would like to reemphasize our 
commitment to funding the elimination of all inadequate housing 
in the continental United States by 2007 and the elimination of 
all overseas inadequate housing by 2009.

                           PREPARED STATEMENT

    I know that you will have plenty of questions. You are well 
aware of the issues regarding the restructuring overseas in our 
BRAC process, so I will not belabor that.
    I would just like to say thank you for the opportunity to 
be here and I look forward to addressing your questions.
    [The statement follows:]

                  Prepared Statement of Tina W. Jonas

    Madam Chairwoman, members of the committee, I am honored to be here 
to discuss military construction and other quality of life components 
of President Bush's fiscal year 2006 defense budget request.
    First, I want to thank this committee for its strong support for 
our men and women in uniform. We look forward to continuing to work 
with you to ensure that our armed forces have everything they need to 
carry out their difficult and dangerous missions.
    The President's budget request for the Department of Defense (DOD) 
for fiscal year 2006 is $419.3 billion in discretionary budget 
authority, a $19.2 billion increase (4.8 percent) over the fiscal year 
2005 enacted level. Combined with fiscal year 2005 supplemental 
appropriations, this request includes sufficient funding to sustain the 
President's pledges to defeat global terrorism, restructure America's 
armed forces and global defense posture, develop and field advanced 
warfighting capabilities, and take good care of our forces.
    Of special importance to this committee, the President's budget 
shows his clear commitment to our military's quality of life--with 
emphasis on military compensation and health care, quality facilities 
and family housing, and restructuring our military basing.

                 MILITARY COMPENSATION AND HEALTH CARE

    The fiscal year 2006 budget maintains the President's commitment to 
take good care of our military people and their families. It reflects 
our conviction that people are the Nation's most important defense 
asset. The budget includes a 3.1 percent increase in military base pay 
and provides significant funding to ensure high quality health care for 
our military families. The fiscal year 2006 budget provides about $20 
billion for the Defense Health Program and $7 billion for the military 
personnel who support the health care program. The budget sustains our 
commitment to no out-of-pocket costs for military members living in 
private housing.

                     FACILITIES AND FAMILY HOUSING

    The President's request for Military Construction and Family 
Housing appropriations totals $12.1 billion in discretionary budget 
authority and funds the Department's most pressing military 
construction and family housing requirements. The request will improve 
our military's working and living conditions through strong sustainment 
and modernization for existing facilities and replacement of facilities 
that are no longer economical to repair.
    Family Housing.--The fiscal year 2006 budget keeps the Department 
on track to fund by fiscal year 2007 the elimination of all inadequate 
military family housing units in the United States, and to fund by 
fiscal year 2009 the elimination of all inadequate units worldwide. To 
reach the fiscal year 2009 goal, the Army will complete funding the 
elimination of inadequate housing at its overseas bases in 2008, and 
the Air Force will complete funding its overseas eliminations by 2009. 
The Department's privatization program is key to its progress in 
eliminating inadequate housing. It enables the Department to leverage 
its funding and get more military families into top quality 
accommodations much sooner than would otherwise be possible.

                       RESTRUCTURING U.S. BASING

    Two closely related initiatives will substantially affect our 
military's quality of life in the years ahead: the 2005 Base 
Realignment and Closure (BRAC) Commission and President Bush's 
restructuring of America's global defense posture.
    BRAC 2005.--The work of the 2005 BRAC Commission will be critical 
to streamlining DOD facilities and saving billions of dollars that 
would be better spent on our military people and capabilities, not 
excess facilities. The President's budget includes funding for 
implementation of BRAC 2005 decisions, beginning with $1.9 billion in 
fiscal year 2006.
    Global Posture.--Closely linked to the BRAC process is the 
President's global posture restructuring, which will ensure that United 
States forces and equipment are located where they can best respond to 
likely requirements in today's security environment. It will return 
70,000 military personnel and 100,000 family members to the United 
States, and relocate forces and equipment that must remain overseas. As 
the 2005 BRAC Commission considers how to streamline and restructure 
the Department's installations, it will have the benefit of our global 
posture restructuring plan.
    Congressional support of both these initiatives is critical.

              FISCAL YEAR 2005 SUPPLEMENTAL APPROPRIATIONS

    Before closing, I want to thank this committee for beginning work 
quickly on the President's fiscal year 2005 supplemental appropriations 
request of $74.9 billion for the Department of Defense. Rapid and full 
approval of the request is crucial to fulfilling our military's 
requirements for the rest of this fiscal year.
    Of critical importance, this supplemental provides significant 
resources to address wear and tear on our military equipment, to create 
a larger and more combat capable Army and Marine Corps, and to train 
and equip Iraqi and Afghan security forces to empower them to take the 
fight to the extremists and to help them take control of their future.
    The President's supplemental request includes $5.3 billion for 
restructuring the Army and Marine Corps because acceleration of this 
effort is urgent and vital to the war on terror. In fiscal year 2005 
and fiscal year 2006, the Department proposes to fund Army 
restructuring through supplemental appropriations, which will 
accelerate the restructuring of the ground forces moving into the 
combat theater and reset those forces rotating out of theater. This 
effort will expand the operating combat force of the Army--making our 
forces more effective and reducing the demand and strain on our 
military units and troops. About $.3 billion of the request is for 
military construction to support this force restructuring, and again 
that is an immediate and critical requirement for our forces in the war 
on terror.
    The supplemental also includes $1.0 billion for military 
construction in the U.S. Central Command (CENTCOM) area of 
responsibility. This will fund urgently needed facilities and improve 
the living and working conditions for U.S. troops in the theater. The 
request includes $303 million for force protection for key facilities; 
$253 million to improve airfields and their operations and safety; $155 
million to improve the movement, handling, and storage of munitions and 
fuel; $146 million for temporary troop billeting; and $59 million for 
troop medical facilities. The vast majority of these CENTCOM projects 
are designed to temporary standards and do not reflect a United States 
commitment to permanent basing in the area.

                                CLOSING

    In closing, I thank you for this opportunity to describe the 
President's commitment to military quality of life in his fiscal year 
2006 budget. The request will enhance the well being of our service 
members and their families, strongly support current requirements and 
missions, and support the needed streamlining and recapitalization of 
DOD facilities. I urge your support for the President's fiscal year 
2006 budget and his fiscal year 2005 supplemental appropriations 
request. Thank you.

    Senator Hutchison. Well, thank you so much, Madam 
Secretary.
    Now we have Mr. Philip Grone, the Deputy Under Secretary of 
Defense for Installations and Environment. Welcome to the 
committee.

                  SUMMARY STATEMENT OF PHILIP W. GRONE

    Mr. Grone. Thank you, Madam Chairman.
    Madam Chairman, Senator Feinstein, and distinguished 
members of the Subcommittee on Military Construction and 
Veterans Affairs, I am pleased to appear before you this 
afternoon to discuss the President's budget request for the 
Department of Defense for fiscal year 2006.
    Madam Chairman, I have prepared a written statement and, 
with the committee, request that it be placed into the record.
    Senator Hutchison. Without objection.
    Mr. Grone. At the outset, I want to associate myself with 
the statement made by my colleague the Under Secretary of 
Defense (Comptroller). The President's budget request for the 
Department of Defense continues the efforts of the 
administration to place our military infrastructure on a sound 
management foundation.
    The business area comprising the Department's support of 
military installation and the stewardship of natural resources 
includes programs totaling over $46 million in the budget for 
the coming year. The Department's management responsibilities 
extend to an infrastructure with 510,000 buildings and 
structures and a plant replacement value of $650 billion and 
stewardship responsibilities for roughly 29 million acres, or 
46,000 square miles of land, which is roughly the size of 
Connecticut and my native Kentucky combined.
    Military construction and military family housing and funds 
necessary to support Base Realignment and Closure, which the 
subcommittee will consider, are a portion, but a vitally 
important portion, of our management approach. The President's 
management agenda contains three key elements for which my 
office has primary responsibility, including the privatization 
of military housing and real property asset management, the 
last of which is the focus of Presidential Executive Order 
13327, issued on February 4th last year.
    On those areas of focus for which the subcommittee is 
concerned, we have made significant progress with the 
assistance of Congress. The military housing privatization 
initiative, as the chairman indicated, is achieving results. As 
of the beginning of this month, leveraging the power of the 
market and the expertise of industry, we have awarded 43 
projects privatizing 87,000 units, contributing $767 million in 
appropriated funds. To achieve the scope of these 43 projects, 
the taxpayer would need to provide $11 billion in military 
family housing construction, and over the life cycle, these 
privatized projects will save the taxpayer 10 to 15 percent, 
even when taking into account the allowances paid to our 
military personnel. Ten of those projects have reached the end 
of their initial development phase and tenant response is very 
positive. By the end of fiscal year 2007, we expect 185,000 
units of housing, 84 percent of the inventory, to be 
privatized.
    The Department's efforts to more properly sustain and 
recapitalize our facilities inventory are also demonstrating 
results. Four years ago, the recapitalization rate stood at 192 
years. The President's budget request supports a 
recapitalization rate of 110 years, and we remain committed to 
our goal to achieve a 67-year recapitalization rate in fiscal 
year 2008.
    Facilities sustainment is budgeted this year at 92 percent 
of the requirement. In both cases, we have built the program 
around private sector best practices and commercial benchmarks 
wherever they can be applied, and we continue to refine our 
models and guidance to keep them current with those practices 
and benchmarks.
    We also continue our effort to strengthen the Nation's 
defense through the Global Posture Review and BRAC. Abroad, we 
will reconfigure our basing and presence abroad to meet the 
challenges of the 21st century as opposed to the static defense 
of the Cold War. At home, we will rationalize our 
infrastructure to further transformation and to improve 
military effectiveness and business efficiency.

                           PREPARED STATEMENT

    Our most recent defense installations strategic plan issued 
last year, entitled Combat Power Begins at Home, reflects our 
focus on improving the management of our installation assets 
and to ensure their ability to contribute to military 
readiness. All of our efforts are designed to enhance the 
military value of our installations and to provide a solid 
foundation for the training, operation, deployment, and 
employment of the armed forces, as well as to improve the 
quality of life for military personnel and their families.
    While much remains to be done, we have accomplished a great 
deal. With the support of this subcommittee, we will continue 
to do so.
    Thank you, Madam Chairman.
    [The statement follows:]

                 Prepared Statement of Philip W. Grone

    Madam Chairwoman and distinguished members of this Subcommittee, I 
appreciate the opportunity to appear before you today to address the 
President's Budget request for fiscal year 2006 and the plan of the 
Department of Defense to improve its infrastructure and facilities.
    The Department of Defense recognizes the long-term challenges 
associated with its infrastructure strategy. The Department has 
developed a strategy and several tools to address these challenges. The 
President's Management Agenda recently added the stewardship of Federal 
real property as a new initiative. The Department is a full participant 
in the Federal Real Property Council established by Executive Order 
13327.
    Working in full cooperation with the military services and other 
Defense components, the Department set out in 1997 to build a 
corporate-wide inventory of assets. The idea was and remains that the 
Department's funding requirements for installations is a function of 
the assets currently on hand and planned for the future. Hence, an 
accurate inventory and a forecast of those assets are fundamental to 
determining and assessing budget requirements. The Department is 
continuing to improve its inventory process and is working extensively 
in the interagency process to support a more useful Federal inventory 
that can be used for management purposes.
    In 1998, the Department set out on a 6-year program to eliminate 80 
million square feet of obsolete and excess facilities. Six years later, 
we concluded that effort by exceeding our target--removing a total of 
86 million square feet. As part of a continuing effort to dispose of 
unneeded facilities, the Department recently completed a new survey of 
demolition requirements.
    In 2001, the Department issued its first ever Defense Facilities 
Strategic Plan. In September 2004, we issued a comprehensive, 
capabilities-based, and performance-oriented Defense Installations 
Strategic Plan. Our new plan begins to integrate more fully 
environmental management systems, safety, and occupational health into 
a comprehensive approach to asset management. The 2004 plan addressed 
recommendations made by the Government Accountability Office (GAO) and 
was approved by OMB as being consistent with the guiding principles of 
the Federal Real Property Council in meeting the objectives of the 
President's Management Agenda.

Global Posture Realignment
    While the Department addresses better business practices, we also 
are working to realign our infrastructure to deal effectively with 
military transformation and 21st Century threats. The Defense posture 
of the past 50 years reflects the Cold War strategy, with U.S. forces 
forward deployed primarily to fight near where they were based. Today's 
environment requires more agile, fast and lean forces able to project 
power into theaters that may be distant from where they are based. This 
agility requires not only a shift in military forces, capabilities and 
equipment, but also a new basing strategy.
    Last fall, the Department completed a 2-year comprehensive review 
of its global posture and basing strategy, which will result in the 
most profound restructuring of U.S. military forces overseas since the 
end of the Korean War. This review was conducted with extensive 
participation by the Combatant Commanders, the Joint Chiefs of Staff, 
and our interagency partners. We provided the Congress with a copy of 
the report in September 2004.
    The new posture will enable the Department to respond more quickly 
to worldwide commitments and make better use of our capabilities by 
thinking of our forces globally. In terms of ``footprint'', we will 
tailor our forces to suit local conditions while strategically pre-
positioning equipment and support. We anticipate realigning or closing 
a number of large permanent bases in favor of small and scalable 
installations better suited for deployments to trouble spots. This will 
also reduce friction with host nations. For example, removal of the 
U.S. Air Expeditionary Wing from Prince Sultan Air Base should help 
improve our relations with Saudi Arabia, and relocating U.S. forces out 
of densely-populated Seoul, Korea, to hubs further south will resolve 
problems with the Korean public while bolstering our military 
capabilities on the peninsula.
    Senior officials of this Department and the Department of State 
have already begun the process of consulting with our friends and 
allies around the world to incorporate their input into our plan. We 
recognize that our allies are sensitive to changes in our overseas 
posture, and we will continue to consult with them as we make final 
decisions and begin executing the strategy. We will continue to consult 
with Members of Congress on our plan and will seek your support as we 
implement these far-reaching and enduring changes to strengthen 
America's global defense posture.
    Since some overseas personnel will return to the United States, 
global posture changes will influence BRAC recommendations that will be 
announced in May 2005. Even though global posture changes will be 
executed over several years and will continue to be adjusted as 
strategic circumstances change, the Department will incorporate 
projected overseas posture changes into the BRAC process.

BRAC 2005
    The domestic BRAC round and the global posture review are key 
elements that support transformation. A well supported, capabilities-
based force structure should have infrastructure that is best sized and 
placed to support emerging mission requirements and national security 
needs. DOD must configure its infrastructure to maximize both 
warfighting capability and efficiency. Through BRAC and the global 
posture changes the Department will support the warfighter more 
effectively and efficiently. The Secretary will provide his 
recommendations for domestic closures and realignments to the 
Commission and Congress by May 16th as required by the BRAC 2005 
statute.
    From a domestic perspective, the Department recognizes it has an 
obligation to assist communities impacted by BRAC 2005. The Defense 
Economic Adjustment Program will include assistance for communities to 
plan for the civilian redevelopment of available real and personal 
property; and implement local adjustment actions to assist impacted 
workers, businesses, and other affected community interests. The 
Department will work to partner with affected communities as we both 
seek opportunities for quick civilian reuse of former military 
installations. For communities engaged with installations that will 
receive new missions, we also recognize the importance of cooperatively 
planning to ensure our mission can effectively be stood up and 
supported.

                        MANAGING INFRASTRUCTURE

    The Department currently manages nearly 517,000 buildings and 
structures with a plant replacement value of over $650 billion, and 
over 46,000 square miles of real estate. We have developed models and 
metrics to predict funding needs and have established goals and 
performance measurements that place the management of Defense 
infrastructure on a more objective, business-oriented basis.

Infrastructure Investment Strategy
    Managing our facilities assets is an integral part of comprehensive 
asset management. The quality of our infrastructure directly affects 
training and readiness.
    Facilities sustainment, using primarily operations and maintenance-
like \1\ appropriations, funds the maintenance and repair activities 
necessary to keep an inventory in good working order. It includes 
regularly scheduled maintenance and major repairs or replacement of 
facility components that are expected to occur periodically throughout 
the life cycle of facilities. Sustainment prevents deterioration and 
preserves performance over the life of a facility.
---------------------------------------------------------------------------
    \1\ Includes O&M as well as related military personnel, host 
nation, and working capital funds.
---------------------------------------------------------------------------
    To forecast funding requirements for sustainment, we developed the 
Facilities Sustainment Model (FSM). FSM uses standard benchmarks drawn 
from the private and public sectors for sustainment costs by facility 
type and has been used to develop the Service budgets since fiscal year 
2002 and for several Defense Agencies beginning in fiscal year 2004.
    Full funding of sustainment is the foundation of our long-term 
facilities strategy, and we have made significant progress in achieving 
this goal. The Department increased funding for facilities sustainment 
consistently from fiscal years 2002 through 2005, sustaining facilities 
at an average of 93 percent of benchmarks. In the fiscal year 2006 
budget request, the Department shows a slight decrease in the 
department-wide rate to 92 percent. The budget request, however, is an 
improvement upon the plan for the fiscal year 2006 contained in the 
fiscal year 2005 FYDP, which funded facility sustainment at 90 percent. 
Our priorities have not changed and with the support of the Congress 
our goal remains to reach full sustainment by fiscal year 2008.
    Restoration and modernization, collectively termed 
recapitalization, provide resources for improving facilities and are 
funded with either operations and maintenance or military construction 
appropriations. Restoration includes repair and replacement work to 
restore facilities damaged by inadequate sustainment, excessive age, 
natural disaster, fire, accident or other causes. Modernization 
includes alteration of facilities solely to implement new or higher 
standards, to accommodate new functions, or to replace building 
components that typically last more than 50 years.
    Recapitalization is the second step in our strategy. Similar 
private sector industries replace their facilities every 50 years, on 
average. With the types of facilities in the Defense Department, 
engineering experts estimate that our facilities should have a 
replacement cycle of about 67 years on average. In fiscal year 2001, 
the Department's recapitalization rate stood at 192 years. This budget 
request supports a recapitalization rate of 110 years, and we remain 
committed to achieving our 67 year recapitalization goal in fiscal year 
2008.

                SUSTAINMENT AND RECAPITALIZATION REQUEST
               [President's Budget in Millions of Dollars]
------------------------------------------------------------------------
                                            Fiscal year     Fiscal year
                                           2005  request   2006  request
------------------------------------------------------------------------
Sustainment (O&M-like \2\)..............           6,515           6,529
Restoration and Modernization (O&M-like)           1,321           1,008
Restoration and Modernization (MilCon)..           3,161            3474
                                         -------------------------------
      Total SRM.........................          10,997          11,011
------------------------------------------------------------------------
\2\ Includes O&M as well as related military personnel and host nation.

    As a key component of our facility program, the Military 
Construction appropriation is a significant contributor to the 
Department's comprehensive approach to asset management practices. The 
fiscal year 2006 Department of Defense Military Construction and Family 
Housing appropriation request totals $12.05 billion. This budget 
request will enable the Department to transform in response to 
warfighter requirements, to enhance mission readiness, and to take care 
of our people. We do this, in part, by restoring and modernizing our 
enduring facilities, acquiring new facilities where needed, and 
eliminating those that are excess or obsolete.

     COMPARISON OF MILITARY CONSTRUCTION AND FAMILY HOUSING REQUESTS
      [President's Budget in Millions of Dollars--Budget Authority]
------------------------------------------------------------------------
                                            Fiscal year
                                               2005         Fiscal year
                                           appropriation   2006  request
------------------------------------------------------------------------
Military Construction...................           4,745           5,284
NATO Security Investment Program........             166             207
Base Realignment and Closure............             246           2,258
Family Housing Construction/Improvements           1,622           2,020
Family Housing Operations & Maintenance.           2,547           2,220
Chemical Demilitarization...............            81.9  ..............
Homeowners Assistance...................  ..............  ..............
Family Housing Improvement Fund.........             2.5             2.5
Energy Conservation Investment Program..              50              60
                                         -------------------------------
      Total.............................           9,460          12,052
------------------------------------------------------------------------

Improving Quality of Life
    At the outset of this Administration, the President and Secretary 
Rumsfeld identified elimination of inadequate family housing as a 
central priority for the Department and set an aggressive target of 
2007 to meet that goal. Greatly expanded use of the privatization 
authorities granted under the fiscal year 1996 Military Housing 
Privatization Initiative has enabled achievement of that target at 
United States based installations where those authorities apply. 
Sustaining the quality of life for our military families is crucial to 
recruitment, retention, readiness and morale. The fiscal year 2006 
budget funds elimination of all inadequate domestic family housing by 
2007, and eliminates remaining inadequate houses overseas by 2009.
    DOD policy relies on the ``community first'' (private sector) to 
provide quality housing. Only when the private market demonstrates that 
it cannot supply sufficient levels of quality housing does the 
Department provide housing to our military families using privatization 
as its primary option followed by government-owned and leased housing. 
For example, we address our housing needs overseas through military 
construction and leasing in the absence of privatization authority.
    To ensure the Department is making the best investment decisions in 
determining the appropriate level of housing, the government provides a 
single and consistent methodology for calculating the requirement which 
was introduced in January 2003 and is being extensively utilized by the 
Services. Currently, 73 percent of military families reside in 
privately owned housing, including 11 percent in privatized military 
housing and 27 percent in government-owned housing areas.
    The Department has skillfully used privatization to more quickly 
eliminate inadequate housing and to provide additional housing where 
shortfalls existed. As of February 2005, the Department has awarded 43 
projects. This includes over 87,000 military family housing units, 
which is a 58 percent increase since January 2004. DOD policy requires 
that privatization yield at least three times the amount of housing as 
traditional military construction for the same amount of appropriated 
dollars. The 43 awarded projects have permitted the Department, in 
partnership with the private sector, to provide housing for about $767 
million in military construction investment. The same level of 
construction activity would otherwise have required over $11 billion if 
the traditional military construction approach was utilized. This 
reflects an average ratio of over 14 to 1, well exceeding program 
expectations.
    The Department's privatization plans in the fiscal year 2006 budget 
will privatize 84 percent of its domestic family housing inventory, or 
roughly 185,000 units privatized by the end of fiscal year 2007. By the 
end of fiscal year 2006, we will have privatized 172,400 housing units.
    For fiscal year 2006, the Department requests $4.243 billion in new 
budget authority for family housing construction and operations and 
maintenance:
  --$1.9 billion to construct 3,447 new/replacement units and improve 
        3,584 existing units.
  --$2.2 billion to operate and maintain approximately 123,452 
        government-owned family housing units, and lease another 26,281 
        units worldwide.
    Funding to support the privatization of family housing is 
programmed and budgeted in the family housing construction 
appropriations and is transferred to the DOD Family Housing Improvement 
Fund (FHIF) when the privatization projects are executed. The fiscal 
year 2006 construction account requests a total of $281 million in 
funding for privatization. Of this amount, approximately $182 million 
is anticipated to be transferred to the Family Housing Improvement Fund 
during fiscal year 2006 along with $428 million in previously 
appropriated construction funds. This $610 million will be used to 
finance the privatization of approximately 34,964 units.

Utilities Privatization and Energy Management
    The Department seeks to reduce its energy consumption and 
associated costs, while improving utility system reliability and 
safety. The Department has developed a comprehensive energy strategy 
and issued new policy guidance that will continue to optimize utility 
management by conserving energy and water usage, improve energy 
flexibility by taking advantage of restructured energy commodity 
markets when opportunities present themselves, and modernize our 
infrastructure by privatizing our deteriorated and outdated utilities 
infrastructure where economically feasible. The comprehensive energy 
strategy supports the use of meters to manage energy usage at locations 
where the monitoring justifies the cost of installing, maintaining and 
reading the meter. Metering in itself does not save energy, however, 
use of meters can be beneficial to determine accurate billing, perform 
diagnostic maintenance, and enhance energy management by establishing 
baselines, developing demand profiles, ensuring accurate measurement 
for reporting, and providing feedback to users.
    DOD, as the largest single energy consumer in the Nation, consumes 
over $2.8 billion of energy per year. Conserving energy and investing 
in energy reduction measures makes good business sense and frees up 
resources for sustaining our facilities and for higher DOD priority 
readiness and modernization. Recent dramatic fluctuations in the costs 
of energy significantly impact already constrained operating budgets, 
providing even greater incentives to conserve and seek ways to lower 
energy costs. These include investments in cost-effective renewable 
energy sources or energy efficient construction designs, and 
aggregating bargaining power among regions and Services to get better 
energy deals.
    Conserving energy in today's high-priced market will save the 
Department money that can be better invested in readiness, facilities 
sustainment, and quality of life. Our efforts to conserve energy are 
paying off; in fiscal year 2004, military installations reduced 
consumption by 1.1 percent despite an 8.8 percent increase in the cost 
of energy commodities from fiscal year 2003. With a 26.8 percent 
reduction in standard building energy consumption in fiscal year 2004 
from a 1985 baseline, the Department has deviated slightly from the 
track required to achieve the 2005 and 2010 facility energy reduction 
goals stipulated by E.O. 13123. This is mostly attributable to the 
lapse of Energy Savings Performance Contract (ESPC) authority which 
typically accounts for more than half of all facility energy savings. 
However, with ESPC authority reauthorized in the fiscal year 2005 
National Defense Authorization Act, DOD has launched an aggressive 
awareness campaign and plan to get back on track to meet fiscal year 
2010 reduction goals.
    DOD has significantly increased its focus on purchasing renewable 
energy and developing resources on military installations. The 
Department has increased the use of Energy Conservation Investment 
Program (ECIP) funds for renewable energy projects from $5 million and 
$11 million in fiscal year 2003 and fiscal year 2004, respectively, to 
$13 million and $18 million in fiscal year 2005 and fiscal year 2006, 
respectively.
    The Department has a balanced program for energy conservation--
installing energy savings measures using appropriated funding and 
private-sector investment--combined with using the principles of 
sustainable design to reduce the resources used in our new 
construction. Energy conservation projects make business sense, 
historically obtaining about $4 in life-cycle savings for every dollar 
invested. The fiscal year 2006 budget contains $60 million for the ECIP 
program to implement energy saving measures in our existing facilities.
    To improve utility systems, the Department has reaffirmed its 
preference to modernize military utility systems through privatization. 
The DOD Utilities Privatization Program has made solid progress over 
the past 2 years. The Services have greatly simplified and standardized 
the solicitation process for obtaining industry proposals. Request for 
Proposal (RfP) templates were clarified to improve industry's ability 
to obtain private sector financing and manage risks. Of 2,601 utility 
systems serving the DOD, 463 systems have been privatized and 733 were 
already owned by other entities. Over 950 systems are currently under 
solicitation as each Service and the Defense Logistic Agency continue 
aggressive efforts to reach privatization decisions on all systems.

Installations Support
    The Installations Support function consists of two major programs: 
Installation Services (formerly referred to as ``base operations 
support'') and Facilities Operations (formerly referred to as ``real 
property services''). The current budget request of $22.5 billion 
includes $16.8 billion for Installations Services and $5.7 billion for 
Facilities Operations in fiscal year 2006. The Defense Installations 
Strategic Plan articulates the need to define common standards and 
performance metrics for managing Installations Support. The Department 
has initiated an effort to define and model each sub-function of 
Facilities Operations (utilities, leases, custodial services, snow 
plowing and the like) by fully utilizing commercial benchmarks. For the 
more diverse tasks within Installation Services, the Department has 
established a cross-Departmental working group to examine definitions 
and budget structures.

Range Sustainment
    In concert with the President's August 2004 Executive Order 
``Facilitation of Cooperative Conservation'' the Department has 
developed a program of Compatible Land Use Partnering that promotes the 
twin imperatives of military test and training readiness and sound 
conservation stewardship through collaboration with multiple 
stakeholders. The Executive Order defines ``cooperative conservation'' 
as actions that relate to use, enhancement, and enjoyment of natural 
resources, protection of the environment, or both, and that involve 
collaborative activity among Federal, State, local, and Tribal 
governments, private for-profit and nonprofit institutions and other 
nongovernmental entities and individuals. The Department's Range 
Sustainment Program is fully consistent with the President's goals in 
this area. Section 2811 of the 2003 National Defense Authorization Act 
authorizes the Services to take a proactive role in developing programs 
to protect our installations and ranges from urban sprawl by working 
with States and non-governmental organizations to promote compatible 
land use through cooperative conservation efforts. This authority has 
enabled DOD to initiate the Readiness and Environmental Protection 
Initiative (REPI)--a multi-year program to sustain test and training 
space for our troops while simultaneously assisting in the protection 
of valuable habitat and open space. This program provides a lasting 
solution and a long-term framework for developing new policies, 
partnerships, and tools to assist communities and other interested 
stakeholders in executing compatible land use partnerships around our 
test and training ranges and installations, as well as work with our 
other Federal landowners on cooperative conservation projects. In the 
coming years, military readiness will still require substantial 
resources, air, land and water areas where military forces can test and 
train as they would fight. It is imperative that we be able to posture 
our test and training infrastructure for transformational and 
sustainable operations.
    The Department appreciates greatly the $12.5 million in fiscal year 
2005 funding provided by Congress to fund the REPI program, and the 
military Services are already executing critical projects in many 
States. A recent agreement to address encroachment at Fort Carson, 
Colorado, and to enhance regional environmental conservation is one 
example of this win-win approach. Other projects are under 
consideration in Hawaii, at MCB Camp LeJuene, North Carolina, and in 
California and Florida. In fiscal year 2004, the Services implemented 
successful partnerships with State and Non-Governmental Organizations 
(NGOs) at locations such as NAS Pensacola (Navy and Escambia County), 
Camp Blanding (National Guard Bureau and State of Florida). These 
multi-faceted conservation partnerships will ensure the long-term 
sustainability of test and training centers supporting the military 
mission. Thus, the Administration has requested $20 million for the 
REPI program for fiscal year 2006 and we are in the process of refining 
the Service priorities for those funds. I have requested that the 
Services prepare and submit requirements associated with fiscal year 
2007 and out-years to support a long-term funding strategy for the REPI 
program. These compatible land use partnering efforts will become even 
more critical to our ability to protect and preserve our test and 
training missions as we enter our post-BRAC transformational 
environment. We look forward to participation in the White House 
Cooperative Conservation Conference later this year to find ever more 
innovative ways to work with others to help secure critical test and 
training ranges. I look forward to working with Congress to ensure our 
ability to fulfill the important programming requirements for these new 
efforts.

Safety and Occupational Health
    The Department is aggressively supporting the SECDEF's priority to 
reduce mishaps in DOD by implementing SOH management systems and by 
making it a priority in our Defense Installations Strategic Plan. Our 
programs focus on continuous incremental improvement in Safety and 
Health, but we're also involved in implementing significant changes in 
safety through our partnership with the Under Secretary of Defense for 
Personnel and Readiness, who chartered the Defense Safety Oversight 
Committee (DSOC). Together, we are leading DOD's efforts to cut mishaps 
in half by the end of fiscal year 2005. The DSOC, composed of senior 
leaders throughout the Department, is finding ways to decrease the 
detrimental effect on our readiness caused by mishaps. We are focusing 
on acquisition; base operating support; training; and deployment 
operations. For acquisition and training, the Army and Marine Corps is 
responding to deaths from HMMWV rollovers by acquiring improved seat 
belt systems for tactical vehicles and by training deployed soldiers 
and marines to improve their driving skills. For deployment health 
protection, we began a program for the factory treatment of Army and 
Marine Corps combat uniforms with permethrin. This will provide 
protection against mosquitoes, and the diseases that they transmit, for 
the life of the uniform. Factory treatment ensures that all uniforms 
are treated and deployment-ready and that soldiers are not exposed to 
concentrated pesticides.

                        ENVIRONMENTAL MANAGEMENT

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

Environmental Management Systems
    To make our operations more efficient and sustainable across the 
Department, we are continuing our aggressive efforts to implement 
environmental management systems (EMS) based on the ``plan-do-check-
act'' framework of the international standard for EMS (ISO 14001). We 
are embedding environmental management as a systematic process, fully 
integrated with mission planning and sustainment. This transformation 
is essential for the continued success of our operations at home and 
abroad. Implementing EMS will help preserve range and operational 
capabilities by:
  --creating a long-term, comprehensive program to sustain training and 
        testing capability while maintaining healthy ecosystems;
  --conducting environmental range assessments to ensure that we 
        protect human health and the environment; and,
  --funding and implementing the INRMPs for our ranges.
    In addition, EMS will help maintain and preserve our historic 
properties, archaeological resources, Native American, and other 
cultural assets for the benefit of future generations. Today, DOD has a 
large inventory of historic properties: 75 National Historic Landmarks, 
and nearly 600 places on the National Register of historic places, 
encompassing more than 19,000 individual properties, including 
buildings, structures, objects, and sites located at over 200 
installations. Over the next two decades, tens of thousands more 
buildings will reach an age requiring evaluation of their historical 
significance.

              ENVIRONMENTAL PROGRAM--SUMMARY OF REQUEST \3\
      [President's Budget in Millions of Dollars--Budget Authority]
------------------------------------------------------------------------
                                            Fiscal year
                                             2005  as       Fiscal year
                                           appropriated    2006  request
------------------------------------------------------------------------
Environmental Restoration...............           1,352           1,370
BRAC Environmental \4\..................             328             449
Compliance..............................           1,666           1,561
Pollution Prevention....................             142             143
Conservation............................             175             205
Technology..............................             274             206
International \5\.......................               3               3
                                         -------------------------------
      TOTAL.............................           3,937           3,934
------------------------------------------------------------------------
\3\ Includes operations and maintenance, procurement, RDT&E, and
  military construction funding.
\4\ Funding levels reflect total requirement.
\5\ International is included in Pollution Prevention and Compliance.

    In fiscal year 2006, the budget request includes $3.9 billion for 
environmental programs. This includes $1.4 billion for cleanup, $0.4 
billion for BRAC environmental, $1.6 billion for compliance; about $0.1 
billion for pollution prevention, and about $0.2 billion each for 
conservation and environmental technology.

Managing Cleanup
    The Department is committed to the cleanup of property contaminated 
by hazardous substances, pollutants, and military munitions. We have 
achieved remedy in place or restoration complete at 15,950 out of 
19,710 sites on active installations. At the end of fiscal year 2004, 
4,046 out of the 4,832 BRAC sites requiring hazardous waste remediation 
have a cleanup remedy constructed and in place, or have had all 
necessary cleanup actions completed in accordance with Comprehensive 
Environmental Response, Compensation, and Liability Act (CERCLA) 
standards. Hazardous waste cleanup at Formerly Used Defense Sites 
(FUDS) achieved remedy in place or response complete at 1,539 out of 
the 2,647 sites.

Managing Compliance and Preventing Pollution
    The Department is committed to going beyond mere compliance. But 
compliance with existing laws and regulations is the base line for our 
program and we continue to plan and fund for this requirement. Our 
ability to meet these compliance driven goals continues to improve. In 
a letter to the editor of USA today, acting EPA Assistant Administrator 
Skinner publicly complemented the Department by stating, ``The 
Department of Defense (DOD) has been a leader in pollution prevention 
and implementing environmental-management systems that serve as models 
for other facilities.'' Pollution prevention techniques continue to 
save the Department needed funds as well as reduce pollution. The 
Department continues to demonstrate pesticide use risk reduction on 
installations and was recognized by the EPA as Pesticide Environmental 
Steward Program Champion, for the third year in a row.

Emerging Contaminants
    In January 2005 the National Academy of Sciences (NAS) released a 
review of the science used to determine the public health risks from 
perchlorate, a chemical with important national defense applications 
due to its use in missile and rocket propellants, munitions, 
pyrotechnics, and flares which was funded jointly by DOD, DOE, EPA, and 
NASA. Even before the start of the NAS study, Federal agencies were 
working hard to understand and address potential risks of perchlorate. 
The NAS report yielded an independent assessment of the available 
science. Now Federal agencies will be able to take actions based on 
sound science to address the issue of perchlorate in our Nation's 
drinking water supply.
    We continue to develop more comprehensive strategies to enable us 
to protect public health while sustaining our assets and better 
managing our liabilities. In 2004, in advance of any legally 
promulgated standard for perchlorate, the Department issued a policy to 
sample for perchlorate that has enabled the Department to better 
characterize the nature and extent of perchlorate plumes associated 
with its facilities. Over the last year, a joint effort between the 
Department and the State of California yielded a sampling 
prioritization protocol to ensure that active and former DOD sites with 
the greatest potential to cause a perchlorate-based health threat were 
investigated first. All current and formerly used DOD sites have now 
been jointly assigned a priority for sampling according to that 
protocol.
    The Department is moving ahead with efforts directed toward 
removing perchlorate from the environment. In advance of any 
requirement, DOD proactively initiated remediation demonstration 
projects at several sites in California, Texas, and Massachusetts. We 
have taken corrective measures to ensure proper disposal and added 
additional wastewater treatment to manufacturing facilities using 
perchlorate. We continue to fund remediation technology research and, 
this year, we launched a $9.5 million wellhead treatment demonstration 
effort with several Southern California communities. The Army's effort 
to find substitutes for some of its training uses of perchlorate is 
also yielding positive results.
    We are using these comprehensive approaches as a model to more 
proactively and cooperatively address other emerging contaminants such 
as trichloroethylene (TCE) and Royal Demolition eXplosive (RDX). The 
Department continues to engage with other agencies in a sustained 
collaborative effort to address emerging contaminants by creating 
mutually satisfactory sustainable solutions. Last fall, DOD began 
working with the Environmental Council of States to define 
opportunities for States, DOD, DOE, and EPA to address emerging 
contaminants more effectively in the future.

                        BUSINESS TRANSFORMATION

Business Management Process Transformation
    The Business Management Modernization Program (BMMP) was 
established 3 years ago and has made significant progress in 
establishing key foundational elements necessary to enable broad 
business transformation across the Department. In April 2003, the DUSD 
(I&E) was designated as the Domain Owner for the Installations and 
Environment Domain of BMMP. Because the foundation is now laid, the 
program is redefining itself to focus on facilitating rapid delivery of 
DOD Enterprise capabilities.
    The I&E Domain has achieved significant accomplishments over the 
past year. We developed a real property unique identification concept 
that will enable greater visibility of real property assets and 
associated financial resources. Our efforts focused on reengineering 
the business process for real property inventory, resulting in standard 
data elements and data definitions for physical, legal and financial 
attributes of real property. Our efforts also produced, for the first 
time in DOD, an end-to-end process of real property management that 
articulates the interfaces with real property asset accountability and 
financial records. Our focus on data (data strategies, elements and 
definitions) will facilitate rapid implementation of the real property 
inventory capability upon deciding on our systems implementation 
strategy. Additionally, we developed a process model for environmental 
liabilities recognition, valuation, and reporting that contributes to 
our overall auditability. During this past year, we also established 
the Defense Installation Spatial Data Infrastructure project to 
implement DOD-wide policies and resource oversight for geospatial 
information resources that support the Installations and Environment 
business mission area.
    During this fiscal year, we will conduct an analysis of system 
alternatives and prepare a transition plan to determine the best 
implementation strategy for the real property inventory reengineering 
effort. We will continue to make improvements across the Department in 
managing hazardous material by developing an enterprise-wide procedure 
for hazardous materials management. We will define I&E geospatial 
information needs and continue to minimize redundant acquisition of I&E 
geodata resources. Lastly, we are aggressively working to put into 
operation a DOD registry for physical locations. This registry will 
identify all DOD sites with a unique identifier and will be associated 
with firm boundary information. The registry will be available across 
the DOD enterprise and to potential users include the warfighting 
community and business mission areas. The site registry will allow for 
personnel and weapons system information systems to be linked to DOD's 
sites.

Competitive Sourcing
    Competition is a driving force within the American economy, causing 
organizations to improve quality, reduce cost, and provide rapid 
delivery of better products and services. The President's Management 
Agenda identifies Competitive Sourcing as one of the five primary 
Federal initiatives. The Department of Defense has long been the 
Federal leader in using public-private competition under the process 
defined by OMB Circular A-76 to decide the least costly and most 
efficient source for commercial functions. It is essential that we 
continue to utilize the process, where it makes good military and 
business sense, to improve support to the warfighter and increase 
readiness. Many important base support functions fall into this 
category. The fiscal year 2006 budget supports continued use of the 
improved process described in the recent revision to OMB Circular A-76 
competitions for functions involving approximately 100,000 full time 
equivalents (FTE). This will allow achievement of the Department's 
targets in the President's Management Agenda.

                               CONCLUSION

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

    Senator Hutchison. Thank you, Mr. Secretary.
    I will start with a few questions. I am going to try to 
give everyone a chance to do round one, and then I will likely 
come back with round two.

                   MORE SPECIFICITY FOR BRAC FUNDING

    First of all, Mr. Grone, the budget request includes $1.9 
billion for the 2005 BRAC round. There are $392 million for 
costs associated with the Global Presence and Basing Strategy, 
but the rest is not earmarked at all. I wondered if you would 
tell us how the Department intends to determine the uses for 
this money. What do you plan for this, and will we have a 
mechanism by which you will come to Congress with more 
specificity for almost $2 billion?
    Mr. Grone. Madam Chairman, that is an excellent and quite 
appropriate question. As we were budgeting for base realignment 
and closure activities at the Department for the coming fiscal 
year, of course, the first year of implementation is always a 
bit of a challenge. We do not know at the time we build the 
budget what the recommendations of the Secretary will be, nor 
do we know, obviously, what the recommendations of the 
commission and the disposition of those recommendations by 
Congress will be.
    We took a good, hard look at lessons learned from the past, 
as we were building the budget. In 1993, the Department had 
requested funds which, if inflated appropriately, would amount 
to approximately $1.5 billion. We took a look at the 1995 
round, applied the appropriate inflators to that, and the 
request was about $1 billion.
    Having said that, the General Accounting Office on numerous 
occasions, in commenting on the 1995 round, indicated to the 
Secretary and to the Congress that the Department's 
recommendations in that year were smaller than it had projected 
at the start and that their analysis, the GAO's analysis, at 
the time found that the services' concerns over closing costs 
played a role in limiting the number of options that were 
actually recommended to the commission and ultimately enacted 
into law.
    So when we took a look at the lessons of the past, as well 
as considering the costs associated with the initial phase of 
realigning forces to the United States from abroad, we came to 
the conclusion that that level of funding, approximately $1.9 
billion, was an appropriate level for the first year.
    As to the process, in 1995, as with prior rounds of BRAC, 
the Department's budget justification included simply a 
reference that we had requested a certain level of funding. 
Once the Congress disposes of the commission's recommendations, 
we will provide a report to the Congress that details the first 
year implementation funding associated with the amount 
appropriated by Congress, and subsequently for fiscal year 2007 
and beyond, we will include a complete breakdown of how we 
expect to expend those funds, as we would with any other budget 
justification. So we certainly will not begin to expend funds 
until we provide such a report for the committee's review, but 
we believe that that initial tranche of funds is an appropriate 
level to get us started.
    We do not have a target for the number of bases we expect 
to close, nor do we have a target for the expected amount of 
savings. But we have taken a good, hard look at lessons learned 
from the past, and we want to put ourselves in the position to 
begin to expeditiously implement BRAC recommendations and we do 
not, obviously, want to be short of the resources necessary to 
make that happen.
    Senator Hutchison. Thank you. We will look forward to 
having something that assures that we will have some 
specificity as you get to the point. I understand, obviously, 
we do not know what bases are being closed and what the needs 
are at this time.

                PROCEEDS FROM SALES OF CLOSED FACILITIES

    Speaking of lessons of the past, after nearly a decade of 
debate over the future of the former El Toro Marine Corps Air 
Station property, which was closed in the 1993 BRAC, the Navy 
has sold the property to a developer for a reported almost $650 
million. We are told that the Navy probably will sell much of 
the property at the now-closed Roosevelt Roads Naval Air 
Station in Puerto Rico.
    Is this something you expect the Navy and other services to 
do following the 2005 BRAC round? If so, will it offset some of 
the costs of base closing? How will that money be allocated? 
And is this sort of a new mode of operation that is different 
from trying to work with community redevelopment corporations 
and giving property back to the community to the best extent 
possible? Just in general, the overview of is this a harbinger 
of the future.
    Mr. Grone. It is an indicator of, in many ways, where we 
would like to be after the 2005 round. And at the outset I want 
to emphasize that in both the case of El Toro and in the case 
of Roosevelt Roads, should the Navy proceed with sale--and Mr. 
Penn who will follow us in the next panel can elaborate on this 
point. But in both cases, those decisions and those 
redevelopment packages are reflective of what we have taken to 
refer to as the mixed tool kit. In both instances, there are 
public purpose conveyances. There are economic development 
conveyances, as well as parcels for public sale. Both resulted 
from extensive consultation with local governments concerned, 
and that is the way in which we see a good deal of the future.
    Our approach, taking good lessons learned from the past, we 
probably significantly as a Department over-estimated our 
ability to sell in the early stages of the first BRAC rounds. 
Later on, given a whole history, which I will not belabor, we 
probably took that pendulum too far over to the right. Where we 
want to be--and we have had extensive conversation with 
redevelopment authorities, local governments, State 
governments, the National Association of Installation 
Developers, and others, and we expect we will continue to have 
dialogue with the Hill on these points as well.
    Where we would like to be is to put ourselves in the 
position where we proceed from a series of four or five key 
principles. One is if we choose to close a base, we need to 
look at ways to accelerate the movement of that mission. Doing 
so will enable the second principle, which is to put the 
property into effective economic reuse as expeditiously as we 
can. As we do that, our approach will be a highly tailored, 
locally tailored effort, working with State and local 
governments and redevelopment authorities, to put that mixed 
tool kit parcel into place and, where it is appropriate, to 
sell.
    As we sell property and we take revenue in, of course, that 
will offset some of the cost, particularly over the long term, 
of our environmental remediation and caretaker cost activities. 
So it is not insignificant in that regard. But we recognize 
that our ability to do that is entirely dependent upon our 
ability to work in cooperation and in partnership with local 
government. We cannot sell and maximize value on our own. We 
must work together, and that is a foundation of our policy as 
we are developing it in the middle of our policy review going 
forward.
    Senator Hutchison. Thank you very much.
    I will now turn to my ranking member, Senator Feinstein, 
and I do have a couple of other questions, but I would like to 
spread the opportunity.

                   CHEMICAL WEAPONS DEMILITARIZATION

    Senator Feinstein. Well, thank you very much, Madam 
Chairman. I will try and be brief.
    Let me ask my first question because Senator Allard is here 
hailing from Colorado, and that is about chemical weapons 
demilitarization. There is no funding for the chem demil 
construction in your 2006 MILCON request, and I think there has 
been a great deal of discussion of how Defense intends to 
proceed with the destruction of munitions stockpiled at the 
Blue Grass, Kentucky and the Pueblo, Colorado facilities. In 
2005, we appropriated a total of $81.8 million for construction 
of the Kentucky and Colorado facilities. In 2004, $104 million 
was appropriated for construction. And this is all on top of 
nearly $100 million that was appropriated for these facilities 
in prior years. So that is almost $300 million that has already 
been appropriated.
    You are not requesting any chemical demil funds. I would 
like to know why not. I would like, if I might, to know whether 
the Department intends to proceed with construction of the 
Kentucky and Colorado facilities, and if these facilities are 
delayed or ultimately canceled, how will that affect DOD's 
ability to comply with the deadlines for chemical stockpile 
destruction imposed by the Chemical Weapons Convention?
    And are you considering the feasibility of shipping these 
weapons from these facilities across State lines, and what is 
the status of the funding? How much has been spent and how much 
of it remains unobligated? I have got them written down. So if 
you forget one, I will get you on another.
    Ms. Jonas. Senator, let me start out and then I will let 
Mr. Grone talk to some of the specifics on the MILCON piece.
    Senator Allard was present at a Senate Budget Committee 
where the Deputy Secretary of Defense committed to working with 
the Congress on the issue. We understand that there are 
concerns here and working some alternatives to deal with the 
situation as it is. Mike Wynne, who is the acting Under 
Secretary for AT&L, of course, is the principal in charge of 
this program. I would be happy to make sure that we get for you 
for the record all the answers to those questions. I am not 
sure I have them all.
    [The information follows:]

    The Department has released funding previously withheld in fiscal 
year 2005 to commence the redesign and construction of the destruction 
facilities managed by the Assembled Chemical Weapons Alternatives 
(ACWA) program. The ACWA program has completed sufficient analysis of 
methods that balance cost, schedule and performance objectives to make 
a determination as to which is the most prudent design approach to 
maximize the opportunity to meet the extended 100 percent Chemical 
Weapons Convention destruction deadline of April 29, 2012. The fiscal 
year 2005 funds and those funds requested for fiscal year 2006 should 
be sufficient to manage the ACWA program through the end of fiscal year 
2006.

    Ms. Jonas. My understanding is that--and I do not have the 
specific numbers on the obligations, but on the prior year 
obligations, a good portion of those funds have been obligated. 
There are some that have not been, and Mike Wynne is looking at 
a spend plan on that to try to deal with the situation.
    But I would say that the Deputy Secretary of Defense 
committed to working with the Congress on potential 
alternatives regarding those two sites.
    Senator Feinstein. Well, you really have not answered the 
questions. But what you are saying is we are working on it. 
$285.5 million has been appropriated by this committee.
    Ms. Jonas. Right.
    Senator Feinstein. What I am asking for, I guess, if you 
are not going to use it at these sites, tell us now. Tell us 
what you are going to do with the money.
    Ms. Jonas. Certainly.
    Senator Feinstein. This has been going on for what? This is 
the third year now.
    Ms. Jonas. Senator, I would be happy to get with Mike Wynne 
and get back with you and your staff to give you the exact 
information that you are requesting. My understanding is there 
is some money that Mike has got on a withhold because he is 
concerned about a spend plan and some cost overruns on that. 
But I would be happy to work with you on that.
    Senator Feinstein. Can you tell us if you are going to go 
ahead with these two sites? Yes or no?
    Mr. Grone. Senator, where I think are now--and I would like 
to elaborate on a couple of the points that my colleague has 
made.
    So far through the program, we have met all our required 
milestones to date, to speak to the point on demilitarization. 
We have destroyed 35 percent of the stockpile. The next 
milestone requires destruction of 45 percent of the stockpile 
by December 2007, and as we sit here today, that deadline is 
achievable.
    As the subcommittee is aware, we have seen significant cost 
growth in the chemical demilitarization program overall.
    Senator Feinstein. I do not want to take up your time. I am 
asking about two sites: Pueblo, Colorado and Kentucky.
    Mr. Grone. The acting Under Secretary has asked for a 
number of alternatives to be looked at. Once that spend plan 
and those alternatives are assessed, we would be in a better 
position to answer the question. All options are on the table. 
None are off the table. And in order to fulfill our 
responsibilities as a Department to ensure that we have a cost 
effective, safe, treaty-compliant program, we need to look at 
all the options given the cost growth that we have had in the 
program, and that is what we are trying to do.
    Senator Feinstein. Well, let me just ask this. You 
basically have not answered the question. You may not be able 
to. I appreciate that. But for 3 years we have appropriated 
money. It seems to me we ought to know whether this money is 
going to be used for that. It is a lot of money. And if it is 
not, whether it is unobligated and it can be used for other 
things.
    Ms. Jonas. Senator, I would be happy to get with you in the 
next couple of days. I will work with Mike Wynne to make sure 
that we get an answer to that question. But my understanding 
was that he was looking at a spend plan on it and that is why 
the withhold took place.
    [The information follows:]

    Yes, we are going to go ahead with these two sites. The Department 
has now released all prior years and fiscal year 2005 appropriated 
funds for Blue Grass and Pueblo.

    Senator Feinstein. Okay, but the bottom line is you are 
uncertain whether you are going to go ahead or not go ahead. 
Right?
    Ms. Jonas. I need to talk with Mike Wynne about where they 
are with respect to his spend plan. I will not make any 
assumptions right now, but I will be glad to get back to you in 
short order.
    Senator Feinstein. When you get back to us, if you could 
bring the information, exactly how much has been spent and for 
what it has been spent, and also what the alternatives are that 
you are considering.
    Ms. Jonas. Absolutely.
    Senator Feinstein. I appreciate that.
    I will reserve my questions so others have a chance.
    Senator Hutchison. We will have a second round.
    Senator Allard.
    Senator Allard. Madam Chairman, thank you very much, and I 
want to thank Senator Feinstein for pursuing that line of 
questioning. It is exactly the same line of questioning that I 
put before you, Ms. Jonas, in previous hearings. I have asked 
the same line of questions at the Subcommittee on Defense, 
asked the same line of questions at the Budget Committee when 
we had our hearing there, and we have the same line of 
questions here. I think they are very important questions that 
we are asking.
    We are not going to be in compliance with the Chemical 
Convention Treaty which has been ratified by the Senate. We had 
testimony from the Secretary of State, Condoleezza Rice, saying 
that if we do not comply with the treaty, it just makes her job 
that much more difficult. So this is an important issue to the 
country, not just Kentucky and Colorado.
    Mr. Grone--did I pronounce your name right? Grone?
    Senator Hutchison. Grone.
    Senator Allard. I am sorry.
    Mr. Grone. That is quite all right.
    Senator Allard. Mr. Grone, I apologize.
    But the point I want to make is that you say all options 
are on the table and the study that you are making includes all 
options. Now, we have in Federal law a provision that says that 
you will not ship interstate chemical weapons or material from 
these chemical weapons stockpiles without permission from the 
Governor or a declared emergency by the President. And none of 
those conditions exist in either Kentucky or Colorado or the 
neighboring States.
    We have already had three studies in Colorado at the Pueblo 
site. Now, why in the world, after we have had three studies, 
are we having another study? We are spending $150,000 on that, 
which could easily be used to begin to put in some of the 
infrastructure ahead of time. To me it seems like an absolute 
waste of taxpayer dollars.
    Now, if you have problems with cost overruns, then I think 
we ought to address that issue. But I do not see why you are 
spending taxpayer dollars on a study on an activity that is 
illegal. You are not going to ignore the law, are you?
    Mr. Grone. No, sir.
    Senator Allard. So I do think this does require serious 
consideration. The Pentagon has simply just not treated this as 
seriously I think as they should, and I hope they do.
    Ms. Jonas. Senator, I would just add that it was the Deputy 
Secretary that committed to work with you and other Senators on 
this very matter.
    Senator Allard. That is correct.
    Ms. Jonas. And I know he is hard at work at that. It is 
very much on his plate, and I know he has held several meetings 
on it already. So we would be happy to get back to this 
committee on plans for the future.
    Senator Allard. I for one would be very interested in 
getting the information that was requested by Senator 
Feinstein, and she would probably be interested in getting the 
information that you might provide to my office too.

                BUFFER AREA AROUND FORT CARSON, COLORADO

    I am going to go on to something that is probably a little 
easier subject. One of the things that we are looking at Fort 
Carson--we have introduced legislation for this--is a buffer 
area around the base. National bases all around the country are 
having urban encroachment occurring on them. I think we have 
probably all experienced this in our States. As a result of 
that, it is difficult for them to carry out their mission.
    We have a unique situation in the State of Colorado in that 
we have a large amount of open space around Fort Carson that is 
owned by very few landowners. This provision, which was just 
passed by Congress last year, has not been applied to any base. 
So Fort Carson I think is going to be our first test as far as 
this is concerned.
    I would like to get some of your views on this. We are in 
the process now of negotiating with the local property owners 
and it is strongly supported by the local community, strongly 
supported by the commanders at the base. From what I can tell, 
everybody in the Pentagon is enthusiastic about it. I would 
just like to have maybe some comments that you might have on 
this approach and what concerns you may have, if any.
    Mr. Grone. Well, Senator, I appreciate the opportunity to 
comment on it because the general initiative is managed by my 
office.
    We had requested funds last year. Several years ago we had 
sought authority from the Congress to begin this type of 
important buffer initiative which Congress graciously enacted. 
We would have the ability with this to improve the long-term 
stewardship and management of encroachment around many of our 
installations.
    We had requested $20 million in funds last year from the 
Congress, and through the budget process, we ended up with 
$12.5 million for fiscal year 2005. We followed up that request 
with an additional request which will be pending in the Defense 
Subcommittee for $20 million in fiscal year 2006.
    The issues at Fort Carson are a high priority issue. For us 
it is a priority for the Army. We are working now on how to 
begin to implement a good deal of the program there. We do have 
some initial experience with these kind of initiatives. A lot 
of what we are doing now was rooted in some local initiatives 
in and around Fort Bragg, North Carolina, and pursuant to the 
authority provided by Congress 3 years ago, we have conducted 
two agreements in the State of Florida, one around Camp 
Blanding to benefit the Florida National Guard, and the other 
around NAS Pensacola, Eglin Air Force Base, between the Navy 
and Escambia County.
    So we are looking at locations all across the country not 
just to use the defense-wide fund, the $20 million we have 
requested this year, but also the services have the ability to 
tap their own O&M funds for this if they have a willing seller 
and if it is something that needs to be critically executed in 
that fiscal year. So we are looking very hard at it.
    It is a very, very positive initiative. It rests on a 
serious of cooperations and cooperative relationships between 
us, the State, and nongovernmental entities. It holds out the 
long-term prospect of being a very key part of our ability to 
guard against encroachment at our installations. We certainly 
support those efforts.
    Senator Allard. I thank you for your response and look 
forward to working with you on that.
    Thank you, Madam Chairman.
    Senator Hutchison. Thank you.
    Senator Landrieu has joined us. Welcome.

                 STATEMENT OF SENATOR MARY L. LANDRIEU

    Senator Landrieu. Thank you, Madam Chair. I just want to 
say how glad I am to be again joining you on this committee. 
There was some question as to our organization. I am happy that 
our committee not only survived but picked up the oversight of 
veterans and look forward to working with all of you in that 
regard.
    I also have a statement for the record, and I apologize for 
being late. So I will just submit it. But I would like to just 
refer to part of that opening statement and then get to my 
questions.
    I wanted to mention in the opening the success that we have 
had--and to thank our panel--in Louisiana for our public/
private venture program, as we refer to it, PPV. Many of our 
States have experienced similar successes. But, Madam Chair, 
that success that was experienced at our naval air station, now 
the joint reserve base in Belle Chasse, is very worth noting.
    Because of the basic radical transformation in an extremely 
positive way of the housing there and the establishment of a 
brand new school, which was done, as I understand, because I 
helped to do it, in quite a unique way, a new partnership 
between the State, the local school board, and the Federal 
Government, at minimal expense to the Federal Government, 
frankly at minimal additional expense, based on the way that it 
was done, we now have just an excellent school operating right 
here next to this base with 600 children and plans for a 
second, brand new housing, morale lifted, families together.
    It leads me, as we begin this cycle, to really think about 
the quality of life and retention related to keeping families 
together and happy. We might recruit a soldier, but we retain 
families. And part of our committee structure is underlining 
and supporting the notion that whether you are the soldier or 
the spouse or the child, the whole family is really serving, 
and the obligation that we have to that entire family for their 
housing, their security on base and off of base.
    So I wanted to cite that in my opening and submit the rest 
of my statement.
    [The statement follows:]

             Prepared Statement of Senator Mary L. Landrieu

    Madame Chairman: Thank you for calling this hearing to review the 
President's budget for Defense-Wide and Navy and Marine Corps Military 
Construction. We use very clinical terms in the present setting like 
``BAH'' (Basic Allowance for Housing), and ``BEQ's'' (Basic Enlisted 
Quarters) of MHA's (Military Housing Areas). While every field needs 
its acronyms, I wonder if we don't sterilize the items we are 
referencing. One of the core missions of this portion of our defense 
budget is to provide homes for our soldiers. Not housing but homes.
    When you think of it in those terms, questions about quality of 
life flow more naturally. If this base is a home for our sailors 
returning from a year or more at sea, or leaving their families behind 
as they deploy to the far corners of the earth, what kind of place is 
it? Do these homes give comfort to our troops when they are deployed or 
do they generate more worry? Has the government helped create a 
community, or have we simply ``housed'' our military families like we 
do equipment.
    These are the questions that we must ask ourselves as we give 
closer scrutiny to the President's request for Defense-wide, Navy and 
Marine Corps military construction. Madame. Chairman, I'd like to 
mention one area that has been a notable success, and that is the 
execution of the Public, Private Venture program, or PPV, by the 
Department of the Navy. I know, because our former Naval Air Station, 
and now Joint Reserve Base, in Belle Chasse, Louisiana has been through 
this process. At minimal cost to the government, dilapidated housing 
stock was completely replaced with new on-base accommodations. They are 
clean, comfortable and worthy of the commitment that our men and women 
make to their government. It has also had a notable impact on the 
number of geographic bachelors serving at Belle Chasse. So-called 
geographic bachelors are servicemen and women who leave their families 
behind at their previous service station because they do not want to 
move them to new locations.
    There are a variety of reasons for geographic bachelors lack of 
base housing, poor public schools, and lack of economic opportunity for 
non-military spouses. What we do know is that the proliferation of 
geographic bachelors contributes to high military divorce rates. 
Compound that fact with the current operations tempo for all the 
branches of service, and you begin to understand why military families 
are under stress. In light of this strain, we must make every effort to 
eliminate geographic bachelors in order to support our troops and 
military families. The PPV program has been a valuable tool in this 
mission.
    The other excellent aspect of PPV for our State is that the project 
request was made in such a way that local Louisiana companies could 
compete for the work. To me, that is a win, win, win situation. Our 
servicemen and women get homes much faster than they would have under 
the status quo, the Navy and the DOD get high quality homes at a 
fraction of the cost of building it themselves, and the local economy 
benefits as jobs are created in the surrounding community. What is 
more, unlike other projects, you actually have an accountable developer 
who is tied to the local community, and therefore, whose reputation 
will suffer if the work is not up to par.
    In too many construction projects undertaken by the DOD, the RFP's 
are designed so that only the usual suspects can participate. They are 
so enormous in scope, and carry such high requirements for previous 
experience that only a handful of companies in the country can compete, 
much less local firms. I do not believe that this approach is good for 
the bases, good for the contracts, or good for the taxpayer's dollar. 
When it comes to craftsmanship, schedules and oversight, bigger is not 
always better.
    Finally, let me say a word about Base Realignment and Closure. 
There are two items that concern me about this process. The first is 
that I am unconvinced that there has been sufficient communication 
between the DOD and its sister agencies about the BRAC process. In 
particular, I am concerned about a lack of consultation with the 
Department of Homeland Security. Many military facilities and certainly 
some in my State, have a dual function. Belle Chasse is not just an 
airfield for the Navy, Marine Corps and Air Force. It also plays host 
to aviation assets of the Customs Service. It does not appear that 
there has been any systematic attempt to consider the needs of other 
Federal agencies in the BRAC process. Nor does there appear to be any 
coherent way for the full Federal Government to participate in 
realignment. Are there Federal agencies that would benefit from 
integrating functions and facilities with a defense installation? 
Absolutely. Would the Department benefit from tenants, and shared 
overhead? Certainly. Yet, there is no way in this BRAC process to 
identify and quantify these prospects or savings.
    Secondarily, and this returns to the issue of quality of life, as 
we consider relocating our troops in Europe to locations that may be 
closer to perceived fault lines, it is important that we again consider 
the impact of our global footprint on military families. It may be 
possible to save some transportation costs by forward deploying our 
troops into countries where they will not bring their spouses and 
families. But contributing to the unaccompanied spouse phenomenon is 
not in the long-term interests of the military. As my friend Max 
Cleland was fond of saying, we recruit a soldier, but we retain a 
family. So if we expect to dig ourselves out of the recruitment and 
retention holes in which we currently find ourselves, it is vitally 
important that we keep an eye on the future. If we force our soldiers 
to choose between their families and their uniform, we must expect that 
they are going to leave their uniforms behind in many instances.
    Madame Chairman, Senator Feinstein, thank you both for your 
leadership on these issues. I look forward to the testimony of our 
witnesses.

      TAKING INTO ACCOUNT OTHER FEDERAL AGENCIES IN BRAC ANALYSIS

    Senator Landrieu. These are my two questions, again getting 
back to this separation, Mr. Secretary. As you know, one of 
them is about separation. This is about BRAC.
    As you know, we are going through the BRAC process. We are 
all engaged in that. Because of the conversations I have had 
with folks in my State, my question is, is there a process, 
formal or informal, that you engage in with other non-military 
but Federal tenants related to decisions related to BRAC? In 
other words, is that taken into consideration, other Federal 
tenants in or around military bases? And if that is taken into 
consideration, how do you? And if not, why are we not taking 
that into consideration?
    Mr. Grone. Senator, the way I can answer the question best, 
maybe not completely, but the best way I can answer it at the 
present time is that the statutory authority for a 2005 round 
of base closure and realignment requires us to take into 
account the effect of our actions on other Federal agencies.
    Senator Landrieu. Requires you to do so.
    Mr. Grone. Requires us to take into account our actions on 
other Federal agencies, and we are doing that. I would prefer 
not to detail how that is being done, as it is part of the 
internal deliberations over the BRAC process, but we do have a 
statutory mandate to take into account the effect of the 
Secretary's recommendations on other Federal agencies, and we 
will certainly comply with the statutory requirement.
    Senator Landrieu. I appreciate that, and I will discuss 
that with you further because there is some concern about that 
process basically related to the Belle Chasse area because 
there are other Federal agencies that have plans for the future 
already firmly in place. That would have some bearing on the 
outcome of that. But I will follow up.

                   KEEPING MILITARY FAMILIES TOGETHER

    The other is on the issue of families. Secretary Rumsfeld 
announced he wants to reshape our military global footprint. 
This committee is in the process of working with him to do 
that. As you know, we had a lot of bachelors basically based in 
Okinawa and Korea. Whether they were real or military 
bachelors, it is because their families could not join them.
    Now, as we reshape that base, what is our philosophy or 
plan for keeping families together, given the rise of divorce 
rates sometimes with our military families, our values to keep 
families together, keep families happy, keep them encouraged, 
keep the morale up because deployments are high? Could you just 
give us a comment about your views about reshaping this 
footprint relative to keeping spouses and children serving 
together where possible?
    Ms. Jonas. I will let Phil talk to the bachelors quarters.
    I will say I am the wife of a retired marine, and I am 
quite familiar with the separation and understand the 
importance to families of support.
    There are some initiatives in our overall budget and in the 
supplemental also for recruiting and retention bonuses. We do 
have a family support center that we have begun. I would be 
glad to provide for you all those types of things for the 
record that we are doing to make sure that the families get the 
support they need. This Military One Source is a center that is 
available 24/7 to military families to answer a plethora of 
questions apparently from where can I find a plumber to can you 
help me with my health care. So there are many initiatives like 
that.
    [The information follows:]

    The following bonuses, authorized in Chapter 5 of title 37, United 
States Code, were included in the Department of Defense fiscal year 
2006 budget request.
    (NOTE: Programs marked with an asterisk (*) are for members on 
active duty; all others are for Reserve Component personnel on other 
than active duty.)
Enlistment/Accession
  --*Enlistment Bonus
  --*Accession Bonuses for Nuclear Officers, Dental Officers, Pharmacy 
        Officers, and Registered Nurses
  --Selected Reserves Non-Prior Service Enlistment Bonus
  --Prior Service Enlistment Bonus
  --Accession or Affiliation Bonus for New Reserve Component Officers
Retention
  --*Selective Reenlistment Bonus
  --*Critical Skills Retention Bonus
  --*Special pay for retention of Aviators, Nuclear Officers, Special 
        Warfare Officers, Surface Warfare Officers, Officers in the 
        Health Professions (Medical and Dental Officers, Optometrists, 
        Certified Registered Nurse Anesthetists), and Pharmacy Officers
  --Reenlistment Bonus for Selected Reserves
  --Special pay for retention of Critically Short Wartime Health 
        Specialists in Selected Reserves
Other
  --*Incentive Bonus for Conversion of Military Occupational Specialty 
        to Ease Personnel Shortages
  --Affiliation Bonus for Service in Selected Reserves
  --IRR Enlistment, Reenlistment or Extension Bonus

    Senator Landrieu. Well, I am generally familiar with those. 
I guess I was not specific. If I could, Madam Chair, have just 
a minute.
    I am generally familiar with the variety of services that 
are offered, but specifically when it comes to the part of our 
budget, which is partly housing and building housing and a new 
footprint, are we building the family housing units, whether 
renovating the current ones that we are in like one of the 
examples I just gave, or as we develop this new footprint, is 
our goal to build them in such a way that families can 
basically not deploy, of course, to the front line together, 
but if they are building in the Mideast or Europe or back here 
where they can be housed at least together and serve from a 
base together? Is that part of our philosophy or are we doing 
something different?
    Mr. Grone. Senator, let me attempt to answer the question 
in this way. Currently roughly two-thirds of our military 
families live in the private economy. As we develop our on-base 
housing for privatization options, those are being renovated 
and new construction constructed to appropriate commercial 
private sector standards. So they provide and will provide our 
families with more housing options, better quality housing 
options, whether they choose to live off base, on base in a 
concentrated military community, or elsewhere.
    We are also looking at barracks privatization as one of our 
options to continue to advance this program forward to be able 
to begin to deal with quality of life concerns of the 
unaccompanied.
    The senior enlisted recently testified before your 
colleagues in the House. Ms. Jonas and I were before Chairman 
Walsh not too long ago, and the question arose with regard to 
child care specifically as an example where the senior enlisted 
have expressed concern. The Congress and the leadership of the 
Department have always responded, and I think responded 
appropriately and well, when the senior enlisted have raised 
issues and we have begun a process, internal to the Department, 
to look at ways in which we can improve child care options for 
our people. We do not have a program yet to bring forward with 
a revised set of priorities or policies, but we are taking a 
hard look at it.
    So whether it is the family support centers that my 
colleague referenced or housing privatization, child care, we 
are doing the things that we think we can to improve the 
ability of the military community to be supported and supported 
appropriately.

                       ARMY MILITARY CONSTRUCTION

    Senator Landrieu. Thank you so much.
    Senator Hutchison. Secretary Jonas, I notice that--and 
Senator Feinstein mentioned this--the Army MILCON request is 
down 16 percent from last year. Air Force is up 61 percent. I 
realize that every service has its own spending plans and you 
cannot tie them together necessarily.
    However, it seems that the Army is facing the most severe 
facility demands. They are bearing the biggest brunt of the war 
on terror, and they are also going to be the primary forces 
moving back from overseas. Yet, the restationing of the Global 
Posture Review is going to come out of the Army's own MILCON, 
meaning that you are going to be asking them to take $2.5 
billion out of their own FYDP. This is a concern to me, and I 
wonder if it is a concern to you and if the Department has 
really looked at this carefully.
    Ms. Jonas. Well, let me begin. I certainly understand your 
concerns.
    With all services, as you know, they build their budgets 
and we work very carefully and closely with them. The Army made 
a choice--and Mr. Grone may want to discuss this a little bit--
to realign some of their resources. As you may know, there are 
many things going on within the Army. I will mention the Army's 
modularity program and restructuring of their forces. If you 
are not familiar with it, let me just explain.
    General Schoomaker is trying to increase the operational 
size of his Army and adjusting his brigades so that where you 
might have had for a division with three brigade combat teams, 
you now would have four. So our supplemental request is asking 
for funds to outfit that fourth unit. The importance of that, 
of course, is to take the strain off the force. If you have 
four units instead of three, you do not have to call up the 
Guard or Reserve units to go. So that is an important part of 
this mix there.
    I am not intimately familiar with the BRAC process. I have 
been outside of that process. But that is consistent with the 
global posture things that they are doing. This was the Army's 
best judgment as to how to realign its resources.
    I understand your concerns. Maybe Phil can further speak to 
their specific judgments there, but I understand your concerns, 
Senator.
    Mr. Grone. Senator, I would just add one point to that. 
While the Army did accept a little bit more risk with this 
budget request, in terms of comparing one budget request to the 
other, comparing it to the appropriate level, the Army's 
recapitalization rate, for example, is just about right on the 
corporate profile at 111 years. So they are not, with this 
budget request, too far out of phase with the overall general 
direction of the Department.
    And certainly within the context of BRAC, as we rebase 
forces from abroad, as we realign missions domestically, a good 
deal of construction activity will accompany that through the 
BRAC account. Historically roughly one-third, or 30 percent, of 
the $22 billion we spent in prior BRAC activity was for 
military construction and military family housing purposes. We 
do not know precisely how much yet and we do not know what the 
phasing of it will be and how much of it would be Army in the 
first year of implementation, but there will be money that will 
be coming back to the Army in terms of the Army's ability to 
reset the force through basing as a result of BRAC.
    So certainly there are things we would like to continue to 
accelerate for the Army, but the Army's program, given all the 
other demands on the Army, is reasonably well balanced.
    Senator Hutchison. Let me just say I am familiar with what 
General Schoomaker is doing, but I think the Department has a 
responsibility to look at the allocations that it is giving to 
each of its services. I believe the Army is doing the most 
restructuring. It is bearing the greatest part of the war that 
we are fighting now. The Marines are as well, but that is a 
smaller unit. And to say that they are going through this 
upheaval with four brigades instead of three means, it seems to 
me, that they are going to need more, not less.
    I have visited every kind of base. I have visited Air 
Force, Navy, Army, and Marine. I think basically the Army is 
behind and getting further behind. I do not think that is the 
right trend when we are asking them to do so much. I have never 
talked to General Schoomaker about this. He has never raised it 
with me, but when I step back and look at all the other things 
he is doing and then look at this program, it does not seem 
balanced to me.
    So I would just ask you to look at that again very 
carefully. I know that you probably give each of the services a 
top line and this is what they have to spend, and he has chosen 
wisely on his first priority to spend it on the 
reconfiguration. But I do not think that means he does not also 
very much need more in this area.
    I have been out to Fort Bliss and Fort Hood, and we are 
putting more troops particularly into Fort Bliss where they are 
going to have to do a lot of temporary housing for the troops 
that are going in. They have plenty of space at Fort Bliss. It 
is a great place to add, and it can take another 5 or 10 
brigades. But I just think we need to be planning for all of 
that and making sure we are looking at what this influx back 
from Europe is doing, plus the reconfiguration, plus the added 
troops they are putting in combat to relieve guard and reserve.
    All the things that are being done are very efficient from 
an operational standpoint when it is done, but it just seems to 
me that you also are going to need to take care of the housing 
and schools and the things that are going to be necessary to 
augment those changes. This does not, on its face, show that.
    Any comments?
    Ms. Jonas. We appreciate your comments. We will certainly 
work with the Army on that. I would just note the supplemental 
request does ask for some funds associated with the restructure 
in the MILCON area.
    Senator Hutchison. Yes. It may be that we have to do some 
things in a supplemental, which I am prepared to do.

                       MARINE CORPS RESTRUCTURING

    Just one last point and then I will go to the others. On 
that same point, the Marine Corps is, in the supplemental, 
asking for $77 million for restructuring from its force 
structure review, but that does not look like it is enough. You 
are probably going to have to have some temporary housing for 
the marines from everything that we can tell. So is $77 million 
enough to do what you are going to need to do with the marines 
arriving this summer at their new locations? I think they are 
coming in this summer.
    Ms. Jonas. Of course, we are working with them. At the time 
we put the supplemental together, the $75 million was where we 
were. Of course, requirements always change and I understand 
that they had some additional requirements for explosive 
ordnance disposal and other things. We will continue to work 
with the Marine Corps. We do a lot also during the year and the 
year of execution to understand where people are at and where 
the services are at with respect to their requirements.
    Senator Hutchison. Be sure you do this before we pass the 
supplemental. If there need to be adjustments, we certainly 
want to do it now and not to have to have another supplemental. 
As you know, it is very difficult to get these and to manage 
them.
    Ms. Jonas. Absolutely. But we will have a mid-year 
execution review here shortly, so we should have a good idea of 
where we are.
    Senator Hutchison. Thank you.
    Senator Feinstein.
    Senator Feinstein. Yes. Thank you very much.

                     FISCAL YEAR 2006 BRAC FUNDING

    Mr. Grone, the MILCON budget request includes a $1.88 
billion wedge to implement the 2005 BRAC round, of which $314 
million is earmarked for the Pentagon's global basing plan. 
Now, that is a large amount of money to be obligated within 1 
year, particularly given the long budgetary lead times that the 
Department so often cites in justifying decisions to fund such 
Army modularity through the supplemental.
    What types of activities will be funded in 2006 with the 
BRAC wedge? And how did the Department come up with the figure 
of $1.88 billion? What metrics were used?
    Mr. Grone. Senator Feinstein, the purposes of the account 
support all of the activities associated with the closure and 
realignment decisions. So military construction, operations and 
maintenance, PCS costs, family housing, environmental 
remediation----
    Senator Feinstein. It is $1.5 billion.
    Mr. Grone. Yes, ma'am.
    From the perspective of how we put it together, again what 
we did was we took a lesson from our prior BRAC activity. In 
the 1993 round, we asked for an amount of funds in the first 
year that was roughly equivalent in today's dollars to $1.5 
billion. In 1995, we asked for a request that would be in 
today's dollars approximately $1 billion. Knowing that we are 
not able to know precisely today, given the state of the 
recommendations, what we are able to sort of work through, we 
took a good, hard look at those lessons. The GAO's criticisms 
of the Department from the 1995 round suggested that we hold 
back on recommendations we might otherwise have brought forward 
out of cost considerations. So when looking at the experience 
of history, when looking at the needs for global posture 
realignment that would be executed through BRAC, $1.9 billion 
seemed an eminently reasonable figure, and I would fully expect 
that we would expend those funds.
    As I indicated to Senator Hutchison earlier during a 
question, we will provide a full report upon the disposition of 
the BRAC recommendations that will detail at great length how 
we will expend those funds in fiscal year 2006, and then in all 
subsequent fiscal years, it would become part of the normal 
budget justification process where we will detail all of that 
expenditure.
    Senator Feinstein. Could we also get an analysis of how 
these funds were spent in the past round?
    Mr. Grone. Yes, ma'am. But I can give you a very broad 
overview at this point, and we can certainly provide more 
detail for the record.
    [The information follows:]

    DOD Base Realignment and Closure (BRAC) Justification Data for 
previous BRAC rounds was provided to Congress in February 2005. A copy 
of that report is attached.

                     DOD Base Realignment & Closure

                 BASE REALIGNMENT AND CLOSURE OVERVIEW

Background
    The Defense Secretary's Commission on Base Realignment and Closures 
was chartered on May 3, 1988 to recommend military installations within 
the United States, its commonwealths, territories, and possessions for 
realignment and closure. The Congress and the President subsequently 
endorsed this approach through legislation that removed some of the 
previous impediments to successful base closure actions. The Defense 
Authorization Amendments and Base Closure and Realignment Act, Public 
Law 100-526, as enacted October 24, 1988, provides the basis for 
implementing the recommendations of the 1988 Commission. Under this 
Act, all closures and realignments were to be completed no later than 
September 30, 1995. Funding for these actions was included in the Base 
Realignment and Closure Account--Part I (BRAC I) which covered fiscal 
years 1990 through 1995.
    The National Defense Authorization Act for fiscal year 1990 and 
1991, Section 2831, allowed for the one-time transfer of $31 million 
from BRAC I into the fiscal year 1990 Homeowners Assistance Fund (HAP). 
The HAP funds are used to assist employees who are forced to move as a 
consequence of base closures and who find that they must sell their 
homes in real estate markets which have been adversely affected by the 
closure decision.
    In the Committee Reports accompanying the fiscal year 1990 Military 
Construction Appropriations Act, the Congress began applying some 
restrictions on the use of BRAC I funds. Concerned that the one-time 
implementation costs had increased by $1 billion when compared to the 
1988 Commission's estimate, the House Appropriations Committee (HAC) 
adopted a spending cap for military construction and family housing of 
$2.4 billion. This cap was reflected in the fiscal year 1990 act 
itself. The fiscal year 1992 Military Construction Appropriations Act 
lowered the cap to $1.8 billion commensurate with the budget request.
    On November 5, 1990, The President signed Public Law 101-510, Title 
XXIX, Defense Base Closure and Realignment Act of 1990, establishing an 
independent commission known as the Defense Base Closure and 
Realignment Commission which met only during calendar years 1991, 1993, 
and 1995. The purpose of the Commission was to ensure a timely, 
independent, and fair process for closing and realigning U.S. military 
installations. The actions to implement the recommendations of the 
1991, 1993, and 1995 Commissions are underwritten from the Base 
Realignment and Closure Account 1990 (BRAC II). By statute, action must 
be initiated no later than 2 years after the date on which the 
President transmits a report to Congress and all closures and 
realignments must be completed no later than the end of the 6 year 
period beginning on the same date. The implementation period for the 
1995 authorized round of base closure was complete as of 13 July 2001.
    Public Law 101-510 included a number of other provisions affecting 
base closure, one of which, section 2923, designated the Base Closure 
Account (BRAC I) to be the exclusive source of funds for environmental 
restoration projects at round one closure sites. The National Defense 
Authorization Act for fiscal year 1992, Section 2827, designated Base 
Closure Account 1990 as the exclusive source of funds for environmental 
restoration projects at closure sites approved by the 1991, 1993, and 
1995 Commissions.
    The intent of this section was to preclude the cleanup actions at 
bases slated for closure from competing with other sources of funding 
for environmental cleanup such as the Defense Environmental Restoration 
Account (DERA). A total of $9,007.1 million has been made available for 
cleanup for the four rounds of base closures through fiscal year 2005. 
The fiscal year 2006 budget program includes $449.1 million for 
environmental restoration at BRAC bases.
    The fiscal year 2002 National Defense Authorization Act, authorized 
an additional round of base realignment and closure in 2005 by amending 
the Defense Base Closure and Realignment Act of 1990 (Public Law 101-
510). The Secretary of Defense's BRAC 2005 recommendations for base 
closure and realignment must be provided to the BRAC 2005 Commission 
not later March 16, 2005. The Department of Defense Base Closure 
Account 2005 (Treasury code 0512) has been established as a single 
account on the books of the Treasury to execute actions to implement 
BRAC 2005 approved closures and realignments.

Budget Justification Requirements
    The Defense Authorization Amendments and Base Closure and 
Realignment Act, Public Law 100-526, is specific in the types of 
information required as to budget justification. The Act states, ``As 
part of each annual budget request for the Department of Defense, the 
Secretary shall transmit to the appropriate committees of Congress:
  --A schedule of the closure and realignment actions to be carried out 
        under this title in the fiscal year for which the request is 
        made and an estimate of the total expenditures required and 
        cost savings to be achieved by each such closure and 
        realignment and of the time period in which these savings are 
        to be achieved in each case, together with the Secretary's 
        assessment of the environmental effects of such actions; and
  --A description of the military installations, including those under 
        construction and those planned for construction, to which 
        functions are to be transferred as a result of such closures 
        and realignments, together with the Secretary's assessment of 
        the environmental effects of such transfers.''
    The fiscal year 2006 budget justification material has been 
developed to comply with the above requirements. The BRAC Executive 
Summary Book provides an overview of the BRAC costs and savings for 
each DOD Component through the 6 year implementation period. The DOD 
Components have prepared separate justification books providing 
detailed information by realignment and closure package, broken out by 
one-time implementation costs, anticipated revenues from land sales, 
and expected savings. This comprehensive approach addresses the total 
financial impact of realignment and closure actions and provides 
justification for the funds requested in the Base Closure Accounts.
DOD Base Closure Account Capitalization and Funding
    The Department has complied with the guidance contained in the 
House of Representatives Report 101-76, Military Construction 
Appropriations Bill, 1990, July 26, 1989, to determine the proper 
method of capitalizing the DOD Base Closure Accounts. In denying 
general transfer authority to the Secretary of Defense, the Committee 
expressed the belief that the necessary one-time costs to implement 
base realignments and closures be requested as new appropriated amounts 
to facilitate improved accounting of the funds appropriated. 
Additionally, the Committee indicated that any savings or cost 
avoidance due to base realignment or closure should be reflected 
through reduced requirements in the annual budget requests for the 
affected appropriations.
    The manner in which the impacts of base realignments and closures 
are reflected in BRAC appropriations accounts is consistent with this 
language. The new BRAC appropriations requested represent the costs of 
environmental restoration and caretaker functions at bases closed under 
the prior rounds of base closure authority. Also included in the 
appropriation request are funds to be transferred to the Homeowner's 
Assistance Program for the purpose outlined in Section III. Since the 
fiscal year 1991 budget request, parcels of land have been transferred, 
without compensation to the Department, thereby reducing projected 
offsetting receipts. Section IV provides examples of anticipated 
revenue from the sale of land and facilities and the anticipated 
revenue loss from land transfers.
    The implementation of base realignment and closures requires the 
relocation of units and activities from one site to another. Recurring 
savings (reduced base operations costs) are realized through the 
increased efficiencies inherent in the consolidation of functions on 
fewer bases. The net savings are reflected as savings in the specific 
appropriations, primarily operation and maintenance, and are not 
incorporated in the DOD Base Closure Accounts.
    Estimates for savings or cost avoidance have been incorporated into 
the DOD Component appropriation account where they are to accrue, 
resulting in corresponding reduced budget requests for those 
appropriations. The annual recurring saving from the four prior rounds 
of base closure and realignment are projected to be about $7 billion 
after the implementation period ending in fiscal year 2001.

Financial Management Procedures
    The Defense Authorization Amendments and Base Closure and 
Realignment Act, Public Law 100-526, established the Defense Base 
Closure Account (BRAC I) as a mechanism to provide the required funding 
to implement the approved recommendations of the Base Closure and 
Realignment Commissions. Public Law 101-510, Title XXIX, Defense Base 
Closure and Realignment Act of 1990, established Base Closure Account 
1990 (BRAC II) as a mechanism to provide the required funding to 
implement the approved recommendations of the BRAC 1991, 1993, and 1995 
Commissions. From aspects of management, budgeting and accounting, both 
Accounts are treated in the same fashion. Funding approved by Congress 
in both Accounts is appropriated and authorized in a lump sum amount 
and may be spent for construction, planning and design, civilian 
severance pay, civilian permanent change in station, transportation of 
things, and other costs related to the realignment or closure of the 
subject bases. The management structure of the program is described 
below.
    The Deputy Under Secretary of Defense (Installations & Environment) 
is responsible for issuing policy for management of the BRAC program 
and overseeing the DOD Components' execution of the program.
    To properly account for and manage appropriated fund resources, the 
DOD Base Closure Accounts were established on the books of the Treasury 
to aid the DOD Components in the closure and realignment of certain 
military installations. Treasury has assigned account symbol 97-0103 to 
identify the DOD Base Closure Account--Part I, 97-0510 to identify DOD 
Base Closure Account 1990--Part II, Part III, and Part IV, and 97-0512 
to identify DOD Base Closure Account 2005.
    Funds made available to the DOD Components are subdivided and 
distribute to the activities responsible for base closure actions. 
Separate allocations are made for each of the accounts by program year. 
Each DOD Component distributes the base closure funds in accordance 
with its normal fund distribution procedures. The applicable reporting 
requirements include:
    Military Construction:
  --Construction
  --Planning and Design
    Family Housing:
  --Construction
  --Operations
    Environmental
    Operation and Maintenance (O&M):
  --Civilian Severance Pay
  --Civilian Permanent Change of Station (PCS) costs
  --Transportation of things
  --Real Property Maintenance
  --Program Management (civilian work years, TDY travel, and related 
        support dedicated to implementation efforts)
    Military Personnel (limited to PCS expenses dedicated to 
implementation efforts)
    Other (including procurement-type items)
    The Under Secretary of Defense (Comptroller) makes funds available 
to the DOD Components based on their official financial plans. 
Financial plans are prepared by the DOD Components in cooperation with 
and at the direction of the program manager, the Deputy Under Secretary 
of Defense (Installations & Environment). The DOD Components' financial 
plans and the subsequent allocation of funds are supported by detailed, 
line-item military and family housing construction justification. 
Separate narrative explanations for other planned expenditures are also 
submitted to the Under Secretary of Defense (Comptroller) in sufficient 
detail to support the DOD Component's Financial plan. The DOD 
Components are allowed to revise planned execution as the situation 
dictates but must notify the Deputy Under Secretary of Defense 
(Installations & Environment) and the Under Secretary of Defense 
(Comptroller) of all changes. To keep the Under Secretary of Defense 
(Comptroller) apprised of these changes, the DOD Components are 
required to submit a revised current year financial plan and supporting 
documentation on a quarterly basis to reflect the status of the current 
plan being executed. When a military construction or family housing 
construction project is to be executed, but does not appear on the 
approved construction project list, the prior approval of the Under 
Secretary of Defense (Comptroller), and Congress is required. This will 
ensure that the Department has complied with the notification 
requirements of the House of Representatives Report 101-176, Military 
Construction Appropriation Bill, July 26, 1989, prior to the 
expenditure of DOD Base Closure Account funds. Each DOD Component is 
allocated funds based upon its official budget justification and 
financial plan.
    Decision Rule for Determining the Validity of Charging Cost to the 
DOD Base Closure Accounts.--In addition to being supported by the 
detailed budget justification, the general criterion to be applied when 
deciding whether to charge specific costs to the DOD Base Closure 
Account is that the cost in question is a one-time implementation cost 
directly associated with the overall base closure effort. For example, 
the one-time operation and maintenance-type costs at R&D-funded 
installations are charged to the appropriate sub-account of ``Operation 
and Maintenance.'' Low-dollar value construction projects budgeted as 
lump sum under the real property maintenance category are charged to 
that sub-account and not the construction subaccount of military 
construction, which is reserved for projects listed individually on the 
financial plan accompanying the fund allocation document. Recurring 
costs driven by the transfer of workload from one location to another 
is budgeted for and charged to the non-base closure accounts.

                             BUDGET SUMMARY

    The tables on the following pages provide information on one-time 
implementation costs, expected savings, and revenues from land sales by 
DOD Component and approved BRAC closure round. BRAC I closures and 
realignments have been projected to cost $2.8 billion and will generate 
total savings of $2.4 billion and land sale revenue of $65.7 million 
during the fiscal year 1990-1995 implementation period. BRAC II 
closures and realignments have been projected to cost $5.2 billion and 
will generate total savings of about $8.1 billion and land sale revenue 
of $25.7 million during the fiscal year 1992-1998 implementation 
period. BRAC III closures and realignments have been projected to cost 
$7.6 billion and will generate total savings of $8.3 billion and land 
sale revenue of $3.4 million during the fiscal year 1994-1999 
implementation period. BRAC IV closures and realignments are projected 
to cost $6.8 billion and will generate total savings of $6.2 billion 
and land sale revenue of $230.2 million during the fiscal year 1996-
2001 implementation period.

               FISCAL YEAR 2006--BUDGET ESTIMATES BASE REALIGNMENT AND CLOSURE ACCOUNT PARTS I-IV
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                            Fiscal year
                                                 ---------------------------------------------------------------
                                                       2003            2004            2005            2006
----------------------------------------------------------------------------------------------------------------
  BRAC Parts I-IV Continuing Environmental and
                 Caretaker Costs
Army:
    Environmental...............................         162.821          61.851          92.050          89.380
    Operations & Maintenance....................          18.557          10.145           8.255           4.473
Navy:
    Environmental...............................         462.166          96.509         101.700         236.581
    Operations & Maintenance....................          12.268          13.402          13.350          39.392
Air Force:
    Environmental...............................         125.569         193.141         127.749         117.167
    Operations & Maintenance....................          22.975           4.796          18.062          17.560
Defense Logistics Agency:
    Environmental...............................          10.168           9.811           6.652           5.974
    Operations & Maintenance....................  ..............           1.000             300             300
                                                 ---------------------------------------------------------------
      Total Environmental and Caretaker Costs...         814.524         390.655         368.118         510.827
                                                 ---------------------------------------------------------------
Homeowner's Assistance Program..................  ..............  ..............  ..............  ..............
Prior Year Financing............................          27.216          18.228           6.952  ..............
Estimated Land Sale Revenue.....................         211.738           2.000         115.000         133.000
BRAC IV Budget Request..........................         575.570         370.427         246.116         377.827
----------------------------------------------------------------------------------------------------------------

    The fiscal year 2006 budget requests $377.8 million of new budget 
authority for environmental restoration and caretaker cost for 
facilities closed under the previous four rounds of base closure 
authority. This funding will ensure bases are continuing to be cleaned 
efficiently to speed the transfer of property to redevelopment 
authorities.
    Anticipated land sale revenue of $133 million will be used to 
offset a portion of the department's fiscal year 2006 BRAC requirements 
of $510.8 million.
    Annual recurring savings from the four rounds of base closure and 
realignment are projected to be about $7 billion after the 
implementation period ending in fiscal year 2001.

                               BRAC 2005

    BRAC 2005 will make a profound contribution to transforming the 
Department by eliminating excess capacity and reconfiguring 
infrastructure. The fiscal year 2006 budget request includes $1,881.0 
million to implement the anticipated approved recommendations from the 
BRAC 2005 Commission.




                     HOMEOWNERS ASSISTANCE PROGRAM

    The Homeowners Assistance Program (HAP) provides assistance to 
eligible service members and civilian employee homeowners who have 
suffered losses through the depression of the real estate market 
resulting from actual or pending base closures. Pursuant to section 
2832 of Title 10, United States Code, as amended by section 2831 of 
Public Law 101-89, the National Defense Authorization Act for fiscal 
year 1990 and fiscal year 1991, the Secretary of Defense was granted 
authority to transfer $31 million of funds appropriated in BRAC I to 
HAP. Accordingly, the Department of Defense transferred $31 million in 
fiscal year 1990 to accommodate valid homeowner assistance requirements 
arising from implementation of the 1988 Commission's recommendations. 
From fiscal year 1992 through fiscal year 1999 the required homeowners 
assistance funding associated with base realignments and closures was 
budgeted in the Homeowners Assistance Program administered by the 
Department of the Army as executive agent for the program. Beginning in 
fiscal year 2000, funds were appropriated in the BRAC program for 
transfer to the Homeowners Assistance Program during budget execution 
to allow more effective and efficient use of these funds in support of 
BRAC implementation. No funds are budgeted within the BRAC program for 
transfer to the Homeowners Assistance Program in fiscal year 2006.

              REVENUE FROM THE SALE OF LAND AND FACILITIES

    In capitalizing the base closure accounts, the additional 
appropriations to pay for the onetime costs of implementation have been 
offset by the amount of revenues that are anticipated due to the 
authorized sale of land no longer required by the Department. Since the 
fiscal year 1991 budget request, parcels of land have been transferred, 
without compensation to the Department, thereby reducing projected 
offsetting receipts. The tables on the following pages show the 
anticipated land sale revenue and examples of projected land sales no 
longer anticipated due to loss revenue resulting from transfers of 
property outside of the Department. Land sale receipts from base 
closures have amounted to $595.1 million through September 2004. These 
receipts are used to offset anticipated BRAC costs. Anticipated land 
sale revenue of $133.0 million will be used to offset a portion of the 
department's fiscal year 2006 BRAC requirements of $510.8 million.

 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Kapalama Military Reservation, HI.......................          38,529
Pontiac Storage Facility................................           3,100
Fort Holabird, MD.......................................             100
USA Reserve Center Gaithersburg, MD.....................             785
Stand-Alone Housing, Various Locations..................          23,199
                                                         ---------------
      Total.............................................          65,713
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET EXTIMATES--BASE REALIGNMENT AND CLOSURES--PART I
                       LOSS OF LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Lexington...............................................           7,379
Army Material Tech Lab..................................           3,124
Jefferson...............................................          28,925
AMC Other...............................................           8,030
Presidio................................................          42,986
Hamilton................................................          49,550
Sheridan................................................          59,092
Fort Douglas, UT........................................           7,379
Fort Meade, MD..........................................         447,770
Cameron Station, VA.....................................         212,624
Stand Alone.............................................          62,053
                                                         ---------------
      Total.............................................         928,912
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
ANTICIPATED/REALIZED LAND REVENUE--NAVY AND PART I LOSS OF LAND REVENUE--
                                  NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NRC Coconut Grove, FL...................................           7,134
NH Philadelphia, PA.....................................              25
NTB Salton Sea, CA......................................              14
                                                         ---------------
      Total.............................................           7,173
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                       LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Naval Station New York (Brooklyn, NY)...................          57,000
Naval Station Puget Sound (Sand Point), WA..............          60,000
                                                         ---------------
      Total.............................................         117,000
------------------------------------------------------------------------


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Chanute Air Force Base, IL..............................          13,000
George Air Force Base, CA...............................          90,000
Mather Air Force Base, CA...............................         305,000
Norton Air Force Base, CA...............................         100,000
Pease Air Force Base, NH................................         120,000
                                                         ---------------
      Total \1\.........................................          26,582
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


 FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART I
                     LOSS OF LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
George Air Force Base, CA...............................          90,000
Mather Air Force Base, CA...............................         305,000
Norton Air Force Base, CA...............................         100,000
Chanute Air Force Base, IL..............................          13,000
Pease Air Force Base, NH................................         120,000
                                                         ---------------
      Total.............................................         628,000
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Cameron Station, VA.....................................          15,661
Fort Ben Harrison, IN...................................           4,634
Sacramento Army Depot, CA...............................             299
Fort Devens, MA.........................................           1,998
                                                         ---------------
      Total.............................................          22,592
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                       LOSS OF LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Fort Devens, MA.........................................         112,000
Fort Dix, NJ \1\........................................          83,000
Fort Ord, CA............................................         399,750
Harry Diamond Lab, VA...................................          30,000
Fort Benjamin Harrison, IN..............................         102,227
Sacramento Depot, CA....................................          24,879
                                                         ---------------
      Total.............................................         751,856
------------------------------------------------------------------------
\1\ Note: The anticipated revenues from Fort Dix were reduced from $83.0
  million to zero. The basis of the reduction is the proposed
  utilization of Fort Dix by other Federal and State agencies which
  precludes disposal of the anticipated excess land.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                 ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
MCAS Tustin, CA.........................................         203,500
NAS Chase Field, TX.....................................             791
NCBC Davisville, RI.....................................              63
NAS Moffett Field, CA...................................           6,250
NH Long Beach, CA.......................................          14,075
NS Philadelphia, PA.....................................           2,000
                                                         ---------------
      Total.............................................         226,679
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                       LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NAS Chase Field, TX.....................................           2,000
NCBC Davisville, RI.....................................          22,000
NH Long Beach, CA.......................................           1,400
NS Long Beach, CA.......................................          21,250
NS Philadelphia, PA.....................................          18,000
NS Puget Sound (Sand Point), WA.........................          12,800
NCCOSC San Diego, CA....................................           3,000
MCAS Tustin, CA.........................................         468,500
                                                         ---------------
      Total.............................................         548,950
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Carswell Air Force Base, TX.............................             178
Castle Air Force Base, CA...............................           4,136
England Air Force Base, LA..............................             783
Grissom Air Force Base, IN..............................           5,981
Loring Air Force Base, ME...............................             335
Lowry Air Force Base, CO................................           9,461
Myrtle Beach Air Force Base, SC.........................          10,455
Richards-Gebaur Air Force Reserve Station, MO...........             300
Rickenbacker Air Guard Base, OH.........................             600
Williams Air Force Base, AZ.............................           4,431
Wurtsmith Air Force Base, MI............................              49
                                                         ---------------
      Total \1\.........................................         36,709
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART II
                     LOSS OF LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Williams Air Force Base, AZ.............................           8,000
Eaker Air Force Base, AR................................           8,000
Castle Air Force Base, CA...............................          27,000
Lowry Air Force Base, CO................................         100,000
MacDill Air Force Base, FL..............................          50,000
Grissom Air Force Base, IN..............................           8,000
Loring Air Force Base, ME...............................           8,000
Wurtsmith Air Force Base, MI............................           8,000
Richards Gebaur Air ForceReserve Station, MO............           8,000
Rickenbacker Air National Guard Base, OH................           8,000
Myrtle Beach Air Force Base, SC.........................           8,000
Bergstrom Air Force Base, TX............................           8,000
Carswell Force Base, TX.................................           8,000
                                                         ---------------
      Total.............................................         257,000
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
               III ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Various Locations.......................................             798
                                                         ---------------
      Total.............................................             798
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
               III ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
DOD Family Housing Niagara Falls, NY....................           1,125
MCAS El Toro, CA........................................         525,000
NAWC Trenton, NJ........................................           1,812
NTC Orlando, FL.........................................          11,126
NAS Cecil Field, CA.....................................              48
NTC San Diego, CA.......................................              80
NH Oakland, CA (Oak Knoll)..............................          15,000
PWC San Francisco, CA...................................          10,330
NS Staten Island, NY....................................             602
NSY Charleston, SC......................................           1,100
Various Locations.......................................           1,107
                                                         ---------------
      Total.............................................         567,330
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
                     III LOSS OF LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
NS Mobile, AL...........................................          28,000
Various Locations.......................................         309,263
                                                         ---------------
      Total.............................................         337,263
------------------------------------------------------------------------


  FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART
            III ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Gentile Air Force Station, OH...........................              54
Griffiss Air Force Base, NY.............................              82
Homestead Air Force Base, FL............................             488
March Air Force Base, CA................................             995
O'Hare IAP ARS, IL......................................              65
Plattsburg Air Force Base, NY...........................           1,288
                                                         ---------------
      Total \1\.........................................          2,972
------------------------------------------------------------------------
\1\ All anticipated/realized land revenues are accounted for in BRAC IV.


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
                 ANTICIPATED/REALIZED LAND REVENUE--ARMY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
Fort Devens, MA.........................................           2,500
Fort Ben Harrison, IN...................................             938
Cameron Station, VA.....................................          14,861
Stratford AAP, CT.......................................           6,590
Army Material Technology Lab, MA........................           6,284
Bayonne MOT, NJ.........................................             278
Hamilton AAF, CA........................................             944
Jefferson Proving Ground, IN............................              55
Detroit, ATP, MI........................................           5,924
Fort Sheridan, IL.......................................           5,150
Stand Alone Housing.....................................             110
Savanna AD..............................................               8
Fort Ritchie............................................              54
Fitzsimons AMC..........................................             172
City of Chicago.........................................          15,980
Fort McClellan..........................................             460
Fort Ord................................................           7,250
New Orleans MOT.........................................             275
Defense Depot Ogden.....................................             680
VHFS....................................................             992
                                                         ---------------
      Total.............................................          69,505
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
                 ANTICIPATED/REALIZED LAND REVENUE--NAVY
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
San Pedro (Housing) Long Beach, CA......................          66,000
NAWC Warminster, PA.....................................              63
NAF Key West, FL (Housing)..............................          15,100
NAS Key West, FL........................................             600
Various Locations.......................................             700
                                                         ---------------
      Total.............................................          82,463
------------------------------------------------------------------------


FISCAL YEAR 2006 BUDGET ESTIMATES--BASE REALIGNMENT AND CLOSURE--PART IV
              ANTICIPATED/REALIZED LAND REVENUE--AIR FORCE
                        [In thousands of dollars]
------------------------------------------------------------------------
                        Location                               Total
------------------------------------------------------------------------
City of Chicago, Illinois--O'Hare International Airport           94,602
 \1\....................................................
Kelly Air Force Base, TX................................             478
McClellan...............................................           1,218
Reese Air Force Base, TX................................              53
Roslyn Air Guard Station, NY............................           3,031
                                                         ---------------
      Total.............................................         99,382
------------------------------------------------------------------------
\1\ Revenue from the City of Chicago for the movement of the Air
  National Guard facilities to Scott Air Force Base, Illinois.


    Mr. Grone. Of the $22 billion that was expended for prior 
BRAC activity, 30 percent of that went to construction and 
construction activity.
    Senator Feinstein. No. I mean tell us for what.
    Mr. Grone. Oh, yes, ma'am. But 30 percent of it went to 
environmental remediation and 40 percent went to PCS, O&M, and 
caretaker costs. But we will certainly try to break that down 
for you for the record.
    Senator Feinstein. I think the time has come, as we go 
through these BRAC rounds, to really know dollar for dollar 
where this money goes, and I would sure like to know.
    Mr. Grone. The justification material for the current 
fiscal years' request for prior BRAC, the $377 million, should, 
I believe, provide a comprehensive breakdown of the accounts 
from prior years. And we certainly would include that in the 
record here so that it is comprehensive.

          SELLING EXCESS PROPERTIES AND APPLYING THE PROCEEDS

    Senator Feinstein. Thank you.
    Now, the Navy has done a good job selling its excess 
properties and applying those proceeds to BRAC environmental 
restoration. I think this year the Navy has requested a $143 
million appropriation and expects to apply another $133 million 
from property sales. Could we have your assurance that, if 
appropriated, the sum of these funds will be applied to Navy 
environmental remediation?
    Mr. Grone. I believe I can give that assurance, yes, ma'am.
    Senator Feinstein. Thank you. And that further land sales 
will be treated the same?
    Mr. Grone. Treated the same in which sense?
    Senator Feinstein. In that the money is then applied for 
environmental cleanup.
    Mr. Grone. For prior BRAC, almost all of our costs at this 
point for prior BRAC is environmental remediation and a very, 
very small, modest amount for property caretaker costs. So to 
the extent we have any additional land sales from BRAC rounds 
one through four, that is certainly how they would be applied.
    Senator Feinstein. Thank you. That is very helpful.

                       STATUS OF GLOBAL REBASING

    Mr. Grone, through global rebasing in the coming years we 
can expect to see the largest reduction of troops permanently 
based overseas since the end of the Cold War. A series of 
global rebasing decisions will be subject to BRAC 2005. What is 
the status of the global rebasing plan? In particular, are 
there negotiations with foreign countries? Is there a green 
light? Are we moving ahead? Are we not moving ahead?
    There are $314 million set aside in the BRAC wedge, as you 
mentioned, for global rebasing. Is any of that funding intended 
to be spent overseas on closed bases in Germany or elsewhere?
    Mr. Grone. Senator, to the latter part of your question, 
BRAC funds are not an eligible source of funds for closure 
costs for closure and realignment activity installations 
abroad.
    Senator Feinstein. So the answer is no.
    Mr. Grone. The answer is no.
    The scope of our BRAC authority, with regard to global 
posture. We intend to use the BRAC round to facilitate the 
return of U.S. forces in the following way. Without BRAC, we 
would largely be asked to address the question of where could 
we fit them, in terms of our present basing configuration. BRAC 
gives us the ability, because the entire domestic chessboard 
will be open, to ask ourselves a different question, which is 
where are they best positioned. Through their realignment 
activities of domestic bases, we will have an ability to put 
those returning forces where the services and the Secretary 
believe they are most effective for the future. We will, 
through BRAC, execute construction activity to support those 
forces through the BRAC appropriation, but other costs 
associated with cost overseas would be paid for other accounts 
that the services have under their financial control.
    Senator Feinstein. Thank you. That is helpful.

                RENEWABLE ENERGY ASSESSMENT OF DOD BASES

    Some time ago, Senator Hutchison and I asked your 
Department to give us a renewable energy assessment of the 
bases. We have not received it. Could you give us a sense of 
the major findings?
    Mr. Grone. I can give you a very direct sense of where the 
report is because it just hit my desk yesterday.
    Senator Feinstein. Good.
    Mr. Grone. I am aware and certainly apologize for the 
initial part of the report being late. It was due in December. 
That part of the report was to basically do the assessment. 
What the committee also asked us for was an implementation plan 
based on our assessment. When you see the report in a matter of 
days, if not this week, it will contain both the assessment 
that we have done, as well as the implementation plan. So it 
will contain both elements.
    We think that there is a lot of benefit that we have gained 
through this assessment and the study that the subcommittee had 
requested. In fiscal year 2003, about $5 million of our energy 
conservation investment funds went to renewable projects. This 
year it is going to be $18 million principally in geothermal 
and in solar.
    We also think, as a result of the study that we have gone 
through, that there are opportunities on the purchase side of 
it for us to begin to engage on a supplier basis with certain 
suppliers who specialize in renewable energy sources.
    So we are learning a great deal through the assessment. We 
would welcome a continuing dialogue over the implementation 
plan certainly and would look for any views that you may have 
on it because we do think it has been a very valuable exercise 
as we have gone through it.
    Senator Feinstein. Thank you very much. We look forward to 
receiving that.

                       PERCHLORATE CONTAMINATION

    Now my perchlorate question. I will admit I am reaching 
here. Is there a way to use some of these environmental cleanup 
monies to take some of the most contaminated sites where they 
most have affected drinking water and get a commitment to 
participate in cleanup efforts?
    Mr. Grone. Senator, that question is not a difficult--it is 
a difficult one but one that sort of, I think, bears a little 
bit of a sense of sort of where we are now. I am not trying to 
avoid the question, but I do think this, as you well know, is a 
very, very complicated issue.
    There has been a lot of uncertainty, scientific 
uncertainty, associated with perchlorate. The National Academy 
of Sciences recently conducted a review of the toxicity of 
perchlorate, and that review was completed in January and the 
administration, including the Department, supported the 
conclusions reached by the NAS. In fact, EPA has used the 
conclusions reached by the NAS to develop a reference dose 
which commonly would be referred to as a 24.5 parts per billion 
reference dose. We will use that reference dose as a factor in 
our risk-based assessments.
    And I would say also with regard to the work that we are 
going with the State of California in the prioritization 
protocol, that work is proceeding very well with a high degree 
of cooperation between the State and the Department. Certainly 
as we proceed, we understand that the State of California may 
well consider a regulatory standard for perchlorate. Once the 
State establishes, if they should choose to do so, a State 
standard, as well as once a Federal standard, if one should be 
promulgated, we certainly will comply with that standard.
    Where we are in terms of remediation today is that it 
becomes part of the risk prioritization as we go through it.
    Senator Feinstein. Let me stop you because I need to 
understand this. Are you saying that you are waiting for the 
State to declare a standard? Because the State does have a 
standard.
    Mr. Grone. No. I am not suggesting that. A standard for 
regulatory purposes. If any State or the Federal EPA declares a 
standard for regulatory purposes, not a draft, but for 
regulatory purposes, we certainly will comply with that. But 
even today we are putting the 24.5 parts per billion reference 
dose that EPA has promulgated and including that as part of our 
risk-based prioritization standard. And in those instances 
certainly where there is a level of significance, we will 
remediate based on the prioritization of remediation as we 
develop it.
    Senator Feinstein. I want to make this point, though. DOD, 
as you know, tried to get liability protection on perchlorate 
and we were able to stop that. Perchlorate is now turning up in 
mother's milk. In one person tested, it was like 91 parts per 
billion. It is turning up all over in the food chain. The 
bottom line fact is DOD has a responsibility to help with the 
cleanup. We have got towns where the drinking water is really 
severely compromised, small areas, Rialto, for example. In 
California their wells are compromised. They have to get 
cleaned up.
    The process we know is expensive. It is about $2 million a 
well with reverse osmosis.
    I have been trying for years now to move EPA to come up 
with a standard. EPA is not about to be moved to come up with a 
standard. In the meantime, you are finding it in milk products, 
you are finding it in lettuce products, and now you are finding 
it in nursing women's breast milk at three times the level that 
you just mentioned of 24 parts per billion.
    So my view is we have to get cracking and get it cleaned 
up. It seems to me that this might be a place to start.
    Mr. Grone. Well, Senator, all I can tell you right at the 
present time, so far we have expended $50 million in 
toxicological and analytical research. We are continuing to 
work with the scientific community----
    Senator Feinstein. $50 million on research on perchlorate? 
It cannot be.
    Mr. Grone. Groundwater treatment technologies for 
perchlorate and possible substitutes for perchlorate in 
military applications.
    Senator Feinstein. $50 million on studies?
    Mr. Grone. In research.
    Senator Feinstein. Okay. Do you have a product for the $50 
million?
    [The information follows:]

    
    
    Mr. Grone. We can supply for the record what we have been 
doing on the analytical agenda on both the toxicological side, 
the science-based side of perchlorate, as well as looking for 
alternatives for the use of perchlorate, both of which we have 
as active parts of the agenda.
    Senator Feinstein. Well, I do not want to take up the 
chairman's time, although the chairman has a problem in her 
State as well. But if we could talk with you about it, we need 
to come to some agreement of what DOD is willing to do. I have 
been trying now for 3 or 4 years, and at some point one runs 
out of patience. That is all I want to say.
    Mr. Grone. Senator, I am prepared to have whatever 
discussions you deem necessary. I am prepared to meet with you 
whenever you feel it appropriate----
    Senator Feinstein. Okay, that would be great.
    Mr. Grone [continuing.] To have the continuing discussion.
    Senator Feinstein. Thank you.

                PERMANENT CONSTRUCTION AT GUANTANAMO BAY

    And the last question. It is a question I asked Chairman of 
the Joint Chiefs Myers at the supplemental hearing of approps, 
and that is the justification for siting the facility in 
Guantanamo.
    Now my understanding was the original justification was to 
avoid review by United States courts. Now, putting aside the 
question of whether that is good policy or not, the United 
States Supreme Court has made clear that much, if not all, of 
the legal argument which was based for that justification was 
unfounded. Simply put, the original justification is no longer 
compelling.
    Now, Senator Hutchison and I with the Secretary had a 
chance to go to Guantanamo 3 or 4 years ago, and so we saw 
pretty much the temporary facilities. I think an argument can 
certainly be made for improvement. But the question is to build 
a permanent facility, $42 million I guess in this MILCON 
budget, when the rationale for putting people at Guantanamo may 
no longer exist.
    My question is, with that rationale gone, do you still want 
to go ahead and build a permanent facility?
    Ms. Jonas. Senator, let me just take a few minutes on this. 
My understanding is that the upgrades were for the humanitarian 
and operational concerns that they have down there. These are 
some of the things that were identified by the ICRC. So the 
security fence and then making the facility a little bit more 
compliant there on humanitarian purposes not on any permanent 
basis.
    Senator Feinstein. I just said perhaps we should go back 
and take a look before we do this. You are saying the $42 
million is just an upgrade for humanitarian purposes. It is not 
a permanent facility?
    Ms. Jonas. Well, I understand the upgrades are to deal with 
the humanitarian concerns, some of the things that were 
identified by the ICRC and force protection or security, I 
should say, the security fence around the area. The security 
fence that they are going to develop there, if funds are 
provided, would reduce the military personnel there by 350. So 
I guess that is one of the pieces, but we would sure be glad to 
have you make a visit and would be glad to provide additional--
--
    Senator Feinstein. Perhaps we can get the detail on that 
request.
    Ms. Jonas. Absolutely.
    [The information follows:]


                            GUANTANAMO NAVAL STATION, CUBA--CAMP 6 DETENTION FACILITY
----------------------------------------------------------------------------------------------------------------
                 Item                             U/M                  QTY            Cost             Cost
----------------------------------------------------------------------------------------------------------------
Primary Facility:                                                                                       $26,848
    Confinement Facility.............  SF......................          43,111         $501.58         (21,624)
    Medical Station..................  SF......................           7,889          537.29          (4,239)
    Sound proofing cell interior wall  SF......................          20,000           12.26            (245)
    Sound proofing cell ventilation..  EA......................             200           90.30             (18)
    Prison design recessed sprinkler   EA......................             280          122.55             (34)
     heads.
    Security Lighting................  EA......................              40           4,644            (186)
    Information Systems..............  LS......................  ..............  ..............            (300)
    Building Information Systems.....  LS......................  ..............  ..............            (202)
Supporting Facilities:                 ........................  ..............  ..............           5,345
    Electric Service.................  LS......................  ..............  ..............          (2,556)
    Water, Sewer, Gas................  LS......................  ..............  ..............          (2,194)
    Paving, Walks, Curbs And Gutters.  LS......................  ..............  ..............             (80)
    Storm Drainage...................  LS......................  ..............  ..............            (129)
    Site Imp (67) Demo (  )..........  LS......................  ..............  ..............             (67)
    Information Systems..............  LS......................  ..............  ..............            (319)
                                                                                                ----------------
Estimated Contract Cost..............  ........................  ..............  ..............          32,193
Contingency Percent (5 percent)......  ........................  ..............  ..............           1,610
                                                                                                ----------------
      Subtotal.......................  ........................  ..............  ..............          33,803
Supervision, Inspection & Overhead     ........................  ..............  ..............           2,197
 (6.50 percent).
                                                                                                ----------------
      Total Request..................  ........................  ..............  ..............          36,000
      Total Request (Rounded)........  ........................  ..............  ..............          36,000
Installed EQT-Other Appropriations...  ........................  ..............  ..............             (99)
----------------------------------------------------------------------------------------------------------------

    Description of Proposed Construction.--Construct a maximum security 
facility at Camp 6 to detain 220 personnel. Primary facilities include 
pre-engineered concrete modular building units on concrete foundations, 
isolation cells, showers, restrooms, indoor and outdoor exercise areas, 
security operations, administrative spaces, interview spaces, security 
and perimeter fence, lighting, associated pedestrian and vehicular 
gates, and a Level II detainee medical station which includes a medical 
ward with 5 total beds; 2 general treatment rooms, a single dental 
treatment room and a medical administration area. Supporting facilities 
include communication/security systems, electrical substation and site 
utilities. Air conditioning is estimated at 120 tons. Project also 
includes the demolition of existing, substandard, water distribution 
line to the area.
    REQ: 1 Each; ADQT: None; SUBSTD: 1 Each
    Project.--Construct a durable maximum security detention facility 
to support the JTF Detainee Operations.
    Requirement.--Provide an adequate maximum security detainee 
facility to house 220 detainees to support the Global War on Terrorism 
(GWOT). The facility will use Federal Bureau of Prison Standards and 
provide a more humane housing for long-term detainees. Provide facility 
standards meeting provisions highlighted in the Geneva Convention. 
These include providing housing units and core functions that are 
contiguous and allow for communal conditions where practical. Address 
facility and operational concerns of GWOT Allies. Upgrading facility 
standards will decrease the personnel required to operate the facility 
safely. Provide necessary utility infrastructure to support all 
facilities.
    Current Situation.--Current facilities are temporary and no longer 
meet the mission requirement. The facilities are labor intensive for 
both security and maintenance resources. Current operations require 150 
more personnel than will be required for the requested facility. The 
new facility will free up this significant number of personnel for 
combat operations in support of GWOT. The inefficiencies experienced in 
proper separation, seclusion, and control of occupants forces JTF to 
maintain a much larger workforce to conduct the mission. Existing 
temporary facilities at Camps 1, 2, and 3 do not provide the communal 
living conditions. These facilities are also close to exceeding the 
utility systems capacity.
    Impact if not Provided.--Existing Camps 1, 2, and 3 were designed 
as temporary facilities and are at the end of their useful life. 
Maintenance and operation of these facilities will continue to be a 
significant draw of manpower, materials, and money due to their 
deteriorating conditions. Mission operations in these antiquated cell 
blocks will continue to be strained and require an increased number of 
security and medical personnel due to the weaknesses in the design and 
materials of the existing facilities. Existing facilities will not meet 
the Geneva Convention requirements, and there will be continued 
scrutiny by the International Committee of the Red Cross (ICRC) and the 
international community until facility standards are raised. The 
waterline security will remain compromised and the water quality will 
remain degraded if this project is not provided. The electrical 
distribution system will become overloaded, unreliable, and a potential 
safety hazard. Outages will result due to circuit overloading creating 
additional equipment maintenance and repairs.
    Additional.--This project has been coordinated with the 
installation physical security plan and all physical security measures 
are included. All required antiterrorism/force protection measures are 
included. Alternative methods of meeting this requirement have been 
explored during project development. This project is the only feasible 
option to meet the requirement. Sustainable principles will be 
integrated into the design, development, and construction of the 
project in accordance with Executive Order 13123 and other applicable 
laws and Executive Orders.

    Mr. Grone. Senator, the only thing that I would add to my 
colleague's comments is I believe the Chairman indicated that 
what we are doing, and the Secretary as well, but I know the 
Chairman had indicated what we are doing is we are 
transitioning to a long-term detention mission which in the 
context of both the humanitarian end of this, as well as the 
reduction--and to be able to operate the facility in a way that 
provides for a safer and more efficient operation, it will, 
(a), reduce the manpower but, (b), provide a safer environment 
for our own military personnel to manage the facility.
    The most cost effective construction method for the 
structure is as it has been detailed to the subcommittee. It 
will be much easier to sustain than the metal structures we 
have there now. As the Comptroller indicated, we have a number 
of important reasons for seeking the funds at this time.
    Senator Feinstein. Well, I just was handed the request, and 
it says, under description of proposed construction, construct 
a maximum security facility at Camp 6 to detain 220 personnel. 
Primary facilities include pre-engineered concrete modular 
building units on concrete foundations, isolation cells, 
showers, rest rooms, indoor and outdoor exercise areas, 
security operations, administrative spaces, interview spaces, 
security and perimeter fence, lighting, and associated 
pedestrian and vehicular gates. So from what I gather from 
this, I mean, this is a whole new permanent facility. The word 
``permanent'' is used and ``maximum security.''
    Now, I would just like to know. It may well be that despite 
the fact that the United States is not going to be able to deny 
people basic due process rights, you still want to have the 
facility. But one of the things I think we do not want to do is 
authorize the money and then find out you change your mind, 
which has happened.
    Mr. Grone. Certainly, Senator--I am sorry, Madam Chairman.
    Senator Hutchison. I think there is another factor here 
which is where is the safest place to house prisoners. I think 
there has always been a concern about having them in America 
and within the 48 States because of actions that might be taken 
to get them released. I do not think it is necessarily a 
treatment issue so much as where do you put potential terrorist 
prisoners where you do not endanger the lives of the people 
around and where is it harder to get to.
    Senator Feinstein. Except, Madam Chairman, we do house 
known terrorists who have committed terrorist acts here in the 
United States.
    Senator Hutchison. Well, but we also have a number of them 
that are not in the United States. They are in Guantanamo Bay. 
I think having a prison that is pretty hard to get to is a 
factor to be considered.
    Senator Feinstein. I thought they were detainees. I mean, 
we have people convicted doing time, the 1993 World Trade 
Center bombing, et cetera. We have a place in Colorado where a 
number of them are incarcerated.
    I just feel I want to be told the truth about this 
facility, why it is being built, instead of building it 
somewhere on ex-surplus military land here, why you are 
building it in Guantanamo. Because none of these people have 
been convicted of anything. They are all detainees.
    Mr. Grone. Senator Feinstein, what I can best tell you is 
that the location represents the best military judgment that we 
have in terms of the location. Neither of us have policy 
cognizance for this. The Under Secretary of Defense (Policy) 
and the Deputy Assistant Secretary of Defense for Detainee 
Affairs are the responsible policy officials, and certainly the 
combatant commander of Southern Command also has very 
significant responsibilities in this area. I believe we can 
work to arrange whatever briefings are necessary for you and 
the chairman and any other member or staff that may be required 
to address the question.
    But the Secretary and the Chairman I believe addressed the 
immediate requirement pretty directly. And the type of 
construction involved that you cited is the most cost effective 
construction at that location to build the kind of facility 
that will allow our military personnel to operate in a safe and 
efficient manner and also provide, consistent with our 
standards, a more humane environment with a little bit more 
room for detainees to live in the facility. But certainly we 
can arrange for whatever briefings may be necessary in that 
regard.
    Senator Feinstein. I appreciate that. Thank you.
    Thanks, Madam Chairman.
    Senator Hutchison. Thank you. I think that is the end for 
this panel. We very much appreciate your time in coming.

                         Department of the Navy

STATEMENT OF HON. B.J. PENN, ASSISTANT SECRETARY OF THE 
            NAVY (INSTALLATIONS AND ENVIRONMENT)
ACCOMPANIED BY:
        REAR ADMIRAL WAYNE ``GREG'' SHEAR, JR., DEPUTY DIRECTOR, ASHORE 
            READINESS DIVISION, UNITED STATES NAVY
        BRIGADIER GENERAL WILLIE WILLIAMS, ASSISTANT DEPUTY COMMANDANT, 
            INSTALLATIONS AND LOGISTICS (FACILITIES), U.S. MARINE CORPS
    Senator Hutchison. I want to now ask our second panel to 
come forward. Making his first appearance before our 
subcommittee is the Honorable B.J. Penn, Assistant Secretary of 
the Navy for Installations and Environment. Joining him are 
Rear Admiral Wayne Shear, United States Navy Deputy Director 
for the Ashore Readiness Division; and Brigadier General Willie 
Williams, U.S. Marine Corps, Assistant Deputy Commandant for 
Facilities.
    Secretary Penn, if you would give us a summary of your 
statement, we would be happy to hear it, and then we will ask 
questions.
    Mr. Penn. Madam Chairman, my pleasure. Madam Chairman, 
members of the subcommittee, being in this job for about a 
week, I assure you I have no trouble in being brief.
    I am accompanied by Brigadier General, soon to be Major 
General, Willie Williams for Marine Corps Installations, and 
Rear Admiral Greg Shear from Commander Naval Installations.
    I have spent most of my initial days getting acquainted 
with my staff and senior leadership of the Navy and Marine 
Corps. I am quite impressed with their skills and dedication.
    I remember when I was on active duty as a naval aviator, 
serving as commanding officer of Naval Air Station North Island 
in California in the late 1980s thinking what new policy 
approaches from Washington might improve installation 
management. Be careful what you dream of.
    Things have obviously changed since that time. I will soon 
begin visiting bases and stations so that I can listen 
firsthand to the needs and concerns from installations 
commanders, sailors, marines, their families, along with the 
civilian employees and contractor personnel who live or work at 
our shore installations and surrounding communities. I hope 
during my tenure to meld their views with those inside the 
beltway, of Congress, the Secretary of Defense, the service 
Secretaries, chiefs of staff, to shape a future for naval 
installations that provides cost effective support for the 
needs of our warfighters. Clearly implementation of BRAC 2005 
decisions will be a major focus of my efforts.
    I have submitted a rather detailed statement for the record 
on our fiscal year 2006 budget request. From a macro 
perspective, funding levels are strong, although I am 
admittedly on the front end of the learning curve on the 
details. General Williams and Admiral Shear helped shape this 
budget, so I will rely heavily on them.
    I would, however, like to talk about one specific aspect of 
our fiscal year 2006 budget request--the financing of our prior 
BRAC cleanup and caretaker needs with the mix of $143 million 
in appropriated funds and an estimated $133 million in land 
sales revenue.
    It is important to view the fiscal year 2006 prior BRAC 
request in the context of the 2005 request. The Department 
expected to finance the entire fiscal year 2005 BRAC program 
from the sale of the former Marine Corps Air Station El Toro, 
California and did not request nor receive any appropriations 
in fiscal year 2005. That sale was delayed by unforseen 
circumstances. Fortunately, the sale of the former Marine Corps 
Air Station Tustin, California in 2003 gave the Department the 
financial flexibility to slow 2004 program executions to 
conserve cash to cover its fiscal year 2005 environmental 
commitments, most of which are in the State of California.
    With fiscal year 2005 execution depleting prior year BRAC 
funds and the public auction of the El Toro property still a 
future event, the Department last fall opted to include 
appropriated funds in fiscal year 2006 to finance its minimum 
cleanup and caretaker status, along with a conservative 
estimate for land sale revenue to accelerate environmental 
cleanup. Although the auction of the El Toro property has now 
been completed, with a winning bid of nearly $650 million, I 
must caution the members of this committee that there is still 
some measure of risk ahead until the buyer and Navy complete 
the sales transaction at settlement.
    I want to emphasize that we cannot be absolutely sure of 
having land sales revenue until settlement occurs, which is 
planned for July. The buyer of previous property in 2003 
defaulted at settlement. Even after settlement, our past 
experience is that it often takes well over 4 months for the 
sale proceeds to be processed through DOD accounting systems 
before the funds are available to the Navy for program 
execution.
    We still have a substantial cost to complete environmental 
cleanup, primarily at closed bases in California, and we are 
developing plans to responsibly accelerate cleanup. That would 
be our first priority for use of the land sales revenue.
    Even with successful settlement of the El Toro property in 
July, we may still need some measure of fiscal year 2006 
appropriated funds to finance first quarter program 
commitments.
    I look forward to working with the Congress on resolving 
this situation, along with more challenging installations and 
facilities issues.
    [The statement follows:]

                    Prepared Statement of B.J. Penn

    Madam Chairman and members of the Committee, I am pleased to appear 
before you today, accompanied by Brigadier General Willie Williams, 
Assistant Deputy Commandant of the Marine Corps for Installations and 
Logistics, and Rear Admiral Wayne Shear, Deputy Director of the Navy's 
Ashore Readiness Division. We will provide an overview of the Navy and 
Marine Corps team's shore infrastructure programs and base closure 
efforts.

                    FISCAL YEAR 2006 BUDGET OVERVIEW

    Our bases and stations provide the essential services and functions 
that help us train and maintain our Naval forces, and enhance the 
quality of life for our Sailors, Marines and their families. Winning 
the Global War on Terrorism (GWOT) is our number one priority while we 
transform our force structure and business processes to meet the 
readiness needs of today and tomorrow. The Department of the Navy (DoN) 
has a considerable investment in shore infrastructure: 104 
installations in the continental United States and 18 overseas 
locations with a combined plant replacement value of about $181 
billion.
    The DoN fiscal year 2006 budget request for installations and 
environmental programs totals $9.8 billion \1\ and provides the funds 
to operate, recapitalize and transform our shore installations. In this 
budget, we have focused our efforts on balancing the risks across the 
operational, institutional, force management and future challenges 
identified by the Department and the Department of Defense (DOD).
---------------------------------------------------------------------------
    \1\ To avoid double counting in the graph, environmental is shown 
separately from BOS, and MILCON is shown separately from SRM funds.




    The Base Operations Support (BOS) request of $4.8 billion, 
excluding environmental which is shown separately, provides fundamental 
services such as utilities, fire and security, air operations, port 
operations, and custodial care that enable the daily operations of our 
bases. The increase of $471 million to the fiscal year 2005 enacted 
level is primarily due to functional transfers to properly align Navy 
Marine Corps Internet with Base Operating Support and program growth to 
accomplish utilities privatization preparation, improve overseas 
Morale, Welfare and Recreation Programs supporting our forward deployed 
forces, and to restore funding required to execute shore mission 
support without degrading quantity or quality of support. We believe we 
have properly priced BOS to avoid execution year adjustments as we have 
experienced in the past. We are also working with the Office of the 
Secretary of Defense and the other Components to define common 
standards and performance metrics for managing installations support.
    Our Military Construction Navy and Naval Reserve request is a very 
robust $1,074 million, about the same as the enacted fiscal year 2005 
level of $1,114 million after excluding the $139 million the DoN 
received in the Emergency Hurricane Supplemental Appropriations Act, 
2005. This level of funding keeps us on track to eliminate inadequate 
bachelor housing, and provides critical operational, training, and 
mission enhancement projects.
    The Family Housing request of $813 million is about the same as the 
enacted fiscal 2005 level of $835 million after excluding the $9 
million the DoN received in the Emergency Hurricane Supplemental. It 
provides $219 million in family housing construction and improvements 
funds, 80 million above the enacted fiscal 2005 level of $139 million. 
Funds to operate, maintain and revitalize the worldwide inventory of 
about 33,000 units total $594 million, $103 million less than the 
enacted fiscal 2005 level (excluding the $9 million in the Emergency 
Hurricane Supplemental), due to a decline of over 18,000 homes from the 
fiscal 2005 level from our housing privatization efforts. The DoN 
continues to fund Basic Allowance for Housing (BAH) at a level that 
eliminates average out-of-pocket housing expenses for service member. 
BAH makes finding affordable housing in the community more likely for 
our service members, and it helps our housing privatization efforts 
succeed.
    Sustainment, Restoration and Modernization (SRM) includes military 
construction and Operation and Maintenance funds. Our fiscal year 2006 
request is $71 million above the enacted fiscal year 2005 level without 
the Hurricane Supplemental. Sustainment funds the necessary maintenance 
and repairs needed to keep a facility in good working order over its 
expected service life. Facilities sustainment requirements are based on 
a DOD model. The fiscal year 2006 budget maintains 95 percent of the 
model requirement for Navy and Marine Corps bases. Restoration and 
Modernization funds regenerate the physical plant either through 
reconstruction or major renovation to keep the facility modern and 
relevant.
    Our environmental program of $1,149 million, comprised of a variety 
of operating and investment appropriations, climbs $123 million above 
the fiscal year 2005 enacted level. Within this broad category, 
compliance accounts decline as a result of fewer one-time projects; 
conservation and pollution prevention funds remain steady; research and 
technology development decline by $15 million as fiscal year 2005 
congressional increases are not continued in fiscal year 2006; cleanup 
of active bases increases by $39 million, primarily to support cleanup 
of the former Vieques training range in Puerto Rico. Of particular 
interest to this Subcommittee, we have included $143 million in fiscal 
year 2006 appropriations to cover minimum required environmental 
cleanup and caretaker costs. In preparing the budget, we also included 
$133 million in estimated land sales revenue that would be used to 
accelerate cleanup efforts.
    Here are some of the highlights of these programs.

                                HOUSING

    Our fiscal year 2006 budget request reflects the DoN's continued 
commitment to improve living conditions for Sailors, Marines, and their 
families. We have programmed the necessary resources and expect to have 
contracts in place by the end of fiscal year 2007 to eliminate our 
inadequate family and bachelor housing.
Family Housing
    Our family housing strategy consists of a prioritized triad:
  --Reliance on the Private Sector.--In accordance with longstanding 
        DOD and DoN policy, we rely first on the local community to 
        provide housing for our Sailors, Marines, and their families. 
        Approximately three out of four Navy and Marine Corps families 
        receive a BAH and own or rent homes in the community.
        
        

  --Public/Private Ventures (PPVs).--With the strong support from this 
        Committee and others, we have successfully used statutory PPV 
        authorities enacted in 1996 to partner with the private sector 
        to help meet our housing needs through the use of private 
        sector capital. These authorities allow us to leverage our own 
        resources and provide better housing faster to our families.
  --Military Construction.--Military construction will continue to be 
        used where PPV authorities don't apply (such as overseas), or 
        where a business case analysis shows that a PPV project is not 
        financially sound.
    We will be able to eliminate 77 percent of our inadequate inventory 
through the use of public/private ventures. As of 1 March, we have 
awarded 15 projects totaling over 26,000 units. As a result of these 
projects, almost 17,500 homes will be replaced or renovated. An 
additional 2,700 homes will be constructed for Navy and Marine Corps 
families. Through the use of these authorities we have secured almost 
$3.0 billion in private sector investment from $300 million of DoN 
funds for these 15 projects. This represents a leverage ratio of ten to 
one. During fiscal year 2005 and 2006, we plan to award projects 
totaling 29,000 homes at ten Navy and Marine Corps locations. This will 
allow us to improve our housing stock and provide more homes to 
Sailors, Marines and their families much faster than if we relied 
solely on traditional military construction. By the end of fiscal year 
2007, the Navy and Marine Corps will have privatized 78 percent and 95 
percent, respectively, of their worldwide housing stock.
    Our fiscal year 2006 family housing budget includes $219 million 
for family housing construction and improvements. This amount includes 
$112 million as a Government investment in family housing privatization 
projects. It also includes $594 million for the operation, maintenance, 
and leasing of DoN family housing.

                     PLANNED PRIVATIZATION PROJECTS
------------------------------------------------------------------------
                                                             Number of
            Fiscal year                   Location             homes
------------------------------------------------------------------------
                USN
2005..............................  Mid Atlantic........           5,930
2006..............................  Midwest Regional....           1,879
2006..............................  Southeast Regional I           4,437
2006..............................  San Diego Phase III.           4,268
2006..............................  Oahu II.............           2,336
                                                         ---------------
      Subtotal....................  ....................          18,850
                                                         ===============
               USMC
2005..............................  Camp Lejeune/Cherry            3,426
                                     Pt.
2005..............................  29 Palms/Kansas City           1,510
2006..............................  MCB Hawaii..........           1,136
2006..............................  Camp Lejeune/Cherry              959
                                     Pt II.
2006..............................  Camp Pendleton IV...           3,359
                                                         ---------------
      Subtotal....................  ....................          29,240
------------------------------------------------------------------------

Bachelor Housing
    Our budget request of $184 million for bachelor quarters 
construction projects continues the emphasis on improving living 
conditions for our unaccompanied Sailors and Marines. There are three 
challenges:
  --Provide Homes Ashore for our Shipboard Sailors.--There are 
        approximately 18,400 junior enlisted unaccompanied Sailors 
        worldwide who live aboard ship even while in homeport. The Navy 
        has programmed funding through fiscal year 2008 to achieve its 
        ``homeport ashore'' initiative by providing ashore living 
        accommodations for these Sailors. We will achieve this goal 
        through a mix of military construction, privatization 
        authorities, and, for the interim, more intensive use of our 
        barracks capacity by housing two members per room. Our fiscal 
        year 2006 budget includes three ``homeport ashore'' projects: 
        $7.8 million at Naval Station Mayport, FL (216 spaces); $50 
        million at Naval Station, Everett, WA (818 spaces); and $13.7 
        million at Naval Amphibious Base Coronado, CA (800 spaces), 
        which is planned for privatization. The funds would be used as 
        a Government cash contribution to a public/private entity.
  --Ensure our Barracks Meet Today's Standards for Privacy.--We are 
        building new and modernizing existing barracks to increase 
        privacy for our single Sailors and Marines. The Navy uses the 
        ``1+1'' standard for permanent party barracks. Under this 
        standard, each single junior Sailor has his or her own sleeping 
        area and shares a bathroom and common area with another member. 
        To promote unit cohesion and team building, the Marine Corps 
        was granted a waiver to adopt a ``2+0'' configuration where two 
        junior Marines share a room with a bath. The Navy will achieve 
        these barracks construction standards by fiscal year 2016; the 
        Marine Corps by fiscal year 2012. We are pursuing a waiver of 
        the ``1+1'' standard to allow us to build an enlisted barracks 
        project in Norfolk to private sector standards. We believe this 
        will reduce construction costs, improve amenities, and 
        facilitate opportunities to privatize barracks in the future.
  --Eliminate Gang Heads.--The Navy and Marine Corps remain on track to 
        eliminate inadequate barracks with gang heads \2\ for permanent 
        party personnel. The Navy achieves this goal by fiscal year 
        2007, the Marines by fiscal year 2005.
---------------------------------------------------------------------------
    \2\ Gang heads remain acceptable for recruits and trainees.
---------------------------------------------------------------------------
BQ Privatization
    We are applying authority provided to us by Congress to proceed 
with three pilot unaccompanied housing privatization projects. We 
issued a solicitation for our first project at San Diego in September 
2004 and received very positive responses from industry. We will soon 
take the next step to narrow the field and invite up to four highly 
qualified offerors to submit detailed technical and financial 
proposals. We plan to select a single proposal by late Spring 2005 and 
make an award in January 2006 after notifying Congress.
    We intend to notify Congress of our intent to issue a solicitation 
for our second pilot project--at Hampton Roads, Virginia--in the very 
near future. We have also initiated a concept development for our third 
pilot project to provide unaccompanied housing in the Pacific 
Northwest.

                         MILITARY CONSTRUCTION

Military Construction Projects
    The DoN fiscal year 2006 Military Construction program requests 
appropriations of $1,029 million, consisting of $830 million for Navy, 
$169 million for Marine Corps, and $30 million for planning and design. 
The authorization request totals $1,078 million. Our fiscal year 2006 
budget uses $92 million in prior year savings identified during budget 
formulation to finance additional military construction needs above the 
fiscal year 2006 appropriation request. Fiscal year 2006 projects were 
properly priced consistent with the analysis that identified the prior 
year savings. The Naval and Marine Corps Reserve Military Construction 
appropriation and authorization request is $45 million.
    The active Navy program consists of:
  --$218 million for eight Chief of Naval Operations projects for 
        Homeport Ashore, Great Lake Recruit Training Command 
        recapitalization and the Naval Academy.
  --$215 million for seven waterfront and airfield projects.
  --$92 million for three special weapons protection projects.
  --$239 million for 12 projects supporting new weapons systems such as 
        F/A 18 E/F, V-22, H60R/S, and VXX.
  --$58 million for four mission enhancement projects such as the 
        Pacific War fighting Center at Naval Station Pearl Harbor, HI; 
        and
  --$9 million for one environmental compliance project at Naval Air 
        Station Pensacola, FL.
    The active Marine Corps program consists of:
  --$58 million for two barracks, one mess hall and one fire safety 
        quality of life project.
  --$25 million in a continuing effort to correct wastewater 
        environmental compliance violations at Camp Pendleton, CA.
  --$54 million for three airfield recapitalization projects at Marine 
        Corps Air Station Quantico, VA, including the second increment 
        of funding to replace 1930's vintage HMX maintenance hangars 
        and a parking apron.
  --$18 million for four projects to provide maintenance facilities, 
        including the new Assault Breacher Vehicle at Camp Pendleton, 
        CA and Camp Lejeune, NC; hot refueling for rotary wing aircraft 
        at MCAS Yuma, AZ; and critical training for Marines with a 
        Multi-Purpose Machine Gun Range at Camp Lejeune, NC.
  --$14 million for five projects that cover a broad range of facility 
        improvements, e.g., main gate access and inspection; 
        encroachment remedies; missile storage.
    The Naval and Marine Corps Reserve program consists of two joint 
reserve centers, a Marine Corps reserve centers, a Marine reserve-
training center, and a hanger modification.
    Fourteen Navy and two Marine Corps \3\ projects have construction 
schedules exceeding 1 year and cost more than $50 million, thus meeting 
the DOD criteria for incremental funding in the fiscal year 2006 
budget. Seven Navy and one Marine Corps projects received full 
authorization in fiscal year 2004 or fiscal year 2005 and are being 
continued or completed in fiscal year 2006. The budget request new 
authorization to start seven Navy and two Marine Corps incrementally 
funded projects in fiscal year 2006.
---------------------------------------------------------------------------
    \3\ The budget also incrementally funds a $14 million Marine Corps 
project.
---------------------------------------------------------------------------
Outlying Landing Field, Washington County, North Carolina
    The new F/A-18E/F Super Hornet is replacing F-14 and older F/A-18C 
aircraft. A Navy Environmental Impact Statement (EIS) examined 
alternatives for homebasing these new aircraft on the East Coast, 
opting to base eight tactical squadrons and a fleet replacement 
squadron at Naval Air Station Oceana, VA, and two tactical squadrons at 
Marine Corps Air Station, Cherry Point, NC.
    This homebasing decision requires a new Outlying Landing Field 
(OLF) to support fleet carrier landing practice training. The current 
site near Virginia Beach, VA is not as effective for night-time 
training due to ambient light sources, and it lacks the capacity to 
handle a training surge such as experienced for the war on terrorism 
and Operation Iraqi Freedom. The Navy selected a site in Washington 
County, North Carolina, about halfway between NAS Oceana and MCAS 
Cherry Point, as the best alternative from an operational perspective.
    A Federal District Court ruled last month that Navy did not fulfill 
its obligations under the National Environmental Policy Act (NEPA) 
before making the decision to construct the OLF, and has enjoined the 
Navy from taking further actions to plan, develop, or construct the OLF 
until it completes additional NEPA analysis. The Navy continues to 
believe that the EIS that it prepared was based on sound science and 
rigorous analysis, and met all requirements of NEPA. Nonetheless, the 
Navy is carefully examining the court's ruling and examining available 
alternatives. The fiscal year 2006 budget includes $23 million in 
available prior year funds to complete land acquisition in the OLF core 
area and commence horizontal construction. We continue to believe that 
these funds will be required for these purposes and will be executable 
in fiscal year 2006.

                                  VXX

    We are pleased to report significant progress on VXX, the next 
generation helicopter transportation for the President, Vice President 
and heads of State. Marine Helicopter Squadron One (HMX-1), located at 
the Marine Corps Air Facility, Quantico, VA, performs these helicopter 
transportation mission using the VH-3D introduced in 1974 and the VH-
60N fielded in 1989. These aircraft are approaching the end of their 
service lives, and do not have the growth margin to incorporate the 
improved capabilities required to meet evolving mission needs in the 
post 9/11 environment.
    The Navy awarded a System Development and Demonstration acquisition 
contract to Lockheed Martin in January 2005 to build and deliver eight 
VXX aircraft for test and evaluation and pilot production. The new 
aircraft will provide increased performance; improved mission, 
communication, navigation, and maintainability; and expanded potential 
for future growth. Developmental flight-testing will begin mid fiscal 
year 2005, with delivery of the first test article by April 2007. 
Initial operating capacity is set for the fourth quarter fiscal year 
2009.
    The Navy also awarded a construction contract in January 2005 to 
build an eight-bay test and evaluation hanger with laboratory, 
maintenance, and office space for a combined Lockheed Martin--Navy 
program management team at Naval Air Station Patuxent River, MD. The 
Navy commissioned an independent study to consider alternate methods of 
providing in-service support for the aircraft. The study concluded that 
a government owned contractor operated facility at Patuxent River 
provided significant life cycle cost savings to the Navy. The $96 
million, incrementally funded design/build facility will also include 
an in-service support capacity for the aircraft once operational. The 
current working estimate for construction is $10 million below the 
authorization request in the fiscal year 2005 budget.

                               FACILITIES

Facilities Sustainment, Restoration and Modernization (SRM)
    Sustainment.--The DOD uses models to calculate life cycle facility 
maintenance and repair costs. These models use industry-wide standard 
costs for various types of buildings and geographic areas and are 
updated annually. Sustainment funds in the Operation and Maintenance 
accounts maintain shore facilities and infrastructure in good working 
order and avoid premature degradation. The Navy and Marine Corps 
achieve 95 percent funding of the sustainment model requirements in 
fiscal year 2005 and fiscal year 2006, consistent with the DOD goal. 
The DoN funding increases by 1.4 percent from fiscal year 2005 to 
fiscal year 2006.
    Recapitalization.--Restoration and modernization provides for the 
major recapitalization of our facilities using Military Construction, 
Operation and Maintenance, Navy Working Capital Fund, and Military 
Personnel Navy funds. The ``recap'' metric is calculated by dividing 
the plant replacement value by the annual investment of funds and it is 
expressed as numbers of years. The DOD goal is to attain an annual 67-
year rate by fiscal year 2008. Neither the Navy nor the Marine Corps 
attains the 67-year goal in the current FYDP due to affordability.

                                   SRM
------------------------------------------------------------------------
                                                   Fiscal Year
                                        --------------------------------
                                            2004       2005       2006
------------------------------------------------------------------------
                  Navy
Sustainment (percent)..................         75         95         95
Recap rate (years).....................        103        104         98

              Marine Corps
Sustainment (percent)..................         96         95         95
Recap rate (years).....................        109         82        103
------------------------------------------------------------------------


    The fiscal year 2006 recapitalization rate has improved 
substantially from that reported last year as a result of a recent DOD 
policy change that allows the military departments to take credit for 
centrally managed Service demolition programs. The Navy has $51 million 
and the Marine Corps $5 million for their fiscal year 2006 central 
demolition programs, which combined is expected to demolish over 2.5 
million square feet of outdated facilities. The new policy allows us to 
consider the construction of new facilities as part of the recap metric 
calculation as long as an equivalent square footage of old facilities 
are demolished anywhere else. We believe that this corporate view is a 
more accurate reflection of the age of our while inventory and the need 
for recapitalization.

                              EFFICIENCIES

Naval Safety
    We remain committed to achieving Secretary Rumsfeld's 2-year 
challenge to reduce fiscal year 2002 baseline mishap rates and 
accidents by 50 percent by the end of fiscal year 2005. At the end of 
calendar year 2004, 15 months into the 2-year challenge, the Department 
was on track to meet the SECDEF goal in over 70 percent of the targeted 
areas.
    The Secretary of the Navy has embraced improving safety as one of 
his top objectives for this fiscal year. Last year Secretary England 
convened the first semi-annual Navy and Marine Corps Safety Council, 
comprised of Senior Flag and General Officers, to review ongoing mishap 
reduction efforts. The DoN is pursuing Occupational Safety and Health 
Administration OSHA (OSHA) Voluntary Protection Program (VPP) status at 
our shipyards and other industrial activities; over the last 16 months, 
we have achieved an average 31 percent reduction in civilian lost 
workdays due to injuries at our three installations with the highest 
injury rates. Increased command emphasis for safety in Operation Iraqi 
Freedom has played a major role in reducing the percentage of Marine 
Corps non-combat fatalities to combat fatalities from 42 percent in 
fiscal year 2003 to less than 9 percent in fiscal year 2004.


    Our fiscal year 2006 budget includes $4.5 million to continue 
development of the Military Flight Operations Quality Assurance 
program. We want to adapt a successful commercial aviation program to 
analyze performance data (i.e., ``black box'' data) after every flight 
and allow aircrew and aircraft maintenance personnel to replay a high 
fidelity animation of the flight and associated aircraft performance 
parameters. That will allow them to recognize and avoid situations 
where flight safety tolerances are exceeded. In addition to the safety 
benefit, we expect significant future savings in reduced maintenance 
costs.

Commander, Navy Installations
    Commander, Navy Installations Command (CNI) had a productive first 
year in its effort to transform the Navy shore establishment into 
centralized shore services and support structure. The Navy is now 
aligned to permit mission commanders to focus on their core mission to 
deliver combat power, while CNI focuses on shore infrastructure 
support.
    A key CNI accomplishment was to implement a Capabilities Based 
Budgeting (CBB) process. This annual, zero-based analysis links the 
delivery of specific shore functions to their resources, and allows 
managers to predict how varying resource inputs alter the performance 
capability of that shore function. Identifying the risks in delivering 
service at varying output levels allows Navy leadership to select the 
desired level of output and associated resourcing based on an 
evaluation of these risks. This process allows us to better align shore 
support services with mission customers' requirements. CNI is now 
expanding this effort to derive common base support models with the 
other military services.



Strategic Sourcing
    The DoN continues to seek efficiencies in its business processes. 
We want to focus on finding the most cost efficient means to support 
our war fighters. There are a number of approaches to achieve this 
goal, e.g., eliminating an unnecessary function or one with marginal 
benefit; re-aligning a function to improve efficiency; or competing a 
function to see if it can be provided more effectively or at a lower 
cost by private industry. We have committed to review over 30,000 \4\ 
positions for competition using the OMB Circular A-76 process by fiscal 
year 2008, although execution plans have temporarily slowed that pace 
as we adopt new OMB and Congressional direction on competition 
policies. We are focusing competitions on those functions that are not 
critical or core to our military operations, are readily available and 
can potentially be performed more effectively by the private sector.
---------------------------------------------------------------------------
    \4\ Represents about 5 percent of the DoN's military and civilian 
workforce.
---------------------------------------------------------------------------
    We recognize the difficulty these competitions have on employee 
morale. However, the gains in clearly defining the Government's 
requirement with resulting savings warrant the continued use of 
competition to determine the most cost-effective service provider. 
Competition between the in-house and contractor work force benefits the 
DoN and taxpayer in the long run. OMB Circular A-76 competitions 
generate on average 36 percent cost avoidance. Our workforce is among 
the best in the world and has responded to the challenge by winning 
over 80 percent of the A-76 competitions.

Utility Privatization
    We are proceeding with efforts to privatize when economical our 
electricity, water, wastewater, and natural gas utility systems. Ten 
USC  2688 provides the legislative authority to convey utility systems 
where economical. Privatization allows installations to focus on core 
missions, relieving them of activities that can be done more 
efficiently and effectively by others. Privatization can help us reap 
private sector efficiency while upgrading aged systems to industry 
standards without compromising safe and reliable services.
    As of February 1, 2005, DoN has privatized 15 of its 645 utility 
systems while exempting 73 utility systems. Approximately half of the 
Source Selections Authority (SSA) decisions have been achieved during 
the past year, with the rest expected by September 30, 2005. When the 
current round of utilities privatization concludes in September 2005, 
DoN intends to pursue other alternatives to enlist industry capability. 
In the end, we need safe reliable utility systems that are operated in 
the most economical manner, and that rely on private industry wherever 
practicable.

                PRIOR BRAC CLEANUP AND PROPERTY DISPOSAL

    The BRAC rounds of 1988, 1991, 1993, and 1995 were a major tool in 
reducing our domestic base structure and generating savings. The DoN 
has achieved a steady State savings of approximately $2.7 billion per 
year since fiscal year 2002. All that remains is to complete the 
environmental cleanup and property disposal on portions of 17 of the 
original 91 bases. We have had significant successes on all fronts.
    Last year DoN relinquished over 71,000 acres at the former Naval 
Air Facility Adak, Alaska, to the Department of the Interior, which 
enabled Interior to exchange portions of the property with The Aleut 
Corporation for other lands. Additionally, the Navy achieved a 
significant milestone at the former Hunters Point Naval Shipyard in San 
Francisco by conveying the first parcel of 75 acres to the San 
Francisco Redevelopment Agency. Of the original 161,000 acres planned 
for disposal from all four prior BRAC rounds, we expect to have less 
than 5 percent (about 8,000 acres) left to dispose by the end of this 
fiscal year.

Property Sales
    We have been very successful using property sales to assist in 
environmental cleanup and property disposal as well as recover value 
for taxpayers. We have used various methods to conduct these sales, 
including General Services Administration (GSA) on-site auctions, GSA 
Internet auctions, and Internet auctions using commercial real estate 
brokers. We used the GSA Internet web site in 2003 to sell 235 acres at 
the former Marine Corps Air Station Tustin, CA, for a net $204 million. 
We also sold 22 acres at the former Naval Air Facility Key West, FL, in 
January 2004 for a net $15 million. The City of Long Beach, CA, opted 
to pre-pay its remaining balance plus interest of $11.3 million from a 
promissory note for the 1997 economic development conveyance of the 
former Naval Hospital Long Beach. We applied these funds to accelerate 
cleanup at the remaining prior BRAC locations.
    Last month the DoN completed its largest public sale via Internet 
auction consisting of four large parcels that total 3,720 acres at the 
former Marine Corps Air Station, El Toro in Irvine, CA, with bids 
totaling $649.5 million. The Internet auction public sale of 62 acres 
at the former San Pedro housing site in Los Angeles, CA, is still in 
process with a top bid of $87 million as this statement was being 
prepared for printing. We expect to close these sales later this year. 
We will also soon close escrow on the public sale of approximately 20 
acres in Orlando, FL, which is noteworthy as the first deed conveyance 
of property prior to completion of all environmental cleanup using the 
public sale process.
    Public sales of smaller parcels were completed in Charleston, SC, 
and Novato, CA, and we expect to proceed soon with the sale of property 
at the former Oak Knoll Naval Hospital upon resolution of legal issues 
stemming from a lawsuit by the local redevelopment authority.

Land Sales Revenue Caution
    A word of caution is necessary regarding land sales revenue. 
Although the auction for El Toro has ended and the auction for San 
Pedro should end soon, it will be several months before these sales 
close escrow, and several additional months until the DoN receives the 
sale proceeds in the DoN prior BRAC account. Until then, litigation or 
default by the winning bidder can delay or cancel the sale, as happened 
with the sale of the former Oak Knoll Naval Hospital in 2003. The El 
Toro sale, planned to occur last year, was delayed for 1 year due to 
litigation and the need to resolve redevelopment issues with the City 
of Irvine. That required us to conserve cash for fiscal year 2005 
execution.
    Because of our experience with the risks associated with predicting 
future receipt of land sales revenue, our fiscal year 2006 budget 
includes an appropriation request of $143 million to cover minimum 
required environmental cleanup actions under enforceable schedules and 
ongoing program costs for properties not yet disposed. Notwithstanding 
these risks, we are optimistic that the El Toro and San Pedro sales 
will close and the funds will become available.

Prior BRAC Environmental Cleanup
    The DON has spent over $2.5 billion on environmental cleanup at 
prior BRAC locations through fiscal year 2004. We estimate the 
remaining cost to complete cleanup at about $559 million for fiscal 
year 2007 and beyond, most of which is concentrated at fewer than 
twenty remaining locations and includes long-term maintenance and 
monitoring obligations for remedies already installed and operating at 
many locations. As we have done previously, the DoN will use any 
additional land sale revenue beyond that projected in our fiscal year 
2006 budget to further accelerate cleanup at these remaining prior BRAC 
locations, which are primarily former industrial facilities that tend 
to have the most persistent environmental cleanup challenges.

Closure of Naval Station Roosevelt Roads, Puerto Rico
    In addition to completing property disposals from the four prior 
BRAC rounds, the Navy closed Naval Station Roosevelt Roads on March 31, 
2004, as directed by section 8132 of the fiscal year 2004 Defense 
Appropriations Act. All military mission activities have been 
relocated. The DOD schools remained open through the completion of the 
2003-2004 school year, as encouraged by the conference report 
accompanying the Act. Naval Activity Puerto Rico has been established 
to protect and maintain the property and preserve its value until 
disposal.
    As directed in the Act, the closure and disposal is being carried 
out in accordance with the procedures contained in the Defense Base 
Closure and Realignment Act (BRAC) of 1990, as amended. Pursuant to 
these procedures, the Navy has approved property transfers to the 
Department of the Army for use by reserve components, and the 
Department of Homeland Security. The Commonwealth of Puerto Rico formed 
a Local Redevelopment Authority (LRA). Using grant funding from the DOD 
Office of Economic Adjustment, the LRA prepared a redevelopment plan 
for the property that envisions a mix of commercial, residential, and 
public uses, as well as conservation of large areas of mangrove forest 
and wetlands. As required by BRAC procedures, we are analyzing the 
potential environmental impacts of property disposal in accordance with 
that redevelopment plan. We expect that property disposal process will 
begin in 2006 and that substantial portions of the property will be 
disposed through competitive public sale. We do not expect this process 
to be completed until fiscal year 2007, and have requested $27 million 
in fiscal year 2006 to cover caretaker costs and maintain the property 
in preparation for sale. The Government Accountability Office (GAO) 
recently reviewed Navy plans and progress in disposing of the former 
Naval Station Roosevelt Roads. GAO found that Navy was following 
prescribed procedures and completed their review with no 
recommendations.

                               BRAC 2005

BRAC 2005 Decision Process
    A successful BRAC 2005 is most important to the DoN, the DOD, and 
the Nation. It may be our last opportunity in the foreseeable future to 
reduce excess infrastructure, move scarce dollars to areas that result 
in increasingly improved readiness, and transform our infrastructure 
consistent with our defense strategy.
    BRAC 2005 provides a fair process that will result in the timely 
closure and realignment of military installations in the United States. 
All military installations inside the United States must be considered 
equally without regard to whether the installation has been previously 
considered or proposed for closure or realignment. All closure and 
realignment recommendations must be based on certified data, the 20-
year force structure plan, and the published selection criteria that 
make military value the primary consideration.



    For BRAC 2005, the Secretary of Defense directed that the analysis 
be divided into two categories of functions. Joint Cross Service Groups 
(JCSGs) are analyzing common business-oriented support functions while 
the Military Departments are focusing on analysis of service unique 
functions. The following seven JCSGs were established: Education and 
Training; Headquarters and Support; Industrial; Medical; Supply and 
Storage, Technical; and Intelligence. The JCSGs and the Military 
Departments will make their BRAC recommendations to the Infrastructure 
Executive Council (IEC), the DOD policy making and oversight body for 
the entire BRAC 2005 process. JCSGs were also utilized in BRAC 1995 but 
in a substantially different manner. In BRAC 1995, JCSG analysis and 
recommendations were provided to the Military Departments for 
consideration in developing their BRAC recommendations. The creation of 
the IEC ensures that DOD senior leadership is directly engaged in 
making these important decisions. Analysis and evaluation by all of the 
BRAC groups are on-going, with a goal of supporting the Secretary of 
Defense's delivery of a comprehensive set of base closure and 
realignment recommendations by May 16th.



    Despite what some may have read in the newspapers, seen on the 
Internet, or heard through the rumor mill, the DOD does not have a list 
of closures or realignments at this time. The number and location of 
such closures or realignments will only be determined after a 
comprehensive and rigorous analytical process that is now underway in 
the Military Departments and Joint Cross Service Groups.

BRAC 2005 Implementation Funding
    DOD has programmed funds through the Future Years Defense Plan for 
implementing BRAC 2005 decisions. Discussions are underway as to how 
these funds may be allocated to the Military Departments for 
implementing BRAC 2005 decisions. Expectations are that BRAC 2005 
implementation costs will be financed by a mix of (1) allocation of the 
DOD funds, realignment of funds from military construction projects and 
SRM funds no longer needed at closing locations, transfers from 
environmental restoration accounts, and if necessary, additional 
military service funds to implement BRAC 2005 decisions.

Preparing to Implement BRAC 2005
    The DoN is building upon its experience in completing cleanup and 
disposal of property from prior BRAC rounds to prepare to implement 
BRAC 2005 decisions. Recently, the Secretary of the Navy approved 
formation of a BRAC Program Management Office (PMO) that reports to the 
Assistant Secretary of the Navy for Installations and Environment. BRAC 
PMO has assumed responsibility for completing cleanup and disposal of 
the remaining property from prior BRAC rounds, and it will become 
responsible for cleanup and disposal of property at installations 
closed or realigned in BRAC 2005.
    The DoN has examined lessons learned from cleanup and disposal of 
property at prior BRAC bases, especially recent successes using 
competitive public sales. Much has changed since the last BRAC round in 
1995. Environmental contamination at remaining bases has largely been 
characterized, and cleanup has been completed or is now well underway. 
A close examination of existing statutory authority and Federal 
regulations for property disposal showed there were ample opportunities 
to improve the disposal process without the need for new legislation. 
Private sector capabilities have emerged and matured for ``brownfield'' 
redevelopment and insurance industry products to address environmental 
liabilities when there is a CERCLA early transfer of contaminated 
property. The DoN expects to take increased advantage of these private 
sector capabilities.
    We will continue to use all of the property disposal authorities in 
the right circumstances, as we have in the case of the disposal of 
Naval Station Roosevelt Roads. Like Roosevelt Roads, however, we 
believe there will be more opportunities to quickly dispose, in 
cooperation with the local community, BRAC 2005 property requiring 
environmental cleanup in its existing condition. The Navy will dispose 
of property using public sale and will include the cleanup of that 
property with it, as is done in ``brownfield'' disposals nationwide. 
This will allow developers with the experience and expertise to 
complete the cleanup as they redevelop the property. That benefits 
communities by getting the property onto local tax rolls and 
redeveloped more quickly, with the local community controlling that 
development through traditional land use planning and zoning. It 
benefits DOD and the Federal taxpayer by divesting unneeded property 
sooner and reducing the environmental cleanup time and expense incurred 
by DOD. The DON goal for implementing BRAC 2005 is that the last Sailor 
or Marine leaving the closed base hand the deed to the property to the 
new owner. We are convinced that this goal is achievable is we start 
preparations for property disposal as soon as closure decisions are 
final.

                               CONCLUSION

    In conclusion, we believe we have put forward a very strong fiscal 
2006 budget request for our facilities and environmental efforts, while 
still recognizing the compelling needs of the Global War On Terror. We 
have funded x percent of Navy and y percent of Marine Corps expected 
base operating costs, funded 95 percent of predicted sustainment 
requirements, while the Navy makes progress on its facility recap 
metric.
    We are funding environmental programs to maintain compliance with 
all environmental standards while accelerating cleanup of past 
contamination and investing in research and development efforts to 
solve emerging environmental concerns.
    We are proceeding with the analysis and scenario development that 
will lead to the Secretary of Defense announcement of BRAC 2005 
recommendations. We have carefully reviewed our implementation 
practices from the previous four BRAC rounds and are establishing, in 
cooperation with DOD, the necessary organizational structures and 
business policies and practices to accelerate closure, environmental 
cleanup, and property disposal.

                             FAMILY HOUSING

    Senator Hutchison. Thank you very much. I want to start the 
questioning with family housing projects that we have funded 
over the past few years, some of which have been canceled 
without notification in order to use the funds for 
privatization purposes. Now, we all support privatization, but 
I wanted to ask if there are any construction projects in the 
request that you are making that you anticipate might be 
diverted to privatized housing, and if you do decide to pursue 
any different programs after we do appropriate for 
construction, will you inform the committee of your decision to 
cancel a project?
    Mr. Penn. Madam Chairman, we had that discussion just this 
morning with some of your staffers, and we have agreed we are 
going to work very closely with the members of your staff on 
this issue.
    Admiral, would you like to----
    Admiral Shear. Ma'am, I would just say that family housing 
improvement and construction projects we have in the 2006 
proposal are in Guam and Japan. So I think the concern that 
they might be diverted is probably not going to be due to 
privatization, since we do not have plans to privatize in those 
areas.
    But as the Secretary said, we also recognize we have a duty 
to keep the committee informed about how we are handling the 
money that goes to privatization, and we have some work to do 
in that regard. So we recognize there is an issue there.

                          JOINT RESERVE CENTER

    Senator Hutchison. Secretary Penn, the Naval Reserve is a 
participant in the real property exchange that will result in 
moving a unit to Ellington Field in Houston, Texas, from 
another location closer to the city itself. I am very 
supportive of this process and the potential for joint 
opportunities that exist at Ellington between the services and 
also components of a homeland security unit of the Coast Guard. 
I wanted to ask if the Navy is satisfied with the progress on 
this move to Ellington and are you looking for other joint 
opportunities, particularly with the Coast Guard, that might be 
beneficial for both the Navy and Homeland Security.
    Mr. Penn. Madam Chairman, yes, ma'am, we are. The 
Department is very pleased to cooperate with the proposal to 
relocate the existing Reserve center, which will include Army, 
Navy, and Marine Corps. We are looking for opportunities to 
work with the Coast Guard. They are at several locations with 
us at this time, and we are looking for ways to enhance this 
opportunity.
    Senator Hutchison. I appreciate that very much because I 
think that with the Air Guard unit that is there, it really 
does provide an opportunity for a truly joint use, and I hope 
that everyone is going to be working together toward that goal.
    The issue of the sale of the land that you addressed we 
think is a very good way to go, and I think you have addressed 
the questions there about using the money for the environmental 
cleanup. Assuming that that final sale goes forward, that would 
be what we would expect, that the money would go toward 
environmental cleanup of both that and the previous BRAC 
requirements.
    Thank you very much, Mr. Penn. Now I will turn to my 
colleague, Senator Feinstein.
    Senator Feinstein. Thank you very much, Madam Chairman.
    Mr. Secretary, welcome.
    Mr. Penn. Thank you.

                          EL TORO LAND AUCTION

    Senator Feinstein. I want to ask about the El Toro land 
auction. It was recently closed. The final bid was $649.5 
million. Now, this is just half of the $1.2 billion that was 
forecast earlier in the process. My question really is why did 
the bids fall so short of the projections, and what does that 
portend, if anything, for other Navy BRAC land sales?
    Admiral Shear. Ma'am, the only comment is that my 
understanding is that the auction price of the land was in line 
with our assessments of earlier. We hired an independent agency 
to assess the value of the property. Some of the auction price 
had to be sent to fees for the local municipality. So the 
actual cost of the developer is higher than $649 million. My 
information is that it is in line with what we were estimating.
    Senator Feinstein. It is my understanding it is not, that 
you said that it could bring as much as $1.2 billion. That was 
the forecast. Now, it may be in line with the assessments, but 
it also may well be that you made judgments that simply were 
not correct. To come 50 percent in a booming land market is, 
Admiral, kind of a sobering judgment.
    Mr. Penn. Senator, if I may, we found in order to develop 
the property, the City of Irvine will require the purchaser to 
enter into development agreements that require the purchaser to 
spend an additional $400 million in developer fees and dedicate 
a substantial percentage of the property for public purposes. 
So an additional $400 million will come off that $1 billion 
figure.
    Senator Feinstein. All I am saying is that you estimated--
not you but the Department estimated--that this would bring in 
double what it does bring in. And now you are saying it is 
going to bring even less because you are going to have to pay a 
number of fees. So the entire $649.5 million is not available 
to the Navy. Is that correct? It is correct.
    Admiral Shear. My understanding is that the price was more 
on the order of $1 billion, of which $649 will be available to 
the Navy. We are not familiar with--or I am not--we will have 
to report back to you on----
    Senator Feinstein. Could you take a look at that?
    Admiral Shear. Yes, ma'am.
    Mr. Penn. Yes, ma'am.
    Senator Feinstein. Could you let our staff know?
    Admiral Shear. Yes, ma'am, we will do that.
    Senator Feinstein. I would very much appreciate that.

                    MARINE CORPS FORCE RESTRUCTURING

    I would like to ask a question about the $75 million for 
Marine Corps force restructuring. The House in its draft report 
on the supplemental roundly criticizes the Pentagon for 
including this funding in a supplemental instead of in the 
regular budget process. However, the House proposes funding all 
but two of the projects requested in the supplemental to 
support this initiative. The two projects that were not funded 
were proposed for Camp Pendleton, California. The reasons cited 
in the committee report is that the final basing decision for 
the second new infantry battalion to be created by the force 
restructuring is still uncertain.
    General Williams. I might ask you this question. And 
welcome. Although the Marine Corps force restructuring plan was 
approved in 2004, this is the first time this committee has 
heard of any military construction requirements associated with 
it. So why was this sprung in a supplemental instead of being 
presented in the regular budget process?
    General Williams. First of all, Madam Chairman, Senator 
Feinstein, on behalf of the marines and sailors and all of 
their families, I really would like to just thank you for all 
that you have done in supporting them in their current effort. 
As you know, at the Marine Corps we are committed to ensuring 
that we have a well-trained, well-cared-for, and a ready force 
to go out and fight our Nation's wars. And the Marine Corps is 
committed to ensure that we have the installations, that we 
appropriately invest in our installations that would ensure 
that they are capable of accomplishing such tasks.
    On the questions of the MILCON projects in the 2005 
supplemental, when the Commandant of the Marine Corps directed 
a study of his force structure to ensure he had the capability 
that he needed in order to continue to support the global war 
on terrorism, he in fact directed this force restructuring 
study group. When the group completed its work and the 
recommendations of the group were approved, it was after the 
opportunity to include those support requirements in the 
baseline budget.
    In addition, at the direction of the----
    Senator Feinstein. Did you say that it was going to be in 
the baseline budget?
    General Williams. No, ma'am. I said it was after the 
opportunity to include them in the baseline budget passed.
    In addition, with the 2005 authorization, we got the 
strength increased. It authorized an increase to 178,000, 
allowing then the opportunity to begin to bring forces on line 
during the summer of 2005. Of course, now, what we were faced 
with is having units come on line without facilities and things 
to support them. The facilities and this entire restructuring 
was in support of the Global War on Terrorism.
    Senator Feinstein. I got that. I got your answer.
    General Williams. So at the direction of the administration 
and in accordance with the precedent that had been set by 
Congress in the past, the Department requested that those 
incremental funds, those incremental costs of war funds then 
would be included in the supplemental appropriation. So we, 
thus, included those in the submission.
    Senator Feinstein. Okay, I understand. Thank you.
    What is the status of the site selection for the second 
infantry battalion, and if it is not at Pendleton, where is it 
going to go?

                       SECOND INFANTRY BATTALION

    General Williams. Yes, ma'am. The siting of the second 
infantry battalion--that decision is being discussed and 
debated by senior leadership of our Commandant, as well as our 
Marine Forces Command, Atlantic and Marine Forces Pacific. As I 
understand it, the decision is, of course, based upon a number 
of things. Some of it is the installations' ability to accept 
the additional sites as well as having all the support 
structure required to support the increased manning of those 
facilities.
    So as far as the actual location, we are looking at Camp 
Lejeune, North Carolina. I would say that that decision has 
been made that we would certainly look at them first in order 
to get that----
    Senator Feinstein. It is awful humid in the summer there.
    General Williams. Yes, ma'am.
    Senator Feinstein. Thank you very much and thank you for 
your service to our country.

                         OUTLYING LANDING FIELD

    Let me ask a question about the outlying landing field for 
Washington County, North Carolina. Mr. Secretary, Congress has 
provided a total of $57.6 million for land acquisition and 
construction of facilities for the proposed F-18 outlying 
landing field for North Carolina.
    You referenced in your prepared testimony last month's 
Federal court ruling which has barred the Navy from continuing 
to acquire land for this project. Given this most recent legal 
setback for the Navy on this, as well as the extent of local 
opposition to the project, is the Navy reconsidering its 
decision to locate the OLF in Washington County? Are you 
looking at any other sites?
    Mr. Penn. The Navy continues to believe that the EIS it 
prepared was based on sound science and rigorous analysis and 
met the requirements of NEPA. Nonetheless, the Navy is 
carefully examining the court's ruling and examining available 
alternatives.
    Senator Feinstein. In your testimony, you note that the 
2006 budget includes $26 million in available prior year funds 
for this project. As I mentioned, we have appropriated a total 
of $57.6 million. Are you saying that the Navy has already 
obligated $31.6 million for this project, or are you holding 
some of the previously appropriated funds in reserve for future 
activities beyond 2006?
    Mr. Penn. No, ma'am. Thus far, the Navy has obligated $8.1 
million total, leaving $25.5 million unobligated before the 
district court halted further expenditures. The 2006 budget 
includes $23 million in prior year savings not related to OLF 
unobligated balances. We believe that the Navy will be 
successful in resolving the litigation and that these funds 
will be needed for execution in fiscal year 2006.
    Senator Feinstein. So you have spent $8 million. Is that 
what you are saying?
    Mr. Penn. Yes, ma'am, thus far.
    Senator Feinstein. Is that of the $30 million that we 
appropriated in 2005, or is it of earlier money?
    Mr. Penn. Fiscal year 2004 and 2005, $33.6 million in 
fiscal year 2004, 2005.
    Senator Feinstein. I have that we appropriated $30 million 
in 2005, is that correct, for this project?
    Admiral Shear. Yes, ma'am.
    Senator Feinstein. So that money is still there. Is that 
correct?
    Mr. Penn. Yes, ma'am. That is correct.
    Senator Feinstein. And that money is not obligated. Is that 
right?
    Mr. Penn. To the best of my knowledge, yes, ma'am.
    Senator Feinstein. So is there more than $30 million in 
unobligated funds for this project?
    Mr. Penn. No, ma'am, there is not.
    Senator Feinstein. Okay, just $30 million. Well, I was just 
told it is $27.6 million in 2004 that is unobligated. It is 
appropriated but not used.
    Mr. Penn. As I mentioned, ma'am, Congress appropriated a 
total of $33.6 million fiscal year 2004 and fiscal year 2005 
for OLF acquisition and horizontal construction. The Navy has 
obligated $8.1 million total, leaving $25.5 million unobligated 
before the district court halted our further expenditures.
    Senator Feinstein. See, we have different figures. Our 
total appropriation already done is $57.6 million, of which the 
Navy has obligated $31.6 million. And you are telling me that 
the $30 million which was appropriated in 2005, is still there. 
It has not been spent. I think we need to get together and go 
over this and see exactly where that is.
    Mr. Penn. Yes, ma'am. I agree. I was told that fiscal year 
2005 rescinded $24 million of the fiscal year 2004 funds. So we 
will get together and coordinate those numbers.
    Senator Feinstein. Yes. So that would be appreciated. Thank 
you all very much. I appreciate it.
    Thank you, Madam Chairman.

                          SUBCOMMITTEE RECESS

    Senator Hutchison. Thank you. That ends the hearing. We 
thank you very much. Welcome aboard. After 1 week, you have 
just passed your first test, your rite of passage, and we very 
much appreciate the information we have gotten today.
    Mr. Penn. Well, thank you very much and thank you for all 
you are doing for our great country.
    Senator Hutchison. Thank you.
    [Whereupon, at 4:23 p.m., Tuesday, March 8, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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