    [Senate Hearing 109-255]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 109-255

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

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED NINTH CONGRESS

                                 FIRST SESSION

                                       on

                                   H.R. 2528

      MAKING APPROPRIATIONS FOR MILITARY QUALITY OF LIFE FUNCTIONS OF THE
        DEPARTMENT OF DEFENSE, MILITARY CONSTRUCTION, THE DEPARTMENT OF
       VETERANS AFFAIRS, AND RELATED AGENCIES FOR THE FISCAL YEAR ENDING
                   SEPTEMBER 30, 2006, AND FOR OTHER PURPOSES

                                   __________

             Printed for the use of the Committee on Appropriations

      Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                                   index.html

                        U.S. GOVERNMENT PRINTING OFFICE
    99-875                      WASHINGTON : 2006
    _____________________________________________________________________________
    For Sale by the Superintendent of Documents, U.S. Government Printing Office
    Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512�091800
    Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

                                   __________
                          COMMITTEE ON APPROPRIATIONS

                      THAD COCHRAN, Mississippi, Chairman
    TED STEVENS, Alaska                  ROBERT C. BYRD, West Virginia
    ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
    PETE V. DOMENICI, New Mexico         PATRICK J. LEAHY, Vermont
    CHRISTOPHER S. BOND, Missouri        TOM HARKIN, Iowa
    MITCH McCONNELL, Kentucky            BARBARA A. MIKULSKI, Maryland
    CONRAD BURNS, Montana                HARRY REID, Nevada
    RICHARD C. SHELBY, Alabama           HERB KOHL, Wisconsin
    JUDD GREGG, New Hampshire            PATTY MURRAY, Washington
    ROBERT F. BENNETT, Utah              BYRON L. DORGAN, North Dakota
    LARRY CRAIG, Idaho                   DIANNE FEINSTEIN, California
    KAY BAILEY HUTCHISON, Texas          RICHARD J. DURBIN, Illinois
    MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
    SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
    WAYNE ALLARD, Colorado
                        J. Keith Kennedy, Staff Director
                  Terrence E. Sauvain, Minority Staff Director
                                     ------

    Subcommittee on Military Construction and Veterans Affairs, and Related
                                    Agencies

                     KAY BAILEY HUTCHISON, Texas, Chairman
    CONRAD BURNS, Montana                DIANNE FEINSTEIN, California
    LARRY CRAIG, Idaho                   DANIEL K. INOUYE, Hawaii
    MIKE DeWINE, Ohio                    TIM JOHNSON, South Dakota
    SAM BROWNBACK, Kansas                MARY L. LANDRIEU, Louisiana
    WAYNE ALLARD, Colorado               ROBERT C. BYRD, West Virginia
    MITCH McCONNELL, Kentucky            PATTY MURRAY, Washington
    THAD COCHRAN, Mississippi
      (ex officio)

                               Professional Staff
                                  Dennis Ward
                                  Sean Knowles
                                 Dennis Balkham
                           Christina Evans (Minority)
                             B.G. Wright (Minority)
                            Chad Schulken (Minority)

                                C O N T E N T S

                                  ----------

                             Tuesday, March 8, 2005

                                                                       Page

    Department of Defense............................................     1
        Department of the Navy.......................................    69

                            Tuesday, March 15, 2005

    Department of Veterans Affairs: Office of the Secretary..........    89

                           Wednesday, March 16, 2005

    Department of Defense:
        Department of the Army.......................................   139
        Department of the Air Force..................................   165

                             Tuesday, June 28, 2005

    Overseas Basing Commission.......................................   183
    Department of Defense............................................   205

       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.]

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

                                  ----------

                            TUESDAY, MARCH 15, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:32 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Kay Bailey Hutchison (chairman)
    presiding.
        Present: Senators Hutchison, Craig, Feinstein, Byrd, and
    Murray.

                         DEPARTMENT OF VETERANS AFFAIRS

                            Office of the Secretary

    STATEMENT OF HON. R. JAMES NICHOLSON, SECRETARY
    ACCOMPANIED BY:
            JONATHAN B. PERLIN, M.D., Ph.D., MSHA, FACP, ACTING UNDER
                SECRETARY FOR HEALTH, VETERANS HEALTH ADMINISTRATION
            HON. VICE ADMIRAL DANIEL L. COOPER (USN RET.), UNDER SECRETARY
                FOR BENEFITS, VETERANS BENEFITS ADMINISTRATION
            RICHARD A. WANNEMACHER, ACTING UNDER SECRETARY FOR MEMORIAL
                AFFAIRS, NATIONAL CEMETERY ADMINISTRATION
            HON. TIM McCLAIN, GENERAL COUNSEL
            RITA A. REED, DEPUTY ASSISTANT SECRETARY FOR BUDGET

               OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

        Senator Hutchison. Our meeting will come to order. I will
    say that this is our first hearing for the Veterans Affairs
    Department for our new subcommittee. I am very pleased to be
    able to work with the Department of Veterans Affairs. Of
    course, I have known the Secretary for a long time and have
    worked with the previous Secretary for this important
    Department. We are delighted that we now have this
    jurisdiction.
        I want to first tell you that we have votes starting at 3
    o'clock, five votes. So I am going to dispense with my opening
    statement because I want to hear from you, and then I want to
    have time for questions. I think what we will do is get as far
    as we can until the vote starts, and then we will see where we
    are and perhaps have to take a small recess and come back. But
    I will dispense with my opening statement and put it in the
    record.
        Welcome to you.
        Let me call on my distinguished ranking member with whom I
    work very closely. It is a great relationship. I think it is
    safe to say we are both very happy to have the Veterans Affairs
    Department in this subcommittee. With that, Senator Feinstein.

                     STATEMENT OF SENATOR DIANNE FEINSTEIN

        Senator Feinstein. Thank you very much, Madam Chairman. I
    echo your comments. I am delighted to work with you. It has
    been many years, and I do not think we have had a problem yet.
    So that is the good news.
        Additionally, I would ask that you allow me to join you in
    welcoming the lady and gentlemen assembled before us. I
    particularly want to welcome Secretary Nicholson. We look
    forward to working with you in this appropriation effort.
        This is a new chapter for the Military Construction
    Committee because we will be taking on the Veterans Affairs
    matters, and I think between the chairman and me, we represent
    two of the three States with the largest population of veterans
    in America. So we have a very unique opportunity to work on
    these challenges and opportunities.
        That said, I do want to let you know where I am coming
    from. I am very disappointed in the President's fiscal year
    2006 budget request for the Department of Veterans Affairs.
    This budget assumes savings of over $1 billion by doubling
    prescription drug co-payments and imposing a $250 enrollment
    fee on middle income veterans, many of whom are struggling to
    make ends meet as it is on incomes as low as $26,000 a year.
    More than 200,000 veterans would be adversely affected by these
    proposals. I think they are unrealistic assumptions. Congress
    has rejected them in the past and I hope we will continue to
    reject them.
        We are a Nation at war. The military has discharged more
    than 244,000 veterans from Iraq and Afghanistan, and the VA has
    already treated nearly 49,000 of those returning troops. Yet,
    this budget turns a blind eye to the increasing demands on the
    VA health care system caused by the influx of new veterans, as
    well as the aging population of veterans from earlier wars.
    Instead of reaching out to veterans, this budget proposes to
    shut more veterans out of the health care system by charging
    enrollment fees, by hiking co-pays on prescription drug
    benefits, and by limiting long-term nursing home care.
        This is not how we should be treating America's veterans. I
    know that money is tight, but the administration should not try
    to balance the books by forcing veterans to shoulder a greater
    share of the burden of health care costs.
        I know these are tough times, Mr. Secretary, but they must
    be addressed. My goal as the ranking member of this
    subcommittee is to do everything in my power to see that we
    keep the promises we made to our veterans and, in so doing,
    make the highest and best use of taxpayer dollars.
        Now, Madam Chairman, I look forward to working with you on
    this aspect of the budget. I also very much look forward to our
    taking over the mantel of the VA/HUD Subcommittee which I think
    did an excellent job in terms of appropriating for veterans and
    veterans affairs. Thank you very much.
        Senator Hutchison. Thank you.
        Senator Murray.

                       STATEMENT OF SENATOR PATTY MURRAY

        Senator Murray. Madam Chairman, thank you. It is a delight
    to join you on this committee.
        Mr. Secretary, it is an honor to be in front of you again.
    We have seen each other I believe on three occasions now. I
    serve on the Veterans Committee, Budget, and Appropriations. I
    appreciate and understand the difficult task that is before
    you.
        Madam Chair, I know that you are short on time because of
    the votes, and I will submit my statement for the record.
        But let me just say this. I share the concerns of Senator
    Feinstein. I do not believe that we have budgeted for the care
    of our soldiers who are returning from war, nor for the ones
    that are already in long waiting lines. You have heard me
    before. You know that I am deeply concerned of the thousands of
    members who are coming home who will be discharged but will not
    have access to health care, particularly our Guard and Reserve
    members. We know that you are talking about community outreach
    clinics, but they are already turning poor patients away in our
    States. So they cannot take up the burden of this.
        Increasing co-pays, enrollment fees, closing our long-term
    care facilities is the wrong thing to be doing at a time when
    we have so many men and women who are serving us overseas.
        So I will submit my statement for the record, but I feel
    very strongly about this and will continue in any way I can to
    help us increase the budget for our veterans because I believe
    it is a promise that we have not kept and we need to follow up
    on.
        Senator Hutchison. Senator Byrd.

                      STATEMENT OF SENATOR ROBERT C. BYRD

        Senator Byrd. Thank you, Madam Chairman, and I thank those
    Senators who have preceded me. I wish to associate myself with
    their remarks.
        Mr. Secretary, during this time of war, few matters could
    be more important than the care that our Nation gives to our
    veterans. West Virginians are extremely proud of our veterans.
    Those men and women who have chosen to serve our Nation are
    owed an enormous debt. It is a moral responsibility that the
    United States carries, as President Lincoln said, ``to care for
    him who shall have borne the battle and for his widow and his
    orphan.''
        But the funding priorities outlined by President Bush in
    his budget undermine our country's commitment to America's
    veterans. The President proposes to double the co-payment for
    prescription drugs, impose a new $250 annual user fee for
    certain veterans, and continue a policy of turning away
    hundreds of thousands of veterans from VA hospitals because
    they are classified as low priority. According to the
    Congressional Research Service, continuing this policy on low-
    priority veterans will deny a staggering 522,000 veterans care
    from VA hospitals by the end of this year.
        The American people must be told how many veterans will
    suffer under the President's budget proposal. The more than
    190,000 veterans in West Virginia receiving health care from VA
    medical centers in the Mountain State are threatened by these
    significant hikes in fees and co-payments. The expected wave of
    combat veterans from the Iraq and the Afghanistan wars will add
    to the stress on our VA facilities.
        Yet, instead of strengthening the VA medical system, the
    Bush administration weakens it. The Nation's three largest
    veterans organizations, the American Legion, the Veterans of
    Foreign Wars, and the Disabled American Veterans, have called
    the President's proposals the most tight-fisted, miserly budget
    for veterans programs. And they are right.
        I note that the President's $81.9 billion emergency
    supplemental does not include a single dime for veterans health
    care. Tax cuts and corporate giveaways are helping the super-
    rich to get further ahead, but the President's budget leaves
    veterans health care far behind. For this Senator, ``support
    the troops'' means taking care of veterans after they come
    home. Our brave fighting men and women deserve much more from
    the White House than sloganeering and health care on the cheap.
        Thank you, Mr. Secretary. Thank you, Madam Chairman.
        Senator Hutchison. Thank you, Senator Byrd.
        Senator Craig, who is the distinguished chairman of the
    Veterans Affairs Committee and a member of our subcommittee.

                        STATEMENT OF SENATOR LARRY CRAIG

        Senator Craig. Well, thank you, Madam Chairman, and again,
    congratulations on chairing this newly structured committee and
    the authority within. Also, let me congratulate Senator
    Feinstein on her new position as ranking on this structure.
        To all of you from the Veterans Administration, Mr.
    Secretary, welcome before this most important committee. I have
    had the privilege, Madam Chairman, of being in each one of
    these lady's and gentleman's departments. I will go back better
    understanding the operations of the Veterans Administration. It
    is critically important for all of us to understand what it
    does and the role it plays as we work with this very difficult
    budget.
        Just this past week--I have held hearings now with all the
    veterans service organizations. The traditional joint hearings
    between the House and the Senate were obviously well attended
    and we heard from all of these marvelous organizations of their
    concern for veterans and the urgency of much of the service
    provided.
        I think it is also noteworthy that over the last 4 years,
    we have done more to improve veterans services than ever in the
    history of our country, tremendous commitments of resources, a
    9.4 percent average increase on an annualized basis. For that,
    we can all be proud.
        We are now debating a budget that is different than what
    the President proposed by a substantial amount. We have a
    budget before us that does not have any of the co-pays in it,
    does not have any of the new fees in it. In fact, it is a
    straight plus-up of nearly $1 billion without any
    reconciliation instructions in it, Madam Chairman. That is a
    significant improvement that serves the veterans of our country
    the way we would want them to be served.
        Does it serve every veteran who once bore the uniform of a
    service of this country? It does not. Nor can we be expected as
    a country to serve those who are not service-connected, who are
    the 7's and 8's, who may well have their own health care
    insurance, but now, because of the phenomenal work that the
    Veterans Administration has done to improve the quality of
    health care delivery within the system, we have created a
    system that is now sought after by all, in large part because
    if they can gain access through the front door, they gain free
    health care, even though they may be among the most wealthy in
    our country, but they have simply borne the uniform.
        That is a question that we have to ask ourselves in a
    fundamentally and fiscally responsible way, and that is the
    question that is now before us on the floor of the Senate. I do
    believe, Madam Chairman, we are going to be given a budget by
    the Budget Committee and instructions to this subcommittee that
    we can work with, that we can hand them to these administrators
    who sit before us in a way that does meet most, if not all, of
    the challenges, that addresses the concerns of Senator Murray,
    as I have, that we have a lot of new, incoming veterans with
    extraordinary needs because of the character of warfare today
    and because of the character of health on the front lines and
    medicine on the front lines of this war.
        So there are a lot of challenges out there that I trust,
    Madam Chairman, you and the ranking member can work with and
    work with those of us in the authorizing committees to make
    happen in defense of America's veterans. That is our charge. It
    is our responsibility.
        Thank you.
        Senator Hutchison. Thank you, Mr. Chairman.
        And now, Mr. Secretary, we would be pleased to hear from
    you.

                 STATEMENT OF THE HONORABLE R. JAMES NICHOLSON

        Secretary Nicholson. Thank you, Madam Chairman and members
    of the committee. Good afternoon.
        Allow me, if you would, to start by introducing those
    experts that I have here and people who are far more
    experienced at the Veterans Affairs Department than I at this
    point. I would like to start on my far left with Tim McClain,
    who is the General Counsel. My immediate left is Dr. Jonathan
    Perlin, who is the Acting Under Secretary for Health. My far
    right is the Acting Under Secretary for Memorial Affairs, Dick
    Wannemacher. In the middle here on this side is Admiral Dan
    Cooper, who is the Under Secretary for Benefits, and my
    immediate right is Ms. Rita Reed, who is the Deputy Assistant
    Secretary for Budget.
        I would ask, Madam Chairman, if I could have my complete,
    comprehensive written statement be submitted for the record,
    but that I would be allowed to offer some highlights here of
    the President's proposal before we take your questions.
        Senator Hutchison. Without objection.
        Secretary Nicholson. Madam Chairman, President Bush is
    requesting a record $70.8 billion for the Department of
    Veterans Affairs in fiscal year 2006: $37.4 billion for
    entitlement programs and $33.4 billion for discretionary
    programs. This total represents a 2.2 percent increase over the
    fiscal year 2005 enacted level. The discretionary funding level
    would represent an increase of $880 million, or 2.7 percent,
    over the enacted level for 2005. The proposed mandatory
    spending level represents a $639 million, or 1.7 percent,
    increase over 2005. This budget represents a total increase of
    47 percent with a 44 percent increase in discretionary funding
    since the beginning of the Bush administration.
        The President's 2006 proposal will allow us to meet the
    health care and benefit needs of all newly separated veterans
    of the conflicts in Iraq and Afghanistan to maintain the high
    standards of health care quality, for which VA is now
    nationally recognized while treating 5.2 million patients. It
    will allow us to follow through on an historic realignment of
    our health care infrastructure through the CARES process, to
    reduce the backlog of disability compensation and pension
    claims, and to continue the largest expansion of the national
    cemetery system since the Civil War.
        In the area of health care, in recent years the
    Department's successes in delivering top-notch health care have
    been stunning. I can brag about this because I had nothing to
    do with it. But this is really a magnificent organization of
    dedicated, competent, compassionate people. The VA exceeds the
    performance of private sector and Medicare providers for key
    health care quality indicators for which comparable data are
    available. A recent RAND Corporation study also shows that
    patients in VA's health care system are significantly more
    likely to receive recommended care than our private sector
    patients.
        This is all the more impressive when you consider the
    explosive growth in VA health care usage. In 2006, the VA will
    treat about 1 million more patients than were treated in 2001.
    The President's budget will ensure there is no slippage in our
    high level of performance, even at these elevated patient
    levels. Ninety-four percent of the primary care appointments
    are scheduled within 30 days of the patient's desired date, and
    93 percent of the specialty care appointments are also
    scheduled within that time frame.
        The President's 2006 budget asks that you enact two
    important provisions affecting only priority 7 and 8 veterans:
    an annual enrollment fee of $250 and an increase in pharmacy
    co-payments from $7 to $15 for a 30-day supply of drugs.
        The proposed enrollment fee is similar to the fee paid by
    career military retirees enrolled in the TRICARE system and
    some would argue even more justified. As you know, most TRICARE
    enrollees have served on active duty for at least 20 years and
    are former enlisted personnel with modest retirement incomes.
    The proposed enrollment fee would apply to those veterans who
    may have served as few as 2 years and who have no service-
    connected disability and who do have reasonable incomes.
        In addition, those veterans who are in priority group 8
    have incomes above the HUD geographic means test.
        I would like to turn to long-term care. This budget
    provides all long-term care needs for veterans who are 70
    percent or more service-connected. It also provides for
    patients requiring short-term care subsequent to a hospital
    stay and those needing hospice or respite care and those with
    special needs such as ventilator dependence or spinal cord
    injury.
        To ensure fairness and consistency, the VA proposes similar
    eligibility criteria across all institutional, long-term care
    venues, VA, contract community, and State nursing homes. The
    Department would continue to expand access to non-institutional
    long-term care with an emphasis on community-based and in-home
    care. In many cases this approach allows veterans to receive
    these services in the comfort and familiar settings of their
    homes surrounded by their families.
        In order to be more prepared to care for our veterans
    returning from Iraq and Afghanistan, the VA's 2006 medical care
    request includes $1.2 billion for the prosthetics program,
    which is $100 million over the fiscal year 2005 enacted level.
    This will support the increasing workload associated with the
    purchase and repair of prosthetics and sensory aids to improve
    veterans' quality of life.
        The budget will also provide $2.2 billion, or $100 million
    over the 2005 level, to standardize and further improve access
    to mental health services across the system, including PTSD.
        We are also proposing a number of program enhancements to
    cover out-of-pocket costs for emergency care for eligible
    veterans in non-VA facilities, to exempt former POW's from co-
    payments for VA extended care and exempt veterans from co-
    payments for hospice care delivered in hospitals or at home.
        We have projected increased health care management
    efficiencies of 2 percent in 2006 which will yield about $600
    million in savings.
        The $750 million requested for CARES in 2006 brings the
    total 3-year investment to $2.15 billion. At its core CARES
    means greater access to higher quality care for more veterans
    closer to where they live. Its impact is already being felt in
    Chicago where the proceeds from an enhanced use lease of VA's
    Lakeside Hospital property are being reinvested at VA's
    Westside facility. This will lead to a new modern bed tower for
    Chicago's veterans.
        Finally, the $786 million proposed in support of VA's
    medical and prosthetic research program would fund about 2,700
    high-priority research projects to expand knowledge in areas
    critical to veterans health care needs. The combination of VA
    appropriations and funding from other sources would bring our
    2006 research budget to nearly $1.7 billion.
        Veterans benefits. The President's request includes $37.4
    billion for the entitlement costs associated with all benefits.
    Our request includes $1.26 billion for the management of the
    Department's benefits program, which is 6.6 percent over the
    2005 level. Veterans Benefits will continue to address an
    increased volume of compensation claims from separating service
    members and older veterans who had not previously submitted
    claims and from current recipients.
        The VA has made significant improvements to the claims
    decision process, but clearly more must still be done. VA takes
    seriously its obligation that every veterans claim must be
    treated fairly and equitably, regardless of the locality. We
    will and must be consistent. To address the issue of
    consistency, the IG is performing an independent system-wide
    review.
        Also, Veterans Benefits leadership is looking at training,
    medical exams, and other aspects of the system to ensure we
    clearly are working toward a consistent, fair, and equitable
    case-decision process for all veterans.
        The President's request would also permit us to continue
    the Benefits Delivery at discharge program. This program
    enables active duty service members to file disability
    compensation claims with VA staff at military bases, complete
    physical exams, and have their claims evaluated before their
    military separations or soon thereafter.
        Burial benefits. The 2006 budget includes $290 million in
    discretionary funding for VA's burial program, including
    operating and maintenance expenses for the National Cemetery
    Administration, capital programs, the administration of
    mandatory burial benefits, and the State cemetery grants
    program. This total is nearly $17 million, or 6.4 percent, over
    the 2005 level.
        It includes $90 million for cemetery construction projects.
    We are requesting $41 million in major construction funding for
    land acquisition for six new national cemeteries and $32
    million for the State cemetery grants program. These resources
    would enable us to increase to 82 percent, the percentage of
    veterans having a veterans cemetery burial option within 75
    miles of their homes.
        Madam Chairman, I would be remiss if I did not note that
    last year's VA National Cemetery Administration earned the
    highest rating ever achieved by a public or private
    organization in the 2004 American Customer Satisfaction Index,
    a rating of 95 on a scale of 100.

                               PREPARED STATEMENT

        So in closing, Madam Chairman, despite the many competing
    demands for Federal funding, the President continues to make
    veterans benefits and services a top priority of his
    administration. Our veterans deserve no less.
        We are now prepared to take your questions. Thank you.
        [The statement follows:]

                    Prepared Statement of R. James Nicholson

        Madam Chairman and members of the Committee, good afternoon. I am
    happy to be here and I am deeply honored that the President has given
    me the opportunity to serve as Secretary of Veterans Affairs. My
    service in the United States Army was the defining experience of my
    life and instilled me with a strong sense of duty and esteem for my
    fellow veterans. I look forward to working with you and the thousands
    of dedicated employees who are carrying out the compelling mission of
    the Department of Veterans Affairs (VA) by ensuring the timely delivery
    of high-quality benefits and services to those veterans in need of same
    earned through their sacrifice and service in defense of freedom.
        In his February 2 State of the Union Address, the President
    underscored the need for America to restrain spending in order to
    sustain our economic prosperity. As part of this restraint, it is
    important that total discretionary and non-security spending be held to
    levels proposed in the 2006 budget. The budget savings and reforms in
    the budget are important components of achieving the President's goal
    of cutting the budget deficit in half by 2009. This budget gives VA
    what it needs to accomplish our priority mission and we urge the
    Congress to support it. The 2006 budget includes more than 150
    reductions, reforms, and terminations in non-defense discretionary
    programs. The Department wants to work with the Congress to achieve
    these savings.
        I am pleased to be here today to present the President's 2006
    budget proposal for VA. The request totals $70.8 billion--$37.4 billion
    for entitlement programs and $33.4 billion for discretionary programs.
    Our budget request for discretionary funds represents an increase of
    $880 million, or 2.7 percent, over the enacted level for 2005, and a 47
    percent increase since the beginning of the Bush Administration.
        With the resources requested for VA in the 2006 budget, we aim to
    build upon many of the Department's achievements that have dramatically
    improved benefits and services to veterans and their families since the
    President came to office. The most noteworthy accomplishments are that
    VA:
      --provides health care to about 1 million more patients
      --improved the quality of patient care that sets the national
            standard of excellence for the health care industry
      --dramatically lowered the backlog of rating claims for disability
            compensation and pension from a high of 432,000 to 321,000 (for
            all claims the backlog peaked at over 600,000)
      --reduced the average length of time to process compensation and
            pension claims from a high of 230 days to approximately 160
            days
      --continued the largest expansion of the national cemetery system
            since the Civil War to honor veterans with a final resting
            place and lasting memorial that commemorates their service to
            our country.
        With strong support from the President, VA has made excellent
    progress in sharpening its focus on more effectively meeting the needs
    of those veterans who count on us the most--veterans with service-
    connected disabilities, those with lower incomes, and veterans with
    special health care needs. I fully support this strategy and am
    committed to ensuring that our health care resources continue to be
    concentrated on care for veterans most in need of the Department's
    services. As an integral part of this focused strategy, we will make it
    a top priority to provide ongoing benefits and services to the
    servicemen and women who served in Operation Enduring Freedom and
    Operation Iraqi Freedom. VA's goal is to ensure that every seriously
    injured or ill serviceman or woman returning from combat receives
    priority treatment and consideration. We will continue to work closely
    with the Department of Defense (DOD) to develop ways by which to move
    records more efficiently between the two agencies, share critical
    medical information electronically, protect the health of troops
    stationed in areas where environmental hazards pose threats, process
    benefit claims as one shared system, and in every way possible, ease
    their transition from active duty to civilian life.

                                  MEDICAL CARE

        The President's 2006 request includes total budgetary resources of
    $30.7 billion (including $750 million for construction and $2.6 billion
    in collections) for the medical care program, an increase of 2.5
    percent over the enacted level for 2005, and more than 47 percent above
    the 2001 level. The $750 million in construction will be devoted to the
    Capital Asset Realignment for Enhanced Services (CARES) program,
    bringing the total Department investment to $2.15 billion over 3 years.
        Given the current fiscal environment, it is more important than
    ever that VA concentrate its resources, policies, and strategies on
    those veterans identified by Congress as high priority. The President's
    2006 budget request includes policies and strategies used successfully
    during the last few years to focus VA health care resources on veterans
    with service-connected disabilities, those with lower incomes, and
    veterans needing our specialized services. In particular, this budget
    assumes continued suspension of enrollment of new Priority 8 veterans,
    as this has proven to be the most effective vehicle through which to
    focus our health care resources on our highest priority patients.
        But maintaining the current enrollment policy will not in itself
    ensure us sufficient resources for the care of those who need us the
    most. The President's 2006 budget asks that you enact two important
    legislative proposals--an annual enrollment fee of $250 and an increase
    in pharmacy co-payments from $7 to $15 for a 30-day supply of drugs,
    both pertaining to only Priority 7 and 8 veterans. This fee and the
    increase in co-payments pertain only to veterans who have no
    compensable service-connected disabilities and do have the means to
    contribute modestly to the cost of their care. This budget asks these
    veterans to assume a small share of the cost so that we may adequately
    care for high-priority veterans.
        The proposed enrollment fee is very similar to the fee the law
    requires retired career service members to pay in order to participate
    in TRICARE, and is arguably even more justified. As you know, TRICARE
    enrollees generally must have served on active duty for at least 20
    years, and many of them are former enlisted personnel with modest
    retirement incomes. The proposed enrollment fee would apply to those
    veterans who may have served as few as 2 years and who have no service-
    connected disability. In addition, some of these veterans (those in
    Priority Group 8) have incomes above the HUD geographic means test.
        I recognize that Congress has not supported either of these
    proposals during the past 2 years. However, these two legislative
    proposals are consistent with the priority health care structure
    Congress enacted several years ago, and will help us meet the needs of
    our highest priority veterans. In addition, past utilization of VA's
    health care services has demonstrated that veterans with higher incomes
    (Priority 7 and 8 veterans) rely less on VA for delivering their health
    care and usually have other health care options, including third party
    insurance coverage and Medicare. An annual enrollment fee of $250 and
    an increase in co-payments for pharmacy benefits from $7 to $15 would
    give higher income, non-disabled Priority 7 and 8 veterans the option
    of sharing a small portion of the cost of their care or utilizing other
    health care options. Our high-priority patients typically do not have
    other health care options, so we must act decisively to protect their
    interests by making sure that sufficient resources are available to
    handle their health care needs.
        With medical care resources of $30.7 billion, we project that we
    will treat more than 5.2 million patients. Those in Priorities 1 to 6
    will comprise 78 percent of the total number of veteran patients in
    2006. This will represent the third consecutive year during which our
    high-priority veterans will increase as a percentage of all veterans
    treated. In addition, about 9 of every 10 medical care dollars in 2006
    will be devoted to meeting the health care needs of those veterans who
    count on us the most.
        Even with an increasing patient workload among our highest priority
    veterans, we will continue our steadfast commitment to providing high-
    quality and accessible health care that sets the national standard of
    excellence for the health care industry. Our two primary measures of
    health care quality--clinical practice guidelines index and prevention
    index--focus on the degree to which VA follows nationally recognized
    guidelines and standards of care that the medical literature has proven
    to be directly linked with improved health outcomes for patients and
    more efficient care. Our performance on the clinical practice
    guidelines index, which focuses on high-prevalence and high-risk
    diseases that have a significant impact on veterans' overall health
    status, is expected to hold steady at the current high performance
    level of 77 percent. As an indicator aimed at primary prevention and
    early detection recommendations dealing with immunizations and
    screenings, the prevention index is projected to remain at its existing
    high rate of performance of 88 percent. VA continues to exceed the
    performance of private sector and Medicare providers for all 15 key
    health care quality indicators for which comparable data are available.
    These indicators include cancer screening for early detection, and
    immunization for influenza and pneumonia. In addition, they cover
    disease management measures such as compliance with accepted clinical
    guidelines in managing diabetes, heart disease, hypertensive disease,
    and mental health.
        The Department has greatly improved access to our health care
    services during the last few years by opening additional outpatient
    clinics, applying information technology strategies to streamline
    administrative, business, and care delivery processes, and implementing
    pay policies and human resource management practices to facilitate
    hiring and retain sufficient health care workers to meet capacity
    demands across the full continuum of care. These initiatives have
    helped VA raise the percent of primary care appointments scheduled
    within 30 days of the patient's desired date to 94 percent and the
    percent of specialty care appointments scheduled within 30 days of the
    patient's desired date to 93 percent. By continuing these types of
    strategies, improving clinical efficiencies, and effectively utilizing
    the resources requested in our 2006 budget, VA will maintain these high
    performance levels.
        The Department's record of success in health care delivery is
    substantiated by the results of the 2004 American Customer Satisfaction
    Index (ACSI). Conducted by the National Quality Research Center at the
    University of Michigan Business School, the most recent ACSI survey
    found that customer satisfaction with VA's health care system was
    markedly above the satisfaction level for Federal Government services
    as a whole. Results released in December 2004 revealed that inpatients
    at VA medical centers recorded a satisfaction level of 84 out of a
    possible 100 points, while outpatients at VA clinics registered a
    satisfaction score of 83. Both of these are well above the government
    average of 72.
        While VA is excelling compared to its private sector counterparts,
    we are committed to doing even better in the future. The results of a
    recent study conducted by the RAND Corporation revealed that patients
    in VA's health care system were more likely to receive recommended care
    than private-sector patients. Quality of care was better for VA
    patients on all measures except acute care, for which care was similar
    for both patient groups. RAND researchers examined the medical records
    of nearly 600 VA patients and about 1,000 non-VA patients with similar
    health problems. They compared the treatment received by both groups to
    well-established standards for medical care for 26 conditions. They
    found that 67 percent of VA patients received care that met the latest
    standards of the health care profession compared with 51 percent of
    non-VA patients. For preventive care, such as vaccination, cancer
    screening, and early disease detection and treatment, 64 percent of VA
    patients received the appropriate care compared to only 44 percent in
    the private sector. The RAND researchers attributed the difference in
    patient care to technological innovations, such as VA's computerized
    patient records, and to performance measurement policies holding top
    managers accountable for standards in preventive care and the treatment
    of long-term conditions.
        As another means by which to ensure sufficient resources are
    available to address the health care needs of those veterans who count
    on us the most, VA is proposing to revise the eligibility criteria for
    long-term care services to focus on the following groups of veterans:
      --those injured or disabled while on active duty, including veterans
            who served in Operation Enduring Freedom and Operation Iraqi
            Freedom
      --those catastrophically disabled
      --patients requiring short-term care subsequent to a hospital stay
      --those needing hospice or respite care.
        These eligibility criteria would be applied to VA-sponsored long-
    term care services, including VA, community, and State nursing homes.
    This long-term care strategy will save approximately $496 million that
    will be redirected toward meeting the health care needs of veterans
    with service-connected disabilities, those with lower incomes, and
    veterans with special health care needs.
        In 2006 the Department will continue to expand access to non-
    institutional long-term care services to all enrolled veterans with an
    emphasis on community-based and in-home care. In many cases this
    approach allows VA to provide these services to veterans where they
    live and to care for them in the comfort and familiar setting of their
    home surrounded by their family. During 2006 VA will increase the
    number of patients receiving non-institutional long-term care, as
    measured by the average daily census, to about 35,500. This total is
    over 50 percent above the number of patients receiving this type of
    care in 2001. Funding for non-institutional long-term care in 2006 will
    be about 67 percent higher than the resource level devoted to this type
    of health care service in 2001.
        VA's 2006 medical care request includes $1.2 billion ($100 million
    over the 2005 enacted level) to support the increasing workload
    associated with the purchase and repair of prosthetics and sensory aids
    to improve veterans' quality of life. VA is already providing
    prosthetics and sensory aids to many military personnel who served in
    Operation Enduring Freedom and Operation Iraqi Freedom and the
    Department will continue to provide them as needed.
        The President's 2006 budget includes $2.2 billion ($100 million
    over the 2005 level) to continue our effort to improve access to mental
    health services across the country. These funds will help ensure VA
    provides standardized and equitable access throughout the Nation to a
    full continuum of care for veterans with mental health disorders. The
    Department will place particular emphasis on providing care to those
    suffering from post-traumatic stress disorder as a result of their
    service in Operation Enduring Freedom and Operation Iraqi Freedom.
        We have included a management efficiency rate of 2 percent which
    will yield about $600 million in 2006. We continue to monitor and
    emphasize the need for performance that results in minimizing unit
    costs where possible, and eliminating inefficiency in the provision of
    quality health care. To that end, we have included within this savings
    target, $150 million that will be achieved through implementation of
    improved contracting practices with medical schools and other VA
    affiliates for scarce medical specialties. This is a long-standing
    issue for which the Department is aggressively implementing management
    changes to ensure fair pricing for the services provided by our
    affiliates.
        As a result of continual improvements in our medical collections
    processes and the policy changes presented in this budget request, we
    expect to collect about $2.6 billion in 2006 that will substantially
    supplement the resources available from appropriated sources. This
    figure is $635 million (or 32.5 percent) above the 2005 estimate, with
    two-thirds of the increase due to the two important legislative
    proposals (the $250 enrollment fee and the increase in pharmacy co-
    payments), and is more than 48 percent higher than the 2004 collections
    total. VA has an expanded revenue improvement strategy that focuses on
    modeling industry best performance by establishing industry-based
    performance and operational metrics, developing technological
    enhancements, and integrating industry-proven business approaches,
    including the establishment of centralized revenue operation centers.
    There are two electronic data initiatives underway that will add
    efficiencies to the billing and collections processes. The electronic
    and insurance identification and verification project is providing VA
    medical centers with an automated mechanism to obtain veterans'
    insurance information from health plans that participate in this
    electronic data exchange. We are pursuing enhancements which will
    provide additional insurance information stored by other government
    agencies. Our second initiative will result in electronic outpatient
    pharmacy claims processing to provide real-time claims adjudication.
            capital asset realignment for enhanced services (cares)
        The President's budget request includes $750 million in 2006 to
    continue the CARES program that renovates and modernizes VA's health
    care infrastructure and provides greater access to higher quality care
    for more veterans, closer to where they live. About $50 million of this
    total relates to the sale of assets and enhanced use proceeds of the
    Lakeside hospital in Chicago. The budget request provides a 3-year
    (2004-2006) investment total of $2.15 billion committed to this
    historic transformation of our health care system. These resources will
    be used to address our prioritized list of major capital investments.
    The proposed projects for 2006 will advance the CARES program by
    providing construction funding for five projects for which design work
    has already started, as well as two additional projects to be initiated
    in 2006. All of these capital projects support the recommendations
    included in the CARES Decision report. About half of the CARES funding
    requested for 2006 will be devoted to three major construction
    projects:
      --Las Vegas, Nevada, New Medical Facility--$199 million to complete
            phase two construction, providing up to 90 inpatient beds, a
            120-bed nursing home care unit, ambulatory care center, and
            administrative and support functions, all of which will expand
            capacity and increase the scope of health care services
            available; VA is working with DOD to ensure mutual needs are
            met
      --Cleveland, Ohio, Cleveland-Brecksville Consolidation--$87.3 million
            to complete phase two construction; this project will
            consolidate and co-locate all clinical and administrative
            functions of a two-division medical center at the Wade Park VA
            Medical Center, leading to annual cost savings of more than $23
            million and enhancing the quality of care
      --Pittsburgh, Pennsylvania, Consolidation of Campuses--$82.5 million
            to complete phase two construction; this project will
            consolidate a three-division health care delivery system into
            two divisions which will improve patient care by providing a
            state-of-the-art health care environment and reducing operating
            expenses.
        Our capital investment planning process and methodology involve a
    Department-wide approach for the use of capital funds and ensure all
    major investments are based upon sound economic principles and are
    fully linked to strategic planning, budget, and performance measures
    and targets. All CARES projects have been reviewed using a consistent
    set of evaluation criteria that address service delivery enhancements,
    safeguarding assets, support of special emphasis programs and services,
    capital portfolio goals, alignment with the President's Management
    Agenda, and financial priorities.

                        MEDICAL AND PROSTHETIC RESEARCH

        The President's 2006 budget includes $786 million to support VA's
    medical and prosthetic research program. This resource level will fund
    nearly 2,700 high-priority research projects to expand knowledge in
    areas critical to veterans' health care needs, most notably research in
    the areas of aging, acute and traumatic injury, the effects of military
    and environmental exposures, mental illness, substance abuse, cancer,
    and heart disease.
        The requested level of funding for the medical and prosthetic
    research program will position the Department to build upon its long
    track record of success in conducting research projects that lead to
    clinically useful interventions that improve veterans' health and
    quality of life. Examples of some of the recent contributions made by
    VA research to the advancement of medicine are:
      --development of an artificial nerve system that enables a patient
            with upper-limb paralysis to grasp objects
      --creation of a new collaborative model for treating depression in
            older adults, the application of which potentially saves lives,
            reduces patients' level of pain, and improves their overall
            functioning
      --the finding that proper intake of cereal fiber and vitamin D are
            among the best ways to prevent serious colon polyps that may
            lead to colorectal cancer
      --development of an oral drug that halts the deadly action of the
            smallpox virus.
        In addition to VA appropriations, VA researchers compete and
    receive funds from other Federal and non-Federal sources. Funding from
    external sources is expected to continue to increase in 2006. Through a
    combination of VA resources and funds from outside sources, the total
    research budget in 2006 will be nearly $1.7 billion.

                               VETERANS' BENEFITS

        The Department's 2006 budget request includes $37.4 billion for the
    entitlement costs mainly associated with all benefits administered by
    the Veterans Benefits Administration (VBA). This total includes an
    additional $812 million for disability compensation payments to
    veterans and their survivors for disabilities or diseases incurred or
    aggravated while on active duty. Recipients of these compensation
    benefits are projected to increase to 3 million in 2006 (2.7 million
    veterans and 0.3 million survivors, or 400,000 more than when the
    President came to office).
        The President's budget request includes $1.26 billion for the
    management of the following benefits programs--disability compensation;
    pension; education; vocational rehabilitation and employment; housing;
    and life insurance. This is $77 million, or 6.6 percent, over the 2005
    level. As a result of the enactment of the Consolidated Appropriations
    Act, 2005 (Public Law 108-447), an additional $125 million will be made
    available to VBA (through a transfer of funds from medical care) for
    disability benefits claims processing. Of this total, $75 million will
    be used during 2005 and the remaining $50 million will be used in 2006.
    The overwhelming majority of these funds will be used to address the
    increased volume of compensation claims from both separating service
    members and older veterans who had not previously submitted claims.
        As a Presidential initiative, improving the timeliness and accuracy
    of claims processing remains the Department's top priority associated
    with our benefits programs. Last year the timeliness of our
    compensation and pension claims processing improved by 9 percent (from
    182 days in 2003 to 166 days in 2004). While we were successful in
    reducing the time it takes to process claims for compensation and
    pension benefits, we were not able to improve timeliness as much as we
    had projected at the beginning of the year. Entering 2004, VA was well
    positioned to meet our performance goals pertaining to the timeliness
    of processing claims. However, a September 2003 decision by the Federal
    Circuit Court in the case of the Paralyzed Veterans of America et. al.
    v. the Secretary of Veterans Affairs required VA to keep veterans'
    claims open for 1 year before making a decision to deny a claim. As a
    result, decisions on over 62,000 claims were deferred, many for as much
    as 90 days. While the President signed correcting legislation in
    December 2003, the impact of the court decision in the early portion of
    2004 was substantial, as the number of pending claims had grown
    dramatically. VA made significant progress during the last half of the
    year, but we were not able to fully overcome the negative effects from
    this court decision on our claims processing timeliness.
        We have had to revise our claims processing timeliness goals for
    the next 2 years due, in part, to the lingering effect of the Federal
    Circuit Court decision. Also having an impact on the timeliness of
    processing is the increasing volume of disability claims and the
    complexity of the claims. In addition, VA will continue to face the
    retirement of staff members highly experienced in processing claims.
    While we have established a sound succession plan, the new employees we
    are hiring will require both extensive training and substantial claims
    processing experience in order for them to reach the productivity level
    of those leaving the Department.
        During 2005 we expect to reduce the average number of days to
    process compensation and pension claims to 145 days, an improvement of
    12.7 percent from the 2004 performance level. With the resources
    requested in the 2006 budget, we will be able to maintain this improved
    timeliness in support of this Presidential initiative. In addition, we
    will reduce the number of pending claims for compensation and pension
    benefits to 283,000 by the end of 2006, a reduction of 12 percent from
    the total at the close of 2004.
        We will increase our efforts to ensure the consistency of our
    disability evaluations from one regional office to another. VA has made
    significant improvements in both the accuracy and consistency of its
    benefit entitlement decisions due to increased quality assurance
    efforts and more focused training of claims adjudicators. However, more
    must be done to ensure the Department meets its commitment to treating
    every veteran's claim fairly and equitably regardless of locality. A
    system-wide review of the rating program for disability compensation is
    underway. In addition to this independent review, the Veterans'
    Disability Benefits Commission has been established to carry out a
    study of the statutory benefits that are provided to compensate and
    assist veterans and their survivors for disabilities and deaths
    attributable to military service. This commission is expected to
    examine and make recommendations concerning the appropriateness of
    these statutory benefits, the appropriateness of the level of the
    benefits, and the appropriate standard or standards for determining
    whether a disability or death of a veteran should be compensated. VA's
    efforts to improve the consistency of disability evaluations are
    supported in the 2006 budget by a request for $1.2 million for skills
    certification testing and $2.6 million for continued development of
    computer-based training tools. These initiatives will complement other
    ongoing efforts supported by our budget that address the issue of
    consistency and accuracy. Among these are:
      --revision of all of the regulations that govern the compensation and
            pension programs in plain language to ensure that the rules can
            be applied consistently and fairly
      --in-depth data analysis of benefit decisions to identify potential
            areas of inconsistency, increasingly possible with our new
            information technology applications and tools
      --centralized processing of appeals remanded by the Board of
            Veterans' Appeals, and ongoing quality reviews of appealed
            claims decisions.
        An important and successful component of VA's vision for providing
    a seamless transition for service members separating from active duty
    is the Benefits Delivery at Discharge (BDD) program. The BDD program
    enables active duty service members to file disability compensation
    claims with VA staff at military bases, complete physical exams, and
    have their claims evaluated before, or closely following, their
    military separation dates. Transitioning service members benefit
    greatly from the BDD program, which has been a vital part of the
    Department's strategy for improving timeliness and accuracy of
    disability compensation claims processing.
        We believe the BDD program provides opportunities to not only
    benefit transitioning service members through timely and accurate
    claims processing, but also to bring new processing improvements and
    efficiencies to the system through consolidation of claims evaluation
    activities. An initiative is currently underway to consolidate
    disability compensation rating and authorization actions on all BDD
    claims to two sites nationwide. VA staff will continue work with
    transitioning service members at military bases to establish claims and
    arrange for timely medical exams, thereby retaining these successful
    aspects of the BDD program.
        In support of the education program, the 2006 budget proposes $7.8
    million for continued development and implementation of the Education
    Expert System. The requested funds will be used to first transition
    education processing to VBA's corporate environment, followed by the
    development and deployment of a processing system that receives
    application and enrollment information electronically and processes
    that information in the new corporate environment without human
    intervention. While it will be a number of years before this system is
    fully deployed, it will ultimately lead to substantial improvements in
    education claims processing timeliness.
        In April 2004 the Department's Vocational Rehabilitation and
    Employment Task Force released its report containing more than 100
    recommendations on how to improve service to disabled veterans. The
    focus of the report was on development and implementation of a new,
    integrated service delivery system based on an employment-driven
    process. In response to the task force's recommendations, VA is
    including $4.4 million in the 2006 resource request to be used for
    establishing a job resource lab in each regional office. These labs
    will include all of the necessary equipment, supplies, and resource
    materials to aid VA staff and veterans in conducting comprehensive
    analyses of local and national job outlooks, developing job search
    plans, preparing for interviews, developing resumes, and conducting
    thorough job searches. These self-service job resource labs will assist
    veterans in acquiring suitable employment through the use of a
    comprehensive on-line employment preparation and job-seeking tool.
        In order to make the delivery of VA benefits and services more
    convenient for veterans and more efficient for the Department, we are
    requesting $4.4 million for the collocation and relocation of some
    regional offices. This effort may involve collocations using enhanced-
    use authority, which entails an agreement with a private developer to
    construct a facility on Department-owned grounds and then leasing all
    or part of it back to VA. At the end of these long-term lease
    agreements, the land and all improvements revert to VA ownership.

                                     BURIAL

        The President's 2006 budget includes $290 million in discretionary
    funding for VA's burial program, which includes operating and
    maintenance expenses for the National Cemetery Administration, capital
    programs, the administration of mandatory burial benefits, and the
    State Cemetery Grants program. This total is nearly $17 million, or 6.4
    percent, over the 2005 enacted level.
        The 2006 request includes $167 million in administrative funding
    for VA's burial program, an increase of $7.3 million (or 4.6 percent)
    from the 2005 enacted level. Within this total, $156 million is for the
    operations and maintenance of VA's national cemeteries and $11 million
    is for the administrative processing of claims for burial benefits. The
    additional funding will be used to meet the growing workload at
    existing cemeteries, primarily by increasing staffing and contract
    maintenance. The growth in workload is a direct result of the aging of
    the veteran population. The annual number of veteran deaths continues
    to rise and VA projects an increase in interments of about 4 percent a
    year for the next several years.
        Our budget request for the burial program includes $90 million for
    construction projects. Of this total, $65 million is for major projects
    and $25 million is for minor projects. Consistent with the provisions
    of the National Cemetery Expansion Act of 2003, we are requesting $41
    million in major construction funding for land acquisition for six new
    national cemeteries in the areas of Bakersfield, California;
    Birmingham, Alabama; Columbia-Greenville, South Carolina; Jacksonville,
    Florida; Sarasota, Florida; and southeastern Pennsylvania. The 2006
    request also includes funding to develop an annex for the expansion of
    Fort Rosecrans National Cemetery in Miramar, California. In addition,
    this budget provides $32 million for the State Cemetery Grants program.
        Our resource investments in the burial program produce positive
    results in service delivery to veterans and their families. We will
    expand access by increasing the percent of veterans served by a burial
    option within 75 miles of their residence to 82.2 percent in 2006,
    which is 6.9 percentage points above the 2004 figure. While our 2004
    performance was extremely high in several key areas, we will continue
    to improve our performance in 2006. We have established the following
    performance goals for 2006:
      --increase to 96 percent (from 94 percent in 2004) those who rate the
            quality of service provided by the national cemeteries as
            excellent
      --increase to 99 percent (from 98 percent in 2004) those who rate
            national cemetery appearance as excellent
      --increase to 89 percent (from 87 percent in 2004) the proportion of
            graves in national cemeteries marked within 60 days of
            interment.
        These performance improvements will further enhance the outstanding
    reputation of VA's National Cemetery Administration which, in 2004,
    earned the highest rating ever achieved by a public or private
    organization in the American Customer Satisfaction Index (ACSI). These
    results demonstrated that the Department's national cemeteries produced
    a customer satisfaction rating of 95 out of a possible 100 points. This
    is two points higher than the last survey conducted in 2001 when VA's
    national cemeteries also ranked number one among Federal agencies in
    customer satisfaction.

                            MANAGEMENT IMPROVEMENTS

        VA continues to aggressively pursue a variety of initiatives aimed
    at ensuring we apply sound business principles to all of the
    Department's operations. Two of our most successful management
    improvement efforts during the last year focus on the strategic
    management of human capital and capital asset management.
        As an integral component of our succession planning activities, we
    released a state-of-the-art ``VA Recruitment'' CD-ROM in September 2004
    promoting the Department as an employer of choice. We distributed this
    to colleges and universities, military transition centers, veterans
    organizations, and VA vocational rehabilitation centers, offices, and
    medical centers. This initiative creates a corporate recruitment
    marketing approach that will give VA a competitive edge in attracting
    highly-qualified career applicants. The CD-ROM uses graphics and video
    streaming to present a wide spectrum of career opportunities and
    describes VA's goals and services, occupations, and the benefits of
    working for the Department. We will continue to focus on creative
    marketing initiatives and outreach to prospective applicants.
        VA has also launched a Capital Asset Management System (CAMS) which
    is an integrated, Department-wide system that enables us to establish,
    analyze, monitor, and manage our portfolio of diverse capital assets
    through their entire lifecycle from formulation through disposal. CAMS
    provides a strategic view of existing, in-process, and proposed asset
    investments across all VA program offices and capital asset types. All
    offices now use this shared system to collect and monitor real property
    and capital asset information. In addition, VA has been approached by
    numerous agencies, including the Departments of Defense, Homeland
    Security, Commerce, and Interior to explore the replication of CAMS in
    their organizations.
        VA's progress in this area places it in the forefront of other
    Federal agencies in terms of its ability to meet the real property
    performance measures and guidelines that were recently finalized by the
    newly created Federal Real Property Council.
        We are currently in the process of fully evaluating all of the
    information gathered during the operational tests of the Core Financial
    and Logistics System (CoreFLS) conducted last year. This year we will
    complete a comprehensive analysis of the product and any existing
    configuration gaps, examine lessons learned from the pilot tests, and
    reevaluate our business processes. This will provide us with the
    information needed to refine the system as well as develop improved
    change management, training, and implementation procedures that are
    critical to successful deployment. In anticipation of an enhanced
    financial management system moving forward to full deployment at VA
    facilities nationwide, the Department's 2006 budget includes $70.1
    million for this project.
        In support of one of the primary electronic government initiatives
    for improving internal efficiencies and effectiveness, the Department's
    2006 budget provides $8 million to continue the migration of VA's
    payroll services to the Defense Finance and Accounting Service (DFAS).
    This initiative will consolidate 26 Federal payroll systems down to 2
    Federal payroll provider partnerships. VA is working with DFAS on all
    required tasks to ensure successful migration.

                                    CLOSING

        In summary, Madam Chairman, our 2006 budget request of $70.8
    billion will provide the resources necessary for VA to:
      --provide timely, high-quality health care to more than 5.2 million
            patients; 78 percent of all veteran patients will be veterans
            with service-connected disabilities, those with lower incomes,
            or veterans with special health care needs
      --maintain the 2005 performance level of 145 days, on average, to
            process compensation and pension claims
      --increase access to our burial program by ensuring that more than 82
            percent of veterans will be served by a burial option within 75
            miles of their residence.
        I look forward to working with the members of this committee to
    continue the Department's tradition of providing timely, high-quality
    benefits and services to those who have helped defend and preserve
    freedom around the world.
        That concludes my formal remarks. My staff and I will be pleased to
    answer any questions.

        Senator Hutchison. Thank you very much, Mr. Secretary.
        I would like to have a 5-minute round. Each of us can have
    one round and then we will definitely have a second and maybe a
    third.
        First of all, Mr. Secretary, I certainly agree with the
    Veterans Administration's principle that we should focus on
    care for priority 1 through 6 veterans. I think everyone would
    agree that that should be our highest priority. Do you agree
    that we must have full funding for those priority 1 through 6
    veterans, whatever else happens?
        Secretary Nicholson. Yes, Madam Chairman. This budget
    reflects that. We have a mandate to take care of those veterans
    who need us the most, and that is those veterans who have been
    injured as a result of their service or become ill, including
    mental illness as a result of that service, those that are down
    and out, the poor, indigent, and those in need of unique,
    special care, and that is those categories.
        Senator Hutchison. This is my question. If the policy
    provisions regarding 7's and 8's with the added enrollment fees
    and co-payments were not enacted, would there still be full
    funding in this budget for priorities 1 through 6?
        Secretary Nicholson. Yes, Madam Chairman, there would. We
    would still be able to take care of those priorities.
        Senator Hutchison. Thank you.

                            THIRD PARTY COLLECTIONS

        Along that line, I understand that you have the authority
    to collect payments from private health insurance for the cost
    of treating veterans' non-service-connected disabilities. So
    when we are looking at the priority 7's and 8's, which have
    become really the growth area for the medical care for
    veterans, according to the GAO your present collection rate is
    only 41 percent and your fiscal year 2006 budget submission
    sets a target of only 41 percent. I wondered why this
    collection target seems low and if you are looking at trying to
    improve that collection rate and perhaps a different way to get
    more income from the 7's and 8's to make sure that we are doing
    the best we can with what we have.
        Secretary Nicholson. Let me respond in part, Madam
    Chairman, and then I am going to ask Dr. Perlin to comment. It
    is 6 weeks today that I have been Secretary, so there are just
    one or two things that I do not know yet.
        Senator Hutchison. We understand totally and we are not
    expecting perfection until next year.
        Secretary Nicholson. It is a very important question. You
    will note that in this budget proposal it shows collections
    being up by 15 percent over last year. I will say that I think
    the VA has shown a commendable transformation in its culture,
    going from virtually no collections, a no-collection culture
    habit mandate, to in a very short time, collecting a
    significant amount of money. But it is still a work in process.
    It is very important.
        I will ask Dr. Perlin if he would comment further.
        Senator Hutchison. Dr. Perlin.
        Dr. Perlin. Thank you, Madam Chairman. The Secretary is
    absolutely right in terms of our Veterans Health Administration
    learning how to collect, and the progress has been substantial.
    In fact, in 2001, our collections were on the order of $700
    million. Today they will approach in the 2006 budget on the
    order of $2.1 billion. That budget builds in an 11 percent
    increase, or collections of $211 million additional.
        I think the 41 percent is important because we need to keep
    moving up, but I would note that it is unadjusted for Medicare.
    As you know, we cannot collect for Medicare, but the figure
    actually reflects the funds that we are not able to collect. So
    actually it is artificially deflated. We do benchmark against
    private sector, and we have been using gross days revenue
    outstanding, and I am pleased to say that we are closing in on
    setting aggressive targets. But your point is well taken. We
    will continue to push the aggressive collections.
        [The information follows:]

        The Department of Veterans Affairs (VA) is not allowed (by law) to
    bill and collect from Medicare. The unadjusted billing to collection
    ratio of 41 percent reflects the large number of over-65, Medicare-
    eligible population that VA serves which cannot be billed or collected.
    VA maintains an adjusted billing to collection ratio which accounts for
    the Medicare-eligible population and this ratio has been in the 75
    percent range for fiscal year 2004 and fiscal year 2005 and provides a
    more realistic measure of performance.
        To improve the collections to billings Medicare-adjusted ratio, VA
    is taking the following actions:
      --Metric Calculation.--Collections to billings calculation attempts
            to quantify net billings by projecting net amounts due from
            third parties and secondary payors. The current calculation
            utilizes national data and does not fully reflect VISN
            differences in population compositions (veterans older and
            younger than 65) and Health Maintenance Organization (HMO)
            penetration that impacts this performance metric.
        --Action.--The Veterans Health Administration (VHA) is working to
                enhance the metric calculation for fiscal year 2006 to
                incorporate population variations and HMO penetration
                differences that could impact overall results. Also, full
                implementation of the e-MRA (Medicare-equivalent remittance
                advice) system throughout VHA will improve the specificity
                of predicting these net realizable amounts.
      --Denial-Management Tracking System.--The private sector approaches
            aggressively the identification, tracking, and resolution of
            third-party denials. VHA is presently establishing several
            best-practice denial-management initiatives at the Veterans
            Integrated Service Network (VISN) level.
        --Action.--VHA is working to compile the best practices from the
                VISN pilots and roll out a comprehensive national denial-
                management strategy in the upcoming months.
      --Formalized Managed-Care Contracts.--The private sector has the
            ability to project net billings with great specificity due to
            established contract rates with managed-care payors, which can
            easily be loaded into their systems to track deviations due to
            over- and under-payments.
        --Action.--VHA has established a National Payor Compliance Office
                (NPCO) to assist VISNs in addressing negotiations
                strategically with managed-care payors. As this process
                matures, VHA will be able to track expected reimbursements
                better, similar to the private sector.
      --Enhanced Development of Revenue-Cycle Productivity Tools.--The
            private sector has invested considerable time and effort to
            ensure that the necessary staff and resources are dedicated to
            the revenue cycle. VHA actively monitors monthly performance of
            its facilities though use of a web-based system (POWER) that
            reports performance using a stop-light color-coded approach.
            This system is considered a best practice when compared to
            private-industry standards. The VISNs have also adopted
            monitoring tools to measure productivity and to ensure that
            appropriate resources are dedicated to the revenue-cycle
            collection process.
        --Action.--VHA is taking a leadership role to extend nationally the
                best practices identified at the VISN level to improve
                overall effectiveness in the collection process.

        Senator Hutchison. I guess that would be my point. Would
    you continue to look for ways where there is an outside
    insurer, a private insurer, that we would make as many of those
    collections as absolutely possible to offset costs?
        My time is up, and I would like to give my colleagues a
    chance to have a first round of questions before this vote
    starts. Senator Feinstein.
        Senator Feinstein. Thanks very much, Madam Chairman. I
    appreciate that.

                   GRANTS FOR STATE EXTENDED CARE FACILITIES

        Mr. Nicholson, the President's fiscal year 2006 budget
    request for the VA suspends grants for the State extended care
    facilities. Could you explain to us why it is necessary to
    impose a 1-year moratorium on grants for construction of long-
    term extended care facilities when there is such a need for VA
    homes throughout this Nation? How would this affect the current
    priorities list for funding under this program? Do you
    anticipate altering this list in fiscal year 2007?
        California, my State, with three homes and 2.3 million
    veterans is one of two States classified under great need in
    regard to home funding. The State plans to request $125 million
    in fiscal year 2007 under this grant program to fund its
    largest project to date which is the greater Los Angeles,
    Ventura County home which includes three separate facilities.
    How would the 1-year moratorium impact funding for this
    project?
        So there are essentially three questions in one. If you
    want me to go one by one, I will.
        Secretary Nicholson. Thank you, Senator. It is an important
    area. Let me address the suspension of the grants. In this
    budget, I think it would reflect a reduction of just over $100
    million for this coming fiscal year 2006. I am going to ask Dr.
    Perlin if he would address the specifics as to California.
        Dr. Perlin. Thank you, Senator. Let me start with the piece
    of the question you asked about the 2005 commitments. The
    commitments are proceeding as was planned. I would have to get
    back to you with the specific information on California.
        Senator Feinstein. And how will this affect 2007?
        Dr. Perlin. I think I would be unable to speculate in terms
    of the future.
        Senator Feinstein. All right. So what you are telling me
    then is you do not know about California. You do not know about
    the future, and it is a 1-year moratorium essentially.
        Could you tell me what the rationale for a 1-year
    moratorium is when the needs are so great?
        [The information follows:]

        The fiscal year 2006 VA budget proposes a 1-year moratorium
    on new grants to States for construction and renovation of
    extended care facilities. This will permit VA to complete an
    assessment of its nationwide institutional long-term care
    infrastructure and ensure that future construction aligns with
    the areas of greatest projected need. Grants that have already
    been awarded will not be affected by the 1-year moratorium.
        VA has already committed to all planned fiscal year 2005
    projects on the current Priority List. The States are currently
    completing the requirements for fiscal year 2005 grant awards.
    VA has committed the maximum fiscal year 2005 appropriations
    and the remaining fiscal year 2004 carryover funds to these
    projects.
        The Priority List is revised annually, as of August 15th.
    All new and existing pending projects are ranked and included
    in the annual list. Once approved by the Secretary, the list is
    used to identify ranked projects and commit funding for
    projects for that fiscal year award or to finalize
    conditionally approved projects. For fiscal year 2007, VA would
    follow the same procedures and commit funds available at that
    time to the projects in rank order. VA cannot predict at this
    time how the California project will be ranked in fiscal year
    2007 or whether there will be sufficient appropriations to fund
    it.

        Secretary Nicholson. Well, I can address the issue in
    brief, Senator. If you take a look at the VA as a whole, it has
    gone through a major transformation from being a hospital-
    centered medical care provider to a clinical-centered provider
    and more outreach and moving out more to where the veterans
    are.
        The same philosophy is operating in extended care. We are
    finding that it is very often both more efficient and effective
    to treat institutional care people or what used to be
    institutionalized people in a non-institutionalized setting
    using the new tools that are available of telemedicine,
    telehealth, social workers, people being allowed to remain in
    their homes or closer to their homes.
        Senator Feinstein. I think I see where you are going, and
    correct me if I am wrong. Is this then an effort to begin to
    phase out long-term care for veterans and sort of go to an
    outpatient treatment process?
        Secretary Nicholson. Well, I think there are certainly some
    people that will need long-term care. There are some people who
    are not candidates for the new capabilities that we have for
    extended non-institutionalized care. So no, I do not think it
    is a path toward the end of them, but it is a trend and one
    that is finding a lot of satisfaction among the people being
    treated that remain at home. They have a social worker come
    there and provide them with care and bathing. With the
    electronics that we have now, we can take blood pressure, get
    their blood sugar, and all that on-line daily with a medical
    mentor talking to them in their home. If they need care, we can
    then move them.
        Senator Feinstein. Let me just, if I might, say a word on
    behalf of the 2.2 million veterans in my State. California is a
    very high cost-of-living State. The extended care facilities
    are very expensive for the most part, particularly if an
    individual does not have Medicaid or Medicare. I guess what I
    hope is that this is just not an effort to absolve us of the
    Federal responsibility to take care of veterans in later years
    who cannot take care of themselves and push it onto the State
    because I think the veterans are not then going to be well
    cared for. So I will leave you with that.
        Senator Craig.
        Senator Craig. Well, thank you very much. I think we are
    going to run out of time rapidly here, Senator Feinstein, as it
    relates to a vote that is now underway.
        Mr. Secretary, from my initial visit with you and our
    initial hearing on your budget, we have proposed a variety of
    changes, somewhat different from what you proposed, which we
    think will offer a little more flexibility in funding and still
    meet all of the needs that you have projected are out there and
    the savings that you have projected are out there.

                     PER DIEM PAYMENT POLICY TO STATE HOMES

        There are many that concern me and I think concern all of
    us, but the State home program, by most accounts, has been a
    very successful partnership between the Federal and State
    governments for the care of aging veterans, and yet VA proposed
    to modify this past per diem payment policy, a change in policy
    the VA says would reduce the number of State beds by more than
    50 percent. We have, obviously, disagreed on that and are
    proposing not to do so.
        Why does VA want the States to reduce the number of State
    home beds? I guess that would be the first question. Even if VA
    does not want to provide institutional care for the non-
    service-connected, why does it want to discourage States from
    attempting to meet that need?
        Secretary Nicholson. Well, one of the things operating
    here, Senator Craig, is a goal of getting in uniform
    conformance with the law from the VA's perspective, which is
    that those people eligible for long-term institutional care are
    those that are 70 percent disabled or more. The goal, as I have
    stated to Senator Feinstein, of--you know, realizing the
    benefits of the care more in the community where the people
    are.
        I am not sure that the VA is desirous of the States getting
    out of the long-term institutional care.
        Senator Craig. I guess then the question, does VA believe
    that it has the legal authority to simply stop paying per diem
    payments to the States for the care of veterans VA does not
    define as a priority?
        Secretary Nicholson. No, I do not think so. I think there
    would be a legislative piece needed. I could also say that this
    budget does not contemplate that a veteran that is in a
    facility who really needs to be there would be moved from that
    bed.
        Senator Craig [presiding]. Well, I am going to run out of
    time, and I need to go vote. So I am going to put the committee
    at recess until the chairman returns. So with that, the
    committee will stand in recess.
        Thank you all very much for being here today.
        Senator Hutchison [presiding]. I am going to call the
    committee back to order. We will try to finish the questions.

                  TRANSITIONAL PHARMACY BENEFIT PILOT PROGRAM

        Let me ask you about the transitional pharmacy benefit
    pilot program. Last year the Department implemented the
    transitional pharmacy benefit pilot program to allow veterans
    on the waiting list to have their privately written
    prescriptions filled at the VA without seeing a VA physician. I
    think this makes great sense, and tying up VA doctors just to
    write a prescription when someone can get one outside probably
    is not the best use of their time.
        I understand the pilot did achieve its goal of improving
    access to VA prescription drugs, but there were implementation
    errors reported by the Inspector General. I am concerned that
    maybe the errors did not give an accurate assessment of whether
    this type of program should be continued. So I wanted to ask
    you what is the status of that pilot program and is it
    something that you are going to implement as a policy?
        Secretary Nicholson. Madam Chairman, this budget does not
    contemplate that. There was that pilot program and it
    encompassed 48,000 people. What was most notable I think about
    that was that approximately half of those prescriptions that
    were presented for filling by the VA pharmacies were requesting
    pharmaceuticals that did not meet the formulary inventory of
    the VA. So it caused difficulties for people on both sides of
    that transaction, as well as the need then for VA functionaries
    who were very dutiful to call the prescriber, if they could
    find them, to see if they could prescribe a comparable for the
    patient that was in our formulary holding.
        I will ask Dr. Perlin, who was there and has been through
    that test, if he would like to elaborate.
        Dr. Perlin. Madam Chairman, thank you for your interest in
    this area. I know it has been positive that the substitution of
    the ability to fill pharmaceuticals might relieve some of the
    waiting when, in fact, a patient wants just a prescription.
        By way of disclosure, I would need to indicate that we have
    learned from the transition pharmacy benefit a few facts. As
    Secretary Nicholson said, almost half of the prescriptions were
    off of our formulary. Even with negotiation, it was still a
    much, much higher rate of non-formulary, which meant that we
    did not achieve some of the efficiencies in terms of cost of
    the prescription that we would in our normal course of
    practice. So it is something that I think deserves further
    consideration, and I would want to consult with the Secretary
    in terms of his future thoughts on the topic.
        Senator Hutchison. Well, I understand the point that was
    being made that perhaps it ends up not being a good tradeoff.
    You save the doctor's time, but you make it harder for the
    pharmacies and maybe more expensive. So I would like for you to
    look at it again just to see if it is worth continuing a pilot
    or if you determine that the good does not outweigh the bad. It
    just seemed like a good concept.
        Secretary Nicholson. So noted, Madam Chairman. It is
    something that we have discussed quite a bit actually in the
    few weeks that I have been there because on its face it does
    seem to have a lot of appeal, especially some of those
    prescribers have been Medicare paid doctors so the public is
    already paying for that service.

                          MEDICAL PROSTHETIC RESEARCH

        Senator Hutchison. Let me ask you a question on the
    research budget. The budget request proposes a $9.3 million cut
    to the medical and prosthetic research account. But I wanted to
    ask you if you feel that that is going to be enough.
        Further, Secretary Principi had made a commitment of $15
    million a year for the Gulf War Syndrome research for a 4-year
    period for a total of $60 million. That is something that is
    very important to me because I think our veterans got very
    short-changed when they came home with these symptoms, that in
    a previous administration, were sort of swept aside as, well,
    it was post-traumatic stress syndrome type thing, and it turns
    out that there is a causal connection between brain damage and
    exposure to chemicals. We, through the Veterans Administration
    under Secretary Principi, were on the road to making that a
    larger study, with the long-term goal of, of course, getting
    antidotes for that or trying to determine if someone is
    predisposed because of a brain deficiency--an enzyme
    deficiency, that is--to not send someone to an area where there
    might be chemical weapons.
        My question is does this cut in the budget give you enough
    funding for your Department to do all of the things that are a
    priority and is Gulf War Syndrome research still going to get
    the full $60 million commitment, in $15 million increments,
    that Secretary Principi had said he would do?
        Secretary Nicholson. Madam Chairman, this budget is
    $1,653,000,000 for research in total. We are asking for an
    appropriation of $786 million. That is sufficient to underwrite
    something like 2,700 different research projects.
        As to your question, is there sufficient funding in here
    approved for the current year Gulf War illness research of $15
    million, the answer is yes.
        We have had some discussion about the $60 million, the 4-
    year program, and counsel to me is that it is not a hard
    commitment. That has been discussed. What I will say to you is
    that the $15 million is absolutely in here, and the subsequent
    years, as I get more familiar with it, I will take a very
    serious look at this. But we will probably be back to you in
    discussion with this.
        I think the answer to your question overall is that there
    is enough in this to do the research that we think should be
    done.
        There is a $100 million in this budget for prosthetics, and
    there is an increase of $100 million for PTSD research and
    application.
        Senator Hutchison. Could you clarify? You are saying that
    the $60 million over the 4 years is not a commitment. So are
    you saying that $15 million is in for this year but you are not
    making a commitment for future years?
        Secretary Nicholson. Well, I am going to first ask the
    general counsel if he would address that from his perspective,
    and then I will respond.
        Mr. McClain. Madam Chairman, we do have $15 million in
    additional research funding for the Gulf War illnesses. That is
    for this particular year in unspecified projects but they will
    go toward Gulf War research. As far as future years, we really
    cannot speculate as to what might come out in future years for
    research dollars, but certainly we have been committed over
    several years now to putting additional resources toward Gulf
    War research.
        Senator Hutchison. Mr. Secretary, do you consider that the
    Gulf War Syndrome is a legitimate area for research?
        Secretary Nicholson. Yes, I do. I know something about
    that. I have been briefed by a team of doctors on that, and I
    think that is a very legitimate area to try to understand. So
    that is not an issue for me, but we have to do it legally.
        I would like to ask Dr. Perlin, if I could, Madam Chairman,
    if he would comment a bit on the current status of the
    research.
        Dr. Perlin. Madam Chairman, this is an absolutely critical
    area. Right now we have 146 separate projects on environmental
    exposures at a cost of about $35 million in the 2006 budget
    proposed.
        In the area of Gulf War illnesses, VA has funded 111
    projects since 1991 and currently there are 48 ongoing. VA's
    commitment to date has been $73 million. The Federal commitment
    has been in excess of $300 million. Of that $15 million, I can
    tell you that right now $5 million have been executed late this
    spring. There is a request for applications to make sure that
    we have the best research in that area.
        I think one of the most promising endeavors this year,
    something that we worked hard with the Research Advisory
    Committee on Gulf War Illnesses to develop is a new center for
    the study of promising treatments for Gulf War illness. While
    we may not have full insight into the mechanisms of what causes
    these unexplained symptoms, we passionately feel the obligation
    to care for these veterans to treat their symptoms. This new
    center promises to help us align our best tools to understand
    what treatments may be promising.
        Senator Hutchison. So you are not in any way saying it is
    not a priority. You will be saying that it is a priority. Is
    that what you are saying?
        Secretary Nicholson. Yes, exactly.

                            DALLAS VA MEDICAL CENTER

        Senator Hutchison. I wanted to talk about a couple of local
    issues. First of all, in November of 2004, your own Department
    ranked the Dallas Veterans Affairs Medical Center the worst VA
    hospital in the country. Of course, that was a revelation to
    many people in the Dallas area. I know improvements have been
    made. I know that the head of that hospital is no longer there.
    But I just wanted to ask you, Mr. Secretary, if you are
    satisfied that the changes being made there are bringing that
    VA hospital up to your standards.
        Secretary Nicholson. Yes. That has been problematic. I
    noted that as soon as I began getting briefed for this job. As
    you noted, some of the key management personnel have been
    replaced. There have been several reviews made of that
    internal. An accrediting association has looked at that. They
    found some deficiencies and have given recommendations to us to
    institute. I am satisfied that those corrective measures are
    underway. We have some good new people in place, but it is
    something that is very important and we are keeping an eye on.
        Senator Hutchison. That is what I was going to follow up
    and ask. Is there a mechanism by which, when you have a
    hospital that gets this low a rating, you would go in and check
    more carefully and more frequently to assure that the changes
    are being implemented?
        Secretary Nicholson. I am going to ask Dr. Perlin to answer
    that.
        Dr. Perlin. Thank you, Mr. Secretary.
        Madam Chairman, absolutely. We are following up with
    objective evidence of improvement. We have the performance
    measurement system throughout the VHA. As our Inspector General
    noted, the performance was not where the citizens of Texas and
    Dallas deserved. That is changing already objectively on the
    basis of data. We can demonstrate that there is significant
    improvement.
        In addition to a new director, Betty Brown, there is also a
    new associate director, Dan Heers, a new chief of staff, a new
    chief nursing executive. And my own calls to individuals down
    there tell me that the progress has been light-speed.
        I would note to you that I plan to make a visit to Dallas
    in April to assure myself that what I am seeing on paper is
    actually represented as the best improvements.
        I think it is important to note that while there have been
    some individuals who have been problematic, that part of my job
    is to encourage the 90 percent of the staff that really go
    above and beyond to give their best for the veterans. So I want
    to make sure that the message is complete, that we sanction and
    improve and hold accountable where we need to, but that we also
    encourage and support those individuals who really do give our
    veterans their best.

                        WACO AND BIG SPRING, TEXAS SITES

        Senator Hutchison. Thank you. I would be very interested,
    after your visit, in hearing what your findings are.
        There are two veterans sites that are in the 18 in the
    CARES plan that are cited as needing more study. One is in
    Waco. I have discussed this with you, Mr. Secretary.
        The Waco facility is a campus. It is a beautiful campus. It
    is under-utilized, that is for sure. The care that it gives is
    excellent. The mental health care, from everything that we
    could tell, did a very solid, good job. But the plan now is for
    there to be a master plan for the Waco facility that is
    supposed to be put together with the city leaders in Waco and
    the consultants from the VA. I just wanted to ask you if we can
    expect that you would continue the commitment to look for a
    master plan for that site so that it can be efficiently used.
        One of the things that I did not quite understand in the
    CARES Commission report is that they closed two smaller clinics
    and recommended that there be a VA clinic built in Waco. It
    just seemed to me that with the facility there being under-
    utilized that perhaps having the clinic move to the long-term
    care facility that there might be an added benefit there and be
    the right thing for the veterans in the area as well as for the
    efficient operation that you would be seeking.
        So do you have any status report on that, or can you just
    at least say that we will have the master plan moving forward
    and that the Department will work with the community leaders
    for that plan?
        Secretary Nicholson. Absolutely I can say that, Madam
    Chairman. In fact, I am planning to go to Waco myself hopefully
    in April. I want to go down there and get on the ground and see
    the facilities, not to preempt the process but so that I know
    and have a feeling myself for the physical assets that are
    there. I know that the continued process out of the CARES
    process is underway, and I think that will run its course and
    have great community involvement. We are very committed and
    interested in that.
        Senator Hutchison. Well, I certainly am pleased that you
    are going there. I hope I can join you. So I would like to call
    your office and see if we can do that together.
        Secretary Nicholson. We will try to coordinate.
        Senator Hutchison. There is a second facility at Big
    Spring. It is a hospital that I visited a few months ago. It is
    in a central location which is 40 miles from Midland, 60 miles
    from Odessa, 87 miles from San Angelo, and 110 miles from
    Abilene. The next closest VA hospital is 200 miles from any of
    those locations.
        I had asked Secretary Principi to consider a public/private
    partnership between the Big Spring VA and Scenic Mountain
    Medical Center to increase the services to the veterans in that
    area. It is the area that all of those communities support the
    VA hospital because it is the most centrally located. As you
    know, we have two Air Force bases, one in Abilene and one in
    San Angelo, that feed into that veterans hospital, plus Midland
    and Odessa feeding in. And if you put it in any of the other
    places, it would be much farther from other population centers.
        So I would ask that you also visit that one--it might be a
    good day to go to both of those at the same time--and look at
    the possibilities of, again, making your service more efficient
    but keeping it at the Big Spring facility where you already
    have a major investment.
        Secretary Nicholson. I will try to do that, Madam Chairman.
    I am committed to Waco. I will see if we can make it work at
    Big Spring. I would like to. I can tell you, as you probably
    know, I think the first open forum of that advisory board for
    Big Spring is scheduled to meet, I think, April 7 for the first
    time with our consultant, Price Waterhouse.

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Hutchison. Well, I know this is all pretty
    overwhelming and you have only been there a short time. But I
    would look forward to working with you to assure that the
    community has its input and that we can do the best for the
    veterans in the area. I think you will be pleased when you see
    both of those facilities.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

              Questions Submitted by Senator Kay Bailey Hutchison

                           MAJOR CHALLENGES AND GOALS

        Questions. I recognize you have been in office only a few weeks,
    but I would like to hear your preliminary observations about the
    Department.
        Specifically, what do you see as the Department's main challenges?
        As VA Secretary, what are the main goals you would like to achieve
    before the end of your tenure?
        Answers.
    Challenges
        VA is a very large, multi-business organization requiring diverse
    management service delivery skills. More than 220,000 dedicated VA
    employees operate its 157 hospitals, 134 nursing homes, 860 outpatient
    clinics, 57 regional benefit offices, and 120 national cemeteries and
    receive pre-discharge claims for disability benefits at 139 military
    sites. They strive to provide world- class service to America's
    deserving veterans who seek (1) health care; (2) the benefits they have
    earned to restore their capability and ensure a smooth transition from
    active military service to civilian life; and (3) honor and fitting
    memorials in death.
        Our single greatest challenge is making sure our veterans receive
    the highest return on the taxpayers' dollar. To do that, VA needs to
    make sure it operates with only the best business practices in place.
    This alone, will make it easier for our veterans to access the quality
    care and services we provide. We must continually improve our business
    practices, maximize sharing opportunities with DOD and others and focus
    our services on those most in need. I look forward to tackling the
    challenges of ensuring best practices in all areas of VA endeavor and
    building on today's successes for even greater achievements in the
    future.
    Goals
      --I want to ensure that timely access to medical care continues to
            improve for those who depend on VA the most, and I want to
            ensure that significant improvements in both accuracy and
            consistency of benefit entitlement decisions are a primary
            focus across regional offices.
      --I want to achieve the right balance of informed, centralized policy
            decision-making with appropriate, responsible decentralized
            implementation at levels closest to the provision of day-to-day
            services to our veterans.
      --I want to lead VA to the forefront of integrating accountability
            systems based on results. VA provides essential, life-saving
            and life-enhancing services for America's veterans, and I want
            the Department to be able to articulate, based on solid
            metrics, the incredible results that are achieved on an on-
            going basis for veterans, their dependents and survivors.
      --I want to continue to build on the objective measures currently
            being used to assess maximum resource-allocation efficiency so
            that every dollar is invested wisely toward the outcome of
            improving veterans' lives.
      --I want to sharpen this organization's focuses on improved
            information and knowledge management and human-capital
            development.
        Madam Chairman, there is so much more I could address, but first
    and foremost, I want to ensure that all 220,000 employees of this
    Department strive every day to improve the lot of those heroic,
    selfless Americans we are privileged to serve--our Nation's veterans.

                  VETERANS RETURNING FROM IRAQ AND AFGHANISTAN

        Question. There are concerns about VA's ability and capacity to
    treat all returning service members from Operations Enduring Freedom
    and Iraqi Freedom (OEF/OIF). Further, there have been media reports of
    some returning veterans who are falling through the cracks and
    experiencing such things as delayed benefits and medical care and
    homelessness.
        For the record, do you have enough resources to meet the needs of
    all returning veterans from Iraq and Afghanistan for this current
    fiscal year 2005?
        Answer.
        Dr. Perlin. Yes, VA has the necessary resources in fiscal year 2005
    to continue meeting the needs of all returning veterans from Iraq and
    Afghanistan.
        Admiral Cooper. VA has the resources, capacity, and systems in
    place to provide priority care and claims processing for all seriously
    injured veterans of Iraq and Afghanistan. We have the resources
    available to continue our highly successful Benefits Delivery at
    Discharge (BDD) program, through which service members are able to file
    disability compensation claims prior to their separation from service.
    Their claims are then processed expeditiously immediately upon the
    service members' separation from service. Last year claims filed
    through the BDD program were processed in an average of 55 days,
    compared to the national average for all disability determinations of
    165 days. We have the resources to conduct briefings for separating
    members of the active components and specialized outreach to
    demobilized reserve component forces. In fiscal year 2004 we conducted
    benefit briefings for more than 88,000 members of the Guard and
    Reserve. VA will continue to meet its responsibilities to America's
    current returning war veterans while working to lower inventories,
    reduce claims processing times, and deal with high claims activity by
    veterans from earlier service periods.
        Question. Does the budget request for fiscal year 2006 provide
    adequate funding to meet the needs of all returning OEF and OIF
    veterans?
        Answer.
        Dr. Perlin. Yes, VA requested the necessary resources in fiscal
    year 2006 to continue meeting the needs of all veterans who have
    suffered injuries or diseases as a result of the conflicts in Iraq and
    Afghanistan.
        Admiral Cooper. The funding request for 2006 is adequate and will
    enable us to continue the efforts described in the previous response.
        Question. Has the VA exhausted all means to reach service members
    who may separate from active duty? Has the VA used public service
    announcements?
        Answer. While there is always more that could be done to reach
    veterans and their families, VA has extensive outreach programs for
    returning service personnel, including Reserve/National Guard members.
        News Releases.--Last year, VA produced a 30-second public service
    video entitled ``Our Turn to Serve'' which was distributed to domestic
    viewing markets near or at major military transition and separation
    bases. It was placed as a streaming video file on the VA Internet Web
    site and marketed electronically to other domestic TV station
    programmers in markets with large military populations. It is now about
    to run on AFRTS outlets serving military based overseas. A new VA
    outreach video program, ``The American Veteran,'' is airing on the
    Pentagon Channel, which reaches military audiences at Department of
    Defense (DOD) installations, communities, and sites in this country and
    around the world. It is a half-hour video magazine featuring stories
    and information of interest to military personnel and veterans that
    focuses on their benefits and how they can access and use them. This is
    a continuing series of monthly programs that will be marketed
    domestically to cable systems, PBS stations, and community access
    cable.
        Transition Assistance Program (TAP) and Other Military Services
    Briefings.--From October 2002 through January 2005, VBA military
    services coordinators conducted transition briefings and related
    personal interviews in the United States as reflected in the chart
    below. These briefings include pre- and post-deployment briefings for
    Reserve and National Guard members.

                                                    OVERALL BRIEFINGS
    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                               Briefings     No. attendees  No. interviews
    ----------------------------------------------------------------------------------------------------------------
    2003............................................................           5,368         197,082          97,352
    2004............................................................           7,210         261,391         115,576
    2005 \1\........................................................           2,263          79,105          34,106
    ----------------------------------------------------------------------------------------------------------------
    \1\ Through January 2005.

        In addition to military services briefings in the U.S., VBA
    representatives conduct briefings overseas under arrangement with DOD.
    VBA provides two tours each year with 6 to 7 VBA representatives
    providing this service for each tour. Each is home-based at a major
    military site and provides services at the site and surrounding areas.
    The countries serviced are England, Germany, Japan, and Italy. Korea is
    serviced by staff from the Benefits Delivery at Discharge office in
    Yong San. A representative from the St. Petersburg Regional Office
    provides that service for Guantanamo Bay. We were recently requested by
    DOD to add Bahrain to our overseas schedule beginning with the May 2005
    tour. The following chart reflects statistics regarding overseas
    briefings:

                                                   OVERSEAS BRIEFINGS
    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                               Briefings     No. attendees  No. interviews
    ----------------------------------------------------------------------------------------------------------------
    2003............................................................             472          12,943          12,947
    2004............................................................             624          15,183           6,544
    2005 \1\........................................................              36           1,278             464
    ----------------------------------------------------------------------------------------------------------------
    \1\ Through January 2005.

        Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard
    members is part of the overall VBA outreach program. In peacetime, this
    outreach is generally accomplished on an ``on call'' or ``as
    requested'' basis. With the activation and deployment of large numbers
    of Reserve/Guard members following the September 11, 2001, attack on
    America, and the onset of OEF/OIF, VBA outreach to this group has been
    greatly expanded. National and local contacts have been made with
    Reserve/Guard officials to schedule pre- and post-mobilization
    briefings for their members. Returning Reserve/Guard members can also
    elect to attend the formal three-day TAP workshops. The following data
    on Reserve/Guard briefings is a subset of the Overall Briefings data
    provided in the first chart:

                             RESERVE/GUARD BRIEFINGS
    ------------------------------------------------------------------------
                   Fiscal year                   Briefings     No. attendees
    ------------------------------------------------------------------------
    2003....................................             821          46,675
    2004....................................           1,399          88,366
    2005 \1\................................             531          32,448
    ------------------------------------------------------------------------
    \1\Through January 2005.

        Briefings Aboard Ships.--VA provided TAP briefings aboard the USS
    Constellation, the USS Enterprise, and the USS George Washington on
    their return from the Persian Gulf to the United States. VBA will
    continue to support requests from the Department of the Navy for TAP
    workshops aboard ships.

    Seamless Transition--Military Treatment Facilities (MTFs)
        In 2003, VA began placing Veterans Service Representatives at key
    military treatment facilities (MTFs) where severely wounded service
    members from OEF/OIF are frequently sent. Representatives of the VBA
    Benefits Delivery at Discharge office in Germany work closely with the
    staff at the Landstuhl Army Medical Center to assist returning injured
    service members who are patients at that facility and family members
    temporarily residing at the Fischer House.
        Since March 2003, a VBA OEF/OIF coordinator is assigned for each
    MTF. Full time staff is assigned to the Walter Reed Army Medical Center
    in Washington, D.C., and the Bethesda Naval Medical Center in Maryland.
    Similar teams work with patients and family members at three other MTFs
    serving as key medical centers for seriously wounded returning troops:
    Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service
    is conducted at all other major military treatment facilities. As of
    January 2005, over 4,500 hospitalized returning service members were
    assisted through this program at Walter Reed, Bethesda, Eisenhower,
    Brooke, and Madigan. Since March 2003, each claim from a seriously
    disabled OEF/OIF veteran has been case managed for seamless and
    expeditious processing.
        Web Page.--As part of the Seamless Transition effort, VBA created a
    new web page for OEF/OIF, directly accessible from the VA homepage.
    Information specific to Reserve/Guard members who were activated is
    included, as well as links to other Federal benefits of interest to
    returning service members. The web page has been accessed over 340,000
    times since its activation in December 2003.
        Benefits Delivery at Discharge (BDD).--VA's BDD program operates in
    concert with the military services outreach program. Under BDD, service
    members can apply for disability compensation within 180 days before
    discharge. The required physical examinations are conducted and service
    medical records are reviewed prior to discharge. The goal is to
    adjudicate claims within 30 days following discharge. Upon receipt of
    the claimant's DD Form 214 (Report of Release from Active Military
    Service), benefits are immediately authorized so that the recently
    separated veteran can receive his/her first disability check the month
    following the month of discharge or shortly thereafter. Currently, 141
    military installations worldwide participate in this program, including
    two sites in Germany and three in Korea. Approximately 26,000 BDD
    claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004;
    and 12,000 in fiscal year 2005 to date.

    Recently-Separated Veterans
        Veterans Assistance at Discharge System (VADS).--All separating and
    retiring service members (including Reserve/Guard members) receive a
    ``Welcome Home Package'' that includes a letter from the Secretary, a
    copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
    0501, Veterans Benefits Timetable, through VADS. Similar information is
    again mailed with a 6-month follow-up letter.
        Secretary's Outreach Letter to Returning Service Members.--Outreach
    letters from the Secretary of Veterans Affairs have been sent to
    approximately 240,000 returning service members who have separated/
    retired from active duty. Enclosed with the letters are copies of VA
    Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of
    VA Benefits for National Guard and Reserve Personnel.

                           PRIORITY 7 AND 8 VETERANS

        Question. Clearly, we must ensure full funding for Priority 1
    through 6 veterans, but I am also concerned about our Priority 7 and 8
    veterans.
        Given the escalating costs of private health care insurance and
    cuts to other publicly funded programs, what is going to happen to the
    tens of thousands of uninsured Priority 7 and 8 veterans? Has the VA
    performed any analysis to project the outcomes of these veterans? Does
    the VA have a good understanding of who these veterans are,
    demographically, and what resources they may have in the event VA
    medical care is not available to them?
        Answer. VA has health insurance coverage data on veterans from the
    fiscal year 2001 Survey of Veterans. VA also obtains health insurance
    coverage data for VA health care enrollees from the annual VHA Enrollee
    Survey. VA has also considered the impact of its proposed policies on
    uninsured veterans. For example, the cost-sharing policies (annual
    enrollment fee and increased pharmacy co-payments) in the fiscal year
    2006 President's budget will enable uninsured Priority 7 and 8 enrolled
    veterans to continue to have access to the VA health care system for a
    very modest amount of cost sharing. We expect that Priority 7 and 8
    enrollees who are uninsured will pay the enrollment fee, while many
    Priority 7 and 8 enrollees who have other health care coverage are not
    expected to enroll because of their alternative sources of care.

                            MANAGEMENT EFFICIENCIES

        Question. This year's request estimates savings of some $1.8
    billion in management efficiencies--an increase of some $590 million
    over the fiscal year 2005 level. I support efforts by the Department to
    improve its management practices, and clearly the Inspector General's
    office has identified a number of areas where savings could be
    achieved. But we haven't seen a lot of detail or reliable data to back
    up these savings projections.
        For example, the budget projects saving $150 million through
    improved contracting practices with medical schools and other VA
    affiliates for scarce medical specialties. Can you explain exactly how
    you will achieve this $150 million in savings?
        Answer. VA anticipates that $150 million in savings will result
    from improved contracting practices. A new directive is about to be
    issued that encourages competitive contracting for services and
    provides contracting officers specific guidance on appropriate costs to
    include in a sole-source contract, when that vehicle is appropriate. In
    addition, there will be increased Office of Inspector General audits of
    sole source contracts with VA's affiliates, which will result in
    further savings from originally negotiated rates.
        Question. Can you provide the committee with details on how the
    Department will achieve its overall management savings goal of $1.8
    billion for fiscal year 2006?
        Answer. The $1.8 billion in management efficiencies is composed of
    recurring and anticipated new efficiencies in standardization of
    pharmaceuticals and supplies; inventory management; productivity; and
    administrative/clinical consolidations and VA/DOD sharing.

                                  HOMELESSNESS

        Question. By some accounts, homeless veterans number around
    200,000; even some veterans returning from Iraq and Afghanistan are
    experiencing homelessness.
        Can you explain why there continues to be such a large number of
    homeless veterans in this country?
        Answer. While homeless veterans tend to be older and better
    educated than their non-veteran counterparts, they face the same
    vulnerabilities that increase their risk of homelessness. These
    liabilities include mental illness and substance use disorders, lack of
    adequate social supports, disadvantages associated with past histories
    of incarceration, and poor employment prospects.
        VA estimates that there may be 200,000 homeless veterans living on
    the streets or in shelters on any given day. Data from the National
    Survey of Homeless Service Providers and Clients conducted in 1996
    indicates that the proportion of veterans among homeless men declined
    to 23 percent from an estimate of 34 percent identified in a similar
    study conducted in the mid 1980s. We believe that VA, working together
    with community-based and faith-based organizations, has put in place a
    wide range of services to address the needs of homeless veterans and
    this system of services is helping veterans move out of homelessness to
    independence and self sufficiency.
        Question. Why are some of our OEF and OIF veterans experiencing
    homelessness?
        Answer. From August through December of 2004, VA has reached out to
    128 homeless OEF and OIF veterans, about 1 percent of all homeless
    veterans contacted through outreach during those months. Review of
    intake assessment information about these veterans suggests that, for
    the most part, these homeless veterans have problems similar to those
    of homeless veterans from other eras and periods of service. However,
    homeless OEF/OIF veterans are younger and appear to have fewer problems
    with substance abuse and they seem to have more short-term situational
    problems such as changes in family status (e.g. separation or divorce).
    These veterans are less likely to be chronically homeless, which gives
    us hope that they can return more easily to self sufficiency.

                                 VISN STRUCTURE

        Question. The President's Task Force (PTF) found that the VA's
    veterans integrated systems network (VISN) structure ``resulted in the
    growth of disparate business procedures and practices.'' Further, the
    PTF's report stated that the ``VISN structure alters the ability to
    provide consistent, uniform national program guidance in the clinical
    arena, the loss of which affects opportunities for improved quality,
    access, and cost effectiveness.'' Due to these findings, the PTF
    recommended ``the structure and processes of VHA should be reviewed.''
        Do you agree with the PTF's findings? If so, what are your thoughts
    on altering the VISN structure? If not, what alternatives do you offer?
        Answer. There is always a tension between centralization and
    decentralization, such as we find in the current VA network structure.
    A system that is too centralized is grossly ineffective and
    inefficient. On the other hand, a system that is too decentralized
    loses the integration and cohesiveness that defines it as a ``system.''
    Achieving the proper balance to avoid both too much centralization and
    too much decentralization requires continual monitoring and refinement
    where necessary. So to that extent, we agree that the structure and
    processes of the VISN structure require continual review. But continual
    review does not necessarily entail significant alterations. Nor is it
    clear that the VISN structure has impaired VA's ability to provide
    consistent, uniform national clinical guidance.
        VA operates a large, integrated health care system that functions
    both efficiently and effectively. Improvements in quality, access,
    veteran satisfaction, and efficiency are measurable and have been
    widely recognized. Health care policy is established centrally in
    Washington and is expected to be executed uniformly throughout all 21
    VISNs. I expect the VISNs to address the unique challenges of their
    respective environments, and we will hold management at all levels
    accountable for implementing national policy consistently. I am a firm
    believer in the benefits of performance measurement, and I will hold
    all VISN directors accountable for the same set of performance measures
    and goals. The individual means to achieve the goals set may vary
    somewhat from VISN to VISN, depending on their individual
    circumstances, but the requirement for implementation of overall
    national health care policies is immutable.

                            STATE HOME CONSTRUCTION

        Question. The budget request proposes a 1-year moratorium on
    providing grants for construction of State nursing homes until the VA
    has completed a review of its long-term care needs.
        Since State veterans' nursing homes account for more than half of
    VA's nursing home workload, to what extent will the moratorium impact
    veterans access to long term-care?
        Answer. The proposed 1-year moratorium on grants for construction
    of State nursing homes will have a minimal effect on veterans' access
    to long-term care. Nationally, State Veterans Homes operate at
    approximately 85 percent capacity; consequently the existing capacity
    can accommodate additional veterans. Moreover, construction projects
    that are already underway are anticipated to add more than 1,600
    additional State Home beds nationally over the next 3-4 years.
        Question. Are there State nursing home projects with established
    and documented need that will be delayed because of the funding
    moratorium?
        Answer. There are nursing home projects for which the States have
    committed matching funds that will be delayed by the moratorium for 1
    year. Because the Priority List is revised annually, VA cannot predict
    how many or which specific projects will be delayed. All new and
    existing pending projects are ranked as of August 15 and included in
    the annual list.

                              VA-DOD COLLABORATION

        Question. For several years, there have been numerous efforts to
    promote health care collaboration between the Department of Defense and
    the VA. The fiscal year 2003 National Defense Authorization Act
    directed DOD and VA to establish a joint program to identify and
    provide incentives to implement, fund, and evaluate creative health
    care coordination and sharing initiatives between the two departments.
        Can you give us a status and any initial findings on this new
    program?
        Answer. Section 721 of Public Law 107-314, the fiscal year 2003
    National Defense Authorization Act, requires that DOD and VA establish
    a joint incentives program through the creation of a DOD-VA Health Care
    Sharing Incentive Fund. The intent of the program is to identify, fund,
    and evaluate creative local, regional, and national sharing
    initiatives.
        A DOD-VA Memorandum of Agreement (MOA), signed on July 8, 2004,
    assigned VA as administrator of the fund under the direction of the VA-
    DOD Health Executive Council (HEC). The HEC appointed the Financial
    Management Work Group to issue the calls for proposals, recommend the
    proposals to be funded, and monitor the projects selected. There is a
    minimum contribution of $15 million by each Department ($30 million
    total per year) each year for 4 years (fiscal year 2004-fiscal year
    2007).
        In fiscal year 2004, 12 proposals were approved. Those proposals
    require $37.5 million in funding over 2 years. Approved proposals
    involve a wide range of services including various tele-health
    projects, women's health services, a joint cardiac catheterization lab,
    a joint dialysis unit, and a joint clinic.
        In fiscal year 2005, 56 proposals have been submitted, and they
    will compete for $22.5 million in funding for the first year. VA and
    DOD are currently reviewing the projects submitted for the fiscal year
    2005 awards cycle.
        There has been a high level of interest by VA and DOD in submitting
    projects for funding. There have been many lessons learned in
    administering the program, such as allowing sufficient time to permit
    review up the chains of commands within both VA and DOD; the need for
    information technology projects to be consistent with the national
    level solutions being developed; and the need for projects to clearly
    identify a benefit to both Departments. The projects selected for
    funding in fiscal year 2004 have not been operational long enough to
    provide an individual project assessment of the results.
                                     ______

                   Questions Submitted by Senator Larry Craig

                                    SERVICES

        Question. The 116th Calvary Brigade Combat Team of the Idaho Army
    National Guard are now stationed overseas in Iraq and fighting in
    Operation Iraqi Freedom. Like all National Guardsmen, when they return
    from active duty they will resume their duties of working under the
    command of the Governor of Idaho.
        What will their eligibility be for VA services, including health
    care and benefits, when they separate from active duty service?
        Answer. Army National Guard personnel activated by Federal
    declaration and who served on active duty in a theater of combat
    operations which includes Operation Iraqi Freedom are eligible for
    hospital care, medical services, and nursing home care. Public Law 105-
    368 amended title 38, United States Code, to authorize VA to provide
    combat veterans with care for conditions potentially related to their
    combat service for a 2 year period following discharge. Care is cost-
    free for conditions that cannot be disassociated from combat service.
    Care for other conditions is subject to applicable copayments. Veterans
    who enroll with VA under this authority retain enrollment eligibility,
    regardless of any enrollment restriction that may be in effect after
    this 2-year post discharge period. Combat veterans who choose not to
    enroll with VA during the 2-year period would be able to enroll in the
    future only if they are otherwise eligible to enroll.
        In addition to health care benefits, they are also eligible for a
    full array of benefits offered through the Veterans Benefits
    Administration (VBA) to include:
      --Disability Benefits
      --Education and Training Benefits
      --Vocational Rehabilitation and Employment
      --Home Loans
      --Life Insurance
      --Burial Benefits
      --Dependents' and Survivors' Benefits
        Question. Does the Department have any programs in place that will
    continue to follow these Guardsmen after their completion of their
    combat mission and they return home to a civilian life?
        Answer. Under 38 U.S.C.  1710(e)(1)(D) and  1710(e)(3)(C), OIF/
    OEF veterans may enroll in the VA health care system and, for a 2-year
    period following the date of their separation from active duty, receive
    VA health care without co-payment requirements for conditions that are
    or may be related to their combat service. After the end of the 2-year
    period, they may continue their enrollment but may be subject to any
    applicable co-payment requirements. For OIF/OEF veterans who do not
    enroll with VA during the 2-year post-discharge period, eligibility for
    enrollment and subsequent health care is, of course, subject to such
    factors as a service connected disability rating, VA pension status,
    catastrophic disability determination, or financial circumstances.
        OIF and OEF veterans have sought VA health care for a wide-variety
    of physical and psychological problems. The most common health problems
    have been musculoskeletal ailments (principally joint and back
    disorders); diseases of the digestive system (with teeth and gum
    problems predominating); and mental disorders (predominantly adjustment
    reactions). The medical issues we have seen to date are those we would
    expect to see in young, active, military populations, and no particular
    health problem stands out among these veterans at present. We will
    continue to monitor the health status of recent OIF and OEF veterans to
    ensure that VA aligns its health care programs to meet their needs.
        Following is a brief description of VA initiatives that have been
    developed in response to the service needs of veterans from Operations
    Iraqi Freedom (OIF) and Enduring Freedom (OEF). Many of these are brand
    new programs that were developed to meet these needs. All of them
    represent ``lessons learned'' from VA's experiences responding to the
    health care and other benefits needs of veterans returning from the
    1991 Gulf War and from the Vietnam War before that.
        Immediate Health Care Needs for Combat Veterans.--In response to
    immediate health concerns for OIF and OEF veterans, on March 26 and 27,
    2003, VA developed a program called ``Caring for the War Wounded,''
    which was broadcast over the VA Knowledge Network satellite broadcast
    system. This program provided timely and relevant information about the
    anticipated health care needs of veterans of the current conflict in
    Iraq, included VA experts on treatments for traumatic injuries;
    chemical warfare agent health effects; infectious diseases;
    radiological health effects; and post-deployment readjustment health
    concerns, and was converted into a new Veterans Health Initiative (VHI)
    health care provider independent study guide, called ``Caring for the
    War Wounded,'' which is available online at vaww.va.gov/VHI/and on the
    Internet at http://www.appc1.va.gov/vhi/.
        New Clinical Guidelines for Combat Veteran Health Care.--In
    collaboration with DOD, VA developed two Clinical Practice Guidelines
    on combat veteran health issues, including one general guideline to
    post-deployment health, and a second dealing with unexplained pain and
    fatigue. The new clinical guidelines give our health care providers the
    best medical evidence for diagnoses and treatment. VA highly recommends
    these for the evaluation and care of all returning combat veterans,
    including veterans from OIF and OEF. The value of the guidelines in
    providing care to returning veterans is described in a video ``The Epic
    of Gilgamesh: Clinical Practice Guidelines for Post-Deployment Health
    Evaluation and Management,'' at www.va.gov/Gilgamesh.
        New Specialized Combat Veteran Health Care Program.--In 2001, VA
    established two new War Related Illness and Injury Study Centers
    (WRIISCs) at the Washington, DC, and East Orange, NJ, VAMCs. Today, the
    WRIISCs are providing specialized health care for combat veterans from
    all deployments who experience difficult to diagnose but disabling
    illnesses. Concerns about unexplained illness are seen after all
    deployments including OIF/OEF, but VA is building on our understand of
    these illnesses. More information is available online at www.va.gov/
    environagents under the heading ``WRIISC Referral Eligibility
    Information.''
        Expanded Education on Combat Health Care for VA Providers.--In
    addition to the programs already described, VA has developed several
    Veterans Health Initiative (VHI) Independent Study Guides relevant to
    veterans returning from Iraq and Afghanistan:
      --``A Guide to Gulf War Veterans Health'' was originally on health
            care for combat veterans from the 1991 Gulf War. The product,
            written for clinicians, veterans and their families, remains
            very relevant for OIF and OEF combat veterans because many of
            the hazardous exposures are the same.
      --``Endemic Infectious Diseases of Southwest Asia'' provides
            information for health care providers about the infectious
            disease risks in Southwest Asia, particularly in Afghanistan
            and Iraq. The emphasis is on diseases not typically seen in
            North America.
      --``Health Effects from Chemical, Biological and Radiological
            Weapons'' was developed to improve recognition of health issues
            related to chemical, biological and radiological weapons and
            agents.
      --``Military Sexual Trauma'' was developed to improve recognitions
            and treatment of health problems related to military sexual
            trauma, including sexual assault and harassment.
      --``Post-Traumatic Stress Disorder: Implications for Primary Care''
            is an introduction to PTSD diagnosis, treatment, referrals,
            support and education, as well as awareness and understanding
            of veterans who suffer from this illness.
      --``Traumatic Amputation and Prosthetics'' includes information about
            patients who experience traumatic amputation during military
            service, their rehabilitation, primary and long-term care,
            prosthetic, clinical and administrative issues.
      --``Traumatic Brain Injury'' presents an overview of TBI issues that
            primary care practitioners may encounter when providing care to
            veterans and active duty military personnel.
        All are available in print, CD ROM, and on the web at www.va.gov/
    VHI.
        Outreach to Combat Veterans.--VA has many new products to offer
    combat veterans and their families.
      --The Secretary of Veterans Affairs sends a letter to every newly
            separated OIF and OEF veteran, based on records for these
            veterans provided to VA by DOD. The letter thanks the veteran
            for their service, welcomes them home, and provides basic
            information about health care and other benefits provided by
            VA.
      --In collaboration with DOD, VA published and distributed one million
            copies of a new short brochure called ``A Summary of VA
            Benefits for National Guard and Reservists Personnel.'' The new
            brochure does a tremendous job of summarizing health care and
            other benefits available to this special population of combat
            veterans upon their return to civilian life (also available
            online at www.va.gov/EnvironAgents).
      --``Health Care and Assistance for U.S. Veterans of Operation Iraqi
            Freedom'' is a new brochure on basic health issues for that
            deployment (also at www.va.gov/EnvironAgents).
      --``OIF and OEF Review'' is a new newsletter mailed to all separated
            OIF and OEF veterans and their families, on VA health care and
            assistance programs for these newest veterans (online at
            www.va.gov/EnvironAgents).
      --``VA Health Care and Benefits Information for Veterans'' is a new
            wallet care that succinctly summarizes all VA health and other
            benefits for veterans, along with contact information, in a
            single, wallet-sized card for easy reference (also at
            www.va.gov/EnvironAgents).
        Special Depleted Uranium (DU) Program.--OIF veterans concerned
    about possible exposure to depleted uranium can be evaluated using a
    special DU exposure protocol that VA began after the 1991 Gulf War.
    This program offers free DU urine screening tests by referral from VA
    primary care physicians to veterans who have concerns about their
    possible exposure to this agent.
        Combat Veteran Health Status Surveillance.--Today, we can monitor
    the overall health status of combat veterans very efficiently by using
    VA's electronic inpatient and outpatient medical records. This
    surveillance summarizes every single visit by a combat veteran
    including all medical diagnoses. VA has developed a new Clinical
    Reminder (part of VA's computerized reminder system) to assist VA
    primary care clinicians in providing timely and appropriate care to new
    combat veterans.
        Question. What resources are being devoted this year to put into
    effect the co-location of the Boise VA Medical Center and Regional
    Office? What are projected for next year?
        Answer. In fiscal year 2005, staff resources in VBA will accomplish
    the following:
      --Secure a letter from the GSA initiating the transfer of the 2.13
            acre parcel to VA and get VA Secretary's signature accepting
            transfer and control of the property.
      --Complete a concept paper for the business case for a project to
            construct a new office building for the Boise Regional Office
            on the subject property.
      --Complete an Exhibit 300 business case application for a project to
            construct a new office building for the Boise Regional Office
            on the subject property.
      --Select an Architect/Engineer (A/E) firm to prepare a preliminary
            design and a Request for Proposals (RFP) for a Design-Build
            contract for the construction of the new office building. Funds
            from the Minor Construction program will be allocated to this
            contract.
      --Begin the preliminary design for the new office building.
        In fiscal year 2006, staff resources in VBA will accomplish the
    following:
      --Complete the preliminary design and the RFP for the Design-Build
            contract.
      --Work with the VHA contracting officer to prepare the solicitation
            for the Design-Build contract.
      --Advertise the project in the FedBizOps for a contract award in
            early fiscal year 2007.
      --Identify the necessary minor construction funds in the fiscal year
            2007 budget for the construction contract.

                               PRESCRIPTION DRUGS

        Question. Last year, Congress enacted the Medicare Modernization
    Act which, for the first time, provides Medicare beneficiaries with
    prescription drug coverage.
        Has VA conducted any assessments of the impact this legislation
    will have on the number of veterans who rely on VA health care to
    provide prescription drug coverage? If so, what has this assessment
    shown?
        Answer. Milliman, Inc., the private-sector actuarial firm that
    develops projections of veteran demand for VA health care, has advised
    VA that the impact of the new Medicare drug benefit on VA enrollment,
    utilization, and expenditures is expected to be minimal. The biggest
    impact is expected to come from reductions in employer-based
    prescription drug coverage. However, the impact may not become
    significant until as late as 2016 since the most recent cutbacks have
    been for future retirees only; those eligible for retirement (over age
    55) have been grandfathered into employer's current plan. Based on
    recent estimates of retirees who could lose benefits, enrollment in VA
    health care could increase by an estimated 35,000 within the 10-15 year
    period following the start of the Medicare prescription drug benefit.
    VA currently treats about 5.2 million veterans per year.
        Question. Does VA believe that there is a way VA can work in
    concert with Medicare on the provisions of prescription medications for
    Medicare-eligible veterans? If so, has VA leadership approached the
    leadership of the Centers for Medicare and Medicaid Services to discuss
    and proposals?
        Answer. VA believes that VA and the Department of Health and Human
    Services' Centers for Medicare and Medicaid Services (CMS) can work
    together so that beneficiaries who chose to use both VA and CMS
    prescription benefits do so in a safe and cost-effective manner.
        To that end, VA Pharmacy Benefits Management staff and staff from
    the Centers for Medicare and Medicaid Services (CMS) have had
    preliminary discussions about potential VA /CMS patient safety and
    electronic prescribing initiatives.
        VA will continue to provide prescription medications to enrolled
    veteran patients who are also eligible for Medicare. VA will continue
    to provide this prescription coverage to Medicare eligible veterans who
    chose VA as their health care provider, even after Medicare Part D is
    fully implemented.

                         STATE HOME PER DIEM PROPOSALS

        Question. The State Home program, by most accounts, has been a
    successful partnership between the Federal and State governments for
    the care of aging veterans. Yet VA proposes to modify its past per diem
    payment policies--a change in policy that VA says will reduce the
    number of State home beds by more than 50 percent.
        Why does VA want the States to reduce the number of State home
    beds? Even if VA does not want to provide institutional care to the
    non-service-connected, why does it want to discourage States from
    meeting that need?
        Answer. VA is not proposing that the States reduce the number of
    State Home beds. State Veterans Homes are owned, operated, and financed
    by the States. VA provides limited financial assistance to the States
    in the form of per diem payments for nursing home, hospital,
    domiciliary, and adult day healthcare. Only the nursing home per diem
    is affected by the fiscal year 2006 budget proposal. The cost of care
    in State Veterans Homes varies from State to State, as does the amount
    of assistance provided to the Homes by the State. Currently, costs not
    covered by the VA per diem payments are covered from various sources,
    including the veterans themselves and State and Federal programs such
    as Medicare and Medicaid. VA's proposal could increase the share of
    costs borne by the State, depending upon the State's own policies for
    coverage of the costs of State Home care. State Homes will continue
    operations to the extent that individual States discharge their fiscal
    responsibility for the operation and management of the Homes. VA does
    not have information on the plans of individual States to respond to
    the change in VA policy.
        The average daily census in State Veterans Homes on whose behalf VA
    pays a per diem payment would decrease from 17,328 to 7,217 from fiscal
    year 2004 to fiscal year 2006. Over the same period, however, VA is
    projecting a substantial increase in both workload and funding for the
    non-institutional programs it supports. The average daily census in
    these home and community-based care (HCBC) programs is projected to
    rise from 25,523 in fiscal year 2004 to 35,540 in fiscal year 2006 (a
    39 percent increase). Funding is projected to increase from $287.3
    million in fiscal year 2004 to over $400 million in fiscal year 2006
    (also a 39 percent increase). The projected increases in HCBC programs
    will serve to offset some of the reductions in nursing home care. VA
    believes the proposals on long-term care in this budget provide an
    appropriate balance between congressionally mandated nursing home
    services and the national trend toward increased use of non-
    institutional home and community-based services in preference to
    nursing home care. HCBC is preferred by most patients and their
    families and is more cost effective than inpatient care.
        Question. Does VA assume bed closures will occur when payments for
    non-priority veterans (those without a service-connection) cease? Does
    VA believe that it has the legal authority to simply stop paying per
    diem payments to States for the care of veterans VA doesn't define as a
    priority?
        Answer. VA is seeking legislative authority to align VA per diem
    payments to State veterans homes with VA's revised long-term care
    eligibility policy. Enactment of this proposal would ensure fairness
    and consistency in how VA treats veterans needing long-term care across
    all venues, including VA nursing homes, community nursing homes, and
    State nursing homes. We are unable to comment on how the individual
    States would respond to this change in policy.
        Question. It seems to me that VA encouraged the States to build
    long-term care capacity by offering them construction subsidies. Would
    a change in the ``rules of the game'' after these State homes have been
    built not break the bargain that the Federal Government has struck with
    the States?
        Answer. The VA State Home Construction Grant Program assists States
    in construction and renovation costs for nursing homes, domiciliary
    facilities and adult day healthcare. The program does not require the
    state to participate in the State Veteran Home Per Diem Grant Program,
    or guarantee the ongoing subsidy of per diem payments. The law is
    separate for each of the programs.
                                     ______

                Questions Submitted by Senator Dianne Feinstein

                 STATE EXTENDED CARE FACILITIES GRANTS PROGRAM

        Question. Today I asked about the decision to impose a 1-year
    moratorium on funding for the State Extended Care Facilities Grants
    program. Specifically, I asked for the rationale behind the decision
    and if he could explain its impact on States, such as California, which
    critically need additional veterans homes. I also inquired about
    whether the moratorium was really a plan to ultimately phase out
    funding for State veterans homes.
        Can you explain to this committee why it is necessary to impose a
    1-year moratorium on grants for construction of long-term extended care
    facilities when there is such a need for VA homes throughout this
    Nation?
        Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium
    on new grants to States for construction and renovation of extended
    care facilities. This will permit VA to complete an assessment of its
    nationwide institutional long-term care infrastructure and ensure that
    future construction aligns with the areas of greatest projected need.
    Grants that have already been awarded will not be affected by the 1-
    year moratorium.
        Question. How would this moratorium affect the current priorities
    list for funding under this program?
        Answer. VA has already committed to all planned fiscal year 2005
    projects on the current Priority List. The States are currently
    completing the requirements for fiscal year 2005 grant awards. VA has
    committed the maximum fiscal year 2005 appropriations and the remaining
    fiscal year 2004 carryover funds to these projects.
        Question. Do you anticipate altering this priorities list for
    fiscal year 2007?
        Answer. The Priority List is revised annually, as of August 15th.
    All new and existing pending projects are ranked and included in the
    annual list. Once approved by the Secretary, the list is used to
    identify ranked projects and commit funding for projects for that
    fiscal year award or to finalize conditionally approved projects. For
    fiscal year 2007, VA would follow the same procedures and commit funds
    available at that time to the projects in rank order.
        Question. Can you provide this committee a better sense of your
    plans going forward and how it would affect funding for future State
    veterans home projects?
        Answer. VA will complete its assessment for our nationwide long-
    term care infrastructure and assess the construction grants program
    priority during the fiscal year 2007 budget deliberations.
        Question. Is the Administration considering a plan to phase out
    grant funding for State veterans homes?
        Answer. The Administration will reevaluate the funding for the
    State Extended Care Facilities Grant program during the fiscal year
    2007 budget deliberations.
        Question. I also know that the State of California plans to request
    $125 million in fiscal year 2007 under this grant program to fund its
    largest project to date, the Greater Los Angeles-Ventura County Home,
    which includes 3 separate facilities. How would the 1-year moratorium
    impact funding for this project?
        Answer. The fiscal year 2006 VA budget proposes a 1-year moratorium
    on new grants to States for construction and renovation of extended
    care facilities. This will permit VA to complete an assessment of its
    nationwide institutional long-term care infrastructure and ensure that
    future construction aligns with the areas of greatest projected need.
    Grants that have already been awarded will not be affected by the 1-
    year moratorium.
        VA has already committed to all planned fiscal year 2005 projects
    on the current Priority List. The states are currently completing the
    requirements for fiscal year 2005 grant awards. VA has committed the
    maximum fiscal year 2005 appropriations and the remaining fiscal year
    2004 carryover funds to these projects.
        The Priority List is revised annually, as of August 15th. All new
    and existing pending projects are ranked and included in the annual
    list. Once approved by the Secretary, the list is used to identify
    ranked projects and commit funding for projects for that fiscal year
    award or to finalize conditionally approved projects. For fiscal year
    2007, VA would follow the same procedures and commit funds available at
    that time to the projects in rank order. VA cannot predict at this time
    how the California project will be ranked in fiscal year 2007 or
    whether there will be sufficient appropriations to fund it.

                             MEDICAL CARE PROGRAMS

        Question. The Administration's overall request for Medical Care
    Programs is $30.8 billion. However, if you discount the collections
    that you anticipate through the Medical Care Collections Fund, as well
    as the new fees that would be imposed on thousands of veterans, you are
    left with a base appropriation request for Medical Care Programs of
    $28.2 billion. Which is only 0.4 percent increase over last year's
    enacted level. This falls well below the standard compounded medical
    inflation rate of 3.9 percent.
        Do you believe that this is sufficient funding given the number of
    veterans returning home from the Middle East?
        Answer. Yes, VA requested the necessary resources in fiscal year
    2006 to continue meeting the needs of all veterans who have suffered
    injuries or diseases as a result of the conflicts in Iraq and
    Afghanistan.

                        MEDICAL AND PROSTHETIC RESEARCH

        Question. I am happy to see the fiscal year 2006 budget calling for
    $1.2 billion for prosthetics and sensory aids, a $100 million increase
    over fiscal year 2005, however, I am concerned about the cut to Medical
    and Prosthetic Research (from $402 million in fiscal year 2005 to $393
    million in fiscal year 2006). As you know, 11,000 men and women of our
    Armed Forces have suffered injuries in Iraq and Afghanistan and to many
    of them functional and efficient prosthetics will make all the
    difference in the world. The VA has made tremendous progress in
    developing new, state-of-the-art prosthetics, but we should not stop
    there. We should continue to fund a robust prosthetic research program.
    None of us ever wants to have to explain to one of our soldiers who has
    lost a leg, that more could have been done.
        Can you please explain why the fiscal year 2006 budget reduces
    money in this area?
        Answer. The VA research program is funded by three funding
    sources--direct appropriation, private grant funding, and Federal grant
    funding. The overall estimated funding is expected to rise in fiscal
    year 2006 by $49 million or 3.1 percent to $1.7 billion. The total
    research program level of effort and number of projects for veterans
    will be at a similar level to that of fiscal year 2005. VA, like other
    Departments across Government, must be a responsible partner in
    assisting to achieve many important, competing priorities. Reducing the
    deficit for the current and long-term strength of this country is very
    important. Therefore, tough choices had to be made in maximizing
    resource impact in a slower growth environment. Medical care for those
    who need VA the most and timely, consistent benefits delivery are also
    crucial services for veterans. A balanced approach in wisely investing
    resources was a guiding principle in the development of this budget.
    Research that enhances veterans' lives continues to be an important
    priority of the VA.
        In terms of prosthetics research, VA is expanding its support of
    multidisciplinary research approaches and examination of enabling
    technologies that aim to ease the physical and psychological pain of
    veterans. The VA Office of Research and Development (ORD) is
    collaborating with clinical services to evaluate the delivery of care
    and help identify optimal utilization of all patient services including
    durable medical equipment for veterans. VA is also dedicated to the
    generation of the rigorous data required to formulate policy and
    establish clinical care guidelines.
        In addition to evaluating existing practices, VA is expanding upon
    its longstanding support for advances in surgical approaches to primary
    amputation to include operative revision and limb lengthening
    procedures that can potentially aid in fitting prostheses and enhance
    function beyond what is now possible. VA is also aggressively examining
    other techniques such as osseointegration, a procedure that replaces
    missing limbs with titanium rods inserted directly into residual bone.
        Examples of ongoing projects include:
      --partnerships with the Department of Defense and Walter Reed Army
            Medical Center to investigate immediate concerns of returning
            Operation Enduring Freedom (OEF) and Operation Iraqi Freedom
            (OIF) veterans;
      --trials of current prosthetic designs and improvements for future
            designs;
      --use of telerehabilitation to prevent complications resulting from
            amputation;
      --bio-hybrid limb projects using regenerated tissue, lengthened bone,
            internal and external titanium implants, and sensors that allow
            amputees to use brain signals and residual limb musculature to
            move their prostheses;
      --new uses for sensory and implanted control devices and biological
            sensors for the detection of health and function including
            microelectro-mechanical or nanotechnologies;
      --evaluation and updates of rehabilitation strategies; and
      --examination of how best to implement research results and develop
            best practices across VHA.

                            MEFLOQUINE (LARIAM) USE

        Question. As you may be aware, I have been concerned about the
    Department of Defense's (DOD) use of the anti-malarial drug mefloquine
    (Lariam) and its impact on our service members. In June 2004, I wrote
    your predecessor Secretary Principi with my concerns about the use of
    this drug, especially after hearing that several service members had
    been diagnosed with permanent brainstem and vestibular damage from
    mefloquine toxicity. Shortly thereafter, the Veterans Health
    Administration issued an Information Letter outlining the potential for
    serious complications associated with mefloquine.
        The VA's health care system is likely to be the first line of
    treatment for service members who have returned from active duty. And
    the VA will bear much of the cost and burden of treatment and
    rehabilitation for service members with mefloquine toxicity.
        Knowing that mefloquine was issued to active duty military in the
    wars in Afghanistan and Iraq, will you take steps to actively monitor
    the impact this drug has on these veterans' health conditions?
        Answer. VA is actively monitoring the DOD studies of possible
    adverse effects of mefloquine and is following the medical literature
    and reported studies. At DOD's invitation, VA participated in a special
    meeting of DOD's Armed Forces Epidemiology Board that DOD charged with
    helping to plan studies on long-term health effects among OIF and OEF
    veterans from mefloquine. VA regularly participates in DOD briefings on
    the status of DOD's studies on this health issue. In addition, VA
    developed an Under Secretary for Health Information Letter that
    reviewed medical and scientific literature on known health effects from
    taking mefloquine (IL 10-2004-007), ``Possible Long-Term Health Effects
    From The Malarial Prophylaxis Mefloquine (Lariam),'' June 23, 2004).
    This information letter alerts VA health care providers to the range of
    possible long-term health effects from taking mefloquine. It is
    important to note that mefloquine is an FDA approved drug that is
    widely used in the civilian community and not just in the military.
        Question. In the past, I have suggested that it is necessary for
    the Department of Defense (DOD) to immediately implement a program that
    will allow soldiers to report side effects and be evaluated, diagnosed
    and treated without fear of reprisal and that reporting such side
    effects not negatively affect their military service or careers. Would
    you be willing to implement such a program at the Department of
    Veterans' Affairs and will you work with DOD on such a program?
        Answer. Mefloquine side effects begin while a person is actually
    taking the drug--in this case, while they were still on active duty.
    Side effects appearing while a service member was still on active duty
    may be recorded by DOD health care providers. Few if any veterans are
    still taking malaria prophylaxis after leaving active military duty and
    then enrolling for VA health care. VA's Information Letter on
    mefloquine side effects (IL 10-2004-007) is intended to alert VA health
    care providers to any side effects that may persist in veterans after
    they have separated from military service. Any relevant findings then
    may be entered into the veteran's health record. Moreover, no health
    problem identified by the VA would result in reprisals or harm to a
    veterans' career because of the strict confidentiality and
    professionalism within the VA health care system.
        Question. As you may know, DOD is undertaking an investigation of
    the impact of mefloquine use by service members. What has the VA's role
    been in this investigation and has the Department participated in DOD's
    investigation?
        Answer. VA has been briefed on this study and actively supports
    DOD's efforts. VA is actively monitoring the DOD studies of possible
    adverse effects of mefloquine and is following the medical literature
    and reported studies. At DOD's invitation, VA participated in a special
    meeting of DOD's Armed Forces Epidemiology Board that DOD charged with
    helping to plan studies on long-term health effects among OIF and OEF
    veterans from mefloquine. VA regularly participates in briefings on the
    status of various DOD studies on this topic.

                                ENROLLMENT FEES

        Question. The budget submission assumes a $250 enrollment fee on
    Priority 7 and 8 veterans.
        How many veterans will have to pay the $250 enrollment fee? How
    many veterans will leave VA if they have to pay this premium? AND How
    does the VA plan to collect this fee from veterans?
        Answer. In 2006, 1.26 million Priority 7 and 8 veterans are
    expected to pay the $250 annual enrollment fee. This policy is expected
    to reduce enrollment for Priority 7 and 8 veterans by 1.1 million and
    reduce the number of Priority 7 and 8 unique patients by 213,000.
        VA will notify all Priority 7 and 8 enrolled veterans of the
    requirement to pay the enrollment fee by letter with appropriate
    payment guidance. Veterans will be provided a specified period of time
    to pay the entire fee or to agree to a quarterly payment schedule with
    payment of the first quarterly payment by a specified date. Payments
    will be processed through a central ``lockbox'' utility separate from,
    but similar to, existing processes used for receipt of veteran co-
    payments.

                            PHARMACY CO-PAY INCREASE

        Question. The budget includes an assumption that the pharmacy co-
    payments for certain veterans will increase from $7 to $15.
        How did VA choose $15 as the amount for the prescription drug co-
    payment?
        Answer. This and the other proposed policies in VA's 2006
    President's budget were designed to ensure that VA is able to fulfill
    its core mission--providing timely access to high-quality health care
    to veterans with serviced connected disabilities, low incomes, and
    those with special needs. The $15 pharmacy co-payment proposal and
    other cost-sharing proposals would only affect higher income, better-
    insured veterans in the lowest priorities and have been strategically
    priced to refocus the VA system on those veterans who need us most. The
    $15 drug co-pay would more closely align VA with other private and
    public health care plans.

                                RETURNING TROOPS

        Question. There are new challenges arising to ensure that returning
    troops are receiving their entitled benefits and services as veterans.
    The new challenges include reaching every veteran.
        What steps is the VA taking to reach out to all of our returning
    troops from Iraq and Afghanistan?
        Answer. Returning troops are provided information about VA benefits
    and services and assistance in applying for these benefits through the
    following VA outreach programs.
        Transition Assistance Program (TAP) and Other Military Services
    Briefings.--From October 2002 through January 2005, VBA military
    services coordinators conducted transition briefings and related
    personal interviews in the United States as reflected in the chart
    below. These briefings include pre- and post-deployment briefings for
    Reserve and National Guard members.

                                                    OVERALL BRIEFINGS
    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                               Briefings     No. attendees  No. interviews
    ----------------------------------------------------------------------------------------------------------------
    2003............................................................           5,368         197,082          97,352
    2004............................................................           7,210         261,391         115,576
    2005 \1\........................................................           2,263          79,105          34,106
    ----------------------------------------------------------------------------------------------------------------
    \1\ Through January 2005.

        In addition to military services briefings in the United States,
    VBA representatives conduct briefings overseas under arrangement with
    the Department of Defense (DOD). VBA provides two tours each year with
    6 to 7 VBA representatives providing this service for each tour. Each
    is home-based at a major military site and provides services at the
    site and surrounding areas. The countries serviced are England,
    Germany, Japan, and Italy. Korea is serviced by staff from the Benefits
    Delivery at Discharge office in Yong San. A representative from the St.
    Petersburg Regional Office provides that service for Guantanamo Bay. We
    were recently requested by DOD to add Bahrain to our overseas schedule
    beginning with the May 2005 tour. The following chart reflects
    statistics regarding overseas briefings:

                                                   OVERSEAS BRIEFINGS
    ----------------------------------------------------------------------------------------------------------------
                               Fiscal year                               Briefings     No. attendees  No. interviews
    ----------------------------------------------------------------------------------------------------------------
    2003............................................................             472          12,943          12,947
    2004............................................................             624          15,183           6,544
    2005 \1\........................................................              36           1,278             464
    ----------------------------------------------------------------------------------------------------------------
    \1\ Through January 2005.

        Briefings for Reserve/Guard Members.--Outreach to Reserve/Guard
    members is part of the overall VBA outreach program. In peacetime, this
    outreach is generally accomplished on an ``on call'' or ``as
    requested'' basis. With the activation and deployment of large numbers
    of Reserve/Guard members following the September 11, 2001, attack on
    America, and the onset of Operations Enduring Freedom and Iraqi Freedom
    (OEF/OIF), VBA outreach to this group has been greatly expanded.
    National and local contacts have been made with Reserve/Guard officials
    to schedule pre- and post-mobilization briefings for their members.
    Returning Reserve/Guard members can also elect to attend the formal 3-
    day TAP workshops. The following data on Reserve/Guard briefings is a
    subset of the overall briefings data provided in the first chart:

                             RESERVE/GUARD BRIEFINGS
    ------------------------------------------------------------------------
                   Fiscal year                   Briefings     No. attendees
    ------------------------------------------------------------------------
    2003....................................             821          46,675
    2004....................................           1,399          88,366
    2005 \1\................................             531          32,448
    ------------------------------------------------------------------------
    \1\ Through January 2005.

        Briefings Aboard Ships.--VA provided TAP briefings aboard the USS
    Constellation, the USS Enterprise, and the USS George Washington on
    their return from the Persian Gulf to the United States. VBA will
    continue to support requests from the Department of the Navy for TAP
    workshops aboard ships.

    Seamless Transition--Military Treatment Facilities (MTFs)
        In 2003, VA began placing Veterans Service Representatives at key
    military treatment facilities (MTFs) where severely wounded service
    members from OEF/OIF are frequently sent. Representatives of the VBA
    Benefits Delivery at Discharge office in Germany work closely with the
    staff at the Landstuhl Army Medical Center to assist returning injured
    service members who are patients at that facility and family members
    temporarily residing at the Fisher House.
        Since March 2003, a VBA OEF/OIF coordinator is assigned for each
    MTF. Full time staff is assigned to the Walter Reed Army Medical Center
    in Washington, D.C., and the Bethesda Naval Medical Center in Maryland.
    Similar teams work with patients and family members at three other MTFs
    serving as key medical centers for seriously wounded returning troops:
    Eisenhower, Brooke, and Madigan Army Medical Centers. Itinerant service
    is conducted at all other major military treatment facilities. As of
    January 2005, over 4,500 hospitalized returning service members were
    assisted through this program at Walter Reed, Bethesda, Eisenhower,
    Brooke, and Madigan. Since March 2003, each claim from a seriously
    disabled OEF/OIF veteran has been case managed for seamless and
    expeditious processing.
        Web Page.--As part of the Seamless Transition effort, VBA created a
    new web page for OEF/OIF, directly accessible from the VA homepage.
    Information specific to Reserve/Guard members who were activated is
    included, as well as links to other Federal benefits of interest to
    returning service members. The web page has been accessed over 340,000
    times since its activation in December 2003.
        Benefits Delivery at Discharge (BDD).--VA's BDD program operates in
    concert with the military services outreach program. Under BDD, service
    members can apply for disability compensation within 180 days before
    discharge. The required physical examinations are conducted and service
    medical records are reviewed prior to discharge. The goal is to
    adjudicate claims within 30 days following discharge. Upon receipt of
    the claimant's DD Form 214 (Report of Release from Active Military
    Service), benefits are immediately authorized so that the recently
    separated veteran can receive his/her first disability check the month
    following the month of discharge or shortly thereafter. Currently, 141
    military installations worldwide participate in this program, including
    two sites in Germany and three in Korea. Approximately 26,000 BDD
    claims were finalized in fiscal year 2003; 40,000 in fiscal year 2004;
    and 12,000 in fiscal year 2005 to date.

    Recently-Separated Veterans
        Veterans Assistance at Discharge System (VADS).--All separating and
    retiring service members (including Reserve/Guard members) receive a
    ``Welcome Home Package'' that includes a letter from the Secretary, a
    copy of VA Pamphlet 21-00-1, A Summary of VA Benefits, and VA Form 21-
    0501, Veterans Benefits Timetable, through VADS. Similar information is
    again mailed with a 6-month follow-up letter.
        Secretary's Outreach Letter to Returning Service Members.--Outreach
    letters from the Secretary of Veterans Affairs have been sent to
    approximately 240,000 returning service members who have separated/
    retired from active duty. Enclosed with the letters are copies of VA
    Pamphlet 21-00-1, A Summary of VA Benefits, and IB 10-164, A Summary of
    VA Benefits for National Guard and Reserve Personnel.
        Question. It is imperative for the Department of Defense and the
    Veterans Administration to work closely to ensure that troops returning
    from Iraq and Afghanistan receive the benefits and assistance to which
    they are entitled.
        How do the VA and Department of Defense coordinate information on
    returning troops? Is the VA getting timely and accurate information
    from the Department of Defense on returning troops? In what manner is
    information on returning troops transmitted to the VA from DOD?
        Answer. VA's Office of the General Counsel continues to negotiate
    with DOD to obtain the complete range of returning service member data
    VA needs for identification, tracking, and statistical/reporting
    purposes. A formal Memorandum of Agreement (MOA) between VA and DOD is
    still pending.
        However, a preliminary agreement has been reached that will allow
    VA to receive a flow of basic data from DOD on a regular basis, thus
    facilitating a seamless transition of seriously disabled service
    members into the VA system. As part of this agreement, VA will begin
    receiving data on those disabled service members who are entering the
    Physical Evaluation Board process.
        Question. What is VA doing to reach out to reservists and national
    guardsmen that were activated and deployed who are now returning home
    and are entitled to benefits?
        Answer. See the response above to the question concerning outreach
    to all of our returning troops from Iraq and Afghanistan. Outreach to
    reservists and National Guard members is addressed in that response.

                               COLORECTAL CANCER

        Question. Colorectal cancer is the second leading cause of cancer
    deaths in the United States, yet survival rates are greater than 90
    percent among those whose cancer is detected early.
        Roughly, what percentage of patients who receive their health care
    at a Veterans Administration facility undergoes routine screening for
    colon cancer?
        Answer. Screening for colorectal cancer in the VA has increased
    significantly. In fiscal year 2004, 74 percent of the established
    veterans (those who received care from VA in the past 12 months)
    requiring colorectal screening received it. The percentage of veterans
    requiring colorectal screening has been increasing. In fiscal year
    1996, the percentage was 34 percent; in fiscal year 2001, 60 percent;
    in fiscal year 2002, 64 percent; and in fiscal year 2003, 67 percent.
        Question. Many patients resist colon cancer screening tests due to
    the anticipated discomfort and inconvenience. On the other hand, those
    who choose to be screened by colonoscopy--the most accurate of the
    current modalities--must often wait months for access to a surgical
    suite and trained gastroenterologist. On average, how long must
    veterans wait for a screening colonoscopy at veterans' hospitals and
    clinics?
        Answer. Diagnostic colonoscopies (for patients with symptoms or
    positive findings) are scheduled as soon as possible with an average
    wait time of 32 days. Screening colonoscopies (for asymptomatic
    patients) are scheduled for the next available appointment. VA does not
    measure specifically for screening colonoscopies, but we are providing
    the following waiting time information for diagnostic colonoscopies and
    GI clinics (which includes upper endoscopies and colonoscopies).
        VHA has completed 20,186 diagnostic colonoscopies for the first 4
    months of fiscal year 2005 with an average wait time from the patient's
    desired appointment date (from the date appointment created if a new
    patient) of 32 days. Half the appointments were completed within 17
    days (median wait time was 17 days).
        VHA completed 55,933 appointments for the GI Endoscopy Clinic for
    the first 4 months of fiscal year 2005. The average wait time from the
    patient's desired appointment date (or the date the appointment created
    if a new patient) was 31 days. Half were completed within 7 days
    (median wait time was 7 days).
        Question. In the fiscal year 2004 Omnibus Appropriation, Congress
    urged the VA to pursue aggressively new technologies available for
    diagnosing colorectal cancer that are less invasive, less expensive and
    provide equal or better evaluations than older methods. What has the
    Administration done in response?
        Answer. VA is committed to improving the colorectal screening
    methods and overall percentage of screened veterans. In general, VA
    follows the evidence-based review of the U.S. Preventive Services Task
    Force (USPSTF) in screening for colon cancer, which is found online at
    http://www.ahrq.gov/clinic/uspstf/uspscolo.htm. As noted in their
    conclusion, ``It is unclear whether the increased accuracy of
    colonoscopy compared with alternative screening methods (for example,
    the identification of lesions that FOBT [fecal occult blood test] and
    flexible sigmoidoscopy would not detect) offsets the procedure's
    additional complications, inconvenience, and costs.'' However, the Task
    Force also found insufficient evidence that newer screening
    technologies (for example, computed tomographic colography) are
    effective in improving health outcomes. VA is still looking for
    evidence to show benefit of the newer technologies and works closely
    with USPSTF.
        VA offers screening for colon cancer using all recognized effective
    modalities. If a patient experiences symptoms or has positive findings
    on a screening by any other modality than colonoscopy, then a
    diagnostic colonoscopy is scheduled.
                                     ______

                   Questions Submitted by Senator Tim Johnson

                              MEDICAL HEALTH CARE

        Question. Recently, I introduced the Assured Funding for Veterans
    Health Care Act (S. 331). This bill would ensure adequate veterans
    health care funding is available by making VA medical care mandatory
    spending. This legislation has been endorsed by all of the leading
    veterans organizations.
        Do you support this legislation, and if not, why?
        Answer. An analysis of your proposed legislation would need to be
    made in light of the President's fiscal year 2006 budget submission and
    overall guidance on the budget.
        That said, however, VA has not supported similar legislation
    introduced in previous Congresses. While mandatory funding may appear
    to be an interesting approach to provide resources to America's
    veterans, VA has some serious concerns about its applicability to a
    very complex, highly dynamic and sophisticated health care delivery
    system such as the VA. A mandatory funding approach could inhibit VA's
    ability to appropriately react to rapid advances in medical science and
    technology and the development of new drugs and equipment have
    dramatically changed treatment modalities and the manner in which
    health care is delivered over the last decade. It could also fail to
    keep up with the demographic or health status changes among veterans
    and possibly create a false impression that VA would have full funding
    to enroll all veterans. Therefore, a mandatory funding system based
    upon static or untimely fixed indices may not be the best way to ensure
    that adequate resources are available to maintain the high quality of
    care that VA has become renowned for to care for our Nation's veterans.
        Former VA Secretary Principi testified that the VA needs at least a
    13 percent-14 percent increase in medical funding each year just to
    maintain current health care services for veterans. The Bush
    Administration's fiscal year 2006 budget request for VA medical care
    does not include such an increase in funding.
        Question. If the Administration's proposed VA health care funding
    levels were enacted would there be a decrease in any veterans health
    care services or was Secretary Principi incorrect in his analysis?
        Answer. The Veterans Health Administration has received record
    budget increases over the last 4 years. With this budget proposal, the
    President, working in partnership with Congress, will have increased
    health care funding for veterans by more than 47 percent since fiscal
    year 2001.
        In fiscal year 2006, VA plans to operate within the level of the
    President's Budget request of $30.7 billion (including $750 million for
    construction and $2.6 billion for collections) for the medical care
    program, an increase of 2.5 percent over the enacted level of fiscal
    year 2005. With this funding level, VA will be able to treat more than
    5.2 million patients and VA will focus its health care resources on
    veterans with service-connected disabled conditions, those with lower
    incomes, and veterans needing our specialized services. In 2006, nearly
    80 percent of veteran patients are expected to be high priority--those
    veterans who count on VA the most.
        The President's Task Force to Improve Health Care Delivery for Our
    Nation's Veterans--a 15-member panel that was assembled to study the
    health care needs of our Nation's veterans--released their
    recommendations in a report on May 28, 2003. The report stated clearly
    that the most pressing problem facing the VA health system is that
    funding is not keeping pace with the need for care. While the panel
    encouraged greater cooperation between the VA and the Department of
    Defense's health care system, they recognized this would not address
    the fundamental problem. Instead, the panel recommended two solutions
    to the VA's funding problems: create an independent board which will
    set the level of VA health care spending each year, or establish a
    formula and provide a mandatory amount of funding for VA medical care.
        Question. Do you plan to endorse or act on either of these
    recommendations from the President's Task Force to Improve Health Care
    Delivery for Our Nation's Veterans?
        Answer. Thank you for your question regarding the endorsement of
    mandatory health care funding for the Department of Veterans Affairs.
    We are most appreciative of your interest and concern to ensure that
    sufficient resources are available to provide high-quality health care
    to our Nation's veterans.
        The discretionary legislative process currently in place has
    provided for substantial increases for the Department of Veterans
    Affairs health care budget over the past several years, nearly a 47
    percent increase since 2001.
        While mandatory funding may appear to be an interesting approach to
    provide resources to America's veterans, VA has some serious concerns
    about its applicability to a very complex, highly dynamic and
    sophisticated health care delivery system such as the VA. A mandatory
    funding approach could inhibit VA's ability to appropriately react to
    rapid advances in medical science and technology and the development of
    new drugs and equipment have dramatically changed treatment modalities
    and the manner in which health care is delivered over the last decade.
    It could also fail to keep up with the demographic or health status
    changes among veterans and possibly create a false impression that VA
    would have full funding to enroll all veterans. Therefore, a mandatory
    funding system based upon static or untimely fixed indices may not be
    the best way to ensure that adequate resources are available to
    maintain the high quality of care that VA has become renowned for to
    care for our Nation's veterans.
        Since 2001 VA has been utilizing a professional actuarial model as
    a basis for the formulation of the budget. These actuarial forecasts
    also have been integrated into the VHA's capital and strategic planning
    processes. This demand model has contributed significantly to the
    achievement of VA's strategic goals and performance measures to provide
    enrolled veterans with access to timely, quality care. This has allowed
    decision makers to ensure that resources are available to meet the
    expected demand or develop policies to address any gap between the
    expected demand and available resources. This professional,
    businesslike approach to forecasting is similar to that employed by
    many large private-sector organizations such as major insurance
    corporations throughout our country. The model utilized is highly
    sophisticated and is capable of predicting patient utilization,
    reliance, morbidity, etc. We continue to revise and update the model in
    order to assure that future projections will be as accurate as
    possible.
        VA therefore strongly believes that the utilization of a highly
    professional, scientific, actuarial model is a much more professional,
    effective, and businesslike approach for budget formulation and
    forecasting than those like mandatory funding.
                                     ______

                Questions Submitted by Senator Mary L. Landrieu

        Question. In May 2001, President George W. Bush signed Executive
    Order 13214 creating the President's Task Force to Improve Health Care
    Delivery for Our Nation's Veterans. The PTF Task Force. This task force
    was charged to identify ways to improve health care delivery to VA and
    Department of Defense beneficiaries. One important recommendation of
    this task force was recently addressed in a letter sent to the VA
    Secretary and to Defense Secretary Rumsfeld. This recommendation
    directed the VA to develop electronic medical records that are
    interoperable and bi-directional, allowing for a two-way electronic
    exchange of health information and occupational and environment
    exposure data. These electronic medical records should also include an
    easily transferable electronic DD214 forwarded from the DOD to the VA.
    This would allow the VA to expedite the claims process and give the
    service member faster access to health care and benefits.
        What progress has been made towards accomplishing this task which
    is necessary in order to ensure that servicemen and women have a
    seamless transition from military to civilian life?
        Answer. The Defense Personnel Records Image Retrieval System
    (DPRIS) is currently operational between the Department of Veterans
    Affairs, Veterans Benefits Administration (over 3,000 users) and the
    Official Military Personnel File systems of the Army, Navy, and Marine
    Corps. DPRIS connects to the VA Personnel Information Exchange System
    (PIES) and allows VA users to electronically request and receive
    official military personnel documentation. The interface with the Air
    Force will be completed in June 2005, and the VA will be able to
    retrieve imaged copies of military personnel records from the Air Force
    by September 2005. All of these systems contain the DD214 and many
    additional military personnel documents that VA uses. The most commonly
    requested form is the DD214, and although the performance parameter for
    DPRIS is to return the requested documents to VA within 48 hours, it is
    currently operating in near real time. In addition to the interagency
    collaboration on DPRIS, DOD and VA are also collaborating on VA access
    to military personnel information that will be stored as data in the
    Defense Integrated Military Human Resources System (DIMHRS). VA
    requirements for military information have been an integral and on-
    going part of the requirements collection for DIMHRS, and the two
    departments are now moving into the technical integration phase which
    will determine the most efficient and expeditious way for VA to access
    information in DIMHRS when it comes on line in 2006. The electronic
    exchange of DD214 information will be fully implemented with DIMHRS.
        Question. According to a New England Journal of Medicine study
    published on July 1, 2004, dealing with Mental Health Problems and
    Barriers to Care with respect to Service Members Returning From Combat
    Duty in Iraq and Afghanistan, 82 percent of veterans acknowledged a
    need for mental health treatment, however only 24 percent reported ever
    receiving any mental health treatment within 1 year after returning
    from combat. Among the concerns veterans reported after returning from
    combat, were depression, anxiety, post traumatic stress disorder and
    almost one third reported the misuse of alcohol. With thousands of
    service members returning from Iraq and Afghanistan this year, these
    numbers will increase significantly. As you know, often times symptoms
    of post traumatic stress do not manifest themselves for months or even
    years after returning from combat.
        Given the importance of mental health issues and the impact that
    these concerns will have on not only the service member's entire
    quality of life, as well as the quality of life of his or her family
    and community, what programs has the VA in place at present to deal
    with these matters and what plans do you have to deal with the
    increased numbers who will require this type of health care?
        Answer. Meeting the needs of our returning veterans and their
    families is among VA's highest priorities. VA has indeed anticipated
    and prepared for the increased numbers of those requiring mental health
    services. VA's approach toward the returning troops and their families
    emphasizes health promotion and preventive care principles. This
    approach is designed to identify and resolve problems in readjustment
    to civilian life, before they progress to problems requiring more
    intensive clinical interaction. For those that require clinical
    interaction, VA provides state-of-the-art psychotherapy and
    psychopharmacology treatments.
        Based on VA's experience and research we do not expect that a great
    majority of Operation Enduring Freedom and Operation Iraqi Freedom
    (OEF/OIF) veterans will suffer long-term consequences of their war zone
    experience. However, many likely will have some short-term reactions to
    the horrors of war. Of those who do develop mental/emotional problems,
    PTSD will not be the only problem to be addressed. VA provides
    comprehensive care for veterans with mental disorders through a
    continuum of services designed to meet patients' changing needs.
        Major depression and substance abuse are two problems that can be
    anticipated, and these disorders carry with them significant risk for
    dangerous behaviors such as suicide and family violence. VA provides
    care through 144 specialized PTSD programs throughout the country along
    with 206 (soon to be 207) Readjustment Counseling Centers (RCS), often
    called Vet Centers. In addition, Outpatient Clinical PTSD Teams,
    Specialized Inpatient PTSD Programs, and Residential Treatment Programs
    are located across the Nation. There are PTSD programs in all States.
    VA's ongoing PTSD program evaluation indicates improvements in PTSD
    symptoms and functioning in patients treated by VA for PTSD. In fiscal
    year 2004, VA spent more than $3 billion on the provision of treatment
    services (medical and psychiatric) to veterans with a mental illness.
        The tasks for these teams are those of outreach, health promotion,
    consultation, and liaison. The working title for these programs is:
    Returning Veterans Outreach, Education and Care programs and there will
    be at least one program in every Veterans Integrated Service Network.
    VA's National Center for PTSD is creating an educational program
    entitled ``PTSD 101'' specifically for clinicians who will be hired
    into the new PTSD programs. There will be basic and advanced care
    modules. Linked to the concepts of the PTSD Clinical Practice Guideline
    and the Iraq Clinician War Guide, it will ensure the provision of the
    latest evidence-based care to veterans with PTSD and associated mental
    disorders.
        Analysis of DOD data as of December 2004 shows that 244,054 troops
    had returned from Iraq, with 20 percent (48,733) receiving care in a VA
    medical center. Of those returned troops, 12,422 had a mental health
    diagnosis: 4,783 were previously diagnosed with PTSD, and 3,500 were
    diagnosed with a depressive disorder. An additional 2,082 veterans were
    diagnosed with PTSD at Vet Centers.
        Readjustment Counseling Service takes the lead in providing
    outreach and counseling services through the 206 (soon to be 207)
    community-based centers throughout the United States. Fifty additional
    Global War on Terrorism counselors have been added to these centers to
    meet this need. In addition the Secretary has assigned authority to RCS
    to deliver bereavement counseling to those in need.
        To position VA for future needs, we have allocated $100 million in
    fiscal year 2005 to implement initiatives contained in the Department's
    Mental Health Strategic Plan. The President's fiscal year 2006 budget
    submission proposes an additional $100 million for mental health
    initiatives in fiscal year 2006. These initiatives will benefit all
    veterans receiving mental health care from VA and include OEF/OIF
    outreach programs designed to provide preventive health services that
    should, in many instances, identify problems and address them before
    they require more extensive clinical intervention. These enhancements
    will also address increased clinical needs of returning veterans and
    existing veterans who come to VA for PTSD care.
        Question. A core mission of the Department of Veterans Affairs is
    the provision of benefits to relieve the economic effects of disability
    upon veterans and their families. For those benefits to effectively
    fulfill their intended purpose the VA must process and adjudicate
    claims in a timely and accurate fashion. Rather than making headway and
    overcoming the chronic claims backlog and consequent protracted delays
    in claims disposition, the VA has lost ground to the problem, with the
    backlog of pending claims growing substantially larger. Historically,
    many underlying causes acted in concert to bring on this intractable
    problem. These dynamics acting in concert have been thoroughly detailed
    in several studies into the problem. While the problem has been
    exacerbated by lack of appropriate and decisive action, most of the
    causes can be directly or indirectly associated with inadequate
    resources.
        What steps does the Veterans Administration plan to take by virtue
    of this recommended budget in order to improve the quality,
    proficiency, and efficiency within the Veterans Administration with
    respect to claims processing and adjudication?
        Answer. The focus of the 2006 budget is to continue progress, in
    support of the President's initiative, to improve the timeliness and
    accuracy of claims processing. Recipients of compensation and pension
    benefits are projected to increase from 2.62 million in 2001 to 3.02
    million in 2006, a 15.3 percent increase. The projected increase is due
    to a number of factors, including the current record levels of DOD
    active duty end strength resulting from the large number of activated
    reserve units.
      --We continue to receive increasing numbers of claims. Between 2000
            and 2004, the number of disability claims received annually
            rose from 674,000 to 771,000, or more than 14 percent. This
            budget conservatively estimates a 3 percent increase for 2005
            and another 3 percent for 2006 in claims receipts. This
            increase is due to both the high active duty levels mentioned
            above, as well as an increase in the number of reopened claims
            due to various changes, including the addition of
            cardiovascular disease and residuals of stroke to the
            presumptive list for former Prisoners of War.
      --To address projected workload increases, this budget continues to
            ensure a sufficient workforce in our compensation and pension
            programs to meet our targets. The FTE in the compensation and
            pension programs will increase by 128 in 2006.
        This budget also continues VBA's goal to improve organizational
    designs and information technology investments to process claims as
    efficiently and accurately as possible. For example:
      --In 2005 VBA will begin the consolidation of the disability
            determination aspects of the Benefits Delivery at Discharge
            Program into two rating activities located in Salt Lake City
            and Winston-Salem.
      --In 2006 VBA will complete implementation of the Cooperative
            Separation Process/Examination initiative at the local level.
            This is a joint VA and DOD initiative that streamlines the
            military discharge process for separating servicemembers with
            disabilities.
      --Funds are provided to continue reorganizing our field financial
            functions to reduce overhead and realign critical resources to
            our business processes directly serving veterans.
      --$4.4 million is provided to begin implementation of the Vocational
            Rehabilitation & Employment Task Force recommendations to
            establish self-service job resource labs at each regional
            office to aid VR&E staff and veterans in comprehensive analyses
            of employment opportunities.
      --Over $15 million has been allocated to support our highest priority
            IT initiative--VETSNET--and continue efforts in C&P, Education,
            and VR&E to move off the existing Benefits Delivery Network to
            the new corporate environment. VETSNET, when fully deployed,
            will greatly expand the information available to decision
            makers, reduce the number of times data must be entered both
            increasing efficiency and insuring that the same data is
            available throughout the Department.
        In addition, the 2006 budget submission will enable VA to continue
    its efforts in skill certification. Skill certification is a core
    initiative of the Department to insure that claims processors in
    regional offices have tested and validated competencies in the
    essential aspects of their positions. We believe that skill
    certification directly addresses quality and proficiency.
        VA will also continue its Benefit Delivery at Discharge (BDD)
    program. That program greatly simplifies the claims process and
    significantly reduces the amount of time required to process a claim.
        Question. There are 119 State Veterans Homes in 48 States and
    Puerto Rico. For more than 100 years the Federal Government has
    provided support for our State Veteran's Homes in partnership with
    State governments. The Federal Department of Veteran's Affairs budget
    for fiscal year 2006 would change the eligibility for Federal support
    excluding for the first time whole priority groups of deserving
    veterans. As a result, up to 80 percent of veterans in many States may
    no longer qualify for partial Federal support through per diem
    payments. Budget assumptions reduce the VA Per Diem grant by $293
    million. The budget would also place a moratorium on Federal
    construction grants for renovations and new construction of State
    Veterans Homes. After decades of partnership with the States--during
    which State taxpayers across the country have contributed millions of
    dollars to build and maintain the State Veterans Homes--the President's
    budget reneges on this commitment to our State homes, State taxpayers,
    and worst of all, our honored veterans. The impact of the proposal
    would be devastating for the residents of the State Veterans Homes. Of
    veterans currently residing in the Homes, approximately 20 percent
    would continue to receive the Federal per diem payments.
        What suggestions does the VA have for veterans who cannot afford to
    pick up these additional payments as a result of the per diem change
    and what plan do you have for Louisiana Veterans Homes which will be
    unable to meet their operating costs as a result of this massive blow?
        Answer. State Veterans Homes are owned, operated, and financed by
    the States. VA provides limited financial assistance to the States in
    the form of per diem grants for nursing home, hospital, domiciliary,
    and adult day healthcare. Only the nursing home per diem is affected by
    the fiscal year 2006 budget proposal. The cost of care in State
    Veterans Homes varies from State to State, as does the amount of
    assistance provided to the Homes by the State. Currently, costs not
    covered by the VA per diem payments are covered from various sources,
    including the veterans themselves and State and Federal programs such
    as Medicare and Medicaid. VA's proposal could increase the share of
    costs borne by the State, depending upon the State's own policies for
    coverage of the costs of State Home care. State Homes will continue
    operations to the extent that individual States discharge their fiscal
    responsibility for the operation and management of the Homes. VA does
    not have information on the plans of individual States to respond to
    the change in VA policy.
                                     ______

                 Questions Submitted by Senator Robert C. Byrd

        Question. According to the Congressional Research Service, the 2003
    decision by the Administration to suspend health care enrollments for
    the lowest priority veterans called Category 8 veterans will affect
    522,000 veterans by the end of the current fiscal year.
        Secretary Nicholson, how many Category 8 veterans in West Virginia
    are no longer eligible to enroll in the VA health care as a result of
    the 2003 decision?
        Answer. As of the end of fiscal year 2004, VA estimates there were
    78,688 veterans in West Virginia who were Priority 8 of which 24,649
    were enrolled. VA projects there were 54,039 Priority 8 veterans in
    West Virginia who were not eligible to enroll with VA for health care.
        Question. If this policy continues, as your budget proposes, how
    many Category 8 veterans in West Virginia will be affected in fiscal
    year 2006 and beyond? How many veterans will be affected nationally?
        Answer. VA projects there are 9,818 Priority 8 enrollees residing
    in West Virginia who will pay the enrollment fee in fiscal year 2006
    and another 8,789 who will choose not to pay. At the national level,
    642,772 Priority 8 enrollees would pay the enrollment fee and 579,929
    would not. These new collections will allow VA to continue to refocus
    resources on veterans that fall under VA's core medical care mission
    (those with service-related disabilities, lower incomes, and special
    health needs). The fees are more closely aligned with other public and
    private health plans.

                PROPOSED BECKLEY VA MEDICAL CENTER NURSING HOME

        Question. Mr. Secretary, I made your predecessors acutely aware of
    my very strong support for the construction of the proposed Beckley VA
    Medical Center Nursing Home, and I want to take this opportunity to
    familiarize you of my interest in this project, as well. The nursing
    home was authorized by the Veterans Programs Enhancement Act of 2000,
    with the sponsorship of Senator John D. Rockefeller, IV. The project
    was originally authorized at $9.5 million. However, after further
    consultation with VA Headquarters officials, the estimates were
    reformulated, with a new total cost of approximately $18 million for a
    120-bed, 71,300 gross-square foot facility.
        I have been supportive of this project since its inception. To aid
    in its development, I added $1 million to the fiscal year 2001 VA-HUD
    Appropriations bill for the design of such a nursing home on thirteen
    acres of available space owned by the Beckley VA Medical Center, a site
    for which I secured $100,000 several years ago in anticipation of
    increased demand for nursing home care in Southern West Virginia.
    Further, I have included language in the Senate reports accompanying
    the fiscal year 2002, 2003, 2004, and 2005 VA-HUD Appropriations bills
    to encourage that funds for the project be included in subsequent
    Administration budgets.
        I understand that the project has undergone the Capital Asset
    Realignment for Enhanced Services (CARES) review process and that it
    has been included in the February 2005 VA Five-Year Capital Plan, 2005-
    2010, which lists the VA's highest priority major medical facility
    construction requirements over the next 5 years. While I am pleased
    that the proposed nursing home is on this list, I am disappointed that
    it is ranked #46 (out of 48 projects).
        Mr. Secretary, is the VA adhering to its capital investment
    methodology by funding construction projects in priority order? Have
    there been any exceptions made? What are they?
        Answer. The Department has adhered to the capital investment
    methodology when funding CARES projects. VA has only allowed projects
    to be funded out of order in extremely limited situations, based upon
    funding allocations, as described below.
        The only exception being:
      --To Allow for Maximizing of the Utilization of Major Construction
            Funds.--In fiscal year 2005 #29 San Diego, CA, $48.3 million
            was funded prior to #28 Dallas, TX. Clinical expansion at San
            Diego was funded since it was less expensive and within VA's
            funding allowance. This occurred again in fiscal year 2006 when
            the design for #6 project in Fayetteville, AR, was funded prior
            to other higher ranking projects because of the availability of
            funding.
        Question. At the current level of funding and the current rank of
    the Beckley VAMC Nursing Home, when do you anticipate that funds will
    be included in the President's Budget for this project? What can be
    done to move Beckley up the list?
        Answer. When Beckley will be included in the President's budget
    cannot be determined at this time as new projects are added (and some
    may drop out) to the review process each year. For example, for fiscal
    year 2006 two additional projects were reviewed as compared to the
    previous year. Existing projects which have not received CARES funding
    and new projects are rescored each year. Split funded projects that
    have received previous CARES funds (because of their higher score)
    retain their ranking.
        Based on the current capital decision criteria, it will be
    difficult for a project like Beckley to compete with other medical
    projects that clearly provide more access to care, or have a life-
    safety component (such as seismic) and/or provide for special
    disability services (spinal cord injury). How well a project addresses
    these criteria leads to an improved score.
        Question. Will the VA's highest major construction priorities be
    reevaulated in the future, providing an opportunity for the proposed
    Beckley Nursing Home to move up on the list?
        Answer. The Department rescores and ranks major projects every
    year. In the next few months, VA will again review and rank major
    construction projects. The highest ranking will be included in the
    congressional budget submission for fiscal year 2007.
        Question. Since the proposed Beckley Nursing Home has already been
    designed with funds that I added in fiscal year 2001 and the land is
    already owned by the VA, why can't this project be moved up on the list
    since it is ready to go to construction?
        Answer. The ranked list of projects are developed based on how well
    each project specifically addresses each of the main criteria and sub-
    criterion used for ranking CARES projects. It would not be equitable
    for the Department to move a project up this list simply based on the
    fact that it is designed. Our capital investment planning process and
    methodology involve a Department-wide approach for the use of capital
    funds and ensure all major investments are based upon sound economic
    principles and are fully linked to strategic planning, budget, and
    performance measures and targets. All CARES projects have been reviewed
    using a consistent set of evaluation criteria that address service
    delivery enhancements, safeguarding assets, support of special emphasis
    programs and services, capital portfolio goals, alignment with the
    President's Management Agenda, and financial priorities.
        Question. What level of funding for the VA's major construction
    program will be required annually and for what period of time to
    complete all of the projects listed in the VA's Five-Year Capital Plan,
    2005-2010?
        Answer. VA will need to reexamine its needs each year and determine
    the appropriate breakout between major and minor construction. The
    Department is unable to determine for what period of time it would take
    to complete all the projects listed in our Five-Year Capital Plan
    because the plan is a dynamic document which is updated each year based
    on competing new projects and priorities. In addition, VA is still
    developing cost estimates for the 70 outyear projects that are listed
    in the plan. Most of these conceptual projects require further
    refinement and development. To date, VA has committed $2.15 billion to
    implementing CARES plans, and additional funding will be requested in
    the outyears as specific capital plans are designed.
        Question. How many design awards has the Department made to date
    and for which projects? How many land purchases and for which projects?
    How many construction awards have been made and for which projects?
        Answer. There have been 16 design awards and 2 construction awards.
    There were no land purchases.
        Design Awards:
      --Atlanta, GA--Modernize Patient Wards--6/04
      --Chicago Westside, IL--Modernize Inpatient Space--11/02
      --Columbus, OH--Outpatient Clinic--8/04
      --Des Moines, IA--Extended Care Building--7/04
      --Durham, NC--Renovate Patient Wards--9/04
      --Las Vegas, NV--New Medical Facility--2/05
      --North Chicago, IL--Surgical Suite/Emergency--11/03
      --Pensacola, FL--Outpatient Clinic--1/04
      --Pittsburgh, PA--Medical Center Consolidation--12/04
      --San Antonio, TX--Ward Upgrades and Expansion--1/05
      --San Diego, CA--Seismic Corrections--1/05
      --San Francisco, CA--Seismic Corrections--12/03
      --Tampa, FL--SCI--10/04
      --Tampa, FL--Upgrade Electrical--10/04
      --Tucson, AZ--Mental Health Clinic--8/04
      --Wes Los Angeles, CA--Seismic Corrections--3/03
        Construction Awards:
      --Chicago Westside, IL--Modernize Inpatient Space--9/04
      --North Chicago, IL--Surgical Suite Emergency--9/04
      --Pensacola, FL--Outpatient Clinic--3/05
                                     ______

                  Questions Submitted by Senator Patty Murray

                           REAL HEALTH CARE INCREASE

        Question. This budget cites an increase of $522 million over last
    year; however, the number is much lower in reality--about $100 million.
    As is typical of this Administration, smoke and mirrors are used to
    deflect attention from the real number. Mr. Secretary, let's be
    perfectly clear about what the President is offering as an increase for
    VA health care. Your testimony cites a 2.5 percent increase for medical
    spending. The Majority staff on the Veterans' Affairs Committee
    provided a terrific chart which tries to make sense of the number and
    found that the requested increase is under $80 million. That's only $80
    million more for the nearly 7 million veterans who are enrolled in VA
    healthcare, for the 170 hospitals and hundreds of outpatient clinics,
    for medical inflation, and payroll increases for thousands of VA health
    care workers. Mr. Secretary, Washington state has nearly 700,000
    veterans and the population is growing. The CARES commission and my
    VISN director have told these veterans that two outreach clinics--in
    North Central Washington and Whatcom County--are on the way. But now
    they are on hold because of funding shortages.
        Simply put: help me to understand how an $80 million increase keeps
    our promise to veterans? Set aside the possible increased revenue from
    insurance companies and the spending associated with new veterans'
    fees.
        Answer. The President's 2006 request includes budgetary resources
    of $30.7 billion which will enable VA to provide the high-quality
    health care services that VA has become renowned for to more than 5.2
    million patients in fiscal year 2006.
        Question. The Budget proposes $30.7 billion (including collections)
    for medical care--a $0.8 billion (2.5 percent) increase over the 2005
    enacted level--to treat over 5.2 million patients. The Budget assumes
    that Congress will authorize new authority whereby veterans with higher
    incomes and no military disabilities will pay a $250 annual enrollment
    fee and higher drug co-pays (from $7 to $15). These will still be low
    and more aligned with other public and private health plans.
        What is the amount the President is requesting Congress appropriate
    for VA's hospitals and clinics?
        Answer. VA is requesting the following appropriations in fiscal
    year 2006:

                            [In thousand of dollars]
    ------------------------------------------------------------------------
                           Description                            Amount
    ------------------------------------------------------------------------
    Medical Services........................................      19,789,141
    Medical Care Collections Fund...........................       2,588,000
    Medical Administration..................................       4,439,124
    Medical Facilities......................................       3,888,469
                                                             ---------------
          Total 2006 Budget Request.........................      30,704,734
    ------------------------------------------------------------------------

        Question. And again to be clear: what is the amount associated with
    payroll increases and inflation? The amount associated with payroll and
    inflation for VA health care is more than $1 billion, so the
    President's request doesn't even cover inflation.
        Answer. The 2006 budget request reflects an increase of $858.9
    million for payroll increases and an increase of $539.7 million for
    inflation. These increases are offset by a decrease in requested
    appropriations of $1.1 billion from a comprehensive set of legislative
    and regulatory policy proposals and a decrease of $590,000 for
    management efficiencies.

           INCREASED COSTS FOR MIDDLE-INCOME VETS/BAN ON PRIORITY 8S

        Question. This budget includes an increase in the drug co-payment
    and an annual enrollment fee of $250 for Priority 7 and 8 veterans. The
    threshold for Priority 7 is only $25,163 a year, so veterans with
    incomes above this level would be required to pay these new fees. The
    budget also continues the ban on Priority 8 veterans, who in some
    regions of the country can be making as little as $28,000 a year and
    still not be eligible for VA care. The President's co-pay increase and
    new enrollment fee are designed to literally drive veterans out of the
    system. Two years ago, the President had no qualms about prohibiting
    enrollment for new ``middle-income'' veterans. That policy continues
    today. In fact, the testimony touts that the President's enrollment
    decision was the ``most effective'' vehicle to manage health care
    resources. This budget takes a different route, however. The goal is to
    make the cost of coming to VA for health care prohibitively expensive.
    Either way, I have to question the priorities of this Administration.
    As you know, my father returned home from World War II as a disabled
    veteran and during the Viet Nam War, I interned in the Seattle VA
    hospital. I know first-hand the scars and wounds that burden our
    veterans when they come back home.
        Mr. Secretary, our veterans--new and old--are some of our most
    important national security assets. Why not provide sufficient
    resources to care for all veterans?
        Is this care not part of the cost of past wars and the current
    conflicts in which we are engaged?
        Do you agree that VA healthcare for our soldiers returning home is
    a cost of war?
        Answer. In the Eligibility Reform legislation, Congress established
    a priority-based enrollment system and required the VA Secretary, every
    year, to assess veteran demand for VA health care and determine whether
    or not resources are available to provide timely, quality care to all
    enrollees. Using this legislatively mandated system for prioritizing
    care to veterans, VA suspended enrollment in Priority 8 and has
    proposed cost-sharing policies for Priority 7 and 8 enrollees as a
    means of balancing veteran demand for VA health care and available
    resources. These policies also refocus the VA health care system on
    those veterans who need us most. With the implementation of the
    enrollment fee for Priority 7 and 8 enrollees, VA expects that 71
    percent of all those using VA's health care system in 2006 will be
    veterans with service-connected medical conditions, special needs, and
    low incomes, up from 66 percent in 2004. The fees are more closely
    aligned with other public and private health plans.

                 REAL EFFECTS OF INCREASING OUT-OF-POCKET COSTS

        Question. The Administration's budget calls for increasing the drug
    co-payment from $7 to $15 per 30-day prescription for Priority 7 and 8
    veterans, as mentioned in an earlier question. It also would require
    these veterans to pay a $250 annual enrollment fee. At the bottom end
    of this spectrum, older veterans on fixed incomes could be making as
    little as $26,000 a year and still be subject to these increases in
    costs.
        I'd like to briefly discuss the potential impact of some of your
    proposals on veterans in the ``middle-income'' bracket. Some of these
    veterans could be making as little as $26,000 a year and still be
    subject to the increases in out-of-pocket costs that are built into
    your budget. And, for a veteran living on a fixed income in a city with
    a high cost of living, like Seattle, this is quite harsh. For example,
    an older veteran on an average of eight medications would see a cost
    increase per year of more than $1,000, just to continue getting his or
    her needed medications and continue enrollment in VA health care.
        How do you reconcile this with VA's mission of providing care to
    all who have served?
        Answer. In the Eligibility Reform legislation, Congress established
    a priority-based enrollment system and required the VA Secretary, every
    year, to assess veteran demand for VA health care and determine whether
    or not resources are available to provide timely, quality care to all
    enrollees. Using this legislatively mandated system for prioritizing
    care to veterans, VA has proposed cost-sharing policies for Priority 7
    and 8 enrollees as a means of balancing veteran demand for VA health
    care and available resources. These policies also refocus the VA health
    care system on those veterans who need us most. With the implementation
    of the enrollment fee for Priority 7 and 8 enrollees, VA expects that
    71 percent of all those using VA's health care system in 2006 will be
    veterans with service-connected medical conditions, special needs, and
    low incomes, up from 66 percent in 2004. The fees are more closely
    aligned with other public and private health plans.

                  STATE VETERANS HOMES: ON THE CHOPPING BLOCK

        Question. This budget contains proposals that will severely affect
    the State Veterans Home program. On the one side, the President will be
    seeking authority to restrict who can receive VA funding for care in
    these homes. While 50 percent of the veterans currently being cared for
    in Washington state's three facilities, the State Home Association has
    told me that in many States, 80 percent or more of State Home residents
    will be excluded by this change. According to the VA's average daily
    census for long-term care, there are estimated to be more than 19,000
    individuals in State nursing homes. This budget would slash that figure
    to about 7,000--a 62 percent decline in 1 year.
        Explain to me how you believe these homes will remain viable if
    these proposed policies are accepted?
        Answer. State Veterans Homes are owned, operated, and financed by
    the States. VA provides limited financial assistance to the States in
    the form of per diem grants for nursing home, hospital, domiciliary,
    and adult day healthcare. Only the nursing home per diem is affected by
    the fiscal year 2006 budget proposal. The cost of care in State
    Veterans Homes varies from State to State, as does the amount of
    assistance provided to the Homes by the State. Currently, costs not
    covered by the VA per diem payments are covered from various sources,
    including the veterans themselves and State and Federal programs such
    as Medicare and Medicaid. VA's proposal could increase the share of
    costs borne by the State, depending upon the State's own policies for
    coverage of the costs of State Home care. In addition, VA long-term
    care has shifted from inpatient to outpatient, similar to the private
    sector. This is more convenient to patients and their families, and is
    more cost-effective

                  VA NURSING HOMES: ALSO ON THE CHOPPING BLOCK

        Question. The Administration would also like to reduce VA's in-
    house capacity by almost 14,000 beds.
        What can you tell me about where VA is in meeting the non-
    institutional capacity called for by GAO, and relied upon so heavily in
    your budget, to make up for this loss?
        Answer. Non-institutional home and community-based care (HCBC) is
    part of the medical and extended care benefits package available to all
    enrolled veterans. We recognize that access to these services varies
    across VA's health care system. Last year, VA adopted a policy of
    increasing HCBC capacity by 18 percent annually to meet the full need
    of enrolled veterans by 2011, and established a performance measure for
    Network Directors to meet that goal. Capacity growth is targeted to
    those regions with the greatest current and projected need for services
    in order to reduce variability in access to care. Progress so far has
    been excellent. Capacity growth exceeded 20 percent in fiscal year 2004
    and is at 113 percent of target so far in fiscal year 2005. The number
    of individual programs is also expanding. For example, VA recently
    approved its 100th Home-Based Primary Care Program (up from 77 less
    than 5 years ago), and Care Coordination services have now been
    approved in all 21 VISNs.
        Care Coordination services involve the ongoing monitoring and
    assessment of selected patients using telehealth technologies to
    proactively enable prevention, investigation, and treatment that
    enhances the health of patients and prevents unnecessary and
    inappropriate utilization of resources. Care coordination provides
    patients a continuous connection to clinical services from the
    convenience of their place of residence.

                              SUBCOMMITTEE RECESS

        Senator Hutchison. So with that, we are in our second vote
    and I am going to close this meeting. I thank you very much for
    your patience and look forward to working with all of you. And
    thank you, Dr. Perlin, for your comments as well.
        [Whereupon, at 3:37 p.m., Tuesday, March 15, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

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

                                  ----------

                           WEDNESDAY, MARCH 16, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:08 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Kay Bailey Hutchison (chairman)
    presiding.
        Present: Senators Hutchison, Allard, and Feinstein.

                             DEPARTMENT OF DEFENSE

                             Department of the Army

    STATEMENT OF GEOFFREY G. PROSCH, PRINCIPAL DEPUTY
                ASSISTANT SECRETARY OF THE ARMY FOR
                INSTALLATIONS AND ENVIRONMENT
    ACCOMPANIED BY:
            MAJOR GENERAL GEOFFREY D. MILLER, ASSISTANT CHIEF OF STAFF,
                INSTALLATION MANAGEMENT
            MAJOR GENERAL WALTER F. PUDLOWSKI, SPECIAL ASSISTANT TO THE
                DIRECTOR, ARMY NATIONAL GUARD
            BRIGADIER GENERAL GARY M. PROFIT, DEPUTY CHIEF, ARMY RESERVE

               OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

        Senator Hutchison. I'll call this meeting order. I'm very
    pleased to be able to have our second hearing on military
    construction. Last week, we had the first of our hearings, and
    today we are doing Army and Air Force. I want to welcome all of
    you to the Committee. My Ranking Member will be here shortly,
    but I wanted to go ahead and start so we could stay on time.
        This is a dynamic year in military construction, and
    especially for the Army. Surely, the Army is doing more than
    probably we could ever have expected, doing modularity, global
    restationing and BRAC, all at the same time, as we are fighting
    the war in Iraq with heavy Army effort.
        There are many demands on the Army right now, and a tough
    budget environment, but it doesn't change the fact that every
    soldier who is reassigned, restationed, or realigned will need
    a place to eat, sleep, and train, and every family will need
    quality education and healthcare.
        Also, the experience of our military families throughout
    the processes of moving will directly affect morale, readiness,
    and retention of our men and women at a time when we must have
    retention.
        So with all of these moving pieces, it seems to me that the
    Army should be investing heavily in infrastructure in order to
    have adequate facilities in place for its soldiers and their
    families when they arrive at the new post. Yet this year's
    budget request is $1.48 billion, down 16 percent from last
    year's request, 25 percent from last year's enacted levels.
        I brought this up last week at the Defense Appropriations
    hearing, with both the Secretary and with General Schoomaker,
    so I do want everyone to know that I am concerned about the
    Army, the demands we're putting on the Army, and a lower
    military construction budget at the same time.
        Having said that, I do so support where the Army is putting
    its increases, and that is in the Guard and Reserve. They are
    going up 23 and 22 percent, respectively, over their 2005
    requests, and the Reserve request is 15 percent above enacted
    levels. That is, I think, a good thing. We have shortchanged
    Guard and Reserve facilities for many years. So, while we're
    not nearly where we need to be, I do support those increases.
    But I will ask you, as the representative of the Department,
    Mr. Prosch, to take back the message that I really believe we
    are shortchanging the Army in military construction.
        On the Air Force, you have a 61 percent increase over
    fiscal year 2005. And, while the Air Force is not facing quite
    the level of change as the Army in the coming year, it will be
    actively participating in BRAC, global restationing, and the
    global war on terror. So there will be infrastructure needs
    over the next few years as these changes play out.
        The Air Force has significantly boosted its family-housing
    budget request. It's up 18 percent from last year. And, as
    ardent a supporter as I am of housing privatization, I am
    pleased to know that with the budgetary cap on the program
    lifted, the Air Force is now really fully engaged in
    privatization. I am concerned that in our desire to meet the
    fiscal year 2007 goal of eliminating inadequate housing to all
    Services, that we also don't forgo responsible budgeting. I do
    think that the Committee, our Committee, needs to be kept
    apprised of the workings of the privatization, and, in cases
    where MILCON has been appropriated for certain projects that
    are now being converted to privatization, I think we need to be
    kept apprised of that and we need to have input when changes
    like that are made.
        With that, I'm going to turn to Senator Allard to see if he
    has an opening statement. And when Senator Feinstein comes, I
    will certainly recognize her.
        Senator Allard.

                       STATEMENT OF SENATOR WAYNE ALLARD

        Senator Allard. Thank you, Madam Chairman. I'd like to
    thank the panel for testifying today. And I'd like to thank
    you. I appreciate the opportunity to welcome our guests from
    both the Army and the Air Force here today.
        Too often, in Congress, we focus on our military's fighting
    units and forget that significant combat-power multipliers are
    Defense installations. If we have the best installations and
    facilities, it will make it that much easier for our soldiers,
    sailors, and the airmen and marines to focus on their mission
    of defending our Nation.
        I'm pleased to welcome our guests here from the Army today.
    I've been impressed by the proactive approach the Army has
    taken to address many of the pressing problems facing its
    military posts, facilities, and training ranges. By thinking
    ahead, I believe the Army is a couple of steps ahead of other
    services, addressing difficult problems, like encroachment and
    shrinking utility of our training ranges.
        And, Madam Chairman, I'll also say that we've got, there at
    Fort Carson--we have some privatization of the housing which
    seems to be working very well. And both Congressman Hefley and
    myself have been following it very closely.
        This praise does not mean the Army doesn't have problems.
    In particular, I am concerned about the redeployment of our
    troops stationed overseas to the continental United States. I
    support this redeployment, as it better addresses our global
    posture, but I am concerned the Army has not thought this
    through. I look forward to asking the witnesses some--from the
    Army some questions on this particular issue, if I'm here.
    Madam Chairman, I've got to leave in about 15 minutes or so.
        Also, we'll be hearing testimony from witnesses from the
    Air Force. And, Madam Chairman, I have serious concerns about
    the way the Air Force has handled the cleanup of one of
    Colorado's former Air Force bases that was closed during a
    prior BRAC round. Once we've gone through BRAC closure, I think
    the follow-up in carrying through your commitments afterwards
    is extremely important. And so, I'll be asking questions in
    regard to the Air Force's lack of effort, and some issues
    regarding a closure that we had in Colorado. I may not be able
    to ask them in person, but, if not, we'll maybe submit
    questions to the Committee. Or perhaps, we'll submit them to
    the Army, and perhaps--maybe they can submit them back to the
    Committee for a response.
        I look forward to working with all of you as we go through
    some difficult priorities setting here on the Committee. And I
    want to thank you, Madam Chairman, for giving me the time to
    say a few words.
        Senator Hutchison. Thank you, Senator Allard.
        We have our first panel today, Mr. Geoffrey Prosch, the
    Principal Deputy Assistant Secretary of the Army for
    Installations and Environment; Major General Geoffrey Miller,
    Assistant Chief of Staff of the Army for Installation
    Management; Major General Walter Pudlowski, Special Assistant
    to the Director of the Army National Guard; and Brigadier
    General Gary Profit, the Deputy Chief of the Army Reserve.
        Mr. Prosch, I'm going to ask you to make your statement,
    but I do want to say how pleased I am with your accessibility.
    I have called on you many times, and you have responded, and I
    appreciate that very, very much. It helps for a very strong
    working relationship.
        So if you--let me just see if my Ranking Member would like
    to make her opening statement now, or would you prefer to wait?
        Senator Feinstein. No statement, Madam Chairman, just to
    welcome everybody. I look forward to their presentations.
        Senator Hutchison. Senator Burns submitted a statement to
    be included in the hearing.
        [The statement follows:]

                   Prepared Statement of Senator Conrad Burns

        Thank you, Chairwoman Hutchison. Gentlemen, thank you for coming to
    brief our subcommittee this afternoon. Your service and work is
    critical to the development and maintenance of the facilities for our
    soldiers, sailors, airmen, and marines around the world. Since today,
    we are talking specifically about Air Force and Army military
    construction, I will restrict my remarks to those areas. I intend to
    honor our men and women serving and those who have made the ultimate
    sacrifice for our country by ensuring that our active, reserve, and
    national guard have the resources they need to support the current and
    future requirements with which they have been tasked.
        Our military personnel are based in dangerous areas all around the
    world. It speaks well of the character of our young men and women, who,
    despite these dangers, accept this duty and continue their voluntary
    service to our Nation. We must ensure that we provide the resources
    needed to maintain their installations both at home and overseas.
        I hold firm in my belief that replacing dangerous and outdated
    facilities improves morale for our military forces worldwide,
    contributing to better-trained, more enthusiastic service members who
    can complete the mission more effectively and safely. Investing in
    facilities to support the fielding, training, operations, and quality
    of life of our forces pays dividends. When I chaired this subcommittee
    years ago, I did just that in my State of Montana. Our Air Force and
    Guard facilities were ``vintage 1940'' buildings. Today Montana has
    state of the art facilities and it has made all the difference in the
    world for those men and women. So it is that I really feel our
    commitment to quality of life and modern facilities must not end with
    the active forces. We must continue to support essential infrastructure
    improvements for our National Guard forces, which are fighting
    alongside our active duty forces.
        Part of this quality of life includes physical fitness. It is clear
    that Air Force Chief of Staff, General Jumper, is making fitness a
    priority throughout the Air Force. I think this is a good thing. We are
    desperately in need of a new physical fitness center at Malmstrom Air
    Force Base (AFB), in Great Falls, Montana. Some of you may know that it
    can get a little chilly up in Montana during the year. . . . This,
    combined with the fact that Malmstrom AFB has the youngest average age
    of any Air Force base, has really accelerated the need for expansion of
    the existing facility. I hope you--Secretary Kuhn and Major General
    Fox--will work with me in finding a way to get this project
    accomplished as soon as possible.
        We have also had some problems with Air Force contractors over the
    years at Malmstrom AFB, on various family housing projects. It just
    shouldn't be something that our airmen have to worry about--sinking
    foundations, front steps separating from the rest of the house, etc.
    While most of this is currently in litigation, I do look appreciate
    your willingness to continue discussions on these issues with you,
    should further steps need to be taken.
        Mr. Prosch, I also note with interest a specific initiative the
    Army is undertaking as part of an overall improvement to its facilities
    posture. As we listen to your testimony today, I would like to hear
    more about the Army's ``Range and Training Land Strategy'' and hope we
    can discuss this further. Fort Harrison, in Helena, Montana, is a
    wonderful asset to not only the Montana National Guard, but the entire
    United States military. Various units from across the country love to
    come to Fort Harrison to train. I wonder if Fort Harrison could fit
    into this strategy somehow.
        You will continue to have my strong support in these areas, as we
    invest in training and quality of life measures. It is of utmost
    importance that we do what we can to maintain the proficiency,
    readiness, and morale of these soldiers and airmen, whom this Nation
    relies upon to protect freedom and our way of life.
        Again, I thank you for being here today and look forward to your
    testimony. Thank you, Chairwoman Hutchison.

        Senator Hutchison. Thank you.
        Mr. Prosch.
        Mr. Prosch. Thank you, ma'am.

                        STATEMENT OF GEOFFREY G. PROSCH

        Madam Chairman Hutchison, Ranking Member Feinstein, Senator
    Allard, I'm pleased to appear before you with my Army
    Installation partners, Major General Geoffrey Miller from the
    Active Army, Major General Walt Pudlowski from the Army
    National Guard, and Brigadier General Gary Profit from the Army
    Reserve.
        This is my fourth year to have this distinct honor to
    represent our great Army and to testify before Congress. It is
    wonderful to be here today with friends and Army supporters
    from this Committee. We look forward to the opportunities this
    Committee brings toward leveraging enhanced quality of life for
    our soldiers and families.
        We have provided a written statement for the record that
    provides details on our Army's fiscal year 2006 Military
    Construction budget. On behalf of the Army Installation
    Management team, I would like to comment briefly on the
    highlights of our program.
        We begin by expressing our great appreciation for the
    tremendous support that the Congress has provided to our
    soldiers and their families who are serving our country around
    the world. We are a Nation and an Army at war, and our soldiers
    would not be able to perform their missions so well without
    your support.
        We have submitted a military construction budget of $3.3
    billion that will fund our highest-priority active Army, Army
    National Guard, and Army Reserve facilities, along with our
    family housing requirements. This budget request supports our
    Army vision encompassing current readiness, transformation, and
    people.
        As we are fighting the global war on terrorism, we are
    simultaneously transforming to be a more relevant and ready
    Army. We are on a path with the transformation of installation
    management that will allow us to achieve these objectives. We
    currently have hundreds of thousands of soldiers mobilizing and
    demobilizing, deploying and redeploying. More troops are coming
    and going on our installations than in any era since World War
    II. Our soldiers and installations are on point for the Nation.
        And on a special note I would ask everyone here to keep our
    forward-deployed soldiers in your thoughts and prayers. New
    forces have rotated recently to Iraq. The 3rd Infantry Division
    and the 3rd Armored Cavalry Regiment have returned for their
    second tour of duty. The 42nd Infantry Division, Army National
    Guard, the Rainbow Division, has deployed. Now, they are over
    there. The enemy will test them early on. So keep them in your
    prayers.
        The Army recently identified key focus areas to channel our
    efforts to win the global war on terrorism and to increase the
    relevance and readiness of our Army. One of our focus areas is
    ``installations as flagships,'' which enhances the ability of
    our installations to project power and support families. Our
    installations support an expeditionary force, where soldiers
    train, mobilize, and deploy to fight and are sustained as they
    reach back for enhanced support. Soldiers and their families
    who live on and off the installation deserve the same quality
    of life as is afforded the society they are pledged to defend.
    Installations are a key ingredient to combat readiness and
    well-being.
        Our worldwide installations' structure is critically linked
    to Army transformation and the successful fielding of the
    modular force. Military construction is a critical tool to
    ensure that our installations remain relevant and ready.
        Our fiscal year 2006 Military Construction budget will
    provide the resources and facilities necessary for continued
    support of our mission. Let me summarize what this budget will
    provide for our Army: new barracks for 5,190 soldiers, adequate
    on-post housing for 5,800 Army families, increased MILCON
    funding for the Army National Guard and the Army Reserve over
    last year's request, new readiness centers for over 3,300 Army
    National Guard soldiers, new Reserve centers for over 2,700
    Army Reserve soldiers, a $292 million military construction
    investment in training readiness, and facilities support and
    improvements for our Stryker Brigades.
        With the sustained and balanced funding represented by this
    budget, our long-term strategies will be supported. With your
    help, we will continue to improve soldier and family quality of
    life, while remaining focused on our Army's transformation to
    the future force.

                               PREPARED STATEMENT

        In closing, Madam Chairman, we thank you for the
    opportunity to outline our program. As I have visited Army
    installations, I have witnessed progress that has been made,
    and we attribute much of this success directly to the
    longstanding support of this Committee and your able staff.
    With your continued assistance, our Army pledges to use fiscal
    year 2006 MILCON funding to remain responsive to our Nation's
    need.
        Thank you for the opportunity to appear before your
    Subcommittee and answer any questions you may have.
        [The statement follows:]

                    Prepared Statement of Geoffrey G. Prosch

                                  INTRODUCTION

        Madam Chairman and members of the subcommittee, it is a pleasure to
    appear before you to discuss our Army's Military Construction budget
    for fiscal year 2006. Our request includes initiatives and sustainment
    of programs of critical importance to our Army, the Congress, and the
    Global War on Terrorism, and we appreciate the opportunity to report on
    them to you. We would like to start by thanking you for your unwavering
    support to our Soldiers and their families who serve our Nation around
    the world. Their courage and sacrifices remain the foundation of our
    Army, and they would not be able to perform their global missions so
    successfully without your steadfast support.

                                    OVERVIEW

        Installations are the home of combat power--a critical component to
    the Nation's force capabilities. The Department of Defense and our Army
    are working to ensure that we deliver cost-effective, safe, and
    environmentally sound capabilities and capacities to support the
    national defense mission.
        Today, United States forces are engaged worldwide in a war against
    global terror. Operations Enduring Freedom and Iraqi Freedom clearly
    underscore the need for a joint, integrated military force ready to
    defeat all threats to United States interests. To meet the security
    challenges of the 21st Century, we require the right blend of people,
    weapons, and support systems. Regarding support systems, we need a
    global framework of Army installations, facilities, ranges, airfields
    and other critical assets that are properly distributed, efficient, and
    capable of ensuring that we can successfully carry out the roles,
    missions, and tasks that safeguard our security at home and overseas.
        The Army's installations framework is multi-purposed. It must
    sustain the regular forward presence of U.S forces as well as their
    emergency deployment in crisis, contingency, and combat. It must have
    the surge capacity to support the mobilization and demobilization of
    our Army reserve component forces. It must also focus 10 to 20 years
    into the future to develop technologically advanced, affordable, and
    effective joint systems and platforms and develop highly qualified and
    committed installation management personnel who will operate and
    maintain them. Our framework must provide a productive, safe, and
    efficient workplace and offer a decent quality of service and
    facilities for our Soldiers and their families (comparable to the
    American citizens off post they are pledged to defend).
        We recognize the enormity of the task to provide the right
    installations framework given the other competing funding programs. We
    are challenged to find the optimum management approach that balances
    the many purposes of our assets. For example, while our installations
    retain their primary military mission to organize, train and equip our
    forces, they also are home to rare species of plants and animals while
    experiencing encroachment from outside civilian communities. Our
    stewardship thus embraces the joint warfighting requirements of the
    Combatant Commanders with environmental management and stewardship of
    our Earth.

                      DEFENSE INSTALLATIONS STRATEGIC PLAN

        In August 2001, the Department of Defense issued the first-ever
    Defense Installations Posture Statement along with the initial Defense
    Facilities Strategic Plan. Those concepts and initiatives have guided
    the Department's programs and budgets and enabled substantial
    improvements in the management and sustainability of our installation
    assets. However, the attacks of September 11, 2001, and the ongoing
    Global War on Terrorism significantly altered our requirement for
    homeland security. The Department of Defense 2004 Installations
    Strategic Plan significantly expands the scope and depth of the initial
    Strategic Plan. The expanded scope reflects the integral relationship
    between natural and manmade assets on our installations. It advances
    the integration of installations and the environmental, safety, and
    occupational health activities to enhance overall support of the
    military mission.
        Our vision is to ensure installation assets and services are
    available when and where needed, with joint capabilities and capacities
    necessary to effectively and efficiently support DOD missions.
        Our mission is to provide, operate, and sustain, in a cost-
    effective and environmentally sound manner, the installation assets and
    services necessary to support our military forces--in both peace and
    war.
        Our goals include the following.
        Right Size and Place.--Locate, size, and configure installations
    and installation assets to meet the requirements of both today's and
    tomorrow's force structure.
        Right Quality.--Acquire and maintain joint Army installation assets
    to provide good, safe, and environmentally sound living and working
    places, suitable base services, and effective support for current and
    future missions.
        Right Safety and Security.--Protect Army installation assets from
    threats and unsafe conditions to reduce risk and liabilities.
        Right Resources.--Balance requirements and resources--money,
    people, and equipment--to optimize life-cycle investments and reduce
    budget turbulence.
        Right Tools and Metrics.--Improve portfolio management and planning
    by embracing best business practices, modern asset management
    techniques, and performance assessment metrics.

                                 THE WAY AHEAD

        Army installations are the home of U.S. combat power and are an
    inseparable element of the Nation's military readiness and wartime
    effectiveness. From our installations, we generate the combat power
    required today and develop the combat power that will be needed in the
    future. To operate installations effectively and efficiently, we must
    sustain, restore, and modernize all of our installation assets and
    services--all the natural and manmade assets associated with owning,
    managing, and operating an installation, including the facilities,
    people, and internal and external environments.
        Our plan is to deliver a framework of installations, facilities,
    ranges, and other critical assets that is properly distributed,
    efficient, and capable of ensuring that we can successfully carry out
    the roles, missions, and tasks that safeguard our security at home and
    overseas. We have made good progress in many areas, but much remains to
    be done. America's security depends upon installation assets that are
    available when and where needed and with the right capabilities to
    support current and future mission requirements. As the guardians of
    Army installations and environment, we embrace transformation as the
    only way to guarantee these capabilities are delivered--effectively and
    efficiently.

                          ARMY INSTALLATION STRATEGIES

        To improve our Army's facilities posture, we have undertaken
    specific initiatives to focus our resources on the most important
    areas--Barracks, Family Housing, Revitalization/Focused Facilities,
    Range and Training Land Strategy, and Current to Modular Force.
        Barracks Modernization Program.--Our Army is in the 12th year of
    its campaign to modernize barracks to provide 136,000 single enlisted
    permanent party Soldiers with quality living environments. The new
    complexes meet the Department of Defense ``1+1'' or equivalent standard
    by providing two-Soldier suites, increased personal privacy, larger
    rooms with walk-in closets, new furnishings, adequate parking,
    landscaping, and unit administrative offices separated from the
    barracks.
        Army Family Housing.--This year's budget continues our significant
    investment in our Soldiers and their families by supporting our goal to
    have contracts and funding in place to eliminate inadequate housing by
    fiscal year 2007 in the United States and by fiscal year 2008 overseas.
    For families living off-post, the budget for military personnel
    maintains the basic allowance for housing that eliminates out of pocket
    expenses.
        Revitalization/Focused Facilities.--Building on the successes of
    our housing and barracks programs, we are moving to improve the overall
    condition of Army infrastructure with the Focused Facility Strategy.
    The Installation Status Report is used to determine facilities quality
    ratings of C-1 to C-4 based on their ability to support mission
    requirements.

        We are a C-1 Army living and working in C-3 facilities. Our goal is
    to reach an overall Army average of C-2 quality by concentrating on
    seven types of C-3 and C-4 facilities. These focus facilities are
    general instruction buildings, Army National Guard Readiness Centers,
    Army Reserve Centers, tactical vehicle maintenance shops, training
    barracks, physical fitness centers, and chapels.
        Army Range and Training Land Strategy.--Ranges and training lands
    enable our Army to train and develop its full capabilities to ensure
    our forces are relevant and ready. Our Army Range and Training Land
    Strategy supports the Department of Defense's training transformation
    goals, Army transformation, and our Army's Sustainable Range Program.
    The Strategy identifies priorities for installations requiring
    resources to modernize ranges, mitigate encroachment, and acquire
    training land.
        Current to Modular Force.--The fiscal year 2006 budget includes
    projects to ensure that our ``training battlefields'' continue to meet
    the demands of force structure, weapons systems, and doctrinal
    requirements. As of fiscal year 2005, we have constructed or funded 80
    percent of the Military Construction requirements for the Stryker
    Brigade Combat Teams.
        Leveraging Resources.--Complementary to these budget strategies,
    the Army also seeks ways to leverage scarce resources and reduce our
    requirements for facilities and real property assets. Privatization
    initiatives such as Residential Communities Initiative (RCI), Utilities
    Privatization, and build-to-lease family housing in Europe and Korea
    represent high payoff programs which have substantially reduced our
    dependence on investment funding. We also benefit from agreements with
    Japan, Korea, and Germany where the Army receives host nation funded
    construction.
        In addition, Congress has provided valuable authorities to utilize
    the value of our non-excess inventory under the Enhanced Use Leasing
    program and to trade facilities in high cost areas for new facilities
    in other locations under the Real Property Exchange program. In both
    cases, we can capitalize on the value of our existing assets to reduce
    un-financed facilities requirements.
        Looking toward the immediate future, we are aggressively reviewing
    our construction standards and processes to align with industry
    innovations and best practices. In doing so, we hope to deliver more
    facilities capability at comparable costs and meet our requirements
    faster.

                             MILITARY CONSTRUCTION

        Our Army's fiscal year 2006 budget request includes $3.3 billion
    for Military Construction appropriations and associated new
    authorizations.

    ----------------------------------------------------------------------------------------------------------------
                                                                                    Authorization
                                                                  Authorization          of           Appropriation
                Military Construction Appropriation                  Request       Appropriations        Request
                                                                                       Request
    ----------------------------------------------------------------------------------------------------------------
    Miltiary Construction Army (MCA)..........................    $1,262,719,000    $1,479,841,000    $1,479,841,000
    Military Construction Army National Guard (MCNG)..........                NA       327,021,000       327,012,000
    Military Construction Army Reserve (MCAR).................                NA       106,077,000       106,077,000
    Army Family Housing (AFH).................................       549,636,000     1,362,629,000     1,362,629,000
                                                               -----------------------------------------------------
          Total...............................................     1,812,355,000     3,275,559,000     3,275,559,000
    ----------------------------------------------------------------------------------------------------------------

                       MILITARY CONSTRUCTION, ARMY (MCA)

        The Active Army fiscal year 2006 Military Construction request is
    $1,262,719,000 for authorization and $1,479,841,000 for authorization
    of appropriations and appropriation. As was the case last year, we have
    included only minimal, critical, overseas projects in this year's
    budget. These projects will provide the infrastructure necessary to
    ensure continued Soldier readiness and family well-being that is
    essential throughout any period of transition.
        People Projects.--The well-being of our Soldiers, civilians, and
    families is inextricably linked to our Army's readiness. We are
    requesting $759 million or 51 percent of our MCA budget for projects to
    improve well-being in significant ways.
        Our Army continues to modernize and construct barracks to provide
    enlisted single Soldiers with quality living environments. This year's
    budget includes 19 barracks projects to provide new or improved housing
    for 5,190 Soldiers. With the approval of $716 million for barracks in
    this budget, 85 percent of our requirement will be funded at the
    ``1+1'' or equivalent standard. We are making considerable progress at
    installations in the United States, but will only fund high-priority
    projects at enduring installations in Europe and Korea.
        We are requesting full authorization of $331 million for multi-
    phased barracks complexes, but requesting only $156 million in
    appropriations for these projects in fiscal year 2006. Our plan is to
    award each complex, subject to subsequent appropriations, as single
    contracts to gain cost efficiencies, expedite construction, and provide
    uniformity in building systems.
        We are also requesting the second increment of funding, $21 million
    for a Basic Combat Training Complex that was fully authorized last
    year. This Complex will house 1,200 basic trainees and provide company
    and battalion headquarters with classrooms and an exterior physical
    fitness training area. The fiscal year 2006 budget also includes a
    physical fitness center for $6.8 million and a child development center
    for $15.2 million.
        Current Readiness Projects.--Projects in our fiscal year 2006
    budget will enhance training and readiness by providing arrival/
    departure facilities, maintenance facilities, and the second phase of a
    library and learning center. We will also construct combined arms
    collective training facilities, shoot houses, an infantry platoon
    battle course, a qualification training range, a multipurpose squad
    course, a digital multipurpose training range, urban assault courses,
    and a modified record fire range. These facilities will provide our
    Soldiers realistic, state-of-the-art live fire training. We are
    requesting a total of $424 million for these high priority projects.
        Modular Force Projects.--Our budget supports transformation of the
    Army to a modern, strategically responsive force. Projects include a
    road upgrade, a tactical vehicle wash facility, a battle area complex,
    a modified urban assault course, and a vehicle maintenance facility.
    Our budget contains $115 million for these projects.
        Other Worldwide Support Programs.--The fiscal year 2006 MCA budget
    includes $141 million for planning and design of future projects. As
    executive agent, our Army also provides oversight of design and
    construction for projects funded by host nations. The fiscal year 2006
    budget requests $20 million for oversight of approximately $800 million
    of host nation funded construction in Japan, Korea, and Europe for all
    Services.
        The fiscal year 2006 budget also contains $20 million for
    unspecified minor construction to address unforeseen critical needs or
    emergent mission requirements that cannot wait for the normal
    programming cycle.

               MILITARY CONSTRUCTION, ARMY NATIONAL GUARD (MCNG)

        Our Army National Guard's fiscal year 2006 Military Construction
    request for $327,012,000 (for appropriation and authorization of
    appropriations) is focused on Current Readiness, Modular Force, and
    other worldwide and unspecified programs.
        Current Readiness Projects.--In fiscal year 2006, our Army National
    Guard has requested $71.6 million for six projects to support current
    readiness. These funds will provide the facilities our Soldiers require
    as they train, mobilize, and deploy. Included are one Readiness Center,
    two maintenance facilities, two training projects, and a training range
    environmental mitigation project.
        Modular Force Projects.--This year, our Army National Guard is
    requesting $201.7 million for 37 projects to transform to a Modular
    Force. There are 13 projects for our Army Division Redesign Study,
    three for Aviation Transformation to provide modernized aircraft and
    change unit structure, four for the Army Range and Training Land
    Strategy, and 17 for the Stryker Brigade Combat Team initiative.
        Other Worldwide Support Programs.--The fiscal year 2006 MCNG budget
    also contains $46.1 million for planning and design of future projects,
    along with $7.6 million for unspecified minor military construction to
    address unforeseen critical needs or emergent mission requirements that
    cannot wait for the normal programming cycle.

                   MILITARY CONSTRUCTION, ARMY RESERVE (MCAR)

        Our Army Reserve's fiscal year 2006 Military Construction request
    for $106,077,000 (for appropriation and authorization of
    appropriations) is for Current Readiness and other worldwide
    unspecified programs.
        Current Readiness Projects.--In fiscal year 2006, our Army Reserve
    will invest $56.4 million to construct four new Reserve Centers and the
    second phases of two other Reserve Centers; invest $15.4 million to
    construct the first phase of a three-phase noncommissioned officer
    academy; and $5.4 million for a Public Safety Center--for a total
    facility investment of $77.2 million. Construction of the six Army
    Reserve Centers will support over 2,700 Army Reserve Soldiers. In
    addition, our Army Reserve will invest $11.5 million to construct six
    training ranges, which will be available for joint use by all Army
    components and military services.
        Other Worldwide Unspecified Programs.--The fiscal year 2006 MCAR
    budget request includes $14.4 million for planning and design for
    future year projects. The fiscal year 2006 MCAR budget also contains
    $3.0 million for unspecified minor military construction to address
    unforeseen critical needs or emergent mission requirements that cannot
    wait for the normal programming cycle.

                    ARMY FAMILY HOUSING CONSTRUCTION (AFHC)

        Our Army's fiscal year 2006 family housing request is $549,636,000
    (for appropriation, authorization of appropriation, and authorization).
    It continues the successful and well-received Whole Neighborhood
    Revitalization initiative approved by Congress in fiscal year 1992 and
    supported consistently since that time, and our Residential Communities
    Initiative (RCI) program.
        The fiscal year 2006 new construction program provides Whole
    Neighborhood replacement projects at seven locations in support of 709
    families for $231.7 million. In addition, we will replace 709 houses
    and upgrade another 1,112 using traditional military construction.
        The Construction Improvements Program is an integral part of our
    housing revitalization and privatization programs. In fiscal year 2006,
    we are requesting $162.4 million for improvements to 1,112 existing
    units at three locations in the United States and five locations in
    Europe, as well as $138.0 million for scoring and direct equity
    investment in support of privatizing 3,606 units at three RCI
    locations.
        In fiscal year 2006, we are also requesting $17.5 million for
    planning and design for future family housing construction projects
    critically needed for our Soldiers.
        Privatization.--RCI, our Army's Family Housing privatization
    program, is providing quality, sustainable housing and communities that
    our Soldiers and their families can proudly call home. RCI is a
    critical component of our Army's effort to eliminate inadequate family
    housing in the United States. The fiscal year 2006 budget provides
    support to continue implementation of this highly successful program.
        We are leveraging appropriated funds and Government assets by
    entering into long-term partnerships with nationally recognized private
    sector real estate development/management and homebuilder firms to
    obtain financing and management expertise to construct, repair,
    maintain, and operate family housing communities.
        The RCI program currently includes 45 installations with a
    projected end state of almost 84,000 units--over 90 percent of the
    family housing inventory in the United States. By the end of fiscal
    year 2005, our Army will have privatized 29 installations with an end
    state of 60,000 homes. We have privatized over 50,000 homes through
    December 2004, and with your approval of the fiscal year 2006 budget,
    we will have privatized over 71,600 homes by the end of fiscal year
    2006.

                     ARMY FAMILY HOUSING OPERATIONS (AFHO)

        Our Army's fiscal year 2006 family housing operations request is
    $812,993,000 (for appropriation and authorization of appropriations),
    which is approximately 59 percent of the total family housing budget.
    This account provides for annual operations, municipal-type services,
    furnishings, maintenance and repair, utilities, leased family housing,
    demolition of surplus or uneconomical housing, and funds supporting
    management of the Military Housing Privatization Initiative.
        Operations ($138 million).--The operations account includes four
    sub-accounts: management, services, furnishings, and a small
    miscellaneous account. All operations sub-accounts are considered
    ``must pay accounts'' based on actual bills that must be paid to manage
    and operate family housing.
        Utilities ($132 million).--The utilities account includes the costs
    of delivering heat, air conditioning, electricity, water, and
    wastewater support for family housing units. While the overall size of
    the utilities account is decreasing with the reduction in supported
    inventory, per-unit costs have increased due to general inflation and
    the increased costs of fuel. We continue to make steady progress in the
    privatization of utility systems/infrastructure on our installations.
        Maintenance and Repair ($309 million).--The maintenance and repair
    (M&R) account supports annual recurring maintenance and major
    maintenance and repair projects to maintain and revitalize family
    housing real property assets. Since most Family Housing operational
    expenses are fixed, M&R is the account most affected by budget changes.
    Funding reductions results in slippage of maintenance projects that
    adversely impacts on Soldiers and family quality of life.
        Leasing ($214 million).--The leasing program provides another way
    of adequately housing our military families. The fiscal year 2006
    budget includes funding for 13,190 housing units, including existing
    Section 2835 (``build-to-lease''--formerly known as 801 leases) project
    requirements, temporary domestic leases in the United States, and
    approximately 8,100 units overseas.
        RCI Management ($20 million).--The RCI management program provides
    funding for the implementation and oversight requirements for
    procurement, environmental studies, real estate support, portfolio
    management, and operation of the overall RCI program.

                      BASE REALIGNMENT AND CLOSURE (BRAC)

        In 1988, Congress established the Defense Base Realignment and
    Closure Commission to ensure a timely, independent and fair process for
    closing and realigning military installations. Since then, the
    Department of Defense has successfully executed four rounds of base
    closures to rid the Department of excess infrastructure and align the
    military's base infrastructure to a reduced threat and force structure.
    Through this effort, our Army estimates approximately $10 billion in
    savings through 2005.
        Our Army is requesting $93.9 million in fiscal year 2006 for prior
    BRAC rounds ($4.5 million to fund caretaking operations of remaining
    properties and $89.4 million for environmental restoration). In fiscal
    year 2006, our Army will complete environmental restoration efforts at
    four installations, leaving nine remaining BRAC installations requiring
    environmental restoration. We also plan to dispose of an additional
    1,119 acres in fiscal year 2006.
        To date, our Army has disposed of 227,429 acres (88 percent of the
    total acreage disposal requirement of 258,607 acres). We have 31,186
    acres remaining to dispose of at 21 installations. Our Army continues
    to save more than $900 million annually from previous BRAC rounds. To
    date, the Army has spent $2.6 billion on BRAC environmental
    restoration.

                           OPERATION AND MAINTENANCE

        The fiscal year 2006 Operation and Maintenance budget includes
    funding for Sustainment, Restoration, and Modernization (S/RM) and Base
    Operations Support (BOS). The S/RM and BOS accounts are inextricably
    linked with our Military Construction programs to successfully support
    our installations. The Army has centralized the management of its
    installations assets under the Installation Management Agency (IMA) to
    best utilize operation and maintenance funding.
        Sustainment, Restoration, and Modernization.--S/RM provides funding
    for the Active and Reserve Components to prevent deterioration and
    obsolescence and restore the readiness of facilities on our
    installations.
        Sustainment is the primary account in installation base support
    funding responsible for maintaining the infrastructure to achieve a
    successful readiness posture for our Army's fighting force. It is the
    first step in our long-term facilities strategy. Installation
    facilities are the mobilization and deployment platforms of America's
    Army and must be properly maintained to be ready to support current
    Army missions and future deployments.
        The second step in our long-term facilities strategy is
    recapitalization by restoring and modernizing our existing facility
    assets. Restoration includes repair and restoration of facilities
    damaged by inadequate sustainment, excessive age, natural disaster,
    fire, accident, or other causes. Modernization includes alteration or
    modernization of facilities solely to implement new or higher
    standards, including regulatory changes, to accommodate new functions,
    or to replace building components that typically last more than 50
    years, such as foundations and structural members.
        Base Operations Support.--This funds programs to operate the bases,
    installations, camps, posts, and stations for our Army worldwide. The
    program includes municipal services, government employee salaries,
    family programs, environmental programs, force protection, audio/
    visual, base communication services and installation support contracts.
    Army Community Service and Reserve Component family programs include a
    network of integrated support services that directly impact Soldier
    readiness, retention, and spouse adaptability to military life during
    peacetime and through all phases of mobilization, deployment, and
    demobilization.
        Installation Management Agency.--The Installation Management Agency
    (IMA) is a result of the Army leadership's vision to streamline
    headquarters, create more agile and responsive staffs, reduce layers of
    review and approval, focus on mission, and transform the Army. IMA
    brings together all installation support services under one umbrella to
    promote optimal care and support of Soldiers and families. IMA is at
    the center of the Army's initiative to mold installation support
    functions into a corporate structure, enabling equitable, efficient,
    and effective management of Army installations worldwide. IMA supports
    readiness, promotes well-being, and preserves infrastructure and the
    environment.
        In its first 2 years, IMA has been successful in executing the
    tasks associated with growing a new organization, while simultaneously
    supporting the Global War on Terrorism. In the upcoming year, IMA will
    continue to develop a cadre of leaders to orchestrate excellence in
    installation management; manage installations equitably, effectively,
    and efficiently; support the well-being of the Army's people; practice
    sound stewardship and resource management; deliver improved mission
    support to all organizations; and develop and sustain an innovative,
    team-spirited, highly capable, service-oriented workforce.

                      HOMEOWNERS ASSISTANCE FUND, DEFENSE

        Our Army is the Department of Defense Executive Agent for the
    Homeowners Assistance Program. This program provides assistance to
    homeowners by reducing their losses incident to the disposal of their
    homes when military installations at or near where they are serving or
    employed are ordered to be closed or the scope of operations reduced.
    For fiscal year 2006, there is no request for appropriations and
    authorization of appropriations. Requirements for the program will be
    funded from prior year carryover and revenue from sales of homes.
    Assistance will be continued for personnel at five installations that
    are impacted with either a base closure or a realignment of personnel,
    resulting in adverse economic effects on local communities. The fiscal
    year 2006 Homeowners Assistance Program budget does not include
    resources for potential requirements that the new Base Realignment and
    Closure 2005 process may cause.

                  FISCAL YEAR 2005 SUPPLEMENTAL BUDGET REQUEST

        The fiscal year 2005 Supplemental request funds facilities that
    directly support the Global War on Terrorism in both the United States
    and overseas locations. It contains $990.1 million in Military
    Construction for the Active Component Army.
        Within the Central Command area of operations in Afghanistan and
    Iraq, there are $687.3 million for military construction projects.
    Projects in Afghanistan include barracks, a fuel storage tank farm and
    distribution system, Joint operations center, power generation plant,
    and an ammunition supply point. Projects in Iraq include barracks, a
    tactical operations building, medical facilities, an overhead cover
    system for force protection, an equipment support activity, a battalion
    and company headquarters, a 60-mile supply route, and a project to
    encapsulate hazardous materials bunkers.
        Within the Southern Command area of operations at Guantanamo Bay,
    Cuba, there is $41.8 million for two military construction projects--a
    detention facility and a radio range security fence.
        Within the United States, there is $261 million for military
    construction relating to modularity. The projects, distributed to seven
    different locations, include site preparation and utility work, an
    aircraft maintenance hangar, an aircraft hangar, and mobilization and
    training barracks.
        Additionally, the fiscal year 2005 Supplemental budget includes
    $248 million in Other Procurement, Army for relocatable buildings to
    provide temporary barracks, company operations, and dining and
    maintenance facilities at five locations in the United States. These
    are required to support our Soldiers as they prepare for battle.

                                    SUMMARY

        Madam Chairman, our fiscal year 2006 budget is a balanced program
    that supports our Soldiers and their families, the Global War on
    Terrorism, Army transformation, readiness and Department of Defense
    installation strategy goals. We are proud to present this budget for
    your consideration because of what this $3.3 billion fiscal year 2006
    budget will provide for our Army:
      --New barracks for 5,190 Solders
      --New housing for 5,800 families
      --Management of 71,600 privatized homes
      --Operation and sustainment of 48,000 government-owned and leased
            homes
      --New or improved Readiness Centers for over 3,300 Army National
            Guard Soldiers
      --New Reserve Centers for over 2,700 Army Reserve Soldiers
      --Three Aviation Transformation projects
      --$292 million investment in training ranges
      --Facilities support for two Stryker Brigades
      --Transfer/disposal of 88 percent of prior Base Realignment and
            Closure acreage
        Our long-term strategies for installations will be accomplished
    through sustained and balanced funding, and with your support, we will
    continue to improve Soldier and family quality of life, while remaining
    focused on our Army's transformation.
        In closing, we would like to thank you again for the opportunity to
    appear before you today and for your continued support for our Army

        Senator Hutchison. Thank you, Mr. Prosch. You are the only
    one on the panel making a statement?
        Mr. Prosch. Yes, ma'am.
        Senator Hutchison. Then I would like to defer to Senator
    Allard, since he has to go, for the first questions. And then I
    will call on Senator Feinstein, and then I will go next. We are
    going to have a 5 minute time rule.
        Senator Allard. Thank you, Madam Chairman.

                    EASEMENTS TO PREVENT URBAN ENCROACHMENT

        One of the things that's happening in Fort Carson is that
    we have an opportunity to begin to take advantage of some
    easements around the base there to prevent urban encroachment.
    This is a problem, when we were on Armed Services Committee,
    that we've addressed with some authorizing legislation. And it
    seems as though we have reached a consensus, as far as the
    community leaders are concerned; we have reached consensus as
    far as the base commander is concerned; and we have reached a
    consensus with the property owners around there. The owners are
    willing sellers. In fact, there's only just a couple of
    property owners there who own very large ranches that border
    Fort Carson. There is urban encroachment that's occurring on
    that area, and I think everybody's concerned about it.
        And so, I just want to inquire of you, Mr. Prosch, what
    sort of priority will these conservation easements have
    particularly when we have everything pretty well lined up.
        Mr. Prosch. Sir, we think it's a great program. And we've
    had some real successes in dealing with encroachment at Fort
    Bragg. We're getting some great successes also at Fort Hood and
    at the National Training Center. We've found that at Fort
    Bragg, our pilot initiative with these easements, we were able
    to obtain land around Fort Bragg and work in close coordination
    with the Fish and Wildlife Service, and actually develop a
    nature habitat surrounding Fort Bragg, which allowed us to move
    endangered species habitat to that area and free up training
    area.
        We're doing the same thing at Fort Hood. On the 16th of
    April, we're going to commemorate a partnership with Central
    Texas that will allow us to free up 47,000 acres of land at
    Fort Hood for both training and cattle grazing.
        We're doing the same thing at the NTC, with the leadership
    of Senator Feinstein. And I would welcome the opportunity to
    work closely with you and the great people in Colorado to help
    that.
        If you look at the challenges we have in the environmental
    arena, encroachment and endangered species are the two biggest
    challenges that we have, because they threaten readiness. And
    if we can not do live-fire training and maneuver training, we
    can not get your soldiers combat-ready in the way that the
    threat they're going to see when they hit the ground in another
    area.
        Senator Allard. Well, I thank you for that statement and
    agree with what you're saying.

                RESTATIONING FACILITY REQUIREMENTS--FORT CARSON

        The other thing that's happening in Colorado is that the
    2nd Combat Brigade Team, the 2nd Infantry is being permanently
    transferred from Korea to Fort Carson, Colorado. I understand
    that there may be some significant restationing facility
    requirements. These requirements may cost as much as 300
    million in military construction. I think Fort Carson is not
    the only base facing these challenges. What is the Army's plan
    to meet these requirements?
        Mr. Prosch. Sir, we're anxiously awaiting their arrival, in
    August. And I would turn it over to Geoff Miller, my active
    duty army assistant here, for the details.
        General Miller. Thank you.
        One of the things, Senator, that's going on--you know,
    we're going to do a combination of things at Fort Carson, for
    example. We're going to renovate 17 of our barracks to the
    ``One-Plus-One'' standard to welcome the 2nd Brigade Combat
    Team back in. We're also going to do some interim facilities
    that will round out that capability. But we do--and we will
    need to come back to the Congress to ask for military--MILCON
    to be able to have permanent capability once the final
    stationing choices are made, after the BRAC announcements are
    made. So----
        Senator Allard. So that's a request you would make in the
    next budget year, in the 2007 budget year?
        General Miller. Yes, sir, that's correct.
        Senator Allard. I see. Okay.
        Madam Chairman, that pretty well wraps up my questions. And
    I see my time's close to running out. And I thank you.
        Senator Hutchison. Thank you.
        Senator Feinstein.
        Senator Feinstein. Thank you very much, Madam Chairman.
        Senator Hutchison. And we're on a 5 minute rule.
        Senator Feinstein. Thank you.

                            DECREASED BUDGET REQUEST

        Why is the Army's request decreased by 16\1/2\ percent,
    when the Army's overall facilities quality rating is C3?
        Mr. Prosch. Ma'am, you'll see a decrease in military
    construction in this budget over what we did last year. Some of
    the rationale on that is that, because of the great success in
    our privatization for housing, we don't have to do as much
    military construction for housing. You can see that our OCONUS
    military construction is focused in our enduring installations.
    We're going to ask for your support for that OCONUS
    construction. Our military housing overseas, we are now----
        Senator Feinstein. Well, let me just stop you. As I
    understand, the housing request has a drop of $220 million, or
    13 percent--actually, 12.9 percent--from last year's request,
    but the overall MILCON is down 16\1/2\ percent. In the time
    I've been on the committee, I've never seen anything quite like
    this, in terms of a decrease of the most active service engaged
    in war today.

                                  RCI PROGRAM

        Mr. Prosch. Yes, ma'am. The family housing operations is
    dropped because of the success of the RCI program, because the
    operations are funded by Basic Allowance for Housing (BAH)
    funds to our privatization partner now. So that's one reason
    why you see a drop there. And that's been very successful. And
    that accounts for several hundred million dollars in drop of
    the family housing operations piece. But if you look at the----
        Senator Feinstein. You're saying that the same number of
    housing units are built, but built this much more cheaply?
        Mr. Prosch. We have 23 installations where we have
    privatized housing. One of the great success stories is at
    Presidio of Monterey. And what you see there is, we used the
    basic allowance for housing as the income stream to fund that.
    And our privatization partners construct and do the family
    housing operations for those programs, so that the Army is
    still funding it, but it's a different stream; it's not through
    the military construction program now. And----
        Senator Feinstein. Well, I'm just wondering, can you say,
    then, that private building of military housing is a big enough
    savings to reduce your budget by 16\1/2\ percent?
        Mr. Prosch. I'm just talking about the operations of family
    housing right now.
        Senator Feinstein. Something--I mean, just something in the
    numbers don't jive.
        Mr. Prosch. Right.
        Senator Feinstein. And maybe we could work together and see
    if----
        Mr. Prosch. Sure.
        Senator Feinstein [continuing]. We can get an understanding
    of those numbers.
        Mr. Prosch. Yes, ma'am.
        Senator Feinstein. Because I don't understand it.
        I would like to ask you a question about--Senator Allard
    has similar concerns but about Fort Ord in----
        Mr. Prosch. Yes, ma'am.

                       FORT ORD BURN--REMEDIATION FUNDING

        Senator Feinstein [continuing]. California. The Army,
    according to this, intends to spend $4.8 million this coming
    year. And last year, range fires burned nearly 2,000 acres of
    Fort Ord at a location that the Army has had difficulty
    clearing because of native grasses. So the fire took care of it
    for you. Could you please describe for me the efforts taken by
    the Army last year at Fort Ord, and explain the funding and the
    time required to complete the remediation actions there?
        Mr. Prosch. Yes, ma'am.
        At Fort Ord, the Army had scheduled a 500-acre programmed
    burn to try to take out some of the chaparral, native species,
    endangered plant there. And it got out of control, but was
    contained on post, and 1,470 acres were, in fact, burned. We
    have been able to surface-clear all of that 1,470 acres. The
    unexploded ordnance is the biggest challenge that we have with
    the range there at Fort Ord. To date, the Army has spent $344.4
    million at Fort Ord. So we are steadily making progress. Last
    year, we spent $26.9 million in order to try to continue to
    make steady progress at Fort Ord. We have cleared, so far, a
    total of 27,000 acres at Fort Ord. We have, remaining, 14,000.
        The biggest challenge is the impact area there, the 7,000
    acres, in a range where the Army has been firing ordnance since
    1917. The $4.8 million allocated for fiscal year 2006, we
    believe, is a balanced approach to try to deal with land that
    we're prepared to turn over. Should we have an opportunity to
    have a more rapid turnover, we could put some more money into
    that.
        I would like to compliment Congressman Farr and the
    stakeholders there in the Monterey area. They have established
    a Strategic Management Assessment Requirements Technology Team,
    called a SMART Team. And we have very, very good cooperation
    with the stakeholders, the local people, the environmental
    community there. And we will continue to try to press on with
    this, as best we can.
        Anything you'd like to add, Geoff?
        General Miller. I think one other thing, Senator, if we can
    add onto--is the SMART Team that's come on. We're using a new
    technology, which is an aerial survey technology using ground-
    penetrating radar to locate the ordnance in the old impact area
    so we can more rapidly make the decision. We think this is
    going to speed our ability to get at this last 14,000 acres,
    and then move back to public use of that land as quickly as
    possible.
        Senator Feinstein. So you have adequate funding to do what
    you need to do.
        General Miller. Yes, ma'am.
        Senator Feinstein. So if I watch, I'll be very pleased by
    what I see?
        General Miller. We believe that after we do this next
    survey, that we can more rapidly get in, and there may be an
    opportunity to invest in some--in the success that that will
    have.
        Senator Feinstein. Okay.

            WEAPONS OF MASS DESTRUCTION CIVIL SUPPORT TEAMS FUNDING

        General Pudlowski, this committee has added funding each of
    the past 3 years to implement the construction program of the
    Army Guard's Weapons of Mass Destruction CST program. How many
    facilities remain to be completed? And how much funding will be
    necessary?
        General Pudlowski. Thank you, ma'am.
        First, let me thank you and the rest of the leadership, and
    tell you that the Guard soldiers are performing extremely well
    today in the Gulf and in other places throughout the world. And
    particularly from California, the number of soldiers that have
    come out of the 40th Division have been tremendous in assisting
    other commands in their preparations and efforts----
        Senator Feinstein. This committee anticipates that Guard
    soldiers from California and Texas are the best in America.
        General Pudlowski. Ma'am, I will tell you that they are
    doing extremely well----
        Senator Hutchison. And if you don't mention Texas pretty
    fast, you're going to be in big trouble.
        General Pudlowski. I will tell you that the 56th Brigade
    and the 36th Infantry Division is doing just as well in the
    environment today. Those comments are coming back daily. And
    the 36th Division's got other missions ahead for their future,
    as well. And, sir, that's not to take away from what Colorado
    has done and how they've contributed.
        Ma'am, to your question, the Civil Support teams are an
    important piece of what we have in the inventory of the
    National Guard, and how they've been employed. We have 23
    additional units that still have to be organized. We're in the
    process of organizing it from a facility perspective. We would
    need the facilities for those 23. Total cost is approximately
    $40 million. And if that resource was made available----
        Senator Feinstein. Okay. So this is how many out of how
    many?
        General Pudlowski. This is 23 out of 55.
        Senator Feinstein. Thank you. And so, you anticipate that
    it'll be completed when? All 55.
        General Pudlowski. At the current rate, it would take us
    the next 5 years of the FYDP to accomplish that. But for a cost
    of $40 million--each one is approximately two-point-some-
    approximately $2 million apiece--we would be able to complete
    that whole operation.
        Senator Feinstein. Thank you.

                         RESERVES TRAINING--CALIFORNIA

        Mr. Prosch. Ma'am, may I just make one comment about a
    great contribution that Fort Hunter Liggett and Camp Roberts in
    California provide to all the Reserves in the western part of
    the United States. Without Fort Hunter Liggett, we wouldn't
    have a significant maneuver area for them to utilize, because
    the National Training Center is very busy with the active
    force. Camp Pendleton has encroachment challenges and they're
    busy, and Fort Lewis is very busy. So it's very important for
    our Reserve forces. And Hunter Liggett allows not only the
    combat brigades, but also the combat-service support and the
    logistical units to train there. So they have tremendous
    capability, and they also have good support with the local
    communities. So we thank you.
        Senator Feinstein. So it's reasonable to believe, Mr.
    Secretary, that the Army is going to retain Hunter Liggett.
        Mr. Prosch. The Army is evaluating all installations fairly
    and squarely. You'll be very proud of the process, when the
    list comes out on May 17, based on military criteria.
        Senator Feinstein. Thank you.

                          GLOBAL RESTATIONING FUNDING

        Senator Hutchison. Mr. Prosch, the Army is the service most
    affected by the Integrated Global Presence and Basing Strategy,
    and we're looking at 60,000 to 70,000 troops coming home. That
    has been announced. You know, I advocated that initiative, and
    am very pleased that it is going forward. I don't see very much
    in this budget request that supports restationing, aside from
    around $392 million earmarked in the BRAC account for global
    restationing.
        My question is, first of all, is that $392 million in the
    BRAC account for the global restationing for the Army? That's
    my first question on this subject.

                              SUPPLEMENTAL FUNDING

        Mr. Prosch. We are going to be relying heavily on the
    supplemental to assist us with the standup of our ten new
    brigades and with the restationing of units that come from
    overseas. We are using BRAC as a strategic lever to determine
    the right location to put all these places.
        Senator Hutchison. Are you--you're saying
    ``supplemental''--are you looking at a future supplemental,
    after BRAC, in which you would start the process of preparing
    bases that are going to take these people, or are you talking
    about a great big MILCON commitment in the next year's budget
    for that purpose?
        Mr. Prosch. When you look at the supplemental right now,
    you see that we've got money earmarked to support modularity--I
    have some handouts here that your people could perhaps show to
    you--that we're using to provide facilities at the temporary
    locations where we put our ten new brigades. On the 17th of
    March, as part of the BRAC announcement, we will also include
    the locations of where we're going to move the units that are
    coming from overseas.
        We are going to come to you, after the BRAC is announced,
    to get your support for the MILCON funding for the long-term
    answer to these organizations. But we're using the supplemental
    now in 2005, because we're standing up new brigades, as we
    speak.
        Geoff, do you want to comment?
        Senator Hutchison. You meant May, sir.
        Mr. Prosch. 16th of May. I'm sorry.
        Senator Hutchison. Yeah, I was thinking, what's today?
        Mr. Prosch. On the 15th of March, they're going to announce
    the BRAC commissioners.
        Senator Hutchison. Yes.
        Mr. Prosch. So the 16th of May is----
        Senator Hutchison. Is the BRAC day.
        And you will be, in that BRAC announcement, making the
    choices of where the incoming brigades are going.
        Mr. Prosch. Yes, ma'am.
        Senator Hutchison. So I'd just--the reason I'm pursuing
    this is that I've gotten some mixed signals about funding for
    the moves. I just want to make sure that the commitment to the
    moves is made, it is there, and the money will follow.
        Mr. Prosch. Yes, ma'am.
        Senator Hutchison. Thank you.
        Mr. Prosch. I would just add that we have announced the
    units that are going to be returning.
        Senator Hutchison. Yes. You just haven't announced where
    they're going.
        Mr. Prosch. The when and the where--the where will be
    determined by the BRAC analysis.
        Senator Hutchison. Right.
        Mr. Prosch. And the when--we're going to try to make the
    right decisions, based on quality of life. We will want to
    coordinate with the local school districts. We're going to want
    to make sure that we have adequate housing. But we're going to
    want to make sure that we've developed brigade-sized facilities
    for these units when they come back.
        Senator Hutchison. Yes, I think all of that is absolutely
    essential and the correct way to approach it. I just have
    gotten mixed signals about the money being available to make
    these moves. And as long as you're telling me the commitment is
    going to be kept, that those troops will be moving home, and
    that we will have the funding request to do it. That's all I
    need to know.
        Mr. Prosch. Yes, ma'am.
        Senator Hutchison. And you have said yes. Correct?
        Mr. Prosch. Yes, ma'am.

                 OVERHEAD AND COMPARTMENT PROTECTION LOCATIONS

        Senator Hutchison. In the supplemental that is going to be
    before us shortly, the Army has requested $300 million for
    overhead and compartment protection at various locations, but
    no specificity. Could you elaborate on where those will be and
    what you're envisioning the uses for that $300 million to be?
        Mr. Prosch. Yes, ma'am. Let me start, then I'll turn it to
    Geoff Miller, who returned from Iraq about 3 months ago.
        As part of the supplemental, one of the requests from the
    combatant commander, General Abizaid, was to try to provide
    enhanced overhead protection for our soldiers in theater. And
    so, we, as the executive agent, are trying to support the
    combatant commander's request. As you recall, there was a
    dining facility that was attacked recently. There is a distinct
    threat from mortar and rocket attacks. And so, they would like
    to provide enhanced protection for the large-density troop-
    soldier areas. It's a two-level type of facility, to where the
    top level would absorb the blast, and the second level would
    actually stop the fragmentation from hitting the troops.
        Senator Hutchison. And where--I understand that, and that's
    a very good explanation, but as you are expanding, are you
    looking at doing these all throughout Iraq and also
    Afghanistan, or are we just looking at Iraq?
        General Miller. Senator, right now they're focused on Iraq.
    There are 41 different locations, and, as Mr. Prosch said,
    they're in--where troops are concentrated--in living areas, in
    dining facilities. And kind of the rule of thumb, if there are
    more than 50 soldiers in an area, we wanted to put overhead
    cover, because we have a--we were having a fairly significant
    challenge in mortars. And that's going down. But these went in.
    So they will go into the Afghanistan--really, around Baghram
    Airport--as we build that up.
        Senator Hutchison. I just want to, on a personal note, say,
    I was privileged to give four Purple Hearts to those who were
    in that dining facility, and I was--it was during December--I
    was most struck by how quickly they got to Brooke Army Medical.
    I think they got there Christmas Eve, and the attack was maybe
    the 19th, something very quick. I was very pleased. And, of
    course, they were great. I met with each of them before I was
    able to give them their Purple Hearts, and they were great
    young people. Just amazing.
        General Miller. Senator, if I can, for the record, we'll
    come back and give you the 41 locations----
        Senator Hutchison. Okay.
        General Miller [continuing]. Where we're going to put--be
    putting this overhead cover.
        Senator Hutchison. Thank you.
        [The information follows:]
                         Overhead Cover Locations--Iraq
        The following list identifies the 41 facilities currently scheduled
    to receive overhead cover. U.S. Central Command is continuing to
    identify additional facilities that require overhead cover:

                            [In thousands of dollars]
    ------------------------------------------------------------------------
                  Location                        Facility            Cost
    ------------------------------------------------------------------------
    Anaconda............................  Dining Facility........    $14,590
    Anaconda............................  Post Exchange--East....      3,660
    Anaconda............................  Post Exchange--West....      3,000
    Fallujah............................  Dining Facility 1......      3,200
    Fallujah............................  Dining Facility 2......      3,200
    Fallujah............................  Post Exchange..........        800
    Marez...............................  Dining Facility........     12,000
    Kalsu...............................  Dining Facility........      1,450
    Freedom.............................  Dining Facility........      2,129
    Hope................................  Dining Facility........      6,000
    Falcon..............................  Dining Facility........      7,278
    Taji................................  Dining Facility 1......      8,400
    Taji................................  Dining Facility 2......      8,400
    Diamondback.........................  Dining Facility........      8,000
    Rustimiyah..........................  Dining Facility........      3,090
    Brassfield..........................  Dining Facility/Gym....        200
    McKenzie............................  Dining Facility........      1,920
    Caldwell............................  Dining Facility 1......      2,077
    Caldwell............................  Dining Facility 2......      2,077
    Caldwell............................  Dining Facility........        804
    Warrior.............................  Building 4098..........      5,683
    Warrior.............................  Building 4088..........      1,151
    Warrior.............................  Building 4096..........        172
    Prosperity..........................  Dining Facility........      2,000
    Victory.............................  Dining Facility........      6,626
    Victory South.......................  MWR Dining Facility....     19,700
    Victory South.......................  Cafe Dining Facility...     15,400
    Liberty.............................  Dining Facility              6,750
                                           DeFleury.
    Liberty.............................  Dining Facility Black..      6,750
    Liberty.............................  Dining Facility Pegasus      3,129
    Gaines Mills........................  Dining Facility........        160
    Speicher............................  Dining Facility........      3,710
    Speicher............................  Dining Facility Victory      3,710
    Danger..............................  Dining Facility........      2,000
    Cobra...............................  Dining Facility I......        408
    Summerall...........................  Post Exchange..........         50
    Summerall...........................  Dining Facility........        124
    Hurricane Point.....................  Dining Facility........        846
    Hurricane Point.....................  Post Exchange..........         48
    Taqqadum............................  Dining Facility 1......     13,617
    Taqqadum............................  Dining Facility 2......      1,808
    Various Sites.......................  Miscellaneous..........    113,833
                                                                  ----------
          TOTAL.........................  .......................    300,000
    ------------------------------------------------------------------------

        Senator Hutchison. My last question, and then I'll see if
    Senator Feinstein has any others for this panel.

                         JOINT BASING--ELLINGSTON FIELD

        Mr. Prosch, as you know I am supportive of the service's
    move toward joint basing, specifically Ellington Field. You are
    very familiar with what we're doing there, and have been
    terrifically supportive. And I just wanted to ask you what the
    status is, from your standpoint, of the move of the Army over
    to Ellington Field from its present location, the Reserve unit
    in Houston, and see if you think that everything is going to go
    well there, and what you determine the status to be.
        Mr. Prosch. Ma'am, I'm very pleased to announce that
    Ellington Field is on schedule.
        Senator Hutchison. Great.
        Mr. Prosch. And I would like to thank the Members of
    Congress for giving us a really good tool, which is called the
    Real Property Exchange. And we have been able to use that in a
    lot of places around the country where you have old armories in
    an urban, central part of town, where the land is very
    valuable, but the facilities are antiquated, and then trade
    that land and build a modern joint facility out in the suburbs.
    And that's exactly what we're doing at Ellington Field. We're
    taking some valuable land, we've got a partnership with the
    University of Texas Medical Association, and we're going to get
    a fair market value and plow that into a joint facility, with
    both the Army, Navy, Marine, and Air Guard at Ellington Field,
    which is a very strategic location, critical for the defense of
    the petrochemical industry.
        And the land surveys are on track. We anticipate that the
    environmental studies will be completed in June of this year.
    We plan to complete all of the actual construction plans this
    summer. We anticipate to do an award in 2006, and actually
    break ground in 2006. We hope to have a memorandum of agreement
    signed with the Army and the University of Texas in August, and
    we'll send you an invitation to that signing ceremony.
        Senator Hutchison. Thank you very much. I'm very pleased
    that it is going on track. I think what you're doing there and
    in other places is so right. It's right for the community, and
    it's right for our Services to be in better locations. And
    particularly this one, with the unique security risk of those
    chemical complexes, I think it is just essential to have the
    Air Force, Army, and Navy and Marine components there. It will
    very helpful. Along with the Coast Guard.
        Mr. Prosch. I might ask my colleagues from the Reserves to
    comment.
        Senator Hutchison. General Pudlowski?

                                JOINT FACILITIES

        General Pudlowski. Ma'am, if I may, we, too, have seen, in
    the Guard, the opportunities that are presented by joint
    facilities. Last year when we came here, we had approximately
    140 facilities that we had occupied in a joint fashion. By the
    end of the year, that had jumped up to 170 locations, and we've
    got 26 more projects that are scheduled in the FYDP.
        I'll just give you a couple of examples of that. In Austin,
    Texas, we have two facilities, one of which will be a
    maintenance facility, that'll be a joint maintenance facility
    shared with the Army Reserve. And we have an Armed Forces
    Reserve Center that'll be shared with the Army Reserve, the
    National Guard, the Marine Corps Reserve, and the Naval
    Reserve, which gives us a greater approach and a greater appeal
    as to how we're going to do that. In California, we have the
    Los Alamitos facility that's going to be shared, not only with
    the Army Reserve, but also with the active Army. We continually
    look for those opportunities.
        We're also seeing some others occur--for example, in West
    Virginia, where we have a training site--that we would look at
    the potential of that to be shared as a joint COOP site, with
    perhaps even the Department of Energy.
        So there are opportunities here, and each time we find this
    opportunity, we seek it because it, in effect, conserves some
    of the State cost for that additional 25 percent when we make
    it a full Federal project.
        Thank you.
        Senator Hutchison. Thank you very much. I'm so pleased that
    you're doing that throughout the country. I just think it's the
    right thing.
        General Profit. Ma'am, I would only add to what Mr. Prosch
    said about Ellington Field, that we're proud to be leading that
    effort in the Army Reserve, and I think your leadership in this
    particular effort has been pivotal, and I appreciate it.
        Thank you very much.
        Senator Hutchison. Thank you very much.
        That's all I have for this panel.
        Senator Feinstein.

                        MILCON PROJECTS IN SUPPLEMENTAL

        Senator Feinstein. I'm still into the 16\1/2\ percent. As I
    understand it, you took $138 million in MILCON projects and put
    them into the supplemental. And they include $100 million in
    these areas: the child development center for Fort Carson--I
    don't know why that's an emergency, if, in fact, it is in the
    supplemental; a barracks complex at Fort Lewis for $15\1/2\
    million; a barracks at Fort Leonard Wood for $14.8 million; and
    then you have the whole--I guess, the modularity thing
    worldwide, at $100 million. Is that all correct, what I've just
    read?
        Mr. Prosch. I'm going to ask Geoff Miller to talk to
    specifics, and then let me try another try at why our MILCON
    request is down 16 percent.
        General Miller. Senator, the----
        Senator Feinstein. I think I probably misspoke. And I still
    don't understand it. But you have put an amount for modularity
    into the supplemental, right?
        Mr. Prosch. Yes, ma'am.
        Senator Feinstein. How much is that? Is that $100 million?
        Mr. Prosch. Geoff?
        Senator Feinstein. What is it? It's $180 million? All for
    modularity, in the supplemental?
        General Miller. Ma'am, we have a total of $559 million in
    the supplemental that is supporting modularity and movement
    through there. And it is a combination of OPA funds to buy
    modular facilities, interim facilities, in MILCON to do the
    preparatory work to allow these modular facilities that are
    barracks and headquarters.
        So this is startup money, as Senator Hutchison pointed out,
    because we will come back in the future and ask for MILCON as
    we make the permanent stationing choices then to be able to
    transition these troops that are coming back from overseas and
    in the modularity piece, so we can have permanent facilities
    there.
        Senator Feinstein. Well, just so--I don't know whether this
    qualifies as an emergency, but, clearly, it's certainly a way
    of doing it. I mean, what you did is, you took a part of out of
    this budget and simply put it in the emergency supplemental, if
    I understand it.

                               MODULAR FACILITIES

        Mr. Prosch. Well, if I could just comment, we are growing
    10 new brigades to try to stretch out the OPTEMPO period that
    our soldiers have so they don't have to go back to Iraq every
    other year. As we stand up these ten new brigade formations--we
    recruited soldiers at Fort Lewis, at Fort Bliss, at Fort Hood--
    and so, these soldiers, in order to not to have to put them
    inside gymnasiums and tents, we're going to use these modular
    facilities. So, in a way, this is really helping us fight the
    war on terror, by stretching out the OPTEMPO, and we believe
    this is the right thing to do. And with this supplemental, we
    can do this in 2005, immediately, versus several years in the
    MILCON piece.
        Senator Feinstein. Well, is this going to continue to
    happen as more people come home, that the modulars are going to
    be in emergency supplementals and not part of the regular
    budget process?
        Mr. Prosch. I believe that, after we get these 10 brigades
    stood up, and this time next year when we're testifying before
    you, we're going to be able to lock into military construction,
    because we will have determined the end state for our 43 new
    active brigades and our 77 total brigades in the Army. And
    we'll want to do it the old-fashioned way, with MILCON, with
    permanent facilities.
        Senator Feinstein. I appreciate that statement, Mr.
    Secretary.
        Mr. Prosch. Yes, ma'am.
        Senator Feinstein. I'm going to write it in indelible ink,
    and hopefully hold you to it.
        Mr. Prosch. Yes, ma'am.
        Senator Feinstein. Thank you.
        Thanks, Madam Chairman.
        Senator Hutchison. Well, and I think we could even do
    something before then. If, on May 17, we know where they're
    going, we could start making preparations, depending on the
    timetable that you all have for them moving, but----
        Mr. Prosch. Yes, ma'am, that will be helpful. And we will
    come see you immediately, because it might make sense to do
    some reprogramming within----
        Senator Hutchison. I think one thing that I gleaned from
    Senator Feinstein, and I will say I agree with, the fewer
    modular units and the more permanent construction we can get a
    head start on, the better off we are.
        Senator Feinstein. I really agree with that.
        Senator Hutchison. I just hate that you're doing it right
    now, and it's a huge expense that goes away in use. If we see,
    on May 17, where people are coming back and we can start
    military construction, even if the moves are a year or two
    away, and we can have permanent facilities and not waste money
    on modular units, that would be my preference, for sure. And I
    think we're seeing that on the committee.

                                    BARRACKS

        Mr. Prosch. I would like to, just for the record, thank you
    all for the steady progress and support you've made. This is
    our 13th year of our barracks program, and over one-half of our
    active Army MILCON budget is going towards barracks. And we are
    going to be 85 percent complete at the end of 2006 to build out
    to the One-Plus-One standard. And I'm sure you're familiar with
    that. We now, as a standard in the Army, we want our soldiers
    to have a suite, where we have two private sleeping areas with
    a walk-in closet, and a common kitchenette and bathroom area--I
    took my son, when he was a college student, to one of these,
    and he said, ``Wow, where do you enlist, Dad?''
        Senator Hutchison. That's true. I saw those at Fort Bliss,
    the new ones, and it is very, very nice, and so much better
    than what we had before. It's great. They love it.

                         ADDITIONAL COMMITTEE QUESTIONS

        Thank you very much. We appreciate not only your
    accessibility and your work, but also your testimony today.
        Thank you.
        Mr. Prosch. Thank you.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                Questions Submitted by Senator Dianne Feinstein

                               BRAC ENVIRONMENTAL

        Question. The Navy has sold portions of its previously BRAC'd
    property and ploughed that money back into environmental remediation.
    Has the Army experienced such sales, and, if so, do you have a similar
    agreement with the DOD Comptroller to use those funds for environmental
    remediation?
        Answer. Yes, the Army has received revenues for BRAC properties and
    used the proceeds for environmental remediation.

                                ARMY MODULARITY

        Question. Generals Pudlowski and Profit, do the National Guard and
    Reserves have additional MILCON requirements related to Army
    Modularity?
        Answer. Yes, for the Army National Guard there are additional
    requirements for transformation to the Army Modular Force. The Army
    National Guard is currently assessing and validating all the
    requirements. We will program for these needs once this process is
    complete.
        The Army Reserve does not currently have additional Military
    Construction requirements related to Army Modular Force transformation.
    However, as Army Reserve force structure in support of Modular Forces
    is determined, additional requirements may be identified. The Army
    Reserve will program for any such requirements as soon as they are
    known.

                               GUANTANAMO PRISON

        Question. DOD is requesting a total of $41.8 million, through the
    Army Supplemental request, for construction of a permanent prison and a
    new security fence at Guantanamo, Cuba. The justification documents for
    the Guantanamo construction do not make clear what will be done with
    the current temporary facilities once the new prison is constructed. Do
    you intend to remove or demolish these facilities, or are they to be
    kept in case the prison population exceeds the 220 capacity of the new
    facility? In other words, is DOD expanding the detention facilities at
    Guantanamo, or replacing them?
        Answer. The funding requested in the fiscal year 2005 Supplemental
    Request is to construct a 176 cell, long-term maximum-security
    detention facility for 220 detainees at Guantanamo Bay, Cuba. This
    facility, known as the Camp 6 Detention Facility, will allow for the
    closure of temporary Camps 1, 2, and 3. Although these camps would be
    closed, they would not be destroyed, retaining capability for the Joint
    Task Force commander to reopen them should the detainee population
    surge. By ``mothballing'' these camps and constructing Camp 6, the
    commander will be able to reduce the total internal guard force by 124
    military police.
        Question. If the new prison is to be strictly a replacement
    facility, does that mean the maximum capacity for housing detainees
    will be 220?
        Answer. Camp 6 will have the capacity for 220 maximum security
    detainees. The existing Camp 5, with a capacity of 100 maximum security
    detainees, and Camp 4, with a capacity of 200 medium security
    detainees, will be retained, providing a total capacity of 520.
        Question. What is the current capacity at Guantanamo, and what is
    the current detainee population?
        Answer. The current capacity in Guantanamo (GTMO) in Camps 1
    through 5 is 1,116. The current detainee population, as of March 16,
    2005, exceeds 530. Camps 1, 2 and 3 were designed as temporary medium-
    security detention facilities requiring robust forces to guard ``must
    retain'' maximum-security detainees. As temporary facilities, these
    camps are nearing the end of their life expectancy. Refurbishment and
    maintenance costs are becoming prohibitive.
        Question. How did DOD arrive at the 220 bed requirement?
        Answer. The fiscal year 2005 Supplemental funding request is to
    build a 176 cell long-term maximum security facility with a capacity
    for 220 detainees at Guantanamo Bay, Cuba. The facility will include
    132 single cells and 44 double cells. In September 2004, the detainee
    population exceeded 580 detainees. One assumption was that 250 of those
    detainees would be classified as ``retain in DOD control''. The
    remaining 336 would be transferred for continued detention or released
    to their country of origin. The 250 ``retain in DOD control'' would
    require long-term detention due to conviction by military commission,
    intelligence value, or because they are deemed too dangerous to
    transfer or release. The ``retain in DOD control'' number has since
    been revised upward to 300.
        A second assumption was that, as the Global War on Terrorism
    continues, small numbers of additional detainees will arrive for
    screening. Since March 2004, 10 additional detainees have arrived in
    Guantanamo Bay.
        The final assumption is that by building a facility with 220 beds,
    the Joint Task Force could close the temporary detention Camps 1, 2,
    and 3, reduce the number of personnel needed to guard the detainees.
    This will also maintain the capability to provide maximum security,
    long-term detention for up to 320 ``retain in DOD control'' detainees
    in Camps 5 and 6, and medium security detention for an additional 200
    detainees in Camp 4.
        Question. When do you expect the prison population to be reduced to
    that level?
        Answer. Based on detainee movement operations already approved by
    the Deputy Secretary of Defense, the number of detainees could be
    reduced to less than 520 by May 1, 2005.
        Question. What other MILCON will be required to support the
    permanent housing of detainees at Guantanamo? For example, what
    additional facilities will be required for the permanent stationing of
    the military personnel assigned to this mission?
        Answer. We do not plan to seek additional MILCON funding for
    permanent structures at Guantanamo Bay at this time due to other higher
    priorities. The fiscal year 2005 Supplemental funding will be used to
    build the Camp 6 Detention Facility and the Radio Range Security Fence
    to allow for reduced force manning.

                          Department of the Air Force

    STATEMENT OF FRED W. KUHN, DEPUTY ASSISTANT SECRETARY
                OF THE AIR FORCE INSTALLATIONS
    ACCOMPANIED BY MAJOR GENERAL L. DEAN FOX, FOR AIR FORCE CIVIL ENGINEER,
                DEPUTY CHIEF OF STAFF FOR INSTALLATIONS AND LOGISTICS

        Senator Hutchison. And now we will turn to our second
    panel. That would be Mr. Fred Kuhn, the Acting Assistant
    Secretary of the Air Force for Installations, Logistics, and
    Environment; Major General Dean Fox, the Air Force Civil
    Engineer and Deputy Chief of Staff of the Air Force for
    Installations and Logistics.
        Mr. Kuhn. Madam Chairman, Senator Feinstein, distinguished
    members of the committee, good afternoon.
        This year's Air Force MILCON budget is the largest in 14
    years, with increases across the spectrum of Air Force
    operations throughout our Total Force. Our fiscal year 2006
    military family housing submission is the largest in Air Force
    history. It keeps us on target to meet our goal of funding, to
    eliminate CONUS inadequate housing in 2007, and overseas
    inadequate in 2009. The Air Force remains committed to funding
    restoration and modernization to meet the OSD goal of a 67-year
    recapitalization rate by fiscal year 2008 and beyond. The Air
    Force is meeting OSD's facilities sustainment goal by funding
    $2 billion this year, and will continue to fund sustainment in
    accordance with that DOD facility sustainment model.
        I sincerely thank the committee and the Congress for its
    efforts to lift the cap on housing privatization, because the
    Air Force would not have otherwise been able to meet our goal
    of funding the elimination of inadequate housing for Airmen and
    their families by 2007. We thank you for providing the
    privatization tools that allowed us to leverage 173 million
    taxpayer dollars into nearly $1.6 billion invested in 13 of our
    bases and in their local communities. This leverage of nine
    privatized dollars for every taxpayer dollar invested allows us
    to fix 11,000 homes now, and another 34,500 homes over the next
    2 years, rather than burdening the Federal budget with an
    additional $5.6 billion in MILCON funds.
        The success of our privatization program would not be
    possible without the authority you provided in Title 10, United
    States Code, Section 2883, which allows the Secretary of
    Defense to transfer military construction appropriations into
    the family housing improvement fund in order to fund these
    forward costs of our privatization projects. For example,
    Congress appropriated $15 million for Hickam Air Force Base,
    Hawaii, in fiscal year 2002 MILCON to renovate 102 units, but
    we were successful in awarding a privatization project with a
    portion of those MILCON funds to fix 1,356 Hickam Air Force
    Base homes for Airmen and their families. That project had a
    project development value of $298 million invested in the local
    economy at a leverage of 71-to-1. We were able to use the
    remaining MILCON dollars to award other privatization projects,
    like Wright-Patterson Air Force Base, Ohio, where we are
    providing 1,536 homes, totaling $109 million in development.
        Similarly, at Beale Air Force Base, in California, we are
    privatizing 1,344 homes and gaining $151 million in development
    with a government investment of $6.7 million, a 22-to-1
    leverage. This project was in jeopardy following the fiscal
    year 2005 congressional rescission however, using the Section
    2883 authority, we redirected funds from appropriations for
    Eglin Air Force Base, Florida, and Travis Air Force Base,
    California, to cover the Government's fund appeal.
        When using the Section 2883 authority, we always make the
    appropriate notifications to Congress. And I want to emphasize
    that we always fix housing only at locations directed by
    Congress. To that end, we will privatize 2,155 homes at Eglin
    Air Force Base and its neighbor, Hurlburt Field, and 1,179
    homes at Travis Air Force Base, California, using the funds
    originally appropriated for replacement projects at those
    bases.
        The final example I would like to provide is Randolph Air
    Force Base, in Texas, where Congress appropriated funds for
    three MILCON projects in fiscal years 2003 through 2005. These
    three projects would have eliminated 406 inadequate homes at
    Randolph Air Force Base, in Texas. However, by delaying these
    projects and privatizing Randolph in a group with six other
    bases, we will now be able to fix the required inventory of
    3,898 homes, while injecting $415 million into the local
    communities of these seven installations.

                               PREPARED STATEMENT

        These examples are typical of how the Air Force has
    maximized the use of MILCON funds and transfer authority of
    Title 10 to accelerate our program and eliminate inadequate
    housing. As our program continues to execute and we look for
    additional opportunities to privatize, we will absolutely keep
    the Congress informed of every change we make in this area.
        On behalf of all of our Air Force men and women and their
    families, I thank you.
        [The statement follows:]

     Prepared Joint Statement of Fred W. Kuhn and Major General L. Dean Fox

        Madam Chairman, Senator Feinstein, and distinguished members of the
    committee, the strength and flexibility of airpower and our joint
    warfighting success in operations around the world is made possible by
    three interdependent factors; outstanding Airmen, superior weapons
    platforms, and an agile support infrastructure. The Air Force fiscal
    year 2006 military construction (MILCON) submission is our commitment
    to these three factors. It provides our Airmen and their families the
    proper facilities to work and live, which in turn will enable them to
    better execute our air and space missions. This year's Air Force MILCON
    budget request is the largest in 14 years, over $4.7 billion, with
    increases across the spectrum of air and space operations and
    throughout our Total Force. Our fiscal year 2006 Military Family
    Housing (MFH) submission will keep us on target to eliminate inadequate
    housing. The Air Force is committed to funding facility restoration and
    modernization at a 67-year recapitalization rate by fiscal year 2008,
    and funding facility sustainment consistent with OSD's Facility
    Sustainment Model (FSM). Sound investment in our installations allows
    us to take care of our people and their families through quality of
    life and work place improvements.

                                  INTRODUCTION

        Air Force facilities, housing, and environmental programs are key
    components of our support infrastructure. At home, our installations
    provide a stable training environment and a place to equip and
    reconstitute our force. Both our stateside and overseas bases provide
    force projection platforms to support combatant commanders. Because of
    this, the Air Force has developed an investment strategy focused on
    sustaining and recapitalizing existing infrastructure, investing in
    quality of life improvements, accommodating new missions, continuing
    strong environmental leadership, optimizing use of public and private
    resources, and eliminating excess and obsolete infrastructure wherever
    we can. Our total force military construction, family housing, and
    sustainment, restoration, and modernization programs are vital to
    supporting operational requirements and maintaining a reasonable
    quality of life for our men and women in uniform and their families.
        The Air Force fiscal year 2006 President's Budget (PB) request of
    just over $1.3 billion for Total Force military construction reflects
    our highest construction priorities. It balances the restoration and
    modernization of current mission facilities, quality of life
    improvements, new mission requirements, future project designs, and
    limited funding for emergency requirements. This request includes $1.07
    billion for active military construction, $165 million for the Air
    National Guard, and more than $79 million for the Air Force Reserve.
        The Air Force fiscal year 2006 PB request of $1.2 billion for the
    Military Family Housing investment program balances new construction,
    improvements, and planning and design work. It will also advance our
    Housing Privatization program. But, while we continue to strive to
    eliminate inadequate housing, we cannot allow more housing to fall into
    disrepair. We need your support to keep our housing operations and
    maintenance submission intact.
        In fiscal year 2006, we will bolster our operations and maintenance
    (O&M) investment in our facilities infrastructure. This investment has
    two components: Sustainment (S) and Restoration and Modernization
    (R&M), which we refer to together as our SRM program. Sustainment funds
    are necessary in order to keep ``good facilities good.'' R&M funding is
    used to fix critical facility deficiencies and improve readiness. In
    this request we have dedicated $2 billion to Total Force sustainment.
    That is 95 percent of the requirement from OSD's Facilities Sustainment
    Model. However, in fiscal year 2006 the Air Force's Total Force R&M
    funds is restricted to $173 million. This means we must defer some R&M
    requirements, which has a cumulative effect on Air Force facilities and
    infrastructure that we must reverse. In the out years we intend to
    invest more heavily in critical infrastructure maintenance and repair
    through our O&M program in order to achieve the Air Force goal of a
    facility recapitalization rate of 67 years by 2008.

    Overseas Military Construction
        The quality of installations overseas remains a priority. Even
    though the majority of our Airmen are assigned in the United States, 20
    percent of the force is assigned to extended tours overseas, including
    29,000 Air Force families. Overseas base infrastructure is old and
    progressively deteriorating, requiring increased investment to replace
    and maintain. Host nation funding helps, but it is not enough. We also
    must provide supplemental funding to support time-critical
    infrastructure necessary for the Global War on Terror. The fiscal year
    2006 request for overseas construction includes $193 million for 18
    separate infrastructure and quality of life projects in the United
    Kingdom, Germany, the Azores, Italy, Turkey, Guam, and Korea. All
    projects are in places designated as enduring locations by regional
    commanders, as described in the Global Basing Strategy.
        In addition, we want to thank you for the essential overseas fiscal
    year 2004 MILCON funding you approved in the Emergency Supplemental
    Appropriations Act (H.R. 3289). The supplemental provided essential
    construction projects in Southwest Asia and at critical en-route
    airlift locations directly supporting ongoing operations in that
    region.

    Planning and Design/Unspecified Minor Construction
        This year's Air Force MILCON request includes almost $96 million
    for planning and design (P&D), including $40.4 million for military
    family housing. The request includes $79 million for active duty, $12.9
    million for the Air National Guard, and $3.8 million for the Air Force
    Reserve. These funds will allow us to complete the design work for
    fiscal year 2006 construction programs and to start the designs for
    fiscal year 2007 projects, allowing us to award contracts that year.
    However, P&D funds for Congressional inserts and directed designs are
    not funded in the President's Budget request. They are accomplished at
    the expense of other Air Force designs. We would greatly appreciate
    your assistance ensuring adequate P&D funding for any Congressional
    inserts.
        This year's request also includes $24 million for the Total Force
    unspecified minor construction (UMC) program, our primary means for
    funding small, unforeseen projects that cannot wait for the normal
    military construction process. Because these projects emerge over the
    year, it is not possible to predict the total funding requirements.
    When UMC requirements exceed our funding request, we augment them by
    reprogramming available MILCON construction funds.

               SUSTAIN, RESTORE, AND MODERNIZE OUR INFRASTRUCTURE

        The Air Force remains focused on sustaining, restoring, and
    modernizing our infrastructure. In 2006, we have increased sustainment
    funding to keep our ``good facilities good'' and targeted limited
    Restoration and Modernization (R&M) funding to fix critical facility
    deficiencies and improve readiness.
        Our sustainment program is aimed at maximizing the life of our
    infrastructure by keeping our facilities in good condition. Without
    proper sustainment, our infrastructure wears out more rapidly. In
    addition, commanders in the field use O&M accounts to address facility
    requirements that impact their near-term readiness.
        When facilities require restoration or modernization, we use a
    balanced program of O&M and military construction funding to make them
    ``mission ready.'' Unfortunately, restoration and modernization
    requirements in past years exceed available O&M funding, causing us to
    defer much-needed work. The restoration and modernization backlog is
    projected to grow to nearly $9.8 billion in 2006. It is important for
    us to steadily increase the investment in restoration and modernization
    in order to halt the growth of this backlog, while fully funding
    sustainment to maximize the life of our good infrastructure
        The Air Force Total Force sustainment funding in fiscal year 2006
    is $2.0 billion, 95 percent of the amount called for by the Facility
    Sustainment Model (FSM) and consistent with established OSD goals. The
    fiscal year 2006 Total Force R&M funding is $173 million. This budget
    carefully balances sustainment, restoration, modernization, and
    military construction programs to make the most effective use of
    available funding in support of the Air Force mission.

               CONTINUE DEMOLITION OF EXCESS, OBSOLETE FACILITIES

        In addition to modernizing and restoring worn out facilities, we
    also demolish excess and obsolete facilities. This ensures funds are
    spent on facilities we need, not on sustaining ones we do not. For the
    past seven years, the Air Force has aggressively demolished or disposed
    of facilities that are unneeded or no longer economically viable. From
    fiscal year 1998 through fiscal year 2004, we demolished 18.5 million
    square feet of non-housing building space. This is equivalent to
    demolishing more than three average size Air Force installations and
    has allowed us to target our infrastructure funding to maintain more
    useful facilities. While this demolition cost us $221 million in O&M
    funding in the short term, it saves us money in the long term. For
    fiscal year 2005 and beyond, the Air Force will continue to identify
    opportunities to eliminate unnecessary facilities.

                     INVEST IN QUALITY OF LIFE IMPROVEMENTS

        The Air Force sees a direct link between readiness and quality of
    life. When Airmen deploy, time spent worrying whether their families
    are safe and secure is time not spent focusing on the mission. Quality
    of life initiatives are critical to our overall combat readiness and to
    recruiting and retaining our country's best and brightest. Family
    housing, dormitories, and other quality of life initiatives reflect our
    commitment to our Airmen.

    Family Housing
        The Air Force Family Housing Master Plan details our Housing
    military construction, O&M, and privatization efforts. It is designed
    to ensure safe, affordable, and adequate housing for our members. To
    implement the plan, our fiscal year 2006 budget request for the family
    housing investment program is more than $400 million over the fiscal
    year 2005 budget. Consistent with Department of Defense Strategic
    Planning Guidance, the Air Force intends to eliminate inadequate family
    housing units in the United States by 2007, accelerate funding at four
    northern tier bases one year earlier than originally planned, and
    eliminate inadequate overseas family housing units by 2009. We thank
    you for your assistance in helping keep us on the path to meet these
    goals.
        For fiscal year 2006, the $1.2 billion requested for our housing
    investment program will provide over 2,900 new homes at 17 bases,
    improve more than 2,000 homes at 16 bases, and support privatization of
    more than 2,200 homes at three bases. An additional $767 million will
    be used to pay for maintenance, operations, utilities and leases to
    support the family housing program.

    Dormitories
        We are just as committed to providing adequate housing for our
    unaccompanied junior enlisted personnel. We are making great progress
    in our Dormitory Master Plan, a three-phased dormitory investment
    strategy. Phase I, eliminating central latrine dormitories, is complete
    and we are now concentrating on the final two phases of the investment
    strategy. In Phase II we are building new dormitories to eliminate our
    room shortage. In Phase III, we will replace existing dormitories at
    the end of their useful life with a standard Air Force-designed private
    room to improve our young Airmen's quality of life.
        The total Air Force requires 60,200 dormitory rooms. It will cost
    approximately $711 million to fully execute the Air Force Dormitory
    Master Plan. That will replace all inadequate permanent party dormitory
    rooms by fiscal year 2007 and all inadequate technical training
    dormitories by fiscal year 2009. This fiscal year 2006 budget request
    moves us much closer toward these goals, requesting $184 million for
    eight dormitory projects--creating 1,648 new rooms for unaccompanied
    personnel at both stateside and overseas bases. With this request, we
    will reach 47 percent of our final permanent party goal and 19 percent
    of our technical training goal.

    Fitness Centers/Family Support Centers
        Along with housing, fitness centers are a critical component of the
    Air Force's quality of life. Our expeditionary nature requires that
    Airmen deploy to all regions of the world, and into extreme
    environments. They must be physically prepared to deal with these
    challenges. Our Airmen must be ``fit to fight.'' Under our new fitness
    program, Airmen are devoting more time and energy to physical fitness.
    As a result, fitness center use has increased dramatically. The Air
    Force Fitness Center Master Plan prioritizes requirements based on
    need, facility condition, MAJCOM input, Operations Tempo, and a
    location's remoteness or isolation. The fiscal year 2006 military
    construction program includes two fitness centers: Charleston Air Force
    Base (AFB), SC and Vandenberg AFB, CA.
        Family Support Centers are also critical to the quality of life of
    our Airmen and their families. They provide needed support services and
    ensure a strong sense of community on our bases. This is especially
    important in overseas locations where our Airmen and their families are
    separated from cultural and community support networks they are
    accustomed to in the United States. For them, our Air Force family
    becomes their primary support structure, especially when a spouse is
    deployed. The fiscal year 2006 submission includes a new Family Support
    Center at Aviano Air Base, Italy.

                            ACCOMMODATE NEW MISSIONS

        Our Airmen are the best in the world, but superior weapons have
    also played a key role in recent joint warfighting successes in the
    Global War on Terrorism. Advanced weapon systems enable our combatant
    commanders to respond quickly in support of national security
    objectives. The fiscal year 2006 Total Force new mission military
    construction program consists of 40 projects, totaling more than $402
    million, and supports core modernization, beddown of new missions, and
    expansion of existing missions. These include Global Hawks at Beale
    AFB, California; Predator force structure changes at Indian Springs Air
    Force Auxiliary Field, Nevada; Combat Search and Rescue aircraft
    beddown at Davis-Monthan AFB, Arizona and a HC-130P simulator facility
    at Kirtland AFB, New Mexico; a Distributed Common Ground Station at
    Hickam AFB, Hawaii; and small diameter bomb facilities at RAF
    Lakenheath, United Kingdom. In particular, two new systems, the F/A-22
    Raptor and the C-17 Globemaster III, require extensive construction
    support.
        The F/A-22 Raptor is the Air Force's next generation air
    superiority fighter, but it is equally capable attacking ground targets
    or gathering intelligence data. Langley AFB, Virginia, will be home for
    the first operational F/A-22 squadrons. Flight training, weapons
    training, and aircraft battle damage repair training will be conducted
    at Tyndall AFB, Florida, Nellis AFB, Nevada, and Hill AFB, Utah. Our
    fiscal year 2006 military construction request includes one F/A-22
    project at Langley AFB, one project at Tyndall AFB, two projects at
    Nellis AFB, and one project at Hill AFB for a total of $47.5 million.
    These projects support the F/A-22 initial beddown and training and will
    not be affected by the final aircraft purchase number.
        The C-17 Globemaster III is replacing our fleet of C-141
    Starlifters. C-17s will be based at Elmendorf AFB, Alaska; Travis AFB
    and March Air Reserve Base (ARB) in California; Dover AFB, Delaware;
    Hickam AFB, Hawaii; Jackson Air National Guard Base, Mississippi;
    McGuire AFB, New Jersey; Altus AFB, Oklahoma; Charleston AFB, South
    Carolina; and McChord AFB, Washington. Thanks to your support, the
    construction funding requirements for Charleston and McChord are
    complete. The request for fiscal year 2006 includes two projects for $6
    million at Dover AFB, three facility projects for $12.6 million at
    Travis AFB, and two facility projects for $54.8 million at Elmendorf
    AFB.

                  OPTIMIZE USE OF PUBLIC AND PRIVATE RESOURCES

    Housing Privatization
        We would also like to thank you for eliminating the cap on the
    Department of Defense Family Housing Improvement Fund. Our Airmen and
    their families appreciate your staunch commitment to their quality of
    life. To date, we have awarded thirteen privatization projects
    providing 10,977 privatized homes for our Air Force families. The Air
    Force has leveraged an investment of $173 million with private sector
    funding to yield $1.6 billion in total development.
        Last year, we completed three privatization projects (Elmendorf
    AFB, Alaska; Robins AFB, Georgia; and Dyess AFB, Texas) and have three
    more under construction (Wright-Patterson AFB, Ohio; Patrick AFB,
    Florida; and Kirtland AFB, New Mexico). We recently awarded five new
    privatization projects at Moody AFB, Georgia; Little Rock AFB,
    Arkansas; Buckley AFB, Colorado; Hanscom AFB, Massachusetts; Hickam
    AFB, Hawaii; and awarded the second phase of the project at Elmendorf
    AFB. Two years ago we set a goal to privatize 60 percent of U.S.-based
    family housing by 2007. With this budget we are on track to beat that
    goal by an additional 12 percent. The fiscal year 2006 request includes
    $65 million to start privatizing more than 2,200 units at three more
    bases: Peterson AFB and the U.S. Air Force Academy in Colorado; and
    F.E. Warren AFB, Wyoming.

    Utility Privatization
        In addition to privatizing housing, the Air Force is interested in
    privatizing utilities where it makes economic sense and does not
    adversely affect readiness, security, or mission accomplishment. Our
    installations are key to our operational capabilities. Our network of
    bases provides necessary infrastructure for deploying, employing, and
    sustaining air and space operations and re-deploying and reconstituting
    the force afterwards. Our bases are also the training platforms from
    which skilled Airmen learn their trades and prepare for deployment.
    Reliable utility services are essential to operations at every Air
    Force base.
        To date, under OSD's utilities privatization program, the Air Force
    has conveyed 10 systems, with a plant replacement value in excess of
    $230 million. By the time the program is complete, we anticipate as
    many as 100 of about 500 systems could be privatized. We are on track
    to meet 95 percent of OSD's milestone: completing Source Selection
    Decisions by September 30, 2005. During the course of this process, we
    expect that many competitive solicitations will end up as sole source
    procurements from local utility companies.

                                   CONCLUSION

        The readiness of our fighting force, now and in the future, depends
    upon our infrastructure. We will continue to enhance our installations'
    capabilities and our Airmen's quality of life and ensure Air Force
    infrastructure remains ready to support our global operations.

                             HOUSING PRIVATIZATION

        Senator Hutchison. Thank you very much, Mr. Secretary.
        I think the Air Force has come to privatization a little
    later than some of the other Services, and with some of the
    MILCON money, there has been a determination, after MILCON has
    been appropriated, that privatization would be the better
    route. My question is, How are you going to work with the
    committee in the future to come to us with a change, if you're
    not going to use MILCON money where you told Congress you
    would? Where would this money go if there is a reprogramming
    request? If you're going to go to privatization, we need to
    have some sort of notification. How would you propose to handle
    that?
        Mr. Kuhn. I think there are many ways that we have done
    this and we will continue to do this. One of the ways is, the
    gentleman to my right and the individuals in his office have
    come over to the Congress to talk about every housing
    privatization project in the Air Force, where the MILCON
    started for the projects, and how they interrelated.
        I also see that there are three points in which we also
    come to you under congressional notification. One is in the
    concept approval of the housing privatization program, in which
    we not only do a notification, but we offer to come over to
    talk to your staff about these issues. And we come back a
    second time, before award, to talk to you about the project
    itself, the dollars that were leveraged, any details that you
    would like. And then there's the third notification when the
    money actually gets transferred into the family housing
    improvement fund.
        But I think my commitment to you, and General Fox's
    commitment to you, is that we can, and have, offered to come
    over to talk to this issue on a systematic, periodic basis with
    your staffs, and they have been incredibly responsive to us in
    that, and it's been a very helpful dialogue.
        Senator Hutchison. Good. Thank you.
        Mr. Kuhn. Yes, ma'am.
        Senator Hutchison. Bolling Air Force Base was going to be
    traditional construction but now it is going into
    privatization.
        Mr. Kuhn. Yes, ma'am, into a group.
        Senator Hutchison. Yes. My question is, you're going to
    privatization for Bolling, and are you going to preserve the
    historic houses? How are you going to handle those historic
    homes?
        General Fox. Madam Chairman, we are looking at Bolling Air
    Force Base as a privatization candidate. And when we initially
    looked at Bolling and ruled it out the first time that we
    looked, it was because it was too good a deal for a developer,
    if you would. The basic allowance for housing was too high to
    make it feasible for the government to press ahead. So the only
    way that we look at it and say that it's a smart move for the
    government is to group it with some other bases that might not
    be quite as good a deal. So, in essence, it becomes the way to
    carry some other bases that are not as good a leverage.
        As Mr. Kuhn mentioned, the great thing about privatization
    is the up-front capability that it gives us. We are now seeing
    nine-to-one leverage across our entire housing privatization
    program, which means, for every dollar that the Government puts
    forward up front, we're leveraging nine in private development.
    So that's what makes the program successful for us.
        At Bolling Air Force Base, we're looking at potentially
    grouping with five other bases. And so, as we look at those
    bases and what we press ahead with in privatization, certainly
    we will have the developer give us proposals that will include
    preserving the historic units. I believe that the developer who
    would then own those units will probably have other proposals,
    as well. But, at this point, I don't think that we're able to
    tell you what a proposer would give us, in terms of the
    different propositions that they might make to us.
        Senator Feinstein. Madam Chairman?
        Senator Hutchison. Yes?
        Senator Feinstein. At 2:30, we have a closed intelligence
    meeting on the defense intelligence budget.
        Senator Hutchison. Sure.
        Senator Feinstein. And I'd like to be excused. It's the
    only chance I have----
        Senator Hutchison. Of course. Do you have a question before
    you leave? Whatever is your pleasure.
        Senator Feinstein. I think--can I ask one question----
        Senator Hutchison. Sure.

                         SPANGDAHLEM AIR BASE, GERMANY

        Senator Feinstein [continuing]. On Spangdahlem? Because
    we've gone over this before. There are two project requests for
    Spangdahlem, the large-vehicle inspection station, at $5.4
    million, and the control tower, at $7.1 million. The question I
    wanted to know is, Do we know which air assets will remain at
    Spangdahlem following the global realignment that would support
    the infrastructure improvement? And, secondly, why haven't we
    requested NATO funding for these projects?
        And another project that appears to be eligible for NATO
    funding is a warehouse at Aviano.
        General Fox. Senator Feinstein, the purpose for
    Spangdahlem, for the long term, it is an enduring base.
    Spangdahlem is one of two bases, coupled with Ramstein Air
    Base, also in Germany, that replaced the capability that Rhein-
    Main Air Base has provided us.
        Senator Feinstein. General, we went over this. I think it
    was--was it last year?
        Senator Hutchison. Yes.
        Senator Feinstein [continuing]. Last year, so we're
    relatively familiar with it. I mean, part of our problem has
    been that you folks change your mind periodically after we've
    begin a project. And I guess what I want to see is that there
    really is going to be the air assets there to support the
    improvements.
        General Fox. Senator Feinstein, there's no change in
    Spangdahlem, nor Ramstein.
        Senator Feinstein. But that still doesn't answer my
    question, because we've never really, to my knowledge, been
    really assured that the air assets are going to be there.
        General Fox. Both those bases, for the long term, replace
    the Rhein-Main capability that brings heavy airlift through
    Central Europe en route to other NATO locations or Southwest
    Asia.
        Senator Feinstein. So what you're telling us is that, on a
    permanent basis, there will be sufficient air assets at
    Spangdahlem to justify these permanent improvements.
        General Fox. Yes, ma'am. Yes, ma'am. At Spangdahlem and
    Ramstein, both of those become airlift capabilities, to include
    wide-body aircraft, C-5 and C-17 aircraft.
        Senator Feinstein. Have we asked for NATO funding for any
    of this?
        General Fox. Yes, ma'am.
        Senator Feinstein. And is it forthcoming?
        General Fox. The vehicle inspection gate is not eligible
    for NATO funding, but the tower is partially eligible, and we
    have asked for NATO recoupment of funds. So when we go forward
    with that project, we pre finance, and then go back to NATO and
    ask for recoupment of those funds. But Spangdahlem and Ramstein
    both are enduring locations.
        Senator Feinstein. And they will recoup $7.1 million?
        General Fox. No, ma'am. We----
        Senator Feinstein. How much will they give you?
        General Fox. I would have to estimate, at this point. I'll
    answer, for the----
        Senator Feinstein. Well, I'd just like----
        General Fox [continuing]. For the record.
        Senator Feinstein [continuing]. To get you on the record so
    we know the money comes back and that you don't use it for
    something else.

                    NATO PRECAUTIONARY PREFINANCE STATEMENT

        General Fox. Senator, the money does not come back to us,
    and I can't use it for something else. When--in a NATO
    scenario, we file a--what is known as a precautionary pre
    finance statement, which tells NATO we intend for them to pay
    back any and all funds that are eligible under NATO. NATO funds
    a minimum military essential requirement. So when they look
    across all NATO member countries, they say--if those NATO
    member countries have a very-much-smaller control tower
    requirement--and usually most countries don't build to our
    standards--they will fund to the minimum standard. And so, we
    can expect to recoup whatever the minimum standard is that
    other countries----
        Senator Feinstein. Of that----
        General Fox [continuing]. Would get.
        Senator Feinstein [continuing]. $7.1 million?
        General Fox. Yes, ma'am.
        Senator Feinstein. Or in excess of the $7.1 million?
        General Fox. A portion of that $7.1 million.
        Senator Feinstein. I guess I don't understand the word
    ``recoup''--does that mean----
        General Fox. Recoupment----
        Senator Feinstein [continuing]. They pay you dollars?
        General Fox. Recoupment means that NATO applies, then,
    funds that they will fund against--a project that we pre
    finance--against the United States share to the NATO Security
    Investment Program. So then the following year, the United
    States does not contribute as much as it ordinarily would to
    NATO.
        NATO contributes--NATO's budget, in Security Investment
    Program, is in the neighborhood of about $550 to $600 million
    per year. The United States share of----
        Senator Hutchison. The question I think----
        General Fox [continuing]. That's about 25 percent.
        Senator Hutchison. Right. But what she's saying is, okay,
    we fund it, NATO comes back, say, and gives us $4 million of
    the $7 million in credits to other NATO accounts. So the Air
    Force has funded the NATO commitment, basically.
        General Fox. So----
        Senator Feinstein. So it's taken off of----
        General Fox. Basically, it buys down----
        Senator Feinstein [continuing]. Our NATO commitment.
        General Fox [continuing]. It buys down our normal
    contribution in subsequent years to NATO. It reduces our share.
        Senator Feinstein. Is that same thing true for the
    warehouse at Aviano?
        General Fox. It would be. I can't tell you exactly what
    percentage of the warehouse at Aviano Air Base qualifies for
    NATO, based on the minimum NATO standard. But it is exactly
    true, as a normal course of business in Europe, the U.S. Air
    Forces in Europe files a recoupment request for anything that
    is or might be eligible for NATO funding. NATO funds, normally,
    operational requirements only, and then to a common minimum
    standard across NATO.
        Where we've really leveraged NATO funding very well for the
    United States is when we went to Aviano and did the Aviano
    beddown. We convinced them that, since it was a replacement for
    Crotone Air Base that was not built, that they should also fund
    support facilities, as well. So we leveraged something like
    $350 million that NATO paid for the Aviano beddown, for
    example. So we do claim, for the U.S. Government, everything
    that NATO makes eligible across member nations.
        Senator Feinstein. But it's just deducted from our
    contributions today----
        General Fox. It just means that----
        Senator Feinstein [continuing]. So it's just a fungible
    exchange.
        General Fox. Yes, ma'am. We do not get funding back; it
    just decrements the amount in subsequent years that we the
    United States would normally contribute.
        Senator Feinstein. Thank you both very much. I appreciate
    that.
        Thanks, Madam Chairman.
        Senator Hutchison. Thank you.

                        GOODFELLOW AIR FORCE BASE, TEXAS

        I just have one more, and this is more of a local nature.
        Goodfellow Air Force Base, in San Angelo, Texas, is one of
    the good examples of true joint training facilities. All of the
    services are represented there. I wanted to ask you, it seems
    to me that Goodfellow has a lot of expansion room, and they're
    doing this intelligence training and language training that is
    so essential right now. My question is, do you have any plans
    to expand that mission profile with the same type of
    intelligence and its cryptology and language training for
    intelligence services? Are you looking at any expansions of
    that at this time?
        Mr. Kuhn. I don't know of any expansions, vis-a-vis the Air
    Force. I don't know what DOD or, for instance, the joint cross-
    service groups in the BRAC might be looking at for that. But
    I've met with the Goodfellow community on many occasions. We've
    talked about the lands, we've talked about their jointness in
    that area and in other areas, and they've been in the forefront
    of this issue for a lot of years.
        Senator Hutchison. Well, it seems that it has really picked
    up with our war on terrorism, because, of course, we're
    recruiting more people who can, not only----
        Mr. Kuhn. Yes, ma'am.
        Senator Hutchison [continuing]. Learn to speak Arabic, but
    to try to decipher signals. And I just----
        Mr. Kuhn. Yes, ma'am. Where jointness becomes even more
    important. Yes, ma'am, I agree with you. But just where I sit
    in the Air Force, I don't know of any plans of the Air Force to
    do anything for that particular----

                         ADDITIONAL COMMITTEE QUESTIONS

        Senator Hutchison. But there is a lot of expansion room
    there.
        Mr. Kuhn. Yes, ma'am, there is.
        Senator Hutchison. Have you been there to see their
    facilities?
        Mr. Kuhn. Yes, ma'am. Had a barbeque there. Yes, ma'am.
        Senator Hutchison. Oh, yes, that's----
        Mr. Kuhn. Yes, ma'am.
        Senator Hutchison. Well, the barbeque is at Dyess, in
    Abilene, also. That's another big one.
        Mr. Kuhn. Been there, too.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]

                      Questions Submitted to Fred W. Kuhn

              Questions Submitted by Senator Kay Bailey Hutchison

                                 FAMILY HOUSING

        Question. Mr. Kuhn, is the Air Force privatizing family housing at
    places where authorization and appropriation for the family housing
    requirements have not been received?
        Answer. No. All of the awarded AF housing privatization projects
    had MILCON projects (for significantly smaller scope or number of
    units) slated for them, including Patrick AFB, which had funds,
    authorized and appropriated that were rescinded by Congress. The Air
    Force uses the authority under Title 10, United States Code Section
    2883, to transfer Military Construction appropriations into the Family
    Housing Improvement Fund in order to fund the scored costs of our
    privatization projects. During the March 16, 2005 Senate Appropriations
    MILCON and Veterans Affairs Committee hearing, Mr. Kuhn affirmatively
    answered Senator Hutchinson's question regarding whether the Air Force
    would notify the committee in cases where MILCON would be used for
    privatization projects. As our Military Family Housing program
    continues to execute and we look for additional privatization
    opportunities we will continue to keep the committee informed of
    changes in our program.

                                BUDGET OVERVIEW

        Question. Mr. Kuhn, I understand you hoped to bring forward a $1.8
    billion MILCON request, but it was reduced to $1.3 billion in the last
    rounds of the budgeting process. What did not get funded as a result of
    that cut?
        Answer. Many changes occurred from the fiscal year 2005 President's
    Budget Request Future Year Defense Program (FYDP) to the fiscal year
    2006 President's Budget Request. Major Commands and Bases were forced
    to defer requirements to future years due to competing budget
    priorities. A list of deferred requirements is attached

                           JOINT FUNDING/JOINT BASING

        Question. Mr. Kuhn, the Defense Department consistently says it
    will emphasize jointness in the upcoming BRAC round which I think is
    exactly the right thing to do. The Air Force generally has the best
    facilities among the Services. How do you intend to embrace jointness
    and still ensure Air Force facilities are of the quality you believe
    you need to most effectively execute your mission?
        Answer. Thank you for the compliment regarding the existing
    infrastructure structure within the Air Force. The Air Force fully
    embraces the concept of jointness through the joint utilization of
    infrastructure assets. This is not a new concept for us. This is
    something we are already doing at the majority of our installations,
    active, guard and reserve today. We strongly believe the responsibility
    to maintain the installation at these high standards belongs to the
    host unit commander. Prior to a new tenant from another service moving
    onto an Air Force installation, the potential tenant and Air Force
    personnel conduct a site survey. The host unit commander informs
    potential tenants of construction compatibility standards, the inter-
    service support agreement standards, and tenant funding
    responsibilities. Final approval for inter-service beddown activities
    is at the Secretariat-level where facility and inter-service support
    levels are addressed. This high-level review reinforces the expectation
    to support existing facility and installation services standards. The
    Installation Capability Council, which is chaired by OSD with members
    from the Services and their Secretariats have chartered a Joint Basing
    Group. This group is developing a policy for the Common Delivery of
    Installations Support. The policy will include standards, metrics and
    pricing or reimbursement rules for installations support.
                                     ______

                  Questions Submitted by Senator Wayne Allard

                      LOWRY AIR FORCE BASE-HAZARDOUS WASTE

        Question. All the developers at Lowry Air Force Base, save one,
    have had their claims for asbestos remediation rejected by the Air
    Force. The Colorado Delegation has been patient with the asbestos
    reimbursement cost process, but the Air Force's response has been most
    unsatisfactory. What is remarkable is that the Air Force continues to
    talk up the Lowry Redevelopment as its shining example in the BRAC
    process, yet this glaring unresolved problem remains. Why has the Air
    Force refused to acknowledge its responsibility for the asbestos it
    left at Lowry Air Force Base, including the asbestos found in utility
    pipes?
        Answer. Our approach to asbestos, as well as to other unknown and
    undisclosed contamination on former Air Force property, is consistent
    with the law. We accept the full responsibility imposed by Federal law
    with respect to Air Force contamination that poses an unacceptable risk
    to human health and the environment. Where--as at Lowry--the condition
    of the property was disclosed to and accepted by the Lowry
    Redevelopment Authority (LRA), and where much of the soil there has
    been relocated from other locations on Lowry or brought onto Lowry at
    the direction of the developers or the LRA, our obligations have
    changed. And where--as at Lowry--there has never been a credible,
    science-based assertion that a situation poses an unacceptable risk to
    human health and the environment, the obligations of the Federal
    Government are nonexistent. With respect to your question on asbestos
    materials in utility pipes, the Air Force does not remove underground
    utility pipes from base closure property. The LRA and its builders have
    been aware that the Air Force did not remove the underground utility
    lines. It is the developer's responsibility to ensure the proper
    management of such pipes during construction activities.
        Question. All the developers at Lowry Air Force Base, save one,
    have had their claims for asbestos remediation rejected by the Air
    Force. The Colorado Delegation has been patient with the asbestos
    reimbursement cost process, but the Air Force's response has been most
    unsatisfactory. What is remarkable is that the Air Force continues to
    talk up the Lowry Redevelopment as its shining example in the BRAC
    process, yet this glaring unresolved problem remains. Why has the Air
    Force refused to reimburse the developers who used their own money to
    pay for the Air Force's hazardous waste?
        Answer. Please be assured that the decisions to deny claims were
    made only after careful review of the facts and applicable law, and
    that the decisions were made with the full support of the U.S.
    Department of Justice. The privileged nature of the settlement
    discussions prevents us from discussing any details.
        Question. All the developers at Lowry Air Force Base, save one,
    have had their claims for asbestos remediation rejected by the Air
    Force. The Colorado Delegation has been patient with the asbestos
    reimbursement cost process, but the Air Force's response has been most
    unsatisfactory. What is remarkable is that the Air Force continues to
    talk up the Lowry Redevelopment as its shining example in the BRAC
    process, yet this glaring unresolved problem remains. Don't you find it
    embarrassing that this hasn't been resolved particularly when
    communities from around the country are meeting at Lowry this Spring to
    discuss successful redevelopment strategies?
        Answer. No. The Air Force has followed Federal and State laws in
    its response to the discovery of asbestos at Lowry Air Force Base. The
    developers incurred their costs at the behest of a State agency that
    directed unprecedented sampling and response actions and then, without
    any basis, informed the developers that the Air Force would pay for it.
    It is not the Air Force's responsibility to resolve such errors. We
    believe that Lowry is an excellent example of successful redevelopment
    and we applaud the LRA for the work it has accomplished to date. We
    also note that the meeting in question is sponsored by a non-Federal
    group, the National Association of Installation Developers (NAID). The
    announcement for the June 4-7, 2005 conference presents the following
    information: ``. . . Lowry . . . has reached marketplace success must
    faster than anticipated, while driving an economic engine that is
    helping the region recover . . .'' and ``since closing in 1994, and
    then breaking ground in 1997, Lowry has become one of Denver's hottest
    neighborhoods. Nearly 3,000 new homes for 6,500 residents now command
    premium prices . . . to date the LRA estimates a $4 billion economic
    benefit to the State.''

                 LOWRY AIR FORCE BASE-PRIVATIZATION INITIATIVE

        Question. I would also like to point out a good news story from
    Lowry, and that is the privatization initiative. This plan would allow
    the Air Force and the Lowry Redevelopment Authority to privatize the
    remaining environmental issues and to complete the conveyance of all
    the remaining land at Lowry. This effort would effectively end any Air
    Force involvement at Lowry, protect them against any future
    environmental clean-ups, and allow the LRA to privately contract out
    all of the remediation efforts left at the site. I believe that if this
    plan had been put in place prior to the discovery of asbestos in the
    soil at Lowry, the entire issue would have been taken care of in a much
    less confrontational manner. I hope that as we proceed with another
    round of BRAC that the DOD will push for these agreements. Will the
    Department of Defense continue to pursue privatization initiatives with
    the communities that are affected by the BRAC process?
        Answer. Yes, the Air Force will continue to pursue privatization
    initiatives at locations where it is economically feasible. In addition
    to Lowry, the Air Force Real Property Agency is pursuing privatization
    at the former McClellan AFB, CA. In coordination with the Department of
    Defense, the Air Force is developing criteria for the BRAC 2005
    Handbook that will aggressively reflect privatization as a viable
    method under BRAC 2005.
                                     ______

                Questions Submitted by Senator Dianne Feinstein

                    SUPPLEMENTAL REQUEST/KUWAITI AERIAL PORT

        Question. Because of the timing of the President's Budget Request,
    and the submission of the $75 billion Supplemental request, it's
    impossible not to question projects included in the supplemental as
    emergencies. The Air Force has asked for an aerial port at Ali Al Salem
    Air Base in Kuwait. The request is for $75 million and that's just the
    first phase of an unspecified number of phases. First, can you give me
    the total cost and number of phases for this project, and secondly, why
    our location at Kuwait City Airport isn't sufficient? These are
    temporary facilities, are they not?
        Answer. The $75.5 million MILCON request in the fiscal year 2005
    Supplemental is an emergency. It is intended to provide the minimum
    construction requirements necessary to move all flying operations out
    of the Kuwait City International Airport (Mubarak AB) and meet the
    current contingency requirements in support of Operation IRAQI FREEDOM
    (OIF). The project expands the runway, taxiway, aircraft parking, and
    fueling capability at Ali Al Salem (AAS) in order to enable the
    airfield to support wide-body aircraft. Additionally, the project
    provides only the basic facility needs to process passengers, handle
    cargo, plus billeting/dining facilities (using pre-engineered
    buildings). The $75.5 million project in the fiscal year 2005
    Supplemental was developed last year assuming continued commercial
    traffic into Kuwait City International Airport (KCIA). Current revised
    planning assumption is that all U.S. flights will be redirected to AAS
    vice KCIA. With this increased number of daily commercial landing and
    takeoffs, recent pavement/soil analysis done by the Corp of Engineers
    determined that the existing design and condition of the Host Nation
    (HN) airfield will require repairs ($18.3 million to $35 million
    depending on design) to the existing airfield pavements in order to
    support heavy aircraft beyond 2 years. We will request HN funding for
    this effort, and if unsuccessful in obtaining HN funding will submit
    O&M funded repair under section 2811. Bottom line: the $75.5 million
    project will effectively move all operations out of KCIA in the short
    term, but the additional load on the AAS runway will cause it to fail
    unless it is repaired. Next, there is a four-phase plan to transition
    Ali Al Salem into an enduring base with permanent type facilities in
    accordance with the long range CENTCOM Master Plan. These phases are
    not tied to OIF, (like the interim $75 million Supplemental project
    mentioned above), and will be submitted for Host Nation funding/cost
    sharing and potential future U.S. MILCON funding. The preliminary scope
    of work and cost estimates for these future phases are reflected in
    detail in the below spreadsheet.

                            [In thousands of dollars]
    ------------------------------------------------------------------------
                                                                HN funding
                          Project title                           request
    ------------------------------------------------------------------------
    Phase 1 Priority:
        Conc Strat Lift Ramp 8 wide/48 other................          75,300
        Connecting Taxiways.................................           2,800
        Engine Runup & Maint Pad............................           3,100
        Fuel Hydrant Sys (8 Strat, 24 Other), Ph 1..........          15,000
        Flightline/Satellite Fire Station...................           3,000
        2 Lane Asphalt road, Ph 1...........................           2,000
        Communications......................................           2,200
        Supporting fac, utilities, demo, sitework...........           7,000
        Demining, Ph 1......................................           7,000
                                                             ---------------
          Phase 1 Total.....................................         117,400
                                                             ===============
    Phase 2 Priority:
        Operational Fuel Storage............................          10,000
        Fuel Hydrant Sys (8 Strat, 24 Other), Ph 2..........          24,900
        PAX Terminal........................................           5,000
        Fleet Service Warehouse.............................           2,300
        Air Freight Terminal................................           5,000
        Wide body Maintenance Hangar........................          22,400
        Maintenance Shops w/Hangar..........................           4,500
        Hangar Apron........................................           3,600
        Squadron Ops Facility...............................           3,400
        AMU Facility........................................           3,400
        Fuels Ops & Testing Facility........................           1,100
        2 Lane Asphalt road, Ph 2...........................             800
        Army Fac (Troop Processing, Hospital, etc)..........          59,000
        Supporting fac, utilities, demo, sitework...........           7,000
        Demining, Ph 2......................................           7,000
                                                             ---------------
          Phase 2 Total.....................................         159,400
                                                             ===============
    Phase 3 Priority:
        12,000  200 Runway w/50 shoulders..........          23,000
        7,500  100 Taxiway w/50 shoulders..........          10,500
        Asphalt Overruns....................................           1,300
        Ladder & High Speed Taxiways........................          16,900
        Hot Cargo Pad.......................................           4,900
        Air Traffic Control Tower...........................           1,800
        Airfield Lighting/NAVAIDS...........................          11,200
        2 Lane Asphalt road, Ph 3...........................             800
        Supporting fac, utilities, demo, sitework...........           7,000
        Demining, Ph 3......................................           7,000
                                                             ---------------
          Phase 3 Total.....................................          84,400
                                                             ===============
    Phase 4 Priority:
        80 km Pipeline from Refinery........................          38,400
        Flightline Dining Facility..........................           2,700
        Housing (1024 room)........................           8,400
        Repair old runway/taxiway after move................          24,600
        MWR & Support Facilities............................           2,800
        2 Lane Asphalt road, Ph.............................          42,900
        Supporting fac, utilities, demo, sitework...........           7,000
        Demining, Ph 4......................................           7,000
                                                             ---------------
          Phase 4 Total.....................................          93,800
                                                             ---------------
          Cost Sharing Totals...............................         455,000
    ------------------------------------------------------------------------

        The transition from Kuwait International Airport to Ali Al Salem
    serves two purposes. One, the Government of Kuwait (GoK) has requested
    that all Military operations relocate as they move to establishing a
    Free Trade Zone and increase tourism to their country. Second, by
    consolidating the Aerial Port of Debarkation APOD (currently at KCIA)
    with the passenger processing and tactical airlift (currently at AAS)
    the force protection risk of convoying deploying/redeploying forces
    between these locations is mitigated. Currently Military and U.S.
    commercial aircraft are parked adjacent to the uncontrolled freeway and
    accessible by commercial vehicles operating on KCIA. Bussing troops
    from KCIA to Camp Buehring for in processing, then on to AAS for
    airlift into Iraq exposes them to risk of attack. The fiscal year 2005
    Aerial Port project allows relocation of APOD from KCIA to mitigate
    force protection risks to troops, improves efficiency of logistics and
    troop movements, and satisfies HN request to allow KCIA civil aviation
    expansion. The facilities to be constructed are pre-engineered
    temporary facilities with anticipated life expectancy of 5 to 7 years
    given the extreme temperature conditions of AAS.

                             RECAPITALIZATION RATE

        Question. Mr. Kuhn, as promised, the Air Guard's request is up
    nearly 30 percent from last year's request, but that still only
    represents a $38 million increase. When compared to the amount funded
    with Congressional ads, the Air Guard still falls $73 million below
    last year's funded amount. The recapitalization rate for the Air Guard
    is 163 years--just slightly less than 100 years off the 67 year goal
    set by DOD. Given that only 24 percent of this year's request buys
    current mission projects, how do you plan to buy down the
    recapitalization rate?
        Answer. The OSD goal for the Services to achieve a 67-year
    recapitalization rate is by fiscal year 2008; a goal which the Air
    National Guard is currently programmed to meet. The Air National
    Guard's fiscal year 2006 and fiscal year 2007 MILCON programs continue
    to be dominated by new mission requirements for the beddown of the C-5
    at Memphis, TN and Martinsburg, WV. Projects associated with these
    beddowns are primarily new footprint and do not count toward the
    recapitalization rate. The completion of these beddowns and the up-turn
    in funding projected for fiscal year 2008 will make this possible.
                                     ______

                Questions Submitted to Major General L. Dean Fox

              Questions Submitted by Senator Kay Bailey Hutchison

                   SUSTAINMENT/BASE OPERATIONS SUPPORT (BOS)

        Question. General Fox, your testimony notes your restoration and
    modernization (R&M) backlog will grow to nearly $9.8 billion in 2006.
    It also notes your request for R&M funds was restricted to $173 million
    in fiscal year 2006. How do you expect to make any progress against the
    backlog with such small R&M request?
        Answer. The readiness of our infrastructure remains an emphasis
    item for the Air Force; however, near-term fiscal constraints
    prohibited us from bringing forward a more robust R&M request. During
    the Program Review period, the Air Force was forced to react to major
    adjustments in the overall Department of Defense budget, including
    reductions of almost $4.8 billion to the Air Force budget in fiscal
    year 2006. In developing options to source funding in response to this
    direction, we looked at the full range of Air Force programs, from
    flying programs to installation support programs. While our fiscal year
    2006 budget request for R&M is less than we would prefer, in the out-
    years we intend to invest more heavily in critical infrastructure
    maintenance and repair through our R&M program in order to achieve a
    facility recapitalization rate of 67 years by fiscal year 2008. This
    strategy is in line with established OSD goals. This additional
    investment in our R&M program will assist in making progress against
    our R&M backlog.
        Question. General Fox, your testimony notes your restoration and
    modernization (R&M) backlog will grow to nearly $9.8 billion in 2006.
    It also notes your request for R&M funds was restricted to $173 million
    in fiscal year 2006. What funding strategy does the Air Force intend to
    employ to bring down this backlog?
        Answer. Our strategy is to invest more heavily in the out-years in
    critical infrastructure maintenance and repair in order to achieve a
    facility recapitalization rate of 67 years by fiscal year 2008. This
    strategy is in line with established OSD goals. This strategy will
    assist in making progress against our R&M backlog.
        Question. General Fox, your testimony notes your restoration and
    modernization (R&M) backlog will grow to nearly $9.8 billion in 2006.
    It also notes your request for R&M funds was restricted to $173 million
    in fiscal year 2006. Given the backlog, why has the Air Force not asked
    for more R&M?
        Answer. Near-term fiscal constraints prohibited us from bringing
    forward a more robust R&M request. During the Program Review period,
    the Air Force was forced to react to major adjustments in the overall
    Department of Defense budget, including reductions of almost $4.8
    billion to the Air Force budget in fiscal year 2006.
        Question. General Fox, your testimony notes your restoration and
    modernization (R&M) backlog will grow to nearly $9.8 billion in 2006.
    It also notes your request for R&M funds was restricted to $173 million
    in fiscal year 2006. Why has the Air Force not submitted a larger
    sustainment and BOS budget?
        Answer. Sustainment, Base Operating Support (BOS), and Restoration
    and Modernization (R&M) are three separate programs, each with separate
    requirements and associated funding goals. For Sustainment, the Air
    Force's fiscal year 2006 budget request is in keeping with established
    OSD goals; namely, it represents 95 percent of the requirement derived
    from the OSD Facility Sustainment Model. For BOS, while our fiscal year
    2006 budget request is less than we would prefer, near-term fiscal
    constraints prohibited us from bringing forward a more robust BOS
    budget. During the Program Review period, the Air Force was forced to
    react to major adjustments in the overall Department of Defense budget,
    including reductions of almost $4.8 billion to the Air Force budget in
    fiscal year 2006. In developing options to source funding in response
    to this direction, we looked at the full range of Air Force programs,
    from flying programs to installation support programs.
                                     ______

                Questions Submitted by Senator Dianne Feinstein

                          VANDENBERG AFB/MCCLELLAN AFB

        Question. General Fox, the Air Force plans to spend $34.7 million
    in fiscal year 2006 for environmental remediation at the former
    McClellan AFB. Could you please tell me, what is the extent of
    remediation efforts still required at McClellan, how much time and how
    much funding is still required?
        Answer. Former McClellan AFB is on the EPA National Priorities List
    (NPL) list and is a very complex environmental site. There are nine
    operable units, which have been organized into 15 specific Records of
    Decision (RODs). Two RODs are completed. 2010 is the projected Final
    ROD date, with 2015 being the final remedy in place date. The Estimated
    Cost to Complete is $752 million. The Air Force is seeking to implement
    alternate contracting methods to buyout all or portions of the
    environmental program over the FYDP. Currently 11 percent of the
    property is conveyed. All conveyances are estimated for completion by
    end of 2016.

                           FOREIGN CURRENCY EXCHANGE

        Question. Maj Gen Fox, Your program notes the challenging foreign
    currency exchange rate. The dollar has been in decline for a couple of
    years now. When submitting requests for this budget, did your estimates
    take into consideration the weakened value of the dollar? If so, given
    a consistent dollar valuation, will exchange rates continue to be a
    challenge in fiscal year 2006?
        Answer. Yes, we have taken into consideration the weakened value of
    the dollar in developing the cost estimates of our fiscal year 2006
    overseas projects. However our prior year projects were programmed at
    higher rates of exchange and the issue of exchange rates will remain a
    challenge when making payment for these projects in fiscal year 2006.

                              SUBCOMMITTEE RECESS

        Senator Hutchison. Yeah.
        Well, thank you very much. Those are my questions. And I
    appreciate your being here and look forward to working with
    you.
        Mr. Kuhn. Thank you very much.
        General Fox. Thank you.
        Senator Hutchison. Thank you.
        Our hearing is recessed.
        [Whereupon, at 3:16 p.m., Wednesday, March 16, the
    Subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

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

                                  ----------

                             TUESDAY, JUNE 28, 2005

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 4 p.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Kay Bailey Hutchison (chairman)
    presiding.
        Present: Senators Hutchison, Allard, Feinstein, Johnson,
    and Landrieu.

                           OVERSEAS BASING COMMISSION

    STATEMENT OF HONORABLE AL CORNELLA, CHAIRMAN, OVERSEAS
                BASING COMMISSION
    ACCOMPANIED BY:
            MAJOR GENERAL LEW E. CURTIS, III, UNITED STATES AIR FORCE
                (RET.)
            VICE ADMIRAL ANTHONY A. LESS, UNITED STATES NAVY (RET.)
            BRIGADIER GENERAL KEITH MARTIN, PENNSYLVANIA ARMY NATIONAL
                GUARD (RET.)
            LIEUTENANT GENERAL H.G. TAYLOR, UNITED STATES ARMY (RET.)

               OPENING STATEMENT OF SENATOR KAY BAILEY HUTCHISON

        Senator Hutchison. The hearing will come to order. I
    apologize for being late, I thank all of you for being here and
    I'm very pleased that we now have our report and our hearing.
    The Commission has concluded that making the necessary changes
    in the report did not have a material affect on its conclusions
    and recommendations, thus the report has been edited in
    response to concerns of the Department, and we appreciate all
    of the cooperation by both the Department of Defense and the
    Overseas Basing Commission.
        The Overseas Basing Commission was created in November of
    2003 in the Military Construction Appropriations Act, Senator
    Feinstein and I were the authors of that legislation. We passed
    the legislation because we were concerned that the United
    States was pouring large amounts of money into overseas
    military facilities that were more appropriate to the Cold War
    than to the security environment of the 21st century. I also
    was concerned that the Department was not thinking boldly
    enough about the posture more appropriate to that new security
    environment, and creating the Commission served a dual
    purpose--providing Congress with an independent view of our
    overseas basing needs, and working with the Department of
    Defense to tackle this effort vigorously.
        We have before us a fresh look at these important
    questions, not necessarily does it have all the right answers,
    but it is another independent view of the subject. I believe
    we'll find that the Commission's very existence will prove to
    have been as important as any of the specific recommendations
    it has to make.
        I'm pleased to note the Commission report overall is in
    support of the Global Basing Strategy of the Department of
    Defense, and while the Commission diverges from the Department
    on some of the specifics, its plan, in the words of the report
    says, ``The Commission fully understands the need for change
    and endorses most of the initiatives undertaken in the
    Department of Defense's Integrated Global Posture and Basing
    Strategy.''
        I will not read the rest of my opening statement, but just
    to say that I think the goal of the Commission and our goal in
    passing the legislation authorizing the Commission has been
    met, and I think that in the main it is also in agreement with
    the Department of Defense Global Basing Initiative. There are
    some differences, and we will discuss those. We will certainly
    want to hear from the Department of Defense as well, but I
    think when we are looking at some of the problems that we had
    in transporting troops during the run up to the situation in
    Iraq, and the training constraints that we have at overseas
    bases, that certainly the move now to having more troops at
    home and deploying from here is something that is in the works,
    thanks to a lot of effort on the part of the Department.
        So, with that, let me ask my ranking member, Senator
    Feinstein for her opening statement, and as the co-sponsor of
    the legislation to create the Commission, we're very pleased
    that we now have a report, and we believe it will add to the
    body of knowledge to make all of our bases better training
    facilities, and better places for our service men and women to
    live and work. Senator Feinstein.

                     STATEMENT OF SENATOR DIANNE FEINSTEIN

        Senator Feinstein. Thank you very much, Madame Chairman,
    and my thanks to the Commission, to its Chairman, Al Cornella,
    to the members, I really think you have done an excellent job.
    I had a chance at reading the classified version and have just
    received this new one now and look forward to looking through
    it.
        I am very pleased you're working through the classification
    issues which have arisen in conjunction with the report, and
    we've reached the point where we can go forward with this
    hearing today. Senator Hutchison's and my goal in establishing
    the Commission was really to enable and obtain an objective,
    informed overview of the global basing plan from the
    perspective of experts outside of the Pentagon. Your report
    offers precisely the type of overview we were hoping to achieve
    and it raises a number of valid and very thought-provoking
    questions.
        The timing of the report in conjunction with the ongoing
    BRAC process could not really be more propitious. I understand
    you've been invited to testify before the BRAC Commission, and
    I would anticipate that your insight into the global basing
    plan will be a valuable asset to them in their deliberations.
        I agree with both you and the Defense Department that it is
    time to re-think the stationing of the United States military
    forces around the world, but I also share your concerns that
    the Pentagon may be moving too fast, too soon without giving
    enough consideration to America's overarching foreign policy
    and national security objectives. This isn't just an exercise
    of moving pieces on a chessboard. When, how and where we
    reposition existing military forces overseas has a far-reaching
    impact, not only on our national security interest, but also on
    a whole host of economic and political interests. The movement
    of troops from Europe and Korea back to the United States will
    have a huge impact on the communities to which they are
    returning, as your report rightly points out, quality of life
    is a key element of the global re-basing strategy, so the
    Department needs to be very careful to avoid returning American
    troops and their families to bases in communities that are not
    ready to receive them, and this is a major concern, I think, of
    Senator Hutchison, and certainly of my own.
        How the Pentagon expects to accomplish this in the midst of
    the wholesale realignment of domestic bases that will occur as
    a result of BRAC is a question that needs to be answered, and
    interestingly enough, I see where, in your report, you
    mentioned that costs, which are anticipated to be between $9
    and $12 billion with only $4 billion currently budgeted from
    fiscal year 2006 to 2011. You mentioned that these may be
    understated, and that an independent analysis conducted for
    your Commission put the tab at closer to $20 billion. I think
    this is something that we need to come to grips with, I hope,
    Mr. Cornella, that you will talk about that in your remarks.
        Secondly, timing and synchronization are central themes,
    but your report is a great first step, I really want to thank
    you for it, and I certainly look forward to your testimony.
    Thanks, Madame Chairman.
        Senator Hutchison. Thank you. Senator Allard.

                       STATEMENT OF SENATOR WAYNE ALLARD

        Senator Allard. Madame Chairman, I would like to make my
    full statement a part of the record.
        But I would just like to just briefly make these comments.
        In some respects the Commission was critical of the manner
    in which the Department of Defense put together its current
    Integrated Global Basing Posture and Basing Strategy, and some
    may even be tempted to argue that the Commission's
    recommendations indicate that we need to delay, or stop
    entirely, the BRAC process. Madame Chairman, I disagree with
    that assessment.

                               PREPARED STATEMENT

        I note that the Overseas Basing Commission stating it
    fully, agrees with the Department's contention, that there's
    considerable need for a rebasing initiative, in fact, the
    Commission strongly endorses most of the rebasing initiatives
    undertaken by the Department of Defense, and I look forward to
    getting to the heart of the recommendations offered by the
    Commission, and I believe that this hearing will further
    demonstrate how important it is that the BRAC process move
    forward, and that the Department's re-basing initiative is
    fully implemented, and I note with interest that there's one
    bullet in your conclusions and recommendations where you state
    that the overseas basing posture of the United States and
    domestic base closure and realignment are closely related.
    Although the Commission calls for an overarching review of the
    overseas basing posture, you state that we believe that the
    BRAC process should move forward as scheduled, thank you,
    Madame Chairman.
        [The statement follows:]

                   Prepared Statement of Senator Wayne Allard

        Thank you, Madame Chairman for holding this important hearing.
        The Commission on the Review of Overseas Military Facility
    Structure of the United States has performed a great service for our
    country. The Commission's report lays out several principles that
    should be considered when reviewing the Department of Defense's
    overseas rebasing initiative. These principles include among others:
      --Ensuring that the rebasing initiative is tied to a master plan
      --Coordinating with agencies outside the Department of Defense
      --Assessing the impact of rebasing on intelligence, force protection,
            homeland security, and other important national priorities
        In some respects, the Commission was critical of the manner in
    which the Department of Defense put together its current Integrated
    Global Posture and Basing Strategy. Some may even be tempted to argue
    that the Commission's recommendations indicate that we need to delay or
    stop entirely the BRAC process.
        Madame Chairman, I disagree with that assessment. I note that the
    Overseas Basing Commission stated it fully agrees with the Department's
    contention that there is considerable need for a rebasing initiative.
    In fact, the Commission strongly endorsed most of the rebasing
    initiatives undertaken by the Department of Defense.
        I look forward to getting to the heart of the recommendations
    offered by the Commission. I believe that this hearing will further
    demonstrate how important it is that the BRAC process move forward and
    that the Department's rebasing initiative is fully implemented.
        Thank you for the opportunity to say a few words. I look forward to
    the testimony of our witnesses.

        Senator Hutchison. Senator Landrieu.

                     STATEMENT OF SENATOR MARY L. LANDRIEU

        Senator Landrieu. Thank you, Madame Chair, I have a full
    statement for the record.
        I would just like to add, I think it's very important that
    our desires and needs as a Nation be brought into line with our
    budget and monies that we have to allocate, and I'm seeing,
    unfortunately, a pattern of setting out on a course
    underestimating the costs associated, and basically running up
    the debt. And so, I think we've got to be very practical in
    this approach, we have some strategic defense postures to keep
    in place, but we also have some very real budget constraints,
    and if the cost is going to be twice or three times as much as
    we had anticipated, then we're going to need to find the money
    somewhere, and just can't pretend that we can do this with
    minimal to no cost, and we've got to be able to be more
    realistic about that, and I'll say more about that in the
    statement that I submit. Thank you.
        [The statement follows:]

                 Prepared Statement of Senator Mary L. Landrieu

        Madame Chairman, thank you for calling this hearing to review the
    Overseas Basing Commission recommendations.
        Since the end of the Cold War, the United States has stood as the
    unrivaled military leader in the world. Our fighting men and women have
    preserved national security and served our foreign policy interests
    admirably since the collapse of the Soviet Union. However, the attacks
    of September 11, 2001 on the United States highlighted the need to
    transform our national defense strategy to address the terrorist and
    extremist threats which seek to destroy our country's influence in the
    world.
        Admiral Nimitz, one of our foremost Naval heroes defined the task
    for us. He noted that ``whoever gets there firstest with the mostest
    wins.'' That is our contemporary challenge which positions U.S.
    fighting men and women abroad. We must place them around the globe in
    such a way as to assure that U.S. forces are the first in the The
    Theater, and that they can bring overwhelming force to bear.
        Yet while our government contemplates a global strategy to keep our
    Nation more secure, we must also consider the personal impacts our
    decision-making will have. As we contemplate closing facilities in
    Germany and other places in Europe, we must keep a special focus on our
    military families. We are already asking them to make incredible
    sacrifices. We do not need to add the inevitable burdens of separation
    and worry by relocating our bases to places where it is unlikely or
    impossible for their families to follow.
        Another consideration for this process is ensuring that our allies
    and friends recognize that we aim to strengthen our commitment to
    secure our common interests. We must explore ways in which we can
    together transform our partnership in order to enhance our collective
    defense capabilities. It is time for our allies to work toward this
    goal together. Gone are the days when the United States can be expected
    to foot the bill for every cause.
        Madam Chairman, while I trust that all the members of the Overseas
    Basing Commission will provide valuable recommendations to strengthen
    the U.S. Global Defense Posture, I think it is important that this
    subcommittee keep in mind that managing this complex concept is a
    costly endeavor. While have put much effort into the building blocks of
    posture changes which include the facilities that make up our overseas
    footprint. However, we also need a new approach to managing the force
    which includes our permanent and rotational presence overseas must
    include our allies and their own accountability for the goals which
    they can no longer expect to achieve without their own proportionate
    investment.
        We must make certain that we keep our Nation's obligation to those
    who have served and sacrificed in its defense. I believe that the U.S.
    Global Defense Posture is important and necessary. I also believe that
    our commitment to this endeavor must be tempered by realistic
    expectations to be achieved and by appropriate and responsible
    contributions to be made by the United States as well as our Allies.
        In its report, the Overseas Basing Commission expressed areas where
    the Department of Defense can provide for a more secure America.
    Suggestions in the report range from better communication and a wider
    spectrum of views by partners in the decision-making process to a more
    cohesive overall design which would be administered by a specific body
    that would be assigned responsibilities to both guide and monitor its
    implementation. Also, the Commission suggests Congress exercise its
    full authority in ensuring that plans and programs are appropriate to
    the task.
        The Commission's recommendations are critical in the strategy of
    transformation which will change the face of national security for many
    years to come. It is essential we have an honest and open dialogue to
    insure America continues to preserve the lives of its citizens for
    generations to come.
        Thank you all for your testimony. Also, I hope that in the future
    we will be able to discuss one of the most important issues which faces
    this committee, the shortfall in Veterans Health Care funding.
        Madame Chairman, Senator Hutchison, thank you for your continued
    leadership on these issues. I look forward to the testimony of our
    witnesses.

        Senator Hutchison. Senator Johnson.

                        STATEMENT OF SENATOR TIM JOHNSON

        Senator Johnson. Thank you, Madame Chairman. I want to in
    particular welcome a fellow South Dakotan, Al Cornella,
    Chairman of the Commission, to the panel today and express my
    appreciation and the Senate's appreciation for you leadership.
    Mr. Cornella is a former BRAC Commissioner and has been willing
    to take on the very significant task of chairing the Overseas
    Basing Commission, and we're appreciative of that, Al, we are
    proud of your service to the country. I welcome our other panel
    members here, as well, who have each of them, undertaken a very
    large scale, but very important undertaking, and will serve the
    Senate well, I'm certain. I will submit a full statement,
    Madame Chairman.
        I do, however, want to note that I believe that the
    Overseas Basing Commission recommendations and the ongoing
    quadrennial review are of such significance that it would have
    been my preference to have seen those issues resolved prior to
    going onto the BRAC Commission's deliberations about the
    closure and the Department of Defense's recommendations,
    frankly, for the closure of military bases around the country.
    I think that all of these interact with each other, and it is
    hard for me to imagine how the recommendation from the
    Department of Defense could be, well premised without in fact
    having prior access to the studies and reviews of the
    quadrennial review as well as the Overseas Basing Commission.
        Nonetheless, here we are, and I look forward to the
    testimony of the Commission, and I want to tell the Commission
    that I was very supportive of this effort I think that your
    work is going to be a very constructive and positive
    contribution to our overall review of America's military
    posture in the world and domestically as well, thank you.
        [The statement follows:]

                   Prepared Statement of Senator Tim Johnson

        Mr. Johnson. I would like to thank Chairwoman Hutchison and Ranking
    Member Feinstein for calling today's hearing to discuss the Overseas
    Basing Commission's interim report.
        I would also like to thank Chairman Al Cornella for appearing
    before the Subcommittee today. The work performed by the Overseas
    Basing Commission is vitally important to our national security and the
    long-term viability of our military force.
        Today the Military Construction and Veterans Affairs Subcommittee
    will hear testimony from Commission members about redeploying
    servicemembers from U.S. military facilities overseas. Their report
    could not come at a more important time.
        The threats facing the United States today are vastly different
    from those during the Cold War. Much has changed since that conflict
    ended and we must shift our security posture to confront new and
    emerging enemies. In addition, Secretary Rumsfeld has released his list
    of proposed domestic base closures and realignments, and the Base
    Realignment and Closure (BRAC) Commission has begun their important
    work to review and revise the Secretary's list. Domestic base closures
    have a profound effect on our military force and the economic health of
    local communities. We should not close a single domestic base if it may
    unduly compromise our ability to defend our homeland.
        Currently, the Department of Defense is undertaking a monumental
    shift in overseas deployments. The threats confronting the United
    States have changed dramatically following the collapse of communism
    and the terrorist attacks of September 11. In response, approximately
    70,000 soldiers, as well as 100,000 family members and civilian
    employees, will be returning from overseas in the next decade. This
    shift in our military force abroad is long overdue.
        However, the Overseas Basing Commission's interim report raises a
    number of important questions that must be addressed. For instance, the
    U.S. military plans to move troops stationed overseas back to American
    soil, but according to the Commission, if a crisis arises abroad, the
    military does not have enough sea and air transportation to rotate
    forces rapidly enough to respond. Just as troubling, the Bush
    Administration has projected it will cost $12 billion to redeploy
    soldiers back to the United States, but has only budgeted $4 billion
    for fiscal years 2006 through 2011. The Commission believes these costs
    are understated and according to their independent analysis the price
    tag is closer to $20 billion.
        Furthermore, if the Defense Department's proposed changes in
    overseas bases are enacted, it will result in additional troop
    rotations. The Commission's report argues that extended and more
    frequent rotations could strain U.S. military personnel and their
    families to the point where the United States is incapable of
    maintaining an all-volunteer force. I am extremely concerned with these
    conclusions. The military is already having trouble meeting recruitment
    and retention quotas. Creating more stress for our soldiers and their
    families will exacerbate this problem and irreparably damage our
    military.
        In response to these concerns, the Commission cautions the
    Department of Defense and urges them to reduce the speed of returning
    soldiers from overseas bases, and I believe this idea has merit. At a
    time when we are fighting wars in Iraq and Afghanistan, we must ensure
    the redeployment of American service members is in accord with our
    long-term strategic defense goals and should be thoughtfully planned
    and executed.
        Additionally, the Commission contends overseas redeployment should
    wait until the Department of Defense determines which domestic military
    bases will be shuttered during this round of base closures. If
    Secretary Rumsfeld and the Pentagon continue to move forward with their
    plan to bring troops back to the United States from overseas
    deployments, I believe we must consider postponing this current round
    of domestic base closures. Simultaneously closing domestic and overseas
    bases may irrevocably damage our ability to defend against threats at
    home and abroad.
        I commend the Overseas Basing Commission for addressing the
    critical issues and concerns raised in preparation for shifting troops
    back to the United States. I strongly encourage Secretary Rumsfeld and
    the Department of Defense to seriously consider the Commission's
    recommendations. We must reorganize our military force in order to
    respond to the threats of the 21st century. The challenge is to do so
    in a manner that is not detrimental to our national security and the
    men and women who proudly serve our country.

        Senator Hutchison. Thank you, Senator Johnson. I think that
    the Department in the next panel will discus how it took into
    consideration the troops that were coming back during the BRAC
    process, so we will get a chance to question them on that.
        Mr. Cornella, thank you for Chairing the Commission, I want
    to thank each Commissioner for all of the time and effort that
    you have put into doing this, you came to Washington many
    times, you went overseas, we appreciate the effort for this
    volunteer force that you gave us, and with that, let me ask
    you, Mr. Cornella, to give us the synopsis of the report, and
    whatever you would wish you say.

                            STATEMENT OF AL CORNELLA

        Mr. Cornella. Madame Chairman, Senator Feinstein, staff
    members, distinguished guests, members of the general public,
    my name is Al Cornella. As I was introduced, I serve as the
    Chairman on the Commission of Overseas Military Facilities
    Structure of the United States, thankfully more commonly known
    as the Overseas Basing Commission.
        I serve with five other Commissioners, four of whom are
    present today. From my far left, the Commission vice-Chairman
    Lou Curtis, Major General United States Air Force, Retired,
    Tony Less, United States Navy, Retired, Pete Taylor on my
    right, Lieutenant General, United States Army, Retired, and
    Keith Martin, Brigadier General, Pennsylvania Army National
    Guard, Retired. Dr. James Thompson, our sixth Commissioner and
    President of BRAC is out of the country and unable to be here
    with us today.
        I would also like to introduce the Commission's Executive
    Director, Ms. Patricia Walker, seated behind me.
        Madame Chairman, I would respectfully ask that the
    statements you received be entered into the record, and I be
    allowed to make a brief opening statement.
        The Commission's talented staff included lead research
    analysts, a general counsel administrative staff, and analysts
    detailed from the Department of Defense and Government
    Accountability Office. The Commissioners and staff have worked
    diligently to prepare the May 2005 report. A final report will
    be provided to Congress and the President by August 15, 2005.
    We were asked to provide this early report so it might be used
    in conjunction with the domestic BRAC process.

                                    OVERVIEW

        The Overseas Basing Commission was established by public
    law in fiscal year 2004. The Commission's task is to
    independently assess whether the current overseas basing
    structure is adequate to execute current missions, and to
    assess the feasibility of closures, realignments or
    establishment of new installations overseas to meet emerging
    defense requirements.
        However, the Commission's work is not intended to preclude
    the Department of Defense's effort toward developing an
    integrated global presence and basing strategy, or IGPBS, and
    you'll probably hear me use that acronym several times. Rather,
    the Commission report should assist Congressional Committees in
    performing their oversight responsibilities for DOD's basing
    strategy military construction appropriations, and the 2005
    base re-alignment and closure determinations.
        But one thing I would like to add as I note from your
    opening statements, that there are views about criticism of the
    Department. I do not believe that our report is offered as
    criticism of the Department, it's offered as ways to strengthen
    the IGPBS plan, but we feel these are constructive thoughts
    that we're sending forth.
        The Commission has been active since May 2004 and began
    with a thorough analysis of national security, defense and
    military strategies. The Commission completed a careful review,
    the Foundation for Global Reposturing, the 2004 Department of
    Defense, again IGPBS. It is important to note, at this point,
    the Department on several occasions has advised us that we are
    entitled to and have received all of the information that has
    been provided to Congress relative to overseas basing.
        Second, based on the Commission's interview, interviews of
    key officials in the office of the Secretary of Defense, the
    Joint Staff, the Combatant Commanders and the State Department,
    the Commission developed evaluation criteria to assess how
    effectively the current and future overseas basing posture
    support current and future national security and military
    operations. In addition, the Commission consulted with former
    senior military leaders, and other national security experts.
    We conducted four public hearings where we received testimony
    from former experts, military experts, defense analysts and
    experts on military family issues. At the final hearing, we had
    representatives from the Department of Defense and the State
    Department. We have engaged in briefings from the Department of
    Defense, the State Department, the Congressional Budget Office,
    Congressional research service, and other entities. We visited
    military installations in many countries, meeting with U.S.
    forces, embassy representatives, foreign military officers and
    local officials. We have met with the majority of combatant
    commands, and in most cases, with the commanders and their
    staffs. We have made two trips to the Pacific Command, three to
    the European Command, and one to the Central Command. We spent
    about 2 months overseas traveling, the Commissioners also
    received briefings from U.S. Southern Commands, Special
    Operations Command, and Transportation Command. We have
    interacted with several thousand people over the past year, the
    vast majority from within the Department of Defense. All of the
    Commissioners and I have learned a great deal from these
    discussions, both here and abroad.
        Based on this review and analysis, the Commission has
    identified six major areas of concern--geopolitical
    considerations, timing and synchronization, operational
    requirements, mobility, quality of life and costs, and I will
    touch on a few of these briefly, and then we are prepared to
    address all of them in your questions.

                           TIMING AND SYNCHRONIZATION

        The Commission would like to make note that decisions have
    been made in regard to locations and force levels before the
    2005 Quadrennial Defense Review, QDR, and the 2005 Mobility
    Capability Study had been completed. The simultaneous
    activities of Service Transformation Army Modularity Operation
    Enduring Freedom, Operation Iraqi Freedom and the Global War on
    Terrorism, IGPBS, BRAC, resetting the forces and rebuilding, of
    pre-positioned equipment--have all competed for funding within
    a limited budget, not to mention the stress that's created on
    the forces, the current schedule of IGPBS moves will adversely
    impact the service's ability to adequately fund modernization
    and readiness.
        In regard to mobility, strategic and infra-theater, lift
    and sea lift capabilities must be significantly upgraded. We
    have yet to meet the lift capabilities identified by the
    mobility requirement study of 2005, which was conducted in the
    year 2000. In addition, announcements of global reposturing are
    being made before the presently ongoing Mobility Capability
    Study is concluded. Again, it would seem prudent to wait for
    the results of that study. It is clear that the mobility of our
    military forces being stressed by the current strain on
    strategic infra-theater lift and sea lift capabilities, the
    stress on strategic lift capabilities is being caused in large
    part by ongoing military operations in Afghanistan and Iraq.
    Strategic mobility is the key to our ability to respond to
    events worldwide, plans for sea and air lift capabilities as
    well as pre-positioned equipment sets must take into account
    the additional demands that IGPBS could place on an
    increasingly continental United States-based force. Surging
    forces from the continental United States will be problematic
    if strategic and tactical life capabilities and pre-positioned
    stocks are not in place.

                                QUALITY OF LIFE

        Next, I'll briefly turn to quality of life issues. These
    issues are complex, but are also key concerns of the global
    positioning strategy, primarily because the United States
    relies on an all-volunteer force. In order to sustain the
    military force both in numbers and in strength, the
    expectations of military personnel and their families with
    regard to active and reserve duty as well as redeployments must
    be met. If these expectations are not adequately met, then the
    U.S. military risks being severely compromised. Needless to
    say, this has enormous consequences politically, and in terms
    of maintaining national security. We have a moral obligation to
    our men and women in uniform and to their families to provide
    the quality of life support that they deserve. Returning forces
    and families should have housing, schools for their children
    and adequate medical facilities in place before they return,
    and the same should be maintained abroad until the last service
    member departs.
        The Commission calls this the ``last day-first day''
    approach; not only does this have moral implications, but it
    will also be reflected in retention rates. The Commission notes
    with concern that the impact in recruiting and retention by
    IGPBS rotational forces has not been adequately evaluated, nor
    have associated risks to sustaining the voluntary force been
    assessed. We strongly recommend that this be given priority,
    and that necessary assessments be completed as quickly as
    possible.

                          GEOPOLITICAL CONSIDERATIONS

        In the present era of the global War on Terror and the
    indisputable global competition in defense, intelligence,
    diplomacy, commerce and energy matters, the Commission feels it
    would be wise to broaden the underlying assumptions, scope and
    participation in the IGPBS process to include vital players
    involved in other areas of national security. The inter-agency
    process, for example, might include the Departments of Defense,
    State, Energy, Homeland Security, Justice, Commerce and
    Treasury, the National Intelligence Director and others. After
    completing the interim report, we were advised that have a
    fourth Commission, but we of the fourth Commission have come to
    a similar conclusion--the others are in the 9/11 Intelligence
    Commission--while moving troops back to the United States may
    be a political priority, force projection demands can only be
    met by developing a rebasing strategy and coordination with
    strategic U.S. alliances abroad, both existing and future.
        Many of our overseas basing capabilities rest on
    contingencies such as future political relations with bilateral
    partners involving fully negotiated and ratified legal
    agreements that support those relations. In many cases the
    status of forces agreements, Article 98 agreements and other
    legal agreements are not in place at the proposed new
    locations.

                                  TROOP LEVELS

        I will mention one specific recommendation, as it is the
    only one that has potential to change the number of returning
    troops, and we estimate this recommended change to affect
    roughly 4,000 troops. In order to hedge against uncertainty in
    regard to near-term threats, demonstrate aid and continued and
    enduring commitment to NATO, and allow for heavy force
    military-to-military contact with our NATO allies, at least one
    of the heavy brigade combat teams scheduled for return to the
    United States should remain in Europe, fully manned, until one,
    the Balkans support mission is lifted to a ground-based
    defensive tank killing system is stationed in Europe and
    Operation Iraqi Freedom is mitigated. Additionally, heavy
    brigade combat teams' equipment should be repositioned to float
    in the region. These recommendations are in addition to the
    Department's plan for a Stryker Brigade in Germany, and the
    173rd Airborne Brigade in Italy, and again, we offer these
    suggestions only to strengthen the Department's plan, not as a
    criticism.

                               PREPARED STATEMENT

        As a final note, I wish to thank the members of the
    committee for inviting the Commission to appear today. It's
    been my privilege to briefly describe the Commission work to
    date. Of course, the report has not been finalized and it is my
    hope that this will be the beginning of dialogue in this
    matter, so that the Commission can strengthen its analysis,
    conclusions and recommendations before submitting the final
    report on August 15. Please be assured that the Commission and
    staff are open to the views and concerns of Congress.
        Thank you for giving us this opportunity to serve your
    needs and those of the Nation, and we will be happy to answer
    any questions you may have at this time.
        [The statement follows:]

                       Prepared Statement of Al Cornella

        My name is Al Cornella, and I serve as the Chairman of the
    Commission on the Review of Overseas Military Facility Structure of the
    United States, more commonly known as the Overseas Basing Commission
    (OSBC).
        I serve with five other Commissioners four of whom are present
    today--the Commission Vice Chairman, Lewis Curtis, Major General United
    States Air Force (Retired); Anthony Less, Vice Admiral, United States
    Navy (retired); Pete Taylor, Lieutenant General, United States Army
    (Retired); Keith Martin, Brigadier General, Pennsylvania Army National
    Guard (Retired). Dr. James Thomson, our sixth Commissioner and the CEO
    and president of RAND is out of the country and could not be here
    today. I would also like to introduce the Commission's Executive
    Director, Ms. Patricia Walker.
        The Commission's talented staff included lead research analysts, a
    general counsel, administrative staff, and analysts detailed from the
    Department of Defense and the Government Accountability Office. The
    Commissioners and staff have worked diligently to prepare this May 2005
    report. A final report will be provided to Congress and the President
    by August 15, 2005. We were asked to provide this early report so it
    might be used in conjunction with the domestic BRAC process.
        The Overseas Basing Commission was established by public law in
    fiscal year 2004. The Commission's task is to independently assess
    whether the current overseas basing structure is adequate to execute
    current missions and to assess the feasibility of closures,
    realignments, or establishment of new installations overseas to meet
    emerging defense requirements.
        However, the Commission's work is not intended to preclude the
    Department of Defense's efforts toward developing an integrated global
    presence and basing strategy. Rather, the Commission report should
    assist Congressional committees in performing their oversight
    responsibilities for DOD's basing strategy, military construction
    appropriations, and the 2005 Base Realignment and Closure Commission
    determinations.
        This Commission has been active since May 2004, and has conducted
    four hearings where we received testimony from former military experts,
    defense analysts, and experts on military family issues. We have
    engaged in briefings from the Department of Defense, the State
    Department, the Congressional Budget Office, Congressional Research
    Service, and other entities. The Commission has met with commanders and
    received extensive briefings on the transformation plan for the
    European Command, Pacific Command, and Central Command. The Commission
    has also met with the Transportation Command, Special Operations
    Command, and Southern Command. The majority of our time was dedicated
    to the areas of greatest change.

    Main Testimony
        Congress created the Overseas Basing Commission as an independent,
    unbiased entity to produce a report that advises Congress on the
    current and future overseas basing structure of U.S. military forces.
    This is truly a daunting task. In order to explain the preliminary
    conclusions and recommendations that the Commission is prepared to
    offer to this committee today, let me begin by explaining the analytic
    approach we took examining and thoroughly studying various important
    aspects of the overseas basing structure.

    Analytic Approach
        First, the Commission began with a thorough analysis of national
    security, defense, and military strategies. The Commission completed a
    careful review of the foundation document for global reposturing, the
    2004 Department of Defense Integrated Global Presence and Basing
    Strategy (IGPBS).
        Second, based on the Commission's interviews of key officials in
    the Office of the Secretary of Defense, the Joint Staff, the COCOMs,
    U.S. Transportation Command, and the State Department, the Commission
    developed evaluation criteria to assess how effectively the current and
    future overseas basing postures support current and future national
    security and military operations.
        In addition, the commission consulted with former senior military
    leaders and other national security experts. Commissioners and staff
    participated in six overseas trips to various commands. We conducted
    four public hearings where we received testimony from former military
    experts, defense analysts, and experts on military family issues. At
    the final hearing we had Mr. Doug Feith and Vice Admiral Robert F.
    Willard from the Department of Defense and Ambassador Rose Likens as a
    representative of the State Department. We have engaged in briefings
    from the Department of Defense, the State Department, the Congressional
    Budget Office, Congressional Research Service, and other entities.
        We visited military installations in many countries, meeting with
    U.S. Forces, embassy representatives, foreign military officers, and
    local officials. We have met with the majority of Combatant Commands
    and in most cases with the commanders and their staffs. The
    Commissioners have received briefings from U.S. Central Command, U.S.
    Southern Command, U.S. Special Operations Command and U.S.
    Transportation Command. We have made two trips to the Pacific Command,
    three to the European Command, and one to the Central Command. All the
    Commissioners, and I, have learned a great deal from these discussions,
    both here and abroad.
        Finally, based on its review and analysis, the Commission
    identified six major areas of concern:
      --Geopolitical Considerations;
      --Timing and Synchronization;
      --Operational Requirements;
      --Mobility;
      --Quality of Life; and
      --Costs.
        I will briefly address each area of concern, and explain the
    findings and conclusions of the Commission on each issue.

    Geopolitical Considerations
        The Commission has determined that the DOD's IGPBS does not
    adequately address current and future geopolitical and strategic needs
    in response to existing and emerging security threats for two reasons.
    First, it is the view of the Commission that the IGPBS is too narrowly
    based on military concerns. While the Commission wishes to commend the
    Department of Defense on the design of IGPBS--which is a strategy that
    is directly aimed at addressing the matrix of existing and emerging
    threats--it is clear that the IGPBS has been almost exclusively
    designed by and for the military.
        In the present era of a global war on terror and the indisputable
    global competition in defense, intelligence, diplomacy, commerce and
    energy matters, the Commission feels that it would be wise to broaden
    the underlying assumptions, scope and participation in the IGPBS
    process to include vital players involved in other areas of our
    national security. The interagency process might, for example, include
    the Departments of Defense, State, Energy, Homeland Security
    (especially Immigration and Customs and Border Patrol), Justice
    (especially the Federal Bureau of Investigation), Commerce, and
    Treasury, the National Intelligence Director, and others. After
    completing the interim report, we were advised that we are the fourth
    commission to come to this conclusion. (Others are 9-11, Intelligence,
    and Roles and Missions Commissions)
        The basic concept of the IGPBS--as established by DOD--is
    fundamentally strong, and can be further refined to include issues
    related to homeland security, law enforcement, energy, non-
    proliferation, and other pressing national needs and priorities.
    Information sharing and inter-agency coordination among government
    agencies is a top priority of this Administration, and we feel that
    IGPBS can support this goal by broadening and diversifying its approach
    and implementation.
        Indeed, many of our overseas basing capabilities rest on
    contingencies such as future political relations with bilateral
    partners fully negotiated and ratified legal agreements that support
    those bilateral relations. In many cases, the Status of Forces
    Agreements (SOFA), access agreements, Article 98 agreements, and other
    legal agreements are not in place in proposed new locations.

    Timing and Synchronization
        Another reason the Commission feels that the IGPBS should be
    modified relates to more particular matters of the proposed timing and
    synchronization of IGPBS. The Commission has concluded that while the
    IGPBS is an ambitious plan to restructure our global posture, it does
    so without fully taking into account other dynamic, ongoing and, in
    some cases, unpredictable changes.
        If the IGPBS is based on the 2001 Quadrennial Defense Review (QDR),
    why would you not wait for the results of the current 2005 QDR--
    scheduled to be completed this fall--or the 2005 Mobility Capabilities
    Study (MCS) to be completed in August before announcing movements of
    forces?
        The simultaneous activities of service transformation, Army
    modularity, Operation Enduring Freedom, Operation Iraqi Freedom, the
    Global War on Terrorism, IGPBS, BRAC, resetting the forces, and
    rebuilding of pre-positioned equipment sets all compete for funding
    within a limited budget. Not to mention the stress on forces. The
    current schedule of IGPBS moves will adversely impact the Services
    ability to adequately fund modernization and readiness.

    Operational Requirements
        The commission is concerned that heavy forces in Europe are being
    removed from the mix. We also note the strategic importance of Okinawa.
    Diminishing our capabilities on the island would pose risk to our
    allies and our national interests in the region. At the same time, we
    feel it is important to move from Futenma Marine Corps Air Station.
        Moreover, not enough attention has been given to our ability to
    train and exercise the force in the formulation of the overseas basing
    plan. Infrastructure is sparse in some regions and, capabilities for
    integrated training across services and with allies remain sketchy.
        The Commission notes with concern that the impact on recruiting and
    retention by IGPBS rotational forces has not been adequately evaluated,
    nor have associated risks to sustaining the volunteer force been
    assessed. We strongly recommend that this be given priority, and that
    the necessary assessments be completed as quickly as possible.

    Mobility
        It is clear that the mobility of our military forces is being
    compromised by the current strains on strategic lift, intra-theater
    lift, and sealift capabilities. The stress on strategic lift
    capabilities is being caused, in large part, by our on-going military
    operations in Afghanistan and Iraq. However, other tactical lift
    demands in terms of responding to political crises such as in Haiti and
    Sudan, as well as unanticipated natural disasters necessitating
    military intervention such as in the recent December 2004 tsunami
    event, also play a factor in challenging DOD's mobility capabilities.
        While moving troops back to the United States may be a political
    priority, force projection demands can only be met by developing a
    rebasing strategy in coordination with strategic U.S. alliances abroad
    (both existing and future).
        Strategic and Intra-theater air and sealift mobility capabilities
    must be significantly upgraded. We have yet to meet the lift
    capabilities identified by the Mobility Requirements Study 2005
    (conducted in the year 2000). In addition, announcements of global
    reposturing are being made before the presently ongoing Mobility
    Capabilities Study (MCS) is concluded. It would seem prudent to wait
    for the results of that study.
        Strategic mobility is the key to our ability to respond to events
    worldwide. Plans for sea and airlift capabilities, as well as
    prepositioned equipment sets, must take into account the additional
    demands that IGPBS could place on an increasingly continental United
    States (CONUS)-based force. Surging forces from CONUS will be
    problematic if strategic and tactical lift capabilities and
    prepositioned stocks are not in place.

    Quality of Life
        Next, I would like to turn to quality of life issues. These issues
    are complex but are also key concerns of the global positioning
    strategy, primarily because the United States relies on an all-
    volunteer force. In order to sustain the military force (both in
    numbers and in strength), the expectations of military personnel and
    their families with regard to active and reserve duty as well as
    redeployments must be met. If these expectations are not adequately
    met, then the U.S. military risks being severely compromised. Needless
    to say, this has enormous consequences politically and in terms of
    maintaining national security.
        We have a moral obligation to our men and women in uniform--and to
    their families--to provide the quality of life support they deserve.
    Returning forces and families should have housing, schools for their
    children, and adequate medical facilities in place before they return
    and the same should be maintained abroad until the last service member
    departs. The commission calls this a ``last-day, first-day'' approach.
    Not only does this have moral implications, but will also be reflected
    in retention rates.

    Costs
        Now, with regard to the cost of changing the overseas basing
    structure and the realignment and closure of bases in general, the
    Commission recognizes that the costs are significant. In many cases, it
    is not even possible to predict the true costs of certain strategic
    changes.
        The cost of IGPBS is estimated at $8 to $12 billion. An independent
    analysis for the commission put the figure closer to $20 billion. Many
    costs are sunk into projected host nation support that may not come to
    fruition. In other cases, the services are expected to pay from within
    their service budgets.
        For example, costs need to be estimated and planned for troop and
    base relocations. Significant upgrades of main operating bases, forward
    operating sites, cooperative security locations, and pre-positioned
    combat support sites need to be planned. Let us also not lose sight of
    the fact that significant financial investments in new weapons systems,
    strategic lift capabilities, training, and integrated systems need to
    be made in order to keep the U.S. military as the premier fighting
    force in the world.
        Finally, these changes need to keep abreast of making Quality of
    Life expenditures in order to attract and keep a dedicated military
    force. Investing in the training of our military force is also a vital
    component of maintaining strategic capability, and requires the
    expenditure of enormous funds.
        In light of this, the Commission recognizes that Congress should be
    informed of realistic costs as to coordinate strategic and operational
    requirements with budgetary needs and constraints. The Congress needs
    accurate estimates to determine what is prudent, and must be prepared
    to support IGPBS if it is to succeed.
        Therefore, in light of the previously mentioned concerns, the
    Commission makes the following recommendations:
      --The detailed synchronization required by so massive a realignment
            of forces requires that the pace of events be slowed and
            reordered. We know of no nation asking us to leave. These moves
            should be conducted at a pace that does not place additional
            stress on our armed forces.
      --That the entire effort of overseas basing be integrated into one
            overarching design that is coordinated and synchronized with
            all ongoing initiatives. Furthermore, an interagency review
            process is put in place to periodically consider the impacts of
            the global force posture and to ensure that outcomes are
            consistent with overall national interests.
      --The Commission believes strongly that Congressional oversight of
            the global posture review is truly necessary. The Congress,
            including the Armed Services and Foreign Relations Committees,
            should provide more rigorous oversight (to include hearings) of
            the global basing process given the scope and cost of the DOD
            rebasing plans, their impacts on the individual services, the
            men and women of our armed services and their families, and to
            the political and trade alliances of the United States.
            Particular attention should also be paid to the timing and
            synchronization and cost of all the related efforts.
      --DOD must ensure that all necessary infrastructure and quality of
            life programs (such as housing, medical, schools, etc.) are
            retained at overseas bases until the last day the service
            members and their families depart. At the same time, Congress
            must ensure that the necessary infrastructure and quality of
            life programs are already in place by the first day the first
            troops and families arrive from their overseas locations.
      --Moreover, the Commission strongly urges that the planned overseas
            basing structure be coordinated with strategic lift
            considerations, especially with regard to troop and equipment
            mobilization. We feel that this planning is necessary in terms
            of adequately meeting the demands of the overall global pre-
            positioning strategy
        Additionally, the Commission recommends that:
      --Marine Corps air assets assigned to Futenma Marine Corps Air
            Station on Okinawa should relocate to Kadena Air Base and/or
            Iwakuni Marine Corps Air Station; all other Marine Corps assets
            should remain on Okinawa.
      --In order to hedge against uncertainty in regard to near term
            threats, demonstrate a continued and enduring commitment to
            NATO, and allow for heavy force military to military contacts
            with our NATO allies, at least one of the heavy brigade combat
            teams scheduled for return to the United States should remain
            in Europe fully manned until: (1) The Balkan's support mission
            is lifted; (2) a ground-based offensive tank killing system is
            stationed in Europe; and (3) Operation Iraqi Freedom is
            mitigated. Additionally, a heavy brigade combat team equipment
            set should be pre-positioned afloat in the region. These
            recommendations are in addition to the current DOD plan for a
            Stryker Brigade in Germany and the 173rd Airborne Brigade in
            Vicenza, Italy.
      --Further, there should be a commitment to support continuous
            rotational deployments to Eastern Europe and provide U.S.
            military-to-military presence in the new NATO countries.
      --The U.S should review its treaty with Iceland, and update it to
            reflect the post-Cold War security environment.
      --Greater depth is needed in Africa to secure long term United States
            interests against potential competitors. The Horn of Africa
            initiative should be replicated in those locations elsewhere on
            the African Continent that may prove to be of increasing
            importance to future strategic concerns. To some extent,
            similar initiatives are needed in Latin America.

    Final Remarks
        As a final note, I wish to thank the members of this committee for
    inviting the commission to appear today. It has been my privilege to
    describe the work of the Commission to date, and to express its
    preliminary recommendations.
        Of course, the report has not been finalized, and it is my hope
    that this will be the beginning of a dialogue in this matter so that
    the Commission can strengthen its analysis, conclusions and
    recommendations before submitting its final report on August 15, 2005.
    Please be assured that the Commission and staff are open to the views
    and concerns of Congress. Thank you for giving us this opportunity to
    serve the needs of the Congress and of the Nation, and we will be happy
    to answer any questions that you may have at this time.

        Senator Hutchison. Thank you very much, Mr. Cornella, and
    we will do 5 minute rounds so that everyone will have a chance,
    and then we'll go back through for a second round.

                            TIMING OF IMPLEMENTATION

        Let me start with the slowing of the plan, and that is the
    area that concerns me the most in your recommendations. I
    certainly agree that in a perfect world we would have
    everything right up to the last day overseas for a family, and
    then the first day they arrive everything would be in place,
    but I don't know that that is realistic, nor do I think it is
    necessarily in the best interest of the families or the
    military, and here's why.
        General Schoomacker has made modularity a priority for our
    forces to be trained for the kind of combat that they are
    seeing today, and I just wondered, if you are looking at the
    military capability, did you consider that moving the troops
    home, and having the modular brigades begin to train together
    so that they could go back into Iraq and Afghanistan, what
    impact slowing the process down, as you have suggested, would
    have on that capability?
        Mr. Cornella. Well, I'm going to let some others answer as
    well, but I will start with your question, Senator. I think you
    point out exactly what may be the problem, in the sense that
    for modularity to occur, the timing is sensitive. And as forces
    are moved back from overseas for all of this to take place, it
    is intermeshed and it has to happen, but that is one of our
    concerns, that in order for that to happen on the schedule that
    has been put forth, we are very concerned that that
    infrastructure, as you indicate, will not be in place at those
    receiving locations, and we think that's critical, both in
    regard to the moral obligation to our forces that I indicated,
    and to quality of life for those folks, and for retention. I'm
    going to see if any of the other Commissioners would like to
    respond; I do have a little more to follow up on.
        Senator Hutchison. I'd be happy to hear from anyone else on
    that, but just if you could also direct your attention to the
    capabilities to do that overseas, versus on our own bases.
        Mr. Cornella. I'm not sure I understand your question,
    Senator.
        Senator Hutchison. Well, if they're trying to get these
    brigades trained and ready to go, and they designated the bases
    to do that, we don't have that kind of capacity in Europe and
    Germany right now.
        Mr. Cornella. I would turn to General Taylor.
        General Taylor. Madame Chairman, I appreciate the
    opportunity to respond to that.

                                 TROOP MOVEMENT

        I think there may be a little bit of misunderstanding about
    what we have recommended. We're not saying that the forces
    should not come back except in that one case, and we explained
    why we felt that was necessary, or suggested that the
    Department should consider leaving one heavy brigade there, but
    the majority of the forces, large majority of them, we're in
    agreement, they should come back. All we're saying is that,
    don't do it until we have both the quality of life and the
    training capability at our bases here in the United States to
    receive these. The bases here in the United States are fairly
    well occupied right now, and it's going to take some
    infrastructure, in both quality of life resources as well as
    training capability, new ranges--just a piece of desert is not
    necessarily enough to train forces, we've got to build the
    modern digistat ranges, we've got to make sure there's adequate
    infrastructure there to receive them.
        Our forces in Germany are being trained right now, yes, and
    I've served there many years, and yes, there are some
    challenges, but we have been able to train some forces over
    there, our forces have given a good account of themselves in
    Iraq and Afghanistan that have been moved from Europe, but
    again, I emphasize that we're not suggesting that they
    shouldn't come back, we just want to synchronize with the
    preparation of the infrastructure here, at the receiving bases
    here in the United States before we do that. And maybe that's
    going to happen, but based on the information that we were able
    to obtain through the conduct of our assessments, we didn't see
    that the right resources had been allocated, or the right plans
    had been made for that.
        Senator Hutchison. Well, it just seems to me that building
    permanent facilities at a foreign base that you know you're
    closing is certainly not a wise use of funds, and you cannot
    train the number of brigades that we're talking about in
    Germany, which I'm not telling you anything that you don't
    know, it just seems that maybe the focus should be more on
    getting the facilities ready in the bases that are going to
    take them here, and that would certainly be the more permanent
    use of the dollars that are going into this, because if you
    delay too long, you may be really affecting the capabilities to
    transform the military, which certainly, the Department is
    trying to do right now, and I think General Schoomacker's whole
    theory is based on having them here and getting them trained so
    that they can deploy directly from domestic bases.
        General Taylor. Madame Chairman, I think we're saying
    exactly the same thing, it's just a matter of timing, and we
    encourage the Congress to put the right amount of resources
    into it to do it as quickly as we can, and as soon as that's
    done, I think we'd be totally supportive of what you've said.
        Senator Hutchison. Well, the other thing is, pouring money
    into overseas bases that we know we're going to abandon has to
    be looked at very carefully in this big picture, and the longer
    we wait the more things can happen that cause us to lose that
    focus. So, I think we are headed for the same goals, but I do
    think we have a difference in emphasis for what should happen
    when. From my standpoint, I know that others disagree with me,
    so we will certainly want to hear from them as well, and also
    the Department. My time is up, so I'm going to stop and go to
    Senator Feinstein.

                                    MOBILITY

        Senator Feinstein. Thanks very much, Madame Chairman. I
    wanted to ask you about your comments on mobility. The reason I
    do this is because virtually wherever I go, and I talk
    particularly to Navy commanders, the question always comes down
    to strategic lift and our inabilities and deficiencies there,
    and you write that adequate strategic sea lift, airlift and
    pre-positioned equipment and stocks do not exist, and that
    current Intra-theater airlift is overstressed. Aside from the
    lift capability, the Commission is also concerned that the air
    and sea ports, inter-nodal connectivities and other mobility-
    enabling systems are not adequate to meet potential
    contingencies. Nor is there a budgetary plan to do so. And I've
    had this told to me by CINCs, by others, and I watch the
    budgets and we never seem to come to grips with it.
        Can you add, in any way, to what you've said, anybody who'd
    like to comment?
        Mr. Cornella. General Curtis, would you like to comment?
        General Curtis. Senator Feinstein----
        Senator Feinstein. Don't be shy, say what you think.
        General Curtis. Senator Feinstein, I've watched the airlift
    mobility issues since I was a Captain at headquarters back when
    the C-5 was first introduced. It is always tough to find the
    space within the budget for the adequate procurement of lift,
    and every time we go through the mobility capability study, and
    the associated budget requirements, fitting everything in, our
    unconstrained requirement is difficult, and in my experience,
    there are trade-offs made.
        But clearly, as we become a more CONUS-based force, and we
    re-do the Army, both up armor and more air mobile vehicles,
    like the Stryker, we need to balance those things very
    carefully with lift capability versus our other requirements
    for modernization. And there are no easy answers to that,
    nobody will be satisfied in the end, because there are never
    enough dollars to go around, but everybody within the equation
    that reaches a solution needs to understand that's a very
    critical balance, and I'm sure you do.

                                      COST

        Senator Feinstein. Thank you. Could you expand on your
    comments on funding, that the cost may be understated, and tell
    us a little bit about the independent analysis that was
    conducted for you that put the tab at $20 billion?
        Mr. Cornella. Thank you, I will take that question.
        I left that out of the shortened version of the statement,
    and there's not necessarily a great deal of explanation in the
    other statement we presented to you. There is in our long
    report, quite a bit of information in regard to the cost, but
    that assessment was done by a detailee from the Government
    Accountability Office, and estimated at $20 billion, and I
    think that information was validated on May 10th by a senior
    member of the Department when they said they did agree with our
    figures, but we had cast a wider net to draw those figures in.
    And so we were looking at areas other than what they were
    stating in the $10 to $20 billion, pardon me, the $9 to $11
    billion. We also did have several--two to be exact--members of
    the Department say that the cost could be closer to $25
    billion, so we feel the $20 billion number is defensible.

                                STRYKER BRIGADE

        Senator Feinstein. I understand your European concern, that
    replacing our heavy forces with a Stryker Brigade before we've
    developed the organic tank killing weapon system necessary.
    What kind of response has there been to that recommendation so
    far?
        Mr. Cornella. Response from the Department?
        Senator Feinstein. Right.
        Mr. Cornella. Well, we've not discussed that specific
    recommendation at length with the Department, we have had
    conversations in our travels with Commanders that made that
    suggestion to us, that they thought that that was a good idea
    that that take place, and General Taylor, do you have anything
    you want to add?
        General Taylor. There is an initiative on the part of the
    Army to have an offensive tank killing capability with the
    Stryker variant, but so far it has not come to fruition, and so
    our basic premise is that we definitely need to have an
    offensive ground tank killing capability there as well as the
    other issues that we mentioned, and we're not saying that that
    Brigade should necessarily stay there forever, but until the
    criteria that we mentioned are realized.
        Senator Feinstein. In terms of deployment of bases, and
    transitioning the military, what lessons do you think were
    learned in Iraq and Afghanistan?
        General Taylor. I would first state an opinion, primarily
    about Iraq that, while initially we felt that we could do this
    with much lighter forces, we're finding out more and more that
    heavy forces, even in a city environment is very necessary. I
    know of some people who fight in that area very well, and some
    of them are parts of my family, and they would clearly rather
    fight out of a tank as even an up-armored Humvee, and I think
    the reports coming back from some of the recent efforts in Iraq
    have been, and Baghdad, have shown that there is a place for
    heavy force, although the Stryker variant up in Mosul has been
    very valuable as well. So, I think we're still learning, I
    think the decision on all of this is still out, but we haven't
    lost the need for some of our heavy forces.
        Senator Feinstein. Thank you, my time is up, Madame
    Chairman.
        Senator Hutchison. Senator Allard.

                                OVERSEAS SAVINGS

        Senator Allard. Thank you, Madame Chairman.
        I noticed in your summary here that you hadn't talked in
    detail as did Senator Feinstein, as to some of the costs. I
    wonder if you could give us just some bottom line figures, if
    possible, has the Department of Defense conducted an estimate
    as to how much money would be saved by reducing their basing
    overseas?
        Mr. Cornella. I'm not sure if we were provided with that
    number. Now it's logical to assume that if bases are reduced
    overseas, there will be some savings, and they may be
    significant. At the same time, those facilities may have to be
    replicated within the United States; and also, I'm not sure
    that those figures that are being put forth include any
    mobility that might be required in order to surge out of the
    continental United States. And I can't address that--those will
    be good questions for the Department in the next panel.
        Senator Allard. Did you try and conduct any kind of
    estimate?
        Mr. Cornella. I would have to ask staff about that; we will
    provide you with that information.
        Senator Allard. Okay. Is it correct to say that you do not
    recommend the Department of Defense go back and do its re-
    basing strategy?
        Mr. Cornella. I think that I would turn to my other
    Commissioners, but I don't think that we mean to indicate that
    they do that.
        General Taylor. Again, Senator, it's a timing issue, and a
    synchronization issue, not the fact that they shouldn't do it.
    Unfortunately, it's not 100 percent clear, at least up to the
    point when we completed most of our reports, exactly what the
    timing was, that was still a developing process. Remember, this
    was prior to the release of the BRAC report, so exactly where
    they were going, or that the Department was recommending they
    were going was not available to us at that time. Now, some of
    that at least portions of that information is available to us,
    and that will help as we complete our report and look at where
    they might be going here in the United States.

                            FORWARD OPERATING SITES

        Senator Allard. It seems to me like in one of the hearings
    on the Armed Services Committee, they talked about forward
    basing, maybe in the Balkan states where we don't have now,
    that you would end up basically with an air field with
    utilities, and if you put in temporary tents, they would be
    basically two by fours in tent structure, and then when your
    mission was done, you would move out, does that seem like a
    reasonable approach to you?
        General Taylor. You're talking about both the security
    locations and the forward operating sites? Yes, and our only
    question about those is whether or not we have consummated the
    agreements with the host countries that we should have in place
    before we go too much farther, and that's being worked by both
    the Department and others, but the concept is valid and we have
    no problem with that.
        Senator Allard. And do you have any reason to believe that
    those host countries wouldn't cooperate with us? The last time
    I talked to most of them they were thrilled to death to be part
    of NATO, and even be part of the forward deployment effort.
        General Taylor. I would suggest that would be a question to
    ask the next panel. I'm sure they can enlighten you. We did not
    have verifiable information that these agreements have been
    consummated, but I'm sure the next panel can respond to that
    better.

                                      BRAC

        Senator Allard. Okay. To what extent do you believe the
    Department of Defense used its IGPBS to formulate its
    recommendations for base closure and realignment? The Secretary
    of Defense admitted his recommendations for base closures and
    realignments to Congress and BRAC and it was in May, and the
    question is, to what extent do you believe that the Department
    of Defense used the IGPBS to formulate its recommendations for
    base closure and realignments, did you look at that?
        Mr. Cornella. Yes, and I think it had a great deal to do
    with the recommendations to the BRAC Commission. The numbers of
    returning troops from overseas impacted Army bases most
    significantly.
        Senator Allard. And the follow up, then, do you see any
    reason why the BRAC process should not go forward?
        Mr. Cornella. Or as we say in our report, we see no reason
    why that should not go forward. I just would like to add one
    thing to your previous question about the Nations where we
    might have lily pads, or CSLs or whatever you might like to
    call them. We have seen instances most recently, without
    mentioning the names of any countries, one where access to an
    Air Force base was either restricted or denied within the last
    few months. We also have seen instances during the Iraq War
    where certain Nations did not allow access. These are the types
    of things that we're talking about in regard to making sure
    that those agreements are in place before you establish those
    locations in those countries.
        Senator Allard. Thank you, Madame Chairman, I see my time
    has expired.

                                      COST

        Senator Hutchison. Thank you, Senator Landrieu?
        Senator Landrieu. Thank you. Let me just see if I can
    summarize a couple of these questions, because I think the work
    you have done is extremely important, and we appreciate how
    difficult it can be sometimes to really give an independent
    view, and we want to be sure that we have our ears open and are
    willing to hear the independent view, so let me just ask
    again--one of the bottom lines of your report, which is all
    documented here, Mr. Cornella, is that the cost associated with
    moving our troops back could be twice as much as what is
    currently estimated? Is that correct?
        Mr. Cornella. Yes, Senator.

                                     TIMING

        Senator Landrieu. Is it also correct that you are
    suggesting that the time frame that is being adopted as we
    speak is probably too aggressive to accomplish the goal?
        Mr. Cornella. Well, I think again, it's a timing issue. If
    all of this could be timed properly, and we had, maybe, an
    infinite pot of money, there probably would not be a problem,
    but there are a lot of things that are taking place, and I
    cited many of those in my opening statement.
        Senator Landrieu. But in your estimation of the summary of
    your report, there is a time frame that has been proposed, and
    you reviewed it and in your professional judgment, you all are
    saying that it is unlikely that the time frame can be met?
        Mr. Cornella. We have addressed it, we have talked to
    commanders in the field, and we feel it's probably ambitious.
        Senator Landrieu. Would it be fair to say, then, that you
    have some serious concerns about meeting that time frame?
        Mr. Cornella. Well, I think we do in the sense that a lot
    of the moves are already taking place, and have started in
    regard to the Pacific, probably, without mentioning names of
    countries, more than have taken place in Europe, but I would
    agree with your statement, Senator.
        Senator Landrieu. Again, I'm not trying to put words in
    anybody's mouth, I'm just trying to clarify for the record what
    I think. The goal of this hearing is, is to really hear what
    you are saying about your view, and if it is that we've
    underestimated the cost, we need to hear.
        Mr. Cornella. Two thousand eleven sounds like a long way
    off, it's really not that far, and I guess my point was that a
    lot of the moves are already taking place as we rotate forces
    through Iraq and Afghanistan, and I think the plan is to bring
    the forces back from those rotations after they pick up their
    families in Germany and other locations, so the bulk of the
    moves may take place sooner rather than later, they may take
    place sooner, rather than towards the end of that 2011 time
    frame.
        Senator Landrieu. General Curtis, then I think Mr. Martin
    had something to add.
        General Curtis. Yes, Senator, there are three numbers down
    here in the report, and they really measure three different
    things, as our numbers often do in government. And, the $4
    billion is the number specifically tailored to this move within
    the palm through 2011. The $9 to $12 billion, as I understand
    it from the material being given by the DOD is an estimate
    which includes other things of the total cost of this move, and
    some of this money, I'm given to understand, would come out of
    the general O&M accounts within the services, not specifically
    be identified within the POM itself.
        Finally, the $20 billion number is a life cycle number
    beyond the POM, so it isn't directly comparable to either one
    of the two previous numbers. The concerns I have after watching
    the process, how we execute our financial processes is that the
    moves with either be slipped because of an insufficiency of
    funding to do it right, we will move without doing it right, or
    we will take money out of the O&M accounts to pay for the move,
    and not know what we didn't buy, what we gave up in terms of
    readiness or something else by forcing the Services to fund
    parts of the move internally. They're three different numbers
    that all mean the same thing, but they could drive unforeseen
    consequences if we insist on meeting the schedule without fully
    funding it with identifiable funds, and that's one of our big
    concerns.
        Senator Landrieu. Mr. Martin.
        Mr. Martin. Thank you very much, Senator, Madame Chairman.
    In perspective, this is the most sweeping transformation and
    repositioning of U.S. forces since the late 1940's, the Defense
    Reorganization Act of 1947. United States forces, the
    repositioning thereof, it should be positive for our national
    security and our national defense. The Department's plan is a
    good plan, if fully coordinated, synchronized, it can and will
    enhance the Nation's security and defense interests. But it
    should be and must be positive for our service men and women to
    the maximum extent possible. The bottom line of what we said on
    the quality of life is we shouldn't be moving soldiers,
    sailors, airmen and Marines any faster than we can build the
    new housing, the new medical facilities, new schools and
    training facilities as General Taylor pointed out, and
    certainly no faster than we can provide the air lift, sea lift
    and pre-positioned stockage to move them from their United
    States, now CONUS-based homes, to potential points of influence
    and engagement. We have an opportunity right now because of the
    Secretary's vision to do the right thing, we need to do it the
    right way. It is an opportunity, and we believe, a
    responsibility, because if we don't take care of the force we
    have now, we could face a future, and the enemies and threats
    of tomorrow with forces we won't have, and options we don't
    like.
        Senator Landrieu. Thank you.
        Senator Hutchison. Are there any other questions of this
    panel? If not, thank you very much for all of the effort that
    you made. We appreciate it and look forward to looking at it
    further, and now I would like to call the second panel from the
    Department of Defense forward. Thank you very much.
        Mr. Cornella. Thank you, Senator.

                             Department of Defense

    STATEMENT OF HONORABLE RYAN HENRY, PRINCIPAL DEPUTY
                UNDER SECRETARY OF DEFENSE FOR
                INSTALLATIONS AND ENVIRONMENT
    ACCOMPANIED BY:
            PHILLIP GRONE, DEPUTY UNDER SECRETARY OF DEFENSE FOR
                INSTALLATION AND ENVIRONMENT
            ROSE LIKINS, ACTING ASSISTANT SECRETARY OF STATE, BUREAU OF
                POLITICAL-MILITARY AFFAIRS
        Senator Hutchison. The next panel is Mr. Phillip Grone,
    Deputy Under Secretary of Defense for Installations and
    Environment, the Honorable Ryan Henry, Principal Deputy Under
    Secretary of Defense for Policy, and Ambassador Rose Likins,
    Acting Assistant Secretary of State, in the Bureau of Political
    and Military Affairs.

                            STATEMENT OF RYAN HENRY

        Mr. Henry. Thank you, Madame Chairman, Senator Feinstein,
    members of the subcommittee, thank you for the opportunity for
    appearing before you today, along with the Overseas Basing
    Commission and Chairman Cornella. Joining me today as you
    mentioned are Acting Assistant Secretary of State, Rose Likins,
    and Deputy Under Secretary, Phil Grone. And I want to say I
    appreciate the insightfulness of your opening remarks today. I
    would like now, if I may, to submit my full statement for the
    record, and make just a few brief remarks at this time.

                      GLOBAL DEFENSE STRATEGY AND PROCESS

        Madame Chairman, the Administration's plan to strengthen
    America's Global Defense Posture will result in the most
    profound re-ordering of military forces overseas since the end
    of World War II. The September 11 attacks clarified our
    understanding of the key security issues that we will face
    during the beginning of the 21st century. Simultaneously, we
    realize that much of our in-place force posture still reflected
    a Cold War structure. We had forward garrison forces configured
    to fight near and where they were based. Unlike the past
    century, today we no longer can predict where, when, or in what
    manner our forces may be called on to fight, therefore our
    forces need to be able to rapidly project power into theatres
    far from where they may be based. Through our Global Defense
    Posture Realignment, we have aimed to strengthen our ability,
    fulfill our international commitments to ensure that our future
    alliances are capable, affordable, sustainable and relevant.
        Then to focus on capabilities, and not just numbers. The
    Defense Department conducted our Global Defense Posture Review
    thoroughly and deliberately. We've collaborated with our inter-
    agency partners through broad and sustained deliberations.
    We've also consulted extensively with our allies and our
    partners to incorporate their views. The Department of Defense
    and the Department of State have held joint consultations with
    relevant international partners, in over 20 foreign capitals,
    beginning in December 2003, and continuing on a sustained basis
    since then. We also have communicated with Congress, and
    personal and Committee staff members throughout the review.
    We've provided a detailed report to Congress in September of
    2004, followed by the submission of detailed overseas master
    plans from each of the regional Combatant Commanders in
    February 2005. And over 40 times the Secretary of Defense, the
    Combatant Commanders, the members of the Joint Staff, and the
    Office of the Secretary of Defense have traveled here to
    Capitol Hill to consult with Congressional Committees and
    Members.
        Finally, as mentioned by Chairman Cornella, we have worked
    closely with the Overseas Basing Commission in its efforts to
    provide Congress with an assessment of a global presence,
    basing and infrastructure needs.

                             A COMPLEX UNDERTAKING

        Madame Chairman, as members of the Overseas Basing
    Commission have expressed, the United States Global Defense
    Posture is incredibly complex. It is a multidimensional field
    involving numerous areas; strategic analysis of geopolitical
    and military factors, facilities and infrastructure analysis,
    diplomatic and legal negotiations and arrangements, acquisition
    policies and transportation issues, operational plans and
    synchronization with the Base Realignment Commission, the QDR,
    the Army Modularity Transformation, the Mobility Capabilities
    Study, and the Navy's Fleet Response Plan. We, in the
    Department, have thousands of people working on this complex
    endeavor, full-time in the military services and the combatant
    command, on the joint staff, in the acquisition community and
    other areas, all overseen by senior military and civilian
    officials and managed by Secretary Rumsfeld.
        Madame Chairman, we stressed in our discussions with the
    Commission that posture is more than just our footprint of
    facilities, it also includes the presence, force management,
    our surge capability and the pre-positioning of stocks among
    these building blocks of global posture. Quality of life
    concerns related to force management merit particular
    attention. Changing the way in which we posture our forces was
    driven in large part by the President and the Secretary's
    desire to relieve stress on our military forces and their
    families by providing more security at home, with fewer
    overseas moves and less disruptions. Specifically, posture
    changes will help reduce double separations, those caused when
    accompanying dependents are separated from both the service
    member and the their loved ones in the United States.
        Additionally, our posture changes are phased over several
    years to help ensure quality of life is sustained. Equally
    important, the plan changes to our posture directly support
    service initiatives aimed at keeping pace with our military
    personnel, such as the Army's Modularity and Unit Location
    concepts, the Navy's Fleet Response concept, and the Air
    Force's ongoing Force Management Improvement.
        Madame Chairman, of particular importance in this complex
    undertaking has been our sustained effort to inject the Global
    Defense Posture into other ongoing defense transformation
    initiatives, specifically, the BRAC and the 2005 QDR. I welcome
    the Commission's statement of support for the U.S. Global
    Defense Posture as important and necessary. The Commission's
    report reflects their earnest effort to assess military
    facilities, and structure of the U.S. overseas facilities. The
    Commission fundamentally agrees with many of the aspects of the
    President's posture plan, and it recognizes the importance of
    changing of posture to meet the 21st century's security
    challenges.
        Madame Chairman, thank you for this opportunity to speak to
    you, and I look forward to answering your questions. And, if we
    may, Ambassador Likins would also like to have an opening
    statement.
        Senator Hutchison. Madame Ambassador.

                      STATEMENT OF AMBASSADOR ROSE LIKINS

        Ambassador Likins. Thank you, Madame Chairman, and Senator
    Feinstein. I appreciate the opportunity to be here and to offer
    a few brief remarks.
        Since late 2003, the Department of State has been working
    closely with the Department of Defense and the National
    Security Council on reviewing and strengthening the U.S. Global
    Defense Posture. The Department has played an active role in
    the shaping and implementation of our future defense posture.
    We have been both participants in the inter-agency process, and
    have been spearheading the diplomatic talks and initiatives
    necessary to obtain the understanding and agreement of our
    friends and allies for this important initiative. The
    Department has and will continue to provide its frank
    assessment of these proposals, and to provide our views as to
    the best way forward. We've had a very good working
    relationship with our DOD colleagues on this issue, conducting
    all consultations together and jointly briefing Congress on
    several occasions.
        While the initial planning for the IGPBS was undertaken by
    the combatant commanders in the individual services, these
    plans were presented to the inter-agency for a full and
    thorough examination before their submission to the President.
    The Department has made its foreign policy views known on many
    occasions and will continue to do so. We firmly believe that we
    are taking the appropriate time to get this right, we continue
    to rigorously review proposals with our DOD colleagues,
    thoroughly examine the many facets of these plans, including
    the necessary legal arrangements, and have conducted numerous
    consultations with friends and allies around the world.
        While consultations in some parts of the world are quite
    advanced, others have not even begun, indicative of the fact
    that we will take whatever time is necessary to ensure that our
    plans are logical, workable, and that our engagement strategy
    makes sense. Consultations are proceeding carefully and
    deliberately to ensure that the arrangements put in place to
    host our forces are enduring and beneficial to a wide range of
    United States interests. Through the consultation process,
    we've received valuable feedback that has enabled us to adjust
    proposals and calibrate our expectations. We have gained
    valuable insights throughout the process, and in many ways, the
    consultation process is one of the many mechanisms for re-
    thinking, and adjusting our defense posture plans.
        To use just one example, during the consultation process,
    we learned that the government of Germany was undertaking its
    own base realignment and closure process. This prompted us to
    accelerate the sharing of details with German officials related
    to our proposed posture changes in Germany and to undertake
    some additional coordination on our two initiatives. I want to
    assure you that we will not rush into a location where there
    are not adequate legal protections and guarantees for our
    forces, and for their freedom of action. We believe that proper
    legal arrangements are a fundamental requirement for any
    defense posture changes. The State Department believes these
    negotiations and DOD have substantially been involved in all
    talks. We have dedicated legal experts and a special negotiator
    working to ensure that the best legal arrangements are secure.
    We support the OBS's view that their long-term strategic
    national objectives, beyond simply military objectives,
    somewhat to reassure you that our efforts on this issue are
    focused on results that make sense from both the defense and
    strategic foreign policy perspective. Thank you very much.
        Senator Hutchison. Thank you, Madame Ambassador. We're
    going to just have about 10 minutes of questions because we
    have two votes called, and I don't want to keep you waiting any
    longer.
        Let me say, first of all, I'm very pleased that both the
    Department of State and the Department of Defense are
    represented on this panel because I wanted to make sure, and I
    think it is very important, that the Department of State is a
    part of this process as we are looking at closing of bases, or
    forward deploying somewhere else, that we have both Defense and
    State involved.
        Mr. Henry, one of the Commission report findings says, ``If
    unforeseen threats arise in either the near term or the mid-
    term, we could be caught in mid-stride, unable to meet them.''
    This is part of the reason they wanted to delay some of these
    moves. My understanding is that the entire reason for
    transforming our posture is because we're not currently
    positioned to meet unforeseen threats, and we need to have the
    capability to meet them as soon as possible. I would just like
    to ask your comments on that part of the report, and if you
    think speeding up the process will cause transformation to
    occur better, or slowing it down would.
        Mr. Henry. Yes, Madame Chairman, I would agree with your
    statement, and as I mentioned in my opening statement,
    uncertainty is part of the strategic landscape which we have in
    a post-9/11 world. We no longer have the comfort or the
    certainty that we had during the Cold War when we had a single
    enemy and we could predict where we would probably have to meet
    him. In a world we live in today, we might need to use our
    forces through large expanses of the Earth's globe, therefore,
    in the places we have our forces, we have to be able to move
    them quickly to where they might be needed to be employed.
    That's a fundamental feature of the transformation, and our
    capability to meet it. We just can't predict how we will have
    to fight with our forces, where or when.
        As far as your question regarding transformation, this is a
    part of an integrated approach to transformation. The Secretary
    of Defense has published his National Defense Strategy which
    supports National Security Strategy, and from which the Base
    Realignment Commission, the Global Defense Posture, the
    Quadrennial Defense Review, all of the major movements that
    we're making in the Defense Department stem from. This is key
    to transformation, all of these things supported simultaneously
    to move forward in a networked fashion.
        Senator Hutchison. Mr. Henry, in the previous panel there
    was concern raised, and also in the report, about our lift
    capacity. Do you think that we have a better capability for
    lift where we need to go by basing more of our troops in the
    United States, or do you think we have a lift problem that
    requires troops to stay in Germany and Korea?
        Mr. Henry. One of the analyses we did post-the Iraqi major
    combat operations, was to look at the amount of lift that was
    needed to move forces from Europe and around to where they had
    to go, and to try to determine the amount of lift and the speed
    of lift with which to get into the theatre, and if it would
    make a difference coming from Europe or from the continental
    United States, and depending on how we might position ourselves
    as a part of the Base Realignment Commission, in some
    instances, we could actually move quicker from the United
    States. That was one of the considerations that drove the
    Global Defense Posture, as was spoken by the previous panel,
    combatant commanders and operators will never have as much lift
    as they would like to, to feel comfortable, it is a matter of
    adjudicating the risk overall of the contingencies that we
    might have to face. As was mentioned by the panel, we are also
    in the process of a Mobility Capabilities Study, something we
    do approximately every 5 years to look at the total lift
    requirements, and how we're going to meet them. As this has
    been dovetailed into the Base Realignment work that we have
    been doing, they have first done one using the old structure
    and analysis. Now they're looking and finishing up their
    analysis, using as a baseline the Global Defense Posture. As we
    presented the committee in our report back in September of
    2004, and it looks like the impact will not be significant in
    roughly, in the same area that we would have had with the other
    structure. The details are still to be concluded on that, and
    we await the conclusion of the study, which will be integrated
    in the QDR.
        Senator Hutchison. Thank you. Senator Feinstein.
        Senator Feinstein. When troops are moved back to the United
    States, will they be accommodated in permanent or temporary
    facilities.
        Mr. Grone. Depending upon the unit and depending upon the
    location and depending upon the time, there will be a mix of
    permanent or temporary, in the main it will be permanent. The
    discussion about whether or not facilities would be available
    for returning forces is a phased plan over a 4-year period, 5
    years if you count the troops coming back from Korea this
    summer to Fort Carson between fiscal year 2005 and fiscal year
    2009. We are working, particularly with the Army, on
    standardizing our facilities design so that they can be sited
    to any location to use commercial construction standards, all
    of which is designed to make permanent facilities more quickly
    and more readily available to returning forces.
        Senator Feinstein. So, you will not be coming to this
    subcommittee or any other subcommittee to look for additional
    dollars for temporary housing?
        Mr. Grone. There may be occasions where, depending upon the
    unit, there may be some temporary billeting for single enlisted
    personnel that is required, but in the main we are planning to
    move out aggressively to provide permanent facilities as
    quickly as we can.
        Senator Feinstein. If you do that, then what type of
    coordination is being done with local school districts to
    mitigate the impact of thousands of soldiers coming back with
    many children?
        Mr. Grone. Well, we have, the Army in particular, since the
    bulk of the returning forces are Army, are engaged in a series
    of intensive consultations with local school districts and
    State and local government on transportation, schools and other
    issues that might be affected by forces returning from abroad.
    Certainly, with regard to housing, our preference is to rely,
    as is our standard housing policy, on the community first, and
    based on what we know, particularly for the three locations,
    whether we have the bulk of the forces returning from abroad,
    Fort Carson, Fort Riley and Fort Bliss, based on that 5 year
    window between 2005 and 2009 that we have people coming back,
    based on our assessment of the market's ability, the local
    market's ability to adapt based on our existing housing
    privatization efforts at all three of those locations. We
    believe that there is sufficient market availability there to
    accommodate returning forces, and a phase-in for families as we
    have laid it out over the course of that 5 year period, so we
    are intentionally engaged with school systems, and with local
    governments. We'll continue that consultation through the
    summer, so that when we get to the school year, 2006, next
    year, that we will be as integrated as we can be. That is not
    to say there won't be challenges, there will. But we believe
    that we will have a quality of life piece well in hand, and we
    look forward to continuing to consult with the subcommittee as
    we move forward to make sure that you're comfortable with the
    plans as we lay them out.
        Senator Feinstein. I would really appreciate that, because
    I know in California, we have schools that are really
    overcrowded at present, and I think there needs to be some real
    planning done in that regard, but thank you. Let me ask you,
    Mr. Henry, because I'm really concerned with what I see as lift
    deficiencies, and everything I've heard from the field doesn't
    jive with what you say. Would you be willing to share with our
    subcommittee your projected plans for specific lift--in other
    words, how many C-17s, new C-17s, et cetera, that kind of
    thing--because everything I read is that the lift capability of
    our country is severely stressed.
        Mr. Henry. Yes, we would be glad to share that, one thing
    it will be part of the QDR that we'll be reporting to the
    Congress, but we'll be glad to come up here in the interim as
    the data becomes available and then as decisions are made as to
    how we're going to proceed, we'd be glad to share that with the
    committee.
        Senator Feinstein. I would certainly appreciate knowing
    what you're planning is. I mean, in the next 10 years, how many
    C-17s will there be, for example?
        Mr. Henry. Yes, Senator, and as those decisions are still
    awaiting the final report out of the Mobility Capabilities
    Study, as mentioned earlier, and so specific decisions still
    await the final analysis and data.
        Senator Feinstein. Thank you very much, Madame Chairman, I
    think that does it for me. I would just like to conclude by
    saying, I know DOD doesn't like helpful suggestions, or any
    suggestion, but I really think this is a good report, and I
    really ask you to review it with an open mind. I think they've
    raised some very good points, and these are all people who have
    served, who have been there, done that, I think they know what
    they're talking about, period.
        Senator Hutchison. Thank you, I think they acknowledged
    that they will.
        Senator Feinstein. Not quite, but it was a nod, which is
    the best DOD ever does.
        Mr. Henry. Senator, we've read the report with great
    interest and we look forward, hopefully, to being able to
    discuss with the Commission their conclusions prior, and we
    think that we can help them with information and analysis and
    insights that would make the final report even better. Perhaps
    correct inaccuracies and some assumptions that we think that we
    could help them with.
        Senator Hutchison. I would just say that the biggest
    concern I have about the report is the slowing it down. I
    really believe that when you make a decision like this, that in
    order to be the most efficient, to use our taxpayer's dollars
    wisely and to bring people home where they know it's going to
    be permanent, it should be done quickly and not drug out. Now,
    obviously we do want to have the accommodations, we want the
    housing, and I think the public/private partnerships make that
    much more able to be done than if we were just building them
    through MILCON. Certainly coordination with the school
    districts and health care facilities in a community will be
    very important, and I think that is valid, but I would rather
    see us gear up to do it quickly, than to slow down and have
    buildings in Germany and buildings in America that are
    duplicative.
        Mr. Grone. In that regard, Madame Chairman, the most
    important potential impediment we have to implementation is not
    full authorization and appropriation of the budget requests to
    support the round, so if we had the resources available, we
    could certainly accelerate, and we will move out as
    expeditiously as you desire to ensure we have facilities in
    place for our people.

                             CONCLUSION OF HEARINGS

        Senator Hutchison. We'll work with you on that. Thank you
    very much, we're going to go to our vote now. Thank you.
        [Whereupon, at 5:30 p.m., Tuesday, June 28, the hearings
    were concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Allard, Senator Wayne, U.S. Senator From Colorado:
        Prepared Statement of........................................   186
        Questions Submitted by.......................................   176
        Statements of...........................................4, 140, 185

    Burns, Senator Conrad, U.S. Senator From Montana, Prepared
      Statement of...................................................   142
    Byrd, Senator Robert C., U.S. Senator From West Virginia:
        Questions Submitted by.......................................   134
        Statement of.................................................    91

    Cooper, Hon. Vice Admiral Daniel L., (USN Ret.), Under Secretary
      for Benefits, Veterans Benefits Administration, Department of
      Veterans Affairs...............................................    89
    Cornella, Hon. Al, Chairman, Overseas Basing Commission..........   183
        Prepared Statement of........................................   193
        Statement of.................................................   189
    Craig, Senator Larry, U.S. Senator From Idaho:
        Questions Submitted by.......................................   119
        Statement of.................................................    92
    Curtis, Major General Lew E., III, United States Air Force
      (Ret.), Department of Defense..................................   183

    Feinstein, Senator Dianne, U.S. Senator From California:
        Questions Submitted by...........................123, 163, 177, 180
        Statements of............................................3, 90, 184
    Fox, Major General L. Dean, Air Force Civil Engineer, Deputy
      Chief of Staff for Installations and Logistics, Department of
      the Air Force, Department of Defense...........................   165
        Prepared Statement of........................................   166
        Questions Submitted to.......................................   179

    Grone, Philip W., Deputy Under Secretary of Defense, Installation
      and Environment, Department of Defense.........................1, 205
        Prepared Statement of........................................     8
        Summary Statement of.........................................     6

    Henry, Hon. Ryan, Principal Deputy Under Secretary of Defense for
      Installations and Environment, Department of Defense...........   205
    Hutchison, Senator Kay Bailey, U.S. Senator From Texas:
        Opening Statements of...............................1, 89, 139, 183
        Questions Submitted by................................114, 175, 179

    Johnson, Senator Tim, U.S. Senator From South Dakota:
        Prepared Statement of........................................   188
        Questions Submitted by.......................................   129
        Statement of.................................................   187
    Jonas, Hon. Tina W., Under Secretary of Defense, Comptroller,
      Department of Defense..........................................     1
        Prepared Statement of........................................     5
        Summary Statement of.........................................     4
    Kuhn, Fred W., Deputy Assistant Secretary of the Air Force
      Installations, Department of the Air Force, Department of
      Defense........................................................   165
        Prepared Statement of........................................   166
        Questions Submitted to.......................................   175

    Landrieu, Senator Mary L., U.S. Senator From Louisiana:
        Prepared Statements of......................................24, 187
        Questions Submitted by.......................................   131
        Statements of...............................................23, 186
    Less, Vice Admiral Anthony A., United States Navy (Ret.),
      Department of Defense..........................................   183
    Likins, Rose, Acting Assistant Secretary of State, Bureau of
      Political-Military Affairs, Department of Defense..............   205
        Statement of.................................................   207

    Martin, Brigadier General Keith, Pennsylvania Army National Guard
      (Ret.), Department of Defense..................................   183
    McClain, Hon. Tim, General Counsel, Office of the Secretary,
      Department of Veterans Affairs.................................    89
    Miller, Major General Geoffrey D., Assistant Chief of Staff,
      Installation Management, Department of the Army, Department of
      Defense........................................................   139
    Murray, Senator Patty, U.S. Senator From Washington:
        Questions Submitted by.......................................   136
        Statement of.................................................    91
    Nicholson, Hon. R. James, Secretary, Office of the Secretary,
      Department of Veterans Affairs.................................    89
        Prepared Statement of........................................    96
        Statement of.................................................    93

    Penn, Hon. B.J., Assistant Secretary of the Navy, Installations
      and Environment, Department of the Navy, Department of Defense.    69
        Prepared Statement of........................................    70
    Perlin, Jonathan B., M.D., Ph.D., MSHA, FACP, Acting Under
      Secretary for Health, Veterans Health Administration,
      Department of Veterans Affairs.................................    89
    Profit, Brigadier General Gary M., Deputy Chief, Army Reserve,
      Department of the Army, Department of Defense..................   139
    Prosch, Geoffrey G., Principal Deputy Assistant Secretary of the
      Army for Installations and Environment, Department of the Army,
      Department of Defense..........................................   139
        Prepared Statement of........................................   144
        Statement of.................................................   143
    Pudlowski, Major General Walter F., Special Assistant to the
      Director, Army National Guard, Department of the Army,
      Department of Defense..........................................   139

    Reed, Rita A., Deputy Assistant Secretary for Budget, Office of
      the Secretary, Department of Veterans Affairs..................    89

    Shear, Rear Admiral Wayne ``Greg'', Jr., Deputy Director, Ashore
      Readiness Division, United States Navy, Department of Defense..    69

    Taylor, Lieutenant General H.G., United States Army (Ret.),
      Department of Defense..........................................   183

    Wannemacher, Richard A., Acting Under Secretary for Memorial
      Affairs, National Cemetery Administration, Department of
      Veterans Affairs...............................................    89
    Williams, Brigadier General Willie, Assistant Deputy Commandant,
      Installations and Logistics (Facilities), U.S. Marine Corps,
      Department of Defense..........................................    69

                                 SUBJECT INDEX

                                  ----------

                             DEPARTMENT OF DEFENSE

                                                                       Page
    A Complex Undertaking............................................   206
    Army Military Construction.......................................    27
    Base Realignment and Closure Overview............................    31
    BRAC 2005........................................................    34
    Budget Summary...................................................    34
    Buffer Area Around Fort Carson, Colorado.........................    22
    Business Transformation..........................................    15
    Chemical Weapons Demilitarization................................    19
    DOD Base Realignment and Closure.................................    31
    Environmental Management.........................................    14
    Facilities and Family Housing....................................     5
    Fiscal Year:
        2005 Supplemental Appropriations.............................     6
        2006 BRAC Funding............................................    30
    Global Defense Strategy and Process..............................   205
    Homeowners Assistance Program....................................    54
    Keeping Military Families Together...............................    26
    Managing Infrastructure..........................................     9
    Marine Corps Restructuring.......................................    29
    Military Compensation and Health Care............................     5
    More Specificity for BRAC Funding................................    17
    Perchlorate Contamination........................................    61
    Permanent Construction at Guantanamo Bay.........................    64
    Proceeds From Sales of Closed Facilities.........................    18
    Renewable Energy Assessment of DOD Bases.........................    61
    Restructuring U.S. Basing........................................     5
    Revenue From the Sale of Land and Facilities.....................    54
    Selling Excess Properties and Applying the Proceeds..............    60
    Status of Global Rebasing........................................    60
    Taking Into Account Other Federal Agencies in BRAC Analysis......    25

                          Department of the Air Force

    Accommodate New Missions.........................................   169
    Additional Committee Questions...................................   175
    Budget Overview..................................................   175
    Continue Demolition of Excess, Obsolete Facilities...............   168
    Family Housing...................................................   175
    Foreign Currency Exchange........................................   180
    Goodfellow Air Force Base, Texas.................................   174
    Housing Privatization............................................   170
    Invest in Quality of Life Improvements...........................   168
    Joint Funding/Joint Basing.......................................   175
    Lowry Air Force Base:
        Hazardous Waste..............................................   176
        Privatization Initiative.....................................   177
    NATO Precautionary Prefinance Statement..........................   173
    Optimize Use of Public and Private Resources.....................   170
    Recapitalization Rate............................................   179
    Spangdahlem Air Base, Germany....................................   172
    Supplemental Request/Kuwaiti Aerial Port.........................   177
    Sustain, Restore, and Modernize Our Infrastructure...............   168
    Sustainment/Base Operations Support (BOS)........................   179
    Vandenberg AFB/McClellan AFB.....................................   180

                             Department of the Army

    Additional Committee Questions...................................   162
    Army:
        Family Housing:
            Construction (AFHC)......................................   148
            Operations (AFHO)........................................   149
        Installation Strategies......................................   146
        Modularity...................................................   163
    Barracks.........................................................   162
    Base Realignment and Closure (BRAC)..............................   149
        Environmental................................................   163
    Decreased Budget Request.........................................   153
    Defense Installations Strategic Plan.............................   145
    Easements to Prevent Urban Encroachment..........................   151
    Fiscal Year 2005 Supplemental Budget Request.....................   150
    Fort Ord Burn--Remediation Funding...............................   154
    Global Restationing Funding......................................   156
    Guantanamo Prison................................................   163
    Homeowners Assistance Fund, Defense..............................   150
    Joint:
        Basing--Ellingston Field.....................................   159
        Facilities...................................................   160
    Milcon Projects in Supplemental..................................   161
    Military Construction Army.......................................   147
        National Guard (MCNG)........................................   148
        Reserve (MCAR)...............................................   148
    Modular Facilities...............................................   161
    Operation and Maintenance........................................   149
    Overhead:
        And Compartment Protection Locations.........................   157
        Cover Locations--Iraq........................................   158
    Overview.........................................................   144
    RCI Program......................................................   153
    Reserves Training--California....................................   155
    Restationing Facility Requirements--Fort Carson..................   152
    Supplemental Funding.............................................   156
    The Way Ahead....................................................   145
    Weapons of Mass Destruction Civil Support Teams Funding..........   155

                             Department of the Navy

    BRAC 2005........................................................    80
    Efficiencies.....................................................    77
    El Toro Land Auction.............................................    84
    Facilities.......................................................    76
    Family Housing...................................................    83
    Fiscal Year 2006 Budget Overview.................................    71
    Housing..........................................................    72
    Joint Reserve Center.............................................    84
    Marine Corps Force Restructuring.................................    85
    Military Construction............................................    75
    Outlying Landing Field...........................................    86
    Prior BRAC Cleanup and Property Disposal.........................    79
    Second Infantry Battalion........................................    86
    VXX..............................................................    76

                           OVERSEAS BASING COMMISSION

    BRAC.............................................................   202
    Cost...........................................................200, 202
    Forward Operating Sites..........................................   201
    Geopolitical Considerations......................................   192
    Mobility.........................................................   199
    Overseas Savings.................................................   201
    Overview.........................................................   190
    Quality of Life..................................................   191
    Stryker Brigade..................................................   200
    Timing...........................................................   203
        And Synchronization..........................................   191
        Of Implementation............................................   197
    Troop:
        Levels.......................................................   192
        Movement.....................................................   198

                         DEPARTMENT OF VETERANS AFFAIRS

                            Office of the Secretary

    Additional Committee Questions...................................   113
    Burial...........................................................   102
    Capital Asset Realignment for Enhanced Services (CARES)..........   100
    Colorectal Cancer................................................   128
    Dallas VA Medical Center.........................................   111
    Enrollment Fees..................................................   126
    Grants for State Extended Care Facilities........................   106
    Homelessness.....................................................   117
    Increased Costs For Middle-Income Vets/Ban On Priority 8s........   137
    Major Challenges and Goals.......................................   114
    Management:
        Efficiencies.................................................   117
        Improvements.................................................   103
    Medical:
        And Prosthetic Research...............................100, 110, 124
        Care.........................................................    97
            Programs.................................................   124
        Health Care..................................................   129
    Mefloquine (Lariam) Use..........................................   125
    Per Diem Payment Policy to State Homes...........................   108
    Pharmacy Co-pay Increase.........................................   126
    Prescription Drugs...............................................   122
    Priority 7 and 8 Veterans........................................   117
    Proposed Beckley VA Medical Center Nursing Home..................   134
    Real:
        Effects of Increasing Out-of-Pocket Costs....................   137
        Health Care Increase.........................................   136
    Returning Troops.................................................   126
    Services.........................................................   119
    State:
        Extended Care Facilities Grants Program......................   123
        Home:
            Construction.............................................   118
            Per Diem Proposals.......................................   122
        Veterans Homes: On the Chopping Block........................   138
    Third Party Collections..........................................   104
    Transitional Pharmacy Benefit Pilot Program......................   109
    VA-DOD Collaboration.............................................   119
    VA Nursing Homes: Also On the Chopping Block.....................   138
    Veterans:
        Benefits.....................................................   101
        Returning From Iraq and Afghanistan..........................   114
    VISN Structure...................................................   118
    Waco and Big Spring, Texas Sites.................................   112

                                       -