[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
                         DEPARTMENT OF DEFENSE
                        FISCAL YEAR 2011 BUDGET

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


                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 4, 2010

                               __________

                           Serial No. 111-25

                               __________

           Printed for the use of the Committee on the Budget


                       Available on the Internet:
       http://www.gpoaccess.gov/congress/house/budget/index.html



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                        COMMITTEE ON THE BUDGET

             JOHN M. SPRATT, Jr., South Carolina, Chairman
ALLYSON Y. SCHWARTZ, Pennsylvania    PAUL RYAN, Wisconsin,
MARCY KAPTUR, Ohio                     Ranking Minority Member
XAVIER BECERRA, California           JEB HENSARLING, Texas
LLOYD DOGGETT, Texas                 SCOTT GARRETT, New Jersey
EARL BLUMENAUER, Oregon              MARIO DIAZ-BALART, Florida
MARION BERRY, Arkansas               MICHAEL K. SIMPSON, Idaho
ALLEN BOYD, Florida                  PATRICK T. McHENRY, North Carolina
JAMES P. McGOVERN, Massachusetts     CONNIE MACK, Florida
NIKI TSONGAS, Massachusetts          JOHN CAMPBELL, California
BOB ETHERIDGE, North Carolina        JIM JORDAN, Ohio
BETTY McCOLLUM, Minnesota            CYNTHIA M. LUMMIS, Wyoming
JOHN A. YARMUTH, Kentucky            STEVE AUSTRIA, Ohio
ROBERT E. ANDREWS, New Jersey        ROBERT B. ADERHOLT, Alabama
ROSA L. DeLAURO, Connecticut,        DEVIN NUNES, California
CHET EDWARDS, Texas                  GREGG HARPER, Mississippi
ROBERT C. ``BOBBY'' SCOTT, Virginia  ROBERT E. LATTA, Ohio
JAMES R. LANGEVIN, Rhode Island
RICK LARSEN, Washington
TIMOTHY H. BISHOP, New York
GWEN MOORE, Wisconsin
GERALD E. CONNOLLY, Virginia
KURT SCHRADER, Oregon
[Vacant]

                           Professional Staff

            Thomas S. Kahn, Staff Director and Chief Counsel
                 Austin Smythe, Minority Staff Director


                            C O N T E N T S

                                                                   Page
Hearing held in Washington, DC, March 4, 2010....................     1

Statement of:
    Hon. John M. Spratt, Jr., Chairman, Committee on the Budget..     1
    Hon. Paul Ryan, Ranking Member, Committee on the Budget......     2
    Hon. Robert E. Latta, a Representative in Congress from the 
      State of Ohio, prepared statement of.......................     3
    William J. Lynn, III, Deputy Secretary, U.S. Department of 
      Defense....................................................     4
        Prepared statement of....................................     6


                         DEPARTMENT OF DEFENSE
                        FISCAL YEAR 2011 BUDGET

                              ----------                              


                        THURSDAY, MARCH 4, 2010

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:05 a.m., in room 
210, Cannon House Office Building, Hon. John M. Spratt, Jr. 
[Chairman of the Committee] presiding.
    Present: Representatives Spratt, Becerra, Scott, Langevin, 
Larsen, Schrader, Ryan, Hensarling, Garrett, Lummis, Austria, 
Latta.
    Chairman Spratt. Let me call the hearing this morning to 
order and explain to our two witnesses that we still have a 
Democratic Caucus going on, and members will be coming in as 
the morning goes along.
    But you have a short time frame yourselves. We need to get 
under way. Today's hearing is on the 2011 Defense Budget. I 
want to welcome our witnesses, Deputy Secretary of Defense Bill 
Lynn, the Under Secretary of Defense Comptroller Bob Hale.
    Secretary Lynn and Secretary Hale, I believe that you have 
to leave here at 12:15 or thereabouts to make another 
commitment in the Pentagon before returning to the Hill to 
testify before the Senate. With those constraints in mind, I 
will rely or be riding the gavel today and asking Members to 
keep their questions confined to the five-minute rule.
    Our first priority in Congress is to ensure that we have a 
military that is second to none and with the understanding and 
support of the men and women who serve in uniform, especially 
when they are in harm's way.
    We must also be realistic about what we can afford over the 
long run. The Congressional Budget Office analyzed the defense 
plans developed by the Bush Administration the year before he 
left. They found a significant gap between planned programs and 
outyear projections. They concluded that tens of billions of 
dollars per year would have to be added to those plans to pay 
for their implementation.
    One of the goals of this hearing is to get a better sense 
of whether or not we are closing this gap. Is this 
Administration adjusting defense plans so they are in sync with 
fiscal reality, more affordable and sustainable? Is it still 
sufficient to meet the security challenges our country faces? 
That is a key question.
    Last year the Administration and Congress took on the 
problem of cost weapons--of cost overruns in major weapon 
systems by implementing acquisition reform, by canceling some 
weapons programs no longer needed, by restructuring those that 
were experiencing problems. It was a good start. In fact, CBO 
estimates that the acquisition changes proposed in the 2010 
budget will reduce outyear costs. Let us hope so.
    While the CBO analysis concluded that more funding will 
still be needed to finance defense plans, particularly for 
operations and support, that is the sum of military personnel, 
O&M, and revolving fund activities. This makes up more than 60 
percent of DoD's budget.
    Under defense plans included in the 2010 budget, CBO 
estimated that the operations and support funding needed would 
be continuing--propose a continuing requirement of a real 
growth of about two percent a year, which is a substantial 
increase compounded over time.
    The cost of our overseas operations in Iraq and Afghanistan 
will also continue to be significant for some time to come. The 
defense budget for this year includes a full-year estimate for 
2011 of $159 billion--that's in 050.
    Place holder estimates of $50 billion a year are put in the 
budget for each year thereafter. And Bobby Gates, Secretary 
Gates, has testified that this is not a realistic number. But 
it is a plug to indicate there will be a cost. That cost is yet 
to be determined.
    This is an improvement over where we were a couple of years 
ago when there was no accounting, no recognition of these costs 
beyond the budget year.
    I hope today we can get a better sense, a better 
understanding of the Administration's overseas plans, the 
assumptions that were made in the development of these cost 
estimates, and what is their likely extrapolation over five 
years to conform to our budget.
    Again, I welcome each of you. And I appreciate you coming 
and I think the whole Committee does. And I want to give Mr. 
Ryan an opportunity to make an opening statement himself before 
we move on to your testimony.
    Mr. Ryan.
    Mr. Ryan. Thank you, Chairman. I would also like to welcome 
our witness, Deputy Secretary Lynn. We had your predecessor 
Gordon England here quite a few times. So we look forward to 
seeing you here quite a few times in the future.
    I want to take a second to note that Chairman Spratt and I, 
along with a few other members of this Committee, recently had 
the opportunity to visit Afghanistan to see firsthand the hard 
work and the dedication of our men and women in uniform. And it 
is impossible not to be impressed with the size, complexity, 
and the capability of DoD.
    Most of all, we are humbled by the skill, the dedication of 
our soldiers, airmen, sailors, and Marines. And we are very 
thankful for what they do and for what you do as well.
    I want to simply say though I am disappointed that once 
again the President's budget uses the enacted war level of $130 
billion to create the illusion of savings. What I mean when I 
say this is it does this by inflating the baseline to assume 
the 2010 level of war spending continues every year for the 
next decade and then claims three quarters of a trillion 
dollars savings by not funding DoD at these levels for the 
duration of this budget.
    Now this is something that OMB does. I realize this is not 
something that DoD does. But that is a pretty embarrassing 
gimmick that we saw last year from the Administration. And 
reusing it this year, certainly doesn't lend any credibility to 
the President's numbers.
    That aside, I do appreciate you providing us with a full 
request for the war in 2011 and for using the $50 billion as a 
placeholder for the future.
    We all know this isn't going to be the exact number. And I 
think most assume it will be much higher. But at least it is an 
acknowledgment by the Department that the Global War on 
Terrorism should be accounted for in the budget.
    Finally, with the incredible rate of growth the Department 
has experienced in the past decade, I am somewhat concerned 
that at least some of it is going to be very difficult to slow. 
A few examples, military and civilian pay, fuel costs, and 
certainly TRICARE and the Defense Health Program.
    All of these have been growing much faster than inflation. 
Yet I see the President's budget projects real growth in the 
Department of just one percent over the next five years.
    What I don't see are any meaningful reforms to help you 
achieve that growth rate. I would imagine that it will be a 
pretty significant challenge on your end.
    So as far as the federal budget becomes increasingly 
squeezed, the deficits in debt threaten not only our economic 
security but our national security. I want to simply ask that 
the Department do everything it can, working both internally 
and with Congress, to address these cost drivers before they 
consume your budget, because above all else we must ensure that 
our men and women in uniform have the resources necessary to do 
the extraordinary task that are asked--that our Nation has 
asked them to do.
    Thank you.
    Chairman Spratt. Thank you, Mr. Ryan.
    Let me, as a matter of housekeeping detail, say that, ask 
unanimous consent, any member who cares to file an opening 
statement may have it inserted in the record at this point. 
Without objection, so ordered.
    [The statement of Mr. Latta follows:]

    Prepared Statement of Hon. Robert E. Latta, a Representative in 
                    Congress From the State of Ohio

    Good Morning. Chairman Spratt and Ranking Member Ryan.
    First I want to thank the Chairman and Ranking Member for holding 
this hearing on a very important issue. I would also like to recognize 
our distinguished witnesses, Deputy Secretary of Defense William Lynn, 
III and Under Secretary of Defense Robert Hale. I want to thank you for 
all of your hard work you do to protect our men and women in uniform, 
and I look forward to hearing your testimony this morning.
    I represent the largest manufacturing district in Ohio. Over the 
last decade, Ohio lost over 600,000 manufacturing jobs, which included 
significant defense manufacturing jobs. Ohio has been a leader for many 
years when it comes to producing material our men and women in the 
Armed Forces use each and every day to protect America and ensure its 
security. The Midwest continues to host the majority of the country's 
automotive industrial base, including those committed to supporting 
specialized military vehicle requirements. I hope the Department of 
Defense will take the necessary steps to sustain their military vehicle 
industrial base under the Fiscal Year 2011 Defense Budget and the 
Quadrennial Defense Review (QDR).
    One of the concerns I have with the President's Fiscal Year 2011 
defense budget is that the Army will cease to purchase new High 
Mobility Multipurpose Wheeling Vehicles or ``Humvees'' because the 
Service has met its purchase goals for the vehicle. However, nowhere in 
the budget does it state that the Department of Defense will fulfill 
the requirement needs of the National Guard. The Ohio National Guard 
currently has 75.4 percent of their Humvee requirements fulfilled, and 
over 60 percent of their total number of Humvees is over 20 years old. 
Currently the Army National Guard has a shortfall in 20 states for a 
total need of 5,000 Humvees. These numbers are alarming to me, having 
worked with the Ohio National Guard during my tenure in the Ohio 
General Assembly, and now in Congress, to make sure our men and women 
in the National Guard have had what they need to fulfill their stated 
mission. I would like to know if the Department of Defense will plan to 
ensure that the National Guard's Humvee fleet is modernized.
    For the foregoing reasons, Congressman Joe Donnelly of Indiana and 
I have formed the Congressional Humvee Caucus. This caucus will serve 
as an informal, bipartisan group of House Members dedicated to 
advocating for the best vehicle mix for the U.S. Armed Forces and 
National Guard and the important role played by the High Mobility 
Multipurpose Wheeling Vehicle. The Humvee has served as a versatile, 
high-performance four-wheel drive, air transportable tactical vehicle 
for over 25 years. We want to work to educate the Administration about 
the unique and integral role the Humvees have played for the defense of 
our country and maintaining homeland security and effective emergency 
response.
    According to the FY10 Presidential Supplemental and the FY11 
Overseas Contingency Operations Afghanistan Security Forces Fund 
(ASFF), production costs for Humvees will total $1.3 billion for the 
Afghan Security Forces and the Afghan National Police in 2011. This 
procurement will not be for our troops but will provide Cargo, 
Enclosure, Up-Armored, and Ambulance Humvees to the Afghans. U.S. 
manufacturers will build Humvee's for the Afghan Security and Police 
Forces, but will vehicle production use the same American manufacturers 
and suppliers, and will these vehicles be the same Humvees produced for 
our troops?
    I look forward to working with the committee as budget 
deliberations continue, and I look forward to working on the issue as a 
co-chair of the Humvee Caucus with Congressman Donnelly.
    With that Mr. Chairman, I yield back.

    Chairman Spratt. Once again, we welcome both of you to the 
Committee today. Is each of you to make a statement?
    Mr. Lynn. I think I will make a short opening statement.
    Chairman Spratt. Secretary Lynn will make the opening 
statement. We will make your statement in its entirety part of 
the record so that you can summarize it.
    Mr. Lynn. Absolutely.
    Chairman Spratt. And we would encourage you to take your 
time and cover particularly the points that you would like to 
make to the Committee about your budget for the forthcoming 
year.
    Thank you again for coming. And we look forward to you 
testifying. The floor is yours.

     STATEMENT OF WILLIAM J. LYNN, III, DEPUTY SECRETARY; 
ACCOMPANIED BY ROBERT F. HALE, UNDER SECRETARY OF DEFENSE, U.S. 
                     DEPARTMENT OF DEFENSE

               STATEMENT OF WILLIAM J. LYNN, III

    Mr. Lynn. Thank you Chairman Spratt, Congressman Ryan, 
Members of the Committee. Thank you for the opportunity to 
discuss the President's fiscal year 2011 budget request for the 
Department of Defense.
    As the Chairman indicated, we have a full statement that I 
have submitted for the record. And I appreciate your including 
that in the record. I will summarize it for you. And then turn 
to your questions.
    I would like to begin with a word of gratitude for your 
support for the men and women of our armed forces. Everything 
we are doing and the budget as a whole is directed towards 
their success.
    The President's top line budget request for fiscal 2011 
totals $708 billion. This includes $549 billion to fund base 
defense programs, $159 billion to support overseas contingency 
operations, and $33 billion to pay for the additional 30,000 
troops being deployed to Afghanistan.
    The base budget represents an increase of 3.4 percent over 
last year's budget. That equates to about 1.8 percent after 
adjusting for inflation.
    As a share of the economy, that is as a share of Gross 
Domestic Product, DoD outlays remain flat at approximately 4.7 
percent.
    Our budget reflects three overarching priorities, all of 
which are based on this year's quadrennial defense review that 
was just issued.
    First, the budget continues the rebalancing of America's 
defense posture. It emphasizes capabilities needed to prevail 
in current conflicts while still enhancing our ability to 
respond to future threats.
    To prevail in current wars, the budget increases Special 
Operations Forces, helicopter lift, intelligence surveillance 
and reconnaissance and other enablers of the forces engaged in 
our current conflicts.
    By increasing military pay, fully funding the military 
health system, and improving family support, the budget also 
reaffirms the Nation's commitment to the all-volunteer force.
    To meet future threats, the budget allocates $189 billion 
to conventional and strategic modernization programs. Funds are 
included for the F-35 Joint Strike Fighter, a new aerial 
refueling tanker, new ships, missile defense programs, space 
capabilities, and a new Cyber Command.
    Second, the budget continues the reform agenda established 
by Secretary Gates in the fiscal 2010 request. In last year's 
budget, Secretary Gates recommended cancelling or curtailing 
programs that if taken to completion would have cost the 
taxpayers $330 billion.
    This year he has proposed cutting seven additional major 
programs. These include the Next Generation Cruiser, the Navy 
Intelligence Aircraft, the EP(X), the third-generation infrared 
surveillance system, the Net-Enabled Command and Control 
System, DIMHRS or the Defense Integrated Military Human 
Resources System. It proposes curtailing the C-17 after the 
current buy. And it proposes not funding an alternative engine 
for the Joint Strike Fighter.
    Further procurements of the C-17 and the joint strike 
fighter alternative engine are two systems in particular that 
we are opposed to funding further. We have considered the 
metrics of each carefully. Our bottom line is that continuing 
either would not serve the interest of the taxpayer, the 
military, or our partner nations.
    We are also continuing to reform the way the Defense 
Department does business. This includes strengthening our 
acquisition workforce and reducing our reliance on private 
contractors.
    Our goal is to serve as good stewards of taxpayer dollars 
as we provide the war fighter with the world-class capability.
    Third, this budget makes a strategic choice to resource 
America's military needs. President Obama has funded real 
growth in the military and in other national security agencies 
even as he--even as he imposes a spending freeze on domestic 
agencies.
    In DOD real growth is projected at 1.8 percent this year 
and approximately 1 percent when averaged across the fiscal 
2010 to 2015 time frame.
    Modest real growth in the DoD base budget is necessary for 
several reasons. Some of our costs such as pay and benefits 
increase with inflation. Other significant expenses, especially 
healthcare, are growing faster than inflation. So because the 
total costs of sustaining the force is growing faster than 
inflation, DoD needs real growth simply to maintain present 
force levels.
    Making cuts in the size of our forces or our operations 
while we are engaged in two conflicts is simply not an option. 
Nor can we responsibly defer preparing for new threats that we 
may face as we go into the future.
    Mr. Chairman, in closing we believe that the fiscal year 
2011 budget request represents the minimum funding needed to 
provide for the defense of the United States and its people. It 
gives us the tools to prevail in the wars we are in while 
making investments appropriate for meeting future threats.
    We strongly urge Congress to support our full defense 
request in its upcoming budget resolution and in subsequent 
funding allocation.
    Mr. Chairman, that concludes my opening statement. Mr. Hale 
and I are available to answer whatever questions you might 
have.
    [The statement of William J. Lynn, III, follows:]

     Prepared Statement of William J. Lynn, III, Deputy Secretary,
                       U.S. Department of Defense

    Mr. Chairman, members of the committee, thank you for the 
opportunity to discuss the President's fiscal year 2011 budget request 
for the Department of Defense.
    On behalf of our Servicemen and women--as well as DoD civilian 
employees--I would like to thank the committee for your support of the 
Department's vital missions. Our troops have shown incomparable bravery 
and compassion in their service in Afghanistan, Iraq, Haiti, and in 
many other countries around the world.
    The budget request for fiscal year 2011 is, in the judgment of 
Secretary Gates and DoD's senior leadership, what is needed to sustain 
and rebalance our forces to address the national security threats we 
face today and anticipate in the future.
    This budget continues the reform agenda established by President 
Obama and Secretary Gates in the FY10 budget. Building on the FY10 
initiatives, the 2010 Quadrennial Defense Review (QDR) assessed the 
threats the U.S. faces in the coming years, established strategic 
priorities, and identified key areas for investment.
                   president's fy 2011 budget request
    The President's topline budget for FY 2011 requests $708 billion 
for DoD. This amount includes $549 billion in discretionary budget 
authority to fund base defense programs, an increase of more than $18 
billion over the $531 billion base budget enacted in FY 2010. The 
increase amounts to 3.4 percent, or 1.8 percent real growth after 
adjusting for inflation. The FY 2011 request includes an additional 
$159 billion to support overseas contingency operations, primarily in 
Afghanistan and Iraq.
    It should be noted that, even with modest real growth, DoD outlays 
as a share of Gross Domestic Product (GDP) will remain flat at 4.7 
percent in FY 2010 and FY 2011. Considering only the base budget, DoD 
consumes about 3.5 percent of GDP.
                    growth in the dod budget topline
    As the President stated in his budget message to Congress, ``Our 
future is dependent on maintaining American leadership abroad and 
ensuring our security at home.'' The President's budget request for DoD 
accordingly reflects the administration's commitment to modest, steady, 
and sustainable growth in defense spending.
    In making his budget decisions, President Obama carefully balanced 
our national security needs with our economic needs, including the 
deficit. Even as the President imposes a spending freeze on domestic 
agencies, he has made a strategic choice to continue funding modest 
growth in the military and in other national security agencies. Real 
growth is projected at 1.8 percent this year and approximately 1.0 
percent when averaged over FY 2010-15.
    Modest real growth in the DoD base budget is necessary for several 
reasons. DoD has some costs that increase with inflation, such as pay 
and benefits. Other costs are growing faster than inflation. In 
particular, military health care expenses are likely to increase by as 
much as five-to-six percent per year over the next five years, 
reflecting the rise in overall U.S. health care costs and increasing 
use of the TRICARE program.
    Because the total cost of sustaining the force is growing faster 
than inflation, DoD needs real growth simply to maintain present force 
levels. Sustaining our current size and capabilities is essential to 
prosecute current wars, meet U.S. commitments worldwide, and conduct 
unanticipated operations, including relief efforts for natural 
disasters. We cannot afford to make cuts in the size of our force or 
our operations while we are at war.
    DOD must also enhance capabilities for which we have an identified 
need and prepare for new threats we may face in the future. Building 
the capacity of partner nations to support U.S. counter-terrorism 
operations has emerged as a crucial national security priority. The 
budget therefore includes higher funding under the Section 1206 Train 
and Equip authority. The budget also increases support to defend our 
computer networks against cyber attacks, enhance our space 
capabilities, and deploy advanced missile defense systems.
    We urge Congress to support our full defense request in its 
upcoming budget resolution and in subsequent funding allocations by 
House and Senate Appropriations Committees. The bottom line is this: We 
need modest real budget growth to sustain and equip a military at war 
while also preparing for the future.
             themes and programs in fy 2011 budget request
    The base budget for FY 2011 request reflects three overarching 
institutional priorities.
    First, it reaffirms and strengthens the nation's commitment to care 
for the all-volunteer force, which Secretary Gates has called our 
greatest strategic asset.
    Specifically, the FY 2011 budget includes $138.5 billion for 
military pay and allowances, including a 1.4 percent pay raise; $2.2 
billion for enduring programs to support wounded, ill, and injured 
Service Members; $50.7 billion for the Unified Medical Budget and the 
Military Health System that serves 9.5 million beneficiaries; $8.1 
billion for military family support programs; and $18.7 billion to fund 
critical military construction and family housing requirements.
    Second, the proposed base budget continues the rebalancing of 
America's defense posture by emphasizing capabilities needed to prevail 
in current conflicts, while still enhancing capabilities that may be 
needed in the future.
    For the wars we are in, especially the conflict in Afghanistan, the 
budget provides for more rotary-wing aircraft; the addition of 1,500 
new helicopter pilots per year by 2012; increased Intelligence, 
Surveillance, and Reconnaissance (ISR) support; enhanced Electronic 
Warfare platforms; and increased funding for Special Operations Forces.
    The FY 2011 base budget also allocates $189 billion to conventional 
and strategic modernization, including:
     $10.7 billion for continued development of the F-35 Joint 
Strike Fighter and procurement of 42 aircraft;
     $864 million to support development of a new aerial 
refueling tanker;
     $25.1 billion for procurement of new ships, equipment, and 
research and development;
     $3.2 billion support the restructuring of the Army's 
Future Combat Systems;
     $9.9 billion for missile defense;
     Funds to strengthen U.S. capabilities in space and to 
stand up a new U.S. Cyber Command.
    These advanced weapons and capabilities are essential to keep us 
ahead of our adversaries. We need weapons systems that give U.S. forces 
an overwhelming advantage in combat, which will both save lives and 
shorten conflicts
    Third, the President's budget will continue the Department's 
commitment to reform the way DoD does business, especially in the area 
of acquisition.
    To ensure that every defense dollar is spent wisely, the FY 2011 
base budget will bolster the capability and size of our acquisition 
workforce. The eventual creation of 20,000 new positions in the federal 
acquisition workforce will enhance our ability to oversee programs and 
generate independent cost estimates, in compliance with Congressional 
legislation. We ask the Congress to support our in-sourcing initiative 
to hire new civilian workers in place of contractors, a move that will 
ultimately reduce costs and operational risks. Our goal is to serve as 
good stewards of taxpayer dollars as we provide the warfighter with 
world-class capability.
    An important component of acquisition reform is having the 
discipline to curtail or end unneeded and troubled programs. In last 
year's budget, Secretary Gates recommended canceling or curtailing 
programs that, if taken to completion, would have cost the taxpayer 
$330 billion dollars. This year he has proposed cutting seven major 
systems, including:
     The Next Generation Cruiser CG(X)
     The Navy Intelligence Aircraft EP(X)
     The Third Generation Infrared Surveillance system (3GIRS)
     The Net Enabled Command and Control System
     The Defense Integrated Military Human Resources System 
(DIMHRS)
     The C-17
     An alternate engine for the Joint Strike Fighter.
    The C-17 and the JSF alternate engine, as Secretary Gates has 
already discussed, are two systems in particular that we are opposed to 
funding further. Three department studies completed over the past five 
years each confirm the adequacy of our current strategic airlift 
capacity. The C-17 is an excellent plane. But we already have 194 C-17s 
and will have procured 223 when the currently authorized procurements 
are completed. This is in addition to 111 C-5s.
    The second JSF engine is similarly a capability that careful review 
has found to be more costly than the benefits it would provide. We took 
a fresh look at this issue, considering the $2.9 billion of additional 
funding it would take to develop a second engine to take it to 
competition, the downstream complications of separate maintenance 
regimes, potential savings achieved through competition, and the 
development status of the original engine. Our bottom line is that 
pursuing a second engine would not serve the interests of the 
taxpayers, our military, our partner nations, or the integrity of the 
JSF program.
           fy 2011 costs for overseas contingency operations
    Besides the base budget, the FY 2011 budget request contains funds 
to support overseas contingency operations. As Secretary Gates has said 
repeatedly, DoD's highest priority is to provide troops in the field 
with everything they need to be successful.
    We are asking for $159.3 billion to fund military operations in 
Afghanistan and Iraq in FY 2011. Included are funds for:
     Operations ($89.4 billion),
     Force Protection ($12 billion),
     IED Defeat ($3.3 billion),
     Afghan and Iraqi Security Forces ($13.6 billion),
     Coalition Support ($2.0 billion),
     Commander's Emergency Response Program ($1.3 billion), and
     Reconstitution or resetting of equipment ($21.3 billion).
    The budget supports a responsible drawdown of U.S. forces in Iraq 
and transfer to Iraqi responsibility and control. The budget also 
supports the growth of forces in Afghanistan, including a supplemental 
request of $33.0 billion in FY 2010 to pay for the additional 30,000 
troops that President Obama has ordered to be deployed.
                         longer term prospects
    As we conduct a responsible drawdown in Iraq and eventually leave 
Afghanistan, the Department's war-related costs will decline. Because 
we cannot accurately forecast wartime costs more than about one year in 
advance, DoD's long-term budget contains a placeholder of $50 billion 
per year for wartime spending from FY 2012 through FY 2015.
    Long-term trends in the base budget depend largely on threats to 
U.S. security and the forces and equipment that must be maintained to 
counter those threats. If we must maintain current force levels, we can 
expect the base defense budget to require some continued real growth.
    We will continue to search for ways to minimize this growth and to 
achieve efficiencies in all areas of the defense budget. Health care is 
one area in particular where the introduction of efficiencies may yield 
cost savings. If present trends continue, we can expect health care to 
consume 10 percent of DoD's budget by 2015. We have proposed some 
health care efficiencies in this budget. Our goal is to work with 
Congress to continue providing high-quality health care while slowing 
cost growth.
                                closing
    Mr. Chairman, in closing I want to thank you and the Committee for 
the opportunity to testify about the Department's topline budget. Your 
support of our troops and their families is deeply appreciated. We are 
confident that the choices and priorities contained in the FY 2011 
budget request will provide for the defense of the United States and 
its people. We are committed to ensuring that our Armed Forces have the 
tools to prevail in the wars we are presently engaged in, while also 
making the investments necessary for the future.
    Mr. Chairman, that concludes my opening statement. I welcome the 
Committee's questions.

    Chairman Spratt. Thank you very much, Mr. Lynn.
    Let us talk about the $50 billion plug for the current 
fiscal year--for the forthcoming fiscal year 2011. The 
Administration has included an additional sum that will take 
overseas contingency, expeditionary costs, call it what you 
will, Iraq and Afghanistan, up by $130 billion if I am not 
mistaken over and above what is already provided. Is that 
correct?
    Mr. Lynn. The----
    Chairman Spratt. So that you have a total of 159----
    Mr. Lynn. It is not--it is a total of nearly $160 billion I 
think.
    Mr. Hale. 159.3 in fiscal 2011.
    Mr. Lynn. That is just--when you add in the $33 billion 
that will be required to increase the troops, that is a slight 
reduction from fiscal 2010.
    Chairman Spratt. Now that is for 2011?
    Mr. Lynn. That is for 2011.
    Chairman Spratt. But 2012, 2013 and the out years to the 
extent you show those, the number is $50 billion.
    Mr. Lynn. That is correct.
    Chairman Spratt. Now how was that number derived?
    Mr. Lynn. That number is not derived by any analysis of 
operations. It is just too difficult to forecast troop levels 
and operational costs into the future. So that number is, I 
think you indicated--the word I would use is plug. That is a 
plug.
    As Congressman Ryan said, we know that there are going to 
be some costs going into the future. We don't know exactly what 
those costs are. So we put a placeholder in. And that 
placeholder is $50 billion.
    Chairman Spratt. We will we be filing a budget resolution 
that looks out over a span of five years? What are the 
prospects that we can see a significant reduction below the 160 
number for next year? So that the years that are now plugged 
years, $50 billion, will be that or something in that range. In 
other words, is $160 billion coming down in the five-year span 
that we look like? Is it realistic to expect that we will 
actually be spending less than 160, two, three years from now?
    Mr. Lynn. If you are looking out that far, I think that
    that is realistic. It is as I say difficult to forecast. 
But the plan right now is to draw--is to continue the draw down 
in Iraq. We will be down to 50,000 troops in September. And we 
will be out by the end of fiscal 2011. We are on track on that 
plan.
    We will be examining where we are in Afghanistan looking 
towards adjusting troop levels towards the summer after this in 
Afghanistan. So there is the possibility that we would look at 
lower levels two to three years from now.
    Chairman Spratt. So there is a distinct possibility that 
the out year number in the future years, three, four, five, 
could be substantially less than the $160 billion we are 
talking about for the upcoming year?
    Mr. Lynn. That is correct.
    Chairman Spratt. One of the elements of the defense budget, 
which has risen inexorably but not gotten a lot of attention is 
the personnel and support costs. Will you comment on what we 
are doing to try to contain those costs given the increases we 
have seen over the last several years?
    Mr. Lynn. Well I think we are trying to do two things, Mr. 
Chairman. One is we are trying to restrain all of our costs, 
including operations and support costs. An important initiative 
in that area is the in-sourcing initiative. We are bringing 
functions back into the government that were outsourced in 
earlier years. That should produce some savings and it should 
produce better oversight, which may in the end actually also 
lead to savings.
    But another thing that we are trying to do with operation 
and support costs is to budget for them accurately, so that we 
are not assuming things in the out years that we don't think 
are going to happen. There is sometimes a tendency with those 
costs to assume that you are going to get savings that nobody 
has any realistic plan to achieve. So we have tried to both 
have concrete plans to achieve savings while at the same time 
have realistic budgeting.
    Chairman Spratt. Do you have a number or range for how much 
we have budgeted as opposed to how much we have planned, the 
planning/budgeting shortfall so to speak?
    Mr. Lynn. If I am understanding your question right, I 
think we have budgeted for O&M and personnel at the levels we 
expect will occur. I hope frankly we can----
    Chairman Spratt. Over the full FYDP?
    Mr. Lynn. Over the FYDP. I mean especially in the next 
couple of years. By the fifth year of the FYDP there is a great 
deal of uncertainty.
    We have about two to three percent real growth programmed 
into the O&M budget. And historically that has been what has 
happened. I hope we can hold it down and make use of it for 
other needs. But I think it is realistic to have it there.
    Chairman Spratt. Acquisition reform, procurement R&D, the 
investment accounts. Are the acquisition reforms you are making 
saving money? Achieving their potential or does more need to be 
done?
    Mr. Lynn. We think we are taking the right steps on 
acquisition reform in terms of independent costing. In terms of 
trying to fix the requirements at the outset and in terms of 
trying to bring the appropriate expertise into the government.
    I think over time that should restrain acquisition costs. 
But in some instances, particularly in the near years, that may 
increase your budget. When you use independent cost estimates, 
if you--you tend to increase the initial estimate rather than 
decrease it. Usually the independent cost estimate is higher.
    And we, for example, with the joint strike fighter, we have 
gone with the independent cost estimates this year. That has 
increased the budget. That has increased the request.
    Now we think that that was going to happen anyway. The 
independent cost estimates tend to be more accurate. It is a 
more efficient means to program as if you get the costs right 
up front. And if you program it right up front, in the long run 
that will save the government money. But I can't give you 
budget savings in the near years.
    Chairman Spratt. I put this question to Mr. Hale, Secretary 
Hale. Are you satisfied with the management reporting cost 
variance-type systems that we have in place now, the SAR, the 
executive reports that are disseminated in the E-Ring and other 
things that keeps you abreast of what is happening in the 
field?
    Mr. Hale. Yes. I think they are reasonable. I will say 
DoD's financial systems are strongest at providing information 
about how we have spent against the money Congress 
appropriated. That is what those systems were designed to do.
    They aren't as strong in providing cost-type information 
for particular activities or initiatives that we are 
undertaking. We are trying to do better there. But often times 
it requires special reports or special exercises.
    So I think in general we have the financial information 
that we need. It could be better. And there are a number of 
initiatives under way to make it better.
    Chairman Spratt. You've got two items here in the--on page 
five of your testimony about the different elements, military 
personnel, O&M. And down to the bottom line which is other, 
minus 22.6 percent. That's a pretty big hit on other. What is 
taking the hit under that category, that heading?
    Mr. Hale. Those are, I believe, revolving funds. And it is 
a complex part of the budget. But among other things it has a 
National Defense Sealift Fund in it. And we are buying one less 
ship.
    But let me expand on that for the record. I think there are 
no major policy decisions there. Have I got that right?
    Chairman Spratt. Let me ask you one overarching question. I 
have been on the Armed Services Committee for all of the 26 
years that I have been here. And we have seen the QDRs come and 
go.
    Your most recent one is like previous ones in that the 
question it leads you to ask as you finish it is $738 billion 
is a whale of a lot of money, a lot more than we thought we 
would be spending just a few years ago on national defense.
    By comparison to what our allies are spending, it is even 
dramatically more, the percentage of GDP in absolute dollars 
and by every other measure. What are we doing or can we do to 
make our allies pull more of the load in policing the world and 
carrying out the missions that we are carrying out in Iraq and 
Afghanistan and other places in the world today?
    Mr. Lynn. Well, it is always a difficult challenge, because 
you are dealing with sovereign nations and they make their own 
decisions. I think Secretary Gates has been particularly frank 
recently with our European allies in his belief that they need 
to increase their national defense contributions.
    That said, I think the support that we are getting in 
Afghanistan and the increased support we are getting in 
Afghanistan from our European and other allies is critical to 
the mission there. So it is always an uneven story. And we have 
to push hard. But we have limited control.
    Chairman Spratt. Thank you very much. And answer any 
questions that Mr. Ryan may have for you please.
    Mr. Ryan. Okay, thank you, Chairman.
    We had a number of hearings last year to go into the cost 
drivers. We had, you know, CBO, GAO, CRS come by. And they did 
a fine job of identifying the cost drivers, you know, 
escalating military personnel costs, TRICARE, weapon systems 
costs.
    What we haven't heard is, you know, what is DoD doing to 
address these cost drivers. Can you tell us kind of what is in 
the President's budget? This is sort of the first full 
President's budget. What is in here that is going to address 
these cost drivers?
    Mr. Lynn. Well, I will ask Bob to expand. Let me start. I 
think the first thing that this budget--where this budget 
differs from prior ones is the discipline in the acquisition 
amount.
    We have taken on some of the programs. This has not always 
been popular. But there are programs that are either not 
performing to the level that we would like, and we have 
cancelled those. There are other programs that are strong 
capabilities but in very narrow niche areas.
    And we have come to the conclusion in a cost benefit 
analysis that we should not be buying those kind of exotic 
capabilities for very narrow purposes.
    And then finally, probably the most controversial, there 
are very good programs such as the F-22 and the C-17 that we 
simply have enough capability in. And we propose ending the 
programs with the current buys. So I think that is a critical 
step.
    A second step is the one that I mentioned to Chairman 
Spratt is in the acquisition reform context. We want to budget 
for these things right, right out of the box.
    So we have taken a strict look at our largest program, the 
Joint Strike Fighter, and we have come in with higher budgets. 
But we think that that is what it is going to take to bring 
this program in. And we think in the end having honest 
budgeting is going to be the most effective cost control 
mechanism.
    Mr. Ryan. Those are weapon systems. What about the other 
cost drivers?
    Mr. Lynn. In the personnel area, we have now achieved close 
to parity in terms of civilian and military pay. So we are no 
longer proposing to add to the employment cost index, which has 
been--over the past several years we have been adding a half a 
percent a year.
    This year we proposed a pay raise at exactly the employment 
cost index. So that will--particularly if that--when you 
reflect that over the whole course of the FYDP, that is 
multiple billion dollars in savings.
    In the medical area we have taken some steps in terms of 
pharmacy pricing, in terms of pricing to Medicare costs that we 
think will help bring down our healthcare costs. But I would 
say frankly I think that is probably a large open area.
    It is one we need to work closely with Congress frankly, 
because in the end you are talking about medical benefits for--
--
    Mr. Ryan. Yes.
    Mr. Lynn [continuing]. Servicemembers and their families 
and retirees. These are people who have contributed enormously. 
And so we need to treat them fairly.
    On the other hand, copays and deductibles have effectively 
been frozen since the mid-1990s. You cannot sustain that 
forever.
    Mr. Ryan. So Iraq is kind of, I guess the mission has 
matured to a place where we are much more comfortable with the 
operation. And we feel like we have advanced our goals and 
objectives there.
    As I mentioned, the Chairman and I just went to Afghanistan 
in January where we were nowhere near that stage of the 
operation. It is my opinion that the July 2011 announced 
deadline was counterproductive for achieving our objectives, 
even though we all want to have a deadline in our own minds.
    Assuming that that deadline is flexible, based upon what we 
are doing in Helmand and Marja and the success of that, where 
we are headed to Kandahar, and the operations that are 
forthcoming, where do you see this time line unfolding? And do 
you think the COIN is working?
    I mean, the counterinsurgency strategy, which we are now 
employing in these areas, do you from your lens see it working? 
Are we kind of where you thought we would be at this stage in 
the game? And what do you think that the real time line is with 
respect to getting this mission to the maturation, the 
government working, and all of those things that we have seen 
in Iraq?
    Mr. Lynn. I mean I think we have seen some important 
elements of progress. I think General McChrystal has described 
the situation as dire but no longer deteriorating. You know, we 
have not turned the corner. I wouldn't say that at this point. 
But I think we have taken some important steps. I think the 
operation in Marja is one of them. I think it represents a 
major effort to implement the COIN strategy that you described.
    The military side of that operation is we are starting to 
get to the completion of at least the initial phases of the 
military side. But if the COIN strategy is truly to work, it is 
the civilian and the Afghan side----
    Mr. Ryan. Right.
    Mr. Lynn [continuing]. That has to be married to that. And 
we are just--I mean, we are just putting in place the Afghan 
governance and bringing in the security forces.
    And so I think--yeah, I think we have to say we haven't 
seen the full results of that yet.
    Mr. Ryan. Do you think it can all be pulled off by July 
2011?
    Mr. Lynn. In Marja, yes.
    Mr. Ryan. All right. I am talking Afghanistan.
    Mr. Lynn. I think we are going to see over the course of 
the next year and a half important indicators of whether we are 
on the right path.
    I think that in many ways one of the important things that 
we need to do over the next year and a half is change the 
direction of the momentum. And the momentum had been working 
against us.
    I think as General McChrystal has indicated, we have at 
least slowed, if perhaps started to reverse that momentum. And 
reversing that momentum is important in terms of capturing the 
allegiance of the population. If they think they are on the 
winning side, that is a critical element in the success of the 
strategy.
    And, yes, I do think over the next 18 months we will get 
important indicators as to whether we are achieving that.
    Mr. Ryan. All right.
    Chairman Spratt. I do think the gentlemen will agree one of 
the messages we took back home from the Ambassador, General 
McChrystal, and others was that this particular date had had 
its salutary effect on the Afghans with whom they deal, making 
it clear to them that this was not an indefinite, open-ended 
commitment. And they bore a major part of the responsibility of 
making it work. And we heard that pretty consistently up and 
down the line while we were there. Let us just hope it works 
out.
    Mr. Becerra.
    Mr. Becerra. Mr. Chairman, thank you. Secretary, thank you 
very much for being here, appreciate it.
    Please convey to everyone at the Pentagon that we 
appreciate the response that was had to some of their requests 
by our troops to improve certain services, to be able to 
respond as quickly as possible to some of the requests by our 
soldiers in the field.
    And I appreciate that we seem to have done a much better 
job from when we first started in Iraq to now be able to 
respond in a much quicker manner to the requests of the 
soldiers that are out there. And I think from point A to point 
B it has worked a lot faster than it was before. Now when there 
is a concern expressed by the soldiers on the ground, that we 
need to adapt to the situation. I think that has gotten to the 
generals a lot faster and to the Pentagon. And I appreciate 
that very much.
    Mr. Chairman, I am actually going to focus on something 
that is very discreet. And the Secretaries may not be prepared 
to answer this. So we may have to take this under advisement 
and respond back.
    I hope you can respond to some of this, because it is a 
small, discreet issue. But in my eyes, it could become very 
big, and it is in regards to Afghanistan.
    I have some general concerns about how we conduct this 
engagement in Afghanistan, because I don't believe that we 
should continue asking for supplementals, asking this to be 
deficit spending. I believe that if our soldiers are prepared 
and having to face the possibility of death that we should be 
prepared and ready to accept the payment of this so that our 
soldiers know that their children aren't going to pay for this 
war that they are fighting.
    And so having said that, let me go to this discreet issue. 
I am concerned that having visited in Afghanistan that I am 
hearing from folks that a lot of the Afghan companies that we 
are contracting with to try to help Afghan--this Afghan first, 
a policy that we have to try to lift the Afghan population, so 
that they can care for themselves, they can fight for 
themselves, they can purchase and manufacture for themselves, 
may not succeed. We are the biggest purchaser in Afghanistan 
today. We are the biggest supplier in Afghanistan today.
    But what I am hearing too often is that too many Afghani 
companies that are trying to contract, legitimately contract 
with the federal government through DoD for some of the 
services that are out there, are finding some real difficulty.
    And it is basic stuff like getting paid. We may think in 
terms of having a credit line in this country, a small 
business, and therefore you are able to float your payments a 
bit. So you are going to take a loan out from a bank so you can 
pay your employees for the work you have done. And 15 days 
later, 30 days later, you get the money from the contract you 
had from the federal government.
    A lot of Afghani companies don't have that kind of float. 
They don't have that kind of credit eligibility. And they don't 
have the time to wait 30 days, 40 days, 60 days, 90 days for 
payment by the federal government for work they have performed 
and performed well.
    And what I am hearing on the ground is that some of these 
Afghani companies are going under, because they haven't been 
paid by the federal government for work they have performed 
well.
    I don't know if you have heard that. But that would panic 
me, because we are trying to set a good impression. And the 
worst thing we can do is say that we asked them to do something 
and they performed. And then they didn't get paid in time 
before they had to go under, because they couldn't pay their 
employees.
    Mr. Secretary, I don't if that is anything you have heard.
    Mr. Lynn. I am not aware of it. Bob, are you?
    Mr. Hale. I have not. I will check. I will say there is a 
balance we have to strike. And that is there have to be some 
internal controls. We have to have some kind of invoice, some 
sort of proof the work was done.
    Mr. Becerra. That I understand, Mr. Secretary.
    Mr. Hale. And we have had difficulties, which I think are 
getting fixed in terms of getting both finance and accounting 
personnel, and even more important, contracting officer 
representatives trained over there. These are U.S. people now 
who check the work, who check the bills.
    We have been focusing--I have joined in a team with 
Secretary----
    Mr. Becerra. Mr. Secretary, let me stop you there. I want 
to check you on that.
    Mr. Hale. Okay.
    Mr. Becerra. I want you to get me the numbers that show 
that. I am going to give you specific cases.
    Mr. Hale. All right. I will.
    Mr. Becerra. Let me give you another example.
    Mr. Hale. We are up to about 90 percent on CORs and finance 
and administration people, because I monitor this very 
carefully. But we will be glad to get you the specifics.
    Mr. Becerra. Okay. Let me give you another example that was 
given to me that I wanted to raise with you. In about three 
weeks, on March 25th and 26th, there will be a conference that 
will be held here. It is the Second Afghanistan Aviation and 
Defense Summit here in D.C.
    The stated purpose of the conference is to focus on 
business opportunities that will aid in the recovery process of 
Afghanistan and help in the effective implementation of the 
country's development programs.
    Here is the problem. Afghanistan businesses will not 
attend. Afghanistan businesses will not attend this conference, 
which is there to help Afghanistan lift itself up.
    Why? They can't get visas to come into the country to 
submit bids or to talk to the potential federal agencies.
    Most of them don't have the kind of money it takes to be 
flying all the way to the U.S. to participate. But they do 
point something else out to me. Afghanistan government 
officials are being flown over to the U.S. to Washington, D.C. 
to participate in this conference.
    Why? So they can talk to the potential bidders about this 
work in Afghanistan. So this is the craziness that I am 
hearing. You are going to send our government officials to the 
U.S. to participate in these conferences, to bid on contracts 
in our country.
    But we the businesses of Afghanistan can't participate, 
because we can't attend the conferences, either because of your 
visa requirements, or terrorism alerts, or we don't have the 
money to pay for something like that.
    I hope that we can follow this up and have further 
conversation, because this is what drives everyone crazy is 
when we hear a legitimate Afghani company saying to me, ``We 
may have to go under, because we performed. But we didn't get 
paid on time. And I don't have the money to pay my employees.''
    I hope that we can follow up, Mr. Secretary, on this. I 
think it is just one of those things that we just have to 
recognize how we can best do business in Afghanistan to help 
the Afghanis.
    By the way, I am not saying outsource jobs, American jobs, 
that we Americans should be doing to anyone else. I am saying 
work that is being done in Afghanistan that Afghani companies 
should be able to do with Afghani workers so we can help them 
lift themselves up so they don't have to continue to depend on 
us. We should help them where we can. And I hope I can follow 
up with both of you on this.
    Mr. Lynn. Absolutely.
    Mr. Becerra. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    Mr. Hensarling. Thank you, Mr. Chairman. Welcome, Mr. 
Secretary.
    One, I want to let you know that I was heartened to hear 
you use the phrase ``cost benefit analysis.'' That is a phrase 
that is not often heard within the confines of the Budget 
Committee. We always hear about the benefits of a certain 
spending request. We just don't often hear them run against the 
cost, so thank you for that.
    The Ranking Member actually focused on a number of issues 
that I wanted to focus on. So I really want to step back, get 
away from the trees, and look a little bit more at the forest 
long-term.
    Can I have the debt chart pulled up, please?
    
    
    Mr. Hensarling. I mean, clearly we all know that we are 
looking at a sea of red ink for as far as the eye can see.
    We have had the CBO Director, Dr. Elmendorf, testify, ``The 
outlook for the federal budget is bleak. U.S. fiscal policy is 
on an unsustainable path.''
    We have had the Director of OMB, Dr. Orszag, say that 
ultimately the ten year--the deficit numbers that are in the 
President's ten-year budget are unsustainable, because they do 
not drop below three percent of GDP.
    Former Comptroller General David Walker in looking at our 
long-term spending patterns said, ``They are a fiscal cancer 
that threatens catastrophic consequences for our country.''
    I am sure you are aware that Moody's has recently opined 
that within the next few years if America does not put forth a 
long-term plan to deal with that sea of red ink that our AAA 
bond rating could be jeopardized.
    Clearly Greece has been in the forefront of the financial 
headlines. And so I guess my question is to what extent do you 
believe that this particular sea of red ink that we are looking 
at, which as we know doubles the national debt from fiscal year 
2008 in five years and triples it in 2010, if we don't get this 
house in order, do you believe there is a long-term threat to 
our national security?
    Mr. Lynn. I think certainly the underpinnings of our 
national security is the health of our economy. So absolutely 
there are national security implications for these numbers.
    That said, I think what the President has done is try to 
balance concern for the fiscal situation that we are in and the 
needs of specific national security programs. And I think that 
is what led him to the conclusion that in the budget that he 
proposed there would be a domestic freeze. But there would be 
some modest real growth in the national security related 
agencies.
    I think he is trying to balance the concern that you 
identified for the overall state of the economy with specific 
needs in the national security arena that are needed to meet 
threats that we face. Of course we are in two wars and so on.
    Mr. Hensarling. If I could, Mr. Secretary, I would like 
your reactions to a couple of news articles that have come 
across my desk recently. I mean, clearly you know that we 
continue to be quite reliant on the Chinese to buy our debt. I 
think I read perhaps Japan became our number one debt holder 
recently. And then somebody recounted the numbers and it was 
China yet again.
    But I think in rough terms they hold about $800 billion of 
our debt. I think now we are right at that tipping point 
whether the majority of our debt is foreign owned.
    On February 10th, the Washington Times reported, ``China's 
military stepped up pressure on the United States on Monday by 
calling for a government sell off of U.S. debt securities in 
retaliation for recent arm sales to Taiwan.'' Do you have any 
comment on that?
    Mr. Lynn. I mean, I think the Chinese, as they said they 
would, have criticized the sale to Taiwan. We thought it was in 
our national security interests. And we are working with the 
Chinese. We hope it----
    Mr. Hensarling. No. But more specifically, Mr. Secretary, 
leveraging the debt that they hold--leveraging the debt of ours 
that they own to attempt to impact our national defense policy.
    Mr. Lynn. I am not sure where you are going, sir.
    Mr. Hensarling. Let me read you another headline that came 
up in Bloomberg January 29th. ``Russia urged China to dump its 
Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a 
bailout of the largest U.S. mortgage finance companies, former 
Treasury Secretary Henry Paulson said.''
    Again, I just--are these harbingers of things to come, 
again, if we do not tackle this particular debt problem?
    Mr. Lynn. I am not sure whether the things that you 
described are actually going to occur. I do think we need to 
tackle the debt problem. I think that the President has 
proposed a commission to do exactly that, proposed it with 
leaders of Congress.
    I think the important element of that commission is that 
you have--you can't just slice out one or two elements. You 
have to take on all aspects of the challenge. You have to take 
on entitlements. You have to take on revenues. You have to take 
on discretionary budgets. And that that is the approach in this 
commission.
    So I think that that kind of approach is exactly the right 
approach to deal with the challenge that you have identified.
    Mr. Hensarling. I appreciate your level of optimism. I see 
I am out of time.
    Chairman Spratt. Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Mr. Secretary, just a tale of two kinds of boomers. The 
first one is the ones we tend to deal with here in terms of the 
broader budget, the baby boomers.
    In 2019 they come flooding into Medicare, into Social 
Security. And because of the costs of Social Security and 
Medicare, the issues that you related to on the Fiscal Reform 
Commission become that much more important.
    How do we deal with those increasing entitlement costs 
coming into the system in 2019, which squeezes out a lot of 
dollars to do other things perhaps?
    But there is another boomer that is coming in 2019 that you 
are probably more intimately familiar with. And I want you to 
tell me what you are going to do about it. In 2019 the Navy is 
expecting to start with the SSBN-X Program. And the costs to 
that program, at least looking ahead, is so much and is slated 
to be so high that it potentially could squeeze out a lot of 
the ship building budget in the DoD, unless we make that 
commitment to the projected costs of that program.
    We had a hearing yesterday on this in the Seapower 
Subcommittee. We are going to have another hearing specifically 
on SSBN-X and Seapower. And one question I have for you is what 
kind of commitment does OSD have, and perhaps OMB have, to 
fulfill the dollar commitment necessary to follow through on 
SSBN-X, as well as on the rest of the Navy ship building 
budget?
    It looks good on paper so far. But I guess there is a 
little bit of concern on the Committee about whether or not 
what happens in reality will follow what happens on paper. Can 
you talk about--can you talk about the SSBN-X Program, the 
dollar amounts necessary for it, and its impact on the rest of 
the ship building budget?
    Mr. Lynn. Sure. You are correct in identifying that it is 
an important modernization program that we maintain our core 
nuclear deterrent through the SSBN Program, which is going to 
have to be modernized in the 2020 to 2040 time frame.
    The costs of that are going to be substantial. And almost 
surely can't be absorbed within the current levels of the Navy 
shipbuilding program. So it doesn't come up in the current 
fiscal year plan which only goes to 2015, which is just the----
    Mr. Larsen. Right.
    Mr. Lynn [continuing]. Very beginnings of that program.
    But in the 40--the 30-year, excuse me, don't make it 40. 
The 30-year shipbuilding plan that we have submitted to 
Congress we are projecting that there will have to be an 
increase in the--in that shipbuilding plan to accommodate at 
least some of that--of the costs of the SSBN.
    And that is indeed what we are planning on at this point. 
That is one of the--we talked about, you know, is there a need 
for real growth in the defense budget or not. That is a 
specific reason why you would see you need at least some level 
of real growth extending out in a predictable fashion for the 
defense budget.
    Mr. Larsen. Okay. I think in April we have a hearing 
scheduled with Seapower specifically on this issue and we are 
going to have to explore it more.
    On acquisition reform, Secretary Hale, Secretary Lynn 
mentioned F-35 and the cost estimates coming in. What is the--
what is the--maybe--I think you can answer this. What is going 
to be--what will be the first DoD program that starts from 
infancy to the end where our acquisition reforms will be 
applied?
    Mr. Hale. Well it won't be the F-35, which is well along at 
this point.
    Mr. Larsen. Absolutely, I'm sorry.
    Mr. Hale. If I could give you a name it would be something 
early in its life cycle that will experience the full efforts.
    Mr. Lynn. I don't know that we have a specific program. Let 
me give you one that I know you are quite familiar with is the 
tanker program.
    Mr. Larsen. Yes, sure.
    Mr. Lynn. On that program, we have taken an approach of 
using the fixed price model even in the development phase. And 
that is a little bit controversial. But we think it is possible 
in this instance, because the technology is within the current 
bounds. Both competitors have the technology in hand. The Air 
Force fully understands the requirements that we have.
    And we have tried to set those requirements up front so 
that we get the plane that we want on day one rather than going 
through engineering change proposals to alter the design to 
finally get the plane that we want, which is a source.
    For all those reasons we think we can use a fixed price 
contract. Using a fixed price contract means that we should be 
able to hit the budget and cost estimates that we use, because 
the risk, unless it is on inflationary and other items out of 
the contractor's control, is with the contractor. So it is very 
much in their interest to bring those costs in on target.
    So that is not exactly what you are saying. It is not an 
independent cost estimate. But it is an acquisition reform that 
is intended to gain accurate costs and so that we know up front 
what we are paying for and what we are getting.
    Mr. Larsen. All right, thank you. Thank you, Mr. Chairman.
    Chairman Spratt. Mr. Latta. We have a vote in ten minutes. 
And I think we can accommodate everybody and allow our 
witnesses to leave----
    Mr. Latta. Well thank you very much, Mr. Chairman. 
Gentlemen, thanks very much for being with us today. I really 
appreciate your testimony.
    Through the years I have done a lot of work with the Ohio 
National Guard and trying to make sure that we have--are 
meeting the needs of our Reserve and our Guard units.
    And one of the things that recently has come to my 
attention is, you know, the concern of keeping the Guard 
modernized. And a lot of times they sometimes get, I don't care 
if it is the Army Guard or the Air Guard, they sometimes get 
the hand-me-downs, you might say.
    But I have recently seen that the Army has noted in their 
budget they are going to discontinue procuring any new Humvees. 
However with the understanding that 60 percent of the National 
Guard's Humvee fleet is over 60 years old, or I'm sorry, over 
20 years old, pardon me, and that the early models are 
significantly less capable than the current models, what is the 
DoD's plan to ensure that the Army's Humvee fleet is 
modernized?
    Mr. Lynn. We have hit the requirement on Humvees. And so we 
are proposing to not purchase more beyond the next year for the 
Army.
    However, that doesn't mean that we would be ending the 
upgrade programs. We would be--the Humvees that we have, we 
would continue to upgrade those. And then there are future 
programs that may come in at some point and replace the Humvees 
in some of their roles. But that is a number of years out.
    Mr. Latta. Let me ask this then. Also I have seen, 
according to a fiscal year 2010 Presidential supplemental, and 
also in the fiscal year 2011 Overseas Contingency Operations 
Afghanistan Security Forces Fund, that production for Humvees 
will total about $1.3 billion for Afghan security forces and 
the Afghan National Police in 2011.
    I guess my question is are these units going to be at the 
same standard that the U.S. Humvees are right now, or are they 
going to be a lesser category you might say without the armored 
plating, or what will these units look like?
    Mr. Lynn. I guess I am going to have to take that unless--
--
    Mr. Hale. Yes. I think I will need to take that for the 
record. I think they will be up armored Humvees. But we have to 
get you the facts for the record.
    Mr. Lynn. But that is an important broader point is 
although the Army has hit their requirement that does not mean 
that there would not be continued sales from foreign militaries 
and indeed potentially other branches of the U.S. military may 
still buy some.
    Mr. Hale. There will be some Air Force and Marine Corps 
purchases as well.
    Mr. Latta. Okay. And then finally with these--on the Afghan 
Security Force sales and things of this nature, will they be 
all U.S. made, or are they going to be contracted? I know there 
is some questions about different contractors and things like 
that in Afghanistan. But will these all be U.S. contracted, or 
are they----
    Mr. Hale. For the Humvees now?
    Mr. Latta. Right.
    Mr. Hale. I think they will be U.S. purchases.
    Mr. Latta. Okay, thank you. I yield back, Mr. Chairman. 
Thank you.
    Chairman Spratt. Thank you, Mr. Latta. Mr. Schrader.
    Mr. Schrader. Thank you, Mr. Chairman. I appreciate the 
opportunity.
    I am concerned about the statements that are being made 
about reforming the acquisition process. It sounds good. When I 
look at the budget it looks like there is a seven percent 
increase in our weapons procurement systems. But I would hope 
we would find a reform that actually would lower our costs 
going forward rather than increasing it. Could you juxtapose 
those two items for me, please?
    Mr. Lynn. Sure. I mean, there are multiple things going on 
here. There is an increase in the overall modernization 
accounts. We think that that is what is needed to frankly buy 
the equipment that is needed for our national security, both in 
the wars that we are fighting now as well as potential future 
threats.
    As I mentioned in the testimony, there are also substantial 
program terminations that we have proposed. The terminations in 
the last budget, the one that Congress approved last year, 
fiscal 2010 that we are now executing, that if you took to 
completion all of the programs that were terminated there, it 
would have been an additional $330 billion. If you----
    Mr. Schrader. What are the terminations the President--what 
does the total amount dollar wise that the President's 
proposing this budget cycle for terminations?
    Mr. Lynn. I don't have the lifetime number. In the fiscal 
2011 the biggest two are the C-17 and the alternate engine.
    Mr. Schrader. Right. I just----
    Mr. Lynn. If you added those two programs in, it would be 
on the order of an additional $3 billion.
    Mr. Schrader. Okay. I was just trying to get a handle 
compared to the 330, 3 billion doesn't sound like very much.
    Mr. Hale. The 330 was, as Mr. Lynn said, at cost to 
complete. I don't also have in my mind the cost to complete for 
the terminations. It would be--that are proposed this year. It 
would be much less than 330.
    But as he said, the savings in fiscal 2011 are about 3 
billion. By contrast, if I remember correctly, last year's 
terminations resulted in savings of about 10 billion, 10 or 11 
billion.
    Mr. Schrader. My comment would be I wish the Administration 
would go back the other way. I keep pushing Congress a little 
bit to be a little more aggressive in dismantling some of these 
programs. And hopefully in reform acquisition we should be 
setting targets to do better with less.
    Clearly the Cold War is over. I mean, we still need some 
nuclear capability. I appreciate that. But the Cold War is 
over. What sort of draw down has gone down on our 
intercontinental ballistic missile systems and our military 
personnel in Europe seeing as how we have to apparently build 
up our forces in the Middle East?
    Mr. Lynn. I am going to have call back from memory. But I 
think at one point we had over 300,000 troops in Europe. And 
now we are down to around 100,000. I will check those and get 
those for the record.
    Our ICBM levels I think are at 450 currently. I am not sure 
what the high. But they were in the midst of negotiations with 
the Russians to try and reduce by a relatively substantial 
mutual number the strategic nuclear delivery vehicles.
    Mr. Schrader. So you envision those going down, continuing 
to go down?
    Mr. Lynn. Absolutely.
    Mr. Schrader. Last question is Al-Qaeda. Are they primarily 
in Afghanistan or Iraq, or what is the current theology here?
    Mr. Lynn. Well, Al-Qaeda is in numerous countries around 
the world. I think that the general intelligence would tell you 
that the leadership locus would be in the ungovernable areas on 
the Pakistan/Afghan border.
    Mr. Schrader. That goes to my concern a little bit. It 
seems like we are fighting this land war in Afghanistan, 
finally getting out of Iraq. And yet Al-Qaeda is more on the 
periphery, perhaps as you say in the Pakistan/Afghan border, 
maybe in Yemen.
    I am not sure why we are devoting so much of our resources 
in an area where Al-Qaeda itself is not present. And we should 
be spending a little more time, perhaps with the drone systems 
that seems to be working very well, and Special Forces units in 
the hotbed areas where Al-Qaeda really is. Why are we not 
pursuing that?
    Mr. Lynn. Well, I think we are. I think we are pursuing 
with our partners in Pakistan and in Yemen I think we are 
pursuing aggressive campaigns against Al-Qaeda as well as the 
operations in Afghanistan. I don't think it is an either/or 
proposition.
    Take the border, you are trying to put pressure on that 
border area from both sides. The Pakistanis have taken 
important steps with some assistance from us. And on the Afghan 
side we are trying to put pressure on the other side. The hope 
is to stabilize the situation with a holistic approach.
    Mr. Schrader. Thank you very much. I appreciate it.
    Chairman Spratt. Let me tell you where we are. We have a 
vote in one minute on the House floor. Mr. Scott has called and 
said as soon as he votes he would like to come and ask some 
questions.
    I can go ahead and recognize at least Mr. Garrett, maybe 
Mrs. Lummis. But we have got two votes following this. Would 
you prefer to come back? Would you prefer to proceed at this 
point?
    Mr. Garrett. I would prefer to proceed. I only have one 
point that I want to raise. And I will submit the rest of my 
questions in writing.
    Chairman Spratt. Okay. Mr. Garrett.
    Mr. Garrett. Thank you. And as I said, I will be submitting 
some additional numbers questions and what have you to you 
afterwards.
    But right now I just want to get to one personal matter 
back in the District. I was not familiar with a program that 
was out there until a couple of years ago. It is a program. It 
is called the Joint POW/MIA Accounting Command or JPAC and all 
the extensive work that they actually do.
    I will just give you the one example that we have been 
dealing with now. It is dealing with folks from the Lessing 
family. This is a gentleman, Army Captain Warren Lessing, who 
was killed way back in World War II when his aircraft crashed 
off the coast of Newfoundland, Canada.
    Now JPAC has been involved. As you know, they are involved 
with excavations and underwater excavations and the like to try 
to recover our fallen heroes to bring back their remains when 
they are identified.
    Now these were identified some time ago. And the family has 
actually been--his granddaughter has been working on it now for 
over a decade. Our office became involved about two years ago. 
I am trying to do it.
    And I do want to say clearly that JPAC has been very 
responsive to our office with this over the time and has filled 
us in on what they are doing and has looked out to see 
everything that they can do.
    But the problem apparently is that there is a cue out there 
or a list out there of about a dozen other--a little less than 
a dozen other excavations that they can--need to do. And the 
type of work that they do is limited, because the folks that 
they can get involved with it because it is highly dangerous 
and underwater and what have you. And there are only so many 
divers that they actually have experts, only a couple I think.
    Are you all familiar with this program? I assume you are.
    Mr. Lynn. At a general level, yes.
    Mr. Garrett. Yes. I just appreciate maybe if not here 
whether you can bring back to us as to what the prospects are 
for funding of this program so that we can make sure that when 
we do know the whereabouts of our fallen heroes, that they can 
come excavate them and bring back their remains to their 
families and do it in a timely manner.
    His son is now 80 years old and would like closure before 
he passes on so they know whatever actually happened to their 
father.
    Mr. Lynn. We would be happy to get that for the record.
    Mr. Garrett. Okay. I thank you.
    Chairman Spratt. Ms. Lummis there is zero time left to 
vote. We can ride it out if you would like. What is your 
preference.
    Ms. Lummis. Mr. Chairman, I have a staffer here. And if I 
could just leave--plant three seeds of questions with you and 
ask you to follow up with him.
    Mr. Lynn. Sure.
    Ms. Lummis. It will take 30 seconds.
    Chairman Spratt. Go ahead.
    Ms. Lummis. Okay, thanks, Mr. Chairman.
    One is are we making any discernable progress towards a 
clean audit?
    Number two is you mentioned modest real growth in your 
budget, 2012 and forward. We are talking one percent real, 
three percent nominal growth. Can you really do it for that, 
and I am curious about how with rising fuel costs, et cetera.
    And question number three is in Wyoming we have a lot of 
new, little national defense oriented research companies that 
are doing some really cutting edge work on technology, 
biodefense, and other things. What are you doing to help 
encourage these small businesses so they can compete with 
larger defense contractors for some of these really cutting 
edge technologies?
    Thank you very much. And my staffer will follow up with 
you. Thanks so much for being here. Thanks, Mr. Chairman.
    Chairman Spratt. Thank you now, appreciate it.
    If you could bear with us. We have got two five-minute 
votes after this vote. Mr. Scott at least had some questions. 
We will be back as quickly as we possibly can.
    In the meantime, if you need to use the telephones or any 
other facilities here, they are yours at your request. Thank 
you for your patience.
    Mr. Lynn. Thank you, Mr. Chairman.
    [Recess.]
    Chairman Spratt. Call the hearing back to order and 
recognize Mr. Scott of Virginia.
    Mr. Scott. Thank you, Mr. Chairman. I appreciate you coming 
back.
    One question I had was on the BRAC closure of Fort Monroe. 
When that was closed there was some speculation about cleaning 
up. Do we have the sufficient funds to clean up Fort Monroe, so 
that when it is turned over to the Commonwealth of Virginia 
that it will be as clean as it was when we gave it to you?
    Mr. Hale. I mean, I need to check specifics for you, Mr. 
Scott. But we generally budget for environmental cleanup of 
BRAC closure sites. So I think the answer is going to be yes.
    Mr. Scott. Okay. We said during the consideration that if 
you close it, you have got to clean it. So it had to be part of 
the calculation.
    In terms of changing the home porting of an aircraft 
carrier from Norfolk to Mayport, I understand that their--I 
haven't seen the risk assessment, which quantifies the hedge 
against uncertainty. During the Cold War there didn't seem to 
be much of a problem, because there was no other East Coast 
nuclear facility. And the question I have is the--just the 
dredging or otherwise making Mayport available just in case 
something unusual happened, would that--why would that not be 
sufficient in the outside chance that something did happen 
rather than move--changing the home porting?
    Mr. Lynn. We looked at that, Mr. Scott. And we came to the 
conclusion that strategically the country was better protected 
if we continued the policy of having two carrier ports on each 
coast.
    That would require putting a nuclear facility at Mayport 
since we no longer have any conventional carriers. In the Cold 
War that you referred to, we had a mix of conventional and 
nuclear----
    Mr. Scott. No. It is just--one of the uncertainties you are 
hedging yourself against would that be hurricanes? Would that 
be one of the uncertainties?
    Mr. Lynn. You would be hedging both against manmade and 
natural disasters.
    Mr. Scott. So we would be moving a carrier to Florida from 
Norfolk to hedge against hurricanes?
    Mr. Lynn. It would be a broader calculation than that. It 
would be against all forms of natural disasters and terrorist 
attacks.
    Mr. Scott. Where could we find the risk assessment?
    Mr. Lynn. We provided briefings to the Armed Services 
Committee. I will make sure that you get it.
    Mr. Scott. Thank you. And once the initial costs--this is 
the Budget Committee. So we want to know all the budget 
implications. After the initial expenditure, what are the 
recurring costs that would be involved?
    Mr. Lynn. I mean, I think you are aware the initial costs 
were on the order of $700 million. I don't have the recurring 
costs. But we can get that for the record.
    Mr. Scott. Have you considered the recurring costs? What 
would the--what kind of costs would we be talking about?
    Mr. Lynn. We have considered it as part of the analysis. 
But I don't have the numbers in my head.
    Mr. Scott. Have you considered the--if the average age on 
these aircraft carriers is about 22 years old, something like 
that, they need to be constantly trained. Where would that 
training take place? For a carrier in Mayport, where would the 
continual training take place? Would they have to come to 
Norfolk to get recurring training?
    Mr. Lynn. I guess I am not certain.
    Mr. Scott. You don't know. Okay. On maintenance----
    Mr. Hale. I think, Mr. Scott, I think they would go to 
training ranges in the Caribbean.
    Mr. Scott. But if they are--but they--if they were in 
Norfolk they could training right there in Norfolk. No 
temporary duty?
    Mr. Hale. It would depend on the kind of training I think.
    Mr. Scott. Okay. As I understand it, the aircraft carrier 
will be gone about half the time. What is the shore maintenance 
staff doing the 50 percent of the time the ship isn't there?
    Mr. Lynn. The same kinds of things that they would be doing 
in Norfolk. There is a series of preparations and other 
functions. There is a continual work up function for all kinds 
of ships.
    Mr. Scott. Would they be in Mayport, or would they be in 
Norfolk?
    Mr. Lynn. There would be a permanent staff in Mayport.
    Mr. Scott. Now I understand that the permanent staff would 
be about 50. But when the ship shows up you would haul people 
from Norfolk, 700 and some people from Norfolk, to be in 
Mayport. Is that not true?
    Mr. Lynn. You are going to have address that to the Navy. I 
am not certain, sir.
    Mr. Scott. If that is true, would that cost be considered? 
Did you consider that cost?
    Mr. Lynn. We did an analysis of the costs and came to the 
conclusion that the danger of putting all of your carriers on 
one port on the East Coast was not a risk that we wanted to 
take.
    Mr. Scott. But we haven't seen that assessment. I 
understand that according to the Navy, the expected level of 
resources over the near and mid-term will not sustain every 
program objective, warranting a willingness to consider 
tradeoffs in even our most deeply held priorities.
    What kind of tradeoffs are we talking about in terms of 
ship acquisition, aircraft procurement, ship repair and 
maintenance, and shore infrastructure? What kind of tradeoffs 
are we talking about? What would this do to our ability to 
achieve a 313 ship fleet if we spend a billion dollars in this 
operation?
    Mr. Lynn. In the shipbuilding plan that we have submitted, 
we have a plan that would get over the 300 ship target. And it 
includes the costs of the facility in Mayport.
    Mr. Scott. Then what other tradeoffs, even in our most 
deeply held priorities, that the Navy was talking about?
    Mr. Lynn. I am not sure what you are referring to.
    Mr. Scott. You said 300. Is that the same as 313?
    Mr. Lynn. I think it is a little less. The 313 number is a 
number that the CNO laid out. The shipbuilding plan lays out a 
range that goes from the 285 we are at now, up over 300, and 
stays over 300 for most of the ship.
    It is hard to have a point target, because when you have 
ship acquisitions and ship retirements, you go up and down in 
individual years. So I think it is better to look at it is that 
you want to be in the low 300s. And some years that might be 
313. And some years it might be a little higher. And in other 
years it might be a little bit lower.
    Mr. Scott. And is there a deficit in shore infrastructure 
and ship repair and maintenance in the Navy budget right now?
    Mr. Lynn. We have increased the Navy maintenance budget 
this year. And we have tried to budget two to three percent 
real growth, which is what we anticipate those kinds of budgets 
to have.
    Mr. Scott. But is there a backlog? There is no backlog?
    Mr. Lynn. I believe there is a backlog.
    Mr. Scott. A huge backlog. Is there not a huge backlog in 
Navy ship repair and maintenance and shore infrastructure that 
the Navy needs to come up with?
    Mr. Lynn. There is always a rolling backlog. We will get 
you the numbers.
    Mr. Scott. Thank you, Mr. Chairman.
    Chairman Spratt. What is in the budget this year for the 
proposed moving of the carrier from Norfolk to Mayport?
    Mr. Lynn. There is very little money in for this year. It 
is over the course of the FYDP.
    Mr. Hale. There is just two million. In the fiscal 2011 
budget, there is two million for planning and design for the 
Mayport move.
    Chairman Spratt. Mr. Ryan.
    Mr. Ryan. Thank you, Mr. Chairman. Gentlemen, thank you for 
your testimony here today and the work you are doing on behalf 
of the country.
    I would like to turn just to a couple of issues, first on 
the acquisition side. Obviously, we all have responsibility to 
make sure that taxpayer dollars are spent wisely. And right now 
with the economy in the downturn, our dollars are particularly 
being stretched thin.
    I want to ask on our acquisition reform issues. Secretary 
Lynn, in your testimony you outline some of the steps DoD is 
taking right now to continue reforming the acquisition process 
and ensure defense dollars are in fact spent wisely.
    How will creating 20,000 new positions in the federal 
acquisitions workforce lead to greater efficiencies and cost 
savings? And next, what additional programs in this year's 
budget are being recommended for discontinuation? And in your 
opinion, will any of these programs make our defense posture 
any weaker or our troops any less safe?
    Mr. Lynn. The 20,000 is--about half of those 20,000 are new 
positions and about half of them are in-sourcing of functions 
that are currently being performed by contractors. When you in-
source the positions, we think that we will get a percentage 
savings. That it is cheaper for us to do it in-house, as long 
as it is a relatively permanent function, than it is to 
outsource the cost of an individual is less. We will get you 
some numbers on that for the record.
    In terms of the cancellation, there were seven major 
programs that were cancelled or curtailed this year. The two 
largest were the C-17 where we proposed to end the buy at the 
current level of 223, which is what Congress has authorized to 
this point.
    And the alternate engine for the Joint Strike Fighter, 
which we would propose not to go forward. We think in terms of 
the first program, we have at this point more lift than the 
studies suggest that we need. So we think we can curtail the C-
17 program at this point within the acceptable risk.
    And with the alternate engine, there--we think also that we 
can contain any risks there. And it will be a more cost-
effective way to proceed with the single engine. We don't think 
that the potential savings from competition outweigh the 
substantial up-front costs of bringing a second engine to 
production.
    Mr. Ryan. Any other examples that you can give me?
    Mr. Lynn. We stopped work on a next generation infrared 
satellite, called 3GIR. We have stopped the next generation 
cruiser called CGX. There is Navy electronic warfare aircraft 
called EPX. There is a command and control system. I forgot----
    Mr. Hale. Net-Enabled Command and Control System.
    Mr. Lynn. Net-Enabled Command and Control System. And then 
there is a integrated--something called the Defense Integrated 
Military Human Resources System, which is called DIMHRS, which 
was a large IT project which frankly had just gone way over 
budget and schedule and was not working. And we have decided to 
take a different approach, tackling each of the services 
individually rather than trying to do it on a government-wide 
basis. Excuse me, a department-wide basis.
    Mr. Ryan. Thank you.
    Mr. Langevin. Before my time runs out, on another issue. 
First of all, I want to applaud Secretary Gates who recently 
testified before Congress that the Pentagon has taken the first 
steps toward repealing ``don't ask, don't tell.'' I think it is 
an antiquated policy. And I think we ought to be judging people 
on their service and not on their sexual orientation. But, 
obviously, a thorough review won't be completed until the end 
of next year.
    Let me ask you, how much money have we spent recruiting and 
training new soldiers to replace the thousands discharged under 
``don't ask, don't tell''? In other words, how much has this 
policy cost the government? And how much will it cost to wait 
another year?
    Obviously, the military being stretched so thin right now, 
you know, we need the best and the brightest that are serving. 
And they shouldn't be I don't think disqualified because of 
their sexual orientation. So I would like you to answer that 
question if you would.
    But also, you know, why spend additional time and resources 
on further review of this policy at the risk of losing more 
distinguished servicemembers? Why not repeal the policy now and 
keep our highly-trained soldiers who are already serving with 
honor and distinction?
    Mr. Lynn. We are trying to strike the appropriate balance. 
There are many issues involved in repealing this policy. We 
have to institute policies on benefits, on fraternization, 
conduct, housing. We have to look at how we are going to move 
the force to a new policy in terms of implementation. There is 
training. There is leadership issues. And we want to do this in 
a very thorough and thoughtful manner. And that is the reason 
for the timing.
    I understand your concern about discharging individuals as 
we look to change this policy. And for that reason we are 
taking a look at what kind of flexibility we have within the 
current law to tighten up the regulations and to narrow the 
basis on which you would see any further discharges under the 
current policy.
    Mr. Langevin. Does the Secretary have the authority to 
suspend the policy for now, pending the outcome of the review?
    Mr. Lynn. No. We don't think--I think the best--I yield to 
the lawyers. But I don't think--I mean, it is--the ``don't ask, 
don't tell'' policy is the law. Congress has passed the law.
    We have implementing regulations that, for example, tell 
you at what level of seniority an officer--the disposition has 
to be made at, because it has to be made--can it be done at a 
colonel level or a more senior level?
    Those kinds of things are implementing the law. We think we 
can make changes in those kinds of things. But can we just 
ignore the law, no, we don't think we can.
    Mr. Langevin. Okay. I am not saying you ignore it. But did 
we have the opportunity to suspend it?
    Mr. Lynn. We don't think we have the basis to suspend it I 
guess was the word you used.
    Mr. Langevin. Okay, thank you.
    Chairman Spratt. Secretary Lynn, Secretary Hale, thank you 
very much for coming, for your forthright answers. And we will 
get you out of here on schedule back to the Pentagon.
    We look forward to working with you this year for a 
significant defense budget for next year. Thank you again for 
your participation.
    [Whereupon, at 12:00 p.m., the Committee was adjourned.]

                                  
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