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



                         [H.A.S.C. No. 111-172]

     MANAGING THE DEPARTMENT OF DEFENSE IN A TIME OF TIGHT BUDGETS

                               __________

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                             JULY 22, 2010






                                  ______

                      U.S. GOVERNMENT PRINTING OFFICE
  63-121                   WASHINGTON : 2011
___________________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer 
Contact Center, U.S. Government Printing Office. Phone 202-512-1800, or 
866-512-1800 (toll-free). E-mail, [email protected].  






                                     
                   HOUSE COMMITTEE ON ARMED SERVICES
                     One Hundred Eleventh Congress

                    IKE SKELTON, Missouri, Chairman
JOHN SPRATT, South Carolina          HOWARD P. ``BUCK'' McKEON, 
SOLOMON P. ORTIZ, Texas                  California
GENE TAYLOR, Mississippi             ROSCOE G. BARTLETT, Maryland
SILVESTRE REYES, Texas               MAC THORNBERRY, Texas
VIC SNYDER, Arkansas                 WALTER B. JONES, North Carolina
ADAM SMITH, Washington               W. TODD AKIN, Missouri
LORETTA SANCHEZ, California          J. RANDY FORBES, Virginia
MIKE McINTYRE, North Carolina        JEFF MILLER, Florida
ROBERT A. BRADY, Pennsylvania        JOE WILSON, South Carolina
ROBERT ANDREWS, New Jersey           FRANK A. LoBIONDO, New Jersey
SUSAN A. DAVIS, California           ROB BISHOP, Utah
JAMES R. LANGEVIN, Rhode Island      MICHAEL TURNER, Ohio
RICK LARSEN, Washington              JOHN KLINE, Minnesota
JIM COOPER, Tennessee                MIKE ROGERS, Alabama
JIM MARSHALL, Georgia                TRENT FRANKS, Arizona
MADELEINE Z. BORDALLO, Guam          CATHY McMORRIS RODGERS, Washington
BRAD ELLSWORTH, Indiana              K. MICHAEL CONAWAY, Texas
CAROL SHEA-PORTER, New Hampshire     DOUG LAMBORN, Colorado
JOE COURTNEY, Connecticut            ROB WITTMAN, Virginia
DAVID LOEBSACK, Iowa                 MARY FALLIN, Oklahoma
JOE SESTAK, Pennsylvania             DUNCAN HUNTER, California
GABRIELLE GIFFORDS, Arizona          JOHN C. FLEMING, Louisiana
NIKI TSONGAS, Massachusetts          MIKE COFFMAN, Colorado
GLENN NYE, Virginia                  THOMAS J. ROONEY, Florida
CHELLIE PINGREE, Maine               TODD RUSSELL PLATTS, Pennsylvania
LARRY KISSELL, North Carolina        CHARLES K. DJOU, Hawaii
MARTIN HEINRICH, New Mexico
FRANK M. KRATOVIL, Jr., Maryland
BOBBY BRIGHT, Alabama
SCOTT MURPHY, New York
WILLIAM L. OWENS, New York
JOHN GARAMENDI, California
MARK S. CRITZ, Pennsylvania
LEONARD L. BOSWELL, Iowa
DAN BOREN, Oklahoma
HANK JOHNSON, Georgia

                     Paul Arcangeli, Staff Director
                Andrew Hunter, Professional Staff Member
               Jenness Simler, Professional Staff Member
                    Caterina Dutto, Staff Assistant























                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2010

                                                                   Page

Hearing:

Thursday, July 22, 2010, Managing the Department of Defense in a 
  Time of Tight Budgets..........................................     1

Appendix:

Thursday, July 22, 2010..........................................    43
                              ----------                              

                        THURSDAY, JULY 22, 2010
     MANAGING THE DEPARTMENT OF DEFENSE IN A TIME OF TIGHT BUDGETS
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck,'' a Representative from 
  California, Ranking Member, Committee on Armed Services........     2
Skelton, Hon. Ike, a Representative from Missouri, Chairman, 
  Committee on Armed Services....................................     1

                               WITNESSES

Conaton, Hon. Erin C., Under Secretary of the Air Force..........     9
McGrath, Hon. Elizabeth A., Deputy Chief Management Officer, U.S. 
  Department of Defense..........................................     4
Westphal, Hon. Joseph W., Under Secretary of the Army............     6
Work, Hon. Robert O., Under Secretary of the Navy................     7

                                APPENDIX

Prepared Statements:

    Conaton, Hon. Erin C.........................................    79
    McGrath, Hon. Elizabeth A....................................    51
    McKeon, Hon. Howard P. ``Buck''..............................    49
    Skelton, Hon. Ike............................................    47
    Westphal, Hon. Joseph W......................................    60
    Work, Hon. Robert O..........................................    70

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Bishop...................................................    95
    Mr. Forbes...................................................    95
    Mr. McKeon...................................................    94
    Mr. Skelton and Mr. Bishop...................................    93
    Mr. Taylor...................................................    94

Questions Submitted by Members Post Hearing:

    Mr. Critz....................................................   110
    Mr. Kissell..................................................   109
    Mr. Larsen...................................................   109
    Mr. Miller...................................................   105
    Mr. Ortiz....................................................    99
    Mr. Owens....................................................   110
    Mr. Turner...................................................   106
. 
     MANAGING THE DEPARTMENT OF DEFENSE IN A TIME OF TIGHT BUDGETS

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                           Washington, DC, Thursday, July 22, 2010.
    The committee met, pursuant to call, at 10:04 a.m., in room 
2118, Rayburn House Office Building, Hon. Ike Skelton (chairman 
of the committee) presiding.

 OPENING STATEMENT OF HON. IKE SKELTON, A REPRESENTATIVE FROM 
        MISSOURI, CHAIRMAN, COMMITTEE ON ARMED SERVICES

    The Chairman. Good morning, ladies and gentlemen. We 
welcome you to today's hearing on managing the Department of 
Defense [DOD] in a time of tight budgets. Our hearing continues 
the committee's aggressive efforts to protect taxpayers at the 
same time we protect the troops and ensure our national 
security.
    This discussion is very timely. First, consider the budget. 
Much to its credit, the Obama Administration this year 
delivered a budget with real growth in defense spending.
    However, the rate of this growth will not support all the 
spending practices which have arisen over the last 12 years, 
during which the defense budget more than doubled. Furthermore, 
the significant federal deficit will make continued real growth 
in the defense budget a challenge.
    Second, consider the Department of Defense's management 
challenge. As illustrated in the ``Top-Secret America'' series 
of articles in this week's Washington Post, the growth in 
contractors and government offices devoted to fighting 
terrorism since 9/11 is staggering. Most of this growth has 
occurred within the Department of Defense, though much of it 
falls in the area of intelligence.
    But little of note at Department of Defense was eliminated 
to make way for the new growth. Instead, the Department has 
grown bigger.
    Managing all this is exactly the job Congress assigned to 
the Department's Chief Management Officer [CMO], a job 
currently filled by Deputy Secretary of Defense, Bill Lynn. And 
while Secretary Lynn could not be with us today, much to my 
regret, we have an excellent panel of witnesses with us.
    Beth McGrath, Deputy Chief Management Officer of the 
Department of Defense; Joe Westphal, Under Secretary of the 
Army; Robert Work, Under Secretary of the Navy; and one-time 
staff director of this committee, one who has done a wonderful 
job here and is doing a wonderful job for the Air Force, Erin 
Conaton, the Under Secretary of the Air Force. We welcome you 
back.
    Secretary Conaton. Thank you, Mr. Chairman.
    The Chairman. Under Secretaries were designated by Congress 
to serve as Chief Management Officers of their respective 
Departments. Now, I have asked these witnesses to update the 
committee on exactly how they are creating the tools, the 
structures and the systems necessary to manage the largest, 
most complex institution in the world. I have asked them to 
focus on a few issues in particular.
    Congress has mandated that the Department must, as long 
last, get its finances in order and be ready for an independent 
audit by 2017. Will the Department comply with the law? What 
progress has been made?
    The Department has asked and received from Congress 
billions of dollars to modernize its business systems over the 
past 10 years. What do we have to show for this investment? Do 
we now have the kind of management information about our 
business operations that we need? When will we get there?
    Last, the committee has followed with great interest the 
efficiency initiative announced by Secretary Gates on May the 
8th at the Eisenhower Library. We want to know how this 
initiative will work? When the Department intends to share its 
findings with Congress?
    This committee stands four-square behind efficiency. At the 
same time, we want to ensure that major budget decisions are 
well considered. We should not attempt to find efficiencies 
through the kind of mindless across-the-board cuts that 
President Obama campaigned against.
    For my own part, I will note loud and clear that I am not 
for cutting the defense budget at this time. My understanding 
is that the Secretary's efficiency initiative is not about 
cutting the budget, but I look forward to hearing more about 
exactly how this initiative is designed to work.
    I would like to also mention the fact that this committee 
successfully passed legislation regarding major weapons systems 
last year--Rob Andrews, Mike Conaway, and the panel--and its 
purpose was to reform the acquisitions system of major weapons 
systems. And this committee is to be congratulated on that, as 
well as those two leaders.
    Also, we passed out and passed on the floor acquisition 
reform, and it is pending in the Senate and hopefully will be 
taken up with our defense bill that we have passed and sent to 
the Senate. This is the efficiency we have already stepped up 
to the plate and passed.
    So with that in mind, I turn to my colleague, my friend, 
the gentleman from California, Buck McKeon.
    [The prepared statement of Mr. Skelton can be found in the 
Appendix on page 47.]

 STATEMENT OF HON. HOWARD P. ``BUCK'' MCKEON, A REPRESENTATIVE 
  FROM CALIFORNIA, RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. McKeon. Thank you, Mr. Chairman, and good morning.
    I would like to thank our witnesses, all of you, for being 
here today. It is unfortunate that Secretary Lynn could not 
also join us. As both the Deputy Secretary and Chief Management 
Officer for the Department, not to mention his role in helping 
to craft Secretary Gates' efficiencies initiative, it would 
have been valuable for the committee to hear from him at a 
hearing specifically dedicated to the Pentagon's management.
    As well, given that the formal responsibilities for CMO are 
still relatively new for the Deputy Secretary, we were also 
interested in his observations about that construct and his 
ability to balance his policy and management portfolios.
    With that said, we are grateful to have with us the Deputy 
Chief Management Officer, Ms. Beth McGrath, whose full-time job 
is to improve the Department's management. I know Ms. McGrath 
has testified before this committee in the past, but I believe 
this is our first opportunity to have all of the Under 
Secretaries, and I welcome all of you here.
    Given the important role that each of you play in serving 
as the Chief Management Officer of your respective Departments, 
I look forward to the chance to discuss the various management 
challenges you face and your plans for mitigating risk to DOD's 
operations while improving efficiency.
    Secretary Conaton--notice how that just rolls off the 
tongue--I know I echo the chairman's sentiments when I tell you 
how pleased we are to see you again. Welcome home, so to speak.
    This is a timely hearing. Although the GAO [Government 
Accountability Office] and others have identified a series of 
persistent management risk areas for DOD, the Department faces 
a looming management crisis in light of congressional delay in 
passing a clean wartime supplemental spending measure.
    The Senate passed its version of the appropriations bill in 
May, but the House failed to take up either a compromise-
version of the bill, or the Senate-passed bill, before the July 
4th recess. Instead, the House amended the Senate bill by 
adding extraneous domestic spending and returned it to the 
Senate. Secretary Gates made it clear that, if the supplemental 
was not enacted by July 4th, the Department would have to begin 
to curtail defense operations.
    I know the chairman shares my conviction that the men and 
women in uniform operating in harm's way in Afghanistan and 
Iraq deserve better. Therefore, it is critical that we hear 
from each of you regarding the impacts this delay will have 
within your Departments and how you intend to manage the risk 
to ongoing operations.
    Lastly, it should come as no surprise that we are 
interested to learn more specifics about how the services are 
implementing Secretary Gates' call for further efficiencies. 
While no one would argue against reducing waste or needless 
overhead, it remains unclear whether or not the Department can 
find $100 billion in prudent savings over the next 5 years 
simply from efficiencies.
    In his May 8th speech at the Eisenhower Library, Secretary 
Gates stated, ``The goal is to cut our overhead costs and to 
transfer those savings to force structure and modernization 
within the programmed budget.'' I support his intent to ensure 
that we do not accept a peace dividend that will hollow out our 
force structure and curtail modernization.
    What gives me pause, however, is that, according to Deputy 
Secretary Lynn, the plan calls for a third of this money, about 
$33.3 billion, to come from ``developing efficiencies within 
the force structure and modernization accounts.'' So I want to 
make sure that we understand the plan. In order to protect 
force structure and modernization, we intend to cut force 
structure and modernization accounts? I hope that you will 
clarify that for me.
    Likewise, press reports indicate that funding may not go 
directly to these investment accounts, and senior officials 
have been recently quoted as forecasting gradual drawdown in 
the investment accounts.
    I know our witnesses are unlikely to reveal planned cuts 
for future fiscal years, but I hope that you will provide 
greater details regarding the process you are using to identify 
both the puts and takes and what measures, besides funding 
cuts, could generate savings, for example, what steps are you 
taking to improve your financial management and accountability.
    We look forward to your responses. And again, thank you for 
your time at this critical juncture.
    Mr. Chairman, I yield back.
    [The prepared statement of Mr. McKeon can be found in the 
Appendix on page 49.]
    The Chairman. Thank the gentleman. Thank you for your 
comments.
    Now for the witnesses, and we, again, welcome each of you 
for this very, very important hearing.
    Elizabeth McGrath, you are on.

STATEMENT OF HON. ELIZABETH A. MCGRATH, DEPUTY CHIEF MANAGEMENT 
              OFFICER, U.S. DEPARTMENT OF DEFENSE

    Ms. McGrath. Sir, thank you, and good morning.
    Chairman Skelton, Congressman McKeon, members of the 
committee, thank you for the opportunity to discuss the 
Department of Defense's efforts to improve its business 
operations.
    It is a pleasure to appear before you with my military 
department Chief Management Officer counterparts. We look 
forward to continuing our work with you as we strive for 
greater efficiency, increased effectiveness, and additional 
agility within the Department.
    While the Department has always worked to improve the 
efficiency and effectiveness of its business operations, the 
imperative to achieve lasting results in the engagement of 
senior Department leadership have never been greater.
    Secretary Gates and Secretary Lynn have clearly articulated 
the pressing need for reform. Today, I would like to share with 
you our overarching management reform efforts, as well as some 
recent successes. Our approach emphasizes improving our ability 
to assess execution through performance management; to develop 
mechanisms to ensure leadership accountability; and to make 
needed changes to the way we procure information technology 
[IT].
    In each of these areas, we rely heavily on the tools that 
Congress has provided us through the last several National 
Defense Authorization Acts. I will review with you our efforts 
in the areas of strategy, governance, process improvement, and 
information technology.
    The Department has developed an integrated enterprise-wide 
business strategy to guide our transformation efforts. This 
strategic management plan aligns the planning and execution 
documents that exist throughout the enterprise.
    The plan identifies five cross-functional enterprise-wide 
business priorities, each with specific outcomes, goals, 
measures, and key initiatives that are critical for success. 
They are: to support the all-volunteer force; to support 
contingency operations; reform the DOD acquisition process and 
support processes; enhance civilian workforce; and strengthen 
financial management.
    Of particular interest for today's hearing may be the 
Department's efforts to improve financial management and move 
toward audit readiness. We have developed a plan that focuses 
on improving the quality of the information that we use. By 
strengthening those processes that execute the dollars Congress 
provides to us, we also unite the enterprise around an effort 
that will benefit everyone, but also requires collaboration and 
support across the defense enterprise.
    We have also established long-term and near-term goals for 
audit readiness, provided programmed resources in establishing 
a governance structure that includes the DCMO [Deputy Chief 
Management Officer].
    Successful strategies rely on an effective management 
framework. This area of governance includes the creation of the 
Chief Management Officer, Deputy Chief Management Officer, and 
military department CMO positions.
    We recognize the committee's priorities include areas that 
have been designated as high risk by the Government 
Accountability Office. We share your focus on reducing such 
risk in working across the Department and the executive branch 
to address these challenges with the shared goals of removing 
items from that list.
    Personnel security clearances is a good example of where we 
have made significant progress. In 2005, the average time for 
the fastest 90 percent of initial clearances took 265 days. 
Today, that number is below 60.
    Additionally, in 2006, the backlog of pending clearance 
investigations stood at almost 1,000 cases. Today, that backlog 
is gone.
    Speed without quality may result in the wrong outcome. 
Therefore, we have actively engaged GAO to exchange ideas 
regarding quality performance measures for clearance 
investigations and adjudications. Collectively, we believe the 
quality measures being developed identify specific quantifiable 
targets linked to goals. This type of engagement is critical to 
addressing and eliminating high-risk issues.
    As the committee knows, information technology is the key 
enabler of our business operations in an area with potential 
for major improvements. One of the Deputy's highest management 
priorities is improving the acquisition and development and 
fielding of IT systems.
    Our current approach to implementing IT takes too long, 
costs too much, and often fails to deliver the performance 
improvements we seek. On average, it takes 81 months in DOD 
from when an IT program is first funded to when it is fielded. 
We often deliver systems that are outdated before we ever turn 
them on.
    In contrast, the iPhone took 2 years from concept to 
delivery. It is clear we need a different approach.
    To that end, Secretary Lynn has established an IT 
acquisition reform task force guided by four principles: speed, 
incremental development, governance and adaptability. We need 
to match the acquisition process to the technology development 
cycle. We must also acknowledge the incremental development 
testing wherever possible in fielding of new capabilities to 
provide better outcomes in IT than trying to deploy a big-bang 
approach.
    We must carefully examine how our requirements govern 
acquisition. We must recognize that different IT applications 
demand different levels of oversight and enterprise 
integration. With these principles in mind, we are working to 
outline a series of acquisition tasks that apply high levels of 
institutional due diligence where it is needed and strip away 
excess requirements where it is not.
    Focusing on business operations at the Department of 
Defense is an area of great immediate interest to our senior 
leadership, as well as an area of serious activity and 
concerted efforts. We are on the way to creating better 
business processes that would create the kind of lasting 
results our country deserves. My CMO counterparts and I look 
forward to the continued opportunities to work with Congress to 
optimize performance across the Department.
    Thank you, and I look forward to your questions.
    [The prepared statement of Ms. McGrath can be found in the 
Appendix on page 51.]
    The Chairman. Thank you very much.
    The Honorable Joe Westphal.

 STATEMENT OF HON. JOSEPH W. WESTPHAL, UNDER SECRETARY OF THE 
                              ARMY

    Secretary Westphal. Mr. Chairman, thank you. Ranking Member 
McKeon, thank you, distinguished members of the committee.
    I would like to ask, Mr. Chairman, that my statement be 
made part of the record. And I just want to make a couple of 
brief points.
    The Chairman. Without objection, each prepared statement 
will be made part of the record. Thank you.
    Secretary Westphal. Thank you, Mr. Chairman.
    Just want to make a couple of brief points. The first is to 
bring you greetings from John McHugh, Secretary of the Army. I 
was with him this morning, and he really regrets not being 
invited to this hearing. But he is thankful that Erin Conaton 
is here, and that he figures he couldn't compete against her 
today.
    Mr. Chairman, members of the committee, you know, I think 
we are all going to be very repetitive in stating to you over 
and over how grateful I think we all are at the great care and 
support that you give our sailors, marines, soldiers and 
airmen, their families and our civilian workforces.
    As some of you know, Mr. Chairman, I worked in this great 
institution many years ago, and we know fully well how 
challenged you are to make so many decisions across everything 
from social programs to national security.
    But we do know and understand that you know the great 
sacrifices that our men and women in uniform and their families 
make in support of our national defense and our freedoms and 
our protections and our way of life every single day. And your 
steadfast support is well known and highly respected by all of 
us.
    And so, I commit to you that we in the Army will do our 
part to ensure that that support that we have from you is not 
diminished. So we will increase our efforts to generate 
savings, reduce cost, enhance performance, and create 
efficiencies.
    Our soldiers' ability to complete the mission depends on 
it. Their families depend on it. The Secretary of Defense and 
the President demand it. And as a Chief Management Officer, 
this is my focus.
    My two great colleagues to my left here and I are doing 
something really unprecedented, having been in the Department 
before. This is the first time, I think, that you have the 
three Under Secretaries, not only now as Chief Management 
Officers, but in their role as Under Secretaries as well, 
collaborating on a regular basis to exchange ideas. We meet 
regularly to find ways to make joint efforts work better and 
create greater efficiency.
    So your designation of us as Chief Management Officers has 
actually created a great opportunity for our military 
departments to be more co-joined and work together on a regular 
basis.
    We are also very closely aligned with OSD [Office of the 
Secretary of Defense], and especially through the Deputy Chief 
Management Officer, Ms. Beth McGrath. Her experience, her 
leadership, her knowledge of these issues is helping us 
immensely to get ourselves coordinated so that we are aligned 
not only horizontally, but we are aligned vertically within the 
Department.
    Finally, Mr. Chairman, on March 1st, the Army submitted a 
report to the committee on our business transformation. It was 
an attempt to give you an idea of what we were working on to 
put together our business transformation plan, which we intend 
to deliver promptly and on time to you on October 1st of this 
year.
    So with that, I thank you again for your tireless efforts 
in support of our armed services and our Army.
    Thank you, Mr. Chairman.
    [The prepared statement of Secretary Westphal can be found 
in the Appendix on page 60.]
    The Chairman. Thank you very much.
    Robert Work.

 STATEMENT OF HON. ROBERT O. WORK, UNDER SECRETARY OF THE NAVY

    Secretary Work. Thank you, Mr. Chairman.
    Mr. Chairman, Congressman McKeon, distinguished members of 
the committee, it really is an honor--I will echo both Joe's 
and Beth's sentiments on that--to be with you here today with 
the other Under Secretaries, and with Beth to talk to you about 
our plans to continue improvement within the Department of the 
Navy.
    I would also like to echo Joe's thanks to the committee. 
After 9 years of war, your support has just been instrumental 
to allowing us to maintain the Marine Corps and the Navy to the 
high level that we have today. So on behalf of Secretary Mabus 
and I, I would like to echo Joe's thanks.
    And Secretary Mabus and I and the entire Department look 
forward to future collaboration with you on the committee as we 
partner to achieve these enduring transformation objectives 
that you have set out for us.
    I spent a lot of time trying to divine the intent of the 
Chief Management Officer position. And as I see it, the 
committee and Congress envisions this role to be the leader of 
transformation across the Department enterprise. And I also 
believe that you thought that business operations was a subset 
of management, and management extends across the entire 
Department of the Navy and in both the Marine Corps and the 
Navy itself.
    So we are looking beyond the business side of the 
enterprise, and we intend to apply the same type of rigor that 
I think that you are looking for in not only business 
operations but weapons systems and other programs across the 
Department.
    Secretary Mabus is interested not only in making the trains 
run on time, but on making the trains run to different places. 
And we believe that that was your intent.
    Our goal is to establish, then, a legacy of transformation 
in the Department of the Navy, instill a culture of business 
innovation and ingenuity, and codify the role of the Chief 
Management Officer and the Deputy Chief Management Officer 
within the Department.
    We also are looking very hard at having the proper 
government form, so our business transformation council is the 
way we do this. That is chaired by myself, the Assistant 
Commandant of the Marine Corps, and the vice chairman, because 
we have found, in the last year--and this just reinforces a 
long-known code--that you have to get both the Secretary and 
the service staffs really invested into business transformation 
or you are not going to be able to have any lasting change.
    So we have the warfighters and the Assistant Secretary of 
the Navy embedded in this process from the very beginning. We 
are also trying to strengthen our Deputy Chief Management 
Officer position. Also, we are doing consolidations within the 
secretariat to align us better with the business operations 
that Beth pointed out to you.
    We are really focused on business processes, but we are 
very, very focused on achieving fully auditable financial 
statements by 2017. We actually are hopeful we will beat that 
timeline. Implementing ERP [enterprise resource planning] 
across the Department, really spending a lot of time on 
acquisition and contracting excellence, following the lines of 
what Secretary Carter set out a week ago, and really trying to 
improve energy efficiencies across the Department.
    So in closing, we very much appreciate the legislation that 
Congress has enacted, which really allows us to delve deep and 
to go into reengineering of our processes in implementing 
transformational change. We recognize that this is going to be 
challenging and difficult, but we are committed to working with 
you to effect this change.
    We definitely do want to foster the business 
transformation. We need to efficiently and effectively support 
the Navy and the Marine Corps and our civilians. And I thank 
you again very much for your continued support, and I look 
forward to working with all of you in the future.
    I would be happy to answer your questions after the 
completion of our statements.
    [The prepared statement of Secretary Work can be found in 
the Appendix on page 70.]
    The Chairman. Thank you very much.
    The Honorable Erin Conaton, please.

 STATEMENT OF HON. ERIN C. CONATON, UNDER SECRETARY OF THE AIR 
                             FORCE

    Secretary Conaton. Thank you, Mr. Chairman, Mr. McKeon, 
members of the committee. Given everything that my colleagues 
have already said, I will try to be brief and just echo the 
high points. But let me start by saying it is really nice to be 
back in this room. I am convincing myself this is just markup, 
you know? I am just sitting at the table, just like markup.
    But it is great to see you and all my former staff 
colleagues in the room here. I also, as long as I am in the 
thanking mode, want to thank my colleagues at this table not 
only for the partnership that Secretary Westphal talked about 
in terms of our ongoing interactions, but I am very much the 
new kid on the block.
    I have only been in the job a couple months, and these 
folks who have been outstanding in terms of not only partnering 
but lending the benefit of their expertise in the Department 
over the period of time that they have been there. So I thank 
them for that.
    I think I have to start the same way they did, by 
acknowledging the work that this committee has done in numerous 
National Defense Authorization Acts and in the Weapons System 
Acquisition Reform Act. Your work has had tremendous impact in 
the Department, and it is hard for me to think of a week going 
by that I am not at a meeting where people are talking about 
the implementation of WSARA [Weapon Systems Acquisition Reform 
Act], what the intent of the Congress was.
    So I know you know that your efforts have an impact, but if 
we can reinforce that, I am happy to have the opportunity to do 
so.
    Like my colleagues, I would say that the Chief Management 
Officer construct relies on strong leadership from the top. And 
so, the fact that we have Secretaries and chiefs of our 
respective services who are committed not only to making this 
organizational construct work but also to help further the 
business transformation objectives that we are working on, 
makes a big deal.
    The other thing I would say is that all of us put mission 
first. So this is about the work that our soldiers, sailors, 
airmen and marines are out there doing every day, and business 
transformation can't be separate from that. It has to be very 
much aligned with what we are asking servicemembers and our 
civilian workforce to do on a regular basis.
    And so, as I have been thinking about the Chief Management 
Officer job, I think, first, what is the mission that we are 
asking, in our case, our airmen to do, and then how do we get 
processes and systems that help support that.
    So I think whether it is with the business transformation 
plans that you all have required or in our own thinking as 
Chief Management Officers, it is important to align our 
business objectives with what the service or the Department, in 
Ms. McGrath's case, is doing overall.
    We in the Air Force have a similar construct, I think, to 
what Secretary Work talked about, which is that we have an 
overall governance structure called the Air Force Council. It 
is how we make our budget decisions every year. It is how we 
adjudicate policy debates that are occurring inside the 
service.
    And it is also the group that we are using for governance 
of overall business transformation and the efficiencies 
initiative. It is critical that all of the folks who are 
working, whether it be our Assistant Secretaries or the deputy 
chiefs of staff on the air staff side, are invested in and 
committed to working these efforts.
    Once we get that done, then I think we can focus on the 
goals on the business side of the house. We obviously have a 
couple large information technology programs that I would be 
happy to talk about if you want to get into that. We too are 
very focused on the efforts led by this committee on getting a 
clean audit in the fiscal year 2017 timeframe and doing 
everything we can to do that as soon as possible.
    And on the efficiency side, we are partners with the rest 
of my colleagues in trying to find a way to--again, mission 
first--get as much money and capability into the force 
structure modernization and readiness sides of the account. And 
I think that is what is motivating the work that Secretary 
Gates has put forward, and it is certainly motivating the work 
that Secretary Donnelly and General Schwartz are undertaking 
for the Air Force.
    So with that, I will turn it back to the chairman and just 
say thank you, again, for the opportunity to come home.
    [The prepared statement of Secretary Conaton can be found 
in the Appendix on page 79.]
    The Chairman. Thank you very much. It is great to have you 
back.
    Mr. Work, the spotlight has been on some shipbuilding. On 
the one hand, we have the USS Missouri, Virginia attack 
submarine being commissioned later this month, which, by the 
way, is in the district of Congressman Joe Courtney, ahead of 
schedule and under budget.
    Compare that to the problems that you have been having with 
the littoral combat ship effort, the excessive overruns. Add to 
that the reform legislation that we passed from this committee, 
and then it became law. Will the legislation that we authored 
be of help in making the shipbuilding more like what is going 
on in Groton, Connecticut? And if so, how, Mr. Work?
    Secretary Work. Thank you, Mr. Chairman.
    Secretary Mabus set as his number one priority, when he 
came aboard last year in May, in really taking a hard look at 
the shipbuilding. And that was followed quickly by the WSARA 
Act, which really kind of struck a chord within the Department 
of the Navy, making sure that we get the requirements 
absolutely right, looking for the right type of contracts, 
making sure that we demand performance throughout the level.
    It is, of course, true, sir, that we have had problems with 
the LCS [littoral combat ship], but I think as the committee 
knows, as a result of the WSARA and also our determination to 
make sure that that program is right, we completely changed the 
acquisition strategy. And although we are not quite complete 
with the down-select yet, I am quite confident in telling the 
committee we will definitely reach the congressional cost cap 
regardless of which ship is chosen.
    As you said, I think we are having great success in our 
attack submarine program, on our T-AKEs [dry cargo/ammunition 
ship] that are being built at NASSCO [National Steel and 
Shipbuilding Company], and we are having good performance 
across the yard.
    So right now, we are really focused on really making sure 
we get requirements right. We are doing that on the SSBN-X 
[ballistic missile submarine-future]. And Secretary Mabus and I 
are committed to making sure that we get the best bang for the 
buck for our shipbuilding dollars.
    The Chairman. The GAO originally proposed a second Deputy 
Secretary of Defense for Management. Is it reasonable to expect 
the Deputy Secretary of Defense to serve as the Chief 
Management Officer in addition to all of his other duties?
    Ms. McGrath.
    Ms. McGrath. Sir, thank you. The construct of the Deputy 
Chief Management Officer working as a day-to-day focus of the 
financial and other management issues, working with the other 
Under Secretaries across the Department so far has been 
extremely effective.
    The Deputy Secretary spends quite a bit of his time on 
management- and business-related issues, from financial 
management to health, information technology, wounded warrior. 
A lot of his time is spent on those topics today.
    So I believe the construct of the Deputy Secretary as the 
Chief Management Officer with someone in the Deputy Chief 
Management Officer role, currently myself, working across the 
Department from an OSD perspective and also with the Chief 
Management Officers of the military departments thus far has 
proven effective.
    The Chairman. Allegedly, there will be savings identified 
in the effort to have efficiencies across the Department. If 
that is the case, where do those savings go? I for one am not 
for cutting the defense budget. Where do they go, Ms. McGrath?
    Ms. McGrath. Sir, as you articulated in your opening 
statement, Secretary Gates has identified a call to look across 
the Department, every aspect of the defense business and 
everything we do, from our support structures to our 
organizational construct, to see if there is a better, more 
efficient and effective way that we can deliver our capability.
    The Secretary has articulated that the military departments 
will keep the savings that they identify. And again, I think it 
was mentioned in the opening statements that we are looking to 
shift dollars from support to force structure and operations.
    The Chairman. Let me ask you this. Are the respective 
services making the necessary investments to meet the 2017 
auditing mandate?
    Ms. McGrath. Each of the military departments' service and 
defense agencies' components have identified their milestones 
to achieve the 2017 goal of the clean audit opinion. Those are 
captured in the financial audit improvement report.
    Financial Improvement Audit Readiness, the FIAR plan, is 
the document where each of the milestones for each of the 
components are articulated, marching toward the 2017 goal.
    The Chairman. I think it was the gentleman from Texas, Mr. 
Conaway, who brought it to our attention about the lack of 
auditing within the Department and the panel's role of putting 
together the second initiative that we passed and is now 
pending in the Senate.
    How did this ever happen that the Department and its sub-
departments were not subject to auditing, Ms. McGrath?
    Ms. McGrath. I am not sure that we were given a pass from 
audit. I think the responsibility for--our fiduciary 
responsibility and our stewardship of taxpayer dollars 
certainly is a responsibility identified and acknowledged 
across the Department.
    I think the challenge in actually delivering an auditable 
financial statement has many factors to it. Some of it is human 
capital-based. Other is the fact that our financial systems 
today--our financial plus our other functional feeder systems 
are not interoperable, which poses a huge challenge for us.
    And then that it must be a Department-wide function to 
actually achieve auditability. It cannot be viewed as just a 
comptroller responsibility, given that most of the information 
comes from other functional areas.
    So I think there is a recognition within the Department 
that we understand what we need to do from a departmental 
perspective, that we do have a plan in place with goals and 
milestones. We have appropriate governance that reaches 
horizontally and vertically in the Department. And without 
those, we would not be able to achieve that, and I believe we 
are positioned to do that today.
    The Chairman. Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman.
    As I alluded to on my opening statement, I remain 
particularly concerned about the steps the Department of 
Defense is having to take to manage its finances in lieu of 
passage of the 2010 wartime supplemental appropriation. 
Secretary Gates has told us that, if we don't have it enacted 
by July 4th, stupid things would begin to happen.
    I would like to ask each of the witnesses to address the 
following: what specific steps are you having to take now to 
avoid running out of money? Please describe the overall risk 
and the impacts these steps will have to ongoing operations, 
routine business, the military and civilian workforce, 
training, other important parts of the responsibilities that 
you have.
    And when specifically will each of your Departments run out 
of money? When will you be unable to provide cash flow? What 
are the additional consequences of your Departments, and the 
Defense Department as a whole, should Congress fail to pass a 
clean supplemental before the August recess, which starts after 
next week? Please?
    Secretary Westphal. For the Army, the consequences are 
pretty significant. I think the Secretary is right. This is 
very, very important that, before you leave in recess, we have 
the supplemental approved.
    We have been fronting some of the resources from our O&M 
[operation and maintenance] accounts to ensure that all 
operational requirements are kept fully funded, and we continue 
to do that. We expect some reprogramming. We have prepared in 
anticipation of this some potentially reprogramming requests. 
We hope that they are not going to have to be exercised and the 
supplemental will be passed.
    To your question specifically, you know, we will run out of 
money about the middle of August for some of these functions in 
our O&M accounts. And so, we will have to begin to take steps 
to ensure that we, first of all, continue to support fully all 
the operational requirements.
    I don't think we are going to have any issues with that, 
but we will have to make some decisions in terms of our O&M 
functions, particularly CONUS [continental United States], that 
may have some impact. And that depends on how quickly you can 
get back and pass a supplemental after that.
    And if we get those reprogramming requests done, that may 
help us to weather that storm through the period of time during 
recess.
    Secretary Work. Sir, from the Department of Navy 
perspective, failure to pass a supplemental before the recess 
would really essentially hamstring the Department's operations 
for the remainder of this year and significantly disrupt 
operations within the Department.
    Our analysis is the same as Secretary Westphal's, that we 
would run out of money for civilians probably around the middle 
of August and have to start furloughing civilians in large 
numbers. We think we would run out of money to pay active duty 
members some time in the mid-September to late-September 
timeframe, and that is not even accounting for all of the 
movements in the O&M programs that would have to occur to make 
sure that we would continue wartime operations.
    From our perspective, then, it would be a very great burden 
on the Department, and the Department of Defense as a whole, 
and would really significantly prevent us from pursuing the job 
of the Department and the nation.
    Secretary Conaton. Mr. McKeon, for the Air Force, it is a 
very similar situation as to what my other two colleagues 
mentioned. Certainly encourage, as quickly as possible, the 
passage of the supplemental.
    In terms of specific dates, the Air Force runs out of O&M, 
Operations and Maintenance, funding to do the whole range of 
operational activities at the end of August, and then has 
military personnel accounts running out by the third week in 
September.
    Like my colleagues, we are very hopeful that you all will 
be able to send something to the President prior to the August 
recess, but we are starting to think about what would have to 
be done in the event that that didn't occur, which would 
include things like furloughs. We may be able to do some 
temporary additional reprogramming, but that wouldn't buy very 
much time. So, very consistent with what my colleagues have 
said.
    Mr. McKeon. I think it was about 2 months ago that we had 
General McChrystal here, and I asked him the same question, and 
he said, if it went into the summer, it would cause problems. 
But he had been assured it would pass before the Memorial Day 
break.
    Now we missed that. We missed the Fourth of July break. If 
it were passed today, does that money immediately flow, or how 
soon before that money reaches you? If it were passed today by 
the House and today by the Senate, how long would it take for 
that money to actually get into your accounts?
    Secretary Westphal. It would be very quick, and it would be 
a seamless process. We wouldn't have these effects that we all 
outlined today.
    Mr. McKeon. You have already taken some steps, though.
    Secretary Westphal. We have. In the Army, we have moved 
monies from our base into some of our operations to support 
those missions to keep them moving, in theater in particular. 
So we have addressed that issue internally. And we do that 
always with the permission of the Congress.
    Mr. McKeon. So are you saying that, if we passed it today, 
you would have the money in your accounts next Monday?
    Secretary Westphal. That technicality I don't really 
understand, but----
    Mr. McKeon. Does anyone here understand that?
    Ms. McGrath. I think we all have an appreciation for the 
process, but the specific date, how many days specifically it 
takes to get from passage into the accounts I certainly would 
be--probably take that for the record to find out how many days 
that would be.
    [The information referred to can be found in the Appendix 
on page 94.]
    Ms. McGrath. But I think the message is that we believe 
that, if it was passed today, would be in sufficient time such 
that other activities would not have to be executed as the 
Under Secretaries have articulated.
    Mr. McKeon. Could you get that back to us----
    Ms. McGrath. Yes.
    Mr. McKeon [continuing]. As quickly as you can? Today I 
would like to know, if it is possible, because my concern is 
that, among some people in the House, there isn't quite the 
sense of urgency.
    I have been given different timeframes that, even if we 
passed it today, it would take some time, and I would like to 
know that. Obviously we are not going to pass it today, and we 
are not going to be in session tomorrow, so it will be some 
time next week at the soonest.
    And I for one think that if it is not done, we shouldn't 
leave town until it is done. So I am hopeful that we will get 
it done as soon as possible next week so that you don't have to 
take some of these steps.
    I am concerned that some things that are happening--I know 
we are not going to leave the troops in harm's way without 
ammunition and without food and without the things that they 
need to carry out their mission, but I am concerned about 
training or some of the other ongoing activities that take 
place for the troops that will be going over there next. And I 
am very concerned about getting that money there.
    Yes?
    Secretary Westphal. Well, just to add to what you were just 
saying, for example, in the Army, one of the ways we support, 
of course, or the way we support our ongoing missions is 
through what we call a generating force, which is exactly what 
you mentioned, it is training and readiness of our Army forces 
here to go forward.
    And of course, all the infrastructure that we have in the 
Department is to support those missions, in any case. And there 
are rules, personnel rules. As Secretary Conaton mentioned, if 
there are furloughs, there are rules about advanced notice to 
employees and things of that nature that we have to take into 
account.
    And we are either passed or dangerously close to those 
deadlines. I am not sure what they are. We will get you that 
information, as well. But all of that causes us a great deal of 
concern, as you have heard from all of us.
    [The information referred to can be found in the Appendix 
on page 94.]
    Mr. McKeon. That is a concern I have. Then, after the 
supplemental is done, then we get to the point of talking about 
the defense appropriation bill, the year ends September 30th. 
It looks to me like we are not going to have an appropriation 
bill passed by September 30th, which means then we get to a CR 
[continuing resolution], hopefully, so that we don't shut down 
the government on September 30th.
    So if we get a CR, that also is disruptive with ongoing 
operations, is it not?
    Secretary Work. Well, sir, we have all lived with 
continuing resolutions before, so it does cause us to do 
choices in business that we otherwise wouldn't have to.
    But if the supplemental is not passed, we would be in an 
emergency situation. I mean, we have already talked about this 
within the Department, where all of the Unders and all of the 
Secretaries, we would all have to get together to try to work 
our way through it.
    So the continuing resolution is something the Department is 
used to handling, and we are able to handle it much better than 
if the supplemental isn't passed. We would consider that an 
emergency.
    Mr. McKeon. Thank you very much.
    The Chairman. Thank the gentleman.
    Gentleman from Mississippi, Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman. I want to thank all of 
our guests, but particularly Secretary Conaton for joining us 
today.
    Secretary Westphal, I received a really disturbing e-mail 
from a Mississippi National Guardsman on his second deployment. 
It is from his dad, who is a Vietnam combat veteran, and it 
mentions the lack of ammunition, but, equally importantly, the 
lack of rollers, that this unit is doing a mine-clearing 
mission in Afghanistan. They do have the MRAPs [mine resistant 
ambush protected vehicle]. But, unlike when he served in Iraq 
and had a roller in front of that MRAP, he doesn't have it in 
Afghanistan.
    Now, and this really is to this point, that I appreciate 
that you are trying to save dollars where you can. But there is 
an inconsistency here that I don't understand.
    We apparently have excess rollers in Iraq now because of 
the drawdown. We have the Air Force telling us that they do not 
need additional C-17s, but I am told we can't get the rollers 
to Afghanistan because of a lack of airlift.
    Now, either you have enough C-17s to get them there, or you 
don't. And if you don't have enough to get them there, 
obviously you don't have enough C-17s.
    So I certainly hope this isn't a case where we are trying 
to save a couple of pennies and will unnecessarily lose 
American lives or limbs. And I would very much encourage you to 
look into this, because it is a matter of life and death.
    Secondly, if you could comment to it, I remember, as we 
were losing our bases in Panama, going to visit that country on 
several occasions, our bases there, and seeing--having started 
off in local government and state government and realizing that 
their budget is always tight--seeing a heck of a lot of things 
there we should have brought home--fire trucks, bulldozers, 
trackhoes [tracked excavator], backhoes--that state surplus 
agencies would have loved to have had. And encouraging a lot of 
people in the Army then to bring those things home, only to be 
told, well, the shipping costs don't make it worthwhile, and 
being particularly angry when ``60 Minutes,'' or someone like 
them, ran a special showing that those bulldozers, in some 
instances, ended up in Havana instead of some down in 
Mississippi or some other state.
    I visited Balad just before Christmas last year, and the 
colonel there told me about--that he had an amnesty for people 
to turn in equipment. And on the amnesty day, he had a 2-mile 
line of equipment that people had turned in that was not on the 
books, that had been paid for by the American taxpayer, that 
some clever unit commander had figured out a way to get it 
there because he felt like his unit needed it. And I commend 
those clever unit commanders for getting the things they 
needed.
    What I don't see is an equally clever effort to get those 
things home. Just this week in the Transportation Committee, 
most of the carriers that have brought the equipment to Iraq 
testified before the committee that they are bringing some of 
that equipment out.
    Most of the carriers--no, all of the carriers testified 
that their ships are leaving Kuwait anywhere at 40 to 60 
percent of capacity, which means that those ships are leaving 
Kuwait with either anywhere from 40 to 60 percent excess 
capacity to be bringing these things home.
    Given that, you know, money is tight, that the taxpayers 
paid for these things, what are you doing to incentivize unit 
commanders to bring these things home, even if they don't need 
it, that some other governmental entity may need it, or that a 
state or local government may need it? Because, again, we got 
burned when we left Panama. We got burned when we left 
Roosevelt Roads. How many times does the Department of Defense 
have to keep making the same mistakes?
    Secretary Westphal. Well, actually, the two issues you 
raised, you know, specific points like that have been made by 
other members and by our own folks. I believe it was in late 
July that I was going to go to theater, go to Kuwait and then 
Iraq, and look specifically at the drawdown and at the movement 
of equipment both back to CONUS and into Afghanistan.
    Now decided to do that in September to wait till after we 
are supposed to be down to the 50,000 level. I discussed this 
with General Odierno and General Webster, the ARCENT [United 
States Army Central] commander. I have asked the Vice Chief of 
Staff, Pete Chiarelli, to go with me because we are doing a 
whole bunch of work together, the Vice and I, on the 
management, on the acquisition side, and on the contracting 
side. So we are going to team up to go there and take a hard 
look at all these things----
    Mr. Taylor. Mr. Westphal, before the chairman gavels us, 
could you find the time to stop by and see me on those two 
items?
    Secretary Westphal. I will do that.
    Mr. Taylor. Thank you, sir.
    The Chairman. Thank the gentleman.
    Mr. Bartlett? Who is next?
    Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman.
    And thank all of you for taking time to be here with us 
today. The title of this hearing, the chairman correctly said, 
was managing a budget in a time of tight budgets.
    And Secretary Work, one of the things that I think every 
one of you would agree with is the key to that is consistency, 
which probably has at least two components. One is a careful 
selection of our priorities initially, and the second thing is 
the ability that we have to predict circumstances that could or 
would change those priorities down the road.
    Now, we have a number of different major opportunities to 
both set those priorities and look at circumstances that could 
change them. One of the big ones is BRAC [base closure and 
realignment commission], where we just bring everybody together 
and we say, ``What are our priorities,'' and we look at that. 
The other one, of course, is the QDR [quadrennial defense 
review].
    And I am particularly concerned, because in the last BRAC 
we had this huge laydown we had looking at priorities and where 
we were, in BRAC of 2005, and also in the QDR of 2006. There 
wasn't a blip on the screen about homeporting a carrier in 
Mayport, Florida.
    My good friend from Mississippi mentioned saving a couple 
of pennies. This isn't a couple of pennies. This is almost a 
billion dollars.
    Can you tell me today, what were--and I know the priorities 
haven't changed because I have a memorandum from the President 
on June 10th where he says, for decades, the federal government 
has managed more real estate than necessary to effectively 
support its programs and missions, and he says we need to take 
immediate steps to better use the remaining real estate assets 
that we have.
    Can you tell me what were the circumstances that changed 
between BRAC 2005 and the QDR in 2006 and the QDR in 2010 which 
would lead the Navy to want to homeport a carrier in Mayport in 
the QDR in 2010 when it didn't raise that at all in BRAC 2005 
or 2006? And then, why was it that we didn't have the 
capabilities of predicting that change in BRAC in 2005 and the 
QDR in 2006?
    Secretary Work. Well, thank you, sir.
    As you know, this has been an issue that the Department of 
the Navy has been examining for quite some time. Essentially, 
we believe in efficiencies. We believe in establishing 
priorities, and we also believe in using our real estate 
wisely.
    As you know, Mayport has long been a carrier port.
    Mr. Forbes. Yes. And Mr. Work, again, just because I have 
got a limited amount of time, I want you to have all the time 
you need, but I just want the change in circumstances between 
BRAC 2005, the QDR in 2006, and the QDR in 2010.
    Secretary Work. All right, sir.
    BRAC 2005 really was focused on closing properties, and in 
this instance, we are maintaining the property at Mayport, the 
base, which is going to house a lot of our surface combatants, 
and we want to make it a carrier home port for a nuclear 
carrier.
    So the movement from BRAC to the QDR, which looked at the 
strategic rationale on doing that----
    Mr. Forbes. But didn't you have that same strategic 
rationale in the QDR in 2006?
    Secretary Work. Sir, I would have to go back and see 
exactly what the 2006----
    Mr. Forbes. Is there a difference in rationale we have on 
any QDR? Don't--we always looking at the same basic criteria in 
our QDRs?
    Secretary Work. Yes and no, sir. We have the basic 
priorities set, but we look at our posture, both in the United 
States and globally----
    Mr. Forbes. Can you do this for me? Would you just get back 
to me in writing on the exact changes that happened between 
BRAC 2005, the QDR in 2006, and that QDR in 2010 and why we 
couldn't have predicted those and raised them in the BRAC 2005 
and 2006?
    [The information referred to can be found in the Appendix 
on page 95.]
    Mr. Forbes. And I have got one other question that you can 
either answer now and get back to me. Chairman asked, ``Will 
the Department comply with the law?''
    Can you give us a comfort level that we will have the law 
complied with when, a year ago, we had in the statute a 
requirement for a shipbuilding plan and an aviation plan that 
be sent to us by the Department? Not only was the statute not 
complied with, but when we had a congressional inquiry that was 
unanimously agreed upon by this committee, there was not even 
an explanation of why that wasn't complied with.
    How do we have comfort that you are going to comply with 
the law down the road if we didn't get a compliance with that 
statute?
    Secretary Work. Well, sir, I know I can speak with 
Secretary Mabus. Both he and I will comply with every law that 
we can. We also respond to guidance from the Secretary of 
Defense. And in the case of last year, the Secretary of 
Defense, I think quite rightfully said, because of the 
difficulties we were having in shipbuilding, that we would move 
that up and have the Deputy Secretary sign it out.
    Mr. Forbes. My time is up. The only thing I would say is, I 
hope that we don't come back on the audits and say that, 
because of the difficulties we have in complying with the 
audits, we are not going to do them.
    And Mr. Chairman, I yield back the balance of my time.
    The Chairman. Thank the gentleman.
    Dr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    Just wanted to make an introductory comment. I appreciate 
the leadership of both Mr. Skelton and Mr. McKeon on the issue 
of the supplemental. I guess our most junior member here is Mr. 
Critz, but from the most senior to the most junior member, we 
agree with you. We need to get this supplemental passed sooner 
rather than later. And I think your candor this morning helps 
that.
    I am always struck by these kinds of hearings in which the 
goal is to help American taxpayers save hundreds of billions of 
dollars. It always strikes me like a junior high sex education 
class. It should be really exciting, but it turns out it is 
not.
    But Secretary Conaton, I think I will direct my questions 
to you since we have Little Rock Air Force Base in my district. 
Help me understand--and I have read through the statements and 
all, and we can get bogged down in kind of the jargon of 
business transformation, those kinds of things. But let me give 
you a couple examples and just how you put them in the context 
of what you are trying to do.
    We have a military construction project that is about 
finished at the Little Rock Air Force Base. It is outside the 
perimeter. It is an education center where Arkansas State 
University offers classes, and some of the institutions that 
offer classes around the country offer classes there for both 
military personnel and civilian personnel from the community.
    Several years ago, the city of Jacksonville passed a 
millage on themselves, raised $5 million to donate to the 
military to help in the construction of the facility. But the 
only way we were able to get that done was to do it as an 
earmark in the defense bill because it was like the Air Force 
wasn't agile enough to figure out a way to accept $5 million of 
local dollars. So my question is, why don't we have that kind 
of agility?
    Another issue is on the--and this is where Congress gets 
involved. Have we given you the kind of flexibility you need in 
the terms of the retirement of old planes? I think we are doing 
okay with E model C-130s. I am not so sure we are doing so well 
with C-5s and some of the others.
    And finally, any kind of update you can give on the 
aviation modernization program with regard to C-130s. But use 
those examples and explain how that fits into what you all are 
trying to do.
    Secretary Conaton. Thank you, Dr. Snyder. I am not familiar 
with the specifics in this instance with Little Rock, but let 
me speak more generally to agility.
    I guess where I would start is--and I knew this going into 
the job, but it is remarkable how large these organizations are 
and how diffuse responsibilities are. But to that end, I think, 
as we have started to think about Secretary Gates's mandate on 
efficiencies, one of the things we have done, and I suspect my 
colleagues have done something similar, is to engage not only 
our major command commanders, so folks who are not in 
Washington, who are out in command and with responsibility for 
our numbered air forces, to get their perspective and to get 
their views of how we can do things better.
    Because I think there is often a Washington perspective, 
and those who are elsewhere in the country and who have a more 
operational day-to-day focus we have to take those views on. So 
from my perspective, increasing agility is one piece of the 
larger perspective that we have got on doing our work better 
and, in the process, freeing up resources that can be put 
toward modernization and force structure.
    On the issue of retirement of aircraft, certainly 
appreciate the support of the Congress in trying to ensure 
that, whether it is C-130s or whether it is our larger 
strategic airlift aircraft, that we can get the most modern 
planes to our units. And in many cases, that involves trying to 
retire some of the oldest fleets on the book to put savings 
into our more modern aircraft.
    I think on the C-130 side that we are in good shape in 
terms of authorization. I know there is some language in this 
committee's bill that deal with some of the specific issues 
around National Guard C-130s, and we will certainly work with 
the committee on that.
    I think, as we go into next year, we may need to be in 
dialogue with this committee about the Title 10 restrictions on 
the size of the strategic airlift force structure dealing with 
C-5 and C-17 modernization. But I think that is an issue for 
2012, and we would be happy to work with you all on that.
    Dr. Snyder. I was on a live media show this morning back 
home, and they called us to ask about this hearing today. And 
one of the questions was, ``What kind of message does this send 
to troops in the field that we are trying to,'' in their words, 
``cut defense budget?'' My own view is--well, I will direct 
that to you, Secretary Work. How do you respond to that 
question?
    Secretary Work. Sir, I have been the victim of many a cut 
drill, just a budget cut drill, and this is fundamentally 
different. We are trying to find efficiencies to actually help 
the marine and the soldier in the field, and to help the airmen 
and the sailors.
    The guidance has been very clear. Secretary Gates has said 
we get to keep the money. And therefore, I think there is 
widespread enthusiasm to go after these types of efficiencies 
to help our soldiers, sailors, airmen and marines.
    So I think I can speak for my colleagues, because we meet 
so often, as Secretary Westphal and Secretary Conaton said. We 
do not in any way think this is a cut drill, and we think this 
is going to directly benefit our young service men and women.
    Dr. Snyder. Okay. Thank you.
    The Chairman. Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Thank you all for being here. Welcome, or welcome back. I 
am getting nostalgic here for a minute in perhaps an unpleasant 
way, and I was thinking of Dr. Snyder's comments and question 
about agility.
    And if I go back to 1988 when I had hair and was much 
younger and was still in uniform, I reported to Marine 
headquarters and found out that there was a discussion going on 
in the acquisition world in the Marine Corps, the famous ACMC 
[Assistant Commandant of the Marine Corps] committee, about how 
we were going to buy computers.
    And while they were trying to decide how to buy computers, 
there were marines in the Marine headquarters in every base 
across the nation who were going out and using O&M funds and 
buying computers and operating systems and software however 
they saw fit. And then those got old, and they bought new ones 
with O&M while the ACMC committee was still trying to figure 
out how to buy computers.
    Now, that was over 20 years ago. New marines have signed 
up, gone on active duty, served 20 years, retired, and I hear 
from Secretary McGrath that it is taken 81 months, 7 years to 
bring on IT systems.
    I am just a little depressed, but it does tell me that we 
still don't have the agility that Dr. Snyder was talking about. 
And it seems to me that you Chief Management Officers have got 
to figure out how to get agile for the services and for the 
Department.
    And I don't have a question because I simply wouldn't have 
enough time for you to try to answer--well you can't answer, 
but please, let us look at the agility.
    I do have a question, and it is connected to another 
nostalgic kind of flashback, this time going back to post-
Vietnam when we ran out of money. Department ran out of money. 
Services ran out of money, and we parked them. I was flying 
helicopters, except we couldn't fly them. We put them on the 
flight line. We couldn't even go out and turn them. We 
certainly couldn't fly them because we were out of flight hour 
program. We were out of O&M, or O&MN [Operation and 
Maintenance, Navy]. We couldn't fly.
    And today if that were to happen, if we don't have the 
supplemental that Mr. McKeon was talking about, would prevent 
us from training if you have to park or anchor or dock the 
ships, and if you have to park the planes. And I find that 
pretty scary.
    But what I find terrifying, and I want to just make sure I 
understood this, is I thought I heard each of you, or at least 
two of you say that your O&M accounts were being affected. You 
were shifting O&M money, and that tells me that we might be in 
that situation where, once again, we have to park them.
    But what I found truly shocking was that I thought I heard 
you say that you were going to not be able to pay in the 
manpower accounts the men and women that we are asking to sail 
and fly and drive and fight, aren't even going to get paid. And 
if that were so, how do you make a distinction--because one of 
our assumptions has been, ``Well, the troops in theater are 
going to have what they need, and we will let the troops at 
home and their families suffer to make sure that those that are 
in harm's way have everything they need.''
    But it sounds to me like we might not even be able to pay 
those troops in harm's way unless you somehow split the 
manpower account and say, ``Well, we are going to pay those 
soldiers in Afghanistan but we are not going to pay the 
soldiers at Ft. Campbell.''
    So my question is, are we really looking at not paying not 
only civilians, which is horrifying enough, but not paying the 
men and women in uniform that are flying, sailing, fighting? 
And I guess I don't know if it is Department-wide or varies by 
service, so please give us an answer. Are they going to get 
paid or not?
    Secretary Westphal. They will get paid. I will speak for 
the Army.
    What we are concerned about is many of our civilian 
workforce in some of these O&M accounts. That is our chief 
concern.
    Mr. Kline. Okay. So for the Army, the soldiers get paid, 
but civilians may be furloughed and not paid.
    Secretary Work, what about the Navy?
    Secretary Work. Sir, as you have said, we have sometimes 
dealt with having to shift O&M monies at the end of a fiscal 
year. But quite frankly, the Department was expecting the 
supplemental to be before the Fourth of July. There was really 
no serious thinking that it would go beyond the summer recess.
    And so our analysis, which isn't complete, as I said, we 
would shift into an emergency mode if the supplemental was not 
passed. As Secretary Westphal said, the first thing that would 
happen is we would have to probably furlough civilians without 
pay. And in mid-to-late September, there is a chance that we 
would run out of money to pay active duty personnel.
    Mr. Kline. The sailors in uniform would not get paid.
    Secretary Work. There is----
    Mr. Kline. Secretary Conaton, how about the Air Force?
    Secretary Conaton. Mr. Kline, it is very similar to what 
Secretary Work said. If we still did not have money the third 
week of September, that is when the military manpower accounts 
would be affected.
    Mr. Kline. So the pilot, the bomber, the attack pilot in 
Afghanistan would be asked to fly those missions and would not 
be paid.
    Secretary Conaton. If we go beyond the third week in 
September.
    Mr. Kline. Thank you. I yield back.
    The Chairman. Mr. Andrews.
    Mr. Andrews. Chairman, these are all the reasons why I am 
confident the supplemental will be quickly enacted.
    I am well aware of the fact that there is a broad consensus 
in the United States that we want to have every dollar 
necessary to defend our country. There is an understanding that 
there are asymmetric threats and different qualitative threats 
than we faced in 1998.
    But here is the way--and this is not meant to be a 
rhetorical question--here is the way many of our constituents 
would ask the question about management and budget in the 
Department of Defense.
    If you exclude spending for foreign operations, if you 
exclude supplementals for Iraq and Afghanistan as special needs 
and go back to the base defense budget, the base defense budget 
in the fiscal year in which we are presently living is 47 
percent higher than it was in 1998. Again, that counts none of 
the Iraq and Afghanistan supplemental.
    Our end strength is eight-tenths of 1 percent higher. The 
number of ships we have is 15 percent lower than it was in 
1998. The number of planes we have is 11 percent fewer than 
1998.
    And I do not mean this to be combative or rhetorical, but 
the logical question a taxpayer would ask is this: If we are 
spending nearly 50 percent more than we did exclusive of 
special operations overseas, Iraq and Afghanistan, and we have 
essentially the same number of people in uniform, we have 15 
percent fewer ships and 11 percent fewer planes, why does it 
cost 50 percent more?
    Secretary Westphal. Well, you are absolutely right. You 
know, I left the Pentagon in 2001 where the Army budget was 
about 70--the base budget was about 76, $78 billion. That base 
budget has more than doubled.
    So there has been a lot of growth. There has been growth in 
structure. There has been growth in personnel. There has been 
growth in a whole host of activities that we weren't engaged on 
to the extent that we are engaged in now, in the intelligence 
community, for example.
    And it is exactly, I think, this growth that Secretary 
Gates wants to get to.
    Mr. Andrews. I, frankly, asked my question because I am 
very sympathetic to Secretary Gates' premise, which is that 
there is an important distinction between our ability to 
vigorously defend our country and the overhead costs associated 
with that vigorous ability.
    I think the job for this committee, for the Department, for 
the public, is where to draw that line. And I want to caution 
us against using superficial ways to draw that line.
    Mr. Conaway and I were just discussing before the hearing, 
it might be tempting to say, ``Well, we have more accountants 
than we did in 1998.'' We may or may not, but just say, 
hypothetically, we do. So, therefore, that is overhead that we 
don't need.
    Well, if those accountants are helping to better manage, 
get better quality out of technology programs, that is a 
superficial and inaccurate measure. So I raise my question to 
really make this point.
    I think the Secretary's premise is exactly right. I think 
that we have too much in the way of logistical support to 
execute our mission. I don't think we have too much mission. I 
don't think we overspend on the mission. I think we should be 
vigorous in pursuing it in every respect.
    But a hard question the Department has to ask, the Congress 
has to ask, the country has to answer, is how do we focus on 
this logistical overhead and do a better job. I mean, I think 
that the rhetorical answer to the question I just asked is that 
we have had excessive growth in the overhead categories in 
these 12 years. And whether it is the way we buy technology or 
the way that we provide housing or the way that we move goods 
and services around the world, we have to do a better job at 
assessing what that is.
    Anybody else care to comment on that?
    Ms. McGrath. So I would actually like to agree, the 
statements that you just made. The Defense Department is a 
corporation. I think the construct of the Chief Management 
Officer and having us look across the Defense Department as a 
business enterprise is different from--see, each of the 
military departments looks--and this is true for every 
component--tends to naturally look very locally to solve an 
immediate problem. I think the example of the computer 
solutions, right, that, you know, everybody buys locally.
    I think the construct of a Chief Management Officer really 
forces the Department to look corporately at what we do, how we 
do it, is it tied to the strategy, the overarching mission of 
the Department, and really analyze the execution piece. And I 
think that is one of the most powerful things that the Chief 
Management Officer legislation has enabled us to do, and I 
think we are taking full advantage of that.
    Mr. Andrews. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Taylor [presiding]. The chair thanks the gentleman.
    The chair now recognizes the gentleman from Arizona, Mr. 
Franks, for 5 minutes.
    Mr. Franks. Well, thank you, Mr. Chairman.
    And thank all of you for being here.
    Ms. McGrath, my first question has to do with the 
PowerPoint presentation that accompanied the Under Secretary of 
Defense, Ashton Carter's memorandum. You are probably familiar 
with it. It was titled, ``Better Buying Power: Mandate for 
Restoring Affordability and Productivity in Defense Spending.''
    And I thought it was pretty interesting. I actually agree 
with a lot of it. He used ``leveraging real competition'' as 
his first initiative for greater efficiency, and I certainly 
think that makes all the sense in the world. And it was to 
support a continuous competitive environment.
    You probably know where I am going here. Given that 
language and the fact that the F-35 is the largest weapons 
system acquisition program in the Department of Defense, how 
can the Administration, with a straight face, support the 
termination of the F-35 alternate engine, given that that is 
just clearly providing a continuous competitive environment 
consistent with the debate in Under Secretary Carter's 
memorandum?
    Ms. McGrath. Sir, I would like to say that I agree with 
Secretary Carter's approach to trying to achieve better, I will 
call it, holistic acquisition. And there are a lot of different 
attributes you can use to achieve that, one being competition.
    I am not familiar with all of the specifics on the issue 
that you raise, and I will be happy to come back to you with 
any specific answers that I can.
    Mr. Franks. Well, let me do this. Let me let anyone else on 
the panel have a shot at that question. This is, again, the 
largest defense-related acquisitions for the Department.
    And this is clearly one of those things where we are 
underscoring a continuous competitive environment, which is 
mandated. It is not suggested, it is mandated in Mr. Carter, or 
Under Secretary Carter's memorandum. And how do we synchronize 
those two things? How do we make them fit together?
    And Mr. Westphal or anyone else that would like to take a 
shot at it?
    Secretary Westphal. Well, luckily for me, I don't have to 
deal with that on the Army side. But I will tell you this: we 
face that similar issue across all our portfolios for our 
weapons systems.
    And what the Vice Chief and I--Vice Chief of Staff for the 
Army have done, at the direction of Secretary McHugh, is to 
stand up a holistic review to validate all our requirements 
across all portfolios of our systems. We need to go back and 
say, ``Do we need this today?''
    We may have needed it 5 years ago, 10 years ago, 3 years 
ago, but are we using it? Is it of value? Are we spending more 
money? Do we have duplication and redundancy in those systems?
    So we have taken the approach that, in order to manage this 
better--and this gets to a lot of the questions you are 
posing--that we have to go back to the requirements piece. We 
have to validate those requirements across a series of 
portfolios of systems that we have and ensure that that makes 
sense today.
    Mr. Franks. Well, I am sure it doesn't shock any of you 
that this Republican is talking about competition, but I--go 
ahead.
    Secretary Conaton. Mr. Franks, I will jump in. And as both 
the Air Force and the Navy and Marine Corps are involved in the 
Joint Strike Fighter program, I will let Secretary Work jump in 
as needed.
    I think what you say about competition across the board is 
very important. I think where Secretary Gates and the two 
service Secretaries came down on the question of the alternate 
engine was a judgment call and a balance, looking at the cost 
of the program in the near-term, the benefit that may accrue 
over time, and the benefits of competition.
    As you know, some former programs, fighter programs, have 
had an alternate engine. Some have not. And I think in the 
judgment of the Secretary of Defense, the up-front cost over 
the next couple years of completing that program did not, on 
balance--was not outweighed by the benefits on the other side.
    And definitely understand the committee has strong feelings 
on this subject.
    Mr. Franks. Well, thank you.
    I am going to try to squeeze one more in, Mr. Chairman. In 
the last 2 years, many of the programs, particularly many 
missile defense programs that I believe are actually vital to 
our national security, have been cut substantially, or even 
zeroed out. And many of our technological programs require time 
to realize those successes.
    Even though the technology shows great promise and has 
demonstrated its knowledge points--for instance, the airborne 
laser I think is a good example--what are the services doing to 
make sure that we don't incentivize the termination of programs 
that could ultimately prove vital to our national security? And 
I am going to throw that out to anyone, as well.
    Secretary Work. Well, sir, from the Department of the 
Navy's perspective, the way this works is, within the 
Department, we have a very structured way to go about the 
different requirements: a deputy advisory working group, which 
reports to the Secretary, who holds small and large groups with 
all the combatant commanders, and that is where the 
requirements are really set.
    As far as ballistic missile defense goes, we think it is 
actually a very good news story. I will let Secretary Westphal 
speak to THAAD [Terminal High Altitude Area Defense] and PAC-3 
[Patriot Advanced Capability-3 Missile].
    Mr. Taylor. Mr. Franks? You actually expired. What I am 
going to ask is that each of the witnesses submit that for the 
record.
    [The information referred to can be found in the Appendix 
beginning on page 94.]
    Mr. Franks. All right, Mr. Chairman. Thank you.
    Mr. Taylor. The chair now recognizes the gentleman from 
Georgia, Mr. Marshall, for 5 minutes.
    Mr. Marshall. Thank you, Mr. Chairman.
    My questioning has to do with the F-35 alternate engine, as 
well. And since it is pretty clear that nobody here is prepared 
to testify too much on that subject, I am just going to make 
some observations.
    I think most on the committee agree that this is not a 
close call. This is an exercise of very poor judgment by the 
Secretary and the two service Secretaries. It is such poor 
judgment that we can't even figure out really where it is 
coming from. It is arguably defensible, but here we are going 
to spend $110 billion over a 20- to 30-year period of time, and 
we are essentially saying we are going to sole-source that 
contract.
    We will buy thousands of these engines. This is not a small 
buy. It is not for a brief period of time. And the idea behind 
the competition is that it is ongoing.
    Now, Secretary Gates has recently said that he believes--
his notion of competition is ``winner takes all.'' I think he 
needs to have a little bit broader notion of competition with 
regard to these long-term projects like this one. We want 
competition throughout the duration of the project.
    I talked to a retired Navy commander, marine, flew fighter 
jets, and he described the problems that they were having with 
the F-16 when there was only one engine, and then the benefits 
that they experienced once there was a competing engine.
    I don't know that this is actually how it was structured, 
but he believes that the way the competition was structured--
and it was annual competition here for better performance, 
better reliability, better responsiveness--every single year, 
the two competing companies were vying with one another to see 
who was going to get 60 percent of the buy in the following 
year.
    And it went back and forth, back and forth between the two 
companies, the effect of which, at least according to this 
retired commander, was a remarkable improvement in the number 
of F-16s that could actually fly, their performance, their 
reliability, et cetera. GAO, looking at the F-16, if I recall 
correctly, it was either 21 percent or 34 percent savings over 
the life of the program as a result of competition.
    The Pentagon's own figures acknowledge that the short-term 
costs that you described the Pentagon as not being interested 
in incurring right now--because we have got tough budget, you 
know, nobody disputes that at the moment--those short-term 
costs will be repaid, almost certainly, and it doesn't take 
into account the likelihood that there will be huge savings as 
a result of the competition that I described that went on where 
the F-16 is concerned.
    So I don't have a parochial interest in this at all. You 
know, when I first started getting involved in this, I didn't 
know who was building the engines. But we make a huge mistake 
by sole-sourcing a 20- or 30-year, $110 billion program.
    And I hope that that message gets back to the two 
Secretaries and the Secretary of Defense, all of whom I respect 
enormously. I think they are doing a great job for the country. 
But their judgment is really flawed on this one, and I don't 
know where it comes from. It is so off-base.
    And with that, I yield back, Mr. Chairman.
    Mr. Taylor. Chair thanks the gentleman for yielding back.
    Chair now recognizes the gentleman from Texas, Mr. Conaway, 
for 5 minutes.
    Mr. Conaway. Thank you, Mr. Chairman.
    Witnesses, thank you for being here this morning.
    I don't discount for 1 second the difficulty in achieving 
auditability or business management systems transformation, all 
those things. It is spectacularly complex issue across all your 
agencies. In a 2-hour hearing, you just simply cannot do 
justice to that.
    But I am concerned that, given the revolving door that is 
your jobs, that 6 years from now we will have someone sitting 
in Ms. McGrath's position talking about yes, the Deputy Chief 
Management Officer system is working, it is working fine, 
auditability and business management systems transfer, those 
words roll off your tongue very well, business enterprise 
architecture, enterprise transition plans, enterprise resource 
planning, Business Transformation Agency.
    All of that sounds wonderful, and to the uninitiated, it 
sounds like we are making progress. But I believe it creates 
fog. And we hide in the fog the lack of progress that we are 
making. There is a long litany of FIARs [Financial Improvement 
and Audit Readiness Plans] or Financial Improvement--whatever 
that thing is--from 1990 to today. And each time we have a 
change in leadership, we have a new plan, and we don't execute 
the plan fully to the end----
    So it is not really a question, but it is an observation 
that this is hard, and I recognize how hard it is, but it is 
important, as well. It is no different in the business arena in 
which a pointy end of the sword in business doesn't like the 
back office guys, and there is always that tension between 
resources and, you know, the mission and those things.
    But we can't, I don't believe, do the mission properly for 
the taxpayer of this country without being able to tell them 
that we spend all this money correctly. We may spend every 
nickel perfectly, but we can't prove it to anybody.
    GAO has a litany of high-risk arena areas that the DOD has 
never had one come off their list. It just gets longer. And so 
all of us on this side are committed to doing what it takes to 
get you the resources and have you keep those resources as you 
go forward.
    I am concerned that, as this efficiency model that 
Secretary Gates has talked about, if you looked at that chart, 
and it looks to me like it is an across-the-board cut. 
Everybody gets $28 billion, and you figure out where it comes 
from even though your individual budgets may be different, your 
individual needs in the next 10 years may be different.
    And it doesn't appear to be, at least on the surface, 
rational as to how we came to the goal, the $101 billion, over 
that timeframe, which I think is about 3-plus percent of total 
spending within the Department over the next 5 years.
    But I worry that you will inordinately punish or take 
advantage of the resources that ought to be used to attain 
auditability, and these management systems transfer because 
those don't have a lot of champions in the system, but spending 
money somewhere else in O&M do have champions in the system. 
Long statement, 3 minute, 4 minutes' worth.
    Can you talk a little bit about cross-pollinization between 
particularly the three service branches? Because each of you 
has an auditability goal, and I am hoping that the Marine Corps 
is still on track to get their goal accomplished.
    The goal of that first audit is laudable and is important, 
but the better goal is auditability over--going forward. We can 
all make Herculean efforts one time to get something done, but 
if you can't replicate that because the systems didn't get 
developed along the way, then we really haven't achieved much 
beyond just that--pat ourselves on the back for that first 
audit.
    So do you have some sort of a cross-pollinization system 
among yourselves? Because you are going to be doing the same 
back office functions across your three Departments.
    Ms. McGrath. So if I could just make a couple of comments, 
and then to the extent my counterparts want to add, the Under 
Secretary of Defense Comptroller, Under Secretary Hale, hosts 
or convenes a FIAR, Financial Improvement Audit Readiness, 
governance board where we all participate. We are all members 
of the governance board. And in fact, I co-chair with him 
because we are taking a look across the defense enterprise, not 
just in the financial space, understanding the systemic changes 
we need to make to ensure auditability.
    So it isn't----
    Mr. Conaway. Well, let me ask you this. You get to that 
point, and you have got to make a decision. The Army wants one 
system, the Navy-Marine Corps wants a system, the Air Force 
wants a--who makes the hard call to say, ``This is the system 
that we are going to go to, we are going to go common across 
all three,'' and force it on them? Is there a system? Is 
anybody in the Department of Defense have that authority to do 
that?
    Ms. McGrath. The common piece are the standards. So if each 
of the military departments today in the services are pursuing 
different financial solutions that, at the end of the day, will 
enable auditability across the enterprise because we are using 
a common set of standards. It is the standards that will drive 
the auditability.
    Mr. Conaway. All right. Well, thank you for what you are 
doing. I know it is hard, but it is important.
    Thank you, Mr. Chairman.
    The Chairman [presiding]. Thank the gentleman.
    Gentleman from Connecticut, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    Your first question, Mr. Chairman, regarding the 
commissioning coming up a week from Saturday, the USS Missouri, 
again focused on a successful program in the Navy, which again 
I think, just to reiterate the point that you made, this ship, 
this submarine, was built with 10 million man-hours. The first 
in its class from the Virginia class, the USS Virginia, was 
built with 14 million man-hours, in other words, a 4-million 
man-hour reduction.
    The first submarine was built. It took 87 months. This one 
will take 60 months. And as we go into the next block of 
submarines that are in the block 3 contract, which the Navy 
executed in December of 2008, we are shooting for 55 months in 
terms of the construction.
    And what I would say is that we are not cutting corners. In 
fact, I think the capability of the Missouri surpasses the 
first in its class so that--obviously, you know, we have got a 
program where we have figured out a way to do it more 
efficiently, in fact improve quality. And it was done because 
we innovated in the yard, because we created a culture of cost 
containment and cost savings. And it really, I think, is a 
model, which particularly in a shipbuilding account that is 
going to be stressed over the next 10 years or so, that I think 
we all should really pay heed to.
    And again, I think Mr. Andrews and Mr. Conaway's reform 
bills, the acquisition reform bills which, again, are about 
trying to statutorily create a system where design and research 
is done up front rather than on top of production, which is 
where I think we got into trouble with the LCS program.
    And I guess, you know, Mr. Work, I mean, we have spent a 
lot of time this year already talking about the SSBN, which 
clearly, looking out on the horizon, is going to put a lot of 
stress on the shipbuilding budget. And I guess my question to 
you is, is the Navy prepared to look at lessons learned from 
the Virginia program, the success which we clearly are seeing 
in real savings and quality, and applying it to that program? 
Which again is going to be a challenge for this committee for 
many years to come.
    Secretary Work. Yes, sir, we are. The Virginia is actually 
the model we are using on the SSBN-X. It is very important. 
Secretary Mabus himself is following the development of the 
requirements for that boat extremely carefully and is working 
directly with the Chief of Naval Operations and Secretary 
Stackley, our Assistant Secretary of the Navy for RDA, 
research, development and acquisition, to really get those 
requirements right so we don't overprice the boat.
    We understand the requirement to put the R&D [research and 
development] in and getting our engineering drawings to a high 
degree of fidelity before we start construction. That is 
exactly our plan. We hope to be ready for the first boat in 
fiscal year 2019. So we are using the Virginia as the model for 
that program.
    Mr. Courtney. Thank you. And I think, you know, some of the 
questions which have taken place this morning about not 
sacrificing our defense needs in the mission of trying to 
create efficiency, I mean, this clearly, I think, is the 
ultimate challenge, because the need for an Ohio replacement 
has been articulated in the QDR, the 30-year shipbuilding plan, 
the nuclear posture review.
    So, I mean, obviously the need is there, and your budget 
shows a commitment to satisfy that need. But clearly, we have 
got to use every tool possible to try and create the efficiency 
so that we get that cost down to a manageable level. And I 
would certainly encourage you to keep going down that path.
    And with that, I yield back, Mr. Chairman.
    The Chairman. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Thank you, members of the panel. Thank you for joining us 
today, and thank you so much for your service.
    Secretary Work, I want to go to you, and I want to expand 
upon Secretary Gates' efficiency initiative that he announced 
on May 8th at the Eisenhower Library.
    It seems like to me under that--and I want to get your 
assessment of that--it seems like to me that, under that 
efficiency initiative, that that is going to require an 
objective analysis of all decisionmaking surrounding 
expenditures. Am I correct in assuming that that is what will 
happen out of this process?
    Secretary Work. Yes, sir.
    Mr. Wittman. Okay. So under that, would you say that it is 
safe to assume, then, that there are going to be significant 
differences or changes in how Departments make decisions on 
expenditures?
    Secretary Work. I am not so certain it would be different, 
sir, in that Secretary Mabus has set up a procedure to get 
decisions to his level, the Commandant's level and the CNO's 
level so that those three leaders make decisions that are right 
for their Department. So I don't think that the efficiency 
drill will change that, but it will just really tighten down 
when we look at every single decision on the final calculations 
we make.
    Mr. Wittman. So you would say, then, that we would be 
applying a pretty strict model of objective decisionmaking 
within deciding on the expenditures?
    Secretary Work. I believe that is Secretary Mabus's intent 
in every decision.
    Mr. Wittman. Okay, very good.
    Let me go back a little bit, then, and go to some testimony 
before this committee of both the CNO [Chief of Naval 
Operations] and the Chairman of the Joint Chiefs. When asked 
about decisionmaking with the home-porting there in Mayport, 
when the CNO was asked, ``Tell us about the objective analysis 
that was done, the risk assessment that was done behind that 
decisionmaking,'' the CNO said specifically hadn't been done. 
This was a seat-of-the-pants judgment they were going to make 
about strategic dispersal.
    Asked the same question of Admiral Mullen. Admiral Mullen 
said the same thing, hasn't been an objective analysis done. 
This is a decision that we are making based on our best 
judgment, or again, seat-of-the-pants decisionmaking.
    I go back to a quote by Secretary Gates. Secretary Gates 
said specifically, ``We need to decide dispassionately about 
these sorts of efforts.''
    Within that realm, do you believe, then, that the decision 
about home-porting a carrier in Mayport should require an 
objective analysis before that decision is complete, since none 
has been done, since there hasn't been a risk analysis? Do you 
believe that, under this efficiency initiative, then, that we 
need to go back and do an objective decisionmaking, or go 
through an objective decisionmaking process on this homeporting 
decision?
    Secretary Work. Sir, I don't believe we do. There is a 
balance between strategic requirements as well as efficiencies. 
In this case, the Department--and as affirmed by the QDR--that 
the strategic rationale for the homeporting decision is a good 
one.
    And this reminds me somewhat--before the DDG-1000 [Zumwalt-
class destroyer] program was truncated, the Department of the 
Navy wanted to single up into one yard for efficiency's sake, 
and we made the case that we would save about $300 million per 
boat, or per ship. And it was the Congress that intervened and 
said, ``Look, you cannot take the risk of singling up into a 
single yard because what would happen if that yard was hit by a 
catastrophic event?'' And the wisdom of the Congress was proven 
a year later in Katrina, when the yard down on the Gulf Coast 
was knocked out for a while.
    There was no objective risk analysis would give you a 
number on why you would do that. It is a strategic judgment of 
leadership that we basically say this is a good call and would 
trump a mere efficiency argument.
    Mr. Wittman. Well then, where would the line be drawn 
between when you make a strategic decision without objective 
analysis and when you make an objective analysis, which in this 
case you can easily quantify the risks that you are trying to 
mitigate? So can you let me know where that line is? Is that a 
line that, through this efficiency initiative, that we are just 
going to kind of meander with?
    Secretary Work. No, sir. I think the process is, on a 
quadrennial basis, do that in the Quadrennial Defense Review, 
so we actually teed that up. At the request of the committee, 
teed that up to the Secretary of Defense to ensure that our 
strategic judgment was sound, and they actually supported us.
    So every 4 years we have that, and then every year we have 
a means by which to bring up strategic concerns to the Deputy 
Secretary and the Secretary. And it is, in my view, a very 
effective way. I have been quite pleased over the last year to 
see it in action.
    Mr. Wittman. I would like to get a copy, too, of the 
response to Congressman Forbes' question about how those 
scenarios then changed. Obviously there must be some 
quantifiable change that is there between the QDR, the BRAC, 
and then the 2010 QDR.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Thank the gentleman.
    We have two votes. We will return as quickly as we can and 
resume the inquiry. And so, please have patience with us. We 
shall return. We are in recess.
    [Recess.]
    The Chairman [presiding]. The hearing will resume.
    Mr. Nye, gentleman from Virginia.
    Mr. Nye. Thank you, Mr. Chairman.
    Secretary Work, I had the pleasure of attending recently a 
breakfast where you were the guest speaker, and you laid out 
and described for us the challenges that you are facing right 
now in terms of Secretary Gates' charge to look carefully at 
all your spending accounts and find ways to save some money, 
particularly looking in the overhead arena.
    And I offered to provide some ideas for ways that I thought 
we could do that, and that is part of our ongoing communication 
with you and Secretary Mabus.
    But I wanted to note, you were describing what Secretary 
Gates said in May, essentially said military spending on things 
large and small can and should expect closer, harsher scrutiny. 
And I think that is a reasonable statement, given the fiscal 
environment that we are in right now.
    In fact, Secretary Mabus recently said, quoting him, ``The 
expected level of resources over the near- to mid-term will not 
sustain every program and every program objective, warranting a 
willingness to consider trade-offs in even our most deeply held 
priorities. And there are no sacred cows. Everything is on the 
table.''
    Do you agree with Secretary Mabus in that assessment?
    Secretary Work. Yes, sir, I do.
    Mr. Nye. Okay. What I wanted to ask was, given that 
constrained environment, and given the new charge that you have 
been provided by Secretary Gates, even subsequent to the QDR 
being released, and considering the fact that the proposed 
redundant nuclear carrier homeport in Mayport carries a price 
tag of approaching a billion dollars estimated, that four 
equivalent facilities exist in the country, including another 
one on the East Coast, and that, theoretically at least, those 
funds could be used for other priorities that are on our list, 
getting the 313 ships, fixing all of our maintenance backlogs 
at the facilities and of the ships that we have in the fleet, 
strike fighter shortfall, all those things that are on that 
list, including every other priority?
    What I wanted to ask is, would you agree that those are the 
kinds of trade-offs that you have to consider?
    Secretary Work. Yes, sir. In fact, we are in the process of 
considering them for this budget submission, which I think you 
know is due up to OSD on the 30th of July.
    As we looked at Mayport, really it is we believe the costs 
are far closer to about $589 million instead of 6 billion, and 
it is really stretched out over a long period of time. Between 
fiscal year 2011 and fiscal year 2015, it is a grand total of 
$239 million.
    So this is a cost that we believe is very manageable and 
does not in any way, shape or form take away from any of the 
other higher priority goals in the Department. We actually 
think it fits well within the guidance we have been given on 
the QDR, and don't believe it will, in any way, shape or form, 
cause a problem in any of the other things you mentioned.
    Mr. Nye. Well, we can agree or disagree on cost, and 
oftentimes we do. And this committee has actually ask for, in 
this year's NDAA [National Defense Authorization Act], some 
further studies into what all might be on the table that would 
lead to a good estimation of what that cost might be at the end 
of the day.
    But I think the bottom line of what I am getting at here 
is, we know there is a cost involved, and it is significant. We 
know that we are in a very tight resource-constrained 
environment and that we have got to make some tough choices and 
some tough trade-offs.
    And that is the charge that you are left with. That is the 
charge that I am left with in terms of representing a district, 
but also taxpayer dollars and trying to ensure the folks that 
fund us that we are using that money as efficiently and 
appropriately as possible when making some of those tough 
trade-offs.
    I just want to note that recently Northrop Grumman 
announced that it is closing its Avondale shipyard due to 
excess infrastructure. In fact, they noted that, since the Cold 
War, the size of our fleet has shrunk significantly, and they 
just can't afford to keep open an extra facility.
    I know there are a lot of folks who would like to see that 
facility remain open. But again, that is a tough choice they 
had to make about facilities and what we are able to afford, 
going forward.
    I just say that to highlight the environment that we are 
in, and I have made no secret of my position on this issue. I 
strongly believe that whatever the final cost, whether it is a 
billion or something in that region, over time, we can use that 
money on things that are more urgent and more pressing for our 
Navy.
    So I just want to close by urging you again, in the 
strongest way I can, to, as you said, consider those possible 
trade-offs, you know, take a look at that project again. And 
going forward, carefully decide whether or not that is really 
the best possible use of our scarce Navy dollars.
    But I thank you all for your service. I understand what you 
have been asked to do is you have been asked to make some very 
tough, difficult choices. And we want to work with you in that 
process.
    Thank you. I yield back, Mr. Chairman.
    The Chairman. Thank the gentleman.
    Before I call on Mrs. Davis, Mr. Work, recently I asked the 
proposed price tag on a replacement vessel for the Ohio-class 
submarine. Has the Navy done any studies on whether a 
replacement, such as the Virginia-class submarine, can perform 
the same duties with obviously an alteration in the missiles 
and the ship somewhat?
    Secretary Work. Yes, sir, we have. Secretary Mabus, when he 
came aboard last year, and I were first given the briefing on 
how much this boat could potentially cost, this became one of 
his focus items from day 1.
    For the last year, the AOA, the Analysis of Alternatives, 
for the submarines has occurred. The judgment is that, because 
we have elected to go with the D-5 missile, that using the 
Virginia is not the right way to go, that it is a much better 
and more efficient thing to exploit our existing infrastructure 
on a 42- or 43-foot diameter hull.
    Once that decision was made, Secretary Mabus has asked 
every single requirement, what is the basis for that 
requirement, and what is the thing that is driving the cost in 
the boat. I don't have a final answer for you, Mr. Chairman, 
but this is at Secretary Mabus's level, and I can assure you 
that we will have an affordable boat that we can afford in the 
20s.
    The Chairman. Well, what is interesting, based upon your 
testimony today, the missile is driving the boat. Have you 
asked engineers to redesign a missile that might fit on a 
Virginia-class submarine? This isn't brain surgery. Have you 
done that?
    Secretary Work. Sir, I will have to come back and see if we 
have done an actual costing, but at the Office of the Secretary 
of Defense level, it really was can we afford to design a whole 
new missile mount, and the decision was to stick with the D-5 
through about 2040. And that will sustain our solid rocket 
motor base industry. It will take advantage of all of the 
investments that we have had up to this point. And we believe 
that is the most inexpensive and the right way to go.
    The Chairman. Well, we may be of some help to you on this, 
and help you with a decision, Mr. Work, because it appears the 
replacement of Ohio-class submarine is just phenomenal and 
might well eat into your attempt to reach the 313 ships that we 
want for the United States Navy.
    I think you ought to ask the engineers about a missile that 
might fit in a smaller submarine rather than the multi-billion 
dollars you might have to sink into a replacement for the Ohio-
class submarine. We are talking about efficiencies.
    Secretary Work. Sir, Mr. Chairman.
    The Chairman. Mrs. Davis.
    Mrs. Davis. Thank you, Mr. Chairman. Thank you to all of 
you for being here and for staying, and a special welcome to 
Secretary Conaton. Good to have you here. Thank you.
    I understand that the Department and the individual 
services are looking very, very hard to cut whatever programs 
are possible, and clearly understood, and I think that we 
should be doing that. I also understand that we are looking for 
some efficiencies, and hopefully some of those might even go 
into quality of life programs for our military personnel and 
their families.
    But I am concerned that we may be cutting, or even 
eliminating, some programs that are extremely valuable, and I 
wanted to talk for just a moment about the My CAA [military 
spouse career advancement] program, the career accounts for our 
military spouses, career advancement accounts.
    That program has been wildly popular, as you know. And I 
wanted to ask, particularly Ms. McGrath, if you could help me 
understand better the process for weighing programs like that 
which, when compared to other programs, are relatively small 
dollar amounts, and yet we have many far larger ticket programs 
out there that gain a lot more attention.
    But this one in particular I think is important to many. So 
what is it that we are really specifically looking at here? It 
is been scaled back, and may, in fact, not have nearly the 
impact that it could have had with a relatively small--larger 
dollar amount.
    Ms. McGrath. Yes, ma'am. We have been talking this morning 
about obtaining efficiencies across the Department of Defense. 
We are looking at--and I think it is been mentioned by 
everybody here--we are looking at everything we do, how we do 
it, and are we optimizing our performance, the way we currently 
execute today. So major programs, organizational structures, 
are there better ways to execute.
    And then, when the decisions are made, it is through what I 
will call an analytical process where all of the submissions 
are brought together and every aspect is looked at, both from 
efficiency, effectiveness, quality of life, things like Wounded 
Warrior certainly would be maintained. We are not looking to 
degrade, you know, quality of life, but I would say that we are 
looking at every aspect of what we do when these decisions are 
made.
    And so, it is not just about, you know, trying to save a 
dollar or move things exactly from, you know, support to 
infrastructure without the input of quality and quality of life 
for our servicemembers and their families.
    Mrs. Davis. Does the impact in the popularity, in many 
ways, of a program--I have had spouses tell me, of all the 
things they have been looking at over the years, all the 
programs that are offered, this one resonated more than 
anything else. And I would submit that I think it is worth a 
second look in that program. And I appreciate your response.
    We are going to nudge on that one, because it clearly can 
make a difference down the line. And I think by so narrowing 
the program and what has happened in the last directive, we are 
going to be missing out on a lot of the kinds of opportunities 
that many of our families might be entering into, which is 
going to turn around and help the services in the long run. And 
I don't think this is the time to lose out on those 
opportunities.
    I also wanted to just raise one other issue, if I may, 
within the time that I have, and that is for you, Secretary 
Work. If you could just speak for a moment, because Admiral 
Roughead had said that predictable ship procurement allows the 
industry to stabilize its workforce and retain the critical 
skills necessary to national security. And Admiral Mullen also 
has noted earlier.
    And in light of that, when we look at the MLPs, the Mobile 
Landing Platforms, being spread out over a period of 5 years 
versus 3 years, which does not maximize the workforce, how do 
you look at those programs and try and make those decisions? 
Because I think we certainly have a strong example or two of 
where pushing up, you know, the opportunity to move within a 3-
year period would make a huge difference in terms of 
maintaining the kind of people that we need to be involved in 
those programs.
    Secretary Work. Yes, ma'am. Secretary Mabus is committed to 
maintaining 10 ships per year across the FYDP [future years 
defense program], 50 ships per year, and within the balance of 
the resources that we can put to new ship construction. And we 
have to make these choices every day.
    I mean, sometimes we do have to go to every other year 
procurement, but in this case we work directly with NASSCO, for 
example, to work out with them on how they could achieve 
favorable rates using existing legislation. And we will 
continue to work with the industrial base in every case to try 
to work through in the most efficient and effective way, given 
the limitation of resources and the priorities that we are 
trying to balance across the Department.
    Mrs. Davis. Thank you. I know they are difficult questions 
and issues, but I think, in the long run, the taxpayer will be 
saving if we can figure out a better way to do that.
    And I would like to yield to my colleague, Mr. Nye, for my 
remaining time.
    Mr. Nye. I want to thank Mrs. Davis for her interest in the 
My CAA program and just follow up by saying I also think the 
program has provided some tremendous value to our military 
spouses.
    And earlier this year, I was contacted by a number of 
spouses who complained that the program was changed without a 
lot of notification to them. And I want to urge you, in your 
review of this program, to please do as much outreach with the 
military spouses as possible to hear their views about it 
before you make changes.
    Thank you.
    Mrs. Davis. Thank you.
    Thank you, Mr. Chairman.
    The Chairman. Thank you very much.
    Does any other member wish to ask a question? Mr. Bishop.
    Mr. Bishop. Thank you for staying around so long. You timed 
it very well.
    Ms. Conaton, I am extremely happy to see you here again in 
your current position, and I want to thank you for all the 
service you gave to us, both when you were in charge of the 
Minority council and then Majority council. I wish you best in 
this new endeavor, as well.
    I am also most familiar, I suppose, with the Air Force 
bases, and I realize that we have a lot of infrastructure needs 
in all the military, but especially the Air Force right now, 
and especially with the MILCON [military construction] 
processes we have.
    One of the idea this committee has long promoted for years 
is the concept of enhanced-use leasing, which tries to leverage 
private sector dollars along with military spending to try and 
utilize our under-utilized properties that may belong to the 
DOD for the benefit of both the private sector as well as for 
military spending.
    I know in my area, Falcon Hill project, which is extremely 
important, we are looking at maybe $500 million worth of 
revenue that can come to the Air Force over 30 years for needed 
infrastructure development.
    So I guess a couple of questions on that line. What is the 
Air Force position, going forward, about promoting and 
fostering enhanced use leases as a tool to help bridge the gap 
between the lack of MILCON resources and the need that is out 
there?
    Secretary Conaton. Thank you, Mr. Bishop, and appreciate 
the opportunity to continue what has been a dialogue with you 
and other members of your delegation on this issue.
    I think enhanced-use leases [EUL] are a very important tool 
as we look at how to best invest our MILCON dollars. So I would 
agree with the premise of your question.
    Mr. Bishop. Does the Air Force have a process, or a system 
in place, to help review potential problems with EULs or to 
recommend to Congress any legislative fixes or authorities that 
may be needed to promote them?
    Secretary Conaton. Sir, I would like to get back to you, I 
think, with a more precise answer for the record about any 
additional needs that we might have there. I guess all I would 
say in a general sense is that I think the dialogue between 
these committees and the services in between individual 
delegations and the services is critically important on this. 
And I will get you a more detailed answer for the record.
    [The information referred to can be found in the Appendix 
on page 95.]
    Mr. Bishop. That would be fair, and I think also better for 
me, as well as the Department or the Air Force, in this case, 
with a more detailed answer later on to that question.
    I am making the assumption that you have not experienced 
any institutional resistance from the Department of Defense in 
fostering an EUL?
    Secretary Conaton. Sir, not that I am aware of. As you 
know, there are a number of enhanced use leases that are very 
complex and complicated in their specifics. And so, the Air 
Force staff has been working to talk through those issues that 
might be of concern to OSD, recognizing that some of these 
instances are more complicated than others.
    Mr. Bishop. In every effort where we start something that 
is a little bit innovative, or new or different, there are 
sometimes institutional concerns or problems that probably can 
be easily worked out if our mindset is that we want this to be 
successful from the outset.
    And I think--I appreciate you saying very clearly that this 
is one of those vehicles that we can use to try and move 
forward into helping some of the infrastructure needs that we 
have, and I appreciate your positive answers. I look forward to 
the more complete answer. And I look forward to working with 
you in the future.
    Thank you.
    Secretary Conaton. I do as well, sir. Thank you.
    Mr. Bishop. Yield back.
    The Chairman. Thank the gentleman.
    Ms. McGrath, what progress has been made in addressing the 
items on the GAO's latest high-risk list for the Department of 
Defense?
    Ms. McGrath. Sir, as I mentioned in my opening statement, 
we address the high-risk areas not as sort of an additional 
thought. That is our everyday thought. They are included in our 
strategic planning document for the business base, which is the 
strategic management plan. They are aligned within those four 
goals, so we take proactive measures to address them each day.
    Each one of the high-risk areas has a plan identified. It 
has appropriate governance in place. We utilize the Defense 
Business Systems Management Committee [DBSMC] to review each 
one of the high-risk areas. We meet with the Government 
Accountability Office frequently on each of the areas in 
addition to the Office of Management and Budget, to ensure that 
we are keeping our eye on the ball.
    We also have identified milestones and measures for each 
one of them, and we track performance quarterly through the 
DBSMC. So I would say I mentioned some specifics on the 
personnel clearance reform. We have made certainly a lot of 
progress there, the management attention, the plan, the 
proactive measures, all our tools we need to actually make 
progress on each one of those. And I believe that we are making 
progress in each one, and I am happy to talk about any of them 
in specific detail or just talk in sort of general terms about 
where we are with each one. But I am comfortable, and I can 
clearly state that we are making progress.
    The Chairman. To each of the Under Secretaries, let me ask 
this: each of you have an adopted, it appears, different 
management structures for business transformation--for 
instance, I note that Lieutenant General Durbin is here--and 
why are your approaches and staffing levels for this endeavor 
so very, very different?
    Mr. Westphal.
    Secretary Westphal. Mr. Chairman, you are right, every 
service has different processes, although some of our processes 
are, of course, the same.
    In the case of the Army, prior to Secretary McHugh and I 
coming on board, the Army had instituted, under the previous 
Administration, an enterprise task force, an enterprise 
approach to management. We examined that closely, and with the 
mandate from Congress to establish an Office of Business 
Transformation, we made the decision to incorporate that 
management enterprise approach within the context of business 
transformation and apply it holistically across the Army.
    Now, that enterprise approach had a staff that had been 
created to help manage the process under the then Deputy Under 
Secretary of the Army. I took some of that staff and brought it 
into the--and to create and establish the Office of Business 
Transformation because they had already been engaged in 
business transformation activities.
    That helped me immensely to be able to then immediately 
take hold of the planning, programming, budget execution piece, 
which we sort of came in in the middle of and really manage the 
POM [program objective memorandum] process, the planning 
process, and establish what I call the Army Management 
Enterprise, which is basically the Secretariat, in lead, with 
the Army staff in support, to put forth what we call the Army 
Campaign Plan, which is essentially the direction that we at 
headquarters give to the Army holistically across the board.
    So it allows me to integrate planning, business 
transformation, the resourcing decisions to bring it to a level 
of integrated discussion among and across all sectors of the 
Army, led by the Assistant Secretaries with me and through to 
the Secretary of the Army to get decisions done.
    And then, in addition to that, we established something 
called the Army Enterprise Board, which is a four-star board, 
led by me but an advisory board to the Secretary of the Army, 
of all the four-stars, that is Secretariat and uniform, to 
basically become a forum for discussion of major issues that 
need to be resolved across the Army.
    The Chairman. Thank you. Mr. Work.
    Secretary Work. Sir, the way I would answer this is I think 
there is great strength in the way the Department is handling 
this now. Each of the Unders come with a little bit of 
different background. Secretary Conaton comes from Congress. 
Secretary Westphal has been in the building before, and Ms. 
McGrath.
    The way it works now, sir, is that we establish common 
goals across the Department of Defense and the military 
departments. We each have to come up with our business 
transformation plan and our business enterprise architecture. 
But each of us come at it a different way, and I would argue, 
it is a strength.
    We have meetings at the DBSMC, the Defense Business Systems 
Management Council, chaired by Secretary Lynn, in which we come 
in and say how we would approach a problem, and we have 
discussions on what are best practices. Ms. McGrath meets with 
the Unders quite often, and then the Unders meet themselves, 
along with our financial management and Comptrollers.
    And by setting it up the way we do, where we all have 
common goals and common plans, but we can approach the problem 
differently, we actually, I think, are better for it, and it 
makes for a very innovative approach to this where we all have 
a common goal, and that is to prepare the best and most 
efficient business operations for the Department.
    The Chairman. Ms. Conaton.
    Secretary Conaton. I certainly agree with everything that 
Secretary Work just said. Just for a brief moment talk about 
the Air Force structure.
    Obviously, like my colleagues, serving as the Chief 
Management Officer, I have a very able Deputy Chief Management 
Officer, Mr. Tillotson, who also is dual-hatted as our director 
of the Office of Business Transformation. The choice in Air 
Force was to relatively leanly staff that office and rather to 
make use of expertise that exists throughout the functional 
secretariat and air staff, recognizing that transformation has 
got to occur in the actual activities of those parts of the 
Department rather than mandated from the outside.
    We also have representation, folks in different parts of 
the country at our major commands who have expertise in Lean 
Six Sigma approaches and have gone through the effort that the 
Air Force has, Air Force SMART Operations for the 21st century, 
what we call AFSO 21, which is our continuous process 
improvement, which will help drive transformation outside of 
the headquarters level, as well as in the headquarters itself.
    But I guess I would come back to things we have talked 
about, which is that leadership really matters in driving 
transformation. And so, the fact that these issues are brought 
to the Air Force Council, which is our governance process, has 
helped us keep a continuous leadership eye on where we need to 
go with mission and transformation.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    I believe Mr. Bishop has an additional question.
    Mr. Bishop. Thank you. I thought that was an important 
question. I appreciate your answers. Could we have, though, for 
the record if necessary, the staffing levels, the number that 
we have, from each of you on those particular areas? And if you 
would like to do that for the record so you can get the exact 
number correct, that would be okay.
    The Chairman. Along with that, could you give a summary of 
the duties about the leaders? You don't have to go all the way 
down to the bottom, but at least give a summary of the top few, 
please.
    [The information referred to can be found in the Appendix 
beginning on page 93.]
    The Chairman. The gentlelady, Ms. Carol Shea-Porter.
    Ms. Shea-Porter. Thank you very much.
    And thank you all for being here. I wanted to pursue the 
supplemental and the impact that you believe that it would 
have. I know that we have seen a lot of votes for and against, 
both Republicans and Democrats voting for it and against it 
over a period of time. Has that caused any problems so far? And 
with the size of the budget, where exactly would you cut? I 
know that you had talked about pay, but what other options 
would there be if you didn't receive the supplemental?
    Secretary Westphal. I am not sure exactly--well, first of 
all, they would come mostly from our O&M accounts. So, 
depending up if the supplemental is not passed before the 
recess, we would then have to go into those accounts and look 
at what we can do.
    We have tried to anticipate the possibility that the 
supplemental wouldn't be passed, and we have submitted, or have 
ready to submit--I can't tell you which one of those two it 
is--some reprogramming to avert any major issues during August. 
But some time in August, we would be having to weigh in how we 
address a lack of funds in some of those accounts.
    Ms. Shea-Porter. Okay. Any idea about what you would be 
looking at?
    Secretary Westphal. We would be looking at the possibility 
of some furloughs in some of those O&M areas in the Army, and 
that would be across various departments and various agencies 
of the Army.
    Ms. Shea-Porter. Okay. Has there been any problem to date 
with the fact that there have been, you know, inability to 
bring this all the way through? Have you experienced trouble?
    Secretary Westphal. No. You know, I mean, we watch 
carefully. We monitor and we certainly have a lot of 
conversations with staff and members about--well, about the 
progress made, and we try to anticipate. And so we have been in 
an anticipatory mood, at least in the Army, and I think all of 
my colleagues would say the same thing in their service.
    But it is a very unpredictable process, and at the end of 
the day, we have to just wait until you make those decisions 
and accept whatever the consequences of those are.
    So we are reasonably hopeful that you will have a 
supplemental approved before you leave for recess. We hope that 
is the case and that we then will proceed to make sure that we 
account for those resources the way you want us to.
    Ms. Shea-Porter. Okay.
    Anybody else want to answer that?
    Secretary Work. Well, as you know, ma'am, Secretary Gates 
sent a letter to Speaker Pelosi, as well as all of the 
chairmen, and basically said this is kind of an unprecedented 
situation. We haven't been--we know that if the supplemental is 
not passed, that some of our base budget operating accounts 
would begin to deplete in August.
    And although we would keep exempt civilians on duty, as 
everyone has said, other civilians might have to be furloughed 
without pay. And of course, we would keep our men and women on 
active duty, but at some point in the latter part of September, 
we would run out of money to pay for those.
    So this is quite an extraordinary circumstance. I can speak 
for the Department of the Navy for certain. This is not a 
circumstance that we would like to be faced with.
    Ms. Shea-Porter. Right. Would you have to look at some of 
the contracts, or is that separate? I mean, would you 
reevaluate some of the contractor deals that we have made?
    Secretary Conaton. I think it would depend on what the 
contract is. To the extent that contracts are issued for work 
that comes out of the operations and maintenance accounts, I 
think it would be affected by the drawdown of those accounts in 
the middle part of August.
    And the only other thing I would add to what my colleagues 
have said on a more general level is the Secretary of Defense 
has told the services, and I think told other parts of the 
Department, really clearly that we should minimize the 
disruption to the programs and to our deployed men and women.
    And we are relying upon Congress, this institution, to 
provide that supplemental, and that we are going to keep moving 
on that path. Obviously we will plan, as we need to, for a 
worst-case scenario, but I think the direction he has given to 
the services is to trust that the Congress will provide.
    Thank you.
    Ms. Shea-Porter. I just wanted to make sure that the plan 
would be to protect the men and women who were in uniform. 
Either way, that is the mission that we all share, and you have 
reassured me that that will be the top priority.
    Thank you so much, and I yield back.
    The Chairman. Thank the gentlelady.
    If there are no further questions, we thank our panelists 
for your testimony, for being with us, for your expertise, and 
especially for your leadership. Thank you again.
    [Whereupon, at 12:48 p.m., the committee was adjourned.]



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




                            A P P E N D I X

                             July 22, 2010

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


              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             July 22, 2010

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




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


              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             July 22, 2010

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

      
      RESPONSE TO QUESTION SUBMITTED BY MR. SKELTON AND MR. BISHOP

    Secretary Conaton. The Air Force Business Transformation Structure 
is comprised of the Office of Business Transformation, and the 
transformation organizations of the key Headquarters Air Force 
functional teams. This team comes together as the Enterprise Senior 
Working Group, under the leadership of the Director of Business 
Transformation, to make up the total transformation team. This 
approach, which was built to take advantage of the already existing 
functional transformation teams, allows the Business Transformation 
Office itself to remain small (a staff of 41 (19 military and 22 
civilian) government positions plus 81 full and part-time contractor 
personnel), while directing the efforts of a total transformation team 
of over 370 personnel. Key positions within the Office of Business 
Transformation include:
    The Under Secretary of the Air Force serves as the Chief Management 
Officer (CMO). The CMO duties are outlined in Headquarters Air Force 
Mission Directive 1-2. By Secretary of the Air Force guidance, the 
Under Secretary performs duties in accordance with Section 904, of the 
FY08 NDAA, as designated by the Secretary to have primary management 
responsibilities for business operations and to be known in the 
performance of such duties as the Chief Management Officer. This 
includes directing and overseeing activities of the Deputy Chief 
Management Office, and serving as the co-chair of the Air Force Council 
which advises the Secretary and Chief of Staff on resourcing decisions 
(and related business transformation initiatives) and efficiencies and 
related performance management.
    The Director of Business Transformation also serves as the Deputy 
Chief Management Officer (DCMO). The DCMO duties are also outlined in 
Headquarters Air Force Mission Directive 1-2. As directed by the Under 
Secretary, the DCMO serves the Under Secretary of the Air Force in 
exercising the assigned duties and authorities relating to the 
management of business operations for the Air Force. The DCMO exercises 
the Under Secretary's CMO responsibilities for business operations by 
effectively and efficiently organizing the business operations of the 
Air Force and providing information related to Air Force Business 
Operations to the CMO and DCMO of the Department of Defense as is 
necessary to assist those officials in the performance of their duties. 
The DCMO also represents business transformation interests in the Air 
Force Corporate Structure by serving as the chair of the Air Force 
Board when discussing issues involving business practice and process-
related topics.
    The Deputy Director, Office of Business Transformation coordinates 
and recommends strategic priorities and performance goals for 
logistics, personnel, training, acquisition, and finance activities Air 
Force-wide; establishes and deploys a business and data architecture to 
support those operations; synchronizes business process changes and 
system deployments in support of those operations and in compliance 
with the architecture; and synchronizes those business operations with 
other services and defense agencies to ensure end-to-end performance 
improvements across the Air Force and in support of DoD and joint 
forces. The Deputy Director provides guidance and direction on Air 
Force policies, plans, and programs related to all aspects of Business 
Transformation. He directly assists in transforming the budget, 
finance, accounting, and human resource operations of the Air Force in 
a manner consistent with the comprehensive business transformation 
plan. The Deputy Director also provides guidance and direction 
pertaining to the elimination or replacement of business systems 
inconsistent with the architecture and transition plan; and is directly 
responsible for the development of the comprehensive business 
transformation plan, with measurable performance goals and objectives.
    The Air Force Office of Business Transformation is further divided 
into two branches, each led by an Air Force Colonel (O-6) with the 
duties of Transformation Outreach and Enterprise Transformation. The 
Air Force Transformation structure explicitly includes synchronizing 
the activities of transformation teams across the Air Staff and Major 
Commands as part of the total effort, rather than creating redundancies 
in the Office of Business Transformation staff itself. These teams 
oversee the current business processes and systems Air Force-wide, as 
well as the implementation of new systems, processes, and training.
    a. Deputy Chief of Staff, Manpower, Personnel & Services (AF/A1). 
Focused on end-to-end improvement of the ``hire to retire'' human 
resource processes, the team consists of 50 personnel (9 military, 19 
civilians, and 22 contractors).
    b. Assistant Secretary of the Air Force for Financial Management 
and Comptroller (SAF/FM). Focused on improving resource management 
processes, including establishment of a clean audit capability for the 
Air Force, the team consists of 107 personnel (28 civilians and 79 
contractors).
    c. Deputy Chief of Staff for Logistics, Installations & Mission 
Support (AF/A4/7). Focused on end-to-end supply chain and maintenance 
management, and on installation efficiencies, the team consists of 117 
personnel (3 military, 56 civilians, and 58 contractors).
    d. Major Command (MAJCOM) Master Process Owner teams. Focused on 
providing direct advice and support to MAJCOM commanders to support 
business transformation activities within each of the MAJCOMs, each 
team consists of 5-10 personnel. [See page 39.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MR. MCKEON
    Ms. McGrath. Once the President signs the bill, the Department will 
work with OMB and Treasury to begin flowing funds to the field for 
execution within a matter of Days. The Department needs final 
Congressional action on the supplemental prior to the August recess. 
While we will react quickly once the supplemental is signed into law, 
this does not change the fact that we cannot make it through the August 
recess without these supplemental funds. [See page 14.]
    Secretary Westphal. Agencies may use furloughs when they no longer 
have the necessary funds to operate. For a furlough 30 days or less, 
the employee should have at least 30 days advance notice. The notice 
period begins upon the employee's receiving the proposed action.
    A furlough of 30 days or more requires at least a 60 calendar day 
specific written notice of the furlough action; however, the Office of 
Personnel Management may approve notifications of 30 to 59 days.
    In the event of a lapse in appropriations, the Office of Personnel 
Management provides that while an employee must ultimately receive a 
written notice of a furlough decision, it is not required that such 
written notice be given prior to effecting the furlough. Issuing a 
written notice prior to the furlough is preferable, but when it is not 
feasible, then any reasonable notice (telephonic or oral) is 
permissible. [See page 15.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MR. TAYLOR
    Ms. McGrath. It is critical that we make the most effective use of 
our limited resources. As the Department makes tough decisions about 
funding for specific programs, we must prioritize competing 
requirements and ensure our prioritized and validated requirements are 
satisfied in the most cost effective manner. When a program faces 
significant technology risk, affordability problems or excessive 
schedule slip, cancellation remains an important tool for the 
Secretary. It is important to note, however, that program cancellation 
does not necessarily constitute cancellation of a particular 
requirement. In many cases program cancellation allows the Department 
to take a fresh look at the requirement and determine the best approach 
to equip our warfighters. The Department's rigorous requirements 
validation process, its Planning, Programming, Budgeting and Execution 
System, and other high-level review and oversight mechanisms ensure 
these decisions are made in a thoughtful, reasoned manner. [See page 
26.]
    Secretary Westphal. The Army is conducting a deliberate and 
thorough portfolio review that encompasses our research and 
development, procurement, and sustainment accounts. We are holistically 
examining, validating, or modifying requirements, ensuring the Army is 
being a good steward of resources. As we conduct our portfolio reviews, 
we are validating the use and battlefield impacts of redundant and 
duplicative capabilities; performing a critical analysis of areas where 
manageable risks can be assumed to gain greater efficiencies. This 
review process not only looks at our current campaigns, but is also 
rigorously evaluating what capabilities we need for future warfighting 
and emerging threats. [See page 26.]
    Secretary Conaton. The Air Force (AF) process to terminate a 
program ensures that those vital to national security are retained by 
calling for multiple layers of scrutiny by the Program Executive 
Officer, the Service Acquisition Executive, USD (AT&L), the sponsoring 
Major Command, the AF Corporate Process, the Secretary and Chief of the 
Air Force, and Office of the Secretary of Defense, prior to 
recommending termination to Congress. [See page 26.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. FORBES
    Secretary Work. The Department of Navy (DON) has been reporting to 
Congress on the development of plans to make Naval Station Mayport a 
potential homeport for a nuclear-powered aircraft carrier since the 
late 1990s. As a result of the 2001 Quadrennial Defense Review (QDR), 
the DON prepared an environmental impact statement to review and assess 
a broad range of options for homeporting additional surface ships at 
Naval Station Mayport. The 2005 Base Realignment and Closure (BRAC) 
process did not provide for operational homeporting decisions due to 
the near-simultaneous strategic analysis on-going in the 2006 QDR. 
However, the DON premised its 2005 BRAC configuration analysis on a 
minimum of two ports on each coast capable of cold iron berthing a 
nuclear-powered carrier to allow for dispersal. The 2006 QDR provided 
the strategic direction for the Navy's 60/40 split of operationally 
available and sustainable aircraft carriers and submarines between 
Pacific and Atlantic homeports, but did not specify homeport locations. 
In January 2009, the DON issued a record of decision to homeport one 
nuclear-powered aircraft carrier at Naval Station Mayport. Although the 
Department of Defense decided to delay the Mayport homeporting decision 
pending outcome of the 2010 QDR analysis, the final 2010 QDR fully 
supported the Navy's 2009 decision to homeport one nuclear-powered 
aircraft carrier at Mayport. [See page 18.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. BISHOP
    Secretary Conaton. The Air Force does have a process in place to 
help review potential problems with potential Enhanced Use Leases 
(EULs).
    Prior to commercial solicitation of a potential EUL, the local 
installation, working with Headquarters Air Force seeks to identify and 
resolve any issues. Thorough up-front due diligence is being done on 
EUL concepts, in which market demand and possible Air Force EUL sites 
(supply) are evaluated for EUL viability. The objective is that all 
demand factors, development constraints (with appropriate options), and 
EUL benefits are identified and communicated, prior to taking a project 
to market. The Air Force has broadened our use of EULs beyond 
traditional real estate to renewable energy ventures. Additionally, any 
future EULs will be reviewed by the Strategic Basing Executive Steering 
Group to ensure maximum benefit to the Air Force and the taxpayer.
    If during the EUL review, the Air Force determines that a proposed 
EUL will require legislative relief, the Air Force submits a 
legislative proposal through the Department of Defense Legislative 
Review Process. [See page 36.]
?

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


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             July 22, 2010

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

      
                    QUESTIONS SUBMITTED BY MR. ORTIZ

    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. Why has the Department (or the military departments) taken no 
meaningful steps to implement Section 803 and to improve its strategic 
sourcing decisions for contract services?
    Ms. McGrath. Due to the timing of the Fiscal Year (FY) 2010 
National Defense Authorization Act and budget preparation cycle, the 
Department was unable to comply with the requirements of Section 803 
for the FY 2011 budget submission. DoD is currently working to comply 
with Section 803 in a phased approach beginning with the FY 2012 budget 
submission. The Under Secretary of Defense for Acquisition, Technology 
and Logistics, the Under Secretary of Defense (Comptroller), the Under 
Secretary of Defense for Personnel and Readiness, and the Director of 
Cost Assessment and Program Evaluation are working closely together to 
develop and execute the Department's approach for collecting, analyzing 
and reporting the data on contract services required by Section 803.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. How can the Department and the military departments exercise 
appropriate stewardship over its service contractor dollars (which have 
more than doubled, if not tripled, since 2000) if it does not make 
strategic sourcing decisions through the program and budget process?
    Ms. McGrath. The Department utilizes the Planning, Programming, 
Budgeting and Execution (PPBE) process to make effective program and 
budget decisions. The PPBE process is a well established and robust 
oversight mechanism supplemented by the many efforts of the Under 
Secretary of Defense for Acquisition, Technology and Logistics to bring 
greater transparency and efficiency to the acquisition of services. 
Phased implementation of Section 803, beginning with the Fiscal Year 
2012 budget submission, will help bring even greater clarity to these 
issues.
    Mr. Ortiz. Given the Secretary of Defense's May 8 speech on defense 
spending, what is each Department's methodology regarding combining its 
functions and realigning or reducing resources to achieve efficiencies 
in overhead, support, and non-mission areas? In lieu of simply re-
categorizing functions and funds in a shell game of sorts, what staff 
layers are being removed and what subordinate commands or middle 
echelons are being eliminated to reduce redundancies, overlap and 
overhead?
    Ms. McGrath. Consistent with the Secretary of Defense's speech on 
May 8, 2010, each of the Defense Agencies, Military Departments and 
Combatant Commanders were provided savings and efficiency goals, but 
they have been allowed broad discretion on how to reach these goals as 
they prepare their programming and budget submissions for Fiscal Year 
(FY) 2012. The Secretary of Defense provided additional information, 
including specific savings initiatives such as the elimination of 
certain Components, in his speech on August 9, 2010. However, at this 
time, except for the specific initiatives identified in his speech, 
Components have developed their own methodology to specifically reduce 
redundancies, overlap and overhead. Additional decisions will be shared 
with Congress when the President submits the Department of Defense 
budget request for FY 2012.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. What are the causes for 
delays in the civilian authorization process and how can such delays be 
minimized? If this is a problem only for some components, why?
    Ms. McGrath. Defense Activities are funded, and positions filled, 
consistent with mission priorities, budget constraints and 
Congressional direction. This is consistent with 10 U.S.C. Sec. 129, 
which states that ``civilian personnel of the Department of Defense 
shall be managed solely on the basis of and consistent with (1) the 
workload required to carry out the functions and activities of the 
department and (2) the funds made available to the department for such 
fiscal year.'' There are a number of reasons why Department of Defense 
(DoD) civilian manpower requirements may not be authorized for fill, 
including funding shortfalls and temporary impediments to acquiring DoD 
civilians such as an apparent lack of qualified candidates, 
insufficient office space, security clearance requirements, etc. If 
this is the case, the DoD Component may elect to contract for the 
service on a temporary basis and transition to DoD civilian performance 
once impediments have been satisfactorily addressed. These types of 
delays could be experienced by any DoD Component. Such delays could be 
minimized through enhanced strategic human capital planning, leading to 
better anticipation of overall needs.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. Is it the Department's 
policy or the policy of the military departments to ``lock'' the 
personnel authorization levels until the next budget cycle, 
notwithstanding changes in workload that may occur, even if this 
results in either ``over-hires'' or hiring additional contractors to 
meet workload changes? What challenges does this present in terms of 
efficient management of its workforce, particularly with respect to the 
imperative to right-size the civilian workforce?
    Ms. McGrath. Consistent with 10 U.S.C. Sec. 129(a), Department of 
Defense (DoD) Components are required to manage their civilian 
workforce ``solely on the basis of and consistent with (1) the workload 
required to carry out the functions and activities of the department 
and (2) the funds made available to the department for such fiscal 
year.'' It is not DoD policy for the Military Departments to ``lock'' 
their databases at the end of the budget process. Each Military 
Department has taken a different approach to managing their personnel 
authorization levels and striking a balance between workforce stability 
and changing workload or priorities to enable effective personnel 
management. In some cases ``over-hires'' or service contracts can be 
the best answer to emerging or short-term requirements.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. Why has the Department (or the military departments) taken no 
meaningful steps to implement Section 803 and to improve its strategic 
sourcing decisions for contract services?
    Secretary Westphal. The Army has taken preliminary steps to 
implement Section 803 of the FY 2010 National Defense Authorization 
Act. We are reviewing all functions on the service contract inventory, 
which we are using to track service contract execution. The Deputy 
Chief of Staff for Operations and Plans is using the results of this 
analysis to project contractor full-time equivalents in our manpower 
documentation systems. These are the necessary precursors to Section 
803 implementation, which is essential to ensuring the Secretary of 
Defense efficiencies actually happen as intended.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. How can the Department and the military departments exercise 
appropriate stewardship over its service contractor dollars (which have 
more than doubled, if not tripled, since 2000) if it does not make 
strategic sourcing decisions through the program and budget process?
    Secretary Westphal. The Army has taken preliminary steps to 
implement Section 803 of the FY 2010 National Defense Authorization 
Act. We are reviewing all functions on the service contract inventory, 
which we are using to track service contract execution. The Office of 
the Deputy Chief of Staff for Operations and Plans is using the results 
of this analysis to project contractor full-time equivalents in our 
manpower documentation systems. These are the necessary precursors to 
Section 803 implementation, which is essential to ensuring the 
Secretary of Defense efficiencies actually happen as intended. Full 
implementation of Section 803 will follow receipt of final guidance 
from OSD (Comptroller).
    Mr. Ortiz. For purposes of the Defense Secretary's overhead 
reductions, how do the Department and each military department define 
``overhead''? Does it include all civilian employees, including those 
who work in depots, arsenals, and installations? Does it include 
contractors? If not, will reductions in overhead simply lead to more 
contracting out? Without Section 803 being implemented, how can 
contractors be considered for purposes of overhead reductions?
    Secretary Westphal. The Department defines overhead as the 
structures, personnel, and operations coded as infrastructure. The Army 
has analyzed its structure, personnel, operations and regards as 
overhead those Generating Force resources that do not directly 
contribute to providing combat forces or services (e.g., headquarters, 
information systems).
    The Army considered all civilians based on functions performed and 
regards as overhead those civilians who do not directly contribute to 
providing combat forces or services.
    The Army agrees that implementation of National Defense 
Authorization Act Fiscal Year 2010 Section 803 is needed to ensure that 
overhead functions performed by in-house personnel are not simply 
outsourced to contractors. Section 803 implementation provides a level 
of detail that helps ensure planned contractor reductions take place as 
intended and do not grow in unexplained ways. The Army is using the 
contractor inventory review process required by the National Defense 
Authorization Act for Fiscal Year 2008 Section 807 to identify in-
sourcing mission-critical occupations in acquisition and security, 
among others, most of which are closely associated with inherently 
governmental functions. Projections from the Section 807 contractor 
inventory are a major component required for National Defense 
Authorization Act for Fiscal Year 2010 Section 803 implementation. Full 
implementation of Section 803 will follow receipt of final guidance 
from OSD (Comptroller).
    Mr. Ortiz. Given the Secretary of Defense's May 8 speech on defense 
spending, what is each Department's methodology regarding combining its 
functions and realigning or reducing resources to achieve efficiencies 
in overhead, support, and non-mission areas? In lieu of simply re-
categorizing functions and funds in a shell game of sorts, what staff 
layers are being removed and what subordinate commands or middle 
echelons are being eliminated to reduce redundancies, overlap and 
overhead?
    Secretary Westphal. The Army has been working for the past several 
years to rebalance our forces and to reform our business practices. We 
have initiated Capability Portfolio Reviews (CPR), with the initial 
focus on materiel portfolios, to garner efficiencies while 
simultaneously reducing redundancies. Having completed reviews of the 
materiel portfolios, we are now reviewing specific non-materiel areas, 
such as Workforce Composition, Training, Installations and Information 
Technology. As we complete these additional CPRs, we will gain a 
comprehensive and thorough picture of our Army's requirements and 
priorities. These reviews will allow us to identify efficiencies and 
reinvest the savings in higher priority warfighting needs and 
modernization efforts that hedge against future threats. The results of 
these reviews will assist us in determining where to make reductions 
and how to apply those savings towards our forces and modernization 
programs.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. What are the causes for 
delays in the civilian authorization process and how can such delays be 
minimized? If this is a problem only for some components, why?
    Secretary Westphal. It can take some time to execute the transition 
from contractor to civilian performance of a function. Once a candidate 
for in-sourcing is identified, mission and workload needs to be 
analyzed and the new civilian position must be classified. Civilian 
replacements for contractors can be hired in advance of an actual 
authorization being documented.
    However, in the Army, civilian authorizations are locked with each 
budget submission in a centralized documentation process to ensure 
dollars are linked to authorizations. We continue to evaluate options 
on how to address this issue.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. Is it the Department's 
policy or the policy of the military departments to ``lock'' the 
personnel authorization levels until the next budget cycle, 
notwithstanding changes in workload that may occur, even if this 
results in either ``over-hires'' or hiring additional contractors to 
meet workload changes? What challenges does this present in terms of 
efficient management of its workforce, particularly with respect to the 
imperative to right-size the civilian workforce?
    Secretary Westphal. In the Army, civilian authorizations are locked 
with each budget submission in a centralized documentation process to 
ensure dollars are linked to authorizations. Out of cycle adjustments 
to requirements (not authorizations) are allowed only in the year of 
execution. Civilian replacements for contractors can be hired in 
advance of an actual authorization being documented. This lag in 
documentation results in ``over-hires'' until the documentation is 
processed in the next budget cycle. Additionally, when new requirements 
are evaluated based on changes in workload and mission, civilian over-
hires may result until the documentation catches up, provided there is 
available funding. Challenges remain in managing the right mix of 
civilian positions when there is a change in requirements, mission or 
workload outside of the normal budget cycle. We continue to evaluate 
options on how to address this issue.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. Why has the Department (or the military departments) taken no 
meaningful steps to implement Section 803 and to improve its strategic 
sourcing decisions for contract services?
    Secretary Work. The Department of the Navy (DON) continues to make 
strategic sourcing decisions throughout the DON to balance the Total 
Force while ensuring that critical ``in-house'' capabilities are 
performed by government personnel where necessary. The objective is to 
ensure the appropriate mix of military, civilian, and contractor 
support to perform its functions; rebuild internal capabilities to 
enhance control of the DON's mission and operations; and reduce 
workforce costs as appropriate. The DON is also identifying 
opportunities to in-source functions that can be performed more cost 
effectively by government personnel. DON continues to work with the 
Office of the Secretary of Defense to implement Section 803 and improve 
strategic sourcing decision making.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. How can the Department and the military departments exercise 
appropriate stewardship over its service contractor dollars (which have 
more than doubled, if not tripled, since 2000) if it does not make 
strategic sourcing decisions through the program and budget process?
    Secretary Work. Strategic sourcing decisions are being made 
throughout the Department of the Navy (DON) to balance the Total Force 
while ensuring that critical ``in-house'' capabilities are performed by 
government personnel where necessary. The DON's goal is to ensure the 
appropriate mix of military, civilian, and contractor support to 
perform its functions; rebuild internal capabilities to enhance control 
of the DON's mission and operations; and reduce workforce costs as 
appropriate. Operational risk will be reduced by in-sourcing functions 
that are closely associated with the performance of inherently 
governmental functions and critical to the readiness and workforce 
management needs of the DON. Additionally, the DON is looking for 
opportunities to in-source functions that can be performed more cost 
effectively by government personnel.
    Mr. Ortiz. For purposes of the Defense Secretary's overhead 
reductions, how do the Department and each military department define 
``overhead''? Does it include all civilian employees, including those 
who work in depots, arsenals, and installations? Does it include 
contractors? If not, will reductions in overhead simply lead to more 
contracting out? Without Section 803 being implemented, how can 
contractors be considered for purposes of overhead reductions?
    Secretary Work. The Department of the Navy is closely working with 
the Department of Defense staff to ensure all understand a common 
definition of ``overhead'' and what functions/employees should be 
included. This will be clearly articulated in our FY 2012 President's 
Budget submission.
    Mr. Ortiz. Given the Secretary of Defense's May 8 speech on defense 
spending, what is each Department's methodology regarding combining its 
functions and realigning or reducing resources to achieve efficiencies 
in overhead, support, and non-mission areas? In lieu of simply re-
categorizing functions and funds in a shell game of sorts, what staff 
layers are being removed and what subordinate commands or middle 
echelons are being eliminated to reduce redundancies, overlap and 
overhead?
    Secretary Work. The Department of the Navy is closely working with 
the Department of Defense staff to ensure we have properly combined/
realigned functions and can achieve efficiencies. This will be clearly 
articulated in our FY 2012 President's Budget submission.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. What are the causes for 
delays in the civilian authorization process and how can such delays be 
minimized? If this is a problem only for some components, why?
    Secretary Work. There are a number of reasons why Department of 
Navy (DoN) civilian manpower requirements may not be authorized for 
fill, including funding shortfalls and temporary impediments to 
acquiring DoN civilians. DoN activities are funded, and positions 
filled, consistent with mission priorities, budget constraints, and 
Congressional direction. This is consistent with 10 U.S.C. Sec. 129, 
which states that the civilian personnel of the DoD shall be managed 
solely on the basis of and consistent with (1) the workload required to 
carry out the function and (2) the funds made available to the 
department for that fiscal year. Delays in filling positions can occur 
for a variety of reasons such as the volume of staffing requests in the 
queue, the time it takes hiring managers to make selections, the lack 
of sufficient qualified candidates available, the level of security 
clearances required, and similar administrative impediments. These 
types of delays could be experienced by any of the DoN activities.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. Is it the Department's 
policy or the policy of the military departments to ``lock'' the 
personnel authorization levels until the next budget cycle, 
notwithstanding changes in workload that may occur, even if this 
results in either ``over-hires'' or hiring additional contractors to 
meet workload changes? What challenges does this present in terms of 
efficient management of its workforce, particularly with respect to the 
imperative to right-size the civilian workforce?
    Secretary Work. Consistent with 10 U.S.C. Sec. 129(a), the DoN is 
required to manage the civilian workforce solely on the basis of and 
consistent with (1) the workload required to carry out the function for 
a fiscal year and (2) the funds made available to the department for 
that fiscal year. In addition, 10 U.S.C. 129(d) requires the Department 
of Defense to ensure that civilians are employed in the numbers 
necessary to carry out the functions within the budget activity for 
which the funds are provided for that fiscal year. Accordingly, DoN 
does not ``lock'' personnel databases at the end of the budget process. 
This flexibility is evidenced in our Departmental experience in the 
most recent fiscal year. The budget request for FY 2009 projected a 
full time equivalent level of 190K. For various reasons, local 
activities executed to a level of 197K for that year.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. Why has the Department (or the military departments) taken no 
meaningful steps to implement Section 803 and to improve its strategic 
sourcing decisions for contract services?
    Secretary Conaton. The Air Force is working closely with the Office 
of the Secretary of Defense (OSD) Comptroller to develop the 
appropriate mechanisms to meet the requirements of FY10 National 
Defense Authorization Act Section 803. We are complying with Title 10, 
Sec 2330a and developing an annual inventory of contracts for services 
that we will use as the baseline for our strategic sourcing decisions. 
Our Air Force functional managers and commanders in the field will use 
this to identify where we are using contract services. OSD has 
established directives, that when taken in concert with this inventory, 
will result in a proper mix of organic military, civilian, and 
contractor resources needed to complete our missions--within 
Congressional, OSD, and Air Force guidelines.
    Mr. Ortiz. The House Armed Services Committee believes compliance 
with Section 803 of the FY 2010 National Defense Authorization Act will 
provide the Congress with much greater clarity on procurement of 
contractor services. The failure to comply is a source of great 
concern. How can the Department and the military departments exercise 
appropriate stewardship over its service contractor dollars (which have 
more than doubled, if not tripled, since 2000) if it does not make 
strategic sourcing decisions through the program and budget process?
    Secretary Conaton. The Air Force built its FY12 Program Objective 
Memorandum (POM) based on our current and projected service contract 
expenditures, taking into account the programmed in-sourcing 
conversions needed to complete our mission and comply with appropriate 
Congressional, Office of the Secretary of Defense (OSD), and Air Force 
guidelines. The Air Force POM is built meeting the intent of Title 10 
Section 235 and we will work with our counterparts in OSD to ensure 
that we comply with service contract reporting requirements as mandated 
for the President's Budget submission.
    Mr. Ortiz. For purposes of the Defense Secretary's overhead 
reductions, how do the Department and each military department define 
``overhead''? Does it include all civilian employees, including those 
who work in depots, arsenals, and installations? Does it include 
contractors? If not, will reductions in overhead simply lead to more 
contracting out? Without Section 803 being implemented, how can 
contractors be considered for purposes of overhead reductions?
    Secretary Conaton. We use the term ``overhead'' to refer to those 
functions that are not directly involved in delivery of mission tasks. 
Maintenance specialists on the flight line or a contractor we have 
engaged to write software code for a system are clear examples of 
activities that are not ``overhead.'' Administrative specialists at 
major headquarters (e.g. administrative assistants to senior staff) and 
management support staffs within program offices are examples of 
``overhead.'' In this discussion, overhead manpower includes military, 
government civilians, and contractor personnel, so the issue embraces 
consideration of the entire workforce. We look at total manpower and 
cost associated with the overhead work (military, civilian and 
contractor) to identify opportunities for efficiencies and to shift 
resources from overhead to direct support of Air Force core functions 
and work. We are looking to eliminate unnecessary or duplicative 
overhead activities that will allow us to realign the associated 
resources and personnel (whether government or contract) to readiness 
and force structure priorities. Finally, it is clear that some amount 
of overhead is necessary to allow the organization to operate; the 
question is how much is enough.
    The Air Force reviewed the full spectrum of operations, from base-
level to headquarters functions, to identify efficiencies and reduce 
overhead costs. As indicated above, this includes total force support 
(military, civilian, and contractors). As part of the Air Force's plan 
to meet the Secretary of Defense's guidance on improving Department of 
Defense operations, the Air Force is identifying headquarters and 
manpower efficiency initiatives to right size organizational 
structures, optimize the civilian workforce, re-purpose military 
manpower for higher priority needs, and reduce contractor support where 
appropriate.
    Within our Air Force acquisition programs, we are reviewing 
contractor overhead (i.e., charges associated with weapon systems 
development other than direct labor on the project) to bring those 
costs to more reasonable levels. We are addressing these acquisition-
system contract overhead charges in concert with the Office of the 
Secretary of Defense and other Services, as well as addressing these 
charges in program-specific contract negotiations.
    Per our other reply on Section 803, we are working with the Office 
of Secretary of Defense Comptroller on the mechanisms for reporting 
contractor services. This reporting will help our efforts to baseline 
contract services and aid us in identifying contract services as part 
of our overall effort to identify efficiencies and reduce overhead 
costs.
    Our objective is to increase the buying power of our Air Force 
dollar. Better tracking of our expenditures and costs is a key element 
of making this effort successful.
    Mr. Ortiz. Given the Secretary of Defense's May 8 speech on defense 
spending, what is each Department's methodology regarding combining its 
functions and realigning or reducing resources to achieve efficiencies 
in overhead, support, and non-mission areas? In lieu of simply re-
categorizing functions and funds in a shell game of sorts, what staff 
layers are being removed and what subordinate commands or middle 
echelons are being eliminated to reduce redundancies, overlap and 
overhead?
    Secretary Conaton. We have looked across the Air Force to identify 
practices and mission areas that could and should be streamlined, to 
include installation support activities, general services, strategic 
sourcing and identification of redundant management at all levels of 
the organization. We are applying business process re-engineering 
approaches (such as lean and six sigma) to review these activities to 
ensure we correctly identify the areas to change. For any efficiency 
area, we are assigning a senior Air Force leader, by name, to direct 
the activity and be accountable for outcomes. We are setting in place 
audit functions to ensure that we track the movement of resources and 
personnel from the targeted efficiency areas to the areas of new 
investment: readiness and direct mission support. Progress on the 
efficiency work and the results of audit outcomes will be reviewed 
quarterly by the Vice Chief of Staff and me and we will be accountable 
to the Secretary and Chief of Staff for results.
    Accepting the Secretary of the Defense's efficiency challenge, the 
Air Force examined its full spectrum of operations with the goal to 
preserve combat capability and full support to combatant commanders, 
joint operations and Airmen, while operating more efficiently. The Air 
Force has identified areas for improved performance at less cost. The 
areas we focused on are those infrastructure and management activities/
costs that support Air Force core functions. The recommendations 
provided to the Department of Defense (DoD) are pre-decisional and have 
not yet been reviewed and approved by the Office of the Secretary of 
Defense based on the FY12 Program Budget Review. The Air Force review 
has included areas covered in the public comments made by Secretary 
Gates in the submission provided to DoD such as reducing the number of 
General Officers and their supporting staffs as well as the number of 
Senior Executive Service (SES) positions. The Air Force looks forward 
to discussing the specific recommendations once approved and submitted 
as part of the FY12 President's Budget.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. What are the causes for 
delays in the civilian authorization process and how can such delays be 
minimized? If this is a problem only for some components, why?
    Secretary Conaton. When the Air Force determines that work 
currently being performed by contractors ``should be performed by Air 
Force civilian employees'' for an inherently governmental reason, the 
Air Force uses the flexibilities granted in the Authorization and 
Appropriation Acts to make corrections as quickly as possible. For 
larger actions that cannot be accommodated within the flexibilities 
granted in the Authorization and Appropriation Acts, the Air Force 
programs and budgets for the workforce change in the next Presidential 
Budget submission to Congress. The prime example of a large action 
requiring program and budget adjustments via the Presidential Budget 
submission was conversion of the Air Force Expeditionary Center 
training support contract at Joint Base McGuire-Dix-Lakehurst and Scott 
AFB when we moved from a contractor workforce to Air Force civilian 
employees based on Business Case Analysis showing the Air Force 
civilian workforce was more economical. Currently, once we are 
authorized a civilian position and we identify the vacancy, depending 
on the type of job and location it takes an average of 120 days or less 
to complete the hiring action.
    Mr. Ortiz. The House Armed Services Committee understands that it 
can take as long as two years in some components between the initial 
identification of a function that should be performed by civilian 
employees and the documentation for the authorizations for the in-house 
personnel necessary to perform that function. Is it the Department's 
policy or the policy of the military departments to ``lock'' the 
personnel authorization levels until the next budget cycle, 
notwithstanding changes in workload that may occur, even if this 
results in either ``over-hires'' or hiring additional contractors to 
meet workload changes? What challenges does this present in terms of 
efficient management of its workforce, particularly with respect to the 
imperative to right-size the civilian workforce?
    Secretary Conaton. The Air Force does not lock the installation 
level manpower books. We maintain a dynamic manpower document that 
Commanders can propose changes to in real time consistent with 
available manpower resources in order to right size the force 
consistent with the dynamic mission environment. This allows a more 
effective and efficient use of the Manpower resource consistent with 
the flexibilities provided to the Air Force in the Authorization and 
Appropriation Acts.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. MILLER
    Mr. Miller. Mr. Westphal, as you know in-sourcing has been a topic 
of interest for the Services, this committee, and our constituents back 
home. Giving credence to this concern of ours, we passed amendments to 
the FY11 NDAA requesting greater scrutiny of in-sourcing jobs within 
DoD. Do you believe that DoD has the proper system in place which 
ensures that DoD is not summarily replacing jobs based on arbitrary 
goals? Please explain.
    Secretary Westphal. The FY11 National Defense Authorization Act 
(NDAA) language specifically requires the Department to comply with 
statutes regarding in-sourcing that were enacted since 2008 and that 
prohibit arbitrary budgetary quotas favoring or disfavoring in-
sourcing. I believe that the Army has the proper system in place to 
ensure we are not summarily replacing jobs based on arbitrary goals. 
Within the Army, we have taken significant steps (via the Panel for 
Documenting Contractors) to implement the contractor inventory review 
process required by the FY08 NDAA Section 807. This review identifies 
appropriate functions to in-source, focusing on functions that might be 
inherently governmental or are unauthorized personal services. The Army 
has taken steps to implement the FY10 NDAA Section 803 to ensure that 
initiatives to in-source, or increase or decrease contract services 
through the budget process, are appropriately justified. Our decisions 
are based on statutory criteria limiting contract work to bona fide 
commercial functions, and government performance to bona fide functions 
that are inherently governmental in nature.
    Mr. Miller. Mr. Work, you mentioned in-sourcing in your statement 
and its importance in the need to promote efficiency and verify mission 
requirements. What methodology and/or standards is the Navy using to 
make its decisions on the jobs it decides to in-source?
    Secretary Work. The Department of Navy's (DON) overarching approach 
for in-sourcing focuses on shaping the workforce to: 1) strengthen core 
workforce capabilities and create personnel and career pipelines; 2) 
improve contract technical requirements and oversight; and 3) balance 
our entry/journey/senior workforce. This calls for a careful analysis 
of the current capability of our total force along with immediate and 
future mission requirements. The DON in-sourcing initiative requires a 
review of existing contracted services in order to make appropriate, 
timely, and well-reasoned in-sourcing decisions. In-sourcing must not 
be approached from the standpoint of a one-for-one replacement of the 
functions currently performed by contractors. Rather, in-sourcing 
requires a thoughtful assessment of current and future mission 
requirements and the right workforce capabilities to carry out the 
mission. In-sourcing is a tool to shape our workforce.
    Mr. Miller. Additionally, in your statement you stated ``Our 
objective is to in-source services, not the individuals performing the 
services.'' This concerns me because it seems like an admission that 
part of the in-sourcing effort relates not to ensuring cost efficiency 
to the taxpayer, but rather an effort to grow the size of the Federal 
Government. Is this assessment of mine incorrect? If so, please explain 
why.
    Secretary Work. The Department of the Navy (DON) is not in-sourcing 
for the sake of in-sourcing; nor are we in-sourcing to grow the size of 
the Federal Government. In-sourcing is being used to rebalance the 
Total Force and restore critical ``in-house'' capabilities where 
necessary. The DON's goal is to ensure the appropriate mix of military, 
civilian, and contractor support to perform its functions; rebuild 
internal capabilities to enhance control of the DON's mission and 
operations; and reduce workforce costs as appropriate. Thus, we will 
reduce operational risk by in-sourcing functions that are closely 
associated with the performance of inherently governmental functions 
and critical to the readiness and workforce management needs of the 
DON. Additionally, the DON is looking for opportunities to in-source 
functions that can be performed more cost effectively by government 
personnel.
    Mr. Miller. In 2009 SecDef Gates announced that 35,000 high skill 
workers would be hired over the next several years, half of which would 
come from in-sourcing currently contracted work. A recent Washington 
Post article (Soloway, 19 July 2010) noted that about two-thirds of the 
positions identified to date for in-sourcing at DoD fall outside of the 
skills Secretary Gates identified. The article goes onto state that 
this well-intended initiative is ``evolving into a quota-driven numbers 
game.'' Is this true? If so, how much do we ensure that we are making 
legitimate cost saving in-sourcing decisions? If not, please explain.
    Secretary Conaton. The Air Force views in-sourcing as an effective 
tool for determining the best workforce mix to accomplish our missions. 
In-sourcing guidance developed by the Office of the Under Secretary of 
Defense for Personnel and Readiness was issued on May 28, 2009. This 
guidance outlines a systematic, well-reasoned, and strategic approach 
to ensure in-sourcing decisions are analytically based and fiscally 
informed. If contract workload is found to be inherently governmental, 
experiencing contract administration problems, providing unauthorized 
personnel services, or otherwise exempt from contracting under 
Department of Defense (DoD) Instruction 1100.22, Guidance for 
Determining Workforce Mix, the function must be in-sourced regardless 
of cost. If the function does not fit one of the above mentioned 
criteria, a cost analysis is required to determine the most cost 
effective means of performing the function. This cost analysis is 
conducted in accordance with the Office of the Secretary of Defense 
(OSD) Directive Type Memorandum (DTM) 09-007, issued January 29, 2010.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. TURNER
    Mr. Turner. Ms. McGrath, I noted in your testimony the longstanding 
goal and recent renewed emphasis on streamlining the departments 
acquisition processes relative to IT investments. I have also noted in 
your testimony and that of others testifying here today, there are a 
number of programs aimed at dramatically improving efficiencies, yet I 
remain very concerned that in our zeal to provide oversight, the line 
has been crossed and critical programs that might reduce wasteful 
inventory build ups or dramatically improve efficiencies are being 
substantially delayed. Specifically what can DoD do to enable these 
important programs to get fielded sooner so the Department can begin 
realizing these savings?
    Ms. McGrath. The Department is working to improve the speed of 
developing and fielding IT systems through creation of alternative 
acquisition approaches for IT that include governance structures and 
oversight procedures appropriately tailored to the unique requirements 
of IT programs. The Deputy Secretary of Defense created an IT task 
force as part of the Department's response to Section 804 of the Fiscal 
Year 2010 National Defense Authorization Act to address this issue. 
Given the unique nature of IT implementations, we anticipate the new IT 
acquisition process will differ significantly from the traditional 
weapons system acquisition process. As the IT task force concludes its 
work, existing laws may need to change to ensure success of the new 
process and we will work with Congress as necessary to ensure success. 
Within the Business Mission Area, a major initiative to rapidly deliver 
capability and integrate governance is the Business Capability 
Lifecycle (BCL). BCL is a framework tailored to rapidly deliver 
business IT capabilities within the Department, by consolidating 
oversight requirements (i.e., funding, requirements and acquisition 
oversight) into one structure while streamlining documentation 
requirements.
    Mr. Turner. Secretary Conaton, you mentioned the role of ECSS in 
the AF's transformation of its Information Technology and Business 
Processes in support of enterprise goals and outcomes of eLog 21. I 
support your overall strategy with regard to eLog 21, the 
transformation of end to end logistics and programs like ECSS as well, 
but I am very concerned about the AF and DoD's ability to execute or 
field these systems. What are we doing, both at senior levels in the AF 
and DoD to field these systems as quickly as possible to begin 
realizing the savings goals outlined by Secretary Gates?
    Secretary Conaton. Our objective is to field these systems as 
quickly as possible to achieve the needed business benefits and 
savings. To meet this challenge we have undertaken a major 
restructuring of both the management oversight and structure of the 
Expeditionary Combat Support System (ECSS) program. Specifically, since 
June 2009, the Chief of Staff of the Air Force conducts quarterly 
reviews of this program. In my role as the Chief Management Officer I 
have taken on greater responsibility to provide more oversight in 
conjunction with the Chief Information Officer and the Service 
Acquisition Executive. This expanded oversight is intended to keep the 
program flowing, and to instill accountability in the acquisition and 
functional sponsors. To complement this expanded senior level oversight 
the Air Force also elevated the Program Manager to a General Officer 
and assigned a dedicated Program Executive Officer to ensure a truly 
streamlined acquisition oversight and reporting chain so that issues 
and roadblocks are raised sooner and dealt with quickly.
    At the program level we have done a number of things to reduce 
risk, accelerate the program, and improve the probability of success. 
We have restructured the program schedule and contracts to focus on 
implementing pilots which allow us to field them more quickly with less 
overall risk. Delivering smaller chunks of content more rapidly is 
consistent with best commercial practices. In fact this approach has 
already proven successful with the fielding in July 2010 of the first 
pilot at Hanscom AFB. We have also implemented improved program 
metrics, schedule tracking, risk management, and internal controls to 
better align and manage risk. These are consistent with the practices 
that the Government Accounting Office (GAO) has been recommending to 
the Department of Defense (DoD). In addition, we have also increased 
both the overall size and the skills of the Air Force team managing the 
program. We have recruited personnel with commercial Enterprise 
Resources Planning experience to improve the competency of the team and 
conducted a number of independent expert reviews to ensure that we are 
not repeating the mistakes made on other programs both inside and 
outside the DoD. All of these and other changes have been put into 
place to ensure that we are moving forward as fast as prudently 
possible to field ECSS. All of these improvements will be discussed in 
more detail as we prepare and submit a Section 804 report to Congress 
later this year.
    Mr. Turner. Secretary Conaton, you mentioned the role of ECSS in 
the AF's transformation of its Information Technology and Business 
processes in support of enterprise goals and outcomes of eLog 21. Most 
believe this transformation is similar to the industry best practices 
of investment in a single Enterprise Resource Planning software. A 
single IT footprint and associated infrastructure is more cost 
effective and efficient rather than being victimized by outdated and 
disconnected legacy systems which have become expensive and unreliable. 
I agree with your testimony that the program will indeed aid the AF in 
reducing wasteful inventory build ups, and thus has the potential to 
save billions. Please describe the potential benefits of ECSS as a 
fulcrum for eLog 21 and discuss its other merits?
    Secretary Conaton. Once fully implemented, the Expeditionary Combat 
Support System (ECSS) will transform and standardize Air Force 
logistics and financial processes using commercial best practices. It 
will standardize business processes through an integrated software 
suite, new personnel roles and enterprise visibility of resources and 
assets. It will retire approximately 240 legacy data systems and will 
strengthen financial transparency/accountability. ECSS will provide 100 
percent asset visibility and accountability by utilizing streamlined 
inventory management processes, prioritized maintenance processes, 
leveraging capacity and increasing equipment availability. ECSS will 
simplify expeditionary force deployment and operations and radically 
improve warfighter supply chain support.
    By adopting an enterprise mentality, ECSS enables the Air Force to 
have greater effectiveness via improved supply chain planning and 
leveraging assets and capability across the total force. Greater 
visibility in the transportation pipeline will enable the Air Force to 
maintain 100 percent total asset visibility of supplies and equipment 
to support worldwide mission requirements. ECSS in partnership with the 
Defense Enterprise Accounting and Management System (DEAMS) is a vital, 
initial step toward delivering required capability to achieve Chief 
Financial Officer (CFO) Act compliance. Additionally the predictive 
maintenance capability will help the Air Force depots prioritize 
workload allowing personnel to focus on key maintenance activities and 
also reduce long lead ordering for material, and improve the overall 
weapon system maintenance throughput.
    Mr. Turner. The application of technology and education in 
developing our future Air Force leaders has been crucial in ensuring 
our technological edge against attackers, aggressors, and adversaries 
and future dominance in the air, space, and cyberspace--how does the 
DoD ensure that short-sighted cuts in R&D and education don't have 
long-term consequences which cripple our future military capabilities 
and compromise our national defense?
    Secretary Conaton. The Air Force will maintain our total dollars 
invested in Science and Technology (S&T) and education programs, 
including Science, Technology, Engineering and Mathematics (STEM) 
programs. Within our programs, we will eliminate unnecessary work and 
overhead to shift more resources into S&T program content and improved 
delivery of training and education to our Airmen.
    We use our Air Force Corporate Structure and other Air Force 
organizations--including the Scientific Advisory Board (SAB), the Chief 
Scientist, and his Technology Horizons study--to achieve a balanced S&T 
program that evaluates near-term requirements with long-term 
investments. We have also established an S&T strategic planning 
division and a special study Tiger Team to define governance and 
prioritization of important technology demonstrations in support of Air 
Force strategic priorities. We have submitted to the Office of the 
Secretary of Defense the Air Force FY12 budget, and we look forward to 
future discussions with members of the House Armed Services Committee 
after the FY12 President's Budget is submitted.
    Mr. Turner. The House IMPROVE ACT, (H.R. 5013) which I supported 
and House approved this April may result in savings up to $135B, 
included the Turner Amendment, which was unanimously adopted, and 
directed that best practices in Acquisition processes be 
institutionalized via education and curriculum. How important is the 
role of education in reducing costs in Acquisitions programs and what 
are some future initiatives which would help in the financial 
management of acquisition lifecycles?
    Secretary Conaton. Education and training are vital to reducing 
costs in acquisition programs as well as revitalizing our acquisition 
workforce--a key element is our Acquisition Improvement Plan (AIP). The 
AIP builds on lessons learned from past shortfalls in our procurement 
processes; but more importantly, it establishes five initiatives--
revitalizing our acquisition workforce; improving the requirements 
generation process; instilling budget and financial discipline; 
improving major systems source selections; and establishing clear lines 
of authority and accountability within acquisition organizations. In 
completing these initiatives to ensure rigor, reliability, and 
transparency across the Air Force acquisition enterprise, we realize 
one thing is certain: a highly competent workforce is essential to 
achieving acquisition excellence. Therefore, developing a capable 
workforce requires finding the right people with the right attitude and 
then arming them with the education and training to ensure they are 
competent to perform their jobs. One of the areas we are currently 
focusing on is giving Program Managers the training and tools needed to 
effectively manage their program's schedule and baseline. Ultimately, 
these acquisition professionals will be able to build incremental 
acquisition strategies that have a stronger probability of delivering 
warfighting systems sooner, on planned schedules and within predicted 
budgets.
    Because our workforce is so important, we are synchronizing their 
education and training with the most efficient processes, in effective 
organizational constructs and through tailored career paths. Our senior 
financial management professionals are fully engaged in the Office of 
the Secretary of Defense Business--Cost Estimating and Financial 
Management Functional Integrated Process Team (FIPT); bringing an Air 
Force perspective to these FIPTs which focus on certification standards 
and associated training curriculum requirements. We are establishing 
ways to improve the delivery and quality of courses and pursuing an 
opportunity to leverage a distance cost estimating master's degree 
program. Tiger teams are also in place reviewing financial management 
and acquisition roles, responsibilities, organizational alignments, 
etc. to enhance acquisition program performance.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. LARSEN
    Mr. Larsen. Do you believe that using Item Unique Identification 
(IUID) technology will help the Department of Defense do a better job 
managing its supply chain, which has been placed on the high-risk list 
by the Government Accountability Office?
    Ms. McGrath. Item Unique Identification (IUID) is one piece of the 
Department's overall effort to achieve improvement in the area of 
Supply Chain Management. IUID can provide a standard approach to 
Serialized Item Management for the Department's most critical and 
sensitive items and use a standard machine-readable mark for all IUID-
eligible items procured by DoD.
    Mr. Larsen. Has your office prepared a business case analysis on 
the benefits of IUID for both new and legacy items? If so, what were 
the key findings of these analyses?
    Ms. McGrath. The Office of the Deputy Chief Management Officer has 
not prepared a business case analysis on the benefits of IUID for new 
and legacy items. However, a cost benefit analysis published by the 
Under Secretary of Defense for Acquisition, Technology and Logistics in 
March 2005 discussed an array of industry experiences with item marking 
technologies and potential sources of savings, but did not attempt to 
determine a precise return on investment due to the lack of data on the 
costs of existing processes.
    Mr. Larsen. What goals have you set for the Department regarding 
the use of IUID technology, and what steps will you take to achieve 
those goals?
    Ms. McGrath. The Office of the Deputy Chief Management Officer has 
not set specific goals for the Department regarding the use of IUID 
technology. However, the Department is driving implementation of IUID 
technology through our defense business system investment management 
governance framework. As relevant defense business systems move through 
the Investment Review Board/Defense Business Systems Management 
Committee process for certification and approval of their funding, 
conditions are levied against them to achieve technology capability 
with IUID. To date, 46 systems have had these conditions levied against 
them, including both Enterprise Resource Planning Systems and other 
defense business systems.
    Mr. Larsen. What efforts are being made at the Department of 
Defense and Defense Contract Management Agency to assist defense 
suppliers and the Services in meeting IUID policy adoption and 
implementation goals?
    Ms. McGrath. Under the leadership of the Under Secretary of Defense 
for Acquisition, Technology and Logistics, DoD has undertaken a wide 
variety of Web-based and face-to-face training efforts, as well as 
dissemination of informational newsletters, videos and an IUID quality 
assurance guide. Many of these efforts, developed and administered by a 
combination of the Defense Acquisition University, Defense Contract 
Management Agency, and Defense Procurement Acquisition Policy, included 
a broad user base of both DoD employees, DoD suppliers and other 
representatives from industry. DoD also participates in a standing 
industry liaison group sponsored by the Aerospace Industries 
Association.
    Mr. Larsen. Does DoD contract writing software automatically 
include IUID clause language on items being procured and meeting IUID 
policy threshold requirements?
    Ms. McGrath. For the Standard Procurement System, the clause is 
mandatory and requires contracting officer override to remove. For 
other contract writing systems, DoD measures compliance with IUID 
policy through sampling and review of contract language.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. KISSELL
    Mr. Kissell. Question for the Honorable Elizabeth McGrath, Deputy 
Chief Management Officer Department of Defense, the Honorable Joseph 
Westfall, Under Secretary of the Army, the Honorable Robert O. Work, 
Under Secretary of the Navy, the Honorable Erin Conaton, Under 
Secretary of the Air Force: ``During the hearing each of the witnesses 
spoke about their Service's efforts to adhere to the Secretary's quest 
to find efficiencies within the Department of Defense and to provide 
the savings to the soldiers, sailors, airmen, and marines. Who will 
decide how the money saved with a more efficient process is spent?''
    Ms. McGrath. Ultimately, Congress will decide how the Department's 
savings will be applied to the Department of Defense and the Federal 
Government after the President submits the budget request for Fiscal 
Year 2012. To develop budget request recommendations to the President, 
each of the Defense Agencies, Military Departments and Field Activities 
received guidance from the Secretary consistent with his speech on May 
8th. The Secretary has urged the Components to seek efficiency in their 
headquarters and administrative functions, support activities and other 
overhead and apply those savings to the warfighter. That is, he asked 
the Components to transfer savings from bureaucratic ``tail'' to 
warfighting ``tooth.''
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. OWENS
    Mr. Owens. Earlier this year, Congress passed the IMPROVE Act, a 
bill to overhaul defense acquisition spending with the hopes of saving 
upwards of $135 billion in taxpayer funding. Do you see this effort as 
also having a positive effect on the Department's efforts to address 
DOD specific items on the GAO's high-risk list, such as Weapon Systems 
Acquisition or Financial Management?
    Ms. McGrath. The GAO High Risk Area of Weapon Systems Acquisition 
highlights that DoD is not receiving expected returns on its 
investments in weapon systems; programs continue to take longer, cost 
more and deliver fewer quantities and capabilities than originally 
planned; and processes for identifying warfighter needs, allocating 
resources and developing and procuring weapon systems are fragmented 
and broken. The IMPROVE Act's sections on the performance of the 
defense acquisition system and workforce directly address these issues 
and help to strengthen many efforts already underway within the 
Department. As the Department's Deputy Chief Management Officer, I 
would highlight the IMPROVE Act's focus on performance management as 
extremely important. It is my view that when performance measures are 
appropriate and well defined, progress is made and people can be held 
accountable for results. They will also enable the Department's 
acquisition leaders to make better informed decisions with more 
complete information.
    With regard to the GAO High Risk Area of Financial Management, the 
IMPROVE Act introduced new tools into the Department's toolbox to help 
incentivize achievement of auditability by 2017. The Department agrees 
with the intent of the legislation emphasizing that accountability is a 
key aspect of achieving auditability. Prior to the IMPROVE Act the 
Department had a number of tools to incentivize behavior. While it is 
still too early to say exactly how the Department will utilize these 
new tools, I believe the Department's current approach of focusing 
first on improving quality, accuracy and reliability of the financial 
and asset information used every day to manage the Department is a good 
approach that lays the foundation for achieving auditability with clear 
interim goals over the near and mid-term.
    Mr. Owens. Are you satisfied with the progress that has been made 
in achieving full auditability so far? What barriers remain to 
achieving this goal, and is it possible the Department could hit its 
mark in advance of the 2017 deadline?
    Ms. McGrath. Achieving auditability is not an easy task for the 
Department. However, as the Deputy Chief Management Officer, I believe 
the current approach put in place by the Under Secretary of Defense 
(Comptroller) is a sound one. The Department is focusing first on 
improving the quality, accuracy and reliability of the financial and 
asset information used every day to manage the Department with clear 
near and mid-term goals. This approach lays the foundation for 
achieving auditability in the most cost effective way, while 
simultaneously improving day-to-day management of our financial 
enterprise. The Department also created a strong governance framework 
to manage its audit readiness efforts and dedicated the necessary 
resources to the effort to achieve success.
    However, achieving auditability is also dependent on a number of 
factors--such as successful implementation of many defense business 
systems, including Enterprise Resource Planning Systems--that make it 
unlikely the Department will meet its objective in advance of the 2017 
deadline.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. CRITZ
    Mr. Critz. Do all service branches and the Department currently 
have the necessary financial and personnel resources to perform the 
analysis to identify the $7 billion in savings called for in FY12 by 
Sec. Gates? Will any of the work to identify these savings need to be 
performed by contractors?
    Ms. McGrath. The Defense Agencies and Military Departments have the 
necessary financial and personnel resources to develop their planning, 
programming and budgeting efforts for submission of the President's 
budget request for Fiscal Year 2012. These submissions will reflect the 
savings called for by the Secretary. While inherently governmental work 
is performed by government employees, contractor involvement in the 
planning, programming and budgeting process varies by Component.
    Mr. Critz. What is the plan for the services to identify savings 
within their branches? Will it be a top-down approach with the 
comptrollers or Chief Management Officers (CMO) identifying areas to 
cut back? Or, will it be a bottom-up approach with each agency and unit 
tasked with finding savings? If it is a bottom-up approach, how will 
the CMO's ensure cooperation throughout the service?
    Ms. McGrath. The Secretary of Defense provided savings and 
efficiency goals to each of the Defense Agencies, Military Departments 
and Combatant Commanders, but he allowed them broad discretion on how 
to reach these goals. The Secretary particularly urged Components to 
seek efficiency in their headquarters and administrative functions, 
support activities and other overhead and apply those savings to the 
warfighter. That is, he asked Components to transfer savings from 
bureaucratic ``tail'' to warfighting ``tooth.'' Apart from the 
Secretary's broad guidance, Components developed their own methodology 
to achieve these goals. Component efforts to meet the Secretary's goals 
and follow his guidance will be scrutinized as part of the annual 
Department of Defense budget build, i.e. the program review for 
President's Budget 2012.

                                  
