[Senate Hearing 111-1052]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1052

                  THE COST EFFECTIVENESS OF PROCURING
                      WEAPON SYSTEMS IN EXCESS OF
                REQUIREMENTS: CAN WE AFFORD MORE C-17S?

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


                                HEARING

                               before the

                FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT
                   INFORMATION, FEDERAL SERVICES, AND
                  INTERNATIONAL SECURITY SUBCOMMITTEE

                                 of the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                                 of the

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 13, 2010

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/

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








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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

               JOSEPH I. LIEBERMAN, Connecticut, Chairman
CARL LEVIN, Michigan                 SUSAN M. COLLINS, Maine
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
THOMAS R. CARPER, Delaware           SCOTT P. BROWN, Massachusetts
MARK L. PRYOR, Arkansas              JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana          GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
JON TESTER, Montana                  LINDSEY GRAHAM, South Carolina
ROLAND W. BURRIS, Illinois
EDWARD E. KAUFMAN, Delaware

                  Michael L. Alexander, Staff Director
     Brandon L. Milhorn, Minority Staff Director and Chief Counsel
                  Trina Driessnack Tyrer, Chief Clerk
         Patricia R. Hogan, Publications Clerk and GPO Detailee
                                 ------                                

 SUBCOMMITTEE ON FEDERAL FINANCIAL MANAGEMENT, GOVERNMENT INFORMATION, 
              FEDERAL SERVICES, AND INTERNATIONAL SECURITY

                  THOMAS R. CARPER, Delaware, Chairman
CARL LEVIN, Michigan                 JOHN McCAIN, Arizona
DANIEL K. AKAKA, Hawaii              TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas              GEORGE V. VOINOVICH, Ohio
CLAIRE McCASKILL, Missouri           JOHN ENSIGN, Nevada
ROLAND W. BURRIS, Illinois

                    John Kilvington, Staff Director
    Bryan Parker, Staff Director and General Counsel to the Minority
                   Deirdre G. Armstrong, Chief Clerk














                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Carper...............................................     1
    Senator McCain...............................................     5
Prepared statements:
    Senator Carper...............................................    35
    Senator McCain...............................................    44

                               WITNESSES
                         Tuesday, July 13, 2010

Hon. Mike McCord, Principal Deputy Under Secretary of Defense 
  (Comptroller), U.S. Department of Defense and Alan Estevez, 
  Principal Deputy Assistant Secretary of Defense for Logistics 
  and Materiel Readiness, Acquisition, Technology, and Logistics, 
  U.S. Department of Defense.....................................     8
Major General Susan Y. Desjardins, Director, Strategic Plans, 
  Requirements, and Programs, Headquarters Air Mobility Command, 
  U.S. Air Force.................................................     9
Jeremiah Gertler, Specialist in Military Aviation, Congressional 
  Research Service, Library of Congress..........................    22
William L. Greer, Ph.D., Assistant Director, System Evaluation 
  Division, Institute for Defense Analyses.......................    24

                     Alphabetical List of Witnesses

Desjardins, Major General Susan Y.:
    Testimony....................................................     9
    Prepared statement...........................................    49
Estevez, Alan:
    Testimony....................................................     8
    Joint prepared statement with Mr. McCord.....................    45
Gertler, Jeremiah:
    Testimony....................................................    22
    Prepared statement...........................................    53
Greer, William L. Ph.D.:
    Testimony....................................................    24
    Prepared statement...........................................    61
McCord, Hon. Mike:
    Testimony....................................................     8
    Joint prepared statement with Mr. Estevez....................    45

                                APPENDIX

Charts referenced by Senator Carper..............................    37
Letter from the Secretary of Defense to Senator McCain...........    44
Questions and responses for the Record from:
    Mr. McCord...................................................    68
    Mr. Estevez..................................................    76
    General Desjardins...........................................    88

 
    THE COST EFFECTIVENESS OF PROCURING WEAPON SYSTEMS IN EXCESS OF 
                REQUIREMENTS: CAN WE AFFORD MORE C-17S?

                              ----------                              


                         TUESDAY, JULY 13, 2010

                                 U.S. Senate,      
        Subcommittee on Federal Financial Management,      
              Government Information, Federal Services,    
                              and International Security,  
                      of the Committee on Homeland Security
                                        and Governmental Affairs,  
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:31 p.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Thomas R. 
Carper, Chairman of the Subcommittee, presiding.
    Present: Senators Carper and McCain.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. The hearing will come to order.
    Good afternoon, one and all. We are delighted that you are 
here. Thank you for joining us for our first panel and in about 
3 or 4 hours from now the second panel. No, it will not be that 
long.
    Three years ago, this Subcommittee held a hearing on 
strategic airlift that analyzed the cost effectiveness of the 
C-5 Modernization Program. Two years ago, we investigated the 
growing cost overruns of the Department of Defense's major 
weapon systems. Last year, Secretary Gates recommended 
eliminating a handful of expensive weapon systems in order to 
save taxpayer dollars, and Congress largely agreed and cut 
nearly every one of them recommended by the Secretary.
    Last month, Secretary Gates announced that the Pentagon 
will attempt to cut its budget by more than $100 billion over 
the next 5 years. This will not be an easy task, but this 
Subcommittee will continue to identify ways to help Secretary 
Gates and his team to achieve this level of savings. We do so 
because we face a troubling budget outlook. As this chart 
shows,\1\ our yearly budget deficits are currently a little bit 
over $1 trillion, and they are projected to be hundreds of 
billions of dollars over the next few years. Even out to 2014, 
the deficit, which last year was about $1.4 trillion, will have 
been reduced by two-thirds, down to about $462 billion. But 
that is still a lot of money.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 37.
---------------------------------------------------------------------------
    Can we look at the next chart?
    We do not just print money. Some people think we just print 
money. When we run out of money and we want to spend money in 
excess of the monies raised through the Treasury, what we do is 
we borrow it. And if you look at some of our biggest creditors, 
China, almost $1 trillion; Japan, about three-quarters of a 
trillion dollars; United Kingdom, over quarter of a trillion; 
and if you add all those countries that export oil to us, close 
to a quarter of a trillion dollars as well.\1\ That is where 
the money comes from when we spend money that we do not have. 
And we have been spending a lot of it.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 38.
---------------------------------------------------------------------------
    To go back, it is hard to believe, but in the year 2000 and 
I think the fiscal year 2001, we actually balanced our Nation's 
budget, only 9 years ago. And there was actually--I remember 
hearing--I do not know if it was Chairman Alan Greenspan or 
someone else from the Federal Reserve, but someone came in and 
testified before us in 2001. There was concern that we were 
paying down the deficit too quickly and could destabilize the 
economy. Hard to believe. That was 9 years ago. And when you 
look at all of this chart, it did not turn out that way, did 
it?
    One of the reasons why we are having this hearing today is 
to figure out how we can have a little bit less red there in 
that China column and a little less green in that Japan column 
and so forth.
    But our spending levels are at record highs to try as we 
come out of the worst recession since the Great Depression; two 
wars, terrible recession, and it has almost been like having 
two feet on the accelerator to try to get us moving, get the 
economy moving. Now in the months and years to come, it is sort 
of like seeing one foot coming off the accelerator and starting 
to tap on the brakes. But it is a delicate balance as we figure 
out--too much braking could stall the economic recovery; not 
enough braking, I think, represents a concern to a lot of us 
who have a sense of fiscal responsibility.
    If we do not control spending, if we do not do something to 
increase revenues, and if we do not begin to close our 
deficits, who are we going to pass the legacy onto? It is my 
kids, it is your kids, it is our grandchildren, and yours.
    This hearing will analyze potentially unnecessary spending 
by once again looking at strategic airlift. This hearing will 
ask what happens when we buy more weapon systems than the 
Pentagon says we need. It is one thing to buy weapon systems 
the Pentagon says we need, we really need them; it is another 
thing to continue to spend money for weapon systems that the 
Secretary of Defense says, ``We do not need that. We have got 
enough of that already.''
    We had an interesting battle on the Senate floor about a 
year ago. Senator McCain, who will be here in a little bit, and 
Senator Levin, the leaders of the Armed Services Committee, 
basically at the urging of the Administration and also because 
they thought it was the right thing, looked at whether or not 
we need to continue to buy F-22 fighter aircraft. And some of 
the information that was presented to us, as you may recall, 
was here is an aircraft that I think, if memory serves me well, 
costs about $191 million a copy. I think we had bought about 
187, and the proposal was to continue buying them. Cost per 
flight hour, about $45,000.
    On any given day, roughly 55 out of 100 of the aircraft are 
mission-capable. And if you add up all the sorties they have 
flown in Iraq, in the Iraq War, and all the sorties they have 
flown in Afghanistan, they added up to zero. So did it make 
sense for us to continue buying that aircraft? It did not make 
sense. Senator McCain did not think it made sense. I certainly 
did not. Neither did Senator Levin, neither did the President, 
neither did Secretary Gates, and we said, ``That's enough. 
That's enough.''
    Today's hearing is going to focus a little bit differently. 
It is not going to focus on an aircraft that has not been 
delivered. To the contrary. The C-17 is a superb aircraft. We 
have a whole squadron of them in Dover, Delaware at our Dover 
Air Force Base. We bought over 200 of them and about that many 
have been deployed. They perform admirably with high mission-
capable rates. And so the question is not: Is the C-17 a dog? 
It is not. It is a very good airplane. When do we have enough 
of them?
    And so we are going to ask our panelists today what happens 
if we buy more C-17s, even though recent airlift studies have 
stated that our strategic airlift capability exceeds our 
demand. I want to set the scene, if I can, for this topic. Our 
strategic airlift fleet consists of about 111 C-5s, big 
airplanes--we have some of those at Dover as well--and about 
223 C-17s. As good as the C-17 has been, though, it cannot do 
everything. As good as the C-5 is, it cannot do everything as 
well. That is why we have a blend of C-5s and C-17s, and C-130s 
as well.
    As you know, the C-5 carries more cargo, sometimes almost 
twice as much as the C-17. It can fly further without 
refueling, almost twice as far as a C-17. It cannot land on 
austere runways, but a study of the record shows that in, I 
guess, the last decade or so, about 95 percent of flights that 
the C-17 landed and delivered goods, provided airlift for, the 
C-5 could have done that as well.
    But the problem with the C-5 has been reliability. The 
mission-capable rate hovers around the mid-60s, for the most 
part in recent years as compared to 85 percent for the C-17.
    To correct those deficiencies in terms of mission-capable 
rate for the C-5, the last Administration, the last President, 
the last Secretary of Defense, said to us: Why don't we take 
those C-5s, those C-5s that were built in some cases in the 
1970s and in some cases in the early 1980s, that have another 
30, maybe 40 years of useful life on their fuselage, on their 
wings, why don't we do something about the engines? And at 
least one of our witnesses here has flown C-5s. We have them at 
Dover. I have heard for years how the engines just do not work. 
About every thousand hours, they have to change them out. The 
new C-5Ms will get about 10,000 hours. They will get about 
10,000 hours between engine changes, and about 50 or 60 of the 
weapon systems or components, avionics systems, have been 
changed out as well. The idea is to get us from about a mid-50 
to 60 percent mission-capable rate up to 75 percent or higher, 
north of there, and so far the three C-5s that have been 
produced, that are being flown literally out of Dover, are 
doing that.
    I think Harlan Geer, sitting right here over my left 
shoulder, was telling me not long ago, that a couple of months 
ago, one of those C-5Ms broke 41 records for airlifts in one 
flight from Dover to Turkey. That is the kind of thing we want 
to hear.
    I will never forget talking to one of the aircraft 
commanders when they brought--I guess it was the first C-5, 
into Dover Air Force Base for its annual inspection, and I 
asked the aircraft commander, ``How does this C-5M fly?'' And 
he said--I thought I would never hear anybody say this about a 
C-5--``It flies like a rocket.'' I said, ``You are kidding.'' 
He said, ``No. It really does. It flies like a rocket.''
    We have had some blips along the way in terms of the work 
that is being done in the C-5, but for the most part, we are 
encouraged to this point.
    I anticipate that the C-17 will continue to play a leading 
role in airlift for years to come, and I also expect that fully 
modernized C-5s will be a worthy complement to our C-17 fleet. 
I do not know if we have anybody here from Lockheed, but here 
is the deal, as I understand it. We expect the C-5Ms to deliver 
at least a 75-percent mission-capable rate and the work that 
Lockheed is doing in the modernization to come in under budget, 
at or under budget. So that is the deal. If Lockheed will 
deliver along those lines, I think this is a pretty good deal 
for the taxpayers. If they cannot, it is not a good deal for 
the taxpayers.
    However, while an even more robust fleet of C-5Ms and C-17s 
would ensure that we would never have to worry about strategic 
airlift, our current budget problems force us to confront some 
tough decisions about how many more aircraft we ought to buy, 
and this starts by looking at how many more C-17s we can afford 
and whether it is cost-effective to keep buying them. The last 
time the Air Force requested C-17s was in fiscal year 2007.\1\ 
That was 4 fiscal years ago. However, since then, the Congress 
has purchased, I think, 43 additional unrequested C-17s. Keep 
in mind the second chart we had up here, which shows where the 
money comes from when we are spending money we do not have. It 
comes from China, it comes from Japan, it comes from the United 
Kingdom, it comes from all those countries that have the oil 
and that have our money.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 39.
---------------------------------------------------------------------------
    In 2007, the Air Force asked for 12. They got 22. In 2008, 
they asked for zero. They got 15. In 2009, they asked for zero. 
They got eight. In 2010, they asked for zero. They got 10. And 
the question is, they have asked for zero again in 2011, what 
are they going to get? And my hope is that the second column 
under congressional purchase, instead of having three question 
marks, will have a zero. And, again, it is no reflection on the 
aircraft. As I said, it is an exceptional aircraft. We have 
just got enough of them.
    We have another chart.\1\ The chart is entitled ``DOD 
Mobility Capabilities and Requirements Study-2016.'' I think 
this was done a couple months ago. Some of you are familiar 
with it. Every so often we ask the Department of Defense to 
look at what our requirements are going to be for airlift, and 
they measure this in million ton-miles per day. Worst-case 
scenario, which I think includes a couple of wars going on and 
a bunch of problems back here at home that we need airlift for. 
And in the worst-case scenario, the Department of Defense, 5 
months ago, said we needed capability to give us 32.7, almost 
33 million ton-miles per day. Our current capability with our 
current fleet of C-5s and our current fleet of C-17s is almost 
36 million ton-miles per day.
---------------------------------------------------------------------------
    \1\ The chart referred to appears in the Appendix on page 40.
---------------------------------------------------------------------------
    Instead of borrowing $800 or $900 billion from the Chinese, 
if they were borrowing money from us, if we had such a robust 
Treasury, that would be one thing. We do not. And to the extent 
that we have about three million ton-miles more per day 
capability than we have need going forward. And even worst-case 
scenario, does it make sense for us to continue to go further 
and further into debt? I do not think it does. Neither does the 
Secretary of Defense. Neither does the President. In fact, the 
Secretary of Defense has recommended that the President veto 
any spending bill that includes funding for more C-17s.
    In this hearing, we are going to explore how to manage a 
cost-effective strategic airlift fleet, and it is not this 
Subcommittee or any Committee trying to dictate to the 
Department of Defense what they ought to be doing or what they 
actually need for the strategic airlift for our country. They 
have told us. This study up here, this most recent one, this 
tells us in a worst-case scenario, and it says we have a lot 
more capability than we have need. As it turns out, we have a 
lot more appetite than we have money to buy things with.
    So we are going to look at whether it is cost effective to 
increase our fleet by buying more C-17s. Finally, we will try 
to determine if there is a business case for increasing airlift 
capabilities beyond our airlift demand. I look forward to this 
hearing. I look forward to a productive hearing. We are 
grateful for everybody who has come over to spend some time 
with Senator McCain and myself, and our colleagues, and I again 
want to thank Senator McCain for the excellent work that he and 
his colleagues did and certainly Carl Levin last year on the F-
22, and for always reminding us that these weapon systems just 
do not materialize out of thin air. We have to buy them. We 
have to pay for them. And we do not have the money.
    What did they use to say about the theory of holes? The 
theory of holes when you are in a hole on the budget, on a 
deficit, if you are in a hole stop digging. Stop digging. That 
is what we want to do. Senator McCain.

              OPENING STATEMENT OF SENATOR MCCAIN

    Senator McCain. Well, thank you, Mr. Chairman, and I will 
make my remarks brief. I want to thank the witnesses and look 
forward to hearing from them, and I do not think we should have 
this hearing without the backdrop of the Secretary of Defense's 
recent announcement that he intends to save $102 billion over 
the next 5 years, which means obviously some very tough 
decisions are going to have to be made. And, obviously, the 
Secretary of Defense and the President have long ago announced 
their opposition to further acquisition of the C-17.
    Now, whether the Appropriations Committee will--how they 
will act remains to be seen, and, Mr. Chairman, I think that is 
one reason why it is important that we have this hearing. And I 
quote from the authorization bill. The Secretary of Defense 
said, ``The administration appreciates that the Committee 
supports the President's budget request regarding the C-17 
program and that it did not authorize procurement of additional 
C-17s.''
    According to the OMB's report on terminations, reductions, 
and savings for fiscal year 2011, the number of C-17s in 
operations and on order together with the C-5 aircraft exceeds 
what is necessary to meet the Department of Defense future 
airlift needs even under the most stressing scenarios.
    According to OMB, the substantial operational costs 
associated with buying additional unneeded C-17s would have to 
be offset by retiring C-5s early. Those aircraft still have on 
an average 30 years of useful service life, and it does not 
seem to me that is a reasonable use of taxpayers' money.
    Perhaps most persuasively, as Secretary Gates noted in a 
letter to me on this program, ``Continuing to purchase C-17s in 
numbers beyond what is required simply diverts limited 
resources from other pressing needs, including critical 
warfighting capabilities.''
    Mr. Chairman, I ask that the letter be included in the 
record.\1\
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    \1\ The letter referenced appears in the Appendix on page 44.
---------------------------------------------------------------------------
    Senator Carper. Without objection, it will be.
    Senator McCain. And Secretary Gates has also made it clear 
that he will strongly recommend the President veto any 
legislation that sustains the unnecessary continuation of this 
program.
    In remarks delivered over the past few months, Secretary 
Gates noted that it was time to return to the model in which 
real choices were made, priorities were set, and limits were 
enforced, and he specifically cited the C-17 program as an 
example where Congress was failing to make choices when it 
comes to defense spending. And he concluded that we all must be 
willing to ask and answer questions regarding real-world 
requirements in order to have a balanced military portfolio and 
a defense budget that is fiscally and politically sustainable 
over time.
    Let us be clear. The only thing sustaining the C-17 program 
in the face of a military requirement that is and will likely 
remain satisfied is the predominance of the military-industrial 
complex. Such machinations should end. When decisions are made 
to start or continue new major weapons programs, the needs of 
the warfighter must preside, not the profit-maximizing 
tendencies of industry or the strictly parochial interests of 
Congress. After billions of dollars wasted over the last few 
years, the C-17 presents the clearest case why in this regard 
we must do better.
    I thank the witnesses, and I thank you, Mr. Chairman, for 
holding this hearing.
    Senator Carper. Senator McCain, it is great to be sitting 
here next to you and have a chance to hear from these witnesses 
today. Let me just briefly introduce them, if I may.
    Our first witness today is Deputy Under Secretary Mike 
McCord from the Department of Defense's Comptroller's office. 
Under Secretary McCord serves as one of the Pentagon's chief 
budget and finance officers. He joins Under Secretary Robert 
Hale in the Comptroller's office in helping Secretary Gates 
take a scalpel to the Pentagon's budget and holding the service 
branches' feet to the fire when it comes to wasteful spending. 
He joined the Department of Defense with 24 years of experience 
in dealing with national security issues in the Legislative 
Branch, including, I am told, 21 years as a professional staff 
member of the Senate Armed Services Committee.
    Under Secretary McCord, we thank you for your participation 
in the hearing. We hope you will be working closely with us 
over the next couple of years to find additional savings in the 
defense budget. Just one quick question. Where did you go to 
college?
    Mr. McCord. Ohio State.
    Senator Carper. The Ohio State University in Columbus, 
Ohio.
    Mr. McCord. Yes, I attended the university in Columbus.
    Senator Carper. Good for you. All right. You are an Ohio 
State Buckeye. It is great to have you here. Thanks. Thank you 
for your service.
    Our second witness on the panel is Major General Susan 
Desjardins. Is that French, Desjardins?
    General Desjardins. Yes.
    Senator Carper. What is it, garden, some gardens?
    General Desjardins. Gardens.
    Senator Carper. General Desjardins is here today to testify 
on behalf of the U.S. Air Force's Air Mobility Command, the 
major command in charge of managing the Air Force's airlift 
fleet. In the Air Mobility Command, General Desjardins serves 
as the Director of Strategic Plans, Requirements, and Programs, 
and in this position she is responsible for force structures, 
planning doctrine, and requirements of the Nation's airlift and 
refueling force. She has some 30 years of service in the Air 
Force, I think, this year, and over 3,800 flying hours as a 
command pilot in a number of different aircraft, including C-
5s, C-17s, and C-135s. Anything else?
    General Desjardins. KC-10s, sir.
    Senator Carper. KC-10s, all right. General, we are grateful 
for your testimony today. We look forward to a productive 
discussion on our Nation's strategic airlift fleet.
    And our third and final witness is Alan Estevez. Mr. 
Estevez is Principal Deputy Assistant Secretary of Defense for 
Logistics and Materiel Readiness, representing the Office of 
the Under Secretary of Defense for Acquisition, Technology, and 
Logistics. Mr. Estevez is one of the top advisers to the 
Pentagon leadership on logistics and readiness. He is here 
today because one of his office's many duties is to prescribe 
policies and procedures for the conduct of strategic mobility, 
to manage strategic mobility programs within the Department of 
Defense. Prior to assuming his current position, I am told Mr. 
Estevez held key positions in the Office of the Secretary of 
Defense. Is that true?
    Mr. Estevez. That is correct.
    Senator Carper. Where he played a critical role in re-
engineering defense transportation processes. Mr. Estevez, we 
thank you for being here today. We understand you flew in from 
theater last night. Is that true?
    Mr. Estevez. That is correct.
    Senator Carper. Not the movie theater, but another theater, 
and we want to invite you to discuss, if you want to, a little 
bit your experiences there, what you saw and heard as it 
relates particularly to the hearing today. And I understand 
that you and Under Secretary McCord will be delivering joint 
testimony today, and Under Secretary McCord will be giving the 
oral statement. We are told if we observe you carefully as he 
speaks, we will see your lips move. And we want to see how this 
works out, and we hope you will just chime in as is 
appropriate.
    Under Secretary McCord, I will ask you to start off the 
testimony that has been prepared for you and Mr. Estevez, and 
then we will go right to our general. Thank you.
    Mr. McCord, please proceed, and your full statement will be 
made part of the record, and I think you are prepared to 
summarize.

   TESTIMONY OF HON. MIKE MCCORD,\1\ PRINCIPAL DEPUTY UNDER 
SECRETARY OF DEFENSE (COMPTROLLER), U.S. DEPARTMENT OF DEFENSE; 
   AND ALAN ESTEVEZ, PRINCIPAL DEPUTY ASSISTANT SECRETARY OF 
  DEFENSE FOR LOGISTICS AND MATERIEL READINESS, ACQUISITION, 
     TECHNOLOGY, AND LOGISTICS, U.S. DEPARTMENT OF DEFENSE

    Mr. McCord. Yes, thank you, Chairman Carper, and Senator 
McCain. I am Mike McCord, Department of Defense's (DOD) Deputy 
Comptroller, and as you said, joining me is Alan Estevez, the 
Principal Deputy Assistant Secretary of Logistics and Materiel 
Readiness, and Major General Sue Desjardins of the Air Mobility 
Command, and we are here to speak about the Department's 
decision to end the C-17 program. Thank you for putting the 
longer prepared statement on behalf of Alan and myself in the 
record.
---------------------------------------------------------------------------
    \1\ The joint prepared statement of Mr. McCord and Mr. Estevez 
appears in the Appendix on page 45.
---------------------------------------------------------------------------
    I want to begin my oral remarks by thanking you on behalf 
of all three of us, and the Department, for your support of the 
men and women who wear America's uniform. Your concern for 
their well-being is greatly appreciated.
    DOD depends on two aircraft, the C-17 and the C-5, to 
provide the airlift needed to deliver and sustain our combat 
power, including most importantly in support of our operations 
in Afghanistan. Over the past 5 years, the Department has 
conducted three studies concluding that our C-17 and C-5 
airlift capability is more than sufficient for our needs today 
and in the foreseeable future. Most recently, the study to 
which you referred was known as the MCRS-16, the Mobility 
Capabilities and Requirements Study, concluded last February. 
It looked at requirements through 2016 to ensure that our plans 
and investments for mobility capability will support future 
operations.
    The results of that study indicated that the Department's 
plans for strategic mobility capabilities are sufficient to 
support our projected requirements. The study concluded that 
the number of C-5s and C-17s in the Department's program of 
record is sufficient, even in the most demanding environments. 
These findings were consistent with all the studies we have 
undertaken over the past 5 years, all of which have shown that 
the size and mix of our strategic airlift fleet is adequate to 
meet requirements and that we have enough C-17s.
    Our analyses have also concluded that keeping the C-17 line 
open is simply not cost effective. It is not cost effective to 
buy more C-17s and then retire more C-5s to meet the 
requirements we foresee, and even if our requirements studies 
turned out to be wrong and we wanted to buy more later, keeping 
the C-17 line open was not judged to be a cost-effective way to 
hedge against that risk compared to upgrading the existing C-5 
fleet or even restarting the C-17 production line later.
    In addition to these studies, the Air Force Fleet Viability 
Board concluded in 2004 that the C-5A, which is the oldest 
variant, will remain viable until at least 2025. And according 
to the Air Force, the C-5 fleet as a whole will remain viable 
until 2040. Moreover, ongoing modernization and refurbishment 
of that fleet will increase the fleet's reliability, available, 
and maintainability.
    So as a result of these studies, Secretary Gates concluded 
that it is not in the national interest to keep adding C-17s. 
Last September, he wrote to Congress that the Department does 
not need additional C-17s to meet strategic needs. Accordingly, 
our budget request for 2011 includes no funds for additional C-
17 aircraft. The President has directly expressed his support 
for the Department's position on this. In comments concerning 
the fiscal year 2011 budget request, he said, ``We save money 
by eliminating unnecessary defense programs that do nothing to 
keep us safe. One example is the $2.5 billion that we are 
spending to build C-17 transport aircraft the Pentagon does not 
want or need.''
    Secretary Gates, as he usually does, made clear where he 
stands by stating in his testimony this year that he would 
``strongly recommend'' a presidential veto of legislation that 
sustains the unnecessary continuation of the C-17.
    The reason the Secretary feels strongly about this is 
because he believes, as he told the House Armed Services 
Committee a year ago, that ``a dollar spent for capabilities in 
excess to our real needs is a dollar taken from a capability we 
do need.''
    Mr. Chairman, this remains our position on the C-17 today, 
and I want to thank the Congress for supporting that position 
in all the defense bills that have been reported or passed by 
the House or Senate this year, and I welcome your questions.
    Senator Carper. Mr. Estevez, how did he do?
    Mr. Estevez. He did exactly what we expected.
    Senator Carper. That is good. All right.
    General Desjardins, please proceed. Thank you.

 TESTIMONY OF MAJOR GENERAL SUSAN Y. DESJARDINS,\1\ DIRECTOR, 
 STRATEGIC PLANS, REQUIREMENTS AND PROGRAMS, HEADQUARTERS AIR 
                MOBILITY COMMAND, U.S. AIR FORCE

    General Desjardins. Mr. Chairman, Senator McCain, and 
distinguished Subcommittee Members, thank you for the 
opportunity to testify about our Nation's strategic airlift 
requirements.
---------------------------------------------------------------------------
    \1\ The prepared statement of General Desjardins appears in the 
Appendix on page 49.
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    As the Director of Strategic Plans, Requirements, and 
Programs for Air Mobility Command, I and my staff translate air 
mobility mission requirements of the armed forces and the U.S. 
Transportation Command into fielded capabilities. We do this by 
long-range planning, requirements assessment, and funding 
allocations that support our ability to organize, train, and 
equip our mobility forces.
    We are faced daily with difficult choices as there are many 
more requirements than resources, more combat needs than 
dollars or manpower available. The Mobility Capabilities and 
Requirements Study-16, or MCRS-16, is an important tool that 
assists us in making some tough, near-term choices that chart 
AMC's path towards the future. By clearly quantifying valid 
operational needs, we can more accurately streamline and shift 
our limited resources to meet other pressing mission 
requirements. MCRS-16 determined that our program's strategic 
airlift fleet of 223 C-17s and 111 C-5s provides excess 
capacity that permits the retirement of our oldest, least 
reliable aircraft. These C-5 retirements will free up the 
manning and dollars needed to assign 16 C-17s to the Air 
Reserve component. The retirements will save approximately $325 
million over the future years' defense program in depot level 
maintenance, flying hours, and modernization costs.
    Conversely, if aircraft retirement restrictions direct us 
to maintain a fleet in excess of the wartime lift requirements, 
then additional manpower, infrastructure, and resources would 
be needed to operate a larger fleet.
    To ensure the long-term viability of our strategic airlift 
fleet, AMC continues to invest in the necessary upgrades of our 
C-5 and our C-17. The C-5 provides a combination of outsize 
capability, high-capacity, and long-range airlift that is 
unequaled by any other airlift platform.
    The almost complete C-5 Avionics Modernization Program will 
provide continued access to worldwide airspace. The 
Reliability, Enhancement, and Re-engining Program (RERP) is a 
vital modernization program. The 52 C-5s currently programmed 
for the RERP modification will provide more reliable, 
efficient, and enhanced strategic airlift at a reduced cost. We 
are confident the modernized C-5M, or Super Galaxy, will 
achieve our operational and sustainment goals and will meet the 
worldwide air traffic performance standards.
    The C-17 continues to be the backbone of our Nation's 
strategic air mobility fleet. It exceeds expectations every day 
under very challenging operational tempo as we support the 
drawdown in Iraq, the plus-up in Afghanistan, and all other 
ongoing mobility operations worldwide. It adds great breadth 
and depth to the mobility playbook because of its mission 
versatility, responsiveness, and enhanced capabilities.
    The program fleet of C-17s and the modernized C-5 fleet 
provide the Nation with sufficient, flexible, and responsive 
inter-theater airlift to meet our wartime and peacetime needs. 
I am confident that our Nation's strategic airlift fleet will 
remain the keystone of the Department of Defense's ability to 
rapidly deliver cargo and personnel anywhere in the world.
    Air Mobility Command will continue to support our joint and 
coalition partners while balancing the requirements to be 
responsible stewards of the taxpayers' hard-earned dollars.
    We greatly appreciate Congress' support of America's air 
mobility fleet. Thank you again for the opportunity to appear 
before you today.
    Senator Carper. Thank you very much, General.
    We will do 7 minutes for our first round, and if we need a 
second one, we will use that as well.
    General Desjardins, I just want to come back to your 
testimony. Thanks very much for your testimony. But I just want 
to try to be clear on one point. Is it the policy of the Air 
Mobility Command that we do not need any additional C-17s?
    General Desjardins. Yes, sir. We do not need any more C-
17s.
    Senator Carper. All right. And what does the Air Mobility 
Command believe to be the appropriate mix, if you will, of C-
17s and C-5s?
    General Desjardins. Sir, the program fleet of 223 C-17s and 
111 C-5s currently, according to MCRS, provides, as you 
indicated in your chart, 35.9 million ton-miles a day. That is 
excess capacity. The 32.7 million ton-miles a day is what the 
Mobility Capabilities Study determined was what we needed to 
meet the future 2016 challenges that we have ahead.
    So with that excess capacity, then we would look to retire 
our least capable C-5s, and that is what we had asked for, 22 
C-5s; 17 in 2011, and 5 in 2012.
    Senator Carper. And by retiring the C-5s, I think you said 
we would realize a savings if we retired with 2 years the 22 C-
5As, realize a savings of about $300, $320 million. Is that 
right?
    General Desjardins. Yes, sir.
    Senator Carper. It was not that long ago that I think we 
had some folks in to see us, very senior people in airlift, I 
think maybe even the Joint Chief at this time from the Air 
Force came in and said basically we want to buy another 30 C-
17s, and we are going to pay for it by retiring 30 C-5s. And I 
said, I do not think the math works on that. I do not think the 
math works on that.
    Mr. McCord, Mr. Estevez, would you just comment on the math 
of that tradeoff, retiring 30 C-5s and using the monies 
therefrom to buy 30 C-17s? Does that work?
    Mr. McCord. No, Senator. We agree that would not work, and 
just to follow up on the General's point, if we already have 
excess capacity, then making tradeoffs between two types of 
airplanes when we already have enough of both is not really 
going to be a way that is going to be cost effective to have 
more of one and less than the other if we still end up with 
more than we need.
    Senator Carper. A couple of months ago, Secretary Gates 
came before our caucus, Democratic caucus at lunch, and our 
Republican colleagues have similar caucus meetings every week, 
and I am sure they invited folks from time to time to share 
their thoughts. One of the questions that I asked Secretary 
Gates and I am going to ask you all here today: If we buy 
additional C-17s, what does it mean we do without? That was the 
question I asked, and let me just ask you all to comment on 
that as well. If we buy more C-17s that apparently we do not 
need, what does it mean we do without? Please.
    Mr. McCord. Senator, I guess at the end of the day you, in 
Congress, would decide that because you would cut something 
from our budget to pay for them. About $300 million for every 
C-17 that is added is the going price. Already we have had $10 
billion added over the last 4 or 5 years beyond what we have 
asked for, and should Congress add any more, then, again, you 
would be making that choice really here of what you would cut 
out of our budget to pay for it.
    Senator Carper. I will tell you what Secretary Gates said. 
He said, ``There are things that we need to better ensure the 
safety and the effectiveness of our warfighters, and to the 
extent that you take away money for those needs and simply use 
it to buy aircraft that we do not need, you put in danger our 
warfighters. Rather than making them more effective and safer, 
you make them less effective and less safe.''
    I thought that was a very compelling argument. I think we 
will find out maybe later this year how compelling our 
colleagues find that argument to be.
    I will ask one more question, and then I will yield to 
Senator McCain, but this is another one for Mr. McCord. General 
Desjardins has said in her testimony that in order to manage 
our excess strategic airlift capability, we will need to retire 
older C-5As, and we talked about maybe 22 of them over the next 
couple of years. If Congress appropriates funding for more C-
17s this year, then we could have to retire even more C-5As if 
that argument is credible. This balancing act could keep on 
going and going and going. And if we retire all the C-5As, 
maybe we can retire--actually, if you do the numbers, 22 C-5As, 
we save what, $320 million? If you retire all the C-5As, that 
would enable us to buy maybe three or four new C-17s. I think 
that is an intellectually honest argument. But in your eyes, 
would that be a cost-effective process? And does a cycle like 
this make it more difficult for you and Secretary Gates to 
achieve your goal of about $100 billion in budget savings over 
the next 5 years.
    Mr. McCord. Yes, it would, Senator, because first of all 
adding force structure is kind of the ultimate cost driver in 
the Department. So many things flow from having extra force 
structure: Training, manning, operating, having construction 
projects to base those things. And we are under a floor from 
the Congress right now, so we cannot have less than X number of 
both strategic airlift planes and C-5s specifically. So it is 
not clear that we could retire anything even if we wanted to, 
so any more planes that are added are basically increasing in 
an area where we already have excess, and adding force 
structure always adds costs.
    Senator Carper. All right. Thank you.
    Does anybody else want to make a comment?
    Mr. Estevez. If I could.
    Senator Carper. Mr. Estevez.
    Mr. Estevez. First, as you noted, I did come in from 
theater last night, and I just want to say that I had the 
opportunity on the ground for 6 days in Afghanistan to observe 
our magnificent strategic----
    Senator Carper. What did you see?
    Mr. Estevez. We were in Kabul----
    Senator Carper. Give us a flavor, if you will.
    Mr. Estevez. Sure. We were in Kabul, Bastion where the 
Marines are in Helmand Province, Kandahar, and Bagram. We got 
to see C-17s delivering force. They were in every one of those 
places. Counter-IED enablers such as Aerostats that we were 
putting up above outposts so they could see the enemy at a 
distance, and MRAP capability, which we were delivering direct 
to the warfighter in those locations. Watched the handoff 
between the aerial porters and the Army at Bagram to put force 
out into the field. Just a magnificent flow going in. A true 
testament to our logistics capability in one of the hardest 
places in the world to get force into.
    Senator Carper. How was the morale? How was the morale that 
you witnessed?
    Mr. Estevez. I thought the morale was pretty good, and good 
assessments, frankly, on the ground. It is a tough fight, but 
people think that we can do this.
    Senator Carper. Good.
    Mr. Estevez. I am very proud to have been out there to 
observe our force engaged.
    Senator Carper. Good. Glad you were there.
    Mr. Estevez. With regard to the mix here, when we were 
looking at the C-5 RERP 2 or 3 years ago, it is most cost 
effective to maintain the C-5 fleet than it is to replace the 
C-5 with a C-17. As you said in your opening statement, and as 
Senator McCain alluded to as well, it is important to have that 
balanced mix. Aircraft are different things for different 
purposes, all related to the strategic mobility. We have a good 
mix right now, so replacing C-5s with 15 C-17s is definitely 
not the most cost effective way to sustain the airlift system 
and the airlift capacity we have. As we noted, we are in an 
overcapacity situation, so retiring some because we do not need 
it is OK, but buying more so that we retire more is certainly 
not the way the Department needs to balancing its business in 
this airlift system.
    Senator Carper. Thanks. And before I yield to Senator 
McCain, let me just--I like to use this example of--I call it 
the pens and pencil example, and I have two C-5s here, A's or 
B's that need to be modernized. They have one C-17. For the 
cost of fully modernizing two C-5As or C-5Bs, we can buy one 
new C-17. We were told by the Air Force that the useful life on 
these C-5s is maybe another 30, even 40 years. And as good an 
airplane as this is, these C-5s, fully modernized, can carry 
roughly twice as much and, as we have seen, fly in some cases 
like twice as far.
    Now, that does not take anything from the C-17, which can 
do some things especially with small fields and austere field 
that the C-5s can do. That is a pretty compelling argument. You 
buy one of these, you get two of these modernized, fly them for 
another 30 years or so. They carry roughly twice as much, and 
you can fly them twice as far.
    That is a pretty compelling argument. I think it is one of 
the things that has led Secretary Gates, this Administration, 
and the last Administration to recommend to us that we go 
forward with the C-5 modernization, holding Lockheed Martin's 
feet to the fire to make sure they deliver. But to the extent 
that they can, it seems like to me a pretty decent bargain for 
taxpayers.
    Senator McCain.
    Senator McCain. Thank you, Mr. Chairman.
    Mr. Estevez, I was also there over the Fourth of July, and 
I bring back the same impressions that you do. I also have a 
very strong impression that the C-130 is doing an incredible 
job since that was our primary means of transportation around 
the area. It is not the most pleasant way to ride, but it 
certainly does the job, as I am sure you are very aware.
    Mr. Estevez. I agree with you on all fronts there, Senator. 
[Laughter.]
    Senator McCain. I do not know why they place those aluminum 
poles always in the center of your back, but someday--there are 
some things that I will never understand.
    I think we need to put a little more perspective on the 
costs here we are talking about. Isn't it true, Mr. McCord, it 
has been about $8.25 billion we have spent just on the 
additional C-17s that Congress has appropriated? Isn't that 
true, roughly?
    Mr. McCord. Roughly. I think it might be a little higher, 
but roughly correct, yes.
    Senator McCain. So let us call it $8 or $9 billion that we 
have spent on aircraft that the military says they neither want 
nor need. But I am not sure that the average taxpayer 
understands the costs involved with training, maintaining the 
crews, all of the aspects of these aircraft that add additional 
billions of dollars to the cost. Could you elaborate a little 
bit on that? And also you, Mr. Estevez, if you want to.
    Mr. McCord. Yes, Senator. As I said earlier, every force 
structure increase necessarily carries with it cost increase 
because you have to man that force structure, train people on 
that equipment. You have bases. You might need a new hangar for 
a plane. It would sort of depend. If you only added one, that 
would be one thing. If you add 43, as it indicates here, then 
you are definitely going to need new bases, new equipment, new 
tooling at these bases, all these sort of things that add costs 
to operate and maintain and train people for that equipment.
    Senator McCain. So we are talking about billions more. I do 
not know if we have any real estimate of those additional 
costs. I would be interested.
    Mr. Estevez. Well, I always say that giving us something 
that we do not need is a gift that keeps on giving, because we 
are going to sustain it if it is in the force structure. So a 
C-17 costs around $23,000, a little more than that, per flying 
hour that it is used. If we have it, it is going to be used 
because it cannot sit there; otherwise, it is going to rot. 
That includes some training involving that crew structure. But 
that is a gift that keeps on giving, so we have 10 and that is 
$23 million per year to sustain that, and over time, a 30-, 40-
year life cycle, we are talking a substantial amount of money.
    Senator McCain. And we are not including in that estimate 
the costs of, say, additional hangars or additional equipment 
and necessary items to keep those aircraft flying. I do not 
know if anybody has a handle on it. I have never seen an 
estimate of those additional costs. I am sure they are very 
hard to get at because at one base they may just be able to use 
existing facilities; at others they may have to build 
additional ones.
    Mr. McCord. That is correct, sir. Our staff this morning 
got me a figure of approximately $1 billion a year for the 43 
that have been added, for the operating and support costs for 
the 43 that have been added, not all of which are in the fleet 
yet, but steady State, about a billion a year.
    Senator McCain. Mr. Chairman, I would argue that is another 
point that we need to make to our colleagues. It is not just a 
one-time expenditure of some billions of dollars, but it is 
also additional billion dollars at least per year of additional 
costs.
    But that also, as I understand it, will then require the 
retirement of C-5s. Is that an accurate statement?
    Mr. Estevez. That would be what we would like to do. 
Frankly, we need some legislative relief in order to get down 
to the numbers that we want to for----
    Senator McCain. And why do you want to do that? Because we 
have overcapacity?
    Mr. Estevez. Because we have overcapacity, exactly, 
Senator.
    Senator McCain. And yet the reason why you are saying that 
you have to do this because of overcapacity, these are 
perfectly--C-5s are perfectly good aircraft that have 10, 15, 
20, 25 years additional life on them that they could have. Is 
that correct?
    Mr. Estevez. That is correct.
    Senator McCain. So we are talking about the $8 to $9 
billion, a billion dollars a year, and then the costs of 
retiring and not keeping perfectly good assets. So the ripple 
effect of this action by Congress is rather significant.
    Mr. Estevez. Yes, sir.
    Senator McCain. General, do you have sufficient--suppose 
that we just went ahead and bought these additional C-17s and 
even more to come if the appropriators have their way. What 
does that do to your requirements?
    General Desjardins. Well, Senator, it is as we spoke about. 
We are already at excess capacity. We have a shortfall then 
someplace else. And so we would have to look at, consider 
retiring the excess capacity that we have got in the strategic 
airlift fleet.
    I think that as retiring--your point earlier about retiring 
and how much does that cost, certainly we owe two reports on 
strategic airlift requirements, and then C-5 re-engining, we 
owe a couple of reports, as well as getting relief from 316 
strategic aircraft.
    But even storage costs to the tune of--if it was 2000 
storage, if you will, where we would have access to spare parts 
for the retired C-5s, that costs money, too, about $50,000 per 
aircraft. So there are costs associated, but we would look at 
it and consider our least capable aircraft in the fleet and 
have to stop flying them.
    Senator McCain. Well, if we could have from Secretary 
McCord and Mr. Estevez, if we could have a possible--just a 
paper, a couple of pages, as to not only the costs of each of 
the additional C-17s, but the ripple effects of it I think are 
rather important in case the Chairman and I have to engage in 
debate and discussion on the floor of the Senate. This could 
lead to that kind of a situation if the appropriators continue 
to add C-17s in the defense appropriations bill.
    Again, this is an important hearing because I think we all 
know that with the present economic situation in the country, 
there is going to be every part of the Federal budget squeezed, 
and the defense budget will not be immune from that. The 
Secretary of Defense has already announced that he intends to 
reduce costs by over $100 billion in the next 5 years, and he 
may be required to do much more than that, depending on what 
happens in Afghanistan and other parts of the world.
    So this is a fight worth having. We have been having it now 
for several years, and I think maybe the environment is now at 
a point where we will be able to prevail over the 
appropriators, and it is very helpful that we have a Secretary 
of Defense who is a man of enormous credibility on both sides 
of the aisle.
    I thank the witnesses. I thank you, Mr. Chairman.
    Senator Carper. Thank you, Senator.
    I want to come back to--I just want to clarify a point. I 
raised this earlier. I just want to come back to it again as a 
follow-on to one of the questions that Senator McCain was 
asking. If we retire 22 C-5As over the next 2 years, did I 
understand that the savings would be about $320 million. Is 
that the number that I heard?
    General Desjardins. Over the fiscal year DP, that is 
correct, Mr. Chairman.
    Senator Carper. And that works out to, I think, about $15 
million a copy. And in doing that, that may be the right 
decision. Far be it from me to prejudge, but if later on the 
modernization program for the C-5Bs goes well and we have 
retired these C-5As, do we have the ability to go back and say, 
no, Lockheed Martin did a great job, they are getting 80-
percent mission-capable rate on those C-5s that they have 
modernized, maybe we should do something with those 22 and 
bring them out of mothballs. Can we do that sort of thing? Is 
that realistic? Or is it too late at that point in time?
    General Desjardins. Mr. Chairman, it would depend on the 
kind of storage or retirement status we would put them in. But 
I would add that the Air Force is very committed to the 
modernization programs for C-5, and I did also want to add that 
we are using--we have three C-5s that have been re-engined 
and----
    Senator Carper. I have seen them all.
    General Desjardins. Yes, sir, and we are using two of them 
right now in the surge, and they are performing very well.
    Senator Carper. Good.
    General Desjardins. So I just wanted to add that.
    Senator Carper. Good. Thank you.
    Now, General Desjardins, let me just ask a follow-up 
question. The 22 C-5As that are maybe focused on for early 
retirement or for retirement, do they have significant service 
life left? Or are they on, if you will, their deathbed? What do 
you think?
    General Desjardins. Mr. Chairman, we have looked at these 
22. Not all of them have we identified by specific tail 
numbers, but we have looked at the bad performers, if you will. 
Do they have service life yet left? Yes, they do. But compared 
with the rest of the fleet, these are the least--we would 
retire the least capable ones.
    Senator Carper. When you were flying C-5s, any idea how 
many flight hours you have in C-5s?
    General Desjardins. I do not have very many, sir. Just over 
100 in the C-5.
    Senator Carper. What I have heard over the years is the big 
problem with C-5s is the engines, and when you have had a 
broken C-5 somewhere around the world, in many cases it was the 
engines. And in the modernization, they have traded out the old 
engines for, I think, the same GE engines that they use on Air 
Force One, as I recall, and we have sort of increased tenfold 
the reliability of those engines.
    General Desjardins. Yes, sir. And as you know, the 
enhancement program also includes 70-plus subsystems that were 
also not performing where they needed to be. Each added up to 
achieving a certain mission-capable rate in addition to the 
engines to get us where we need to be at initial operating 
capability plus 2 years.
    Senator Carper. OK. Thanks.
    If I could turn to you, Mr. Estevez, I think part of the 
responsibility of the ATL office--and what does ATL stand for?
    Mr. Estevez. Acquisition, Technology, and Logistics.
    Senator Carper. Yes, it does. The office in DOD is to be 
wary of industrial-based concerns as well. We have been told 
that we ought to buy more C-17s in order to keep the C-17 
production line alive in case our airlift demand drastically 
increases, even beyond the most demanding scenario that we 
looked at on one of our charts over here in the recent study. 
We have talked with aircraft producers in the past. They have 
told us that when you shut down a production line, you do it in 
a way that is not permanent. Or to put it another way, they 
store the production equipment away so that the line could be 
re-established in the future. Is that a possibility with the C-
17 line? And if Congress, for example, did not buy any more C-
17s in the fiscal year 2011 year, would the production line be 
permanently shut down? And part of this, I know the folks that 
make the C-17, as I said earlier, an exceptionally good plane. 
It is not just the United States that uses them, wants to use 
them in providing airlift. My understanding is other countries 
have purchased or are endeavoring to purchase the C-17s. Where 
does that fit into all this in terms of production line, 
keeping the line going?
    Mr. Estevez. There are a couple of facets to your question, 
so I will take them----
    Senator Carper. Take your pick.
    Mr. Estevez. With regard to shutting down a line, what we 
would do is we would take the special tooling related to that 
line. We would put that in storage should we for some reason 
need to restart that capability. So it would be there. There 
would be expense related to doing that. That would not be the 
best way to go about it. Frankly, there is an industrial base 
that we are fortunate to have in this country that can build 
wide-bodied cargo aircraft, and we would more likely draw on 
that base for our next generation of airlift rather than 
restart that line. But it is a possibility to restart that 
line.
    Let me just address--there is another industrial base that 
we need to consider in this process, and that is our carriers, 
aircraft liner companies that we use under our Civil Reserve 
Air Fleet program to haul cargo for us that provides us 
additional capacity in our go-to-war capability, and they are 
doing also a magnificent job in sustaining both our forces in 
Iraq and Afghanistan today.
    Should we have more capacity than we need, at some point we 
dry up the dollars that are available to sustain that 
industrial base. So, again, it is important to balance the 
whole mix of capacity that we have out there, and sustaining 
those craft carriers is one of our key capabilities that we 
need to retain.
    Senator Carper. Good. One of the questions that I wove into 
that mix of questions was whether or not there is an appetite 
from other countries, including some of our NATO allies, to 
acquire C-17s. I think some have, and my understanding is that 
others are interested in the aircraft. Can anybody comment on 
that?
    Mr. Estevez. There are other countries, and I would turn to 
the General to fill that out. The British have some. The 
Australians have some. It is not a cheap plane, so some of our 
allies do not have the resources that we are blessed to have.
    Senator Carper. But it turns out we do not. We borrow. If 
we do not have the resources, we just go out and borrow the 
money to buy them.
    Mr. Estevez. So there are some allies that do have that 
capability, and there are some that are buying, continuing to 
buy from the Boeing line.
    Senator Carper. Good. One of the things that the President 
has been pushing in recent months is to, I think, double over 
the next 5 years our exports from this country, and this could 
be one of the very good things that we make well that we might 
want to export more of.
    I have maybe one last question, and this would be for Mr. 
Estevez and for General Desjardins. Three years ago, we faced a 
situation where strategic airlift was in short supply, and we 
were supposedly leasing, I think, a Russian aircraft--I think 
it is called An-124. Were they called Condors? Did they call 
them Condors? I think they did--from the Russians in order to 
deliver cargo to the battlefield. And I assume that we have 
since stopped this practice given the Air Force wants to retire 
22 C-5As. Could you all confirm that we have stopped leasing 
the Russian aircraft?
    Mr. Estevez. We still use the Russian aircraft in 
situations, and I am going to turn to the General to fill this 
out. But we select the right aircraft for the right mission for 
the right time. An-124 can carry eight MRAPs; a C-5 can carry 
five MRAPs. An-124, because it is a commercial plane, being 
sustained for commercial business, has a reliability that it 
lands at Bagram and takes off without repair and, frankly, it 
is more cost-effective than flying a C-5 in for that mission.
    So when the opportunity arises to use the right aircraft, 
then we are able to lease it and re-lease it through a U.S.-
flagged carrier. We use that aircraft. I think it is less than 
1 percent of the total craft costs that we have expended.
    Senator Carper. All right. General Desjardins.
    General Desjardins. Sir, this does not mean that we are not 
using the C-5 and the C-17 for these outsize--when we need to 
use the C-17 and C-5, depending on what kind of field they need 
to go into, potentially a threat environment, then we 
definitely want that organic capacity and that capability to be 
able to do that. But this is contracted through TRANSCOM. It is 
not a lease. It is a contracted service that we do take 
advantage of, but in small amounts, less than 1 percent, as Mr. 
Estevez indicated.
    Senator Carper. Is it 1 percent of missions? Is it 1 
percent of cargo delivery?
    General Desjardins. Flying hours. Of the flying hours, 
total flying hours for the craft.
    Senator Carper. All right. Thanks.
    All right. I do not always do this, but I want to do this 
today. We have had a chance to hear from each of you. You have 
had a chance to hear from Senator McCain and myself on these 
issues. I just want to give you maybe a minute apiece, if you 
would like, just to give us some closing thoughts, giving us 
interchange and ideas that have been exchanged. Feel free to 
re-emphasize some of the points that you have already made or 
to refocus on others.
    I think in our business repetition is good. We call it 
staying on message. But feel free, if you want to repeat some 
of the points you have made or just to re-emphasize, to 
underline those, or if you want to maybe make another point in 
closing.
    Secretary McCord, why don't you go first?
    Mr. McCord. Thank you, Senator. I guess the only other 
point I would want to make is that while the possibility is 
always out there that the requirements will turn out to be 
greater than we have said, we have studied this many times now, 
and we do not believe that is the case. But even if we were 
wrong by a little bit, we already have, as the General has 
alluded to, and you have on your chart, a pretty healthy buffer 
in the excess capacity we already have today, and that even if 
we were wrong, the first place we would go is to what we 
already have on board today to deal with any such mis-estimate. 
You would have to go all the way past that to even think about 
needing to buy more C-17s. But as Mr. Estevez has said, 
RERP'ing or modifying the C-5s we have now would still be more 
cost effective even if we got to that point of going past all 
the excess capacity we already have on board today. So we just 
do not see a case for needing any more.
    Senator Carper. All right. Thank you, sir. General 
Desjardins.
    General Desjardins. Sir, I would just say a couple things. 
This MCRS-16 study was probably the most extensive study that 
has been 2 years in the making----
    Senator Carper. Really?
    General Desjardins [continuing]. And some very stressing 
cases, looking forward to 2016, and so I think that it is 
something that has been studied--mobility coverage airlift has 
been studied a fair amount, but I would say that this is, like 
I said, 2 years in the making, and very relevant to where we 
are and came up with a million ton-miles per day that shows 
that we do have excess capacity.
    I would ask that we--again, we owe the Congress a couple of 
reports that we are working to get to you so that we can get 
retirement relief of the C-5As so that we can continue to 
operate the fleet the way that we need to so that we, again, 
are not corporately, the Department, we are shortfelled 
somewhere else. So we would like to do that.
    We do not need any more C-17s, and the fleet that we have 
right now, the programmed fleet, is a strong fleet and it is 
right-sized.
    Senator Carper. All right. Thanks.
    Before I turn to Mr. Estevez, I think a couple of years ago 
we actually asked the Air Force when they were talking about 
the 30-30 deal, retire 30 C-5As, the dogs, the worst of the C-
5As in order to pay for buying 30 new C-17s, which does not 
work, as we talked earlier. Just the math does not work. Maybe 
with the savings of retiring 22 or in that case 30, you could 
maybe--I do not know--buy five or six, maybe five C-17s. But we 
asked the Air Force, I think--Mr. Geer, correct me if I am 
wrong. Didn't we ask the Air Force to identify by tail number 
the worst-performing C-5As? Did we ever get that list? We never 
got answers. We never got any tail numbers from them. You might 
just anticipated we would be wanting to see that list.
    General Desjardins. Yes, sir.
       INFORMATION SUBMITTED FOR THE RECORD BY GENERAL DESJARDINS
    The following are the 22 C-5A's at the top of the retirement list. 
Please note that tail numbers may change if schedule inspections reveal 
costly repair actions:

        70000453        70000459
        70000457        68000217
        70000447        69000017
        69000003        70000446
        70000466        68000225
        69000027        69000001
        69000008        68000211
        70000464        69000015
        70000454        70000465
        70000455        69000019
        70000462        70000467

    Senator Carper. OK. Mr. Estevez, the last word, please.
    Mr. Estevez. First I will say that we will have those 22 
identified if we get the congressional relief that we are 
asking for in order to retire unneeded capacity.
    I am going to take you up, Senator, on repeating the 
message. We do not need more C-17s. We have studied this 
repeatedly. No studies have come back and said we need more 
capacity. In fact, we are over capacity to the point that we 
had in dialogue with Senator McCain. It is not just the 
procurement cost of a new airplane. It is a gift that keeps on 
giving. You have to sustain that plane, once you have it, over 
time, and that is a cost that also could be doing other things 
inside the defense budget that are more important than having 
more capacity than we need.
    So we appreciate you having this hearing to let us make the 
case that we have the airlift capability that we need and to 
hear us out in that regard.
    Senator Carper. All right. Thanks.
    Well, thank you very much for taking the time to appear 
before our Subcommittee today. I thank each of you for your 
service to our country, and some of the folks on our 
Subcommittee will probably have some additional follow-up 
questions. How long do we have to submit those, do you know? 
Two weeks. Two weeks. And I would just ask, if you get any 
additional questions from Senator McCain or myself or our other 
colleagues, that you respond to those soon.
    Again, thank you. We look forward to working with you, not 
just with respect to providing cost-effective airlift but other 
ways to save money and to do so in a way that does not 
undermine our security of this country and our ability to 
defend itself. Thank you so much.
    Mr. McCord. Thank you.
    General Desjardins. Thank you, sir.
    Senator Carper. We would invite our second panel of 
witnesses forward, both witnesses. Mr. Gertler, welcome. Mr. 
Greer, welcome.
    Whenever I meet somebody whose name is Jeremiah, I am 
always reminded of a song, and the one you have probably heard 
more times than you care to recount.
    Mr. Gertler. Sir, sixth and seventh grade were a 
particularly unfortunate time.
    Senator Carper. I suspect they were. [Laughter.]
    Senator Carper. Great song. Having to be Jeremiah, it could 
probably have been a little trying at times. I understand you 
go by J.J. What is the second J?
    Mr. Gertler. Joseph, sir.
    Senator Carper. All right. Well, we are honored that you 
are with us. We understand you joined us today from the 
Congressional Research Service, and I am told by Mr. Geer back 
here that you are their top military aviation specialist. That 
is quite a billing.
    Mr. Gertler. Yes, sir. I would temper that observation by 
noting I am the only military aviation specialist of CRS, so I 
am also the bottom one.
    Senator Carper. All right. Well, I understand you came to 
CRS with extensive experience in providing defense analysis to 
the Congress in your 10-year career on the Hill, served in 
positions on the House Armed Services Committee and the Senate 
Armed Services Committee, where you conducted oversight on the 
entire defense procurement budget and issues related to missile 
defense.
    The House Armed Services Committee, when you were working 
over there, who chaired?
    Mr. Gertler. Actually, three chairmen during my tenure, 
sir: Floyd Spence, Bob Stump, and Duncan Hunter.
    Senator Carper. All right. And on the Senate Armed Services 
Committee?
    Mr. Gertler. I was not on the committee staff. I was on the 
staff of a member of the committee handling committee issues 
for Senator Charles Robb from Virginia.
    Senator Carper. OK. And in addition to your time on the 
Hill, I am told, Mr. Gertler, that you have also served as 
analyst at the Department of Defense during part of the Clinton 
Administration and as a senior fellow at the Center for 
Strategic and International Studies. We thank you for your 
testimony today and look forward to hearing from you as we 
delve into this issue.
    Mr. Gertler. It is an honor to be here.
    Senator Carper. Our second and final witness is Dr. William 
Greer from the Institute for Defense Analyses. The Institute 
for Defense Analyses is a federally funded research center that 
conducts research and analysis on issues of national security 
for policymakers. Dr. Greer is the Assistant Director of the 
System Evaluation Division at the Institute for Defense 
Analyses. Dr. Greer's service at the Institute of Defense 
Analyses has included conducting studies on air mobility and a 
range of other aviation issues. Dr. Greer was a task leader of 
the congressionally mandated study on the Size and Mix of 
Airlift Force, which was published in February 2009.
    Dr. Greer, I understand that your testimony will focus 
today on the conclusions you came to in the course of that 
study. We are eager to discuss whether these conclusions can be 
applied to our current airlift discussions. We thank you for 
your testimony. I think it is going to be quite insightful and 
I think useful as we move forward on these issues and these 
deliberations. Thank you.
    Your entire testimony will be made part of the record. I 
would ask each of you to use maybe roughly 5 minutes. If you go 
a little bit beyond that, that is all right. If you go 25 
minutes, that is not all right. I will have to rein you in 
before we get that far along. But, again, thank you both. 
Please proceed.

   TESTIMONY OF JEREMIAH GERTLER,\1\ SPECIALIST IN MILITARY 
 AVIATION, CONGRESSIONAL RESEARCH SERVICE, LIBRARY OF CONGRESS

    Mr. Gertler. Thank you, Chairman Carper, and thank you for 
inviting me to testify and participate in this hearing on 
behalf of the Congressional Research Service (CRS).
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Gertler appears in the Appendix 
on page 53.
---------------------------------------------------------------------------
    Senator Carper. Do you two know each other?
    Mr. Gertler. For about an hour now, sir, yes.
    Senator Carper. All right. Fair enough. Please proceed.
    Mr. Gertler. As this is my first testimony since joining 
the Congressional Research Service, I wish to acknowledge for 
the record the significant contributions made to CRS' work and 
to that of the entire Congress by my predecessor, the late 
Christopher Bolkcom. As a former staffer and client of CRS, I 
well know and share the regard in which his counsel was held by 
Members of the Congress, and I hope only that my work will do 
credit to his memory.
    That work today concerns strategic airlift. I will not 
repeat the many facets of the current request or current 
situation regarding C-17s and C-5s that have already been gone 
over by the previous witnesses.
    Senator Carper. Let me just interrupt for a moment. As I 
said earlier to the first panel, sometimes repetition is 
helpful. Sometimes it is not. So do not be reluctant to 
emphasize or re-emphasize----
    Mr. Gertler. Well, I was being mindful of your 25-minute 
dictum, sir.
    Senator Carper. Fair enough.
    Mr. Gertler. In that case, as you know, the 2011 budget 
submission does not include any further procurement of the C-17 
transport and proposes to retire 17 C-5As.
    In previous years, Congress has added C-17s beyond the 
number requested. So far this year, both authorizing committees 
and the full House have acted on the bill. None has added any 
new C-17s. None has added any additional C-5 modernizations.
    As Members of the Subcommittee know, Mr. Chairman, Congress 
traditionally adds programs to defense budgets for quite a 
number of reasons. Each of these is discussed more fully in my 
written testimony, but, briefly, they include such factors as 
policy differences with the Executive Branch, as seen in the 
case of the alternate engine for the F-35 Joint Strike Fighter 
and the V-22 Osprey and in the Congress' annual solicitation of 
the services' unfunded request lists.
    Another factor is to maintain options for future policy 
changes, as in the sustainment of the B-1 bomber prior to the 
1980 Presidential election, which allowed the voters to choose 
between the two candidates' competing visions for that program.
    Constituent benefit. As members' statements and press 
releases make clear, economic and employment benefits for a 
particular geographical area underlie a number of congressional 
procurement decisions.
    To maintain a viable industrial base: Separate from the 
constituent interest aspect of keeping production facilities 
open, maintaining national capabilities to design, develop, and 
manufacture certain defense items has been seen as a goal 
worthy of national investment. Indeed, this interest is not 
unique to Congress. The Department of Defense itself has on 
occasion requested systems, absent formal requirement or in 
excess of them, in order to preserve industrial capabilities.
    To reduce risk. Now, ``risk'' is one of the less 
consistently defined terms used in defense discussions, but it 
usually attempts to measure the probability that a particular 
military goal will not be met by a certain schedule. If a 
particular force posture is deemed high risk, Congress has 
added assets in order to bring that risk down.
    And to hedge against changes in requirements from current 
projections. One common observation regarding the post-Cold War 
world is that uncertainty is the norm in defense planning.
    Budget requests are based on estimates of future challenges 
and threats, projections of U.S. national interests, and the 
likely capability requirements extending from them. But even 
highly educated projections have at times not foreseen 
substantial challenges. Other times, Congress may have 
differences over the assumptions or analytical process of an 
important study. Adding unrequested systems can be seen as 
giving commanders flexibility in case future events differ from 
DOD's projections.
    That brings us to today's hearing. DOD's most recent study 
of airlift demand, the Mobility Capabilities and Requirements 
Study-2016, is classified. But its unclassified executive 
summary stated, ``With few exceptions, MCRS found the 
Department's planned mobility capabilities sufficient to 
support the most demanding projected requirements.'' It went on 
to say that the capacity of the Department's strategic airlift 
fleet exceeds the peak demand in each of the three MCRS cases 
that they studied.
    Critics, some of whom are advocates of further C-17 
production or additional C-5 modernizations, can have 
legitimate questions about that conclusion. It is a challenge, 
Mr. Chairman, to address the contents of a classified study in 
an open session, but I have included in my written testimony 
some questions that readers of MCRS-16 can ask to gain insight 
into the relevance of the study's data and the validity of its 
conclusions.
    Finally, as to cost effectiveness, it can be a very tricky 
metric. Costs from mature systems are comparatively easy to 
determine, but the effectiveness side of the equation is more 
difficult to quantify because, as I have noted, the purposes 
for which DOD requests certain systems and Congress' goals in 
approving and/or expanding on those requests may not be the 
same. And, of course, another effect of spending on unrequested 
items is to divert money from known needs.
    Instead of chasing any one element of this farther, I will 
stop here, Mr. Chairman, so that we may focus on the points of 
most interest to the Subcommittee.
    Thank you for the opportunity to appear before you today on 
behalf of the Congressional Research Service.
    Senator Carper. Mr. Gertler, thank you so much. Dr. Greer, 
please proceed.

 TESTIMONY OF WILLIAM L. GREER, PH.D.,\1\ ASSISTANT DIRECTOR, 
   SYSTEM EVALUATION DIVISION, INSTITUTE FOR DEFENSE ANALYSES

    Mr. Greer. Thank you very much, Mr. Chairman. I am pleased 
to be here to talk about a recent study we have done also. Our 
study is not the MCRS study but one done a year before that, as 
you mentioned, and it is called the Size and Mix of the Airlift 
Force.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Greer appears in the Appendix on 
page 61.
---------------------------------------------------------------------------
    The Department of Defense selected us to do a study, which 
was actually requested by the National Defense Authorization 
Act in 2008. And so I am going to confine my testimony today, 
not to all the parts of the study we were asked to do, but I 
will confine it to the C-5/C-17 part of it, which is what is 
relevant here.
    I will also ask that the lengthier version of my oral 
remarks be entered into the testimony.
    Senator Carper. Without objection, your entire testimony, 
including those remarks, will be included.
    Mr. Greer. Now, the National Defense Authorization Act had 
a wide range of operational scenarios they asked us to look at: 
Peacetime operations, humanitarian aid, disaster relief, 
homeland security, irregular warfare, all the way up to major 
combat operations, so the whole gamut.
    Within these, the study considered numerous alternatives 
that included upgrading existing C-5s and procuring additional 
C-17s. So we looked at a large number of alternatives, all of 
which had different mixes of these aircraft.
    We also examined fleets that were both larger and smaller 
than planned for acquisition. We looked at operational 
effectiveness and life-cycle costs. So unlike the MCRS, ours 
was a cost-effectiveness study. So I will summarize the 
approach we took, the alternatives we looked at, and the main 
findings.
    The program of record when we did our study 2 years ago was 
the base case that we used, and then we did excursions from 
that. For strategic airlift, the program of record actually 
only had 205 C-17s at that time, not 223. So that is what we 
used as our base case. It did have 111 C-5s for a total of 316 
aircraft. The C-5s can be further divided into 59 C-5As and 52 
C-5Ms. So that is the program of record.
    Senator Carper. When you say C-5Ms, do you mean C-5Bs or--
--
    Mr. Greer. Well, I mean B's and C's that have been upgraded 
to the C-5M through the RERP process. One name for it is either 
C-5 RERP or C-5M.
    Senator Carper. Thank you.
    Mr. Greer. So the RERP modification, by the way, just so 
you know, involves not just new engines and pylons but a number 
of other auxiliary power units----
    Senator Carper. What are some of the most important ones?
    Mr. Greer. Well, the most important one would be the 
engines, no question about that.
    Senator Carper. But beyond the engines?
    Mr. Greer. I have listed the auxiliary power units, and I 
do not remember the other multiple--I can provide that later.
    Senator Carper. OK. Thanks very much, if you could.
    Mr. Greer. I just do not remember off the top of my head.
    Senator Carper. Just for the record. Thank you.
    Mr. Greer. The most important one is the engines, though.
    So I will just remind us again that we looked at 205 C-17s 
rather than 223. So the requirements--we had sort of two 
questions to answer here. What were the requirements? And did 
this program of record meet the requirements? And how did the 
alternatives match up in cost-effectiveness?
    The requirements we used were different from the MCRS. The 
MCRS had not been done, so we did not have the same major 
combat operations details that they had. So instead we used the 
only other existing Department of Defense requirements, which 
was the MCS, the Mobility Capabilities Study from 2005, for the 
major operations.
    For the non-major operations, we were able to take 
advantage of the latest--the SSSP or the Steady State Security 
Posture scenarios, which were the same as used in MCRS. So our 
requirements were a mixture of the non-combat ones from MCRS 
plus the major combat operations from the MCS.
    When we take those scenarios, we looked at how the program 
of record matched itself against delivery, and we found that 
the program of record meets the acceptable risk for delivery in 
those scenarios, in all those scenarios combined. So the 
alternatives we looked at, just to mention them briefly, were 
not just the base case, which had 316 aircraft, but it looked 
at smaller and larger excursions that held the C-5 RERP fleet 
constant at 52 C-5Ms, while adding C-17s and/or reducing C-5As. 
We also looked at excursions in which all of the C-5s were 
RERP's to C-5Ms, all 111 of them, and then other ones in which 
we actually did not RERP all the C-5Bs that are currently 
planned, so something less than 52 would be RERP's and then 
either adding or subtracting other aircraft.
    What we found, obviously, is that larger fleets do better 
than smaller ones. They cost more so there is a tradeoff in 
cost and effectiveness, but I will remind you that the program 
of record met the requirements that were postulated.
    We addressed two other issues--several other issues, one of 
which was starting and stopping the C-17 line, which was one of 
the major questions asked of us. Our assessment of the C-17 
line shut down and restart is that continued production, even 
at very low rates of, let us say, five aircraft a year is 
expensive relative to the restart costs. So we think that the 
scenarios in our study do not call for any larger numbers, but 
if there were a requirement that emerged some time in the 
future, our feeling from our calculations is that restarting 
would be better than paying the cost as a hedge for continuing 
production, because the likelihood of that future requirement 
we think is fairly low.
    The requirements that we used from the MCS study seemed to 
be very similar to that from the MCRS study after 5 years. So 
we do not see a reason for extrapolating to higher 
requirements.
    We also looked at lifetimes, and we found the C-5s and C-
17s all have lifetimes beyond the year 2040.
    So, Mr. Chairman and other Members of the Committee, I will 
conclude there with my prepared remarks and be glad to discuss 
any of the other findings. Thank you.
    Senator Carper. Good. Thanks so much for those comments.
    I would like to start off my first question just by asking 
you to look back just a little bit to earlier in the afternoon 
when we had three other people sitting at this witness table, 
and they gave us their testimony and responded to our 
questions. I just want to take a minute or two, each of you, 
and just reflect on what you heard that maybe you agreed with, 
anything that you did not agree with, or maybe just some 
thoughts that sort of grow out of what you heard them say. 
Please. Dr. Greer, do you want to go first, please?
    Mr. Greer. I would be glad to. I did take a couple of 
notes.
    Senator Carper. I thought you might.
    Mr. Greer. Some of the comments, the questions had to do 
with cost, and since the MCRS study really did not deal with 
cost, that was not in that study, but there were opinions 
expressed anyway. We looked fairly extensively at the cost of 
everything, and one interesting observation was the tradeoff of 
one for one if you buy a C-17 and get rid of a C-5A, what is 
involved there. And vaguely it was said this would not be a 
good idea.
    Actually in our study we show that quite explicitly. There 
is about a factor of 2 in the difference between the money you 
pay to buy a C-17 and operate it for 25 years and the cost to 
operate a C-5A for the same period. It turns out to be around 
$400 to $600 million, depending on whether it is reserve or 
active. So that is about $400 to $600 million to buy--$250 
million of which is to buy it, the rest of it is to operate it, 
as Senator McCain was commenting about. And if you then compare 
that with getting rid of a C-5A, how much do you save? Over 
that same period of time, you save about $250 million. So there 
is a factor of 2 difference. You pay more to buy a C-17 than 
you save in getting rid of a C-5. You would save--you would 
have to get rid of two C-5s to pay for the one C-17 that you 
bought. You would lose an airplane, one total airplane.
    Let me just let you make some comments, and if you do not 
mind, I will look at my notes and see if there are any others I 
want to comment on.
    Senator Carper. OK. Thanks.
    Mr. Gertler. Senator, I think the most striking piece of 
testimony that I heard this morning had to do with the tail 
costs, the idea that, yes, you buy the aircraft and that is one 
price, but it is so rare that we look at the costs to operate 
and support that over its lifetime.
    Now, frankly, that goes both ways. If one is resuscitating 
a C-5, particularly one that has been retired and is going back 
through a modernization program, that, too, will have an 
operational tail cost, although the C-5Ms should have a lower 
operating cost than the current C-5A, B, C fleet, in large part 
due to the improved engines that get much better fuel 
efficiency. But consideration of a life-cycle cost rather than 
the year-by-year acquisition cost, which is what Congress seems 
so often to focus on, may lead to a different conclusion than 
if one just looks at the annual outlay.
    Senator Carper. Thank you. Thank you for those 
observations.
    Mr. Gertler, I believe in your testimony you said to us 
that Congress sometimes adds on unrequested items to defense 
bills because they differ with the policy and not necessarily 
because of parochial concerns. You gave us a very good example 
in the F-35 alternate engine program. I know some members 
without parochial interests in the F-35 alternate engine 
believe that the competition of the alternate engine will drive 
down costs and produce a better quality engine. When it comes 
to adding more C-17s, are there any policy disagreements akin 
to the one that you cited with the F-35 alternative engine? And 
do any of these policy arguments have any merit in your 
opinion?
    Mr. Gertler. There are several policy arguments. I think 
the two main ones that come to mind as being on point with 
regard to the C-17 decision are the industrial base discussion, 
which we have had at some length. There has currently been or 
rather recently been a very public debate on this subject. 
Secretary Gates, in testimony a few weeks ago, stated that he 
believed that the commercial wide-body airline or aircraft 
industrial base would be sufficient to pick up the slack if we 
needed to go back and do another tranche of military cargo 
aircraft. And some members publicly took him to task for that 
statement and differed with him on that.
    Senator Carper. Say that again? What did the Secretary 
testify to? Just say that again.
    Mr. Gertler. That military--and I am paraphrasing here. 
That military cargo aircraft are just wide-bodied cargo 
aircraft, and we already know how to make civilian wide-bodied 
cargo aircraft, so the military--there may not be a military 
uniqueness to the C-17 production line or technology base. And, 
again, that is something over which people can reasonably 
differ, and have.
    But I think the other significant one has to do with 
hedging, the notion of do we have margin if our projections 
about the future are wrong. In terms of the million ton-miles 
per day figures we saw, the Department currently has an excess 
of about 10 percent. Now, when an insurance salesman comes to 
your home and says, ``I would like to sell you some insurance; 
something bad might happen to you,'' you make a decision about 
what it is worth to you to have that eventuality covered.
    We have right now 10 percent worth of insurance already 
built into the program. Some members may believe that we need 
to have a greater insurance, that we need to have more excess 
in case our projections about future demand for airlift prove 
to be wrong.
    Senator Carper. Thanks.
    Dr. Greer, if I could, a question for you. In your 
testimony, you discuss, among other things, the cost of 
restarting the C-17 production line if it were to be shut down 
in the next year or two. I believe that if Congress decided not 
to buy additional C-17s in fiscal year 2011, as I said earlier, 
foreign sales would prevent line closure, at least for the next 
couple of years. Could you further discuss the cost of 
restarting a terminated C-17 production line? Did your 
calculations include the possibility that foreign sales could 
at least keep part of the C-17 production line open for the 
next several years?
    Mr. Greer. I would be glad to answer. First of all----
    Senator Carper. One more time. There you go.
    Mr. Greer. Yes, sorry. Thank you very much. We did not take 
into account foreign sales. We were simply looking at U.S. 
acquisition, and it really would not change anything in our 
analyses other than the start date at which the line would shut 
down.
    We looked at this from a point of view of an investment, 
very much like an insurance policy that was referred to before, 
is that if we have several hedging options against a future 
which might change dramatically from that which we have today. 
One would be to go ahead and build 15 a year. Another one would 
be to build five a year, keeping the line operating at a sort 
of sustainment level. And then a third one would be keeping a 
warm line active, which I think Mr. Estevez referred to as just 
keeping the tooling at very minimal cost, but not building 
anything. And then shutting it down. Those were the four 
different things we looked at.
    It would take about a billion dollars, we think, to restart 
the entire facility from cutting it down, razing it to the 
ground, and building a new facility. This was a rough guess. 
There are numbers twice that much, actually from the Boeing 
company that it might be as much as twice that, but $1 or $2 
billion seems to be the range that the Air Force and 
contractors believe is right. And this seems to be in accord 
with, comparison with other large facilities that have been 
proposed to be built to build large-bodied aircraft.
    The hedging calculation then is to say how likely is it 
that you would expect to see a large requirement increase, and 
we do not see that very likely from any of the patterns we have 
seen in past studies.
    Another angle we took on that was to say how many years 
would it be before--let us say we went 10 years and then 
discovered, my gosh, we really need to build--we have suddenly 
emerging very high requirements. We need more C-17s. We 
probably would build a different airplane at that time, but let 
us say we would still build C-17s. Would it have been smarter 
to have maintained the C-17 line or to have stopped it, 10 
years from now restarting it? In that particular case, it 
actually would have been better to have stopped and restarted. 
You do not get--in the sense that you would have saved money 
overall because of the discounting value of dollars in the 
future spent versus dollars spent tomorrow. And the one 
advantage in continuing the production is that you would get 
the aircraft faster. You have already been building them, so 
there they are. But you have had to maintain them during a 
period of time when you did not need them, and then there is 
still time to build--and whether you would build a C-17 10 
years from now is still arguable. Probably new technology would 
come in, and a new airplane would be chosen.
    Senator Carper. Thanks. Let me just follow up on that. Do 
you recall--actually, either of you can respond to this one, if 
you will, but do you all recall--and you may have said this but 
I missed it, but has there been an aircraft production line 
that has been successfully restarted in recent memory upon 
having been shut down?
    Mr. Gertler. Actually two come to mind.
    Mr. Greer. OK. I only know one, so you----
    Mr. Gertler. OK. That again is referencing, as I mentioned 
in my testimony, the B-1, which the Carter Administration 
canceled in 1997, I believe, production of that stopped. And it 
was restarted several years later under the succeeding 
Administration.
    That was a fairly unusual case because in that case the 
contractor, Rockwell International, put an enormous amount of 
their own money, something in the vicinity of a quarter billion 
dollars, to keep the facility there, to store the tooling and 
to keep most of the workers employed so that they would be 
available. They were essentially betting on the outcome of the 
presidential election and that the subsequent Administration 
would restart the B-1.
    But it should be noted, even with a large investment and 
their maintenance of large amounts of raw materials as well to 
start the B-1, it still took 3 years from when they got the go-
ahead until the next plane came off the production line. So 
they were shut down for a long period, but the restart still 
took a good while.
    That differs in a very significant way, I think, from the 
C-17 case, and it is this: At that time there was a thriving 
aerospace industry in Southern California. People who stopped 
working because a program went away at one plant went across 
the street to the plant that had just won a contract. And so 
there were a lot of workers to draw from when you restarted, 
when you got your contract.
    That is not the case now. The C-17 line is the last 
airframe production line in California. And so there is a big 
question as to whether if you close the plant the workers would 
disperse to other industries and not be available when you 
decided to restart.
    The other one that comes to mind--and I knew fewer details 
about this--is the C-5. The C-5A was built from 1969 to 1973. 
Congress decided to start the C-5B, and that ran from 1985 to 
1989. There was a 12-year break in production of C-5s. But, 
frankly, I do not know much of the detail of how Lockheed 
facilitized to restart that production.
    Mr. Greer. I do not know much more about that. We actually 
talked to Lockheed about the C-5's stop and restart, trying to 
get data for analyzing the case for the C-17, trying to find 
analogs. I know that they did stop and put their tools aside, 
kept them in mothballs, so to speak, so that they could use 
them again 12 years later. Most of the records from that period 
of time seem to have gone away, so it is hard to reconstruct 
the actual cost, which was our issue. So I cannot comment any 
more than that because there is no more information than that.
    Mr. Gertler. It should be said, I believe, though, that 
that was at Marietta, Georgia, which was a plant that was doing 
other production of other aircraft during that period. It was 
not dedicated to a single aircraft in the way that the C-17 
facility----
    Senator Carper. What else were they building? C-130s?
    Mr. Gertler. C-130s were made there. They were doing 
fighter work at the time?
    Mr. Greer. They were doing fighter work. Which one would 
that have been? I do not know for sure. I do not remember.
    Mr. Gertler. Not coming off the top.
    Mr. Greer. But you are right that there were----
    Mr. Gertler. And one other factor with regard to the C-17 
facility. It is an enormous amount of property in Southern 
California. It is immensely valuable land, which is to say----
    Senator Carper. Roughly how many acres? Any idea?
    Mr. Gertler. I do not know. It is next to an airport, and I 
do not know how much of the entire airport facility Boeing 
actually owns.
    Senator Carper. Which airport?
    Mr. Gertler. It is part of the Long Beach airport.
    Senator Carper. OK.
    Mr. Gertler. But presumably, if the production line were 
shut down for a significant period of time, Boeing would want 
to operate on good business principles and monetize their 
asset.
    Senator Carper. OK. Thank you.
    This might be my next to the last question for either of 
you, but, Dr. Greer, your written testimony indicates that 
there might be future ways to increase airlift outside of C-5s 
and C-17s. I think you discussed an interesting possibility of 
employing refueling tankers that are not being utilized to 
conduct airlift missions. To your knowledge, has the Department 
of Defense and the Air Force ever put this suggestion into 
practice?
    Mr. Greer. Well, yes, sir. The tankers carry cargo all the 
time. The KC-10 self-deploys, carrying its own internal cargo 
that it needs wherever it goes. I am told from the Air Force 
that aircraft, KC-10s or C-135s, returning to the United States 
refueling, let us say, in Germany, if there is cargo at the 
base that needs to come back, rather than calling in an 
airlifter, they simply put it on the tanker. The tanker then 
brings it back.
    The tanker has a fixed space for cargo, so the fact that it 
is carrying fuel does not displace the cargo. The cargo and the 
fuel go into totally different areas of the airplane. It does 
add weight, so you get more fuel burned, of course, if you are 
carrying cargo. So this is done frequently.
    What I do not know would be done--this is a fair question 
to ask--is that in our analysis we assumed that the tankers 
that went to the theater, while waiting for tanking missions as 
we built up forces in theater, could they be used during their 
spare time, so to speak, carrying cargo around in the theater? 
They are not leaving the theater. They are still operating 
there. They are on call to come back and be a tanker when 
needed, but they can operate during this open time as 
airlifters. I do not know if we have experience with that sort 
of thing happening. But there is no question that tankers can 
carry cargo, they do carry cargo, and this kind of utility 
certainly is possible. It may be just a policy change, that is 
all.
    Senator Carper. OK. The next question I want to ask is one 
that neither of you may be prepared to respond to. I am going 
to ask you, if you cannot respond to it today, if you could for 
the record. We talked about the potential for foreign sales, 
additional foreign sales of the C-17, and my question either 
for here or for the record is: Could you recommend some things 
that our government, Executive and Legislative Branches working 
together, might do to incentivize and encourage those foreign 
sales so that the line may be extended beyond the next year or 
two? That would be a question. If you all want to respond to 
that now, or a bit later, I would ask that you do that. What 
would be your preference?
    Mr. Greer. Later for me.
    Mr. Gertler. Certainly to find someone who would know an 
answer to the question would be my preference.
    With regard to foreign sales, though, the C-17 is currently 
operated by the United Kingdom, Australia, Canada, Qatar, and 
NATO is buying a small pool to share among NATO nations.
    Senator Carper. When you say small pool, what? Three or 
four?
    Mr. Gertler. I believe it is three aircraft to be a NATO-
wide capability. They have an order from the United Kingdom for 
one additional aircraft. They have orders from the United Arab 
Emirates for six. And they have an agreement for another 10 for 
India, but as of last month, that contract had not been signed. 
I do not know whether it has actually been signed yet. So far 
that is what they have got in train for the production line.
    Senator Carper. Good. Well, with an Administration, a 
President--as I said earlier, the President has been quite 
vocal about doubling our exports over the next 5 years, and 
this might be one for the Administration to focus a bit on.
    Did either of you want to add anything in response to my 
question?
    Mr. Greer. No. I have nothing to add to that.
    Mr. Gertler. No, sir.
    Senator Carper. What I would like to do as we come to the 
end here is just say, any closing thoughts? Do you want to take 
a minute or two to add any closing thoughts before I give a 
wrap-up statement and we call it a day?
    Mr. Greer. OK. Shall I start?
    Senator Carper. Please.
    Mr. Greer. OK. I had just one thought that I would like to 
add to the comments so far. As you know, from the time we did 
our study until the time MCRS did its study, there was about a 
10-percent rise in capability. In our study, we see one could 
also extract at least another 10 percent, if not 20 percent, 
higher capability without buying a single additional airlifter. 
And this would be partially through using tankers--that was 
part of it--partially through having CRAF, aircraft, the Civil 
Reserve Airlift Fleet, carry heavier cargo than they 
traditionally carry. They carry bulk now. If they can carry 
small larger vehicles called ``oversized'' by the military, 
that would help a lot. We found that was actually the single 
biggest help. And C-5s carrying a larger load temporarily 
during wartime, which they are permitted to do, and also 
relying more on allies who have airlifters to assist would also 
greatly benefit this.
    Now all of these can be counted on, you understand, but if 
we can extract even some of those, you are going to increase 
the capability even more before we have to buy a single 
additional airplane of any kind.
    Senator Carper. Good. That is an interesting thought. Thank 
you. Mr. Gertler.
    Mr. Gertler. Sir, one other factor with regard to 
maintaining the production line has not really been gone into 
today. Over the last few years, there have been a number of 
looks, both by the Department and by private industry, at a 
civil variant of the C-17. There is some interest from the 
package delivery industry, from the freight haulers, in that. 
There are also some obstacles, technical ones and having to do 
with export-controlled items. It may also not wind up being an 
economical proposition, but I believe that if you are looking 
for a way to extend that production line, the possibility of 
commercial sales, which are then aircraft that could be in the 
Civil Reserve Fleet and available to the Department as that 
insurance policy, should we need more than we think, is one way 
to address both issues.
    Senator Carper. All right. Well, good. Thank you so much 
for all the thought that you have put into your work that 
enabled you to come here to testify before us today and to 
respond to our questions.
    I have a closing statement for the record that I want to 
enter into the record.\1\
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Carper appears in the 
Appendix on page 35.
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    I would like to add to that the following: I said early on, 
a decade ago--it is hard to believe a decade ago we had 
balanced budgets in this country. We had two of them in a row, 
I think, the first since 1968. And there were concerns about 
our paying down the debt, the Nation's debt too quickly, that 
it would somehow destabilize our economy. And it did not work 
out quite that way, as we know, and we found between 2001 and 
2008 we basically ran up as much new debt in our country as we 
did in the first 210 years of our Nation's history. And last 
year the deficit was even greater, and we are looking toward--
if we do not do something, we will end up doubling our Nation's 
debt again over the coming decade. That is not sustainable.
    What do we do about it? One of the things that the 
Administration, the President has called for, and what I would 
describe as a multi-pronged attack on the deficit: One, a 
freeze on overall non-security discretionary spending; second, 
convene a Deficit Reduction Commission, with a lot of good 
people, Democrats and Republicans, some very bright people on 
that Commission whose job is to come back to all of us later 
this year, all of us in the Congress, and say these are some 
things we think we might want to consider with respect to 
entitlement programs, Medicare, Medicaid, Social Security, and 
some of the other entitlement programs, too, to be able to save 
some money, and to look at revenues--we have a lot of--we call 
them the Bush tax cuts which expire, I think, later this year. 
The question is what do we do about those? So everything would 
be on the table, the entitlements and the expiring tax cuts.
    The third thing that the Administration has started 
focusing on--and this Subcommittee has certainly focused on it 
for several years, both when Senator Coburn was our Chairman 
and the last several years that I have been privileged to Chair 
this Subcommittee. But one of the things we tried to focus on 
is some people call it waste, fraud, and abuse. It is more than 
just that. It is just inefficient spending, in fact, an 
inefficient spending of taxpayers' dollars, and in some cases 
not taxpayers' dollars but monies that we borrow from all over 
the world.
    Among the things that we have begun to focus on are 
something called improper payments. As it turns out, we spent 
last year, Federal agencies--this is not including the 
Department of Defense or all of Homeland Security, but improper 
payments in the Federal Government, about almost $100 billion 
in 1 year, a lot of the overpayments. We are focused on trying 
to recover monies that have been overpaid, misappropriated, and 
going out and recovering those monies. I think we recovered in 
Medicare just in the last maybe 2 years, and just part of the 
Medicare program, Parts A and B, not C and D, but we have 
recovered about $600 million by just going after--we call it 
post-audit recovery for inappropriate spending. So the idea is 
not just to stop making improper payments but to go back, and 
after we have overpaid the monies, go out and recover it. And 
we provide to the--it is contractors, private contractors, who 
do the recovery. They get to keep maybe 10 cents on the dollar. 
That is their incentive for doing the work. We are going to 
extend that to not just Medicare Part A but Medicare Part A, 
Part B, Part C, and D, and also to work the same approach with 
respect to Medicaid, and now to extend that to--with the House 
voting, I think tomorrow, to pass our improper payments 
legislation which some of us have worked on for a long time, 
with the Administration and with the past Administration, we 
can increase our ability to go there and recover money and 
bring it back to the Treasury, bring it back to the Medicare 
trust fund.
    The major weapon systems, cost overruns a big factor here. 
If my memory serves me correctly, in 2001 the Department of 
Defense, as I said, major weapon system cost overrun in 2001 
was about $45 billion. That is a lot of money. I think in 2008 
it was $295 billion, which is a whole lot more money. And so 
part of that is F-22 and part of it is, frankly, weapon systems 
that we may not need any more of, and that could go to really 
good systems, like the C-17s.
    One of the ideas that is being discussed is whether or not 
to give this President enhanced rescission powers. Some 
describe it as almost statutory line-item veto powers, not to 
give them forever but maybe a 4-year test drive, see if it 
works, see if it is actually helpful, see if the President 
abuses that power and unbalances this balance between the 
Executive Branch and Legislative Branch.
    We have got a bunch of IT projects that actually deliver 
better service for less money to the people of this country. 
Unfortunately, we have a bunch of IT projects that do not, and 
they are way over budget, they are not meeting their advertised 
benefits for us.
    And another area that we have explored in the Subcommittee 
is the tax gap. The last time we heard, the IRS was saying, I 
think 2 years ago, that they felt the tax gap was about $300 
billion in any given year. That is monies that are owed to the 
Treasury that are not being collected, a fair amount of which 
they actually know who owes the money. And if we can only 
collect a third of that, that is $100 billion. That is a lot of 
money.
    And so if you add all that stuff together--the 3-year 
freeze on non-security discretionary spending, the Deficit 
Reduction Commission that we have got up and running to look at 
entitlement programs and the revenue side, consider improper 
payments, including the ability to go out and recover money 
that has been misappropriated or misspent, major weapon 
systems, enhancing the President's rescission power, try it out 
for maybe 4 years, and these failed IT projects that the 
Administration is focusing on, and the tax gap, just collecting 
more of the money that is owed. And one other that has always 
intrigued me is surplus properties. The Federal Government owns 
huge amounts of property, not just land, not just defense 
installations but all kinds of property that we do not use 
anymore, that are empty, we have to pay utilities, provide 
security, do some maintenance to maintain them. It does not 
make a whole lot of sense. And the idea that we can maybe 
encourage agencies to sell that stuff and reduce our costs, 
those are just some of the things that we are trying to do.
    When you put it all together, it is actually a pretty good 
program. Does that mean we are going to wipe out all that red 
ink that we are looking at down the line? No. But we would sure 
have a lot less than we would otherwise, and we need to do 
that. So your testimony is helpful in that effort, and we are 
grateful to you and to our first panel of witnesses for it.
    Again, over the next couple of weeks, you might hear some 
questions from our colleagues, who either were here or not 
here, and to the extent you can respond to those questions and 
take a look at the one question I asked about when you are 
promoting foreign sales, particularly our friends from CRS, if 
you could help us with that, we would be most grateful.
    I have asked our Republican colleagues here over my right 
shoulder if they have any questions and they wanted to use me 
as their mouthpiece to ask any other questions. I could not get 
them to do it. But they said they thought Senator McCain did a 
pretty good job, and I think he did as well.
    We look forward to having an ongoing dialogue with you, and 
thank you again for joining us today. With that, this hearing 
is adjourned. Thanks.
    [Whereupon, at 4:21 p.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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