[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


                                     

                         [H.A.S.C. No. 112-100]

                                HEARING

                                   ON
 
                   NATIONAL DEFENSE AUTHORIZATION ACT
                          FOR FISCAL YEAR 2013
                                  AND
              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                         FULL COMMITTEE HEARING

                                   ON

                        BUDGET REQUEST FROM THE

                         DEPARTMENT OF DEFENSE

                               __________

                              HEARING HELD

                           FEBRUARY 15, 2012


                                     
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                   HOUSE COMMITTEE ON ARMED SERVICES
                      One Hundred Twelfth Congress

            HOWARD P. ``BUCK'' McKEON, California, Chairman
ROSCOE G. BARTLETT, Maryland         ADAM SMITH, Washington
MAC THORNBERRY, Texas                SILVESTRE REYES, Texas
WALTER B. JONES, North Carolina      LORETTA SANCHEZ, California
W. TODD AKIN, Missouri               MIKE McINTYRE, North Carolina
J. RANDY FORBES, Virginia            ROBERT A. BRADY, Pennsylvania
JEFF MILLER, Florida                 ROBERT ANDREWS, New Jersey
JOE WILSON, South Carolina           SUSAN A. DAVIS, California
FRANK A. LoBIONDO, New Jersey        JAMES R. LANGEVIN, Rhode Island
MICHAEL TURNER, Ohio                 RICK LARSEN, Washington
JOHN KLINE, Minnesota                JIM COOPER, Tennessee
MIKE ROGERS, Alabama                 MADELEINE Z. BORDALLO, Guam
TRENT FRANKS, Arizona                JOE COURTNEY, Connecticut
BILL SHUSTER, Pennsylvania           DAVE LOEBSACK, Iowa
K. MICHAEL CONAWAY, Texas            NIKI TSONGAS, Massachusetts
DOUG LAMBORN, Colorado               CHELLIE PINGREE, Maine
ROB WITTMAN, Virginia                LARRY KISSELL, North Carolina
DUNCAN HUNTER, California            MARTIN HEINRICH, New Mexico
JOHN C. FLEMING, M.D., Louisiana     BILL OWENS, New York
MIKE COFFMAN, Colorado               JOHN R. GARAMENDI, California
TOM ROONEY, Florida                  MARK S. CRITZ, Pennsylvania
TODD RUSSELL PLATTS, Pennsylvania    TIM RYAN, Ohio
SCOTT RIGELL, Virginia               C.A. DUTCH RUPPERSBERGER, Maryland
CHRIS GIBSON, New York               HANK JOHNSON, Georgia
VICKY HARTZLER, Missouri             BETTY SUTTON, Ohio
JOE HECK, Nevada                     COLLEEN HANABUSA, Hawaii
BOBBY SCHILLING, Illinois            KATHLEEN C. HOCHUL, New York
JON RUNYAN, New Jersey
AUSTIN SCOTT, Georgia
TIM GRIFFIN, Arkansas
STEVEN PALAZZO, Mississippi
ALLEN B. WEST, Florida
MARTHA ROBY, Alabama
MO BROOKS, Alabama
TODD YOUNG, Indiana
                  Robert L. Simmons II, Staff Director
               Jenness Simler, Professional Staff Member
                Michael Casey, Professional Staff Member
                    Lauren Hauhn, Research Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2012

                                                                   Page

Hearing:

Wednesday, February 15, 2012, Fiscal Year 2013 National Defense 
  Authorization Budget Request from the Department of Defense....     1

Appendix:

Wednesday, February 15, 2012.....................................    59
                              ----------                              

                      WEDNESDAY, FEBRUARY 15, 2012
FISCAL YEAR 2013 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FROM THE 
                         DEPARTMENT OF DEFENSE
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

McKeon, Hon. Howard P. ``Buck,'' a Representative from 
  California, Chairman, Committee on Armed Services..............     1
Smith, Hon. Adam, a Representative from Washington, Ranking 
  Member, Committee on Armed Services............................     2

                               WITNESSES

Dempsey, GEN Martin E., USA, Chairman, Joint Chiefs of Staff.....    11
Panetta, Hon. Leon E., Secretary of Defense......................     5

                                APPENDIX

Prepared Statements:

    Dempsey, GEN Martin E........................................    76
    McKeon, Hon. Howard P. ``Buck''..............................    63
    Panetta, Hon. Leon E.........................................    66
    Smith, Hon. Adam.............................................    65

Documents Submitted for the Record:

    Letter to Chairman McKeon from Secretary Panetta, Dated 
      November 2, 2011 (Submitted by Mr. Turner).................    91
    Letter to Secretary Panetta from Chairman McKeon and Mr. 
      Turner, Dated September 13, 2011 (Submitted by Mr. Turner).    89
    Memorandum of Agreement between the Department of Defense and 
      the Department of Energy (Submitted by Mr. Turner).........    92

Witness Responses to Questions Asked During the Hearing:

    Mr. Bartlett.................................................    99
    Ms. Bordallo.................................................   100
    Mr. Hunter...................................................   101
    Mr. Johnson..................................................   101
    Mr. Kline....................................................   100
    Mr. Turner...................................................    99
    Mr. Wilson...................................................    99
    Mr. Wittman..................................................   101

Questions Submitted by Members Post Hearing:

    Ms. Bordallo.................................................   107
    Mr. Conaway..................................................   116
    Mr. Heinrich.................................................   120
    Mr. Langevin.................................................   106
    Mr. Loebsack.................................................   115
    Mr. Owens....................................................   121
    Mrs. Roby....................................................   126
    Mr. Ruppersberger............................................   122
    Mr. Schilling................................................   124
    Mr. Scott....................................................   126
    Mr. Smith....................................................   105
    Mr. Turner...................................................   107
    Mr. Wilson...................................................   105
    Mr. Wittman..................................................   118
FISCAL YEAR 2013 NATIONAL DEFENSE AUTHORIZATION BUDGET REQUEST FROM THE 
                         DEPARTMENT OF DEFENSE

                              ----------                              

                          House of Representatives,
                               Committee on Armed Services,
                      Washington, DC, Wednesday, February 15, 2012.
    The committee met, pursuant to call, at 10:05 a.m. in room 
2118, Rayburn House Office Building, Hon. Howard P. ``Buck'' 
McKeon (chairman of the committee) presiding.

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

    The Chairman. The hearing will come to order.
    Good morning, ladies and gentlemen. Thank you for joining 
us today as we consider the President's fiscal year 2013 budget 
request for the Department of Defense. To put this budget in 
context, it is critical to examine the strategy that has 
informed its submission.
    At the outset, I want our witnesses to know that I 
appreciate the hard work that went into the development of the 
strategy. It is no small effort to completely revise a strategy 
1 year after the submission of the Quadrennial Defense Review 
and less than 3 months after the submission of a budget 
request.
    However, I do have serious concerns about the trajectory 
that this new strategy puts us on. Although this strategy is 
framed as making the military more nimble and flexible, it is 
not clear how slashing the Armed Forces by over 100,000 during 
a time of war, shedding force structure and postponing the 
modernization makes that so. The President must understand that 
the world has always had and will always have a leader. As 
America steps back, someone else will step forward.
    We have now heard multiple times that the strategy drove 
the budget and not the other way around. I suppose this starts 
with the President's call to slash at least $400 billion from 
defense last April in advance of any strategic review. An 
honest and valid strategy for national defense can't be founded 
on the premise that we must do more with less or even less with 
less. Rather, you proceed from a clear articulation of the full 
scope of the threats you face and the commitments you have. You 
then resource the strategy required to defeat those threats 
decisively. One does not mask insufficient resources with a 
strategy founded on hope.
    Furthermore, the President's new defense strategy 
``supports the national security imperative of deficit 
reduction through a lower level of defense spending.'' The 
Administration appears committed to ensuring the military is 
the only sector of the Federal Government to meaningfully 
contribute to deficit reduction.
    Simultaneously, the budget proposes additional spending by 
diverting savings from declining war funding to domestic 
infrastructure spending. How can you save by not spending money 
that wasn't in the budget to begin with? This is a cynical 
gimmick that once more ensures our military, and only our 
military, is held responsible for what little deficit reduction 
this budget represents.
    White House Chief of Staff Jack Lew said, the time for 
austerity is not today. Ask the 124,000 service members who 
will have to leave the military how they feel about that.
    The President's budget is a clear articulation of his 
priorities. The President's budget asks the men and women in 
uniform, who have given so much already, to give that much more 
so that the President might fund more domestic programs.
    The President claimed that the budget would rise every year 
but ignores the fact that this request is $46 billion less than 
what he said he needed last year and more than $5 billion less 
than what was appropriated for fiscal year 2012. Furthermore, 
despite the new strategy's goal of pivoting to Asia, a theater 
where naval assets and airlift are decisive, the budget calls 
for retiring 9 ships, removes 16 more from the new construction 
plan, and cuts our airlift fleet by hundreds.
    This isn't the only place where the President's public 
statements and missions seem to diverge. We cannot neglect the 
war. The President was committed to counterinsurgency strategy 
in 2009, yet inexplicably, and certainly not based on the 
advice of his commanders, announced our withdrawal date and to 
pull out the surge forces before the end of the next fighting 
season.
    Mr. Secretary and Chairman Dempsey, before the President 
makes another announcement about troop withdrawals, I implore 
you to heed our commanders' advice. We are seeing success. 
Let's not make a decision to pull some of the remaining 68,000 
troops before we see what happens this fighting season. Let's 
wait to reassess any more force level decisions until the end 
of the year.
    I have more questions, but with that, I will conclude. 
Thank you again for being here. I look forward to your 
testimony and call now on Ranking Member Smith for his opening 
statement.
    [The prepared statement of Mr. McKeon can be found in the 
Appendix on page 63.]

STATEMENT OF HON. ADAM SMITH, A REPRESENTATIVE FROM WASHINGTON, 
          RANKING MEMBER, COMMITTEE ON ARMED SERVICES

    Mr. Smith. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary and General Dempsey for being 
here. And I applaud you for the effort that you've put in, of 
course, over the last year. This did start quite some time ago 
with a major strategic review of our military and our national 
security needs that was, as has been documented, a very 
holistic transparent process, in which you brought in all of 
the military leaders and really sat down and thought about what 
our national security needs are going to be for the next 10 
years.
    The strategy, without question, was where this whole 
process started, and I applaud you for that. And you have laid 
out a very clear and coherent strategy. Now when it comes to 
the budget numbers, I think it is important to take a step back 
and have a little perspective on exactly what they are.
    The defense budget has doubled over the course of the last 
10 years. The budget that has been put before us, as the 
chairman points out, will be increasing the defense budget 
every year from this year forward. We hear about these cuts. 
These cuts are from what was projected to be needed to be spent 
a year or two ago. They are not actual cuts, with the sole 
exception of this year.
    Yes, after doubling the defense budget over the course of 
the last 10 years, not even counting the overseas contingency 
operations money, this one year, we go from $530 billion last 
year to $525 billion, and then it goes up every single year for 
the next ten. It is part, I guess, of sort of ``Washington-
think'' that when you increase the budget, you can call it a 
cut. You know, it is a decrease in the increase, perhaps, but 
it is an increase nonetheless. So we have to keep those numbers 
in perspective.
    I think it is also worth pointing out that over the course 
of the last 10 years, I don't think there is a single person on 
this committee who would argue that we have done an outstanding 
job of efficiently and effectively spending those dollars on 
the defense budget. Anybody who would argue that we can't go 
back and look at our acquisition and procurement process and do 
it much better, do it in a way that is actually going to 
deliver more capable pieces of equipment at less money, and 
that is what these gentlemen have done if they have taken a 
look at those last 10 years and figured it out how to do it 
better.
    Now I am not going to be overly critical of those last 10 
years; 9/11 happened, and we had to respond. We had to fund the 
military. And when you have to act that fast, mistakes will be 
made. And I know the people who were making those decisions 
back then did their level best in a very difficult time.
    But to not learn from that experience 10 years later and 
figure out a way to spend that money, that would be a betrayal 
of our job and of the job of the people in the Pentagon, so I 
applaud you for doing that. I think we have a budget that did 
put the strategy first that puts us in the right direction. And 
then also I will point out that this is the law.
    The budget numbers that we have projected for the next 10 
years and that Secretary Panetta and General Dempsey had to 
live under were passed by this Congress. Now I know some 
Members of the committee voted for it and some Members didn't, 
but it is the law of the land, passed by the House and the 
Senate. The $487 billion reduction in the projected increases 
is the law that these people had to follow and that we passed 
and gave to them.
    So as we hear today about various different programs and 
areas where we think that this budget is cutting too much, it 
would be most helpful--and I doubt this will happen, but I will 
ask for it anyway--that if, as people are making those 
criticisms, they point out where they would like to find the 
money, either within the defense budget, you can say, okay, 
your strategy is all right, but you should have spent more 
money here and less money there.
    Or if you don't think that is possible within the defense 
budget, then by all means, let us know what taxes you want to 
raise to produce more money, or if you don't want to do that, 
what other programs, preferably with some specificity, instead 
of just generally saying we would like to spend less money on 
government, that you are going to cut. Otherwise, this is just 
an exercise in imagining that we have more money than we 
actually do.
    These gentlemen didn't have that luxury. They had to put 
together a budget based on the law that we gave them. And 
again, I will emphasize I think they did a very good job of it. 
They put out a strategy that understands how the world is 
changing. The main threats that we are going to face are going 
to be asymmetric nonstate terrorist threats, and then also 
Iran, North Korea, their missile technology--we need a 
different sort of military to confront that than the one that 
fought two major land wars in the last 10 years.
    This strategy reflects those changes. To give one example, 
the Special Operations Command will keep going up because we 
know how critical they are to precisely the fight that we face. 
They are going to increase that ISR [intelligence, 
surveillance, and reconnaissance] capability, through unmanned 
aerial vehicles and other sources, also going up to make sure 
that we meet the needs that are in front of us.
    Now there are a lot of other things that aren't going up, 
but that is because things have changed. We need a new strategy 
to confront the threats that we did, and in a difficult budget 
environment, you guys did that and put together a very good 
strategy.
    So I hope we will have a realistic conversation. And if 
more money wants to be spent here, tell us where we should find 
it and tell us how to balance that out. You never forget that 
it is also in our national security interest to have a strong 
economy and a fiscally responsible Government. And if we don't 
have those things, the strongest military in the world will not 
be able to protect us.
    So this is a very interesting debate that we are going to 
have over the course of the next several months. I look forward 
to the comments from the Members of this committee and from the 
Secretary and the General. We have a lot of difficult work to 
do, but I think we are off to a good start, and I look forward 
to working with everybody on the committee and at the Pentagon 
to get the job done for the American people. Thank you.
    [The prepared statement of Mr. Smith can be found in the 
Appendix on page 65.]
    The Chairman. Thank you.
    We are fortunate to have us today our Secretary of Defense, 
the Honorable Leon E. Panetta, from the U.S. Department of 
Defense; General Martin E, Dempsey, United States Army, 
Chairman, Joint Chiefs of Staff; the Honorable Robert F. Hale, 
the Under Secretary of Defense (Comptroller) of the Department.
    Thank you, gentlemen, for being here.
    Mr. Secretary, the time is yours.

    STATEMENT OF HON. LEON E. PANETTA, SECRETARY OF DEFENSE

    Secretary Panetta. Thank you, Chairman McKeon, Congressman 
Smith, Members of this committee.
    It is always nice to be able to return to the House. It was 
my home in the past, and I still consider it one of the good 
moments of my history in public service.
    If I could ask that my statement be made part of the 
record, and I will try to summarize it as briefly as I can.
    The Chairman. No objection, so ordered.
    Secretary Panetta. I appreciate the opportunity to appear 
before you to discuss the President's budget request for the 
fiscal year 2013 for the Department of Defense.
    Let be begin, first of all, by thanking all of you for the 
support that you provide to our service members and to their 
families. These brave men and women--and they are, for anybody 
who has gone to the battlefield or talked to those in uniform, 
they are without question the next greatest generation of 
individuals--along with the Department's civilian professionals 
who support them, they have done everything that has been asked 
of them and more during more than a decade of war. And again, I 
thank you for the support that you have provided to them.
    The fiscal year 2013 budget request for the Department of 
Defense was, indeed, a product of very--of a very intensive 
strategy review that was conducted by the senior military and 
civilian leaders of the Department. All the service chiefs, all 
of the combatant commanders participated in this effort. We 
also had the advice and guidance from the national security 
team and the President as well.
    The total request represents a $614 billion investment in 
national defense. It includes $525.4 billion requested for the 
Department's base budget and $88.5 billion in spending in 
support of our troops in combat.
    The reasons for this review are clear. First, the United 
States is at a strategic turning point after a decade of war 
and obviously a very substantial growth in defense budgets. 
But, second, with the Nation confronting very large debts and 
very large deficits, Congress passed the Budget Control Act of 
2011, imposing by law on us, by law, a reduction in the defense 
budget of $487 billion over the next decade.
    We at the Department decided to step up to the plate to 
abide by the law and to use this crisis as an opportunity to 
try to establish a new strategy for the force of the future, 
and that strategy has guided us in making the budget choices 
that are contained in the President's budget. The fact is that 
we are at a turning point that would probably have required us 
to make a strategic shift under any circumstances.
    The U.S. military's mission in Iraq has ended, but we still 
have a tough fight on our hands in Afghanistan, but 2011 marked 
significant progress in reducing violence and transitioning to 
Afghan-led responsibility for security. And we are on track to 
complete that transition by the end of 2014. The NATO [North 
Atlantic Treaty Organization] ministers, ISAF [International 
Security Assistance Force], all of the NATO countries are 
unified in this strategy, and we are abiding by our Lisbon 
commitments.
    Last year, the NATO effort in Libya also concluded with the 
fall of Gadhafi, and successful counterterrorism efforts have 
significantly weakened Al Qaeda and decimated its leadership.
    But despite what we have able to achieve, unlike past 
drawdowns, where threats have receded, the United States still 
faces a complex array of security challenges across the globe. 
We are still a nation at war in Afghanistan. We still face 
threats to our homeland from terrorism. There is a dangerous 
proliferation of lethal weapons and materials.
    The behavior of Iran and North Korea continues to threaten 
global stability. There is continuing turmoil and unrest in the 
Middle East from Syria to Egypt to Yemen and elsewhere. Rising 
powers in Asia are testing international rules and 
international relationships, and there are growing concerns 
about cyber intrusions and cyber attacks.
    Our challenge must be to meet these threats; to meet these 
threats, protect our Nation and our people, and at the same 
time meet our responsibility to fiscal discipline. This is not 
an easy task. It is a tough challenge.
    To build the force we need for the future, what we decided 
to do is develop a new strategic guidance that consists of the 
following five key elements: Number one, the military will be 
smaller, and it will be leaner, but it should be agile. It 
should be flexible, ready to deploy quickly and technologically 
advanced.
    Second, we have to rebalance our global posture and 
presence to emphasize Asia-Pacific and the Middle East. These 
are the areas of greatest concern in the future.
    Third, for the rest of the world we need to build 
innovative partnerships and strengthen key alliances and key 
partnerships from Europe to Latin America to Africa.
    Fourth, we will ensure that we have the capability to 
quickly confront and defeat aggression from any adversary, 
anytime, anywhere.
    And, fifth, this can't just be about cuts, it has to be 
about investments. What do we protect and prioritize in terms 
of investments, in technology and new capabilities, as well as 
our capacity to grow, adapt and mobilize as needed.
    While sharing this strategy and shaping the strategy, we 
didn't want to make the mistakes of the past. And every time we 
have gone through these drawdowns there have been serious 
mistakes that have been made. Our goal was to maintain the 
strongest military in the world, to not hollow out the Force. 
That is extremely important: To not hollow out the Force, which 
means to maintain a large force structure and then cut training 
and equipment and all the other things that are essential to 
make that a first-rate force. Thirdly, to take a balanced 
approach to budget cuts, put everything on the table and look 
at every area in the Defense Department budget. And, lastly, to 
not break faith with the troops and their families, people that 
have been deployed time and time again to the battlefield.
    Throughout the review, we also made sure that this was an 
inclusive process. General Dempsey, as Chairman, and I worked 
closely with the leadership of the Services, combatant 
commanders and consulted regularly with Members of Congress as 
well as the President and members of the Administration. As a 
result of these efforts, the Department is strongly unified 
behind the recommendations that we are presenting today.
    Consistent with the Budget Control Act, this budget 
reflects $259 billion in savings in the first 5 years. We 
obviously project meeting our $487 billion number over 10 
years, but in the budget we present to you, it is the 5-year 
cycle, and that includes $259 billion in savings.
    It is a balanced and complete package, and as I said, it 
follows the key elements that we laid out in our strategy. The 
savings come from three areas. First, efficiencies; second, 
force structure and procurement reforms and adjustments; and, 
finally, compensation. Compensation is an area that has grown 
by 90 percent, and we felt that we had to achieve some cost 
controls in the future there as well.
    Let me just quickly go through each of those areas. If we 
tighten up the force, then I think we have a responsibility to 
tighten up the operations of the Department by reducing excess 
overhead, eliminating waste and improving business practices 
across the Department. As you know, the fiscal year 2012 budget 
proposed about $150 billion in efficiencies over 5 years, and 
we are in the process of implementing those changes.
    But we felt we could do more, so we have identified another 
$60 billion in additional savings over the next 5 years through 
measures such as streamlining support functions, consolidating 
IT [information technology] enterprise services, rephrasing 
military construction projects, consolidating inventories and 
reducing service support contractors. As we reduce force 
structure, we also have a responsibility to try to provide the 
most cost-efficient support for the force. And that is the 
reason the President will request Congress to authorize the 
Base Realignment and Closure process for 2013 and 2015.
    Look, as somebody who has gone through BRAC [Base 
Realignment and Closure], and I went through it in my district 
and know what it means and know the impact that it can have, it 
is a controversial process that impacts on Members and impacts 
on their constituencies. I understand that. And, yet, it is the 
only effective way to try to achieve the needed infrastructure 
savings that we have to achieve in the long run.
    Lastly, to provide better financial information, we are 
also increasing our emphasis on audit readiness and 
accelerating key timelines. In October of 2011, I directed the 
Department to accelerate the efforts to achieve fully auditable 
financial statements. Originally, under a mandate, we were 
supposed to do that by 2017; I asked that it be done by 2014.
    But efficiencies alone are not enough to achieve the 
required savings and that is obviously why we had to make 
significant adjustments to force structure and procurement 
investments. But we did it in line as, again, with the 
strategies that we put in place. And let me quickly walk 
through those. First, we knew that coming out of the wars, the 
military would be smaller.
    Our approach to accommodating these reductions was to use 
this as an opportunity, as tough as it is, to fashion an agile 
and flexible military that we will need in the future. We have 
got to have an adaptable and battle-tested army that is there 
for decisive action and capable of defeating an adversary on 
land and also at the same time be innovative.
    We need a Navy that maintains forward presence and is able 
to penetrate enemy defenses; a Marine Corps that is a middle-
weight expeditionary force with reinvigorated amphibious 
capabilities; an Air Force that dominates air and space and 
provides rapid mobility in global strike and persistent ISR; 
and a National Guard and Reserve that can continue to be ready 
and prepare for operations when needed.
    To ensure an agile force, we made a conscious choice--that 
we have decided not to maintain more force structure than we 
could afford to properly train and equip. That was the point I 
made about not doing something that hollows out the Force.
    We are implementing force structure reductions that are 
consistent with this strategic guidance for a total savings of 
about $50 billion over the next 5 years. The biggest pieces of 
that include resizing the Active Army, where at 562,000, we 
will be going down to about 490,000 by 2017. This will be 
gradual, and at that point, it will be a level that will still 
be higher than pre-9/11.
    Same thing is true for the Marine Corps. We will go from 
202,000 to 182,000 marines. We will also reduce and streamline 
the Air Force's airlift fleet, basically going after aging C-
5As and C-130s but will still remain a fleet of 275 strategic 
airlifters and 318 C-130s.
    The Navy will protect a fleet of 285 ships and protect our 
highest priority and most flexible ships, but we will be 
retiring 7 lower priority Navy cruisers that, frankly, need to 
be upgraded with ballistic missile defense capability. That 
hasn't happened, and it would require significant repairs in 
order to do that.
    Second, the strategic guidance made clear that we have got 
to protect our capabilities and project our power to Asia-
Pacific and the Middle East. To this end, we have maintained 
the current bomber fleet. We maintained the aircraft carrier 
fleet, 11 ships and 10 air wings. We maintained the big deck 
amphibious fleet. We restore Army and Marine Corps forces 
structure in the Pacific. After the drawdown from Iraq and the 
drawdown in Afghanistan, we are going to maintain a strong 
presence not only in the Pacific but in the Middle East as 
well.
    This budget also makes selected new investments to ensure 
that we develop new capabilities, $300 million to fund the 
next-generation Air Force bomber; $1.8 billion to develop the 
new Air Force tanker; $18.2 billion for the procurement of 10 
new warships.
    Third, this strategy makes clear that even though Asia-
Pacific and the Middle East are the areas of greatest concern 
and priority, the United States will work to strengthen our key 
alliances, build partnerships and develop innovative ways, such 
as rotational deployments, to sustain U.S. presence elsewhere 
in the world.
    With regard to NATO, we will be investing almost $200 
million in the NATO Alliance Ground Surveillance System and 
$9.7 billion to develop and deploy missile defense capabilities 
that protect the U.S. homeland and strengthen regional missile 
defenses.
    Fourthly, the United States must have the capability to 
fight more than one conflict at a time. This is essential. But 
we are in the 21st century, and 21st century combat is a lot 
different. And we need to have the capabilities to deal with 
threats in the 21st century. That means we need to invest in 
space, in cyberspace and long-range precision strikes and the 
continued growth of Special Operations Forces to ensure that we 
can still confront and defeat multiple adversaries, even with 
the force structure reductions that we have outlined. Even with 
some of the adjustments to force structure, this budget 
sustains a military that we believe is the strongest and will 
remain the strongest in the world.
    We will have an Army of more than 1 million Active and 
Reserve soldiers, 18 divisions, 65 brigade combat teams, 21 
combat aviation brigades. We will have well a Navy battle force 
of 285 ships that will remain the most powerful and flexible 
naval force on Earth. We will have a Marine Corps with 31 
infantry battalions, 10 artillery battalions, and 20 air 
tactical squadrons; and an Air Force that will continue to 
ensure air dominance with 54 combat coded fighter squadrons in 
the current bomber fleet.
    Lastly, we have to invest. If we are going to leap ahead of 
our adversaries technologically, we have got to be able to have 
some key investments in new technologies. We provide $11.9 
billion for science and technology research; $2.1 billion for 
basic research; $10.4 billion to sustain continued growth in 
Special Operations Forces; $3.8 billion for unmanned air 
systems; and $3.4 billion for cyber activities.
    Let me also mention a key element that we absolutely have 
to maintain, which is a strong, capable and ready National 
Guard and Reserve. To that end, we are going to retain--we have 
asked the Army to retain mid-level officers and NCOs 
[noncommissioned officers], so that the structure and 
experienced leaders will be there if we have to mobilize and 
regrow the Force quickly.
    Another important element is to preserve our ability to 
quickly adapt and mobilize a strong and flexible industrial 
base. We have got to have an industrial base for the future. 
This budget recognizes that industry is our partner in the 
defense acquisition enterprise.
    And, finally, to the most fundamental element of our 
strategy and our decisionmaking process, our people, far more 
than any weapons system or technology, the greatest strength of 
the United States is our military, the men and women in 
uniform.
    One of the guiding principles in our decisionmaking process 
was to keep faith with them and their families. So we are 
protecting family assistance programs. We are protecting basic 
benefits. We are sustaining important investments in the budget 
to try to assist our troops with their needs and the needs of 
their families. Yet, in order to build the force needed to 
defend the country under existing budget constraints, the 
growth in costs in military pay and benefits has to be on a 
sustainable course. As I said, this is an area of the budget 
that has grown by 90 percent. We have got to implement some 
efforts to try to control those costs in the future.
    The budget contains a roadmap to address the costs of 
military pay and health care and retirement in ways that we 
believe are fair, transparent, and consistent with our 
fundamental commitment to our people.
    Let me conclude by saying this, Members of the committee: 
This, as I said, has not been an easy task. Putting together 
this kind of balanced package has been a difficult undertaking 
for everyone, but at the same time, we have viewed it as a very 
important opportunity to try to shape the force we need for the 
future. I believe that all of us, the Service chiefs and the 
combatant commanders have developed a complete package here 
aligned to achieve our strategic aims and at the same time meet 
our responsibility to fiscal discipline.
    As you look at the individual parts this plan--and I urge 
you to do that, look at every element of the plan that we have 
submitted--I encourage you to bear in mind the strategic 
tradeoffs that are inherent in any particular budget decision.
    This is a zero-sum game, and as far as I know, there is no 
free money around, and the need to balance competing strategic 
objectives has to take place in a resource-constrained 
environment. We need your support and partnership. We look 
forward to that.
    I understand these are tough issues, and I also understand 
that this is the beginning, not the end, of this process.
    But this is what Congress mandated. The majority of this 
committee voted for the Budget Control Act. We are mandated 
under law to meet these requirements of almost a half a 
trillion dollars in savings over the next 10 years. We have 
taken that responsibility seriously. We need your partnership 
to do this in a manner that preserves the strongest military in 
the world. This will be a test for all of us, whether reducing 
the deficit is about talk or about action.
    And, let me finally be very clear. When you take a half a 
trillion dollars out of the defense budget, it comes with risk. 
We think they are acceptable risks. But, nevertheless, there 
are risks here. We are dealing with a smaller force. We are 
going to have to depend on the speedy mobilization. We are 
going to have to depend on new technologies. We are going to 
have to take care of troops coming home to make sure that they 
have jobs and have the support that they need.
    There is very little margin for error in this budget.
    This is why Congress must do everything possible to make 
certain that we avoid sequestration. That would subject the 
Department to roughly another $500 billion in additional cuts 
that would take place through a meat-axe approach and that we 
are convinced would hollow out the Force and inflict serious 
damage to the national defense.
    So the leadership of this Department, both military and 
civilian, is united behind this strategy that we presented and 
the budget that we are presenting, but we look closely to 
working with you in the months ahead to do what the American 
people expect of their leaders, to follow the law, to do our 
part in reducing the deficit, to be fiscally responsible but 
also to develop a force that can defend this country, a force 
that supports our men and women in uniform and a force that is 
and always will be the strongest military in the world.
    Thank you, Mr. Chairman.
    [The prepared statement of Secretary Panetta can be found 
in the Appendix on page 66.]
    The Chairman. Thank you very much.
    General Dempsey.

STATEMENT OF GEN MARTIN E. DEMPSEY, USA, CHAIRMAN, JOINT CHIEFS 
                            OF STAFF

    General Dempsey. Chairman McKeon, Congressman Smith 
distinguished Members of this committee, thank you for the 
opportunity to discuss the President's defense proposed budget 
for fiscal year 2013.
    I would like to begin by saying this budget represents a 
responsible investment in our Nation's security. At its core, 
it is an investment in our people, the sons and daughters of 
America who serve this Nation in uniform.
    Allow me to open with a few words about them and what they 
have accomplished. The last 10 years of war have been among the 
most challenging in our history.
    Through it all, the Joint Force has persevered, and it has 
prevailed. Our families have stood with us deployment after 
deployment after deployment, and so have you. Together, we have 
fulfilled our solemn vow to protect and defend America, her 
citizens and her interests.
    As I sit with you today, our service men and women remain 
globally engaged. They are deterring aggression, developing 
partners, delivering aid, and defeating our enemies. They stand 
strong, swift, and ready in every domain every day. I had the 
privilege to be with a few of them while traveling to 
Afghanistan and Egypt earlier last week.
    As always, I witnessed extraordinary courage and skill in 
the young soldiers just off patrol in the deep snows of the 
Hindu Kush, and the men and women of the NATO training mission 
managing the development of the Afghan National Security Forces 
and the brave and vigilant Marine security detachment in our 
embassy in Cairo, and in the superb junior airmen who flew us 
to the right place at the right time. They exemplify a 
professional military with a remarkable and reliable record of 
performance.
    In just the past year, for example, we further crippled Al 
Qaeda. We helped protect the Libyan people from near certain 
slaughter, while affirming NATO's important role beyond the 
borders of Europe. We brought to a close more than 20 years of 
military operations in and over Iraq. And like we did in Iraq, 
we are steadily transitioning responsibility for security onto 
Afghan shoulders. And, of course, as you recall, we helped 
Japan recover from a perfect storm of tragedy and destruction.
    And, of course, these were just the most visible 
accomplishments. Behind the scenes and beneath the surface, we 
defended against cyber threats. We have sustained our Nation's 
nuclear deterrent posture, and we worked with allies and 
partners to build capacity and to prevent conflict across the 
globe. We continue to provide this Nation with a wide range of 
options for dealing with the security challenges that confront 
us. And in an increasingly competitive, dangerous and uncertain 
security environment, we must remain alert, responsive, 
adaptive, and dominant.
    This budget helps us to do that. It is informed by a real 
strategy that makes real choices. It maintains our military's 
decisive edge, and it sustains our global leadership.
    Moreover, it ensures we keep faith with the true source of 
our strength, and that is our people.
    With this in mind, allow me to add just a few additional 
comments to those of the Secretary. First, this budget should 
be considered holistically. It is really a joint budget for a 
Joint Force rather than individual Service budgets formed 
parochially. It presents a comprehensive, carefully devised set 
of decisions. It achieves balance among force structure, 
modernization, pay, and benefits. Changes that aren't informed 
by that context, the context of jointness, risk upending the 
balance that I have just described and potentially compromising 
the Force.
    Second, this budget represents a way point, not an end 
point, in the development of the Joint Force we will need for 
2020 and beyond. It puts us on a path to restore versatility at 
an affordable cost. Specialized capabilities that were once on 
the margins become more central, even while we retain and must 
retain our conventional overmatch. It builds a global and 
networked Joint Force that is ably led and always ready.
    And, third, this budget does honor our commitments made to 
our military family. It keeps faith with them. There are no 
freezes or reductions in pay. There is no lessening in the 
quality of health care received by our Active Duty service 
members and our medically retired wounded warriors. Now that 
said, we simply can't ignore the increasing cost of paying 
benefits. To manage costs, we need pragmatic reform. All of 
this can be done in a way that preserves our ability to recruit 
and then retain the best of America's talented youth.
    Finally, all strategies and the budgets that support them 
carry risk. This is no different. In my judgment, the risk in 
this strategy and budget lies not in what we can do but in how 
much we can do and how often we can do it. This budget helps us 
buy down this risk by investing in our people and in the joint 
capabilities they most need.
    To close, thank you. Thank you for keeping our military 
strong, thank you for taking care of our military family, for 
supporting those who serve, who have served and importantly who 
will serve.
    I know you share my pride in them, and I look forward to 
your questions.
    [The prepared statement of General Dempsey can be found in 
the Appendix on page 76.]
    The Chairman. Thank you very much.
    Thank you for your testimony. Thank you for your service. 
Thank you for doing a great job in a very difficult situation.
    You have mentioned the Deficit Reduction Act, and Mr. Smith 
mentioned it. And again, many of us voted for it; some didn't. 
The Deficit Reduction Act called for serious reductions in our 
spending.
    I understand the results of the last election and people 
said you have got to go to Washington and get our financial 
spending in order. Everything needs to be on the table, defense 
included. And I don't think anybody would argue with a budget 
as large as we have in the Defense Department that we can't 
find savings. And this is a huge, a huge cut.
    Defense accounts for 20 percent of our overall budget. And 
the first tranche of the savings that we voted on in the 
Deficit Reduction Act, 50 percent of the savings come out of 
defense. So I would say that we have given and given a lot out 
of defense.
    And then the sequestration, I mean, when we voted for the 
deficit reduction, we were told that the ``super committee'' 
[Joint Select Committee on Deficit Reduction], that the 
sequestration was so bad that it would force the super 
committee to do its work to find other savings in the 
entitlement programs, which is where the real problem is 
anyway. Because if we eliminated all defense spending, if we 
eliminated all education spending, if we eliminated all 
transportation spending, if we eliminate the total 
discretionary budget, we would still be running a deficit of 
over half a trillion dollars.
    So, all of this talk, all of this agony of going through 
all of these cuts, which are very significant, don't really 
address the real deficit problem. It is not the Defense 
Department that is putting us into a very precarious situation 
in spending.
    Having said that, you have stepped up to the plate. You 
have found the cuts over the next 5 years that are very 
serious, and you have devised the strategy the best way you can 
to meet the threats that we can meet given the cuts.
    Just a couple years ago, before you got here, Mr. 
Secretary, before you got here, Mr. Chairman, Secretary Gates 
in that same seat was saying that we had to, over the next 5 
years, have a 2-percent growth over inflation, or we would have 
to reduce the size of the Force.
    Well, that has come to pass because we not only are not 
having a 2-percent growth over inflation; we are actually 
having a reduction when you consider inflation. And your report 
from the Department points that we are going to have negative 
real growth over the next 5 years based on this budget when you 
take into account inflation.
    So we understand that, and we are going to work through 
that, and you have stepped up and said that the military can 
live with this. But the sequestration we cannot live with. I 
think we are all in total agreement on that.
    So I have a question. The way we are moving forward right 
now, there is nothing in this budget to deal with sequestration 
except a possible tax increase if that is needed at the end of 
the day.
    This budget that we will be dealing with kicks in, starts 
with the new fiscal year on October 1. Being realists, I think 
all of us understand that we are probably not going to have 
that budget. The Senate says that they are not going to pass 
one, and we will do ours on the House side. But being an 
election year, I think we probably understand we are not going 
to have a normal year.
    We haven't had a normal year for years, so maybe we are 
going to have a normal year, and we will be with a CR 
[Continuing Resolution] from October 1, at least through the 
election. And, you know, I don't know how we will come back and 
deal with this in January.
    But in January, the sequestration kicks in. Now you have 
had 6, 7, 8 months to really work on this budget, to go through 
a strategy and budget, and you have done exhaustive work to 
come up with this budget. A week or so ago, we had Dr. Carter 
and Admiral Winnefeld, the secretaries of the Services and the 
chiefs. And one of the Members of this committee asked Dr. 
Carter what he had done, what was being done to plan for 
sequestration. His answer was basically we don't have to do any 
planning for it. All we have to do is pull out the budget and 
take 8 percent off of every line item.
    I think everybody in here probably understands the chaos 
that would create. I don't know how many contracts the 
Department has; I know it is hundreds. Those would all have to 
go back and be renegotiated. Pensions, retirement plans, health 
insurance, all of the things that would have to be dealt with, 
further force reduction immediately. And given that we have got 
the CR hanging over us and then sequestration kicking in--I, 
Mr. Secretary, talked to you about this.
    I put in a bill--this is going to be serious, dealing with 
everything that we are talking about here today, the 
sequestration just takes it right over the top. And we are 
looking at all the news reports that we are hearing, the saber-
rattling going on over in Iran, the new leadership in Korea, I 
mean, I think the world is in a very, very serious situation.
    And I know, General, you have told us in a meeting a couple 
weeks ago that in your 37 years, this is the most serious you 
have ever seen it.
    So I think these are serious questions.
    My bill would move, would pay for the first year of 
sequestration, which moves it back a year. It does it with as 
little pain as possible through attrition, decreases the size 
of the Federal workforce.
    But I am asking you, Mr. Secretary, if this is something 
you could support, trying to fix sequestration now instead of 
having all of the people that will be laid off this year in 
preparation for next January, if it wouldn't be better to move 
ahead and fix that now, deal with it now, not wait for the 
December 31 deadline and that would still give us then next 
year to work on next year's problems and sequestration.
    Secretary Panetta. Mr. Chairman, as I have said time and 
time and time again, sequestration is a crazy process that 
would do untold damage to our national defense. It is a 
mechanism that would do, you know, just kind of blindsided cuts 
across the board and would really hollow out the Force. So I am 
prepared to work with you in every way possible to try to work 
on both sides to try and develop an approach that would de-
trigger sequestration. My hope was frankly that the super 
committee would take that responsibility and do that. I think 
that is what everybody's hope was.
    That didn't happen and that really concerned me. And so 
whatever, whatever we can do on both sides to try to develop an 
approach that would de-trigger sequester and avoid that kind of 
horrific result, I am certainly prepared to work with you on 
that.
    The Chairman. Thank you. Thank you very much.
    Mr. Smith.
    Mr. Smith. Thank you, Mr. Chairman.
    I will point out that the overall budget that the President 
submitted contained $3 trillion in 10-year savings so that if 
that budget were passed, that more than meets the $1.2 
[trillion] that was required to avoid sequestration. So there 
was a plan put on the table, and I share the chairman's remarks 
that the sooner we resolve that overall issue, the better for 
all concerned, whatever that plan may wind up looking like.
    And I wanted to just get a couple more comments from you 
about BRAC, because you have seen since that discussion 
started, it has not been greeted warmly on the Hill, to put it 
mildly, except by me. I think I might be the only one I think 
who has had a single positive thing to say about it. And I just 
sort of looked at it logically and said, you know, if we are 
shrinking the force by the size that we are in reaction to the 
fact that Iraq is done, Afghanistan is winding down, we are 
moving two brigades out of Europe. We are making substantial 
changes within the strategy.
    I mean, regardless of the debate about the budget, we are 
going to be moving things around. I mean, logically, there is 
no way we can do that without doing some closures and 
realignments; I just don't see where it is possible. I 
certainly have a large number of bases in my State and various 
degrees of vulnerability. And I understand that, but it has to 
be done as far as I can see. So I will maybe give you just a 
minute or two to make another pitch for why we at least need to 
be at least a little bit more open to what, in my mind, is an 
absolutely necessary step.
    Secretary Panetta. Well, I mean, it goes to the point that 
as we make the reductions that I think will take place under 
any circumstances as a result of some of the drawdowns in the 
wars that we are engaged in, we are going to have units 
returning or coming back that will be drawn down.
    That means that the force that we maintain will need less 
infrastructure to support it. That is just a reality.
    How do you make the decision as to what parts of that 
infrastructure ought to be reduced or changed or eliminated? 
That has been--frankly, that has been a challenge as long as I 
have been in this town to try to make those decisions. And 
ultimately what happened was that someone developed the BRAC 
process as a way to effectively do that by putting all of these 
decisions in one package and having an up-or-down vote.
    I was a part of going through three BRAC processes. I had 
installations in my district and one of those BRACs eliminated 
Fort Ord in my district, which represented 25 percent of my 
local economy. So I know the impact that the BRAC process has. 
At the same time, we were able to establish a campus of the 
California State university system there and reuse that area 
and, frankly, came out on the better end of the deal.
    But, nevertheless, it is a tough process to go through. And 
yet, you know, standing back, I can't see a better way to do 
this other than BRAC, because if you try to do this on a 
piecemeal basis, you know, we know what is going to happen: It 
is not going to go anywhere. The only effective way to deal 
with it is to put it in this kind of package.
    But, by the way, I also understand the costs involved. You 
know, BRAC costs a hell of a lot of money to do cleanup and all 
the other things need to be done.
    Mr. Smith. That should be done. This is not about, you 
know, this is a way we can save money. We know it is not in our 
previous five experiences. Now, in the long term, it does save 
money. You better keep that in mind.
    Secretary Panetta. Yes.
    Mr. Smith. Yes, for the 5-, 10-year numbers, the long term 
matters. It is more about making sure you have the force 
structure and basing system that you need to support your 
National Security Strategy.
    Secretary Panetta. That is right.
    Mr. Smith. Thank you. I just want to make one quick 
editorial comment on Guam and just, you know, for you to be 
clear. I know we are doing the realignment in the Pacific. 
There are still some details to work out, just primarily of our 
negotiations with Japan, what to do about Okinawa and 
elsewhere, and I know there has been a significant reduction in 
what is going to go, the number of marines that are going to go 
to Guam from the previous plan.
    Mr. Smith. I would just like, as you are still trying to 
figure out what exactly to do in Okinawa, if you could consider 
perhaps more marines going to Guam and also not just rotational 
but on a permanent basis.
    And, believe me, I understand. We rolled this plan out I 
think 6 years ago. It was going to cost $10 billion, and then 
there were all kinds of demands, and it wound up being $23 
billion to move into Guam, which was completely unacceptable. 
And the people in Guam are going to have to work with you to 
get those costs under control, but I just hope you will 
consider the fact that there is still more capability there to 
move some of those marines to Guam if we can perhaps get a more 
cooperative reception about how to make the finances work. So I 
hope you will consider that as you go forward with the Pacific 
plan.
    Secretary Panetta. Thank you very much for that.
    We are--you know, we very much view this as an opportunity 
to try to really give us a chance to reposture our force in the 
Pacific. Guam is a very important part of that. Believe me, it 
is something we are seriously looking at, and we are trying to 
work with the Japanese to try to get this done. This thing has 
been around for 15 years, and nothing has happened, and the 
time has come to try to get this resolved, and that is what we 
are trying to do.
    Mr. Smith. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    And we haven't had a chance to talk about this, but my 
thinking is really evolving on this whole Guam issue. And we 
are talking about reducing the marines by 20,000. Maybe one way 
to do that would be to just bring the marines that we take out 
of Okinawa, bring them to Camp Pendleton or some--bring them 
home and maybe leave some prepositioned equipment in place or 
something.
    I think when we are talking about the tremendous cuts that 
we have to make then we are going to have to really look at 
that seriously, because this is just escalating, and we may be 
able to solve two problems instead of one.
    Mr. Bartlett.
    Mr. Bartlett. There is obviously no wild enthusiasm in 
Congress for additional BRAC rounds for two reasons. Every one 
of those facilities is in somebody's district. It might be 
yours that gets gored. And, secondly, we really do not save any 
money in the short term because of the cleanup.
    You know, we have been on some of these bases for a hundred 
years. Our families have lived there. Our kids have played 
there. And we are making the statement that these are second-
class citizens, because they can live and play in a place that 
really isn't even good enough to give away.
    I know the law may require us to do this environmental 
cleanup, but I think we make the laws here in Congress, and we 
could change that law. If the local community doesn't want the 
facility, we will plant some trees and lock the gate and come 
back in a hundred years and cut the trees; and by that time, 
whatever the environmental problem was, it will undoubtedly be 
much less.
    If we force you to keep open infrastructure that you don't 
need, clearly, this impacts what you can do in personnel, in 
modernization, and in R&D [Research and Development]. Would you 
tell us for the record how much more you could do in personnel, 
modernization, and R&D if we could close these facilities 
without the obligatory cleanup?
    [The information referred to can be found in the Appendix 
on page 99.]
    Mr. Bartlett. I have a question, General Dempsey. If you 
ask our combatant commanders what they would like more, it is 
always ISR. So it is appropriate that the new defense strategy 
cites intelligence, surveillance, and reconnaissance as one of 
the capabilities ``critical to our future success.''
    Yet the DOD [Department of Defense] budget request for 
fiscal year 2013 is approximately $1 billion, or 25 percent, 
less than fiscal year 2012 for ISR programs. Each of the 
Services is terminating a major ISR program in the fiscal year 
2013 budget request: the Army's enhanced medium-altitude 
reconnaissance and surveillance system, the Navy's medium-range 
maritime unmanned aerial system, and the Air Force's Block 30 
Global Hawk unmanned aerial system.
    In the case of the Global Hawk, 18 aircraft will be placed 
in storage. Nine of these are currently deployed and supporting 
combat command operations. Would you please explain what 
appears to be a real conflict between the new strategy and 
fiscal year 2013 budget investment decisions?
    General Dempsey. I will, sir. Thanks for asking.
    First of all, you are right that combatant commanders--and 
I was one--have an insatiable--literally, that word by that 
definition--an insatiable appetite for ISR. What we have 
learned over the course of the last 10 years is that certain of 
those platforms--I mean, once you procure them, you begin to 
recognize both the limit of their--the expansiveness or 
limitations of their capabilities. And what you see reflected 
in our budget is a look across all of the various components of 
this thing called ISR to determine which ones are actually 
delivering the best value--meaning the best possible 
intelligence, surveillance, and reconnaissance capabilities at 
the best value. At the best business case, if you will.
    And so, for example, the Block 30 Global Hawk has 
fundamentally priced itself out of our ability to afford it 
when the U-2 [Dragon Lady high-altitude reconnaissance 
aircraft] gives, in some cases, a better capability and, in 
some cases, just a slightly less capable platform. So what you 
are seeing there is our ability to eliminate redundancy, to 
continue to invest in the best value, and to avoid at every 
possibility redundancy that fundamentally is too expensive.
    Mr. Bartlett. Secretary Panetta, with the delay in the F-35 
[Lightning II fifth-generation multirole fighter] aircraft 
program, what steps have you directed the Air Force, the Army, 
and the Marines to take to maintain the necessary fighter 
inventory until the F-35 can be procured in numbers to replace 
legacy fighter fleets?
    Secretary Panetta. We have ensured, obviously, that we 
maintain our full fighter force in place--and obviously it 
continues to require upgrades. We are prepared to make those 
upgrades as necessary.
    Our goal here is to develop the fifth-generation fighter. 
We think that is absolutely essential. And F-35s are coming off 
the production line. They continue to be tested. Frankly, the 
tests are going pretty well. We have got to do some software 
tests on all three models.
    I just took the STOVL [short take-off vertical landing] off 
of probation because it had five problems that Secretary Gates 
had identified that put it on probation. It has been able to 
deal with all five problems, and now we are looking at the 
software aspects. So this plane is on path to hopefully coming 
into full production within the next few years.
    Mr. Bartlett. Thank you very much.
    The Chairman. Thank you.
    Mr. Reyes.
    Mr. Reyes. Thank you, Mr. Chairman.
    First and foremost, Mr. Secretary, thank you for coming to 
El Paso and covering a few of the issues that you have covered 
with the committee here this morning.
    I have got two areas that I would like for both you and 
General Dempsey to focus on.
    The first one deals with the reaction to the request for 
another possible BRAC from our allies abroad. And I know you 
have had a chance, since first asking for that authority, to go 
out and talk to at least some of our allies; and so I am 
curious if you could share that with the committee.
    And then the other issue--and then I will give you the rest 
of my time--the other issue is the Administration is fixing to 
launch yet another effort of troops in New Mexico and Arizona. 
And I am concerned that not only is that very expensive but it 
puts our troops in a questionable position. Because they are 
not trained for law enforcement. They are trained for combat. 
And I would appreciate it if you would comment on this latest 
effort to deploy troops in New Mexico and Arizona.
    As I understand it from the information that I have, it is 
against the ultra light vehicles that the cartels are using. 
But there are certainly better ways to do that than a full 
force presence in those--in those two areas.
    So if you would cover that, I would yield the rest of my 
time to both of you.
    Secretary Panetta. Congressman, let me address the first 
part of your question; and then I will have General Dempsey 
comment on the second part.
    On the first part of the question, we are--and we have 
been--looking at infrastructure abroad very carefully. Because, 
obviously, if we are going to look at infrastructure in this 
country, we are obligated to look at infrastructure abroad.
    We are going to be taking down two brigades in Europe. That 
will impact on infrastructure there. We have already closed in 
the period of the last I guess 6 to 7 years 100 bases in 
Europe. We are probably looking at probably 23 additional bases 
that we will be looking at as well. So that we are, as a result 
of drawing down our forces there, looking at what savings we 
can make in infrastructure in that arena.
    General Dempsey. Congressman, on the issue of use of troops 
on the border, you know, we went down that path to meet an 
immediate need several years ago; and every year we review our 
posture in that regard. And we have seen it all along as an 
interim strategy, a transitional strategy, and one that could 
ultimately be replaced by technical means, whether it is ISR in 
the military sense or other surveillance capabilities available 
on the commercial market.
    So we understood when we began this, our role filling that 
immediate need. We are eager, actually, to partner and are 
partnered with Department of Homeland Security, with the FBI 
[Federal Bureau of Investigation], with State and local 
governments. We do exercise it periodically, but I am not eager 
to have that become a core competency of the uniformed 
military.
    Mr. Reyes. And it is important to note that this is a very 
expensive proposition when you deploy troops and especially 
when we have already built up the border patrol to over 21,000 
agents.
    I was just last week in Nogales, Arizona--Tucson and 
Nogales, Arizona. And speaking to the people there, they 
comment on the fact that everywhere that they are we have 
border patrol agents.
    So I am really at a loss to understand why we would want to 
deploy troops at a time when we are trying to save money. That 
is a very expensive proposition.
    The border is a safe environment in spite of all the 
rhetoric that we hear politically. So I would hope that we 
could rethink that if at all possible at a time when we are 
trying to save money.
    Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mr. Thornberry.
    Mr. Thornberry. Thank you, Mr. Chairman.
    Mr. Secretary, let me just add a couple of brief facts to 
some conversation that you have already had this morning.
    One is that the President instructed the Pentagon in the 
spring of 2011 to look for $400 billion in savings in the 
Defense budget. Now that was before your time, and it was 
before General Dempsey's time. But any notion that the $487 
[billion] sprung out of Congress just from the Budget Control 
Act spontaneously in some way is obviously not true. It was 
under way long before we ever got that that point.
    The second point I wanted to throw out is a little more 
specificity on BRAC. By the way, I have supported every round 
of BRAC since I have been in Congress. But the 2005 round of 
BRAC will not even break even until 2018, according to GAO 
[Government Accountability Office]. That means for 13 years it 
is going to cost more money to have BRAC than it would if you 
didn't have BRAC.
    And so having the Pentagon suggest two more rounds when it 
will aggravate the budget situation for 13 years, or at least a 
decade, leaves me scratching my head a little bit. And I think 
it is important to put a little more specificity. It doesn't 
even break even for a decade, which I think is problematic.
    But, General Dempsey, another thing that leaves me 
scratching my head these days is the reports that the military 
and the Administration are looking at substantial cuts to our 
nuclear deterrent. Under START [Strategic Arms Reduction 
Treaty], we are going to end up with about 1,500 weapons. If 
the reports are right, there is consideration of cutting that 
80 percent down to, say, 500, just for rounding, and that is 
being generous.
    It seems to me if we end up with 500 nuclear weapons and 
country A has a couple hundred, that all the incentive in the 
world is for them to catch us, because it is not that far and 
not that hard for them to do. So I would appreciate your best 
professional military judgment on whether cuts of 80 percent in 
our nuclear stockpile really are good for the national security 
of the United States.
    General Dempsey. I won't comment on the 80 percent figure, 
Congressman. What I will say is that what has been reported is 
the CliffsNotes version--not that you would ever understand 
what CliffsNotes are from your personal education--but it is 
the CliffsNotes version of what is a very comprehensive set of 
discussions internal to the military with the national security 
staff on what is our next negotiating strategy notably with 
Russia. And the status quo, by the way, is always an option and 
one that is in play.
    So at this point, sir, I would just--I would encourage you 
not to become too concerned with the media reports of what is a 
very comprehensive process.
    Mr. Thornberry. Well, I do become very concerned, partly 
because it does nothing but encourage other countries to 
advance their nuclear program. If they see that we are going to 
come down from 1,500 to some number in the low to middle 
hundreds, it does nothing but encourage our enemies and 
discourage our friends. And the result of that is more nuclear 
weapons programs all across the world, which would seem to me 
to be something that we would not want to have happen.
    So I get very concerned if our military takes seriously any 
notion that we can--can even begin to approach reductions on 
that scale. I am worried about where we are with the last round 
of START, but much less something that goes to that level 
concerns me very much.
    Mr. Secretary, let me ask one last thing. Vice President 
Biden has said that the Taliban is not our enemy, and I have a 
quote here says--that supports that.
    Do you agree--do you believe that the Taliban is our enemy 
in Afghanistan? And if they are not our enemy, can we leave a 
secure and stable Afghanistan without addressing the Taliban 
and their safe havens in Pakistan?
    Secretary Panetta. The Taliban, as you know, Congressman, 
is a very broad group. Our primary enemy in that part of the 
world is Al Qaeda. And the Taliban elements, the terrorist 
elements that support Al Qaeda are also our enemy. And there 
are some elements, obviously, of the Taliban that support Al 
Qaeda; and those are the ones that we have been targeting.
    Mr. Thornberry. Can we leave a safe and secure Afghanistan 
without dealing with those elements of the Taliban that support 
Al Qaeda?
    Secretary Panetta. I think--our goal is to make sure that 
they never again can establish a safe haven in Afghanistan from 
which to conduct attacks on this country, and that remains our 
primary goal.
    The Chairman. Mr. Reyes--I mean, Mr. Andrews. Excuse me.
    Mr. Andrews. Thank you, very much, Mr. Chairman. I would 
like to hear Mr. Reyes ask more questions.
    But I want to thank General and Mr. Secretary, Secretary 
Hale for your service to our country and particularly, 
Secretary Panetta and Mr. Hale, your accessibility to members 
of this committee and the Congress. It is refreshing, and you 
have been the most accessible leaders of the Defense Department 
I have ever encountered, and I am very grateful for that.
    I also wanted to thank you, Mr. Secretary, for your comment 
on page 3 of your written testimony about the very personal 
priority you put on achieving audit readiness for the 
Department. My friend and colleague, Mr. Conaway, has taken a 
lead on this issue. He wrote it into law in an effort he and I 
worked on together, and he has very diligently led a panel of 
this committee to try to achieve that reality.
    All the discussions we are having this morning and are 
going to have in the next couple of months may be based on 
false data if we don't have good financial statements. So I 
think--you know, this is a boring topic that doesn't make 
headlines, but it is absolutely critical to an intelligent 
discussion of the hard financial choices we have in front of 
us. So I thank you for your very personal investment in that 
issue.
    And I did want to get to a more controversial question now.
    Despite some of the rhetoric, which I think corresponds to 
the year on the calendar, the budget proposal that you have 
submitted, if I understand it, for every $100 that we spent in 
the core Defense budget last year we are going to spend $99 in 
fiscal year 2013; and for every hundred people we had in 
uniform, at least authorized to be in uniform, we are going to 
have $99. So I think before we get too excited about what the 
1-year budget means we have got to understand that.
    I do share with Mr. Smith and I think with you an 
understanding of the difficult political realities of the BRAC 
process but the necessary decisions that must be made, and I 
wonder if you could outline for us what some of the strategic 
tradeoffs would be if we don't do the BRAC process. You know, 
you have been through it. I have been through it. I think 
everybody on the committee has, one way or another. Tell us 
what happens if we bend to the easy decision and not do BRAC. 
What do we give up in that trade-off?
    Secretary Panetta. I mean, look, you all know this. The 
Defense Department budget is made up of only so many parts. I 
have identified the areas that involve savings that we can 
focus on, and we put everything on the table. Those parts are 
efficiencies, whatever we can do to try to eliminate waste and 
cut down on bureaucratic overhead, and there is a lot of that. 
But, you know, we have added about $60 billion in savings in 
that area.
    The second area, obviously, is force structure. And that 
means that--you know, that involves cutting personnel out of 
the force; and we have already targeted about a hundred 
thousand reduction in both the Army and the Marine Corps.
    Thirdly, modernization, weapons, procurement areas, and 
there we have gone after significant savings. We still have to, 
obviously, maintain technology and weapons systems that are 
key, but we have put on hold some of the areas that we think we 
can achieve some savings. We have gone after cost 
effectiveness. We have gone after affordability and tried to 
deal with some of those areas as well in terms of savings. And 
then the last area is compensation, which involves the pay and 
benefits for our military.
    Okay. So if infrastructure is part of the force structure 
reduction savings, and let's assume we don't do any 
infrastructure savings and yet we still have to come up with 
additional savings, where are you going to go?
    Mr. Andrews. Right. I think it is fair to say that if we 
don't do infrastructure then there is only three places to 
look----
    Secretary Panetta. That is right.
    Mr. Andrews [continuing]. The compensation for the troops 
and their families and the civilian employees, tools and 
weapons that we need to defend the country, or other strategic 
priorities about what we can do around the world.
    I mean, I was involved in a piece of litigation against 
BRAC that went to the United States Supreme Court. I have been 
through this one. But I also understand that we won't cut that 
infrastructure without the BRAC; and, as difficult as it is, I 
frankly would encourage you to ask for that new authorization 
and would like to work with you to support it. Not because I 
like BRAC, but because I even greater dislike the alternatives 
to it.
    I thank you for your time and testimony this morning.
    The Chairman. Thank you.
    Mr. Jones.
    Mr. Jones. Mr. Chairman, thank you very much.
    And, Mr. Secretary, I might be the only Republican on the 
committee to say thank you for your recent decision about 
bringing our troops out in 2013. This has been a great interest 
and concern to me.
    I have Camp Lejeune Marine Base in my district, Cherry 
Point Marine Air Station. That is what my question will deal 
with. You, being an elected official, served in the House I 
think with my father a few years ago, Walter Jones senior. You 
know better than any of us here, or as good as any of us, that 
politics is local. There is no question about it.
    I have Cherry Point Marine Air Station in my district. I 
also have the depot in my district. And so it brings the 
question that Mr. Bartlett was asking you about, the F-35, and 
of course at Cherry Point, because of the depot, the interest 
in the F-35B. And knowing that at one point in a discussion I 
had a few months ago there was a thought that maybe at some 
point in time as this F-35 becomes on line and becomes a 
reality that there might be eight squadrons going down to 
Cherry Point.
    Well, I realize in this very difficult budget year and none 
of us know what we would like to see today might not be a 
possibility tomorrow. So if you would expand a little bit more 
on how you feel that the progress has been made on the F-35 and 
knowing that you believe that we do need a strong fighter 
system in our country, if you would elaborate just a little bit 
more on that, I would appreciate it.
    Secretary Panetta. Thank you, Congressman.
    You know, the only way the United States remains the 
strongest military power in the world is to keep developing new 
generation fighters that have the technologies and capabilities 
that we are going to need in the future. And I had the 
opportunity to go to Pax River and see the development that is 
behind the F-35 and actually sit in there and look at the 
technology that is involved. I mean, we are talking about 
spectacular technology that would be part of this plane in 
terms of stealth capabilities and also targeting capabilities. 
And it is the next-generation fighter. It is what we are going 
to need.
    And, very frankly, the countries are all lined up waiting 
for this plane because they know how good it is going to be; 
and that is why we have got to keep it on track.
    We can have three variants. I cannot go into defending all 
the decisions that were made before I became Secretary, but 
three variants is not an easy process. It means you have to 
look at a lot of different questions that arise depending on 
the capabilities that you are trying to design in each area. 
But, nevertheless, each of those is important. We need a Navy 
plane, we need a Marine plane that can lift, as the STOVL will, 
and, obviously, we need an Air Force plane. So those are the 
key ingredients.
    My view is, you know, based on what--because I came into 
this pretty skeptical about where this thing was. I looked at 
the facts. I looked at the testing that is going on. I looked 
at the production rates that are out there. I am convinced that 
we can deal with the final problems that are there, largely 
software issues that we have got to face.
    We are producing these planes even as we speak, but they 
are continuing to be tested. My goal is, working with the 
industry, to make sure that any changes here now can be as cost 
efficient as possible. That is what I worry about. I don't want 
big changes in these planes, because that will ramp up the cost 
real fast. So the real challenge right now is to keep these 
costs under control as we resolve the final issues involved 
with this plane. But I am convinced we are going to be able to 
put that in place.
    Mr. Jones. Mr. Secretary, thank you for that answer.
    I have spent almost 10 years trying to clear the names of 
two marine pilots, John Brow and Brooks Gruber, who crashed the 
V-22 in Arizona on April the 8th. Nineteen marines were burned 
to death. And I appreciate what you said when you said you 
wanted to make sure that the manufacturer of this plane have it 
ready and no hidden problems like they found with the vortex 
ring state that brought that plane down.
    And I am hopeful that the Marine Corps will give the two 
wives who have requested a paragraph to make it clear that 
their husbands were not at fault, and I hope that I won't have 
to come to you at some point in time and show you the evidence 
that we have accumulated over 10 years that the pilots knew 
nothing about how to react to vortex ring state that night.
    So I do appreciate your answer and thank you again for your 
leadership of our country; and, General Dempsey, thank you as 
well. And may God continue to bless our men and women in 
uniform.
    And with that, Mr. Chairman, I will yield back, because I 
had a little bit of extra time before they started the clock.
    The Chairman. Thank you.
    Mrs. Davis.
    Mrs. Davis. Thank you.
    And thank you, Mr. Secretary and General Dempsey, for going 
out of your way and really talking about the fundamental 
element of this new strategy, which I think is our people; and 
ensuring that keeping faith with our soldiers, our sailors, our 
airmen, and marines and their families particularly remains a 
top priority.
    Mr. Secretary, as we think of this process and move forward 
of changing our force structure and reducing personnel end 
strength over the next few years, what are we doing to ensure 
that we retain a spectrum of experience and knowledge across 
the Services and specialties? And, within that package, what is 
your greatest concern?
    Secretary Panetta. Let me yield to General Dempsey on that, 
because he has been very involved in how we approach the 
retention of some of these mid-level officers.
    General Dempsey. I will hearken back to my time as the 
Chief of Staff of the Army, because that is the issue that the 
service chiefs are grappling with the Secretary's guidance.
    But one of the things we did back in the 1990's is, when we 
separated soldiers we did so--and I said soldiers but 
servicemen in general--when we separated them, we were 
separating them too quickly. We actually had reduction in force 
boards that sat specifically to tell people to go. But we could 
do that, because we were passing them into a pretty good 
economy. Maybe one would even argue a booming economy back in 
those years. And we were no longer in conflict.
    The big difference about what we are doing right now is 
that those other assumptions I just mentioned are not any 
longer valid. We are passing people into a struggling economy. 
We are still in conflict and likely to remain in conflict. So 
what we are doing as service chiefs is taking a look at how do 
we, first of all, pace this.
    And to the question, by the way, that is related to BRAC, 
if you fix too many variables on us--if you, for example--there 
is some physics involved--if you fix the variable called 
infrastructure and if we are kind of maxed out in terms of 
literally physical ability to pass people out of the service in 
a dignified way, it doesn't leave us many levers to pull in the 
middle. It is operations maintenance, training, and equipment.
    That is why we are concerned about BRAC, and it is also why 
we are concerned about the pace at which we separate people. 
Now once we settle in on the pace--and we have--then we look 
internal to our systems. We have any number of personnel 
policies, promotion rates, accession rates; we have evaluation 
reports, board processes. But to the extent that we can use the 
existing processes to identify the highest performing 
personnel, keep them, encourage them, continue to develop them, 
we will be in good shape. To the extent that this is 
accelerated on us, if it is accelerated, then we get into a 
position where we are forcing people out; and at that point I 
won't be able to sit here and guarantee you that we are going 
to be keeping the right people.
    Mrs. Davis. Do you see--is part of that discussion really 
formalizing longer periods of time between the eligibility for 
promotion and the promotion among noncommissioned and 
commissioned officers?
    General Dempsey. It is a great point and one which we--it 
is a Rubik's cube, to tell you the truth. We twist it and turn 
it. In some ways, you want to accelerate promotions, because it 
is an incentive for especially the highest performing personnel 
to see that they have a great deal of potential and that that 
potential is being fulfilled. On the other hand, it has the 
other effect that you just described.
    So, you know, I would use a somewhat overused word 
probably, but I think it is a matter of finding the balance 
between--let's call it talent management and then managing the 
personnel system to treat people with dignity and respect but 
also reshape the Force.
    Mrs. Davis. I really appreciate that. I think there are 
concerns. There should be concerns that, for many of the men 
and women who are serving, that the fact that they would be 
leaving the Services faster perhaps than they had ever imagined 
means that we have to put a lot more resources into that 
transition period and really ensuring that they have the skills 
and talents necessary. And are we looking at that in terms of a 
whole different kind of preparation as they leave? It is almost 
a preparation as they come in so that they are leaving in a 
different manner.
    Secretary Panetta. You asked what worries me the most--and, 
frankly, that is one of the issues I worry about the most.
    As we draw down over these next 5 years, we are going to be 
putting another 12,000 or more out, you know, bringing them 
back. And, right now, the system is clogged. It doesn't work as 
efficiently, frankly, as it should. And we have got to do a 
better job of being able to take these young men and women that 
come out and give them the counseling, give them the education 
benefits, give them the jobs, give them the support systems 
that they absolutely have to have in order to be able to 
reestablish themselves in the communities. Otherwise, we are 
going to be dumping them in these communities, no jobs, no 
support; and that is why we have high unemployment now among 
our veterans, is that that is exactly what is happening. We 
have got to change that.
    Mrs. Davis. Thank you.
    The Chairman. Thank you.
    Mr. Forbes.
    Mr. Forbes. Thank you.
    Mr. Secretary, your schedule only allows me 5 minutes for 
questions, so I am going to try to be concise and help you be 
concise in your answers.
    But you made a statement that this will be a test of 
whether reducing the deficit is about talk or action. I just 
want to be clear. We welcome a conversation with you or the 
President about serious deficit reduction. We wish we could 
have had it before the President pushed through an $800 billion 
stimulus package that many of us believed was ill advised or a 
health care bill that is putting a lot of our employers out of 
business.
    But be that as it may, we want to reduce the deficit; we 
just don't want to do it on the backs of the men and women who 
are fighting for this country every day.
    And to answer the ranking member's question he put before 
us: What wouldn't you have voted for? I wouldn't have voted for 
that $800 billion stimulus package which contains almost twice 
what these cuts were, and I would repeal the health care bill 
tomorrow.
    But let's look at the approach of how we got here. And 
wouldn't you agree that if we had been more responsible in 
handling our budget as a Federal Government that the better 
approach would have been for us to have developed a national 
strategy--Department of Defense to develop a national strategy 
to defend the country, to be able to discuss exactly what we 
needed for that strategy, to determine what the resources would 
be in order to meet that strategy, and then come to Congress 
and say this is what we need to do in order to do that job to 
defend the country? Wouldn't you have agreed that that would 
have been a better approach?
    Secretary Panetta. Congressman, a better approach--and I 
say this not so much as Secretary of Defense but as a former 
OMB [Office of Management and Budget] Director and chairman of 
the House Budget Committee--the better approach would have been 
for Congress, both Republicans and Democrats and the President, 
to sit down and develop a comprehensive deficit reduction 
package.
    Mr. Forbes. Mr. Secretary, I understand that. But I am 
talking about, as far as the strategy, wouldn't it have been a 
better approach to have done it in the manner that I just 
delineated?
    Secretary Panetta. That would have been nice, but we were 
mandated to up come up with a $487 billion reduction.
    Mr. Forbes. I understand that. But wouldn't that have been 
the better approach?
    Secretary Panetta. Of course.
    Mr. Forbes. Okay. And then point in fact, as you mentioned, 
that is not the approach that we took. What we did was to give 
you $487 billion of cuts, and then you were forced to create a 
strategy that worked within the parameters of those cuts; is 
that correct?
    Secretary Panetta. That is right.
    Mr. Forbes. And then, based on that, Mr. Secretary, isn't 
it true that it would be virtually impossible for you or 
anybody else testifying on behalf of this budget to delineate 
for us the portion of that strategy that was driven by these 
budget cuts versus the portion of the strategy that was driven 
by security changes around the world?
    Secretary Panetta. I don't think you have to make a choice 
between fiscal discipline and national security. I really 
don't.
    Mr. Forbes. Mr. Secretary, I am just trying, because of my 
5 minutes--isn't it true, though, that, as you said, you were 
forced to have $487 billion of cuts. You worked a strategy that 
worked within those parameters. But isn't it virtually 
impossible for you or anyone else to tell us what portion of 
that strategy was driven by that $487 billion of cuts versus 
just security changes that took place around the world?
    Secretary Panetta. As I said, we would have been required 
to look at a change in strategy under any circumstances because 
of the drawdowns that were taking place. This is not just a 
deficit reduction.
    Mr. Forbes. I understand that. I understand that. And we 
have two different components. We have security changes that 
would have had strategy change and we have budget cuts that 
would have caused it. But isn't it true that you cannot 
delineate between those two?
    Secretary Panetta. Well, they were both involved in 
determining our strategy.
    Mr. Forbes. Exactly. Now, you also mentioned that this was 
imposed on you by law. I know I have heard you state before 
this would not have been the figure you would have picked, the 
$487 billion. Is that true?
    Secretary Panetta. That is for sure.
    Mr. Forbes. I wouldn't have picked that, and I didn't vote 
for that figure.
    But you have had a lot of discussions with the President. 
You heard Mr. Thornberry say the President came out and said he 
wanted $487 billion of cuts before the strategic cut was taking 
place. In your discussions with the President in looking at the 
strategy, at any time has the President ever voiced to you the 
fact that he thought this $487 billion of cuts was too much?
    Secretary Panetta. I think the President understood that 
this was not going to be easy and that there would be risk 
involved in doing it.
    Mr. Forbes. I understand. That is not my question. Did the 
President ever voice to you the fact that he felt this $487 
billion in cuts was too much?
    Secretary Panetta. He felt, as I did, that Congress and the 
President had gone forward with this Budget Control Act and we 
were obligated to fulfill it.
    Mr. Forbes. And had he--you disagree with that figure. I 
disagree with that figure. Had the President disagreed with 
that figure, could he not have put any of those cuts back in 
the budget that he had just presented to Congress?
    Secretary Panetta. I think the President shared your 
concern, which is what do we do about reducing the deficit. 
That was the only thing that was worked out by Congress on a 
bipartisan basis.
    Mr. Forbes. Did he put any of those cuts back into this 
budget? Any of the cuts made, did he roll them back and say 
that was too much, I am going to put them back in the budget?
    My time is up. Thank you, Mr. Chairman.
    Secretary Panetta. I don't think he could have done that 
without the support of Congress.
    The Chairman. Thank you.
    Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Mr. Secretary, General, thank you for being here today and 
your testimony, your tireless service to our Nation. We are all 
grateful.
    I want to focus on two important areas in the budget and 
priorities for me: Virginia Class submarine and I also want to 
talk about cybersecurity. Mr. Secretary, as you know, the 
Virginia Class submarine is a model procurement program; and we 
are only now beginning to reap the rewards of an aggressive 
cost-management effort and a consistent two-boat-per-year 
funding level.
    The proposed delay of one of these subs from fiscal year 
2014 to outside the FYDP [Future Years Defense Program] I 
believe could disrupt these gains and incur significant extra 
costs. How did the Department come to this decision and how 
does the Department propose to mitigate the military risks, the 
monetary costs, and the workforce challenges generated by the 
shift?
    Obviously, the Virginia Class submarine is a program that 
has come in on time and under budget because of the 
efficiencies that we gain from bloc buys and bringing stability 
to the supply chain; and I am concerned this delay is going to 
cost us in these areas.
    Second, as you know, I have been a long and staunch 
supporter and advocate for increased investments in 
cybersecurity; and I am pleased to see the continued escalation 
of the attention being paid to cybersecurity and the projected 
$18 billion in funding from fiscal year 2013 to fiscal year 
2017.
    Mr. Secretary and General, how does the proposed budget 
address these threats and the vulnerabilities that we face in 
the cyber arena? And I know you talked a bit about this today, 
but I would like to expound on that. And in the event of a 
large-scale cyber attack, how resilient are our power grids and 
military bases?
    Obviously, our military bases in many ways are dependent on 
the critical infrastructure of our electric grids that is owned 
and operated by the private sector; and if they go down our 
military bases and their ability to function are vulnerable. 
What efforts are we doing to make them resilient and have some 
of their own power to provide backup, if necessary?
    General Dempsey. If I could, Congressman, I will talk 
cyber; and then I will ask Mr. Hale to talk about submarines; 
is that right?
    We are very concerned about cyber. You know, we talk about 
what is new in the world in terms of threats over the last 10 
years or emerging. For us, it is emerging capabilities. It is 
special operating forces, it is cyber, and it is ISR. Those 
same capabilities are also becoming available to our 
adversaries. And in the case of cyber in particular we have 
been acting to prepare ourselves in terms of our vigilance on 
our systems and our defensive mechanisms, and we have got--as 
you know, we stood up CYBERCOM [U.S. Cyber Command]. We have 
got a cyber strategy.
    But we remain vulnerable; and we are trying, through a 
series of tabletop exercises and conversations with the 
national security staff as well on the Senate side now notably, 
we are trying to determine the next steps. And there is 
legislation pending sponsored by Senators Lieberman, Collins, 
Rockefeller, and then a Feinstein amendment to that that is a 
very good and important first step in providing the kind of 
information-sharing and expanding--for potentially the first 
step in expanding protections beyond the dot-mil domain for all 
the reasons you suggest.
    But make no mistake about it. There is controversy--and 
plenty of it--around this issue because of the Department--we 
are the Department of Defense. There is the Department of 
Homeland Security, FBI. So there are authorities to be 
considered. And we are working through all of that. What I am 
suggesting to you is that the current legislation pending is a 
good first step.
    Secretary Hale. In terms of the Virginia Class submarine, 
which is I think what you are referring to, we are planning to 
buy nine in this FYDP. A year ago, we were planning to buy 10; 
and we will buy 2 a year in this FYDP, except for fiscal year 
2014 we will buy 1. So it is an affordability decision, 
frankly. The submarine fits into our strategy, and we will 
certainly continue to buy. But we were looking, frankly, to 
ways to comply and be consistent with the Budget Control Act.
    Secretary Panetta. I was asked this question yesterday. 
And, you know, if there are cost efficiencies that can be 
achieved here that allow us to do this with savings and in a 
more cost-effective way, we are prepared to look at that.
    Mr. Langevin. I have additional questions, but my time is 
coming to an end. I would just reiterate the importance, 
obviously, of the Virginia Class submarine program. I am 
concerned about its delay, and it is going to wind up costing 
us I believe in both our workforce if we are not careful and 
also the efficiencies----
    The Chairman. The gentleman's time has expired.
    Mr. Langevin. With that, I yield back.
    The Chairman. Mr. Wilson.
    Mr. Wilson. Thank you, Mr. Chairman.
    Thank you all for being here today.
    And I share the concern of Chairman Buck McKeon. The 
American people need to know this, that what is being proposed 
is a reduction of 80,000 personnel in the Army, 20,000 marines, 
10,000 personnel of the Air Force. I am truly concerned at a 
time of war that we would have these reductions which I think 
is going to put American families at risk, those serving in the 
military and the American public at large. And it just--I just 
find it inconceivable. Every day we read about another threat 
to our country of instability around the world.
    Additionally, Mr. Secretary, I know that you are having to 
make tough choices and in particular, though, I identify with 
veterans. I served 31 years in the Army, and I am just grateful 
for my service and the commitment and dedication and 
commitments to veterans, too, from and to. But I am very 
concerned that the Administration is proposing cost increases 
on health care for military retirees, and these are 
extraordinary. For TRICARE Prime that a proposal for fiscal 
year 2013 increases enrollment fees between 30 and 78 percent. 
Over 5 years, the enrollment fees would increase between 94 and 
345 percent.
    How can we justify such increases when really commitments 
were made to the people who have made such a difference in 
protecting our freedoms?
    General Dempsey. Let me answer that, if I could, 
Congressman.
    You know, when we said that in order to rebalance this 
military of ours--and, by the way, you know, I don't want to 
let it pass entirely that I don't share your concern. But I 
will tell you that I am responsible to this Nation to do a risk 
assessment on the size of the force against the strategy, and 
my assessment is that the budget we have proposed and the force 
structure we are building toward is adequate to meet the needs 
of the Nation. If I didn't, I would tell you.
    In terms of compensation, the TRICARE enrollment fees of 
which you speak haven't been adjusted since the mid-'90s. They 
are an anachronism in terms of any other health care program. 
And I don't ever accept, by the way, the comparison of military 
benefits to civilian because of what we ask our uniformed 
military to do.
    On the other hand, we cannot any longer allow our paid 
compensation health care--and, as you know, we are going to 
look at retirement at some point in the out-years--we simply 
can't allow that to keep growing. As the Chief of Staff of the 
Army I knew that if my manpower costs exceeded 45 percent, I 
would break the Army because I wouldn't have the money to 
invest in the other things I have to invest in. We are close, 
and now is the time to act, and that is why we have taken this 
action.
    Mr. Wilson. And my concern would be that we should be 
providing more--that this is not the burden.
    Additionally, Mr. Secretary, last year, the former governor 
of Maine, John Baldacci, was hired to review military health 
care. I understand that he has completed his report. Could you 
provide the committee a copy?
    Secretary Panetta. I will be happy to.
    Mr. Wilson. Has his report in any way influenced the 
Defense budget reforms?
    Secretary Panetta. I am sure--I believe it has, but, 
frankly, I have not reviewed it myself. But let me get back to 
you on that and provide you a copy of that.
    Mr. Wilson. And, additionally, I would like to know the 
salary paid and then the supporting costs for his services.
    Secretary Panetta. Sure.
    [The information referred to can be found in the Appendix 
on page 99.]
    Mr. Wilson. And, in conclusion, I want to thank both of 
you. You have raised a great concern about sequestration, the 
risk to the American people. What do you recommend that we do? 
And in particular I am very hopeful that of course you would 
support the very progressive and very positive legislation of 
Chairman Buck McKeon.
    Secretary Panetta. I have indicated my concerns about 
sequestration. I would just urge you to work on a bipartisan 
basis to develop an approach that can pass the Congress that 
would de-trigger sequestration.
    Mr. Wilson. And the consequence of sequestration?
    Secretary Panetta. It would be devastating. You take 
another $500 billion out of this Defense budget, the strategy I 
just presented you I would have to throw out the window.
    Mr. Wilson. And indeed, Mr. Secretary, I have been very 
positive about your service, because I know sincerely you 
believe this. But we have got the get the message out. Just the 
word ``sequestration'' puts people to sleep. So please be the 
Paul Revere I know.
    Thank you very much.
    General Dempsey. Congressman, I forgot to thank you for 
your 31 years of service. Thank you.
    The Chairman. Ms. Bordallo.
    Ms. Bordallo. Thank you, Mr. Chairman; and I would like to 
welcome Secretary Panetta and General Dempsey. I appreciate the 
Administration's continued focus on the Asia-Pacific region and 
that DOD intends to press forward with the buildup of Guam. 
Thank you, gentlemen.
    The DOD recently announced a changed realignment plan for 
Guam. What is the rationale for changing the implementation 
plan with Japan? What prompted these decisions? What is the 
benefit of the proposed realignment? To what extent did the 
passage of the Budget Control Act play in these changes? And 
can you also elaborate on the strategic importance of keeping 
marines forward-deployed? How is this necessary to keep our 
treaty agreement with Japan?
    Mr. Secretary.
    Secretary Panetta. Congresswoman, first and foremost, let 
me indicate that no decisions have been made with regards to 
what exactly that realignment will be. We are in discussions 
with Japan.
    Ms. Bordallo. I understand.
    Secretary Panetta. We are trying to make decisions. This is 
an issue, as you know, that has been out there for a long time; 
and we just think it is time to try to get it done and to try 
to resolve it. And Japan has been very helpful and cooperative 
in trying to work with us in that effort, and we will continue 
to keep you informed. Because, obviously, it affects your home 
area; and we want to make sure that you know what we are 
thinking about before we actually make any final decisions 
here.
    It is important to try to try to keep that presence 
forward. My view is that we need a Marine presence that is 
forward. I do not want to draw that Marine presence back to 
this country. I think it has to be forward in the Pacific. We 
are trying to be innovative in the way we are doing that. The 
approach that we are taking in Australia is an example of the 
kind of rotational presence that we think can make sense. We 
are talking to the Philippines about doing the same thing.
    But the bottom line is that we want to maintain the Marine 
force forward presence in the Pacific. That is an essential 
element of our strategy.
    Ms. Bordallo. Thank you.
    Another question I have: When the Japanese see the updated 
plans from DOD and identify the reduced number of marines 
coming, will they reduce the overall funding that they were 
going to supply for the buildup? Will this lead to reduction in 
support for civilian infrastructure that is needed to support 
the military population on Guam? If the Japanese do reduce 
their funding commitment, how will the Department ensure that 
the infrastructure needs continue to be addressed?
    Secretary Panetta. That is also one of the things we are 
discussing.
    As you know, one of the elements here is the development of 
a new Futenma air facility; and it is an expensive process 
because it involves environmental permits that have to be 
obtained. It is a very expensive project. But, at the same 
time, they have been very generous in saying that whatever 
moves have to be made they will support--they will give us a 
lot of the funds to try to support that.
    That continues to be a part of our conversation; and, as I 
said, I am very pleased with the attitude that the Japanese are 
taking.
    Ms. Bordallo. So you don't think there will be any 
reduction at this point?
    Secretary Panetta. No.
    Ms. Bordallo. Mr. Secretary, Deputy Secretary Carter 
certified in writing--and I know this question has been asked 
before I arrived by Congressman Bartlett--he certified in 
writing to Congress that the Global Hawk system was essential 
to national security. Global Hawk was $220 million cheaper per 
year to operate than the U-2. The decision to pull 18 Global 
Hawk Block 30 aircraft out is shortsighted, in my opinion.
    Your recommendation to terminate Block 30 is a complete 
reversal of your decision. Can you explain how an asset can be 
critical to national security and then less than 1 year later 
be terminated? And can you answer how the Air Force will 
compensate for the loss of this capability?
    Secretary Panetta. I am going to have General Dempsey speak 
to that.
    But, look, we are very committed to unmanned systems. We 
think that is the future. But, at the same time, we have to 
make judgments about which ones are most cost-effective; and I 
think that was behind the decision here.
    General Dempsey. Yes, ma'am. And we are flying four other 
variants of Global Hawk. This is not about Global Hawk. It is 
about Global Hawk Block 30, and it has become too expensive 
relative to other capabilities we have.
    Ms. Bordallo. All right. And I have one final question, if 
I could.
    The fiscal year 2012 NDAA [National Defense Authorization 
Act] requires that DOD meet five requirements in order to spend 
Government of Japan funding that is currently sitting 
unobligated to the U.S. Treasury. Now this is a matter of great 
concern in our community. What steps is DOD taking to meet 
these five requirements?
    Secretary Hale. It is part of the overall discussions. We 
need to arrive at--we need to arrive at an agreement with 
Japan, and we need some----
    The Chairman. Mr. Hale, the gentlelady's time has expired. 
Could you take that one for the record for her please? Thank 
you.
    [The information referred to can be found in the Appendix 
on page 100.]
    The Chairman. Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman; and, gentlemen, thank 
you for being here.
    Secretary Panetta, I want to thank you for our meeting last 
week with Congressman Andrews where we discussed the issue of 
national standards for custody rights for our service members. 
We asked you to affirm Secretary Gates' and DOD's policies 
supporting a national standard.
    As you know, unbelievably, across the country there are 
Federal law court judges that will take custody away from our 
servicemen based upon their time away serving their country. 
This committee has been very active on this issue, every member 
of the committee having endorsed the national standard, the 
House having passed five times a national standard. We would 
appreciate your support and advocacy to assist us in making 
that law.
    Secondly, I appreciate your statement on the Budget Control 
Act and the issues of sequestration. It is a thing--you know, 
as we look to sequestration I think the American public does 
not know the great risk that could be imperiling our military. 
Your statements on it are important. That is one of the reasons 
I voted against the Budget Control Act, so we would not have 
this gambling with our military security.
    Mr. Secretary, as you know, I am the chairman of the 
Strategic Forces Subcommittee. Nuclear weapons fall under my 
category. I have three questions, two for you and one for the 
General concerning that.
    Mr. Secretary, as you know, your predecessor, Secretary 
Gates, agreed to transfer some $5.7 billion to the National 
Nuclear Security Administration for specific purposes that were 
articulated in this document, which I ask to be included in the 
record, that was to govern the transfer of these billions to 
the National Nuclear Security Administration.
    [The information referred to can be found in the Appendix 
on page 92.]
    Mr. Turner. I would ask if you would characterize the 
Department of Defense level of comfort with how the initial $5 
billion tranche has been spent. For example, where did DOD's 
$1.2 billion go that it gave to the NNSA [National Nuclear 
Security Administration] to begin construction on the plutonium 
replacement facility known as CMRR [Chemistry and Metallurgy 
Research Replacement Facility]? And how about the funding for 
the W-76 warhead which is again delayed in the NNSA budget this 
year, seemingly without regard to the Navy's need for this 
warhead?
    And, secondly, Mr. Secretary, you kindly, in a 
correspondence in November, responded to the chairman and 
myself requesting that we receive briefings on the nuclear war 
plan; and you had indicated that you would agree to reinstitute 
those briefings with our committee.
    [The information referred to can be found in the Appendix 
on pages 89-91.]
    Mr. Turner. They have not commenced, and we are afraid it 
might be stuck in the bureaucracy of DOD. We would appreciate 
your assistance there.
    General, with respect to Congressman Thornberry's question 
on the proposed 80-percent cut to our nuclear arsenal, you 
indicated that these were just proposals or plans that were 
being reviewed and it might be premature for discussing them. 
But I would like your input on the initiation of where these 
are coming from.
    Because it is our understanding that the President has 
asked to consider an 80-percent cut going to a warhead 
inventory of somewhere around 300. If you could confirm that 
the Administration is in fact the one that is initiating, that 
this is not just coming from somewhere arbitrary within the 
bureaucracy, that would be helpful, also.
    Mr. Secretary.
    Secretary Panetta. If I could comment on your last 
question, this was all part of a nuclear posture review that 
was mandated by law and that the Administration began that 
process of going through the review. And the second step was 
basically, you know, how do we now implement the review that 
was taking place?
    So it kind of followed that procedure, and there are a 
number of options that are being discussed. And, as the General 
has pointed out, one of those options is maintaining the status 
quo; and no decisions have been made. This has been something 
that has been part of a process for discussion within the 
national security team and remains there at this point.
    As you know, reductions that have been made, at least in 
this Administration, have only been made as part of the START 
process and not outside of that process; and I would expect 
that that would be the same in the future.
    With regards to your question on the funding issue, let me 
ask Bob Hale to respond to that. That is the $5.7 [billion].
    Secretary Hale. We are working closely with NNSA. I think 
there are concerns on our part, theirs, too. There has been 
some cost growth that it sounds like you are aware of. But they 
are fully committed to meeting our needs, and we are trying to 
work with them. These are important programs, and we need to 
carry forward with them.
    I think I will try to provide you more detail for the 
record.
    [The information referred to can be found in the Appendix 
on page 99.]
    Secretary Hale. But I can tell you that we have a nuclear 
weapons council that meets regularly with NNSA representatives 
as well as ours, and they are deeply engaged in these issues.
    Mr. Turner. But you do have concerns; correct?
    Secretary Hale. Yes.
    Secretary Panetta. Finally, let me commend your leadership 
on the adoption issue. We did have a chance to discuss it. I 
share the concern that you raised. I think it does need to be 
addressed. You have been successful at passing it in the House 
side. It doesn't seem to come out of the Senate. And I think 
the one thing I indicated to you is I want to work with you to 
see if we can actually try to get something done on this issue 
this year.
    The Chairman. Thank you.
    Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman, and thank you to the 
witnesses.
    Secretary Panetta, again, I want to thank you for visiting 
the Groton shipyard. Back in November, you had a chance to 
climb on board the Mississippi and the North Dakota, which is 
under construction, as well as really a pretty extraordinary 
town hall with the workers on the pier there where you very 
eloquently described the value of the industrial base to our 
national security.
    In light of that, I just--to follow up on Mr. Langevin's 
questions, the Mississippi, which was christened just a few 
weeks later, had come in $64 million under budget, 12 months 
ahead of schedule; and there is no question that the momentum 
of two subs a year, which took 20 years to get us up to that 
pace, is achieving savings.
    That block for contract shift--which, by the way, that is 
the third time it has been changed, not the second time, Mr. 
Hale--there is no question that, in terms of materials 
management, in terms of workforce management, in terms of 
layoffs, which is inevitably going to flow from that shift, is 
going to result in costs. And I guess the question is, you 
know, did you include that in your FYDP in terms of the costs 
of that dip in production which, again, we are seeing real 
results now in terms of savings because of the higher 
production rate.
    Secretary Hale. So far as I know, the FYDP is fully funded. 
I hear your point, if they take $487 billion out of the budget, 
and we tried to do it in a way consistent with our strategy, 
but we had to do it. And this is one of the issues raised with 
the Navy to discuss with them. And they would have preferred 
not to do it, so would we, but it is where it is. It is a 
fiscal '14 decision. We will get another chance to look at it 
in light of current fiscal realities.
    Mr. Courtney. Well, the strategy, of course, which was 
articulated at the outset today, clearly focuses on Asia-
Pacific, and you can't have an effective strategy without a 
strong undersea fleet.
    Thank you for saying that you are willing to continue to 
work on this.
    Secretary Hale. We will take a look at it as the 
Secretary----
    Mr. Courtney. The long-term effect in terms of the fleet 
size will be decades.
    Secretary Panetta. Now, you know, I was very impressed with 
what I saw in Groton. I don't want to lose those skills. I 
don't want to lose those abilities. I want to maintain that 
kind of industrial base. So we will continue to do whatever we 
can to work with you to see what we can do to try to reduce 
those costs in the future.
    Mr. Courtney. Thank you, Mr. Secretary.
    I would also want to go back to Mr. Thornberry's point 
about the 2005 BRAC, which, again, I respect the fact that you 
have deep, profound personal experience in terms of what you 
went through in your time in Congress. But some of us have our 
own experience as well. I served on the Readiness Subcommittee 
for the last 5 years. We have been following the 2005 BRAC like 
a box score in terms of its results. It cost about twice as 
much as was predicted; and, as Mr. Thornberry said, the net 
savings are still years away.
    And, you know, obviously, we all get sort of pinned as 
being sort of looking at our own backyard when this issue gets 
discussed, but I think there is a legitimate question here, 
particularly with the fact that we have got to deal with the 
Budget Control Act caps. You know, how you do this in terms of 
not costing money in the short term?
    I mean, the answer we have gotten so far from Dr. Carter 
and yourself is that it is zero in terms of projected savings 
for the plan that was submitted there. So, you know, zero minus 
zero equals zero.
    I mean, if we don't do it--I mean, it just doesn't--it is a 
nullity in terms of trying to achieve the Budget Control Act 
targets; and, frankly, I think that is a very big threshold 
question which the Department has to answer before I think 
there is going to be any willingness to look at this thing at 
all.
    Secretary Panetta. You know, I mean, I hear what you are 
saying; and the 2005 costs are--frankly, you know, it is just 
unacceptable the way that process ultimately worked out in 
terms of how much it cost us. On the other hand, obviously, in 
the long run it will produce some savings.
    I guess what I would suggest to you is that, you know, we 
have been through three BRAC rounds. There are some lessons to 
be learned here. If we are going to do another BRAC round, as 
we have recommended, perhaps we need to do it in a way that 
tries to acknowledge some of the lessons learned here to make 
sure that we achieve the savings that we have to achieve as 
part of the BRAC process. Maybe that is a better way to 
approach this issue.
    Mr. Courtney. Well, it is my understanding that we are 
going to see language sometime in March in terms of the 
proposal. And, again, there is going to be a high degree of 
skepticism for those of us who, again, have been tracking the 
overall results of the last round. And certainly I know you 
have gotten mixed comments here today, but I just want to at 
least share, certainly for some of us, this is a real problem.
    And I yield back.
    The Chairman. The committee will take a 5-minute break and 
reconvene at 5 minutes after, and Mr. Kline will be next.
    [Recess.]
    The Chairman. The committee will come to order.
    The chair recognizes Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here, for your testimony, 
for your extraordinary service to our country.
    I very much appreciated, General Dempsey, your testimony. 
You mentioned that the families have stood with us, talking 
about our men and women in uniform and stressing the importance 
of keeping faith with the true source of our strength, that is 
our people.
    And it is in that line, in that vein, Mr. Secretary, that I 
want to raise a subject that I have raised in the past in this 
committee. And that is the subject with the sort of convoluted 
name of the Post-Deployment Mobilization Respite Absence 
program, PDMRA; and although the name is a little convoluted, 
it is pretty straightforward.
    DOD enacted this program back in January of 2007 with the 
express purpose of taking care of our troops, recognizing that 
we have men and women deployed for extraordinarily long periods 
of time and rewarding them with this program so that they could 
spend more time with those families, the families that have 
stood with us and so that we could keep faith with our men and 
women in uniform and their families.
    This program has been in effect and running, doing what it 
is supposed to do, easing stress on our men and women in 
uniform, rewarding the families. And then on October 1st of 
2011, the Department came out with a new policy. And it came 
out with this policy--of course, it affects the soldiers who 
are deployed today to Kuwait or Afghanistan, changing the 
number of days that you can get as a reward for extended 
periods of service; and you could have a negative impact of 
over 3 or 4 weeks, in some cases, because of this new policy.
    And so I am--I understand the Department is perfectly 
allowed to make policy changes, but I am very concerned that it 
looks like there is no provision for grandfathering those that 
are overseas now. We have a part of a brigade combat team of 
the famous Red Bulls out of Minnesota and surrounding states 
that are over in Kuwait right now, and there is a lot of 
confusion about what the policy is going to be.
    I think it is important that we keep faith, that we not 
change things around during the middle of a deployment and so 
we don't have our soldiers sitting over there wondering, and 
their families wondering, what this policy is going to be.
    So I have a question for you, Mr. Secretary, is will you 
grandfather this new policy so that the soldiers that are 
deployed now get what they thought they were going to get when 
they deployed? It applies to all, but I am particularly talking 
about members of the Guard and Reserve who are making decisions 
based on these sorts of policies.
    So if you know that answer, I would take it now. If you 
don't, I would take it for the record.
    [The information referred to can be found in the Appendix 
on page 100.]
    Mr. Kline. I actually sent you a letter a month ago, 
January 18th, to be exact, requesting the answer to this. And I 
understand from talking to staff that that is in the works, and 
I am going to get an answer.
    But I just think it is really, really important that we 
keep that faith and that we not change policy and we not have 
that kind of an impact on our men and women in uniform.
    So that is my first question.
    Secretary Panetta. Congressman, if I could just respond to 
that.
    We are looking at that program. It is an important program, 
and I am looking at the implications of what happened with the 
policy change to determine whether or not we should make any 
adjustments. I am not going to make any promises to you, but I 
will assure you that I will take a hard look at that before we 
get you the answer.
    Mr. Kline. Please do. And I would just reiterate that, in 
my opinion, from where I am sitting looking at my own 
experience and talking to many of my constituents and many 
people in Minnesota, who have been really impacted by these 
deployments, the Red Bulls had the longest combat deployment of 
any unit, Active, Reserve, National Guard, any Service; and so 
I just think it is really, really important that we keep faith 
with those men and women.
    Now I have another really quick question. I know you have 
answered this before, but I see that we are talking--and I 
think, General Dempsey, you mentioned that we are looking at--
or the Secretary--both of you talked about modifying the 
retirement system for our men and women in uniform. And I just 
want to underscore again that any such changes will not affect 
those already serving; is that correct?
    Secretary Panetta. Our position, strong position here is 
that all those that are currently serving would be 
grandfathered in under the present system. As the Commission 
reviews future changes, they are not going to be affected.
    Mr. Kline. Thank you.
    My time has expired, Mr. Chairman.
    The Chairman. Thank you, Mr. Loebsack.
    Mr. Loebsack. Thank you, Mr. Chair.
    Before I say anything else, I do want to, I guess, concur 
with Mr. Kline. We have Iowans who are in that Red Bull group 
as well, and we have many of the very same concerns in Iowa 
when it comes to the Guard and Reserve.
    And I do want to thank both of you--or all three of you--
for your service.
    At the outset, I just want to quote from the defense 
strategy when it states that ``the concept of reversibility, 
including the vectors on which we place our industrial base, 
our people, our Active-Reserve Component balance, our posture, 
and our partnership emphasis is a key part of our decision 
calculus.''
    The strategic guidance also states that DOD will ``make 
every effort to maintain an adequate industrial base.''
    I strongly believe that a critical part of our industrial 
base is, in fact, organic based, our arsenals, certainly our 
ammunition plants and our depots. They provide, I believe, a 
critical function of our readiness and our ability to supply 
our troops in the event that we have another conflict. We are 
drawing down now but in the event that we have future 
conflicts.
    We have got to maintain, I think, the capabilities of the 
organic industrial base to respond to future contingencies--
there is no doubt about it--and allow for reversibility 
highlighted in the strategy. And I strongly believe that the 
Department must ensure that this organic manufacturing base be 
preserved but that it be actively supported.
    Secretary Panetta, Chairman Dempsey, has the Department 
actively engaged the military services to develop a plan to 
sustain our organic industrial base, including our organic 
manufacturing capabilities? And, if so, what is that plan?
    Secretary Panetta. Well, that is part and parcel of the 
whole strategy here, which is to maintain that industrial base 
that you talked about. And the industrial base, I think, does 
include the areas you have just defined. We need to have that 
as part of our ability to be able to mobilize and to be able to 
reverse any steps we have taken in order to be prepared for the 
future.
    We are looking at a broad strategy here as to how best do 
we do this to make sure that, as we fund the industrial base, 
we do it in ways that obviously are cost savings but at the 
same time maintain those areas in place. It is sometimes not an 
easy balance. But my goal is, I do not want to put anybody out 
of business in that area. I think we need to have it, and we 
are going to do everything we can to ensure that they are 
around.
    Mr. Loebsack. Thank you.
    General Dempsey.
    General Dempsey. I can assure you, Congressman, that as the 
service chiefs have briefed me on their plans they have also 
briefed the Secretary, and it is always part of the 
conversation.
    Mr. Loebsack. Thank you.
    The strategic guidance also states that ``the challenges 
facing the United States today and in the future will require 
that we continue to employ National Guard and Reserve forces.''
    I guess I have a couple of questions related to that.
    Both Secretary Panetta and Chairman Dempsey, can you 
explain what role DOD's total force policy will play in 
implementing the new strategic policy across each of the 
Services? And can you explain further how the total force 
policy will be implemented in light of the proposed force 
reductions among the Services? And, within that, how will the 
experience and readiness of the Operational Reserve be 
maintained?
    That is a big question, I understand, and kind of a series 
of questions.
    General Dempsey. Yes, sir, it is a very big question and 
one that is a work in progress.
    What we are taking a look at is--it is fundamentally how we 
balance Active, Guard, and Reserve. And then within that a 
subset is, as you balance the Force, how much is of it is 
operational, that is to say, ready to go today and how much is 
strategic, ready to go in 30 days, 6 months, or a year.
    And as the service chiefs come and appear before you, they 
are doing that work within their rotational schemes. Every 
Service has a rotational scheme; and they will be able to 
articulate what portions of each of those components need to be 
available in those bins now, 30 days, 60 days, a year. May not 
be able to give you the details, but that is what we are 
working toward.
    Mr. Loebsack. All right.
    Mr. Secretary.
    Secretary Panetta. It is really essential here. We have 
learned a great deal over the last few years in our ability to 
make the fullest use of the Reserve and the Guard. I mean, if 
you go out to the battlefield you can't tell the difference 
between National Guard units and Active Duty. They are out 
there doing exactly the same thing, and they are getting 
tremendous experience, they are getting tremendous 
capabilities. I want to be able to continue that capability so 
that they are ready to go. And, you know, the Services are 
working on plans to make sure that we have that kind of 
rotational ability.
    Mr. Loebsack. I just want to echo that. Our Guard and 
Reserve have been absolutely fantastic, not just in Iowa and 
Minnesota but throughout the country; and they have done a 
great job in their operational roles, not just strategic.
    Thank you very much to all of you.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. I appreciate the gentleman's concern for the 
workforce, and I would encourage you to look at my bill. 
Because they are going to be making layoffs, you know, planning 
for next January's sequestration, that could be avoided if we 
could fix that problem now.
    Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman. I am on your bill, by 
the way; and I share the gentleman from Iowa's concerns. I have 
spoken repeatedly in recent months with General Stein and 
General Dunwoody about this very issue.
    And I am sad to see General Dunwoody retire, by the way. 
She is a class act.
    But one of the thing she has assured me is that you all are 
determined to not get caught like we were caught off guard 
going into Iraq and Afghanistan and Iraq when it came to our 
depots' capabilities. And I believe we have heard General Stein 
when they say that.
    Then I look at the budget that has just been proposed and I 
look at depot funding for 2013 and it's 82 percent of last 
year, and last year the majority of the funding was in OCO 
[Overseas Contingency Operations]. This year, none of it. Reset 
was a little better. Ninety-three percent of last year all of 
this funding last year and this year is OCO. The numbers for 
depot maintenance for the Army Reserve is 57 percent of last 
year, for the National Guard is 64 percent of last year.
    And my question is, if we want to make sure we are ready 
for the next--and, by the way, obviously, we are still in a war 
and we have other theaters threatening. Why has depot 
maintenance been cut so much and why is there no funding in the 
traditional reset accounts?
    General Dempsey.
    General Dempsey. Yes, sir, I mean, the demand is going 
down. Yes, we remain in conflict, but in Iraq we went from 
50,000 a year ago down to roughly 300 uniform personnel now. I 
mean, when that demand goes down, so, too, does the demand 
signal back into the depots. Although, as you correctly point 
out, there will be a period of residual recapitalization and 
retrofit and so forth.
    But some of what you see reflected there, this wasn't done 
as a budget drill. It was based upon the demand signal and how 
we have to take action immediate--but let me ask Mr. Hale to 
comment.
    Secretary Hale. I think some of what you are seeing is, as 
we shift funding from OCO to the base, as the Iraq war ended, 
some of those units, some went to Afghanistan but some are 
coming home, and we need to get their funding back in the base 
budget. That is some of what is driving those trends.
    And then, as General Dempsey said, we are seeing lower 
requirements in some cases because the tempo of operations will 
be lower when we are out of Iraq.
    Mr. Rogers. Yes. Those are just much larger percentages of 
reduction. Just quickly, you know, we still have some real 
significant reset demands that I understand in maybe '14 and 
'15 we may see some larger reductions, but those are awfully 
sharp hills to go off this again.
    Secretary Hale. Again, to my knowledge, reset is a 
difficult issue, and it is hard to predict, and it is hard to 
know exactly when their equipment will be available. We are 
very mindful that we need to fix or repair this equipment that 
is coming out of Iraq and that will come out of Afghanistan, 
and we will do everything we can to work with you. I think we 
have $9.3 billion, if my memory serves me right, for reset in 
fiscal '13 budget. There is a lot of money in there, and we are 
trying to do our best to make sure it works.
    Mr. Rogers. Is it your plan to do the reset in our depots, 
all of it?
    Secretary Hale. Well, it is a combination. In some cases, 
equipment is so bad we have to replace it. But where it is 
fixable, yes, we will be in the depots.
    Mr. Rogers. All of the reset will be done in our depots.
    Secretary Hale. Yes.
    Mr. Rogers. Great.
    While the Army is downsizing, this decrease in depot 
maintenance seems to be a little severe, given that we are 
still in Afghanistan. Do you envision a flattening off of this?
    Again, I go back to when I was first here right when we 
went into Afghanistan and Iraq, and it was 18 months before we 
were really up and running like we should have been. I am 
concerned that this downsizing you all plan to continue it, 
rather than reach a plateau and make sure that we are ready 
with this depot infrastructure. Give me some reassurance that 
we are not going to keep the----
    Secretary Panetta. Well, my whole point here is that we 
have to be ready to mobilize and surge quickly, and I want to 
be able to have the facilities I need in order to do that. That 
is one of the requirements I basically made to the service 
chiefs and all of them to make sure that we have the base on 
which, if we have to go, we have got them and they are in 
place. Closing those facilities is going to hurt us. And so my 
point is, let's try to do what we can to maintain what we need 
in order to mobilize quickly.
    Mr. Rogers. And that is what I am looking for, reassurance. 
These numbers, you are confident that with these cuts you are 
still going to be able to maintain that core capability----
    Secretary Panetta. That is correct.
    Mr. Rogers [continuing]. If we need--in the event we are in 
North Korea or Iran 6 months from now.
    Secretary Panetta. Yes, absolutely.
    General Dempsey. And with these numbers I share the 
Secretary's confidence and commitment he just made to you. 
Sequestration cannot make that commitment.
    Mr. Rogers. I agree. It can never happen.
    I have got some more questions. My time is up, and I will 
just submit those for the record.
    Thank you, gentlemen, for your service.
    The Chairman. Thank you very much.
    Ms. Tsongas.
    Ms. Tsongas. Thank you, Mr. Chairman; and thank you all for 
your testimony. It is quite an array of issues you have to deal 
with, so I give you great credit for being so responsive to all 
our questions.
    I just wanted to note that past testimony before this 
committee has rightly noted that our Nation's fiscal crisis 
represents a threat to our national security. As Secretary of 
State Hillary Clinton and former Secretary of Defense Bob Gates 
have both noted, our rising debt has implications for both our 
influence around the world and our ability to project strength.
    To that end, I commend the diligence with which you have 
prepared the Department's strategic guidance, along with the 
fiscal year 2013 budget, which was shaped by that guidance. In 
the initial round of cuts that has been required by the Budget 
Control Act, a ranking member noted--Ranking Member Smith 
rightly noted that it is a decrease in the increase. And we 
actually had a witness last week--sorry, I can't remember his 
name but--who said that a strategy without fiscal constraint is 
not a strategy. So I think that forces have combined to create 
a strategy that acknowledges the constraints we deal with but 
also the world in which we live.
    You also noted that--as you are doing this, you noted the 
fundamental importance of keeping faith with our military 
personnel. So I am going to go to an issue that we have 
discussed before.
    In your last appearance before the committee, Secretary 
Panetta, we talked about the fact that the military's rate of 
sexual assault among service members is much too high. In 2010, 
there were 2,670 reported sexual assaults in the military. By 
the Pentagon's own estimate, 13 percent of sexual assaults are 
reported. And in your last testimony you committed, despite 
budget austerity measures, to absolutely work to confront 
sexual assault, to encourage survivors to come forward, and to 
continue to fund programs that prevent it.
    As we restructure the Force in the coming year, this is a 
problem we must continue to work to address. As we all know, a 
climate of trust is fundamentally important to how our military 
operates; and failure to address it truly does erode that 
climate.
    In January of this year, you publicized policy, some 
mandated by the fiscal year 2010 NDAA, giving victims who 
report a sexual assault an option to quickly transfer from 
their unit in order to remove them from the proximity of an 
alleged perpetrator. You stated that the DOD would require the 
retention of written records of sexual assault for a period of 
50 years to make it easier for service members to claim 
veterans benefits.
    You also announced that $9.3 million would be spent on 
training to give rape investigations and prosecutions more 
teeth to provide service members with the protections they 
deserve.
    I want to thank you for all your efforts and your 
commitment to sexual assault prevention and response, and I am 
particularly encouraged by the near doubling of the 
Department's budget request for the Sexual Assault Prevention 
and Response Office for fiscal year 2012.
    You have many, many tools now in your tool chest that 
didn't exist in prior years, but these policies will only prove 
effective if we make sure that military commanders and leaders 
at every level are aware of these policies and are able to 
appropriately respond to it. We must make sure that every 
person that a rape survivor could turn to is ready to 
appropriately respond to protect that service member. And we 
have been learning, as people have been coming to our office, 
that some of these changes are not making themselves known on 
the ground.
    Lower level leadership is the key to changing the culture 
in the military that has allowed this problem to exist for far 
too long, and that is why I am encouraged to hear that you have 
acknowledged that you are conducting an assessment on how the 
military trains commanders and leaders. Still, we have much 
work to do.
    So my question, Secretary Panetta, is, going forward, how 
do you see this coming together to continue to create a 
continued strategic approach, institutionalizing prevention of 
and response to sexual assault, making sure that all levels of 
the military are aware of the tools in the toolbox and how--and 
guidance in their response?
    And I left you very with little time. If I have to take an 
answer for the record, I will.
    Secretary Panetta. Thank you, Congresswoman. Thank you for 
your leadership on this issue. This is very important to me.
    I think we have to take steps to make sure that we have a 
zero tolerance with regard to sexual assault. And you know the 
problems. All of the steps you outlined, that I presented, we 
are pushing on every one of those fronts to make sure that we 
do everything possible to try to limit sexual assaults.
    I have got--the final thing is really what you mentioned, 
which is we have got to get our command structure to be a lot 
more sensitive about these issues, to recognize sexual assault 
when it takes place, and to act on it, not to simply ignore it. 
That is one of the important things.
    Ms. Tsongas. Thank you, and we will follow up in future 
hearings. Thank you.
    The Chairman. Mr. Franks.
    Mr. Franks. Well, thank you, Mr. Chairman.
    Gentlemen, thank you for being here, General Dempsey, 
Secretary Panetta, Mr. Hale.
    Secretary Panetta, I guess, first of all, I would like to 
echo the concerns of Mr. Thornberry regarding the 
Administration's consideration or potential proposal of 
reducing our nuclear--our strategic nuclear inventory by as 
much as 80 percent. I mean, I have to suggest to you I consider 
that reckless lunacy. And your response, in all deference to 
you, sir, was really a nonresponse; and it did little to 
assuage my concerns.
    And I just have to tell you for the record, given the need 
for a broad umbrella that America represents to the world in 
terms of our nuclear deterrent, given the importance of being 
able to demonstrate in the mind of any enemy, even those that 
are not altogether sound, of our overwhelming capability to 
respond and overwhelm any aggression on the part of someone 
with nuclear capability, I just want to go on record as saying 
that there are many of us that are going to do everything we 
possibly can to make sure that this preposterous notion does 
not gain any real traction.
    So, with that said, let me shift gears and ask you a 
question related to missile defense.
    As you know, homeland defense is listed as the first policy 
priority in the Ballistic Missile Defense Review; and, 
furthermore, the ground-based midcourse defense system is 
currently the only proven missile defense system that protects 
the U.S. homeland from long-range ballistic missile attacks. 
And yet, with that said, the fiscal year '13 budget request is 
$250 million less than was enacted in fiscal year '12, which is 
a follow-on to a decrease of $180 million in fiscal year '11.
    Now, the budget cuts to these systems makes it very clear 
to me that the Administration is willing to diminish our only 
system that protects--our only prudent system that protects our 
homeland from long-range ballistic missiles. And, furthermore, 
the budget request increases funds for several of the European 
Phased Adaptive Approach systems which, to the casual observer, 
might indicate that the Administration has actually 
subordinated protecting the continental U.S. from ballistic 
missiles to that of protecting Europe.
    Now, unless you or your Department or this Administration 
has assessed that the threat to our homeland from long-range 
ballistic missiles has declined such that GMD [Ground-Based 
Midcourse Defense] is no longer the critical system we all 
thought it was or unless somehow the Administration's 
commitment to protecting the homeland has in some way declined, 
I guess I am in the middle of a conundrum here, Mr. Secretary.
    And so my question is this: Would you explain, in your 
mind, in the policy of the Department, whether GMD is indeed a 
critical system to protect our national security? And, if so, 
how does this rather specific and direct cut to these systems 
reflect that commitment?
    Secretary Panetta. First and foremost, Congressman, I 
obviously share your concern that we have to do everything 
possible to protect our homeland; and, for that reason, we 
maintain the full nuclear deterrent here and in the triad. 
Every aspect of the triad is maintained, because I believe that 
is extremely important to our ability to protect our homeland.
    With regard to the specific decision on the funds there, 
even though it is less than what we have provided, the fact is 
that it meets our needs in terms of upgrading the missile 
system that we have. You know, our missile system is in place, 
it is ready to go, it is effective. We are not going to reduce 
that effectiveness in any way here.
    The sole point here is to try to do what we can to, 
obviously, achieve some savings but at the same time make sure 
that it doesn't impact on our readiness. And I can assure you 
that nothing in this budget impacts on our ability to respond 
and protect this country under the nuclear deterrent.
    Mr. Franks. Well, Mr. Secretary, I don't doubt for a moment 
your commitment to this country. I would just suggest to you 
that the policies that we are hearing here should alarm us all.
    And with that, Mr. Chairman, I yield back.
    The Chairman. Thank you.
    Ms. Pingree.
    Ms. Pingree. Thank you very much, Mr. Chair.
    Thank you all for your time today, your testimony, and for 
your service to this country.
    Secretary Panetta, I truly appreciate hearing the steps 
that the DOD has taken towards a sustainable defense budget and 
how it correlates to the President's new strategic guidance. 
With emphasis placed on the need to keep the agile and flexible 
military force, I will be interested to hear in the future how 
the force structure will serve those needs. Specifically, the 
Navy already has agility built into its force, which would help 
support strategic targeted operations.
    In addition to reevaluating our strategy after 10 years of 
war, I do believe that we must continue to provide our service 
members and their families the support that they need, and I am 
pleased to hear you speaking about that today. We truly need to 
keep our promise to the honorable men and women who have earned 
their benefits. I am also pleased to hear that it is a priority 
of yours.
    And I was very pleased with the testimony of my colleague, 
Ms. Tsongas, that it is a priority of yours and General Dempsey 
to take care of our military as well as addressing military 
sexual trauma; and I agree with her that there is still a great 
deal that needs to be done in regards to that.
    I want to talk a little bit about Afghanistan. The deaths 
of bin Laden, Anwar al-Awlaki, and the elimination of much of 
Al Qaeda's leadership, are testament to the success and 
effectiveness of the small, rapid missions instead of the 
nation-building missions of the past. The emphasis, based on a 
lily pad strategy, will help us continue to address our 
national security priorities as well as draw down unnecessary 
troop levels in Europe, for example.
    Secretary Panetta, I was pleased to hear you announce a few 
weeks ago that the drawdown from Afghanistan would begin as 
early as mid-2013. Although I appreciate accelerating the 
drawdown slightly, I would like to hear more about the number 
of troops that will be withdrawn in 2013, as well as the 
schedule set for the pace of withdrawal of the 68,000 troops 
who will remain.
    As a long-standing opponent of the war, I also have serious 
concerns that the lessons learned from Iraq are not being 
implemented fully in Afghanistan. As the DOD attempts to rein 
in costs, I am puzzled why contracting in Afghanistan has not 
been more closely scrutinized, especially since many of the 
contractors overlap in both Iraq and Afghanistan.
    The Special Inspector General for Iraq Reconstruction has 
highlighted over half a billion dollars, $640 million to be 
exact, that could be used more effectively elsewhere and almost 
a third, $217 million, of which were payments to contractors 
for reimbursements that were not supported by any 
documentation.
    For example, Inspector General Stuart Bowen specified that 
an audit of Anham LLC, which has contracts in both Afghanistan 
and Iraq totaling almost $4 billion, revealed they overbilled 
DOD by at least $4.4 million for spare parts, including $900 
for a switch valued at $7.05.
    Now I know I have asked a lot here today and there is a 
limited amount of time available, but let me ask a couple of 
questions; and if you are able to discuss it, that would be 
great. If not, I will take the answers for the record.
    My questions are: What steps have been taken to implement 
the lessons learned from Iraq in the case of Afghanistan? Has 
it been successful and what more can we do at this time of the 
important budget-cutting that is currently going on?
    Secretary Panetta. Congresswoman, there is no question that 
a lot of lessons were learned in Iraq; and many of those 
lessons are being applied in Afghanistan.
    I think the good news is that 2011 was really kind of a 
turning point. In 2011, the level of violence went down. We 
weakened the Taliban significantly. More importantly, the 
Afghan Army really came into its own operationally. It started 
really being effective in terms of providing security.
    We have gone through several tranches of areas where we are 
transitioning to Afghan security and governance. The second 
tranche, which we just have gone through and announced, when we 
complete that over 50 percent of the population will be under 
Afghan security and Afghan control. We are going to continue 
those tranches through 2012 as well as into 2013.
    In 2013, our goal is that, when the final tranche is 
completed, that the Afghans will take the lead with regards to 
combat operations and we will be in a support mode. Although we 
will be combat ready, we will basically be operating in support 
through the remainder of 2014.
    We are on track now, according to Lisbon, to be able to 
draw down with our ISAF forces by the end of 2014; and then the 
discussion will be what kind of enduring presence we have 
there.
    But bottom line is I think we are on the right track with 
regard to completing our mission in Afghanistan.
    Ms. Pingree. Thank you.
    The Chairman. Thank you, Mr. Secretary.
    Mr. Conaway.
    Mr. Conaway. Thank you, Mr. Chairman; and, gentlemen, thank 
you for your long service and your demonstrated patience this 
morning with being here.
    Leon, I want to add my comments to what Rob Andrews said. 
Thank you for your forward lean on the audit issue and 
sustaining an audit, property resourcing that. You and Bob Hale 
and your team, the ripples that your comments have made and the 
efforts that have gone forward since October I have seen them 
felt all down through the organization, which is where it has 
got to get done. So thank you for that, and I appreciate it.
    We still don't know yet from General Allen--you said 
yesterday to the Senate--how we are going to bring home the 
23,000 that are scheduled this year. I am just worried that 
your comments of the last few weeks were a little premature. I 
don't think anybody says it has gotten a whole lot safer in the 
east of Afghanistan.
    And I understand the glowing comments you were just making 
about the Afghan Army. Concern that fighting season in 2013 is 
split by Ramadan and that we would have our folks in a position 
to allow something to go on in the second half right after 
Ramadan, the last half of that fighting season in 2013, is 
counterproductive to what we are trying to get done.
    Can you help me understand--I am in a position to have some 
information on intelligence as to what is going on, and it did 
not--I was a bit shocked with your comments, because it is not 
marrying up with the evidence I had at that point in time from 
things improving on the ground that rapidly to--and since then 
that questions of certain folks you should know just makes 
your--maybe you were misquoted or maybe overstated with respect 
to that, but I am concerned that we----
    And then one final question.
    Secretary Panetta. Sure.
    Mr. Conaway. Rumors more recently that even more 
accelerated drawdowns are going on, and the question yesterday 
in the Senate was that no decision was made. Does that imply 
that those conversations are, in fact, going on within the 
Administration separate and apart from what General Allen is 
telling you and the commanders on the ground are telling you? 
That would be of great concern to us if these are political 
decisions being driven within the White House for whatever 
reason, that they would start having those conversations. Can 
you help me understand what is going on there?
    Secretary Panetta. Yes, first and foremost, after 40 years, 
I am never responsible for any headlines on any article that 
involves comments that you make.
    My comments were perfectly in line with our commitments 
under Lisbon. And to prove it, all of the defense ministers in 
the last meeting I attended, all of them concur in the same 
strategy, which is we are in together and out together by 2014, 
and we are all following exactly the same process here. We are 
doing the tranches. We are doing the transition to Afghan 
authorities.
    Obviously, we are watching it closely to make sure that it 
is working. So far, it is working. The Afghan Army is doing a 
great job. We have got to continue to put them in place. We 
have got to make sure that they are able to achieve security.
    Everything is conditions-based when you are in war. That is 
a bottom line here. So we are going to be tracking this very 
carefully as we go through that process.
    With regards to the decisions, obviously, we are in the 
process of how do we draw down to 23,000 the surge, and General 
Allen will present a plan to General Dempsey within a few 
months to be able to show how that will be accomplished.
    And then, beyond that, frankly, no decisions have been 
made, because we are looking at the situation on the ground, 
what we are going to need in order to achieve the mission that 
we are all interested in achieving.
    Mr. Conaway. So we are still set on what the mission is and 
no instructions to change the battle plan to reflect lower 
levels of American troops beyond the 68,000. None of that is in 
the works or pushing forward at all.
    Well, thank you for that.
    One minor--one issue with respect to the budget, I think it 
was also a $600 million decrease in defense funding because of 
the switch--or adding $600 million for green energy or 
renewable energy efforts, that is a cut to defense spending. It 
is not your core mission. You know, we are going to pay--and 
Secretary Mabus is bragging on the--paying $15 a gallon for jet 
fuel to fly F-18s as a demonstration project, I guess; and it 
just makes no sense in these kinds of budgetary constraints 
that we would pay $15 a gallon.
    And even if you ramp that industry up as good as it is 
going to get, you are going to be paying twice for that blend 
of algae and fossil fuels over just what straight fossil fuel 
is. So I am not real keen on spending that $600 million. I 
think you could find a better place to spend $600 million in 
defending this country, as opposed to demonstration projects 
that might not yield the benefits that we want.
    So, again, I appreciate your long service to our country.
    I yield back.
    The Chairman. The gentleman's time has expired.
    Mr. Critz.
    Mr. Critz. Thank you, Mr. Chairman.
    Secretary Panetta, General Dempsey, Secretary Hale, thanks 
so much for being here. Thank you for your service to this 
country.
    Secretary Panetta, the Air Force recently announced force 
structure changes in light of the new national defense 
strategy. These changes include major aircraft reductions above 
combat and mobility forces and announced the closing of an Air 
Reserve station in Pittsburgh, Pennsylvania, outside of BRAC 
process.
    The base serves 1,400 Active Reserve and Guard units of 
both Navy and Air Force and has tens of millions of dollars 
appropriated for improvements. Can you tell me if the decision 
to close the base was made in coordination with your office or 
with other stakeholders and how many other bases are being 
identified for unilateral Department of Defense closure outside 
of the BRAC process?
    Secretary Panetta. Congressman, I really recommend that you 
ask the chief of the Air Force that question. Because the 
decision to make that decision was in his hands as part of the 
strategy here that was being implemented to kind of fulfill the 
strategic goals that we were after. So on that specific 
decision I would recommend you ask him that question.
    Mr. Critz. Okay, thank you. And it plays actually into a 
larger role. Because, as you know and are aware, that the Air 
Force's restructuring plan proposes a reduction of 65 C-130 
tactical airlifters, getting us to a total fleet projection of 
318 aircraft. Part of that is because we are going to be 
lowering the Army to a structure of about 490,000 members. My 
concern is that pre-9/11 the Army was at about 480,000, so very 
similarly sized, and we had 530 C-130 tactical airlifters. And 
I am just curious as to the Air Force's new restructuring plan 
isn't realistic, given previous demands for tactical airlift 
and future demands in this new strategy. Can you elaborate on 
any of this, the Secretary or General Dempsey?
    General Dempsey. I cannot elaborate on that specific issue 
except to say that the collaboration between the Air Force and 
the Army on their lift requirements, that has been 
accomplished, and you will have both of them here at some point 
in the future.
    Mr. Critz. Right. Yes.
    General Dempsey. But, you know, this is about accounting 
rules. So if you have X number of airborne brigades, how much 
lift do you need; X number of ground combat brigades, how much 
lift do you need? And those accounting rules have been adjusted 
over time based on lessons learned.
    Do you want to add anything.
    Secretary Hale. Well, I would add that C-130s are important 
to us, but all our studies show we have too many, frankly. And 
so what you are seeing is adjusting in tough budget times to go 
down to what we believe are the minimum requirements that meet 
our wartime needs.
    Mr. Critz. Yes, well, and part of my concern is that we are 
actually adding, I guess, duties to the Air Force's C-130, 
because they are going to be doing the C-27J lift as well.
    And just as a sort of general idea, I look at the C-27J, it 
was going to be sort of a pickup truck, and a C-130 might be 
more like a tractor trailer truck. And I am just curious if the 
C-130 going to be able to get into the same airports as the C-
27 and is it really a cost savings? Or are we going to start 
saying, well, we can't get into these places, so we are going 
to up the tempo for the Chinooks to do what the C-130s can't 
do?
    I guess my question is long-term. This is a short-term 
savings. Is it also a long-term savings? Have we looked at the 
20-, 30-year life cycle of these aircraft?
    Secretary Panetta. I think they have looked at the long-
term savings that would be achieved here. I mean, part of the 
goal in developing our strategy was obviously to ensure that we 
had not only agility and ability to deploy quickly but that 
what we were using was multimission and designed to accomplish 
a series of missions, not just one. And the problem with that 
one aircraft was that it was kind of single-mission oriented.
    Mr. Critz. Right.
    Secretary Panetta. And that is why I think the Air Force 
recommended that we move towards that choice of the C-130s.
    Mr. Critz. Okay, I am a little suspicious. I have just 
heard from some of my Army friends that they like the greens, 
they like the same uniform in the aircraft above them, and it 
makes them a little more comfortable.
    General Dempsey. That shocks me, Congressman, for the 
record.
    Mr. Critz. My last question, in a very short amount of 
time, is we have used the National Guard at a level in the last 
10 years in OIF [Operation Iraqi Freedom] and OEF [Operation 
Enduring Freedom] that we have never seen in the past. The 
future defense plan, does it maintain that same tempo of use of 
National Guards, or are we going to see--and I don't want to 
say diminishing, but much less use of National Guard in forward 
operations?
    General Dempsey. What we do, sir, is we respond to the 
demand. So as the combatant commanders put a demand on the 
system, the service chiefs meet it. The answer to your question 
is we will have Active Component and notably Guard and Reserve 
in an ARFORGEN [Army Force Generation] cycle that meets the 
demand. If the demand goes down, there will be fewer demanded.
    Mr. Critz. Thank you, Mr. Chairman. I yield back.
    The Chairman. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    And Secretary Panetta, General Dempsey, Secretary Hale, 
thank you so much for joining us today and thank you for your 
service.
    Secretary Panetta, I want to begin with you and go back to 
some of the statements you made about this effort of budget 
reductions being driven by strategy and ask you this: I know 
that part of that strategy is an increased operational 
capability and presence in both the Middle East and the Asia-
Pacific. Within that context, we are looking now about an 
additional SSN [nuclear-powered attack submarine] being moved 
outside of FYDP; and we know that in that particular theater, 
especially the Asia-Pacific, the SSN is a very frequently 
utilized asset.
    Also, we are going to be pushing the SSBN(X) [Ohio 
replacement ballistic missile submarine] 2 years further down 
the road, so it is not going to be operational or deployable 
until at least the 2020s. And we are going to have a 
significant period of time where we have a reduced number of 
ballistic missile submarines in a time where we know that is a 
very critical element to our nuclear triad. Looking at those 
things strategically and where we are reemphasizing our 
efforts, that seems to be counter to that.
    And I would ask this: With that in mind, have we looked at 
and can you tell me--from the perspective of China, can you 
tell me how many subs they are building per year and how many 
submarines they will have in fiscal year '17 and beyond, just 
to have a comparison as to where we are going to be 
strategically?
    General Dempsey. If I could, Congressman, we should take 
that one for the record and make it in a classified setting.
    [The information referred to can be found in the Appendix 
on page 101.]
    Mr. Wittman. Okay, very good.
    Secretary Panetta. Clearly, our goal here was to not only 
maintain but to strengthen our presence in the Pacific. That is 
the reason, frankly, we maintained 11 carriers. The Navy 
assures me that we have more than adequate submarine fleet to 
be able to accompany our forces there. We have delayed the Ohio 
class based on costs and trying to make sure that we could 
control those cost overruns as we went through the process, but 
I can assure you are we are still committed to getting that 
online.
    Mr. Wittman. Another issue, too, there with our fleet as we 
are looking at the reduction in the size of the fleet, you talk 
about the seven cruisers that are going to be brought out 
because of the cost of modernizing them to a BMD [Ballistic 
Missile Defense] platform. But you are also looking, too, at a 
fleet that has been really pushed. We are talking about 
maintenance that has been put off. So many ships, as far as 
their Ao, their operational availability, is really 
being pushed.
    If we are looking at that in a strategy that denotes more 
challenges there in the future, especially with our naval 
capability--and just having been to an exercise, a Bold 
Alligator, and looking at our operational capability within the 
Marine Corps that is necessitated by ships, and looking also at 
our amphibious ship decline in numbers, I would ask, too, how 
are we going to reconcile that with operational availability, 
with ship availability based on backlog of maintenance and our 
L class ships essentially going down, yet we are going to be 
emphasizing that capability as part of our strategy? How do we 
fix or how do we address that--what I see as a conflict?
    General Dempsey. If I could take a shot at that one, 
Congressman, you are talking about a specific single Service. 
In this case, you are talking about the Navy.
    I mentioned in my opening comment we really need to think 
about this as a joint force; and what we are doing as service 
chiefs and as joint chiefs is looking at our war plans and 
determining how we meet the demands of the war plans 
innovatively, differently, creatively, and integrate those 
capabilities that we did not have 10 years ago.
    So while it might seem that the Navy, actually, as part of 
this Joint Force has actually benefited from this new strategy 
as it has shifted to the Pacific, but it hasn't been without 
cost to them at all. And the entire Joint Force has to be 
appreciated to understand how we meet the needs of the Nation 
in terms of the new strategy.
    Mr. Wittman. Sure. I certainly appreciate that.
    I guess my concern is, is that with that reemphasis in 
those areas and looking at this new strategy, while I 
understand the cross capability that is there, it still appears 
to me, though, as where we are going to be calling on our Navy. 
In many instances, the capacity and capability there is going 
to be pushed to the absolute maximum.
    We look at the number of MEBs [Marine Expeditionary 
Brigades] that can be deployed and the things that we are 
asking our folks in the Marine Corps and the Navy to do in a 
joint atmosphere. It seems to me that they are going to be 
pushed in a situation where it may not be the most challenging 
of situations, where we say, wow, we can't do all the things 
that we need to do.
    So my concern is that if this is indeed being driven by 
strategy--and, Mr. Secretary, you spoke of increased risk--my 
question is, is are these scenarios, is it an acceptable risk? 
In your mind, is it an acceptable risk?
    Secretary Panetta. Well, I think it is an acceptable risk. 
We are going to be maintaining 285 ships. We have got 285 ships 
now. We will have 285 ships in 2017. In that next 5-year period 
our hope is to increase the fleet to 300 ships. So our goal is 
to try to make sure that we have a flexible, deployable, and 
capable Navy that is out there.
    The Chairman. Thank you.
    Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman; and thank you, Mr. 
Secretary and General Dempsey, for being here today.
    I know that the development of a new strategy and related 
changes in the budget requests were very difficult 
undertakings, and some of the responses that I have heard from 
some on the committee to your work has been unfounded 
criticism. There is no way a 1-percent reduction of the 
Pentagon's base budget from 2012 to 2013 could mean the 
difference between the world's greatest military and a 
hollowed-out force; and under the Administration's proposal, 
the DOD base budget will remain essentially constant between 
2013 and 2017, after adjusting for inflation.
    I believe there is room for additional savings in the 
Department's budget, and those may very well come when we can 
get some clean accounting statements. And I am glad to know 
that that time period, Mr. Secretary, you have moved up to 
2014, I believe, right? And I share your concern about and your 
opposition to across-the-board cuts that would be mandated by 
sequestration.
    But before I ask any questions, I would like to ask a 
couple of things. Last October, there were records that I 
requested, and those records were not submitted until last 
week. Can you be more prompt after this hearing with supplying 
any records or answers that are requested?
    Secretary Panetta. Congressman, I was not aware of that. 
But, in the future, if you make a request for documents and you 
don't get them in an expedited way, I wish you would call me 
and let me know; and we will make sure you get them in time.
    Mr. Johnson. All right. Thank you.
    And also in that regard, Mr. Secretary, a DOD report on 
rare earth elements was due in June of 2011; and it has not 
been completed as of yet. And we were also promised an interim 
report in December, but we have received no interim report. Can 
this be gotten to us quickly?
    Secretary Hale. That one is an interagency coordination. I 
know it is late. I am told it will be very soon.
    Mr. Johnson. Thank you. Any timeframe?
    Secretary Hale. I don't have a specific time. Let's get 
back to you with more specifics.
    [The information referred to can be found in the Appendix 
on page 101.]
    Mr. Johnson. All right. Thank you.
    Secretary Panetta. My legislative aide is saying a couple 
of weeks. We hope that will be in that period.
    Mr. Johnson. All right. Thank you. That is great.
    Mr. Secretary, I am concerned that the pivot to the Asia-
Pacific increases the risk of an increasingly adversarial 
military competition with China, and that is not in either 
country's best interests. How do we execute this new strategy 
without beginning a new Cold War? And I might add that I 
definitely see a need for us to reposition our thinking in 
terms of the Asia-Pacific region.
    Secretary Panetta. I just had this discussion with the vice 
president of China yesterday. We are--you know, we are a 
Pacific power. They are a Pacific power. And while we have had 
our differences, the fact is we have some common concerns that 
we need to confront.
    One is nuclear proliferation in that area, and it is as 
much a concern to China as it is to us.
    Secondly, it is the whole issue of ensuring that trade 
routes and commerce flows freely in that area. That is another 
area that we have a joint concern.
    Thirdly, we have humanitarian needs in that area that we 
need to respond to, and they are as much concerned about that 
as we are. Area after area, there are some common areas that we 
have concerns that will help us improve the regional 
cooperation in that area. That is the kind of relationship we 
would like to have with China, and that is what we hope to 
develop. But in order to do that we have to do that from a 
position of strength, and that is why we have to maintain our 
presence in the Pacific.
    Mr. Johnson. Thank you, Mr. Secretary.
    The Chairman. Thank you.
    Mr. Hunter.
    Mr. Hunter. Thank you, Mr. Chairman.
    Thank you all for your service and your time.
    Let me start with this. This is a quote from Secretary 
Perry and General Shalikashvili, Chairmen of the Joint Chiefs 
of Staff under President Clinton:
    ``A dramatic reduction in the threat allowed for a 
significant reduction in the size of our military forces. The 
most obvious benefit of reductions in force and support 
structure was a reduction in the defense budget. This peace 
dividend--I am quoting--this peace dividend, amounting to about 
$100 billion a year, has been a major contributor to the 
balanced budget that our country now enjoys. The question, of 
course, is did the Nation pay too high a price for this 
benefit? In particular, was the capability of the military 
forces reduced to the extent that they cannot adequately 
protect American national interests? Our answer to that 
question is an emphatic no.''
    A year and a half later, terrorists murdered about 3,000 
Americans and off we went to war. And, as Secretary Rumsfeld 
said, we went with the Army we have, not the one that we wanted 
or wished for.
    I would like to know in general, how do you differentiate 
yourself from these two leaders in that time who were presiding 
over what they would not call--but we look back and see--was a 
hollowing out of the military?
    General Dempsey. Well, I differentiate from them because I 
think we each face our own different circumstances.
    I mean, you know, I mentioned earlier in response to 
another question that the fiscal reality of the '90s is 
different than the fiscal reality of this decade. And it seems 
to me that, as others have testified, that we can only remain a 
global power if we have got that balance, the aggregate of 
diplomatic, economic, and military power. And what you are 
seeing us do is try to reconcile a different set of 
circumstances from any--from any of our predecessors and to 
ensure that we do form a strategy and map the budget to it, as 
opposed to just reacting to budget cuts. And I can only assure 
you we did that and that this will have to be seen as having 
been effective or not over time.
    Mr. Hunter. Thank you, General.
    Okay, moving on then, let me hit on to a few other things 
in no particular order here.
    One of the main points of the budget is calling for more 
capability in the Guard and Reserve. Yet the NGREA, that is 
National Guard Reserve Equipment Account, is zeroed out in this 
budget. There is no request for NGREA at all when we are going 
to put more on the backs of our Guard and Reserve.
    The National Guard Reserve Modernization account, reduced 
by 44 percent.
    Navy Reserve over the next 5 years goes down by 9,000 
sailors based on current capability, even though in 5 years we 
will have LCS [Littoral Combat Ship] and a lot of different 
programs, more UAVs [unmanned aerial vehicles], Fire Scouts, 
which we will then need to get them back for and that will be 
more expensive, shortsighted.
    Air Force is reducing, it looks like, two Active and five 
Reserve squadrons. It should be the other way around, just from 
our point of view, kind of common sense. If you are there to 
save money, you look at these Reserve and National Guard air 
squadrons. They are the ones that pulled a lot of weight in 
Iraq and Afghanistan.
    I think Chairman Kline had a statement on that matter. It 
just doesn't make sense, two Active, five Reserve, when you 
could support a lot more Reserve for the cost of one Active.
    Drones and technologies, we are to ask for half as many 
Reapers. Even though we say the strategy is so that we could 
rely more on technology, we are reducing Reapers in half. We 
are reducing the number of Global Hawks. We cancelled the 
Navy's next generation of UAV because the Fire Scout can do the 
job. That is all fine if your argument wasn't that we are going 
to rely more on this type of technology, but then you cut it at 
the same time. That doesn't make sense to me.
    Third, Asia-Pacific. We fund ship repair at 100 percent, 
which we all know is about 80 percent of what it really needs. 
You still have ships going out that are not even close to being 
capable to do their job.
    You cut seven cruisers--it looks to me like we cut seven 
cruisers so that we could fund 100 percent of 80 percent of the 
Navy's needs, if that makes sense, meaning you cut seven 
cruisers so that you can--we don't want to have to fix the 
things that are expensive to fix, so we just let them go. That 
is what is happening here.
    Navy refuses to down select on the LCS. That is Congress' 
problem as well as DOD's, in my opinion. We should be able to 
at least down-select on an LCS. I don't care which one it is. 
You can't train for the same class. You are training different 
sailors to work on two different ships, different logistical 
tails, different modules--or same modules but different command 
decks inside. You are going to have to have sailors get trained 
for two totally different things.
    And, lastly, something that I noticed, the joint light 
tactical vehicle, you are going to have contracts going out in 
June of this year. Ford came to us and said, hey, if you 
prolong this a year, Ford will get involved and save you 
hundreds of millions of dollars; and we said no.
    There are some major problems with this budget. My main 
point is this: The strategy and the budget contradict each 
other. They do not go hand in hand, they don't fit, and it 
looks to me like the things that we are trying to accomplish 
are not going to be paid for.
    Anyway, that is my opinion; and I am sticking to it.
    Thank you, Mr. Chairman. Thank you, gentlemen, again for 
your service. I appreciate it. Thanks for what you are doing 
and for coming in here with it.
    General Dempsey. Thanks for reading the thing. Obviously, 
you studied it quite a bit.
    The Chairman. The gentleman's time has expired. Will you 
please answer those questions for the record?
    General Dempsey. We would be happy to.
    [The information referred to can be found in the Appendix 
on page 101.]
    The Chairman. Ms. Hochul.
    Ms. Hochul. Thank you, Mr. Chairman. Thank you for joining 
us today and for your service to our country.
    Certainly I echo some of these sentiments, because we are 
concerned about the need to cut costs. That is the great 
challenge that faces you, and we appreciate the stress that you 
are under to accomplish this. However, it does seem that the 
more cost-effective way to approach it is to continue standing 
Reserve and Guard units in a stronger capacity than has been 
announced thus far.
    So we are asking for your consideration. As a 
representative of the Niagara Falls Air Reserve Station, we are 
expected to, if all goes according to, as projected, to lose 16 
percent of the Nation's Guard. That is a big hit for an area 
like ours.
    And as you were talking I took to heart what you said, Mr. 
Secretary, about the need to have jobs when our veterans come 
home. My part of the country sends a lot of people to war, and 
they come back to our area and the jobs are just not there. So 
we treasure these jobs as well as the proximity we have to the 
border of Canada.
    We believe that you will certainly understand the need to 
ensure that we have a continued mission, if not the C-130s that 
the Guard currently has but another mission to fall in its 
place; and that is very important for a variety of reasons.
    But, again, what you have said about our military security 
being linked to our economic security and our industrial base 
and our manufacturing, do you envision a policy or what are 
your thoughts on a policy whereby, using our limited Department 
of Defense procurement dollars, do we actually give preferences 
to domestically produced materials? Is that something under 
consideration? Is that something that you think would help our 
jobs situation back home, to shore up our economy and our 
industrial base as well, sir?
    Secretary Panetta. Well, let me begin by saying you can't 
view the Defense Department budget as a jobs program. I know 
there are jobs that are dependent on it. I know we care an 
awful lot about the people that work under our Department. But 
the bottom line is, what do we need in order to get the best 
defense for this country and where can we get it?
    And, frankly, we do look at the U.S. industrial base as 
supplying, frankly, the biggest part of that. Why? Because I 
can't rely on--I don't want to rely on foreign suppliers for 
that. I have got to rely on U.S. suppliers in the event that we 
have a crisis and we have got to respond.
    Ms. Hochul. I agree with you 100 percent.
    And I would like your comments added, sir.
    General Dempsey. Yes, thanks. Thank you, ma'am.
    Just on this Active, Guard, and Reserve issue, we have 
really got to be clear--I mean, the Active is Active because 
they are full-time, 24/7/365; and we fund them to be full-time 
so that they can be the most responsive for us. The Guard and 
Reserve, if they were full-time, if they were ready on the same 
timeline, would cost exactly the same thing.
    But yet, you know, on occasion we will be told the Guard 
and Reserve are cheaper. They are, because we only employ them 
for X number of days a year. Once you bring them in and you 
want them to serve for 365, the fully encumbered costs are 
identical. The question for the Nation that we are trying to 
answer is how much Active, because you need them right now, how 
much Guard and Reserve, and then, within that, how many of them 
do you need within 30 days, 180 days, or a year?
    So, believe me, we want to do what is best for the Nation, 
but this is not a--you know, the Active, Guard, Reserve, it is 
not a dichotomy, it is a trichotomy, has to be handled very 
carefully, or we will talk ourselves into something that won't 
deliver when we need it to deliver.
    Ms. Hochul. And I take that to heart. But I want to get 
back to the Secretary's comments. Is there anything that this 
Congress can do to assist in your stated goal, which I share, 
that we can do for more our industrial base, our local 
manufacturing, and, again, our national security, as opposed to 
relying on manufactured items from countries that may turn on 
us and may not end up being our friends. Is that something we 
can work on together? Because I think that is important.
    Secretary Panetta. Yes, absolutely. I would have no problem 
working with you on that aspect, because I want to be able to 
turn to our base in this country when we have to respond and 
mobilize.
    Ms. Hochul. Thank you very much.
    Mr. Chairman, I yield back the balance of my time.
    The Chairman. Thank you.
    Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Gentlemen, I appreciate you hanging around just for my 
questions.
    General, you spoke about the ISR capabilities. I represent 
Robins Air Force Base, and we have the JASORS [Joint Advanced 
Special Operations Radio System] there. And it is not 
appropriate here, but I would like to get some information to 
you. There is a very efficient way to increase the capabilities 
of that unit and those planes that would, I think, be a 
significant cost savings, so I will provide that information 
for all of you. I will work my staff to your staff.
    I will tell you I did not vote for sequestration. I 
represent Robins Air Force Base. As I said, I am from Georgia. 
We have Fort Benning. We have Fort Gordon. We have Fort 
Stewart. We have Moody Air Force Base. We have King's Bay.
    I also, as the chairman would tell you, that I am one of 
the ones that did not sign the letter saying no cuts to the 
military. I recognize that we are going to have to have some 
reductions.
    What I see happening, though, through the communities that 
have such a large military industrial base, is the fear between 
sequestration and the talk of BRAC. It is disrupting 
businesses, whether it is an entrepreneur that wants to build a 
restaurant or a city who is trying to determine what sewer 
capacity they need or water capacity or other types of 
infrastructure they need. It is I think in the end causing us 
more unemployment because of that uncertainty.
    Zell Miller was one of Georgia's governors and was a U.S. 
Senator. And one of the things that he did--and he received 
some criticism for it when he did it, but in the end it 
worked--he went through a process called redirection where he 
asked every agency to deliver--the agency head was to deliver 
the 5 percent that they would cut. It wasn't up to any of the 
elected officials. The agency heads delivered the 5 percent 
that they would cut.
    So your base commander could deliver the 5 percent that 
they would take out, and then they were allowed to present back 
to a command where they would put 2\1/2\ percent of that. The 
net result of that was a 2\1/2\ percent reduction and spending 
and, quite honestly, a more efficient agency.
    And so, as somebody who has come from a State 
appropriations committee--and Secretary Panetta and General and 
Comptroller, I know that you all have more experience than I do 
with these issues--but that is something that we did see that 
worked.
    I would also like to say, Mr. Secretary, there are 89 of us 
that are freshmen Republicans. We would very much enjoy a 
discussion with the President. That is something that we are 
not allowed. I wish we could. I wish that that was said about 
us working together could happen, and obviously that means that 
you have those meetings.
    But I would ask, as we talk about these cuts, you know, 
there is no discussion of cutting food stamps. We are talking 
about cutting veterans' benefits. You know, there is not talk 
of cutting housing programs or other things. I mean, the things 
that have been outlined to us are cuts to the military. And we 
need your help.
    I mean, when Fox News and CNN are on--and I watch Fox, I 
will tell you--but CNN is a Georgia company and--I mean, we 
need you out there talking about the damage that sequestration 
is going to do to national security, to our economy, the 
military industrial complex.
    Those people work. My people at Robins want to get up in 
the morning and go to work and have a job. They want to build 
an airplane.
    So I would just ask that we are going to do everything we 
can to have your back, and we need you out there outlining the 
damage that can be done for us.
    Secretary Panetta. Congressman, thank you for those 
comments; and, obviously, I will continue to talk about the 
impact that sequester would have. And I agree with you. Just 
having the shadow of that out there is of tremendous concern to 
communities across the country, to industries across the 
country, and is something that we really have to try to get rid 
of.
    But just to--bottom line here is we were handed a number 
for defense reductions. We stepped up to the plate. We met our 
obligations to try to do this in a way that would still 
preserve for us an effective force to deal with the threats. 
But you can't balance the budget on the backs of defense, 
either.
    Mr. Scott. Absolutely.
    Secretary Panetta. You have got to look at every other area 
in the budget in order to deal with the deficits that we are 
confronting; and I just hope Congress ultimately makes the 
decision, along with the President, to do that.
    Mr. Scott. And, Mr. Secretary that is the statement that we 
need to hear over and over and over from those of you at the 
DOD and our military leaders. You can't balance the military 
budget on the backs of the military.
    Thank you so much.
    The Chairman. Thank you for waiting to get your question 
out there.
    Thank you very much, Mr. Secretary, General, Mr. Hale. We 
appreciate your being here, appreciate the work you are doing.
    This hearing is now at an end.
    [Whereupon, at 1:15 p.m., the committee was adjourned.]
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                            A P P E N D I X

                           February 15, 2012

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                           February 15, 2012

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

      
              Statement of Hon. Howard P. ``Buck'' McKeon

              Chairman, House Committee on Armed Services

                               Hearing on

            Fiscal Year 2013 National Defense Authorization

             Budget Request from the Department of Defense

                           February 15, 2012

    Thank you for joining us today as we consider the 
President's fiscal year 2013 budget request for the Department 
of Defense.
    To put this budget in context, it is critical to examine 
the strategy that has informed its submission. At the outset, I 
want our witnesses to know that I appreciate the hard work that 
went into the development of the strategy. It is no small 
effort to completely revise a strategy one year after the 
submission of the Quadrennial Defense Review and less than 3 
months after the submission of a budget request.
    However, I do have serious concerns about the trajectory 
that the new strategy puts us on. Although this strategy is 
framed as making the military more ``nimble'' and ``flexible,'' 
it is not clear how slashing the armed forces by over 100,000 
during a time of war, shedding force structure, and postponing 
modernization makes that so. The President must understand that 
the world has always had, and will always have a leader. As 
America steps back, someone else will step forward.
    We have now heard multiple times that the strategy drove 
the budget--and not the other way around. I suppose this starts 
with the President's call to slash at least $400 billion from 
defense last April, in advance of any strategic review.
    An honest and valid strategy for national defense can't be 
founded on the premise that we must do more with less, or even 
less with less. Rather you proceed from a clear articulation of 
the full scope of the threats you face and the commitments you 
have. You then resource a strategy required to defeat those 
threats decisively. One does not mask insufficient resources 
with a strategy founded on hope.
    Furthermore, the President's new defense strategy 
``supports the national security imperative of deficit 
reduction through a lower level of defense spending.'' The 
Administration appears committed to ensuring the military is 
the only sector of the Federal Government to meaningfully 
contribute to deficit reduction. Simultaneously, the budget 
proposes additional spending by diverting ``savings'' from 
declining war funding to domestic infrastructure spending.
    How can you ``save'' by not spending money that wasn't in 
the budget to begin with? This is a cynical gimmick that once 
more ensures our military--and only our military--is held 
responsible for what little deficit reduction this budget 
represents.
    White House Chief of Staff Jack Lew said ``the time for 
austerity is not today.'' Ask the 124,000 service members who 
will have to leave the military how they feel about that.
    The President's budget is a clear articulation of his 
priorities. The President's budget asks the men and women in 
uniform who have given so much already to give that much more, 
so that the President might fund more domestic programs. The 
President claimed that the budget would rise every year, but 
ignores the fact that this request is $46 billion less than 
what he said he needed last year and more than $5 billion less 
than what was appropriated for fiscal year 2012. Furthermore, 
despite the new strategy's goal of pivoting to Asia, a theater 
where naval assets and airlift are decisive, the budget calls 
for retiring 9 ships, removes 16 more from the new construction 
plan, and cuts our airlift fleet by hundreds.
    This isn't the only place where the President's public 
statements and missions seem to diverge. We cannot neglect the 
war. The President was committed to a counterinsurgency 
strategy in 2009, yet inexplicably--and certainly not based on 
the advice of his commanders--announced our withdrawal date and 
to pull out the surge forces before the end of the next 
fighting season. Mr. Secretary and Chairman Dempsey, before the 
President makes another announcement about troop withdrawals, I 
implore you to heed our commanders' advice. We are seeing 
success. Let's not make a decision to pull some of the 
remaining 68,000 troops, before we see what happens this 
fighting season. Let's wait to reassess any more force-level 
decisions until the end of the year.

                      Statement of Hon. Adam Smith

           Ranking Member, House Committee on Armed Services

                               Hearing on

            Fiscal Year 2013 National Defense Authorization

             Budget Request from the Department of Defense

                           February 15, 2012

    Mr. Chairman, thank you for holding this hearing. I would 
like to thank our witnesses, the Secretary of Defense, Leon 
Panetta, and the Chairman of the Joint Chiefs of Staff, General 
Martin Dempsey, for appearing here today. Both of them have 
long and distinguished careers on behalf of our Nation.
    Earlier this year, the President released the findings of a 
strategic review, which clearly articulated the global threat 
environment, and presented a broad strategy to address those 
threats moving forward. The budget released earlier this week 
supports that strategy by ensuring that our military has the 
tools and resources necessary to deter, confront, and defeat 
threats wherever they may emerge. This is the right way to 
develop a defense budget--generate a coherent strategy, and 
then provide resources to fund that strategy.
    I have consistently said that we can rationally evaluate 
our national security strategy, our defense expenditures, and 
the current set of missions we ask the military to undertake 
and come up with a strategy that enhances national security by 
spending taxpayer dollars more wisely and effectively. I 
believe the fiscal year 2013 defense budget meets that goal.
    This budget is also fully consistent with the funding 
levels set by the Budget Control Act passed by Congress. 
Although I did not support this act, many members of the House 
Armed Services Committee did, Congress passed it, and the 
Department of Defense has submitted a budget that complies with 
the congressionally mandated funding levels.
    Over the last few years, our military has put together a 
significant string of foreign policy successes, including the 
death of bin Laden, Anwar al-Awlaki, the elimination of much of 
Al Qaeda's leadership, the end of the war in Iraq, and 
supporting the uprising in Libya. The budget lays out a 
strategy that will enable the United States to build on those 
successes and confront the threats of today as well as in the 
future.

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                           February 15, 2012

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                           February 15, 2012

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

      
             RESPONSE TO QUESTION SUBMITTED BY MR. BARTLETT

    General Dempsey. The cost of cleanup has gone down significantly 
from the BRAC rounds of 1990s to the latest round because we have been 
conducting ongoing remediation of environmental hazards on the 
installations. We are obligated to remediate the property regardless of 
whether the base is closed or not. Therefore, these costs are not 
offsets to the savings generated by BRAC closures.
    Additional detail: BRAC is a process that does not have a 
predetermined outcome. Using statutory selection criteria that 
emphasize military value and a force structure plan looking out 20 
years, DOD must complete a comprehensive review before it can determine 
which installations should be realigned or closed. The list of closures 
is then reviewed by an independent Commission that can (and has in the 
past) altered the list. Its review includes holding public hearings and 
visiting various sites. The commission's review results in a list of 
closures and realignments that are sent to the President and are 
subject to review by Congress. It is this thorough process that 
produces the list of installations that DOD will close. [See page 17.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. WILSON

    Secretary Panetta. Relative to Dr. Baldacci, he was tasked to 
review the military health system for opportunities to improve care and 
reduce costs. He was also asked to lead one of the site review teams 
evaluating the processes inherent in the Disability Evaluation System 
(DES) for our wounded warriors. Dr. Baldacci completed a confidential 
summary of his observations prior to his departure in March 2012. USD 
(P&R) would be happy to meet with you and discuss his observations.
    In this position, Mr. Baldacci received an annual salary of 
$165,300. [See page 30.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. TURNER

    Secretary Hale. Of the $5.7 billion transferred in FY 2011 for the 
National Nuclear Security Administration (NNSA) Future Years National 
Security Programs for FY 2011-2016, only funds provided in FY 2011 and 
FY 2012 (approximately $1.5 billion prior to enactment adjustments) 
were applied to the NNSA defense weapons programs. The Department of 
Defense (DOD) cannot now clearly identify the application of this 
funding in FY 2013 and beyond.
    You asked specifically about the Chemistry and Metallurgy Research 
Replacement (CMRR) construction project and the W76 life extension 
program (LEP). Modernizing the U.S. strategic nuclear enterprise as a 
whole is a key national security priority. The decision to defer the 
CMRR was a difficult one, but was made to permit critical warhead life 
extension programs to move forward in the newly constrained fiscal 
environment. This tradeoff was approved by the Nuclear Weapons Council 
after careful review. Moreover, the DOD's independent Uranium 
Processing Facility (UPF)/CMRR study concluded that if funding limits 
constrained parallel construction of the two facilities, then phased 
construction would be a prudent alternative approach, with UPF 
construction beginning first.
    The DOE's FY 2013 budget proposes to defer construction of the CMRR 
for at least 5 years while meeting the plutonium requirements by using 
existing facilities in the nuclear complex which avoids $1.8 billion of 
costs from FY 2013 to FY 2017.
    The W76 LEP was fully supported in the FY 2012 and FY 2013 budget 
years. However, the FY 2013 budget out-year profile stretches out the 
W76 LEP completion by 3 years still meeting the DOD requirements.
    We are currently working with NNSA to restructure the entire 
portfolio of work driven by the DOD requirements to match the out-year 
funding available in the NNSA FY 2013 President's budget. It is hoped 
that the resulting plan will alleviate all of our concerns. [See page 
34.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. KLINE

    Secretary Panetta. The Department does not plan to grandfather 
currently mobilized/deployed units. The revised PDMRA accrual rates 
continue to provide members required to deploy/mobilize beyond 
established thresholds with an adequate number of administrative days 
for respite upon return home. Members also accrue 30 days of leave per 
year, and each Service also provides members with a reintegration 
period upon the unit's return home prior to full demobilization.
    Changes to the PDMRA program resulted from a comprehensive review 
of the program requested by the former Chief of Staff of the Army. The 
program revisions: simplified a difficult to understand and administer 
program by replacing graduated accrual rates with set accrual rates 
based on deployment/mobilization location; eliminated the 4-day per 
month accrual rate, which resulted in some members receiving excessive 
administrative absence days off for respite; and, enhanced equity in 
the PDMRA benefit between Active Component and Reserve Component 
members by focusing the benefit on deployment/mobilization locations. 
The program changes were fully vetted and supported by the Military 
Departments, each of which continues to support the changes. I mention 
this to let you know that the decision to change the program was not 
taken lightly.
    The revised PDMRA accrual rates continue to provide Reserve 
Component (RC) members required to deploy/mobilize beyond established 
thresholds with a reasonable number (up to 24 days per year) of 
administrative absence days for respite. Members deployed to Iraq or 
Afghanistan may accrue up to 24 PDMRA days per year. Members deployed 
to Combat Zone Tax Exclusion (CZTE) areas may accrue up to 24 PDMRA 
days per year, provided the Military Department Secretary has 
designated the area as a 2-day per month PDMRA accrual location. Most 
RC members deployed to a CZTE areas also receive: Government-funded 
transportation to their leave destination under the Rest and 
Recuperation (R&R) Leave Program (members deployed to Iraq or 
Afghanistan also receive 15 administrative absence days under the Non-
chargeable R&R Leave Program); $680 in monthly compensation (Family 
Separation Allowance- $250, Hazard Duty Pay- $225, Hostile Fire Pay- 
$100, Per Diem- $105); tax free military pay under the CZTE benefit; 30 
days of leave per year; and a reintegration period upon the unit's 
return home prior to full demobilization. When viewed with regard to 
all benefits and compensation provided, RC members continue to be 
adequately compensated under the revised PDMRA program. Accordingly, 
the Department does not plan to exempt Reserve Component members 
deployed or mobilized prior to October 1, 2001 from the PDRA program 
changes.
    As a point of clarification, the revised PDMRA accrual rates only 
apply to that portion of an ongoing deployment/mobilization that occurs 
on or after October 1, 2011. Previous PDMRA accrual rates apply to that 
portion of an ongoing deployment or mobilization that occurred prior to 
October 1, 2011. The Department's implementation of the PDMRA change on 
October 1, 2011, ensures members serving side-by-side receive the same 
benefit, and provides equity between Service members with regard to 
PDMRA. Grandfathering the benefit would perpetuate the disparate 
treatment of Service members with regard to PDMRA. [See page 37.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MS. BORDALLO

    Secretary Hale. We have begun discussions with the Government of 
Japan focused on adjustment to the number of marines relocating to Guam 
as part of our effort to achieve a more geographically distributed, 
operationally resilient and politically sustainable force structure in 
the region. The Department continues to study the requirements for a 
smaller force on Guam which meets the PACOM Commander's operational 
requirements, and the Commandant of the Marine Corps requirements for 
training and quality of life in the Pacific Region. These efforts will 
delink the movement of marines to Guam and resulting land returns south 
of Kadena from progress on the Futenma Replacement Facility. 
Additionally, we expect to provide the independent assessment of the 
U.S. force posture in East Asia and the Pacific region by late June, in 
accordance with Section 346 of the FY 2012 National Defense 
Authorization Act. Master planning efforts and assessments of the 
impacts to Guam's civilian infrastructure will take place once the size 
and type of Marine units are finalized and will require the following: 
detailed facility planning; base master planning; a bilateral agreement 
on cost sharing; and appropriate environmental impact analysis. [See 
page 33.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MR. WITTMAN

    General Dempsey. [The information referred to is classified and 
retained in the committee files.] [See page 50.]
                                 ______
                                 
              RESPONSE TO QUESTION SUBMITTED BY MR. HUNTER

    General Dempsey. Based on the new strategy, we prepared a budget 
that strikes an appropriate and necessary balance between succeeding in 
today's conflicts and preparing for tomorrow's. The hard choices we 
made to develop this balance were directly informed by the new 
strategic guidance, and account for real risks and real fiscal 
constraints. Although the budget represents responsible investment in 
our national security, the trade-offs were tough and the choices were 
complex.
    I am an advocate of looking beyond this particular budget 
submission, out to 2020. The merits of our choices should be viewed in 
the context of an evolving security environment and a longer-term plan 
for the joint force. [See page 54.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MR. JOHNSON

    Secretary Hale. An interim report on rare earth was provided to 
Congress on August 18, 2011 and a final report was provided March 9, 
2012. Together, they address the issue of assessing the rare earth 
material supply chain and the availability of material versus demand 
from the defense industrial base. [See page 52.]
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                           February 15, 2012

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

      
                    QUESTION SUBMITTED BY MR. SMITH

    Mr. Smith. The FY2012 National Defense Authorization Act included a 
requirement for the Department to report on the cost-benefit, return on 
investment, and long-term payback of LEED and other green building 
rating systems. It also included a prohibition on using funds for LEED 
Gold or Platinum certification unless the Secretary of Defense provided 
Congress with a notification stating the cost-benefit and demonstrated 
payback for such a decision. Following passage of the FY2012 NDAA, a 
Navy statement, cited by the Federal Times claims ``the Navy is moving 
ahead with its plan to certify all of its buildings as LEED Gold by the 
end of fiscal 2013.'' Please provide the committee with an update on 
the Department's plans to meet the reporting requirement included in 
the FY2012 NDAA, including a general framework and scope of the study, 
whether the Department is planning on meeting with interested outside 
parties to solicit input, and whether the Department intends to perform 
this report internally or whether it will be contracted out. In 
addition, is the Department or any of the Services, moving forward with 
a LEED-only policy or are other green building rating systems or 
alternative approaches being considered?
    Secretary Panetta. The report on cost-benefit, return on 
investment, and long-term payback of LEED and other green building 
rating systems affects all the Services. Office of the Deputy Under 
Secretary of Defense for Installations and Environment (DUSD I&E) has 
been provided recommendations on the path forward and outside party 
assistance.
    Navy's policy is that ``All applicable/certifiable types of 
building projects (vertical construction) must be registered with USGBC 
(or equivalent) and have the required submittal documentation to meet 
the required LEED silver level rating (or equivalent).'' NAVFAC has 
maintained a commitment to meeting the Guiding Principles for High 
Performance and Sustainable Buildings established through Executive 
Order (EO) 13423 and the expanded requirements in EO 13514. Navy is 
developing a High Performance Building Standard which incorporates cost 
effective features of ASHRAE 189.1. ASHRAE 189.1 is a commercially 
recognized whole building design consensus standard for high performing 
buildings which provides performance and prescriptive requirements in 
site sustainability, water use, energy efficiency, renewable energy, 
indoor environmental quality, building impact on the atmosphere, 
materials, and resources. The High Performance Building Standard will 
automatically make all new construction and major renovation projects 
achieve the equivalent of LEED Silver certification.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. WILSON

    Mr. Wilson. The Afghan National Security Force budget request has 
been cut by 50% and has been justified by a reduction in the need for 
front-loaded costs, such as equipment and facilities. That is 
understandable, but a reading of the budget request also shows a 55% 
reduction in funds from $1.1B to $500M for ``training and operations'' 
allocated to the Ministry of Interior forces which includes the Afghan 
National Police. How can such a significant cut not have a serious 
impact on the critical police training effort as it only increases in 
importance to both U.S. plans and to the Afghan people's security?
    Secretary Panetta. The Afghan National Security Forces (ANSF), 
including the Afghan National Police (ANP), are growing in capability. 
It is this growth in capability which in fact is reducing the costs to 
develop the ANP. Growth in capability is covered by two distinct 
phases: ``Build ANP'' capabilities and ``Sustain ANP'' capabilities. 
During fiscal year 2012, the ANP is on track to achieve their planned 
end strength of 157,000 personnel. Once they achieve their target end 
strength, the ANP enters into the ``Sustain'' phase in fiscal year 2013 
and subsequently would reduce their requirement for initial entry 
training to focus on sustaining the force level. Another projected 
savings is based upon the Afghans assuming a greater role in the 
overall training mission in fiscal year 2013 and thus significantly 
reducing DOD's reliance upon mentor and trainer contracts to meet these 
needs. The ANP is growing in overall strength and in capability, 
including the capability to train new recruits. This process will be 
reflected in both their operating and generating forces. For 
clarification, the funding decrease for training and operations for the 
ANP is from $l.l billion in fiscal year 2012 to $570 million in fiscal 
year 2013 for a reduction of 48 percent.

    Mr. Wilson. The Afghan National Security Force budget request has 
been cut by 50% and has been justified by a reduction in the need for 
front-loaded costs, such as equipment and facilities. That is 
understandable, but a reading of the budget request also shows a 55% 
reduction in funds from $1.1B to $500M for ``training and operations'' 
allocated to the Ministry of Interior forces which includes the Afghan 
National Police. How can such a significant cut not have a serious 
impact on the critical police training effort as it only increases in 
importance to both U.S. plans and to the Afghan people's security?
    General Dempsey. The Afghan National Security Forces (ANSF) fund 
was designed to quickly develop Afghan infrastructure, satisfy 
equipment requirements, and accelerate training, with most significant 
investments made in previous years. We now have the infrastructure, 
equipment, and police force in place and the reduced ANSF funding 
request is a reflection of that fact.
    The training and operations budget reductions reflect the ongoing 
transition of training workload from the Combined Security Transition 
Command--Afghanistan (CSTC-A) to the Ministry of Interior (MoI). As the 
MoI begins taking on more of the training workload, a variety of 
training savings will be realized, including a reduced contracted 
trainer requirement, consolidated specialized training, and literacy 
training requirements.
                                 ______
                                 
                   QUESTION SUBMITTED BY MR. LANGEVIN

    Mr. Langevin. In a time of unprecedented deficit reduction, I am 
concerned we are not making progress towards improving energy 
efficiency of DOD facilities and incorporating new technologies into 
these efforts. How is the Department leveraging current and previous 
investments in science and technology to maximize returns on 
investment?
    Secretary Panetta. The Department of Defense (DOD) facility energy 
strategy is designed to reduce costs and improve the energy security of 
our fixed installations. It has four elements: reduce the demand for 
traditional energy through conservation and improved energy efficiency; 
expand the supply of renewable and other distributed (on-site) 
generation sources; enhance the energy security of our installations 
directly (as well as indirectly, through the first two elements); and 
leverage advanced technology.
    As you noted, one of the ways DOD can lower its energy costs and 
improve its energy security is by leveraging advanced technology. 
Technology has been DOD's comparative advantage for 200 years, as 
evidenced by the military's leadership in the development of everything 
from interchangeable machine made parts for musket production to the 
Internet. This advantage is no less important when it comes to facility 
energy.
    To leverage advanced technology relevant to facility energy, three 
years ago, the Department created the Installation Energy Test Bed, as 
part of the existing Environmental Security Technology Certification 
Program. The rationale is straightforward. Emerging technologies offer 
a way to cost effectively reduce DOD's facility energy demand by a 
dramatic amount (50 percent in existing buildings and 70 percent in new 
construction) and provide distributed generation to improve energy 
security. Absent outside validation, however, these new technologies 
will not be widely deployed in time for us to meet our energy 
requirements. Among other problems, the first user bears significant 
costs but gets the same return as followers. These barriers are 
particularly problematic for new technologies intended to improve 
energy efficiency in the retrofit market, which is where DOD has the 
greatest interest.
    As the owner of 300,000 buildings, it is in DOD's direct self-
interest to help firms overcome the barriers that inhibit innovative 
technologies from being commercialized and/or deployed on DOD 
installations. We do this by using our installations as a distributed 
test bed to demonstrate and validate the technologies in a real-world, 
integrated building environment. Projects conduct operational testing 
and assessment of the lifecycle costs of new technology while 
addressing DOD-unique security issues. For example, the Test Bed is 
doing a demonstration of an advanced control system that could increase 
boiler efficiency by five percent; if the technology proves out, DOD 
can deploy it on thousands of boilers and see a meaningful energy 
savings. More generally, by centralizing the risk and distributing the 
benefits of new technology to all DOD installations, the Test Bed can 
provide a significant return on DOD's investment.
    The Test Bed has about 70 projects underway in five broad areas: 
advanced microgrid and storage technologies; advanced component 
technologies to improve building energy efficiency, such as advanced 
lighting controls, high-performance cooling systems and technologies 
for waste heat recovery; advanced building energy management and 
control technologies; tools and processes for design, assessment, and 
decision making on energy use and management; and on site energy 
generation, including waste-to-energy and building integrated systems.
                                 ______
                                 
                    QUESTION SUBMITTED BY MR. TURNER

    Mr. Turner. Secretary Panetta, during our Oct 13 hearing last year, 
you said: ``With regards to reducing our nuclear arena, I think that is 
an area where I don't think we ought to do that unilaterally, we ought 
to do that on the basis of negotiations with the Russians and others to 
make sure we are all walking the same path.''
      Do you still believe, as you stated to this committee 
last year, that U.S. nuclear force reductions should not be unilateral?
      Can you tell us anything about press reports that the 
nuclear guidance review currently under way in the Administration, in 
response to President Obama's direction contained in PPD-11, compelled 
the Administration to review only three scenarios for future U.S. 
nuclear force postures: (1) 1100 to 1000 deployed warheads; (2) 800 to 
700 deployed warheads; and (3) 400 to 300 deployed warheads?
    Secretary Panetta. I will reiterate that we have gone through a 
nuclear review and presented options to the President, but these 
options are in no way unilateral.
    As stated in the Nuclear Posture Review (NPR), the United States 
intends to pursue further reductions in nuclear weapons with Russia. 
The Department's NPR follow-on analysis of deterrence requirements and 
force postures will help identify the force levels needed to support 
these objectives and any potential risks. The completion of this 
analysis is necessary to inform the formulation of any future arms 
control objectives involving our strategic nuclear stockpile.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MS. BORDALLO

    Ms. Bordallo. Please explain how DOD's budget, with respect to the 
civilian workforce, is not a continuation of Secretary Gates' arbitrary 
constraints on civilian direct hire full-time equivalents?
    Secretary Panetta. While the DOD's FY 2013 budget request reflects 
a continuation of the direction to hold civilian full-time equivalents 
to FY 2010 levels, DOD Components requested and received exceptions to 
those levels for recognized workload increases. In the aggregate, U.S 
Direct Hires are declining by 7,367 from FY 2012 to FY 2013. The 
reduction is in the reimbursable program (12,194) which is partially 
offset by an increase in the direct program. The direct program 
increases by 4,827 for critical workload requirements supporting the 
National Guard and Reserves; the acquisition, audit and contract 
management communities; and medical readiness programs.
    Ms. Bordallo. How does the DOD's budget request reconcile with 
legislative language set forth in Division A, Section 8012 of 
Consolidated Appropriations Act of 2012 (P.L. 112-74), which states 
that `` . . . during fiscal year 2012, the civilian personnel of the 
Department of Defense may not be managed on the basis of any end-
strength, and the management of such personnel during that fiscal year 
shall not be subject to any constraint or limitation (known as an end-
strength),'' and more specifically, that the fiscal year 2013 budget 
request be prepared and submitted to the Congress as if this provision 
were effective with regard to fiscal year 2013?
    Secretary Panetta. The DOD budget request complies with section 
8012 of the Consolidated Appropriations Act of 2012 (P.L. 112-74). 
Defense civilian personnel are not managed on the basis of end 
strength. The Defense budget is managed based on executive and 
legislative guidance, strategic plans, resource levels, workload, and 
mission requirements. As required by the Congress, the DOD documents 
the civilian personnel levels supported in the budget request in the 
OP-8 exhibit. The OP-8 reflects the specific funding for civilian 
personnel, as well as the number of full-time equivalents (FTEs) and 
end strength.
    Ms. Bordallo. President Obama has made reducing reliance on 
contractors and rebalancing the workforce a major management initiative 
of his Administration. Does the Department's FY13 budget request and 
reductions in the civilian workforce reflect an opinion that the 
Department has achieved an appropriately balanced workforce?
    Secretary Panetta. The Department's ``sourcing'' of functions and 
work between military, civilian, and contracted services must be 
consistent with workload requirements, funding availability, readiness 
and management needs, as well as applicable laws and statute. The 
fiscal year 2013 budget request, and associated civilian workforce 
reductions, reflects our best judgment today and represents a carefully 
coordinated approach based on the Department's strategy and policy that 
balances operational needs and fiscal reality. The Department remains 
committed to meeting its statutory obligations to annually review 
missions, functions, and workforce composition, including reliance on 
contracted services, and to ensure the workforce is appropriately 
balanced and aligned to our most critical priorities.
    Ms. Bordallo. In FY10, the Department added 17,000 new positions as 
a result of insourcing contracted services. Can you tell us what that 
number was in FY2011? And to what extent will insourcing continue to be 
a workforce shaping tool?
    Secretary Panetta. In fiscal year 2011, DOD organizations reported 
that they established nearly 11,000 civilian positions as a result of 
insourcing contracted services. The Department remains committed to 
meeting its statutory obligations to annually inventory and review 
contracted services and identifying those that are no longer required 
or are inappropriately aligned to the private sector. Insourcing 
remains a very effective and critical tool for the Department to 
rebalance its workforce, realign inherently governmental and other 
critical work to Government performance (from contract support), and, 
in many instances, to generate resource efficiencies.
    Ms. Bordallo. The Department's budget request overview included 
discussion of improved buying power and how acquisitions are managed. 
To what extent does the Inventory of Contracts for Services impact 
these improvements and management of the Total Force?
    Secretary Panetta. The Department began its Better Buying Power 
initiative in 2010 to improve the way the Department acquires defense 
goods and services. The Inventory of Contracts for Services is one data 
source used to help the Department improve the stewardship of our 
resources allocated to contracted services and helps ensure efficiency 
through better management. This includes improving accountability and 
visibility into the level of effort associated with contracted 
services, maximizing competition, conducting spend analyses, and 
rationalizing the Department's supplier base. With regards to Total 
Force management, the post submission review of the annual Inventory of 
Contracts for Services is used to inform workforce planning through 
assessing economies of scale or scope, identify potential areas of risk 
and overreliance on contracted services, and identify opportunities for 
efficiencies. This includes reviewing the nature or way the contract is 
administered as well as the organizational environment within which it 
is being performed. Additionally, the Inventory of Contracts for 
Services will identify areas to strengthen contract oversight and 
assist in the preparation of budget justification materials and 
spending analyses.
    Ms. Bordallo. The Department requested emergency relief from the 
Paperwork Reduction Act in order to move forward, after 4+ years of 
non-compliance, with the Inventory of Contracts for Services. However, 
OMB has failed to act on that request. What is the impact to the 
Department's progress, and the fiscal implications, of not getting the 
emergency filing approved?
    Secretary Panetta. As of early April, the Department has not 
received the emergency waiver to the Paperwork Reduction Act (PRA) as 
requested from OMB in December 2011 and is proceeding with the full PRA 
filing process that will take an additional 2-3 months. While the 
Department continues to press forward and will submit the annual 
Inventory of Contracts for Services (ICS) in June as required by 
statute, this submission will include contractor full time equivalents 
(CFTE) calculated from obligated dollar amounts and an Army factor 
derived from data reported by their contractors, as opposed to on 
actual direct labor hours as required by statute. Without the emergency 
waiver to the PRA as requested, the Department is delayed by at least 1 
more year to demonstrably improve the ICS, and at least 2 years from 
full compliance with the fiscal year 2011 NDAA changes to section 2330a 
of title 10 requiring that CFTE be calculated based on direct labor 
hours and other data collected from private sector providers.
    Until the PRA waiver is granted, the Department cannot take steps 
to modify statements of work to collect the required data. Most DOD 
Components had planned to begin modifying statements of work this 
fiscal year. As a result of the delay, contracts will likely not begin 
being modified until fiscal year 2013, resulting in a delay until 
fiscal year 2014 of the first real data collection.
    While the fiscal implications are challenging to quantify, they do 
exist and are related to Components' ability to improve planning for 
increasingly scarce resources. Delays in collecting direct labor hours 
prevent the Department from getting an accurate accounting of the level 
of effort for contracted services, which would facilitate assessing 
those services using a common unit of measure, full-time equivalents. 
Without this level of fidelity, making value-based decisions and trade-
offs by distinguishing between direct labor hours supporting the 
mission and indirect costs, overhead, and other costs is adversely 
impacted. For example, the Army, which has had the necessary PRA waiver 
in place for over 5 years, has found that approximately half of all 
Army contract dollars in the base budget go to non-labor costs, such as 
overhead and profit, rather than direct execution of mission and 
workload. Such increased fidelity has enabled the Army to more 
appropriately realign limited resources to its more pressing 
priorities.
    Ms. Bordallo. The Department says it is still looking at where it 
is most cost-effective to insource. However, if the Department is 
holding to FY10 civilian levels and in fact, if this budget further 
reduces the civilian workforce, how can DOD organizations insource if 
it is more cost-effective?
    Secretary Panetta. The Department remains committed to its 
statutory obligations under title 10 to annually review contracted 
services and ensure that they are being performed in the most cost-
effective manner possible. While the overall civilian workforce is 
reduced in the FY13 budget request, insourcing remains a viable tool to 
realign workload from the private sector and deliver services using 
Government civilians while providing the best value to taxpayers. While 
the Department has directed organizations to maintain civilian 
authorizations, with certain exceptions at FY10 levels, DOD 
organizations may insource contracted services that meet the necessary 
criteria by absorbing work into existing Government positions by 
refining duties or requirements; establishing new positions to perform 
contracted services by eliminating or shifting equivalent existing 
manpower resources (personnel) from lower priority activities; or on a 
case-by-case basis, requesting an exception.
    Ms. Bordallo. What if the work is found to be inherently 
governmental or otherwise should be performed by civilians, instead of 
contractors? What flexibility is there to immediately convert that work 
to civilian performance without having to ask permission to add 
civilians or reduce staffing in other equally important missions?
    Secretary Panetta. The Department remains committed to its 
statutory obligations under title 10 to annually review contracted 
services and ensure appropriate performance of functions that are 
inherently governmental, closely associated, or otherwise exempted from 
private sector performance (to mitigate risk, ensure continuity of 
operations, build internal capability, meet and maintain readiness 
requirements, etc). Contracted services that meet the necessary 
criteria should be immediately divested, if of low priority, or 
insourced to Government performance. Where appropriate, DOD 
organizations may immediately insource by absorbing work into existing 
Government positions by refining duties or requirements; establishing 
new positions to perform contracted services by eliminating or shifting 
equivalent existing manpower resources (personnel) from lower priority 
activities; or on a case-by-case basis, requesting an exception. In 
order to ensure increasingly constrained resources are allocated 
appropriately and with consideration for organizational mission 
priorities, the Department is currently assessing the process by which 
the civilian workforce is administered in order to increase management 
flexibilities at the mission level.
    Ms. Bordallo. The FY12 NDAA capped contract spending for FYs 12 and 
13 at FY10 levels. And the Congress directly linked that cap to the 
civilian personnel cap. In FY10, the Department requested just over $60 
billion for contract services. In this budget, you requested around $70 
billion. But you've reported to the Congress that your spending in FY10 
was actually upwards of $100 billion, and by some estimates nearly $200 
billion. Since you cannot obligate more than approximately $60 billion 
this fiscal year, what is the Department going to stop doing? What work 
is going to cease? Or will you increase civilian personnel--which may 
be more cost-effective since you're seeking the most cost-effective 
mix?
    Secretary Panetta. The FY 2012 NDAA cap applies to the base budget 
for contract services for all appropriations except Military 
Construction (MILCON); Research, Development, Test and Evaluation 
(RDT&E); and medical care entitlements provided by private care 
providers. The Department's base budget request in FY 2010 that 
establishes the cap is $67 billion. Actual execution for FY 2010 for 
the accounts included in the cap was $113 billion, but includes 
contract services funded in the Overseas Contingency Operations (OCO). 
The Department does not distinguish base obligations from OCO 
obligations in the accounting systems. The FY 2012 enacted base budget 
for contract services is below the cap by $1.7 billion after adjusting 
for civilian personnel growth and shifts from the OCO to base budget 
(both adjustments are allowed in the FY 2012 NDAA). The FY 2013 base 
budget request is below the cap by $0.5 billion.
    Ms. Bordallo. The GAO recently reported that DOD contributes nearly 
$3.3 billion to defense contractor pension plans, hidden as overhead 
charges in contracts. Surely this is a more ripe area for savings than 
considering retirement reform for military personnel or asking our 
dedicated civilian workforce to continue to bear the brunt of budgetary 
reductions?
    Secretary Panetta. Pensions are a major cost for Department of 
Defense (DOD) contractors and a significant factor in attracting and 
retaining the caliber of workers we need them to have to be able to 
perform on DOD contracts. The Department is significantly increasing 
its audit, contract pricing, cost accounting, and contract oversight 
capability by increasing the capacity and capability of the Defense 
Contract Audit Agency and the Defense Contract Management Agency. DOD 
is challenging all costs throughout the Department to include 
contractor costs of our acquisition programs. We have specialized audit 
and actuarial teams monitoring and evaluating pension costs for 
reasonableness and accuracy.
    Generally, DOD contractors are following the lead of commercial 
contractors by reducing and controlling pension costs using defined 
contribution plans in place of the more expensive and volatile defined 
benefit plans. However, contractor pension costs for older defined 
benefit plans will increase over the next 5 to 7 years, even if the 
plans have been scaled back or are not allowing new entrants. This is 
due to the Pension Protection Act, which increased the annual minimum 
funding requirement to ensure pension plans are funded sufficiently.
    Ms. Bordallo. What assurances can you give the Committee that as 
widespread civilian reductions are occurring across the military 
departments work is not shifting illegally to contract performance?
    Secretary Panetta. Reductions in the civilian workforce are 
correlated to workload and mission prioritization. The Department is 
committed to ensuring that workload associated with civilian reductions 
does not shift to contract but is eliminated or realigned to other 
civilians. On December 1, 2011, the Under Secretary of Defense for 
Personnel & Readiness issued guidance to the Department reiterating the 
statutory prohibition on conversion of work to contracts. This 
guidance-directed vigilance in preventing the inappropriate conversion 
of work to contract performance, particularly as the Department adapted 
to declining budgets and operating in a constrained fiscal environment. 
Specifically, managers and Commanders were reminded of their 
obligations to preclude such illegal shifting of work as they 
implemented the results of organizational assessments, continued to 
assess missions and functions in terms of priority, and revisited both 
their civilian and military force structures. Through the use of our 
ongoing communications with national labor leadership, the Department 
has been able to look into allegations of improper workload shifts and, 
if justified, take corrective actions.
    In addition, the DOD has established an internal, multilevel 
governance process for monitoring implementation of all efficiencies, 
to include those resulting in civilian workforce reductions. Any issue, 
such as illegal shifting of work, can be addressed via this governance 
process for adjudication. If circumstances warrant, an exception 
request to increase the civilian workforce to meet workload 
requirements can be made.
    Long-term, as the Department makes improvements to its Inventory of 
Contracts for Services, as required by title 10, we will have increased 
visibility and accountability into such contracts. Specifically, 
improvements currently under way will enable the Department to more 
accurately identify contracted level of effort based on direct labor 
hours and associated data. This increased fidelity into contracted 
services will serve as another critical tool for the Department to 
monitor and preclude possible workload realignment.
    Ms. Bordallo. There was a lot of discussion last year about the 
``exceptions'' to the FY10 civilian levels Secretary Gates mandated. 
Please provide a detailed list of all exceptions across the Department 
approved to date and the reason for those exceptions, as well as those 
exceptions across the Department that have been requested but not 
approved, and the justification for such.
    Secretary Panetta. The list of exceptions approved by the Deputy 
Secretary of Defense and the adjustments approved by the Deputy 
Secretary of Defense in the FY 2013 budget request are provided below.

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[GRAPHIC] [TIFF OMITTED] T3426.031

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    Ms. Bordallo. The Department identified over $60 billion in 
additional savings being generated during next 5 years through measures 
such as streamlining of support functions, consolidating I.T. 
enterprise services, rephasing military construction projects, 
consolidating inventories, and reducing service support contractors. Of 
that $60 billion, how much is associated with civilian personnel and 
how much is associated with service support contractors?
    Secretary Panetta. Many of the initiatives comprising the $60 
billion in additional savings encompass reductions to civilian 
personnel and/or service support contractor requirements. For example, 
savings of $10 billion resulted from reducing the civilian pay raise, 
and approximately $1 billion was saved by the Army adjusting the 
civilian workforce to reflect the military end strength reduction. The 
Department also has a specific initiative to reduce service support 
contractors by $1 billion across the next 5 years.
    Ms. Bordallo. Based on your answer above, is that ratio appropriate 
given the large scale reductions in the civilian workforce that 
resulted from last year's budget and considering that contracted 
services have grown at a rate of 150% over the past decade while the 
civilian workforce increased at a much more moderate rate?
    Secretary Panetta. Over the past decade (FY 2003 to FY 2013), our 
budget for civilian payroll costs has grown by approximately 60 percent 
whereas budgeted contract services have only grown by approximately 40 
percent. The Department employs a total workforce management concept 
whereby we strive to maintain the proper balance of military, civilian 
and contractor workforces. DOD sourcing of functions and work among 
military, civilian, and contracted services must be consistent with 
workload requirements, funding availability, readiness and management 
needs, as well as applicable laws and regulations.
    Ms. Bordallo. Do you believe that workforce sourcing decisions 
involving non-appropriated fund employees, where work is being 
outsourced, should be subject to the same stringent cost analysis 
requirements that are applicable under title 10 provisions to 
appropriated fund employees?
    Secretary Panetta. Across the Department, non-appropriated fund 
(NAF) resources that support operations such as exchanges and morale, 
welfare, & recreation programs are administered in an economical, 
efficient, and business-like manner. To that end, contracts using NAF 
must be executed in a manner that best serves the NAF instrumentality 
in a fair, equitable, and impartial manner. DOD Components are required 
to establish and maintain systems necessary to ensure individual 
fiduciary responsibility for properly using NAF resources and 
preventing waste, loss, or unauthorized use of such funds. While the 
provisions requiring cost analyses for outsourcing of work delineated 
in title 10 do not specifically apply to NAF employees, the Department 
is committed to making sure, consistent with its policies regarding NAF 
instrumentalities, that any sourcing decisions related to NAF 
activities are fiscally advantageous to the Department and the 
commands/installations they support. Our efficient and business-like 
NAF system enables the Department to continue to deliver the services 
and fiscal outcomes necessary to sustain our NAF programs which 
directly support our entire military community.
    Ms. Bordallo. The Air Force recently briefed members of the House 
about large-scale reductions in the civilian workforce. How is the 
Department, specifically your staff, ensuring that those reductions are 
well-reasoned and based on workload and necessity, factoring in risk 
and cost, as opposed to simply implementing a mandated civilian 
personnel level?
    Secretary Panetta. The Air Force conducted a focused strategic 
review of the entire Air Force civilian workforce to evaluate the high-
priority mission areas and determine where positions needed 
realignment. The Air Force examined the full spectrum of operations--
from base-level to headquarters--to develop a wide range of efficiency 
initiatives to streamline and right-size the organization and 
management staffs, ultimately to forge a leaner, more effective Air 
Force. The Air Force followed Secretary of Defense guidance from 
Resource Management Directive 703, focusing reductions in overhead and 
support areas while minimizing the impact to functions and to aircraft 
operations and maintenance, acquisition excellence, and the nuclear 
enterprise. As part of that review, the Air Force had to make tough 
decisions on which areas to resource in order to provide the Nation 
with the capabilities that it requires.
    Specific missions that are identified by the Air Force for growth 
include intelligence, surveillance, and reconnaissance (ISR); the 
nuclear enterprise; and acquisition excellence. The effect on the 
civilian workforce at individual installations depends to a large 
degree on which missions are located at a particular location. Other 
factors in the decisionmaking process included the number of encumbered 
positions versus vacancies, the funding source for the civilian 
positions (operations and maintenance, depot maintenance activity 
group, and acquisition demonstration), and the impact of lost 
intellectual capital at the installation level.
    Ms. Bordallo. What processes are in place to ensure the workload 
associated with reductions being made in the civilian workforce is in 
fact ceasing, as opposed to being absorbed by other labor sources such 
as contractors or military personnel?
    Secretary Panetta. Reductions in the civilian workforce are 
correlated to workload and mission prioritization. The Department is 
committed to ensuring that workload associated with civilian reductions 
does not shift to other sectors of the Total Force, such as military or 
contract performance.
    To that end, on December 1, 2011, the Under Secretary of Defense 
for Personnel & Readiness issued guidance to the Department reiterating 
the statutory prohibition on conversion of work to contracts. This 
guidance directed vigilance in preventing the inappropriate conversion 
of work to contract performance, particularly as the Department adapted 
to declining budgets and operating in a constrained fiscal environment. 
Specifically, managers and Commanders were reminded of their 
obligations to preclude such illegal shifting of work as they 
implemented the results of organizational assessments, continued to 
assess missions and functions in terms of priority, and revisited both 
their civilian and military force structures.
    Additionally, on March, 2, 2012, the Under Secretary of Defense for 
Personnel & Readiness issued guidance to the Department regarding the 
use of ``borrowed'' or ``repurposed'' military manpower. This guidance 
is intended to ensure that amidst declining operational tempos for our 
military personnel and, as civilian reductions associated with 
efficiencies are implemented, military personnel are not 
inappropriately utilized, particularly in a manner that may degrade 
unit readiness.
    Through the use of our ongoing communications with national labor 
leadership, the Department has been able to look into allegations of 
improper workload shifts resulting from civilian workforce reductions 
and, if justified, take corrective actions. In addition, the DOD has 
established an internal, multilevel governance process for monitoring 
implementation of all efficiencies, to include those resulting in 
civilian workforce reductions. Any issue, such as inappropriate 
shifting of work, can be addressed via this governance process for 
adjudication. If circumstances warrant, an exception request to 
increase the civilian workforce to meet workload requirements can be 
made.
    Ms. Bordallo. Recently this committee heard of an instance in 
which, because of budget reductions, a janitorial services contract had 
been eliminated. As a result, professional civilian personnel have been 
advised by management that they are now responsible for trash removal 
and bathroom cleaning--services previously provided by contract. Surely 
the quest for efficiency is not intended to divert people from their 
core missions or result in them working in filthy conditions. Yet, this 
is how the reductions which DOD claims are so well-reasoned are being 
executed in the field. Was any workforce analysis conducted to inform 
these reductions or were they the result of a ``salami slice'' approach 
across all elements of the Department?
    Secretary Panetta. The reductions in the Department's workforce, 
both civilian and contract support, are correlated to workload and 
based on mission/function prioritization, reflecting the changes in the 
Department's strategy and force structure. The Department has 
established an internal, multilevel governance process for monitoring 
implementation of all efficiencies and associated budget reductions. 
Occurrences such as the above, if accurately described, are the 
exception, not the norm, and the Department is committed to using its 
established governance processes to prevent such adverse impacts.

    Ms. Bordallo. What recourse, in a particular year of execution, 
does a manager or Commander have if he or she wishes to insource a 
contract in order to achieve fiscal savings?
    Secretary Hale. The Department remains committed to its statutory 
obligations under title 10 to annually review contracted services and 
ensure that they are being performed in the most cost-effective manner 
possible. Where appropriate, DOD organizations may immediately insource 
by absorbing work into existing Government positions by refining duties 
or requirements; establishing new positions to perform contracted 
services by eliminating or shifting equivalent existing manpower 
resources (personnel) from lower priority activities; or on a case-by-
case basis, requesting a Deputy Secretary of Defense (DSD) exception to 
their existing civilian levels. Several exceptions have been granted by 
the DSD for recognized workload that is appropriately performed by 
Government civilians. To ensure increasingly constrained resources are 
allocated appropriately and with consideration for organizational 
mission priorities, the Department is currently assessing the process 
by which the civilian workforce is administered in the year of 
execution.
    Ms. Bordallo. To what extent was the decision to hold across-the-
board civilian levels, without commensurate across-the-board 
constraints on contracts, informed by cost and risk assessments?
    Secretary Hale. The FY 2013 budget request extended two initiatives 
that were initiated in the FY 2012 budget request to balance the 
workforce with mission priorities. The initiative to hold civilian FTE 
levels at the FY 2010 level and the direction to reduce service support 
contractors that provide staff support by 10 percent. Both initiatives 
are associated with ongoing organization assessments and mission 
prioritization in an effort to streamline business process and reduce 
administrative workload. Overall, funding for contract support services 
is reduced in FY 2013 by almost 3 percent. The FY 2013 base budget 
reflects a total of $131.9 billion for contract support services for 
all appropriations (excluding Military Construction), which is $3.9 
billion (3 percent) below the FY 2012 enacted budget of $135.8 billion. 
The amount of funding for civilian direct hires (both U.S. and Foreign 
Nationals) declines $70 million from $76.560 billion in FY 2012 to 
$76.490 billion in FY 2013. The reduction in civilian funding is less 
than 0.1 percent. The Department will continue to monitor the 
implementation of both initiatives to ensure actions are taken to 
minimize program risk.
    Ms. Bordallo. We've heard a lot about decreases and reductions in 
contracted services, yet when we look at the figures and talk to the 
field, what is evident is that reductions in contracts are very 
narrowly defined and limited to only a miniscule subset of what the 
Department actually purchases in terms of services. Why has the 
Department chosen to levy across-the-board reductions to only military 
E/S and civilian personnel without considering wholesale reductions to 
more expensive contractors?
    Secretary Hale. The FY 2013 budget reflects a balanced workforce 
that decreases spending on military end strength, civilian personnel, 
and spending for contract services. It reflects our best judgment today 
and represents a carefully coordinated approach based on the 
Department's strategy and policy that balances operational needs and 
fiscal reality. Proposed reductions in military end strength are linked 
to declines in our current overseas commitments; revised strategy, 
posture and operational planning; and changes to our force structure. 
Similarly, the proposed reductions in civilian personnel and contracted 
services are predominantly associated with ongoing organizational 
assessments and mission prioritization in an effort to reduce 
administrative workload. The funding for contract support services 
declines by a higher rate (3 percent) from FY 2012 to FY 2013 than the 
funding for civilians (less than 0.1%). Contracted services are a key 
enabler of the warfighter and a source of overall infrastructure 
operations, and in many instances provide cost-effective support. The 
Department remains committed to meeting its statutory obligations to 
annually review services provided by contract, ensuring that they are 
aligned to our most pressing priorities and continue to be the most 
cost-effective means of delivering such support.
                                 ______
                                 
                   QUESTION SUBMITTED BY MR. LOEBSACK

    Mr. Loebsack. I am concerned about changes to the community 
pharmacy program under TRICARE proposed in the FY13 budget request. 
When TRICARE beneficiaries have a child who is sick and needs a 
prescription immediately, they should not have to pay even more than 
they already do to go to their local pharmacy, especially because using 
mail order in that case isn't an option. Interaction with a pharmacist 
has many benefits, including cost savings given that poor medication 
adherence results in $290 billion in waste annually. I think the 
ongoing use of local pharmacies by TRICARE beneficiaries bears out the 
importance of direct access to a pharmacist. How is DOD preserving this 
relationship between the patient and their local pharmacist and 
ensuring that TRICARE beneficiaries are able to receive prescriptions 
they need immediately without being forced to pay more when mail order 
isn't an option?
    Secretary Panetta. Under the FY13 budget proposal TRICARE 
beneficiaries will continue to have the option of filling prescriptions 
at a military treatment facility pharmacy, a retail network pharmacy, 
through TRICARE Pharmacy Home Delivery or a non-network retail 
pharmacy. We fully recognize the role of community pharmacies in many 
aspects of healthcare, however the mail order option is less expensive 
than retail for both TRICARE beneficiaries and the Government, and 
provides 24/7 access to a registered pharmacist. Compared to other 
national and Federal health plans, the DOD pharmacy benefit remains the 
most generous and robust in coverage. Even with the recent copay 
increase and proposed FY13 copay changes, the DOD beneficiaries have 
minimal out-of-pocket costs for all medications, including acute 
medications obtained through retail pharmacies.
    Over the last few years, Department of Defense (DOD) has made 
significant efforts to control rising pharmacy benefit costs. The 
strategies and efforts pursued have been drawn from private sector best 
business practices, national trends, Congressional mandates, 
professional consultants, and independent studies. Each effort has had 
an effect in controlling the rise in pharmacy costs. Based on recent 
analysis of prescriptions maintenance medications filled for DOD, the 
data show mail order drugs are more cost-effective than purchasing them 
from a drugstore, the brand name standardized market basket cost per 
90-day supply was 19% lower at either mail order or military 
pharmacies, compared to the retail pharmacy network.
    Under the budget proposal, the vast majority of drugs will continue 
to be available from retail pharmacies. Only non-formulary drugs, which 
are relatively few, will no longer be generally available at retail. 
However, there is always an alternative drug in the same drug class on 
the uniform formulary and available at retail.
    A broad range of Medication Management Therapy (MTM) services are 
provided through DOD. MTM is a component of the Patient Center Medical 
Home (PCMH) model which is being implemented throughout the Military 
Services Treatment Facilities. The PCMH model enables clinical 
pharmacists to contribute to the healthcare team through services 
focused on medication management in improving patient clinical outcomes 
while lowering total healthcare costs. In addition, the Managed Care 
Support Contractors, through their Case Managers and disease management 
programs, are also engaged in improving beneficiary outcomes for 
conditions that account for high cost drug expenditures.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. CONAWAY

    Mr. Conaway. How will your ability to become audit-ready be 
affected by the current strategy or manpower changes and do you 
anticipate the need for additional resources once the FIAR plan has 
been revised to meet your expedited goals?
    Secretary Panetta. An appropriate level of personnel, training, 
tools, and support is being targeted to achieve auditable financial 
statements, and the Department plans to spend $300 million to $400 
million a year (excluding resources to implement Enterprise Resource 
Planning Systems) over the next 6 years on improving business 
operations and achieving auditable financial statements. The Department 
has reported that the resources and plans were in place to meet the 
previous 2017 goal.
    The Department of Defense is committed to achieving audit readiness 
for the Statement of Budgetary Resources (SBR) in 2014. Today we face 
very tight budgetary limits and the Department has carefully 
scrutinized requests from Components for additional funding to meet the 
accelerated SBR goal. Where appropriate, the Department has included 
those requirements in out Fiscal Year 2013 budget requests.
    Mr. Conaway. The Department should include objective and measurable 
criteria regarding FIAR-related goals in its senior personnel 
performance plans and evaluations. Performance evaluated on the basis 
of such criteria should be appropriately rewarded or held accountable. 
Evaluated performances should be documented and tracked to measure 
progress over time. How will senior leadership across the DOD be held 
accountable for audit preparedness in their specific departments?
    Secretary Panetta. In October 2011, I directed that achieving 
auditable financial statements will be an ``all hands'' effort across 
the Department. Leadership commitment from the highest level is setting 
the tone and priority for audit readiness. Auditability is a goal that 
every commander, every manager, and every functional specialist must 
understand and embrace to improve efficiency and accountability within 
the Department.
    The Service Secretary and Chief of Staff for each Military Service 
have committed to achieving specific near-term goals in support of 
their plans for achieving auditable financial statements. I have 
reviewed these commitments and plans and am holding civilian and 
military senior leaders from across the Department accountable for 
progress against those plans. Senior executives, both financial and 
functional, now have audit goals in their individual performance plans 
and we are working to include them in General and Flag Officer 
performance plans as well. Their performance against their plans will 
be assessed each year during their annual appraisal. This helps ensure 
those under their leadership are getting the message that better 
control over financial assets has a big effect on mission success, and 
everyone has a part to play.
    Mr. Conaway. Last year, I was very impressed with your leadership 
in moving the audit-ready SBR deadline up to 2014. In that same vein, 
do you believe we can find more efficiencies/better business practices 
to alleviate the burden of budget-reduction on our troops? How do you 
plan to continue this strategy?
    Secretary Panetta. Our streamlined approach to achieve improved 
financial information and audit readiness focuses efforts on first 
improving information that DOD uses to manage: budgetary information 
and count and location of mission-critical assets. Improving budgetary 
information provides more visibility of budgetary transactions, 
resulting in more effective use of resources; provides for operational 
efficiencies through more readily available and accurate cost and 
financial information; and improves fiscal stewardship by ensuring 
funds appropriated, expended, and recorded are reported accurately, 
reliably, and timely. Improving mission-critical asset information 
provides more reliable and accurate logistics supply chain and 
inventory systems; improves our ability to timely acquire, maintain, 
and retire assets; allows for more effective utilization of assets; 
provides better control over assets preventing their misuse, theft, or 
loss; and reduces unnecessary reordering. The acceleration of both of 
these goals should result in efficiencies that allow resources to be 
reallocated to mission requirements. The strategy complements our 
ongoing emphasis on increased resource stewardship and cost 
consciousness.
    Mr. Conaway. During several of your press statements and speaking 
engagements, you have said that we cannot break faith with those who 
serve but the President is asking for an independent commission to 
study military retirement. What type of research has the DOD conducted 
regarding the effects of changing the retirement system would have on 
recruiting and retention of quality service members?
    Secretary Panetta. As part of its vigorous, internal review, the 
Department has contracted with RAND-NDRI, a recognized expert, to use 
its Active and Reserve dynamic retention and cost model, to model and 
analyze the impact on recruiting and retention of various military 
retirement system alternatives. While many in the private sector, and 
elsewhere, have suggested alternatives to the current military 
retirement system, few of these alternatives have undergone rigorous 
modeling or analysis. The Department is committed to ensure any 
proposal it develops is sound and does not harm the Department's 
ability to recruit and retain the future force. Secretary Panetta has 
also made clear that current members will be grandfathered; for those 
who serve today, there will be no changes in retirement benefits.
    In addition to this ongoing review, the Administration and the 
Department recommended Congress establish an independent commission to 
review military retirement, and if enacted, the Department will provide 
the Commission significant input.

    Mr. Conaway. The Department should include objective and measurable 
criteria regarding FIAR-related goals in its senior personnel 
performance plans and evaluations. Performance evaluated on the basis 
of such criteria should be appropriately rewarded or held accountable. 
Evaluated performances should be documented and tracked to measure 
progress over time. How will senior leadership across the DOD be held 
accountable for audit preparedness in their specific departments?
    General Dempsey. In October 2011, Secretary Panetta directed that 
achieving auditable financial statements will be an ``all hands'' 
effort across the Department. The highest levels of leadership are 
setting the tone and priority for audit readiness. Auditability is a 
goal that every commander, every manager, and every functional 
specialist must understand and embrace to improve efficiency and 
accountability within the Department.
    The Service Secretaries and Chiefs have committed to achieving 
specific near term goals in support of their plans for achieving 
auditable financial statements. Both Secretary Panetta and Deputy 
Secretary Carter have reviewed these commitments and plans and are 
holding senior leaders across the Department, both civilian and 
military, accountable for progress against those plans. Financial and 
functional senior executives now have audit goals in their individual 
performance plans and annual evaluations and we are working to include 
them in General and Flag Officer performance plans.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. WITTMAN

    Mr. Wittman. As we move to enable the ANSF and ALP to take the lead 
on combat operations in Afghanistan, how are we calculating the risk 
that the plan could fail and we will once again have to retake the lead 
in combat operations planning and execution? Last March we were briefed 
by General Petraeus that progress in Afghanistan was ``fragile and 
reversible.''
    What has changed in the last 11 months that makes us so sure that 
the ANSF and the Afghan government are capable of countering the 
Taliban and the terrorist networks along the border region with 
Pakistan? Last year the Chairman of the JCS testified before us that, 
``We cannot allow the Taliban to reorganize and reconstitute as they 
did in 2004 and 2005, regain their oppressive influence over the Afghan 
people, and once again provide safe haven to Al Qaeda.'' What is the 
chance that the Taliban regains their foothold and provides a safe 
haven to Al Qaeda? This safe haven and enabling provided by the Taliban 
is the environment that allowed 9/11 to be planned and executed. Would 
you classify our progress in Afghanistan as stable and irreversible?
    Secretary Panetta. Over the past 11 months, we have significantly 
reduced the Taliban's capabilities, while increasing the size and 
ability of the Afghan National Security Forces (ANSF) as they begin the 
transition process. ANSF and Coalition operations focused on the south 
and southwest of Afghanistan have decreased the Taliban's ability to 
support the insurgency. The process of transitioning the security lead 
to the ANSF is progressing, with more than half of the population in 
Afghanistan living in areas that have begun the transition process. 
Over the last 12 months, the ANSF have not only increased their ranks 
by more than 55,000 personnel, but they have also greatly increased 
their capabilities. Although risk has decreased, risk still exists, 
particularly due to Pakistan sanctuaries and the slow pace of improved 
governance and development in Afghanistan. DOD continues to review 
these risks through our quarterly assessment processes. We expect the 
ANSF, in partnership with their U.S. and Coalition partner forces, to 
continue to make gains over the next year that will ensure the 
transition of lead for security to the ANSF by the end of 2014 in 
accordance with the NATO Lisbon Summit goal.
    Mr. Wittman. Secretary Panetta, in this budget plan we are 
purchasing 2 Virginia Class SSNs and we are moving one SSN out of the 
FYDP. We are delaying the start of SSBN(X) by 2 years. SSBN(X) will not 
realistically be operational and deployable until the 2020s. Do you 
know how many submarines the Chinese are putting to sea this year and 
the total they have planned between now and FY17?
    Secretary Panetta. We expect the People's Liberation Army Navy will 
have 63 submarines by the end of 2012, and 75 submarines in their order 
of battle by 2017. Additional details may be available by separate 
cover.
    Mr. Wittman. Secretary Panetta, we are shifting our focus and 
strategy to increased operations and increased presence in the Asia-
Pacific and the Middle East. This increase in presence is already 
resulting in an increase in deployment lengths and an increase in the 
frequency of deployments for our Navy. Our surface combatants, 
carriers, and submarines have routinely deployed to support cyclic 
combat operations and contingency operations around the globe for 10 
straight years.
    Basic maintenance has been pushed to the right over the past 10 
years and our fleet is in desperate need of routine shipyard 
availabilities and maintenance work. Couple this problem with the fact 
that among other early decommissioning plans, we are decommissioning 7 
Aegis cruisers that are between 20-25 years old.
    The fact is this new strategy is juxtaposed against a fleet that is 
decreasing in size, while the fleet's tasking is being increased. How 
do we expect to increase our presence and project power effectively in 
the Pacific and Indian Oceans with a fleet that is currently at 284 
ships with no realistic plan of growing to 313 ships? Is a 313-ship 
fleet still the goal? If we accept the risk of a smaller fleet with 
increased responsibilities, how do we ensure that fleet is built to 
last and capable of an increased workload without compromising 
operations and maintenance standards?
    Secretary Panetta. The Navy has long played a pivotal role in 
providing presence and reassurance to our allies and partners in the 
Asia-Pacific (AP) region. It has also provided deterrence against those 
who seek to threaten U.S. and allied security interests. To build upon 
the approximately 50 ships that currently operate daily in the AP 
region, the Department of the Navy will rebalance its fleet resources 
towards the Pacific. The Navy will look to homeport a greater number of 
ships on the Pacific coast in coming years as well as forward-deploy 
Littoral Combat Ships in Singapore on a rotational basis. Marines and 
their associated lift will rotate through Australia on a regular basis.
    The presence provided by the Navy's forward deployed ships will be 
augmented by the routine deployment of U.S.-based Pacific ships to the 
AP region. The Navy's presence in the AP region will complement and be 
complemented by the array of exercises, operations and forward presence 
provided by the other Services.
    The Department of Defense seeks to build the fleet to 300 ships but 
a number of factors will affect that calculus, including cost, 
readiness, and risk. For the present, the current ship inventory is 
judged to be sufficient to provide the requisite capability and 
capacity to achieve the direction of the Department's new strategic 
guidance. The Department is also committed to ensuring the Nation has a 
ready fleet that is prepared to fight and win at sea. To aggressively 
grow a fleet that is not properly resourced to maintain the highest 
state of training and readiness has the strong potential to create a 
hollow force. The Department is committed to ensuring that does not 
occur.
    To achieve the expected end of service life for the fleet's 
vessels, the Department of the Navy has undertaken specific 
initiatives. Large surface combatants, the Aegis cruisers and 
destroyers, are having their cyclic response plan adjusted from a 27-
month cycle to a 32-month cycle. This will align the maintenance cycle 
of the large surface combatants with the aircraft carrier with which 
they are associated and will protect planned shipyard maintenance. The 
Department of the Navy will also continue its fleet modernization 
program to upgrade combat systems, communications, and engineering 
capabilities. These investments will provide the fleet with more ready 
and capable warships. The Department is also closely working with the 
Department of the Navy to fund ship and aircraft maintenance to ensure 
that all necessary maintenance is funded within the baseline budget 
request.
    Mr. Wittman. Mr. Secretary, what are the U.S. strategic objectives 
in Afghanistan? What level of capability will the Afghan National 
Security Forces need to possess in order to achieve these objective as 
they take the lead in security operations in 2014? Specifically, how 
many Afghan National Army kandaks and equivalent units of the Afghan 
National Police will need to be independent or effective with advisors 
in order for U.S. forces to move to a primarily advisory role?
    Secretary Panetta. Our core goals are to disrupt, dismantle, and 
defeat Al Qaeda, and prevent Afghanistan from ever again becoming a 
safe haven that could threaten the United States or our Allies and 
partners, and to deny the Taliban the ability to overthrow the Afghan 
Government. The Afghan National Security Forces (ANSF) are critical to 
achieving and sustaining our core goals in Afghanistan. The ANSF are on 
track to take the security lead in Afghanistan by the end of2014. The 
degree to which kandaks can operate independently is one measure of 
effectiveness of the ANSF; however, our ability to adjust roles and 
achieve our goals is also based on other factors, such as the enemy 
threat situation, the degree of governance and development, and 
progress against corruption. As such, we have not designated a specific 
number of independently operating kandaks as a metric for determining 
when our forces can transition from combat to advisory operations in 
Afghanistan.

    Mr. Wittman. As we move to enable the ANSF and ALP to take the lead 
on combat operations in Afghanistan, how are we calculating the risk 
that the plan could fail and we will once again have to retake the lead 
in combat operations planning and execution? Last March we were briefed 
by General Petraeus that progress in Afghanistan was ``fragile and 
reversible.''
    What has changed in the last 11 months that makes us so sure that 
the ANSF and the Afghan government are capable of countering the 
Taliban and the terrorist networks along the border region with 
Pakistan? Last year the Chairman of the JCS testified before us that, 
``We cannot allow the Taliban to reorganize and reconstitute as they 
did in 2004 and 2005, regain their oppressive influence over the Afghan 
people, and once again provide safe haven to Al Qaeda.'' What is the 
chance that the Taliban regains their foothold and provides a safe 
haven to Al Qaeda? This safe haven and enabling provided by the Taliban 
is the environment that allowed 9/11 to be planned and executed. Would 
you classify our progress in Afghanistan as stable and irreversible?
    General Dempsey. The best way to address your concerns is to 
discuss what we will do to provide long-term support to the ANSF and 
the Afghan government in order to prevent extremists from re-
establishing a foothold in Afghanistan. We continue to work with the 
Afghan government on the establishment of a long-term strategic 
partnership in order to provide a framework for our bilateral 
cooperation in the areas of security, economic and social development, 
and institution building. This will ensure that the United States will 
be able to target terrorism and support the development of a sovereign 
Afghan government that defeats our common enemies.
    Mr. Wittman. As Village Stability Operations and the Afghan Local 
Police Program expands we have seen increasing numbers of U.S. Special 
Operations Forces operating in remote and isolated areas. As key 
enablers shift to training and advising the ANSF, or drawing down to 
support the reduction to 68,000 troops, how are we mitigating the risk 
to SOF in remote areas? How do you plan to maintain sufficient key 
enablers such as MEDEVAC, intelligence support, and logistics?
    General Dempsey. The force disposition that will reflect the 68K 
troop strength is still being developed. The plan may affect Special 
Operation Force's (SOF) ability to remain in some areas of Afghanistan 
as coalition force disposition will likely change. Since over 50% of 
the logistics support for VSO/ALP SOF units comes from the Regional 
Commands and Battle Space Owners, SOF can expect that in some cases 
supply lines will become longer. However, US SOF have routinely 
operated in remote areas of Afghanistan for a considerable time. The 
number of SOF units operating in remote areas has grown with the 
expansion of the VSO/ALP program and this expansion is not without 
risk. The expansion so far has been commensurate with our ability to 
resupply, enable, and ensure that force protection considerations have 
not been degraded. MEDEVAC capabilities in support of current SOF 
footprint conducting VSO/ALP are within prescribed timelines of SECDEF 
policy. Whenever a quick reaction force is required to add additional 
forces to a threatened VSO/ALP site, SOF-partnered forces such as the 
Afghan Commandos, Afghan National Army Special Forces or the Afghan 
Partner Units are dispatched to the VSO/ALP location to mitigate any 
threat.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. HEINRICH

    Mr. Heinrich. Secretary Panetta, I am deeply concerned, and I know 
a number of my colleagues are as well, about the budget cuts to small 
satellite programs such as Operationally Responsive Space (ORS) and the 
Space Development and Test Directorate in fiscal year 2013.
    The FY13 budget seeks to repeal the establishment of the ORS 
program office and eliminate already marginal investments in small 
satellite programs. Given the increasingly competitive environment in 
space and the high cost of procuring traditional, multibillion dollar 
satellites, I fear these cuts are penny-wise and pound-foolish. 
Specifically, the FY13 Defense Budget Overview proposes a ``restructure 
of the Operationally Responsive Space (ORS) program in order to provide 
more responsive and timely space capabilities to the warfighter,'' yet 
the funding request in the ORS budget line was $0.
    How is the elimination of the ORS office that is responsible for 
spearheading this effort consistent with providing ``more responsive 
and timely space capabilities to the warfighter''?
    How does DOD intend to continue its support of the concept and 
mission without any resources dedicated to this effort?
    Secretary Panetta. The fiscal year 2013 budget request terminates 
the Operationally Responsive Space (ORS) Program Office, but not our 
commitment to achieving the goals of ORS. Responsive and resilient 
space capabilities are still critical to protecting our ability to 
operate effectively in space. As the National Security Space Strategy 
notes, ensuring U.S. capabilities are developed and fielded in a 
timely, reliable, and responsive manner is critical for national 
decisionmakers to be able to act on time-sensitive and accurate 
information and for military forces to be able to plan and execute 
effective operations. To that end, we will incorporate the ORS efforts, 
principles, and activities into the Air Force Space and Missile Systems 
Center (SMC) Program Offices and fund integration of ORS concepts into 
the SMC through existing programs. This will ensure resilient, 
survivable, flexible, and responsive capabilities are considered in all 
future space programs, not merely in one discrete program office.

    Mr. Heinrich. As you know, the ORS-1 imaging satellite was launched 
in June 2011 in response to an urgent requirement from the Commander of 
USSTRATCOM in support of CENTCOM.
    It is my understanding that ORS-1 has met and exceeded CENTCOM's 
expectations.
    Can you speak a little more on what the warfighter's response has 
been to this reconnaissance asset?
    If the ORS mission has been realigned into other programs, how much 
funding is being allocated for this mission? How does DOD plan to use 
commercial capabilities, including hosted payloads in FY13?
    General Dempsey. Yes, CENTCOM has been satisfied with the 
performance of ORS-1 to date. The capabilities of ORS-1 and associated 
applications continue to grow. The operational program is fully funded 
through the design life of the satellite.
    The ultimate goal for ORS is to incorporate the ORS concepts into 
the broader space mission. As part of the transition, the Air Force 
Space Command's Space and Missile Systems Center (SMC) will be the 
direct recipient of ORS residual activities. While the Air Force is 
still working the specific details, the intent is to explore 
alternatives including partnerships with other nations, commercial 
firms, and international organizations; as well as alternative U.S. 
Government approaches such as cross-domain solutions, hosted payloads, 
responsive options, and other innovative solutions. To support these 
efforts, $10.0 million has been transferred from ORS to the following 
programs: Advanced EHF Milsatcom, Global Positioning System III--
Operational Control Segment, Space Based IR System--High, Space Control 
Technology, and Technology Transition.
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. OWENS

    Mr. Owens. Secretary Panetta, you propose with this budget to 
reduce the number of Army Brigade Combat Teams (BCTs) by eight, with 
two coming from Europe. How far along is the Department in determining 
which U.S.-based BCTs will be drawn down, and when might your analysis 
of these decisions be made available to Members of Congress, Commanders 
at U.S.-based installations and the general public? Will Members or 
home installations have the opportunity to weigh in before these 
decisions go into effect?
    Secretary Panetta. The Army is considering a number of potential 
options, but no final decisions have been made as to which U.S.-based 
BCTs will be drawn down. An announcement on specific force structure 
actions is expected sometime before, or in conjunction with, submission 
of the FY14 President's Budget in early February 2013. The Army will 
develop a plan that will provide detailed information regarding the 
draw down and address notification of affected congressional districts 
and Army installations prior to the decision going into effect.
    Mr. Owens. Secretary Panetta, it should come as no surprise that 
your request for additional BRAC authorizations has been met with some 
resistance from Members of Congress, including myself. I do appreciate 
General Odierno's recent statements that closures of major 
installations are not in the works, and I believe many of us are 
willing to work with the Department if there is unused or otherwise 
excess real-estate on your books. Giving the Department carte blanche 
to begin a process for closing installations, however, is not something 
I for one am open to considering. I have concerns not only for major 
installations here in the U.S., but also for the costs generally 
associated with a BRAC request. Can you give us a range of the 
potential costs for a BRAC round, and are there any details available 
on where the money to pay for such an effort would come from?
    Secretary Panetta. The costs of a potential BRAC round will not be 
understood until after the formal review process is complete. The 
Department must develop its recommendations, have them reviewed by the 
independent BRAC Commission, forwarded by the President to Congress, 
and if Congress does not enact a joint resolution disapproving the 
recommendations, the Department can develop budget estimates of the 
costs.
    The Department is committed and legally obligated to follow the 
normal internal budget deliberation process to determine the source of 
funds for implementation costs. As BRAC is a key priority, the 
Department will apply the resources necessary to support both a robust 
and thorough BRAC analysis and an efficient and effective 
implementation process. BRAC has an upfront cost, but it begins 
generating savings almost immediately, and those savings will partially 
offset its initial costs. Moreover, BRAC will generate recurring 
savings far in excess of the upfront investment.
    Mr. Owens. Secretary Panetta, affordability is the underlying 
premise of the F-35 program--yet this budget proposes for the 4th year 
in a row a flat production rate of 30 aircraft per year; in your 
opinion, what can be done in the near term to help drive down costs and 
ensure an efficient ramp rate to make certain the F-35 program will be 
affordable in the long term?
    Secretary Panetta. The Department is reducing costs in the near 
term by keeping production low to mitigate the cost risks from 
concurrent production and testing. Concurrency is a transitory issue, 
and those risks will progressively decline as the program nears the 
completion of development and testing. Additionally, the Department is 
managing production costs through the transition from cost type to 
fixed-price-type contracts, which began with the Low-Rate Initial 
Production (LRIP) Lot 4 contract. In LRIP Lot 5, the Government's cost 
risk is being mitigated by transferring some responsibility for 
concurrency cost to the prime contractor. The LRIP Lot 6 and 7 
contracts will implement an event-based contracting strategy that buys 
aircraft quantities based upon development and test progress. This 
strategy provides a means to control the production rate, which will be 
informed by demonstrated development performance against the 2012 plan 
and concurrency cost risk reduction. These steps will control near-term 
costs while ensuring that aircraft procured will last their required 
service life, come with the required mission capability, and have a 
reduced need for post-production modifications.
    Production efficiencies are not entirely postponed to the future 
even when production quantity remains level under this staged 
production approach. Beyond cost reduction from improved learning in 
touch labor that this approach will generate, quality improvements are 
expected to reduce current scrap, rework, and repair costs. Process and 
performance improvements across the supplier base in material and 
overhead accounts are expected to reduce costs as well. Improved timely 
incorporation of test-discovered changes in the production 
configuration will deliver jets that require fewer post delivery 
modifications. These coupled aspects should result in real 
affordability gains each year as production contracts are negotiated on 
a basis of expected improvements accordingly.
    Mr. Owens. Secretary Panetta, can you speak to the importance of 
international participation to controlling costs on the F-35 program?
    Secretary Panetta. International participation is very important in 
controlling costs because the production of additional aircraft reduces 
aircraft unit costs for all the participating nations. The F-35 program 
continues to be the Department of Defense's largest cooperative 
program, with eight Partner countries participating under Memorandums 
of Understanding for System Development and Demonstration and for 
Production, Sustainment and Follow-on Development. The eight Partner 
countries are Australia, Canada, Denmark, Italy, The Netherlands, 
Norway, Turkey, and the United Kingdom. All the Partners recently met, 
and each expressed its continued commitment and support for the 
program. Currently, Partner and U.S. buys are projected to total 697 
and 2,443 aircraft, respectively.
    In addition to the cooperative partners, there is strong Foreign 
Military Sales interest. In 2010, Israel signed a letter of agreement 
to purchase 19 F-35A variants for $2.75 billion, with deliveries 
scheduled to begin in 2016. Israel plans to purchase an additional 56 
F-35As in the future. In December 2011, Japan selected F-35 using a 
competitive process. On February 1, 2012, Japan signed a $6-million 
agreement to conduct F-35 studies. Japan is expected to sign an 
agreement to purchase the first 4 of a planned acquisition of 42 
Conventional Take-Off and Landing F-35A aircraft by June 2012. 
Deliveries will begin in 2016.

    Mr. Owens. General Dempsey, the F-35 program has been restructured 
a number of times--three times in the past three years. I just want to 
confirm for the record that the requirement to develop and field an 
affordable, 5th-generation multirole strike fighter remains. Is that 
correct?
    General Dempsey. Yes, the Department is committed to the JSF 
program of record that includes all three variants. We have slowed 
procurement in order to complete more testing and minimize concurrency 
issues before buying significant quantities.
                                 ______
                                 
                QUESTIONS SUBMITTED BY MR. RUPPERSBERGER

    Mr. Ruppersberger. As semiconductor manufacturing continues to move 
offshore, particularly to China and Taiwan, it can be expected that 
there will be a rise in counterfeit chips. This is especially 
concerning because they are used in critical information systems and 
weapons systems. How does the Department plan to ensure that the U.S. 
Government has a reliable source for leading-edge technology and 
manufacturing for its military systems? Is there a long-term plan to 
deal with this issue?
    Secretary Panetta. There is a multitiered effort within the 
Department of Defense (DOD) to address Counterfeiting. It starts with 
an acquisition program assessing program risk and the consequence to 
the system if the system, a subsystem, assembly, or an individual item 
is counterfeited or incorporated by a DOD Prime or sub-tier supplier 
into a higher level system. Those identified as being at-risk then 
require assignment of a level of traceability implemented through 
Quality Assurance procedures at the Prime, sub, and any DOD-direct 
suppliers for each at-risk item. Depending on the level of risk, 
suppliers may be required to document the authenticity of the item on 
the low end, perhaps for the use of qualified suppliers, or at the high 
end, procure only from a trusted source. The goal is to leverage the 
management of critical application items, including critical safety 
items and mission-critical components. This management process is 
already well defined and applies strong controls for the identified 
parts. The risks typically considered fall into the areas of Technical, 
Program, and Cost. As part of risk assessment and mitigation, DOD 
Program Managers are required to document the risk of counterfeits and 
their countermeasures in either their Program Protection Plan or their 
Systems Engineering Plan. The Department advocated this approach to the 
Office of Management and Budget's Intellectual Property Enforcement 
Coordinator's (IPEC) Federal Anti-Counterfeiting Working Group, as the 
chair of its Risk and Traceability Teams. With IPEC, DOD will lead the 
development of a Federal Acquisition Guide on Identification and 
Mitigation of Counterfeit Risk.

    Specific DOD steps are:

      Anti-Counterfeit policy (DOD Instruction) is in 
development
      In the interim:

          More than 2,000 personnel have been trained in 
        counterfeit detection and mitigation.
          DOD representatives participate in industry groups 
        that have written anti-counterfeit standards to be approved by 
        the association membership.
          Code has been developed within the Department's 
        primary system for tracking non-conforming material, the 
        Product Quality Deficiency Reporting system that enables 
        Components to tag suspected counterfeit items, for further 
        investigation.

    These initial steps are part of a comprehensive anti-counterfeiting 
program that will extend from system development to counterfeit 
material disposal over the next 3 years.
    Mr. Ruppersberger. The Defense Science Board (DSB) Task Force on 
High Performance Microchip Supply Report dated February 2005 included a 
recommendation (#5) that stated ``Developing cost-effective technology 
for the design and fabrication of low-production-volume, leading-edge 
technology ASICs will require the combined efforts of DOD, the 
semiconductor industry, and semiconductor fabrication equipment 
suppliers'' and ``DDR&E should now take another look at ASIC production 
and formulate a program to address barriers to low- to medium-volume 
custom IC manufacturing.'' Based on the DSB Report recommendation, has 
the DOD developed any plans for an alternative, more flexible approach 
to manufacturing trusted, low-volume, leading-edge microelectronics?
    Secretary Panetta. Yes. The Department recognizes that leading-edge 
Application-Specific Integrated Circuit (ASIC) manufacturing technology 
resides in the global commercial sector and that the number of 
companies with the right capabilities is decreasing. The DSB Report 
supported the Department's need for low-volume access to leading-edge 
ICs. Since 2004, the Department partnered with the National Security 
Agency to gain economies of scale by aggregating ASIC demands. A 
contract was competitively awarded to a commercial firm to serve as a 
leading-edge, trusted ASIC foundry for a 10-year period to ensure 
access to leading-edge technology over a long term. This program has 
resulted in thousands of trusted ICs delivered to defense and national 
security programs. A trusted accreditation process was established, 
through which more than 50 industrial firms are accredited as trusted 
suppliers of IC technologies. The combination of the Trusted Foundry 
contract and the trusted supplier network provides DOD and its 
contractors with a rich set of technologies and options.
    The Department is now in the process of formulating plans for the 
next 10 years. Numerous options are under study, including a short-term 
extension of the current arrangement and a recompetition for long-term 
sources of trusted IC manufacturing. Our plans will depend on the 
competitive marketplace to decrease costs and increase the array of 
technology options available to DOD. We are working with industry to 
outline a plan that will provide the Department with the flexible 
access to the widest array of trusted ASIC technologies available. We 
anticipate this plan will be complete late FY 2012 for implementation 
in FY 2013 and will be incorporated into the Department's Program 
Protection Plan.
    Mr. Ruppersberger. We understand that DOD and Air Force seek to on-
ramp New Entrant competitors for national security space launch. As you 
know, I strongly support competition in space launch which will reduce 
costs to the taxpayer, according to an extensive Government 
Accountability Office review. How will DOD and the Air Force off-ramp 
from a block buy contract with ULA to enable New Entrants to compete?
    Secretary Panetta. Since the Government Accounting Office report 
was released, several steps have been taken to certify New Entrants. 
First, the New Entrant Certification Strategy was signed by the Air 
Force, the National Reconnaissance Office, and National Aeronautics and 
Space Administration (NASA), and released in October 2011. The document 
defines the coordinated certification strategy for commercial New 
Entrant launch vehicles. The certification strategy is anchored on 
NASA's existing model. Second, the United States Air Force Launch 
Services New Entrant Certification Guide was signed and released in 
October 2011. The Guide provides a risk-based approach the Air Force 
will use to certify the capability of potential New Entrant launch 
companies for Evolved Expendable Launch Vehicle (EELV) missions. The 
Guide lists the criteria any New Entrant must meet in order to launch a 
high-value operational satellite.
    To facilitate the certification of potential new entrants, the Air 
Force has identified two missions that providers may bid on--the Space 
Test Program (STP)--2 and the Deep Space Climate Observatory (DSCOVR) 
missions. These non-National Security Space (NSS), EELV-class missions 
have a higher risk tolerance and will provide an opportunity for the 
potential new entrant to prove their capability for certification. Once 
a New Entrant is certified, launch services not covered under the FY13 
Block Buy could be competed. When the Phase I Block Buy expires and New 
Entrants are certified, we will have a full and open competition for 
launch services.
    Mr. Ruppersberger. The Air Force has indicated that it has asked 
United Launch Alliance to fill out a matrix of what price they would 
charge for 6 to 10 boosters per year, across a range of 3 to 5 years, 
in order to determine a pricing ``sweet spot'' for ULA booster cores in 
a block buy procurement. How does the Department of Defense and the Air 
Force intend to independently assess whether the pricing is fair and 
reasonable? If the Air Force determines that the ``sweet spot'' is 10 
booster cores per year for 5 years because this is the largest quantity 
order, how does it intend to allow New Entrants to compete?
    Secretary Panetta. The Department of Defense and the Air Force are 
committed to fostering competition while ensuring the reliability and 
capability of New Entrants desiring to participate in fulfilling 
National Security Satellites launch requirements.
    Part 1: The Air Force will independently develop price estimates 
based upon certified cost and pricing data, as well as independent cost 
estimates. The Defense Contract Audit Agency (DCAA) and the Defense 
Contract Management Agency (DCMA) have committed to full participation 
in the Evolved Expendable Launch Vehicle (EELV) proposal evaluation and 
negotiation activities, thereby ensuring the final cost of space launch 
services represents the best value to the Government.
    Part 2: The Air Force and the Department of Defense see competition 
as a critical element of our long-term efforts to reduce launch costs. 
The new EELV acquisition strategy, set to begin in FY13, entails an 
evaluation of an economic order quantity of EELV booster cores, covers 
contract periods ranging from 3 to 5 years, and encompasses a quantity 
range of 6 to 10 booster cores per year. By examining a range of 
contract options and terms for EELV procurement, and by examining 
progress by New Entrants in the coming months, the Air Force will be 
well-positioned to balance the rate and commitment decision with our 
fundamental priorities: operational requirements, price, budget and 
enabling competition. Once a New Entrant is certified, launch services 
not covered under the FY13 Block Buy could be competed. When the Phase 
I Block Buy expires and New Entrants are certified, we will have a full 
and open competition for launch services.
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. SCHILLING

    Mr. Schilling. The strategic guidance states the DOD will have a 
key element focused on investments in technology and new capabilities 
as well as the capacity to grow, adapt and mobilize as needed. Does 
this mean you will be ensuring that our organic base, including 
arsenals and depots, will be properly utilized and workloaded to ensure 
our capabilities to meet future threats is kept warm?
    Secretary Panetta. The Department agrees it is essential for 
national defense that we maintain depot maintenance and the arsenal 
organic capabilities that enable our forces to respond to mobilization, 
national defense contingency situations, and other emergency 
requirements. In addition to the formal processes and reporting 
requirements required by 10 U.S.C. Sec. 2464, 10 U.S.C. Sec. 2466, and 
10 U.S.C. Sec. 2476, the Office of the Assistant Secretary of Defense 
for Logistics and Materiel Readiness oversees programs and initiatives 
designed to support our Nation's organic industrial base.
    Mr. Schilling. How does the DOD view its working capital bases like 
Arsenals? These are the most cost-effective part of our Army's flexible 
industrial base as they do not cost taxpayers large pots of money, but 
instead encourage public-private partnerships that help our economy.
    Building on that, I have been aware of a study that has been going 
on to address the organic base in the future. When will that plan be 
released and what is your plan for the organic base in the future?
    Secretary Panetta. As operational requirements are reduced in Iraq 
and Afghanistan, workloads in all Army organic industrial base (OIB) 
facilities are projected to decline at moderate rates. Throughout this 
period and beyond, the Army's Depots and Arsenals will continue to be 
designated as Centers of Industrial and Technical Excellence (CITE) for 
maintenance and repair; for example, Pine Bluff Arsenal is CITE for 
chemical and biological defense equipment and the Army's manufacturer 
of white and red phosphorus, incendiary, illumination and color smoke 
ammunition rounds.
    To mitigate reductions in Overseas Contingency Operations (OCO) 
funded work at Army OIB facilities, the Army Materiel Command's TACOM 
Life Cycle Management Command worked with its commercial partners, Army 
Program Executive Offices (PEOs), Program Management Offices (PMOs), 
and the Army's OIB activities to highlight the Army's OIB capabilities 
and identify opportunities for the Arsenals to partner with commercial 
firms to meet future PEO/PMO requirements. For example Rock Island 
Arsenal (RIA) is partnering with Sivyer Steel Corporation, a company 
that operates a foundry that has expertise in casting, molding, core 
making and machining. RIA and Sivyer anticipate that this partnership 
will yield the production of competitively priced, high quality 
castings. The partnership will also reduce lead time, and yield an 
increased workload for the foundry.
    The Army's strategy for ensuring that the Army's OIB remains viable 
and relevant include: investment in new technology, training and plant 
equipment at the same rate that the Army modernizes its weapon systems; 
identifying and aligning core competencies and workloads to support 
current and future surge requirements; investment to maintain ``state-
of-the-art'' capabilities and quality of work environment standards; 
and prioritizing funding to achieve the desired end state--viable and 
relevant OIB facilities.

    Mr. Schilling. You brought up the important point that we will have 
a large number of veterans entering the system.
    What specifically do you plan to do to help them transition back 
into the civilian world?
    General Dempsey. Currently, all Services provide mandatory Pre-
Separation Counseling and voluntary DOL Transition Assistance Program 
Workshops, VA benefits briefings and Individualized Coaching 
opportunities to assist Service members as they transition out of the 
military. In August 2011, the President called on the Department of 
Defense (DOD) and Veterans Affairs (VA) to lead a Task Force with the 
White House economic and domestic policy teams and other agencies, 
including the Department of Labor (DOL), to develop proposals to 
maximize the career readiness of all Service members. This DOD 
Employment Initiative Task Force is one element of the President's 
comprehensive plan to reduce Veteran unemployment and to ensure all of 
America's Veterans have the support they need and deserve when they 
leave the military, look for a job, and enter the civilian workforce.
    This task force is reviewing transition programs that are currently 
being offered within DOD, VA and DOL and expects to implement a new 
training and services delivery model to help strengthen the transition 
of our Service members from military to civilian life in Spring of 
2012. The model will establish the framework for ensuring Service 
members (of both Active and Reserve Components) meet a set of career 
readiness standards prior to transition to civilian life. These 
standards will be sub-divided into employment, technical training, and 
education. They will ensure Service members depart the military career-
ready with a meaningful set of ``tools'' that will position them to 
achieve desired transition outcomes.
    Mr. Schilling. I do not want to see the issues that veterans from 
Vietnam who suffered from Agent Orange exposure come back around to our 
most recent veterans.
    Will you be working with the Department of Veterans Affairs to 
ensure that those who are leaving DOD will get the care they need to 
address issues like exposure to depleted uranium?
    General Dempsey. The Department of Defense (DOD) and Department of 
Veterans Affairs (VA) are actively engaged in several important efforts 
to ensure exposure-related information is shared between our 
departments. Any confirmed exposures which involved clinical care or 
assessment are recorded in the Service members' medical records, and 
these records are available to the VA. In addition, the post-deployment 
health assessment and post-deployment health reassessment are made 
available to the VA health care providers. These assessments are filled 
out by every Service member following deployment and include self-
reported exposures. To further enhance our collaboration, the 
Departments recently signed a data transfer agreement (DTA) allowing 
the 2-way sharing of embedded fragment analysis data, including data on 
individuals with retained DU fragments.
    The Departments are working towards an overarching exposure-related 
DTA that will permit the sharing of all occupational and environmental 
exposure-related data. Also under way are efforts to create Individual 
Longitudinal Exposure Records (ILERs). Once developed, ILERs will 
capture a wide variety of exposure-related data from a number of 
different sources that will link that information to Service members 
over the course of their military careers. This information will be 
available to DOD and VA health care providers, and it promises to 
improve the quality of health care. It will also ensure more timely and 
accurate adjudication of exposure-related claims and access to Service-
connected benefits.
    For the past two decades, DOD has been working closely with the VA 
on concerns related to depleted uranium (DU) exposures. To date, 
neither the DOD nor VA have identified any illnesses in DU-exposed 
Service members or Veterans that have been linked with those exposures. 
The DOD and VA continue to study DU exposures and ensure any Service 
members or Veterans that may be at risk are periodically monitored. The 
Military Services continue to identify Service members with documented 
exposures and refer them to the VA so they have the opportunity to be 
included in the VA's DU Follow-up Program. Only 10 Service members with 
DU exposure have been identified resulting from duty in Iraq or 
Afghanistan. (See http://www.publichealth.va.gov/exposures/
depleted_uranium/followup_program.asp)
                                 ______
                                 
                    QUESTIONS SUBMITTED BY MR. SCOTT

    Mr. Scott. Do you support or oppose lifting the ban on U.S. flag 
and general officers from visiting Taiwan? Besides Taiwan, what other 
countries are U.S. flag and general officers banned from visiting?
    Secretary Panetta. As a matter of policy and consistent with the 
policy stated in the Taiwan Relations Act, we review and consider, in 
coordination with the U.S. Department of State, travel by U.S. flag and 
general officers to Taiwan on a case-by-case basis; there is no ban on 
such travel. In addition, we will continue to support the practice of 
sending retired flag and general officers to Taiwan to serve in a 
mentorship capacity as part of our robust program for defense and 
security engagement with the armed forces of Taiwan.

    Mr. Scott. Do you support or oppose lifting the ban on U.S. flag 
and general officers from visiting Taiwan? Besides Taiwan, what other 
countries are U.S. flag and general officers banned from visiting?
    General Dempsey. Having retired general and flag officers visit 
Taiwan assists Taiwan and aids our ability to assess Taiwan's defense 
needs accurately. We will, therefore, continue the practice of sending 
retired flag officers to Taiwan to facilitate improving Taiwan's 
defense capabilities. Visitors have included Admiral (ret) Blair, 
Admiral (ret) Natter, Lieutenant General (ret) Gregson, and Lieutenant 
General (ret) Leaf. They have all spent weeks mentoring senior Taiwan 
flag officers to include attending the Han Kuang exercises. We will 
continue to send our best and our brightest to assist Taiwan with its 
defense.
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                    QUESTIONS SUBMITTED BY MRS. ROBY

    Mrs. Roby. In your written testimony you discussed how the 
Department of Defense's plan includes reducing our forces that ``we 
must help our veterans find education opportunities, meaningful 
employment, and first class heath care.'' You also go and say that this 
not ``exclusive responsibility of the Services or veterans 
organizations.''
    What is the plan of the Department both internally and across other 
Federal agencies to ensure that military personnel transitioning out of 
the military are equipped with the necessary training and education to 
obtain employment?
    I am particularly concerned since the unemployment rate for young 
Iraq and Afghanistan veterans is 22% and for wounded veterans is 41%.
    Secretary Panetta. The Department of Defense, in collaboration with 
our partners from the Department of Labor, helped develop a TAP 
Employment Workshop Redesign to create experiential, effective and 
enduring solutions for successful transition from military to civilian 
life and employment. In August 2011, the President created a task force 
led by the DOD and VA and supported by agencies including the 
Department of Labor (DOL), Department of Education (DoEd), Small 
Business Administration, and the Office of Personnel Management (OPM) 
to develop proposals to maximize the career readiness of all Service 
members. In coordination with our partners, DOD's role involves 
implementing and sustaining a comprehensive plan to ensure all 
transitioning Service members have the support they need and deserve 
when they leave the military. The President also directed reforms to 
our transition assistance programs to ensure that every Service member 
receives the training, education, and credentials needed to 
successfully transition into the civilian workforce or to pursue higher 
education. We are working with our partners to develop program and 
services, fully aligned with the ``VOW to Hire Heroes Act of 2011,'' to 
give Service members a comprehensive set of transitioning tools, 
skills, and support mechanisms as they complete their service to our 
Nation. We will deliver an implementation plan for these programs and 
services to the President in spring 2012.

    Mrs. Roby. In your written testimony you discussed how the 
Department of Defense's plan includes reducing our forces that ``we 
must help our veterans find education opportunities, meaningful 
employment, and first class heath care.'' You also go and say that this 
not ``exclusive responsibility of the Services or veterans 
organizations.''
    What is the plan of the Department both internally and across other 
Federal agencies to ensure that military personnel transitioning out of 
the military are equipped with the necessary training and education to 
obtain employment?
    I am particularly concerned since the unemployment rate for young 
Iraq and Afghanistan veterans is 22% and for wounded veterans is 41%.
    General Dempsey. In August 2011, the Department of Defense (DOD)/
Veterans Affairs (VA) Employment Initiative Task Force was created, 
encompassing DOD, VA, the White House economic and domestic policy 
teams and other agencies, including the Department of Labor (DOL), to 
develop proposals to streamline current programs and maximize the 
career readiness of all Service members. This Task Force is reviewing 
transition programs that are currently being offered within DOD, VA and 
DOL and expects to implement a new training and services delivery model 
to help strengthen the transition of our Service members from military 
to civilian life in Spring of 2012.
    The model will establish the framework for ensuring Service members 
(of both Active and Reserve Components) meet a set of career readiness 
standards prior to transition to civilian life. These standards will be 
sub-divided into employment, technical training, and education. They 
will ensure Service members depart the military career-ready with a 
meaningful set of ``tools'' that will position them to achieve desired 
transition outcomes.

                                  
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